Contents

Marketplace Lending

Pairing up

ABS, bank partnerships to lift marketplace lending

Marketplace lending and fintech will play an increasing role in the future of the securities market, according to US SEC chair Mary Jo White. Speaking at a recent SEC fintech seminar, White praised the benefits of innovative financial technologies, but outlined the need for relevant regulatory guidelines to protect investors and wider participants.

White stated that "fintech innovations have the potential to transform key parts of the securities industry" and added that marketplace lenders are providing individuals and SMEs with new paths to access capital. However, while such developments have brought many benefits, the SEC has a responsibility to "evaluate how our existing rules address both the challenges and opportunities presented by these new technologies".

Specifically on the area of marketplace lending, White stated that the SEC is unique to other regulators as it focuses exclusively on investor protection. A key challenge, she claimed, is "the adequacy of information to make informed investment decisions, such as the information on the loans and borrowers underlying their investments, as well as platforms' proprietary risk and lending models".

She added: "As investors are drawn to potentially higher yielding but riskier marketplace loans, information about the borrowers' ability to repay the loan underlying the investment is obviously critical."

A key part of investor protection, according to White, is ensuring full and fair disclosure of material information - which is equally a bed rock of federal securities laws. The speed and impact of some of the developments within marketplace lending and other fintech innovations has prompted a need for consideration of regulation, which needs to be "thorough and forward-thinking".

A marketplace lending panel at the seminar explored several of the themes touched upon by White. The first avenue of enquiry mooted by Sebastian Gomez Abero, head of the office of small business policy, SEC division of corporation finance, was how financial innovation has impacted access to capital.

Karen Mills, senior fellow at Harvard Business School, commented that capital markets froze after the financial crisis, so individuals and especially SMEs - which are typically dependent on credit - found they could not get access to credit. She stated that this is still an issue that persists today, but that the situation has been helped by some "great entrepreneurs, who have entered the lending market to take advantage of technology and innovation to meet this gap".

Ram Ahluwalia, ceo and co-founder of PeerIQ, highlighted that securitisation is "the primary financial innovation that has enabled consumers and businesses to access capital markets" and that "it transforms illiquid credit into marketable securities, which can then be sold into a diverse, broad base of institutional investors". He added that while institutional investors and issuers in the securitisation industry pulled back from securitisation post-2008, it's in the interest of the market participants and policymakers to keep it going to "ensure smooth functioning of the ABS market" and so open up access to capital.

The moderator then asked what is needed to improve or facilitate the ability of industry participants to access capital while maintaining adequate investor protections. Conor French, general counsel at Funding Circle, added that marketplace lending has the ability to strengthen the financial system because of its potential to "provide better access to safe and affordable credit to consumers".

However, he added that the ability of the sector to do this is perhaps limited by a relative amount of uncertainty regarding future regulation. French nevertheless said that he is "excited" to see the SEC refocusing on marketplace lending and that it is important for the sector that it establishes clear "customer guardrails".

Orchard ceo and co-founder Matt Burton concurred, stating that marketplace lending has "the potential to be ten times bigger than it is now", but that it will benefit from "clear guidance about which agency will oversee this". He suggested that working with the SEC will be "an important step forward".

Javier Saade, md at Fenway Summer, indicated that the fintech and marketplace lending sector will "ultimately benefit consumers and SMEs because current infrastructure that provides capital formation and enterprise for players...is antiquated, slow and broken".

Alhuwhalia agreed, saying that non-bank lending is growing across every asset class in double-digits. But he pointed out that non-banks, like marketplace lenders, don't have access to depository financing.

As a result, he continued, they are "tapping securitisation markets, which offer permanent capital at low cost and scale". But in order for this to work effectively, there needs to be a "discussion around the transmission mechanism, through standardisation of data, through transparency in the collateral pool, while improving liquidity in the securitisation market".

The topic then shifted to the question of adequacy of data for investors, both in terms of whole loans and for buyers of securitised marketplace loans. Mills commented that there is a lack of data available on small businesses in terms of loan origination levels to SMEs, although there is some attempt to pull this together, as outlined by proposals in the Dodd-Frank Act.

In terms of what investors need, French suggested that proper "loan level disclosure and simplicity to avoid opaque pools of loans" is key for investors. Additionally, when it comes to how loans are allocated to investors through a platform, the process benefits from "robust governance" and clarity as to how investor money is distributed.

