When looking at activity by rating services in 2020, the SEC found problems involving ABS and CLOs, among other issues. The regulator as usual didn’t identify the offenders.
Changes implemented in response to the financial crisis of 2008 helped the MBS and ABS markets perform better than expected at the onset of the pandemic.
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.
When Congress passed the Dodd-Frank Act in 2010, the SEC had nine months to issue a rule on conflicts of interest in the securitization market. The proposed rule on the issue has been pending since 2011.
The SEC’s Investor Advisory Committee wants increased regulatory disclosures in the sector. However, an SEC commissioner questioned the utility of the proposal.
The ruling partially lifts the cloud surrounding a 2015 ruling over the valid-when-made doctrine, providing banks with legal arguments to defend their securitization trusts against state usury laws.
Federal regulators have delayed their review of risk-retention requirements until next year. Also, most regulatory actions planned for MBS and ABS fall into the “long-term” category.
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