SEC Chair Jay Clayton asked for public comment on whether asset-level disclosure requirements for residential mortgage-backed securities ("RMBSs") are causing a decrease in SEC-registered offerings.
In a public statement, Mr. Clayton said that regulators are interested in whether certain aspects of the SEC's 2014 revisions to asset-backed security ("ABS") regulations, which were reviewed in response to the financial crisis, have led to a decrease in SEC-registered RMBSs.
As an example, Mr. Clayton raised questions about a recent Treasury housing reform plan that included a recommendation to the SEC to consider revising RMBS asset-level disclosure requirements (see previous coverage). He asked for public input on multiple issues.
The State of the RMBS Market
In general, Mr. Clayton asked (i) why there have been no SEC-registered RMBS offerings since 2013, (ii) whether the lack of SEC-registered RMBS issuances could have resulted partly from the 2014-adopted SEC asset-level disclosure requirements and (iii) if the dominance of Freddie Mac, Fannie Mae, Ginnie Mae or other government-sponsored entities in the residential mortgage securitized market have contributed to the lack of the offerings for SEC-registered RMBSs.
Questions Relating to RMBS Asset-Level Disclosure
Mr. Clayton is seeking comment on:
- whether circumstances in the RMBS market have changed since (i) the period leading up to the 2008 financial crisis and (ii) post-2014 rule revisions;
- which aspects of asset-level disclosure requirements should be reconsidered if there have been changes in the market;
- if asset-level disclosure requirements should be aligned with private-label RMBS issuers' practices of offering securities in Rule 144A-exempt markets;
- how the SEC should assess asset-level disclosures provided in RMBS offerings by Fannie Mae and Freddie Mac; and
- other standards that might be used as benchmarks for RMBS asset-level disclosure requirements.
Mr. Clayton also asked for feedback on the "provide-or-explain" regime, which he explained had been initially left out of the 2014 disclosure requirements and would have allowed an issuer to choose to omit asset-level data if they provided an explanation as to why the data was left out. Mr. Clayton asked if the "provide-or-explain" regime:
- should be reconsidered and whether issuers should be able to choose the data provided;
- would "detrimentally" reduce the comparability and standardization of asset-level data points for RMBSs by allowing issuers to leave out certain responses; and
- should be provided by the SEC under the condition that it is not available for other ABS asset classes that are required to comply with asset-level disclosure requirements.
Questions Relating to Data Collection
Mr. Clayton asked whether:
- specific data points should be eliminated;
- the SEC rationale provided in the 2014 Adopting Release for certain data points adopted remains valid in the current market;
- deleting any of the data points would adversely affect the analyzation of the underlying assets;
- there are any data points that need to be clarified; and
- responses to the above questions were different at the time of the offerings for data in the initial filings versus data provided in the ongoing filings.
Questions on Privacy
Concerning the two-digit zip code requirement (see previous comment), Mr. Clayton asked:
- what geographic information is needed in order for investors to conduct sufficient risk-and-return analytics of underlying assets and the securities offered; and
- if there are alternative methods of providing the necessary information in a way that would lower the reidentification risk.
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