French pointed out that Funding Circle provides "metrics on loan a level basis", as the company's philosophy is "to put as much information out there as possible". However, he commented that there are limitations about how much can be shared, due to rules around data protection and requirements about "protecting the privacy of borrower or guarantor".

In terms of where the industry is headed and at what stage it might now be, Mills suggested that the initial phase of the sector was mainly one of optimism. She suggested that the industry was initially in a "wild west" phase, where there was a belief that online lending companies would take over 70% of consumer and SME loan origination, with the focus on endless growth.

Mills further posited that marketplace lending is now entering a second phase, focusing on partnerships, possibly between online lenders and banks. She highlighted that, particularly with regard to SME loans, "it is very hard to find an SME ready to borrow - customer acquisition is very expensive, which has gone into expensive pricing".

She added, however, that while banks have "low cost deposits and customers", they don't have the customer-facing technology that SMEs want today. Mills added that should online lenders wish to partner with banks, they will have to be prepared for "regulatory oversight" that banks have to comply with, which will then apply to marketplace lenders in a bank partnership.

Alhuwalia pointed out that "in a negative real rate world, banks globally are struggling to earn their cost of capital, so those that fund marketplace loans or partner with non-banks can achieve ROE objectives". He agreed that banks will work with marketplace lenders, as utility to achieve portfolio duration and return objectives to round out their portfolios.

In terms of the future of the sector, Abero asked what role the SEC could play in the development of the industry. Burton noted that there has recently been confusion about whether the loans are securities, which makes it difficult for platforms to "know who they should be working with". This could be resolved with greater clarity from the SEC, he suggested.

French seconded this, commenting that greater certainty around regulation is needed - particularly because when there are many different federal agencies overlooking consumer finance, with additional state counterparts, it resulted in "a real cooling effect on flow of capital to early stage platforms", both in terms of equity and debt. He added that it would be helpful to have either a Federal non-bank charter or perhaps the ability of states to "passport licenses to other states".

In terms of projections for where the sector will be in five years, Burton set out an optimistic agenda, stating that while marketplace lending currently only represents 1% of the consumer lending market, it will grow to 10% in five years. He expects fragmentation in the sector to continue, along with further bank partnerships.

Mills suggested that while partnerships will be likely, there will be a growing number of failures within the sector and "winners and losers will emerge". She added that China could provide a model, with platforms there providing a central place for "several kinds of transactions".

Alhuwalia stated that in five years the industry will likely have traversed a full credit cycle, which could "lead to consolidation". He suggested that the sector is unlikely to sustain many non-bank lending companies that don't have the scale to acquire customers or to acquire capital at low cost.

He added that the time would enable the sector to build up enough data to help "those that survived to thrive" and provide investors with more accurate assessments of cumulative loss expectations through a cycle. Alhuwalia concluded that he hopes marketplace lending might be more mainstream in five years and be referred to as lending in general, particularly because currently there are risk premiums on securitised marketplace loans that are the same loans as banks originate "but with a newer business model attached".

RB

Marketplace Lending

Reputation management

MPL ABS growth likely, subject to strong macroeconomics

Marketplace loan ABS performance will generally remain stable into 2017, with loan originations and issuance growing, according to Moody's. The agency adds that the marketplace lending sector will use 2017 as a year to rebuild its tarnished reputation after a series of negative developments in 2016.

The firm points out that these challenges could, however, still further expose platforms' shortcomings stemming from their unique and still-developing business processes. However, despite this and continuing uncertainty around the sector owing to short performance history of the loans, it expects that of marketplace loan ABS the overall credit quality of new transactions will change little.

Moody's goes on to say that the quality of unsecured consumer loans in new deals will be essentially unchanged because lenders' underwriting and practices for these loans will be generally stronger amid greater sector scrutiny but this will be offset by shifts in acquisition channels. Equally, marketplace loan ABS backed by student loans will include "only marginally weaker collateral" and stronger bank appetite for SME loans could result in securitisation of weaker loans in that sector.

The agency expands on this saying that SMEs tend to go to marketplace lenders when they have weak business performance history or need liquidity quickly and banks cannot reach that demand. Moody's therefore suggests if banks can improve their ability to offer timely loans, more SME marketplace loans available for securitisation could come from struggling businesses, which would expand adverse selection in the deals.

