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SEC
Proposed Rule Amendments to Remove Rating References On April 27, pursuant
to Section 939E of the Dodd-Frank Act, the
SEC proposed amendments to remove references to credit ratings in various Exchange Act rules. Comments must
be submitted within 60 days after publication in the Federal
Register. SEC
Release. SEC Proposed Rule.
GSE
Alignment of Guidelines for Servicing Delinquent Mortgages
On April 28, the FHFA directed Fannie Mae and Freddie Mac
to align their guidelines for servicing
delinquent mortgages that they own or guarantee in four key areas:
(i) borrower contact; (ii) delinquency management practices; (iii) loan
modifications and foreclosure alternatives; and (iv) foreclosure
timelines. The updated guidelines will also establish monetary incentives
and penalties for servicer performance. FHFA Release.
CFTC
Proposed Rules on Capital Requirements for Swap Dealers and Major Swap
Participants
On April 27, pursuant to
Section 731 of the Dodd-Frank
Act, the CFTC
proposed rules that would mandate capital requirements
for swap
dealers and major swap participants
that are not subject to prudential regulation by the Fed, OCC, FDIC, FCA, or
FHFA. Capital requirements would be adjusted depending on whether a
swap dealer or major swap participant is a futures commissions merchant, a
nonbank subsidiary of a U.S. bank holding company, or neither of the
foregoing. CFTC
Fact Sheet. CFTC and SEC Proposed Rules and Guidance for Swap
Definitions
On April 27, pursuant to Sections 712 and 721 of the Dodd-Frank Act,
the CFTC and SEC issued proposed rules that would
further define the terms swap, security-based swap, and security-based swap agreement. The
proposed rules also would adopt regulations regarding mixed swaps as well as books and records
for security-based swap agreements.
During the April 27 Open Meeting in which the CFTC approved the proposed rules, the Commissioners observed
four different approaches between the SEC and CFTC: (i) the inclusion of
anti-evasion provisions in the proposed rules; (ii) the treatment of insurance
on swaps as a securities-based swap; (iii) treatment of swaps linked to
futures for foreign sovereign debt securities; and (iv) the jurisdiction and
applicable regulatory requirements of the CFTC over indexed credit default
swaps. Comments must be submitted within 60 days after publication
in the Federal Register. SEC Release. CFTC Fact Sheet. CFTC Open Meeting
Webcast. Treasury Notice of Proposed
Determination on Foreign Exchange Swaps and Forwards
On April 29, Treasury issued
a notice of proposed determination exempting foreign exchange swaps and
forwards from the definition of "swap" under the Commodities Exchange Act. The
proposed determination does not extend to other foreign exchange derivatives
including foreign exchange options, currency swaps, and non-deliverable
forwards. Foreign exchange swaps and forwards will remain subject to
the Dodd-Frank Act's trade
reporting requirements and business standards. Comments must be
submitted within 30 days after publication in the Federal Register. Treasury Fact Sheet. Proposed
Determination. CFTC Proposed Rule on
Protection of Cleared Swaps Customer Contracts and Collateral
On April 27, pursuant to Section 724(a) of the Dodd-Frank Act, the CFTC proposed rules concerning the
protection of cleared swaps and
associated collateral of futures commission merchants (FCM) customers.
Among other items, the rules: (i) parallel the regulations governing the
account in which FCMs currently hold futures customer collateral
pre-bankruptcy and (ii) contain analysis of the costs and benefits of the
four models of protection being considered, as described in the ANPR issued
by the CFTC on November 19, 2010. CFTC Fact Sheet. CFTC ANPR. CFTC Proposed Rule. CFTC Proposed Rules to Adapt
CFTC Regulations to New Commodity Exchange Act Definitions
On April 27, in accordance with Sections 721 and 733 of the Dodd-Frank Act,
the CFTC proposed rules to
revise its regulations to reflect: (i) amendments to the definitions of
"futures commission merchant"
and "introducing broker"
in the Commodity Exchange Act and (ii) the creation of swap execution facilities as trading platforms for swaps. CFTC Fact Sheet. CFTC Proposed Rule. |
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On April 28, DRBS
updated its methodologies for oil and gas
companies and for project finance.
