Last week, the Securities and Exchange Commission provided new guidance, in a question and answer format, about certain programming changes to its online disclosure system that have been made to support recently adopted revisions to Regulation AB and new Exchange Act Rule 15Ga-2. More specifically, the guidance covers the procedures that a filer must use in the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system that enable it to file a preliminary prospectus and to furnish Form ABS-15G, along with accompanying tables and third party due-diligence reports. It also addresses...

The advent of mobile phone financing has given U.S. asset-backed securitization a new twist with its unique risks and strengths relative to other consumer ABS, according to a new report from Moody’s Investors Service. Mobile phone financing represents a shift from the previous business model of subsidizing phone purchases for customers with two-year service contracts. Many cell-phone makers and wireless carriers, such as Apple, Samsung Electronics, T-Mobile, AT&T, Sprint and Verizon, now use financing contracts in most of their phone sales. The most common form of financing is...

Securitizations backed by proceeds from franchises such as Domino’s Pizza and Dunkin Brands hit a record in terms of issuance volume in 2015. Industry participants suggest the market for such deals, known as whole-business securitizations, is set to expand due to growing interest from investors. There was more than $7.0 billion in WBS issuance in 2015, exceeding the issuance of the three prior years combined, according to Cory Wishengrad, a senior managing director and head of structured products origination at Guggenheim Securities. Wishengrad and others involved with structuring franchise/royalty securitizations spoke at a recent roundtable hosted by Standard & Poor’s. “The WBS sector has made...

New issuance of non-mortgage ABS fell 6.6 percent last year even though the market’s biggest segment pushed to a new post-crash high, according to a new Inside MBS & ABS analysis. A total of $173.05 billion of non-mortgage ABS were issued in 2015, the second-highest annual output since 2008. The direction, however, was less encouraging. New issuance tumbled 17.1 percent from the third to the fourth quarter, sinking to $30.69 billion – the lowest three-month total in over three years. But with record sales in the U.S. auto industry, securitization of vehicle-finance contracts increased...[Includes two data tables]

Issuers of MBS and ABS continue to address compliance issues with the Securities and Exchange Commission’s so-called Regulation AB2. Meanwhile, the Structured Finance Industry Group has urged the SEC to continue to delay further action on disclosure proposals that remain outstanding. In August 2014, the SEC published a final rule setting a variety of disclosure requirements for the structured finance market. Issuers of publicly registered MBS and ABS were required to comply with rules, forms and disclosures established by Reg AB2 by Nov. 23, 2015. Asset-level disclosure requirements will take effect Nov. 23 of this year. During a webinar hosted by the law firm of Mayer Brown late last week, Stuart Litwin, a partner at the law firm, said...

Nonbanks gained more ground in Fannie/Freddie mortgage servicing during the fourth quarter of 2015, according to a new Inside The GSEs analysis of agency mortgage-backed securities disclosures.Non-depository institutions provided the servicing for some $1.327 trillion of Fannie and Freddie single-family MBS outstanding as of the end of last year. That was up 3.8 percent from the third quarter and represented a hefty 10.1 percent gain from the end of 2014. Banks, thrifts and credit unions were still the dominant GSE servicers, accounting for 67.9 percent of the market at the end of December 2015. But their $2.803 trillion of Fannie/Freddie servicing was down 1.2 percent from...

The Department of Justice announced in December that a structured finance supervisor at RBS Securities pleaded guilty to participating in a multi-million dollar securities fraud scheme and is cooperating with the government’s ongoing investigation. Adam Siegel was co-head of U.S. ABS, MBS and commercial MBS trading at RBS between 2008 and 2014. The U.S. Attorney’s Office in the District of Connecticut said Siegel admitted that he and others conspired to increase RBS’s profits on trades of residential MBS and collateralized loan obligations at the expense of customers. “His crime included...

Exams by the Securities and Exchange Commission in 2015 uncovered a number of problems at rating services large and small, according to a report released by the SEC at the end of December. However, the firms weren’t identified by name because the exams aren’t public. The report is a laundry list of findings involving the 10 nationally recognized statistical rating organizations, six of which are involved in the MBS and ABS markets. The findings came from exams that focused on activities in 2014. Offending rating services generally were referred to solely based on their size, with Fitch Ratings, Moody’s Investors Service and Standard & Poor’s referred to as “larger” rating services and the other companies referred to as “smaller” rating services. The SEC said...

The prospects for consumer ABS in 2016 are a bit mixed. Auto ABS – especially subprime – appear susceptible to the Federal Reserve’s promised raising of interest rates this year and beyond, but credit card ABS are strong and performing well. “Rising interest rates could pressure U.S. auto ABS transactions, especially first on subprime deals,” analysts at Fitch Ratings said in a recent client note. While they expect last month’s initial rate increase by the Fed to have only a marginal near-term impact on borrowers, they said the plan to raise rates gradually over four years could increase the monthly debt burden on auto loan borrowers. “Although the rate increases are expected to affect the entire market, Fitch believes...

Separate appeals courts this week vacated legal victories that the federal government achieved in the aftermath of the financial crisis. The cases involve former officials at State Street Bank and Trust and a former MBS trader at Jefferies & Company. In 2014, commissioners of the Securities and Exchange Commission voted 3-2 to reverse a ruling by the SEC’s Chief Administrative Law Judge involving James Hopkins, a former vice president and head of North American product engineering at State Street, and John Flannery, a former CIO at the bank. The ALJ had dismissed...