The rating agency adds that the asset performance of outstanding deals is overall stable, with deals' notes continuing to perform strongly, and student loan deals having ongoing low default rates. Of the consumer loan securitisations that it rates, it expects losses to accumulate as the loans season, but deal performance will remain strong due to the build-up of credit enhancement for senior tranches. The firm notes that some senior tranches will most likely pay down completely in 2017.

Additionally, the firm suggests that consumer loans in deals it doesn't rate and unsecuritised consumer loans from quarterly origination vintages from the start of 2014 through the end of 2015 will continue to perform somewhat worse in general than loans from the previous quarterly vintage. This is due, the agency suggests, to "already progressively steeper loss curves for the loans originated within the 2014-2015 period, which was before many lenders tightened their criteria."

Furthermore, the agency suggests that collateral in 2016 securitisations will perform worse than loans in previous vintages, partly because some of the transactions include 2015 loans as well as 2016 loans, originated before the lenders strengthened their underwriting. Despite this, student loan ABS should continue to have extremely low default rates due to the strength of the borrowers and the steady economy, while losses on transactions backed by SME marketplace loans will likely not change significantly.

The legal and regulatory landscape will, however, continue to cause uncertainty in the industry, but any new developments will only have a modest impact on the sector or be incremental in nature. The agency adds that SME marketplace lenders will face the highest risk of disruption from regulatory or enforcement actions on the state or federal level.

Moody's adds that SME marketplace loans are subject to fewer rules than consumer loans and firms that take out these loans are often owned by individuals that are financially unsophisticated or lack significant earnings. A tougher regulatory environment would increase the chance of expensive legal actions, according to Moody's, potentially reducing their profitability - which could, in turn, reduce the performance of securitisations backed by such businesses. Back-up servicers could mitigate some of this risk, the agency adds.

On the regulatory front, the firm expects a continuation of court cases and actions by states that cast doubt on the partner-bank origination model used by certain platforms, potentially resulting in some consumer loans becoming void or unenforceable under state usury laws. While it doesn't expect definitive answers in 2017, some court cases might provide additional clarity.

The agency suggests that originations and securitisation issuance are likely to rise next year, but adds that this depends on several factors like financial market conditions and how well the industry can meet its evolutionary challenges. Moody's adds, however, that any economic weakness, significantly weaker loan performance or financial market disruptions "would likely significantly slow loan volumes" and states that "as the US interest rate normalisation process resumes, there is a risk that financial market volatility intensifies, with a synchronous repricing of assets globally."

Marketplace loan ABS issuance volumes could be less effected by negative originations, depending on the nature of loan buyers and their strategies. It points out that despite slowing consumer loan originations, issuance continued to rise in 2016 and concludes that if conditions do worsen, student loan ABS issuance is most likely to avoid shrinking in 2017 owing to the "strong performance and perceived lower volatility of such collateral."

RB

Secondary markets

Euro secondary quiet

The European securitisation secondary market has had another quiet start to the week.

Italy was unsurprisingly the main focus yesterday, but as with broader markets securitisation secondary was little moved and flows were light. Italian paper has edged out a few basis points and there was some softening of tone in other peripherals, but for the most part ABS/MBS secondary spreads are holding firm.

CLOs, which had closed out last week the busiest sector, were much quieter yesterday partly as a result of many participants' absence at a US CLO conference the first half of this week. Generic secondary spreads throughout the euro 2.0 stack continue to be unmoved.

Today looks to be another quiet day with no BWICs on the European schedule so far.

Secondary markets

Euro secondary keeps positive

Tone across the European securitisation secondary market continues to be positive.

After a quiet start to the week, yesterday saw a flurry of BWICs from a range of sectors driving activity, most of which were easily absorbed and traded in line with expectations. Consequently, the bulk of secondary spreads remain unmoved.

Today sees more supply from a variety of sectors, albeit some in relatively small size if not number and with one CLO BWIC that has already seen six of its seven original line items trade ahead. Overall, there are currently five BWICs on the European schedule for today.

Most eye-catching is a seven line 318.4m original face dollar-, euro- and sterling-denominated auction of UK buy-to-let seniors. Due at 14:30 London time it consists of: AUBN 4 A2, AUBN 5 A2, PARGN 7A A1A, PARGN 7A A1B, PARGN 7X A1A, PARGN 7X A1B and PARGN 8 A2B.

Only AUBN 4 A2 has covered on PriceABS in the past three months - at 98.02 on 4 September.

