Most impacted securities have already made the transition from the London Interbank Offered Rate. S&P expects the LIBOR Act will minimize the risk on the remainder.
If the federal government doesn’t increase its debt ceiling in the near term, payments to investors in MBS and ABS will largely still continue as usual, according to DBRS. But there are significant risks in terms of borrower performance.
The SEC’s proposed rule on conflicts of interest in the securitization market is unworkable and unnecessarily broad, according to industry stakeholders.
Congress is getting closer to passing legislation that would help legacy MBS and ABS transition away from LIBOR; there’s a securitization angle in Zillow’s move to discontinue its fix-and-flip business.
During a Capitol Hill hearing, House Democrats focused on credit rating shortcomings that allowed for the subprime crisis of 2007-2008 and inadequate reforms that followed.
One of the five draft bills proposed by the House Democrats this week seeks to establish a board that would be responsible for assigning rating services to provide grades on MBS and ABS.
The Structured Finance Association is working with members of Congress on a potential bill to help facilitate the transition away from the scandal-scarred LIBOR.
A longer statute of limitation and increased disclosure requirements could help attract long-term investors in the MBS and ABS market, industry experts recommend.
New York’s six-year statute of limitation for breach of rep-and-warranty claims in RMBS does not raise investor risk significantly if the deal comes with full, upfront third-party due diligence.