The American Bankers Association joined seven other associations in supporting a recent Securities and Exchange Commission decision to revisit disclosure requirements for residential mortgage-backed securities, or RMBS.
Following the role that RMBS played in the 2008 financial crisis, the SEC adopted amendments to its regulatory framework for asset-backed securities – Regulation AB – that created broad new reporting requirements for RMBS securitizations. Freddie Mac and Fannie Mae were exempted from the changes, and nearly all private-label RMBS offerings have since occurred in the Rule 144A market.
“The fact that zero publicly registered RMBS offerings have occurred since the 2014 amendments to Regulation AB strongly suggests that the commission’s current approach does not work,” the SEC said in a statement. The commission also questioned whether the current asset-level disclosure requirements for RMBS under Item 1125 of Regulation AB are too burdensome and may be hindering public offerings. It ion sought comment on whether to align the definition of “asset-backed security” in Regulation AB with the definition in the Securities Exchange Act of 1934 to expand access to the public markets for a wider range of asset classes.
In a joint letter, the associations said they appreciated the SEC decision to revisit the regulation, and that they support modifications “that broaden the mortgage credit risk investor base, make registered issuance of RMBS a more feasible option for issuers, protect the privacy of consumers and promote investor protection.”
“A vibrant registered public RMBS market would broaden the investor base for RMBS, thereby increasing the availability of capital to fund mortgage credit and helping to lower mortgage costs for American families,” they said. “Additionally, a broader private-label RMBS market is a necessary complement to broader housing finance reform efforts that are a priority of the administration.”