Secondary markets

US CLOs robust

The US CLO secondary market remains robust.

"Everyone is now back from the conference in California and the tone remains positive," says one trader. "Secondary spreads continue to be robust in the face strong new issuance."

The trader continues: "In contrast to the headwinds we were facing after the conference last year people are now cautiously optimistic. The belief is that most issuers are prepared for risk retention and there are suggestions that regulation may be eased under the Trump administration."

That optimism is supporting activity levels, the trader suggests. "You'd typically expect activity to start to slow this week ahead of year-end. However, we're still seeing trading at a moderate pace - it's not really busy, but far from quiet for the time of year."

There are eight BWICs on the US CLO calendar for today so far. The largest is a ten line $30.4m collection of single- and double-Bs.

Due at 11:00 New York time, it comprises: BSP 2015-VIA C, CTWTR 2014-2A C, CTWTR 2015-1A D2, GALXY 2013-16A E, JTWN 2015-7A C, MAGNE 2015-15A D, MCLO 2015-8A C, SNDPT 2014-1A E, VENTR 2014-19A D and VENTR 2015-22A D2. Only SNDPT 2014-1A E has covered with a price on PriceABS in the past three months - at 83.27 16 September.

Structured Finance

SCI Start the Week - 5 December

A look at the major activity in structured finance over the past seven days.

SCI content this week is sponsored by BNY Mellon. All content this week is being made available free of charge, with no registration required.

Pipeline
There were a dozen deals added to the pipeline last week, including three Towd Point deals. In total there were six ABS, two RMBS and four CMBS added.

The ABS were: Canadian Credit Card Trust II Series 2016-1; US$784m Ford Credit Floorplan Master Owner Trust A Series 2016-5; US$125m HERO Residual Funding Trust 2016-1R; Motor 2016-1; US$424.59m Springleaf Funding Trust 2016-A; and £268m Towd Point 2016-Granite 3.

£800m Towd Point Mortgage Funding 2016-Vantage 1 and US$390m Towd Point Mortgage Trust 2016-5 made up the RMBS. The CMBS consisted of US$652.9m CFCRE 2016-C7, US$913.4m CGCMT 2016-P6, US$819.3m JPMCC Commercial Mortgage Securities Trust 2016-JP4 and US$909m MSBAM 2016-C32.

Pricings
There was a long list of pricings last week. At the final count there were 10 ABS prints, five RMBS, six CMBS and 13 CLOs.

The ABS were: US$800m Capital One Multi-asset Execution Trust 2016-A6; US$475m Capital One Multi-asset Execution Trust 2016-A7; US$2bn Citibank Credit Card Issuance Trust 2016-A1; US$500m Citibank Credit Card Issuance Trust 2016-A2; US$283.6m HERO Funding 2016-4; US$1.5bn Huntington Auto Trust 2016-1; US$85.34m LendingClub Issuance Trust Series 2016-NP2; €730m Red & Black Auto Lease Germany 2; €1.015bn Santander Consumo 2; and €655m Valsabbina SPV 1.

The RMBS were: US$241.23m Bayview Opportunity Master Fund Iva 2016-SPL1; €536m European Residential Loan Securitisation 2016-1; €1.18bn Hypenn RMBS VI; JPMMT 2016-4; and A$500m Resimac Triomphe Trust - Resimac Premier Series 2016-2.

The CMBS were: US$701.68m CAS 2016-C07; US$415m JPMCC 2016-ASH; US$555m Morgan Stanley Capital Citigroup Trust 2016-SNR; RUB4bn Mortgage Agent MKB 2; US$477m New Residential Mortgage Loan Trust 2016-4; and US$280m RAIT 2016-FL6.

Lastly, the CLOs were: US$456m Allegro CLO 2016-1; US$614.1m Ares XLI CLO; US$537.6m Bain Capital Credit CLO 2016-2; US$125m Callidus ABL Corporation 2016-1; US$579m Carlyle Global Market Strategies CLO 2014-1R; US$408.75m Catamaran CLO 2016-1; US$488.4m CIFC Funding 2015-1R; US$410.4m HPS Loan Management 10-2016; €2.5bn IM Grupo Banco Popular Empresas VII; US$419.87m Jamestown CLO 2012-1R; US$407.6m LCM Partnership 2016-23; US$658.03m OHA Loan Funding 2015-1R; US$614m Riserva CLO.