DBRS Methodologies. On April 27, Fitch released
its updated criteria for rating general obligation transactions of state housing finance agencies. Fitch Release. Fitch Report. On April 25, Fitch
released is updated criteria for rating airport
operating lease ABS. Fitch Release. On April 25, Fitch released
its updated report on U.S. municipal
structured finance rating criteria. Fitch Release. Fitch Report. Note: Free registration is required for Fitch releases and
reports. |
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CFTC and SEC Proposed Rules
and Guidance for Swap Definitions
In addition to their effect on the financial industry as a
whole, the proposed definitions under Title
VII under the Dodd-Frank Act will
specifically impact asset managers. Please
see item above. CFTC Proposed Rules on
Capital Requirements for Swap Dealers and Major Swap Participants
Under the CFTC
proposed rules, asset managers would face capital requirements for swap
dealers or major swap participants that are not futures commissions merchants
and are not nonbank subsidiaries of U.S. bank holding companies. Please
see item above. |
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Federal
Home Loan Bank of Boston Files RMBS Suit On April 20, 2011, the Federal
Home Loan Bank of Boston ("FHLB Boston") filed suit against over
eighty defendants in Massachusetts state court. FHLB Boston alleges
that various underwriters, depositors, individual defendants, and rating agencies
made misstatements and omissions in the sale of mortgage-backed
securities. The alleged misstatements and omissions include those about
the originating banks' adherence to their stated underwriting guidelines,
appraisals, credit ratings, compliance with predatory lending restrictions,
and the enforceability of the underlying mortgages. FHLB Boston joins
several other Federal Home Loan Banks that already have filed suit in courts
throughout the United States over their purchases of mortgage-backed
securities, including the Federal Home Loan Banks of Atlanta, Chicago,
Indianapolis, Pittsburgh, San Francisco, and Seattle. Complaint. Federal
Judge Grants Motion to Dismiss Claims Against Bank of America as Successor to
Countrywide
On April 20, 2011, Judge
Mariana Pfaelzer of the U.S. District Court for the Central District of
California granted Bank of America's motion to dismiss the claims against it
in a putative class action complaint that sought to hold Bank of America
liable for Countrywide's alleged misstatements and omissions regarding
Countrywide's loan origination practices. Plaintiffs argued that Bank
of America can be held liable as a successor to Countrywide's liability
because the asset transfer between Bank of America and its subsidiary
Countrywide constituted a de facto
merger. Judge Pfaelzer disagreed; in applying Delaware law, Judge
Pfaelzer noted that "Delaware courts use the doctrine of de facto merger sparingly" and
declined to apply the doctrine here. Notably, Judge Pfaelzer's decision
runs contrary to an April 2010 decision by New York Supreme Court Justice
Eileen Bransten which held, under New York law, that the asset transfer did
constitute a de facto merger
and that Bank of America could be liable as a successor to Countrywide.
Pfaelzer Decision.
Bransten Decision. Bank
of America and Countrywide Sued By Purchasers of $619 Million in RMBS
On April 27, 2011, a group of
insurers owned by Western & Southern Financial Group filed a lawsuit in
the United States District Court for the Southern District of Ohio against
Countrywide, various former Countrywide officers, and Bank of America, as
successor to Countrywide, in connection with the sale of RMBS between 2005
and 2007. The plaintiffs allege that the Countrywide defendants were
responsible for misrepresentations and omissions in offering materials,
pursuant to which plaintiffs purchased approximately $619 million in
RMBS. Plaintiffs allege misrepresentation and omissions regarding
Countrywide's underwriting guidelines, owner-occupancy status, appraisals, and
exceptions to low-documentation loan procedures. Plaintiffs assert
federal law claims for violations of Sections 11, 12(a)(2), and 15 of the '33
Act, and Sections 10(b) and 20(a) of the '34 Act. They also assert
state law claims for negligent misrepresentation, fraud, aiding and abetting
fraud, and various violations of the Ohio Securities Act. Complaint. |
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