CREF Policy Update Dec. 7: SEC Issues Conflicts of Interest Final Rule
SEC Issues Conflicts of Interest Final Rule
Last week, the Securities and Exchange Commission (SEC) published its Final Rule to Prohibit Conflicts of Interest in Certain Securitizations. The final rule implements Section 27B the Securities Act and is intended to prevent the sale of asset-backed securities that are tainted by material conflicts of interest.
Why it matters: In previously submitted comments, MBA’s recommendations included ensuring that Mortgage Insurance-linked Notes (MILNs) and Credit Risk Transfer (CRT) transactions are not considered conflicted transactions, that MILNs are not considered synthetic asset-backed securities under the rule, and that servicers, special servicers, and B piece buyers are not considered “sponsors.”
• The final rule also generally excludes servicers, custodians, and other parties performing ongoing security/asset administration from the definition of “sponsor.” However, whether a special servicer and/or B piece buyer is a “sponsor” and subject to the rule will be determined by a review of the facts and circumstances in each individual case.
Go deeper: While the need to prevent transactions that present material conflicts of interest between certain securitization participants and investors is understandable, it was important that the final rule did not impact normal transactions that support the efficiency and efficacy of the securitization market.
What’s next: The final rule will be effective 60 days after publication to the Federal Register. MBA will remain engaged with the SEC on critical issues impacting the housing finance system.
For more information, please contact Stephanie Milner at (202) 557-2747.
CFPB Director Chopra Testifies Before Congress
Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra appeared before both the House Financial Services and Senate Banking committees for his Semi-Annual Report to Congress. Per custom, he fielded questions from lawmakers on policy initiatives undertaken by the Bureau. A summary of both hearings can be found here and here.
Why it matters: Among many other issues covered, Director Chopra was asked about Section 1071 rulemaking concerns and housing affordability.
Go deeper: Director Chopra also discussed the potential for the Bureau to increase its use of supervisory resources targeted towards nonbanks due to the growing role those institutions play in the delivery of lending and financial services.
• Lawmakers’ questions also focused on CFPB governance and operations, PACE lending markets, and the use of AI in lending decisions.
What’s next: MBA will continue to advocate on relevant commercial real estate finance issues with both the CFPB and Congress, as needed. On October 3, the Supreme Court heard oral arguments regarding the constitutionality of its funding structure regarding in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited. A decision is expected by early next summer.
For more information, please contact Rachel Kelley at (202) 557-2816, Ethan Saxon at (202) 557-2913, George Rogers at (202) 557-2797, or Bill Killmer at (202) 557-2736.
Upcoming MBA Education Webinars on Critical Industry Issues
MBA Education continues to deliver timely single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:
• Ten Things Your Company Must Do in 2024 – Dec. 12
• California’s Corporate Climate Data Accountability Act – Dec. 14
• Builder’s Risk Insurance: Analysis & Perspectives – March 20
MBA members can register for any of the above events and view recent webinar recordings by clicking here.
For any questions, please contact David Upbin at (202) 557-2931.