Editor's picks
Tip of the iceberg?: Securitisation is increasingly recognised as providing the 'double bottom-line' benefits sought by impact investors. Indeed, the number of impact investors allocating to ABS is expected to continue rising alongside issuers seeking to broaden their investor base, despite the election of reported climate change denier Donald Trump...
Digging deeper: A recent JPMorgan study of 48 US CLOs shows that from 2013 to date there has been an average increase in WARF score from 2,719 to 2,899, while yields have decreased on average 48bp. The findings suggest that investors are not being adequately compensated, but market participants remain optimistic about the sector...
Developing marketplace: Representatives from Orchard Platform, MountainView and Global Debt Registry joined SCI over the summer to discuss marketplace lending developments. This Q&A article highlights some of the main talking points from the session, including the importance of thorough due diligence and data verification, regulatory developments and the prospect of market consolidation...
Innovative Griffon deal welcomed: Griffon Funding - which Barclays closed in September - has been hailed as an innovative model for banks seeking to reduce their regulatory capital requirements. The £2.43bn privately-placed true sale balance sheet CMBS is backed by 57 loans secured by 1,516 properties and over 12,000 lease contracts...
Rare Irish RMBS priced: Lone Star has privately placed a rare Irish non-conforming RMBS. Dubbed European Residential Loan Securitisation 2016-1, the €536.6m transaction is backed by both performing (representing 32.58% of gross book value) and non-performing (63.81%) mortgages originated by Irish Nationwide Building Society...
Euro ABS/MBS distracted: New deals are continuing to keep focus away from the European ABS/MBS secondary market. "Primary is still distracting most players, with a couple of new deals in particular drawing most attention right now," says one trader. "The Red & Black auto deal is pretty straightforward, but the next Towd Point issue is more complex and it's taking a bit of time for people to fully understand the credit and get comfortable with it..."

Deal news
• Renovate America is in the market with an usual PACE securitisation. Dubbed HERO Residual Funding 2016-1R (Cayman), the US$125m transaction is backed by the residual certificates of five previously issued PACE ABS from the HERO platform.
• The note trustee for Titan Europe 2006-5, US Bank (previously ABN Amro), has instructed the cash manager to retain €50m to provide for potential liability arising from class X noteholder contentions. As with a further four other Titan deals which are subject to class X noteholder litigation, it is unknown whether additional class X interest following default will ultimately rank senior to class A1 principal.
• The class B, C and D notes of Invitation Homes 2013-SFR1 have been upgraded by Moody's as a result of the steady build-up in equity in the properties backing the securitisation. IH 2013-SFR1 was the first-ever single-family rental securitisation (SCI 1 November 2013) and the move marks the first-ever upgrade for the segment.
• Structural amendments have been implemented in relation to Dutch auto lease ABS Highway 2015-I, following a change in ownership of the transaction's originator, Athlon Car Lease Nederland. Mercedes-Benz Financial Services Nederland acquired all the shares in Athlon on 1 December.
• Unique Pub Finance Co last week cancelled £37m out of the £190m liquidity facility amount available to the UK whole business securitisation via an agreement with RBS. Going forward, the liquidity facility amount will be sized to cover the maximum amount of debt service over any future 18-month period, with the amount available for the class M and N notes limited to £45m and £12.5m respectively.

Regulatory update
• The European Commission's CRR 2 reforms, which it unveiled last week, include proposals that appear to increase the attractiveness of securitisation in connection with the leverage ratio and net stable funding ratio (NSFR). The package embeds three main Basel 3 elements into EU law: the fundamental review of the trading book (FRTB), the leverage ratio and the NSFR.
• SFIG has released a green paper on the responsible growth of securitisation in the marketplace lending sector, focusing initially on sufficient data disclosure. The paper seeks to identify a framework of market standards and recommends best practices through an open discussion among a broad cross-section of market participants.

Evolving analytics

Valuation and risk landscape discussed

FINCAD has recently incorporated MBS into its F3 pricing, valuation and risk analytics solution. SCI asked James Church, vp, product management and R&D at FINCAD, about the challenges of bringing MBS into a common valuation and risk solution, as well as his views on the current valuation and analytics landscape.

Q: How and when did FINCAD become involved in the pricing and valuations business? How has the service evolved in recent years?
A: FINCAD was established in 1990. The founders came from the investment management industry and worked in a brokerage in Vancouver at a time when derivatives were first emerging. They saw an imbalance between the information available to the sell-side versus the information available to the buy-side.

