SEC: 'Skin In The Game' Required For MBSs
WASHINGTON-The Securities and Exchange Commission yesterday proposed new rules for the issuance of asset-backed securities, including mortgage-backed issues popular with credit unions, that would require the issuer to retain at least 5% of the credit risk of assets being securitized.
The provision is aimed at ensuring that loan originators take greater care in making loans by maintaining some "skin in the game" after loans are securitized.
Observers argue that issuers of packaged mortgage securities didn't have "skin in the game" and as a result were encouraged to include subprime loans-where borrowers weren't properly screened-in the package because they knew they could sell the pooled security to another party.
"The proposed rules are intended to better protect investors in the securitization market by giving them more detailed information about pooled assets, more time to make their investment decisions, and the benefits of better alignment of the interests of issuers and investors through a retention or 'skin in the game' requirement," said SEC Chairwoman Mary Schapiro. "Finally, the rules would bring greater transparency to the private market as well."
The proposal, similar to one backed by the Obama administration, comes as poor quality subprime and other alternative mortgages are causing MBS to go bad.
NAFCU President Fred Becker said credit unions opposed the proposal when it was debated as part of the financial services bill and continue to oppose it because it would make it more difficult and costly for smaller players, such as credit unions, to securitize their loans. "We think it would be bad for credit unions," Becker said.
The SEC proposal, issued for a 90-day comment period, would wait five days to issue the asset-backed securities after they file a prospectus, as most issues are generally sold through expedited SEC procedures known as "shelf offerings."
The proposal also would require greater disclosures, including information about each loan's performance and whether the borrower's income was verified prior to the loan's origination.
Asset-backed securities, especially mortgage-backeds, are widely seen as a major cause of the financial crisis, especially those issued in the non-uniform, or private-label market.
CU Buys Bank's Former CU Branch
LOWELL, Mass.-Northern Massachusetts Telephone Workers' CU said it purchased a former Haverhill Bank branch in nearby Haverhill, one of two branches that belonged to a one-time credit union acquired by the bank in 2008.
The $475 million credit union bought the building for $1.5 million and plans to open its own branch there in June.
The 6,500-square-foot structure was built in 2003 and operated by Northeast Community CU, which two years ago was merged into Haverhill Bank. It was considered surplus by the bank after the unusual merger.
2 Charged In $170K Heist At Vegas CU
LAS VEGAS-Two men were charged in a federal indictment with last September's hold up at a Mountain America CU branch here, when assailants made off with almost $172,000.
The FBI said at least three men participated in the robbery on Desert Inn Road late in the afternoon last Sept. 9, when robbers waved their guns and told employees and members to get down on the ground.
Two of the robbers vaulted the counter and emptied the teller drawers, and then demanded access to the vault. After one of the tellers opened the vault, the men took the money from it and ran out of the CU.
The two charged were identified as Roland Mimms, 24, of Anaheim, Calif., and James Ernest Massey, whose age and residence were not immediately available. The third assailant still is at large.
MFCU Opens 2nd In-Store Branch
LATRHUP VILLAGE, Mich.-Michigan First CU continues to expand its presence in the Detroit metro area withthe opening of its second in-store branch, inside the Meijer store in Lincoln Park. To celebrate the grand opening and welcome new members, the $525 million credit union will be giving away a family four-pack of tickets to the Detroit Tigers' opening day home game.
