A longer statute of limitation and increased disclosure requirements could help attract long-term investors in the MBS and ABS market, industry experts recommend.
The SEC’s Office of Credit Ratings is exploring how it can address conflicts of interest in ratings of MBS and ABS. An increase in performance-related disclosures and boosting unsolicited ratings are being considered.
The SEC is facing pressure to address “ratings shopping” in the MBS and ABS markets. Big rating services are not keen to switch from the issuer-pays model.
Banks will no longer have to meet extensive disclosure requirements for their MBS deals to receive investor-friendly protections. The change was met with criticism from an Obama appointee to the FDIC’s board.
A $175 million prime auto ABS issued by GTE Federal Credit Union in November was the first rated ABS issued by a credit union. Other deals are likely to follow thanks to revisions made by the NCUA.
To avoid retaining risk in securitization deals, mortgage lenders are joining hands with investors who act as “co-sponsors” and take on the first-loss position.
Issuance of marketplace lending ABS is expected to increase slightly, led by optimism in the economy and improved underwriting criteria, according to rating services.
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