The founders' vision was, therefore, to correct that imbalance by giving more information to those buying the derivatives contracts, so they could make a better decision about their fair value and potential risks.

That led to a product called the FINCAD Analytics Suite and was the first product that facilitated the valuation of an interest rate swap inside Excel - something that today would be taken for granted, but at the time was innovative. This product grew to become what we believe was the world's first commercially-available multi-asset class library. As the derivative market evolved, so too did the product.

FINCAD recognised that one of the main challenges was going to be understanding how to get all asset classes to interact with each other in a multi-currency, multi-asset class portfolio with a derivatives overlay. There was a tendency to look at the problem on an asset-by-asset basis, not necessarily as a portfolio problem. This became a challenge for investment firms, as they needed to understand how different asset portfolios behaved in combination with increasingly complex derivatives overlays.

In 2010, FINCAD brought in a solution to deal with the portfolio analytics problem - the FINCAD F3 Solution - and that is what is driving growth today.

Q: FINCAD has recently incorporated MBS into its FINCAD F3 Solution. Why?
A: We are seeing more demand for analytics on MBS, which is why we integrated it into our F3 product. Low-yielding investments are a new reality for investors across the globe and, as a result, we are seeing an increasing number of managers wanting to take on MBS investments to get a higher return. At the same time, new regulations are pushing fund managers to do a better job of risk-managing those positions and to be more transparent with their investors.

Q: Which market sector/s do you target and why?
A: We have a strong buy-side focus. However, we also work with smaller sell-side firms that have the same complex problems as Tier 1 institutions, but that do not necessarily have the in-house resources to deal with them.

Q: How do you differentiate yourself from your competitors?
A: When I look at the competitive landscape, our core client base - asset managers and hedge funds - have a few options. They can either use a hosted vendor, but often these can behave a bit like a black box. They can also be hard to integrate and flexibility is limited.

For those clients looking for flexibility, there are front-to-back office solutions available, but these come at a significant cost.

There is a gap in the middle that we think FINCAD fills: we can be implemented relatively quickly and, unlike hosted systems, we are more flexible and easier to integrate. Within that middle ground, we differentiate ourselves on the depth of the multi-currency, multi-asset class portfolio valuation.

Q: Which asset classes within structured finance are most problematic from a pricing and valuations perspective and why?
A: The main problem from our perspective is how to bring structured products into the same valuation or risk solution as everything else. An asset manager will have a number of different fixed income securities. Traditionally, a lot of the structured finance securities live on their own little island and so the challenge is to come up with a process that can pull everything together.

Solving that problem is something on which FINCAD has been focusing. If investors can bring MBS into the same risk solution as their other portfolio holdings, they can get a really clear view across their entire portfolio, in order to make better valuation, risk and hedging decisions.

Q: What challenges and opportunities does the current regulatory environment bring to your business? How do you intend to manage/take advantage of these?
A: The current regulatory environment brings a host of opportunities and challenges. Now more than ever, there is a greater focus on risk management and how to calculate risk - whether that involves being a lot more thorough on sensitivities, for example, or calculating VAR. Whether firms use derivatives for a hedging strategy or for an investment strategy, they must now submit an independent valuation for those derivatives - they cannot just rely on counterparty valuation any more.

Another market dynamic is that regulators are forcing firms to move away from older software solutions. Computing through Excel comes with operational risks, for example, and older systems cannot always cope with the demands of current market realities.

Q: Away from regulation, what other issues do you consider to be of importance in your industry?
A: Historically low returns in the investment environment means that investors have to look to new sectors for higher yields, such as MBS or emerging market bonds. Others may be moving into multi-currency investing, whereas previously they might have only invested in US dollar-denominated assets. Changes in strategy bring new risks to manage.

I also think that investors are getting more cautious with their money. They want to understand how returns are being made, how good a manager's risk management practices are, and how likely they are to get their money back.

Clients want better risk and valuation analytics in order to make better decisions. At the same time, the speed of decision-making is getting faster.

There is now a need to know your risk performance intra-day, on demand and to make those investment decisions quickly. In order to do that, you need faster risk analytics.

Q: What major developments do you expect/would you like to see within your industry in 2017?
A: Clients will be looking even harder at how they can optimise their businesses for regulatory compliance. Many regulations come with capital requirements - particularly in the pensions and insurance sector - so they will want to find out how to best optimise their balance sheets for 2017.

