GlobalCapital: The SFA will have been tackling a number of different industry issues this year, but what have been some of the key issues influencing and impacting the US structured finance market?

Bright: One of the main issues for the industry, and for us at the SFA, has been the work involved in getting a bill through Congress that provides a safe harbour for legacy structured finance contracts which don’t have adequate fallback language (in terms of what rates can move to on the contract in the event that there is no Libor). This has been a Herculean effort to craft legislation that essentially ensures that consumers can be smoothly transitioned away from Libor if they are on contracts without fallback language.

This work involved working closely with the US Federal Reserve to draft the bill, which the House Committee for Financial Services passed earlier this year by unanimous vote. That was a good win, but the bill still needs to be passed by the House of Representatives, and the Senate, before it arrives on the President’s desk. So, there is a way to go yet but we are making good progress.

Together with this, the industry has been very focused on dealing with the economic repercussions of Covid-19, specifically forbearance plans and how that’s impacted mortgage securitizations, as well as progressing work on the standardization of disclosures around ESG and sustainable investments.

From our perspective, the securitization market is faced with an opportunity and a challenge to come together to build some industry best practices for disclosures and minimum structural levels across all the ESG categories. On our side, we’ve actually convened a taskforce to investigate and report on what type of information investors need to be able to credibly say that a particular securitization investment is a sustainable investment.

 

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