I think industry members will also be looking at what the next steps will be for regulatory compliance. There are a number of systems with manual processes that are feeding valuations into regulatory filings, for example. I would expect these to be replaced with a more controlled system that can fuel front- and middle-office analytics, while also producing numbers that can be used for regulatory filings.

Q: What developments can the industry expect to see from your service in 2017?
A: We will continue to innovate in our analytics coverage and will look to expand into the front- to middle-office workflow. F3 is growing into a solution that can provide more robust analytics for valuation risk and P&L in the front office, as well as VAR for the middle office. Increasingly we see the opportunity for front and middle office to share information, so they can make better decisions around investment strategies and risk management.

We also want to continue to work on getting clients to business value faster. Clients faced with a low return environment will want to drive efficiency in their business.

AC

Structured Finance

Allianz absorbs credit manager

Allianz Global Investors (AllianzGI) has added Sound Harbor Partners to its private debt platform. AllianzGI will acquire Sound Harbor's assets for an undisclosed sum and the Sound Harbor team will join AllianzGI.

The acquisition will allow AllianzGI's clients to access US private credit investment funds managed by a team with a track record of outperformance. The Sound Harbor team, led by Michael Zupon and Dean Criares, will become part of the AllianzGI global investment platform, maintaining the integrity of its investment strategy, process and team.

Sound Harbor is a New York-based private credit manager, focused on alternative investments in corporate loans, direct lending, distressed debt and opportunistic credit. It manages these investments on behalf of its clients in private limited partnerships, separately managed accounts and CLOs.

Structured Finance

Organisational changes confirmed

Scope Group's holding company has transitioned into Scope SE & Co KGaA. At the same time, the rating agency is raising capital to finance its accelerated European growth.

The first tranche of shares - at a volume of €30m - will be placed in the next few weeks, with almost half already confirmed with or reserved by investors. Scope plans to ultimately raise up to €100m of capital, as approved by its shareholders at an extraordinary general meeting on 27 October.

The capital-raising is targeting European insurers and pension funds, in particular. Scope will invest these funds primarily towards expanding coverage and staff numbers in major European financial markets.

The agency's new legal form, Kommanditgesellschaft auf Aktien (KGaA), combines a family-owned company's long-term focus and dynamics with a listed entity's stability and capital market access. The structure ensures that capital and strategic management are kept separate, thereby protecting Scope's from potential conflicts of interests.

The management of Scope SE & Co KGaA is represented by Scope Management SE as its personally liable partner. The executive board of Scope Management SE has the same composition as Scope Corporate's former board - Florian Schoeller as ceo and Torsten Hinrichs as coo.

Scope Management SE is owned by Schoeller Corporation and AQTON SE, as well as by Scope Foundation, which is currently being established. The foundation will be led by a board of trustees composed of five figures from the European finance industry.

The supervisory board of Scope Management SE comprises: Martha Boeckenfeld (chair), Georg Graf Waldersee (deputy chair), Sebastian Canzler and Michael Ollmann.

Structured Finance

CLO vet recruited

Fifth Street Finance Corp has appointed Patrick Dalton as ceo and a member of the board, effective on 2 January 2017, succeeding Todd Owens. Concurrently, Ivelin Dimitrov will step down as president, cio and a member of the board.

Dalton joins Fifth Street from Gordon Brothers Finance Company, where he served as president, ceo and chair of the investment committee from 2012. Prior to that role, he was president and coo at Apollo Investment Corporation from 2008, having joined the firm as a partner in 2004. He previously served as a vp at Goldman Sachs, Chase Securities Corp and Chase Manhattan Bank.

Dalton has also been named co-president of Fifth Street Asset Management.

Structured Finance

Arrow enters Italian market

Arrow Global Group is entering the Italian market with the acquisition of Zenith Service. It will purchase the servicing business for €17m, subject to regulatory approval by the Bank of Italy.

Zenith is a leading master servicer in the €168bn Italian structured finance market and also services salary assignment loans (CQS). As of June 2016, the estimated stock of the securitised market for CQS in Italy amounted to more than €3.2bn.

Arrow will retain Zenith's management team and existing service offering, but also plans to pursue a broader client offering as part of its wider Italian strategy. The firm already has a significant presence in the UK, Portugal and Benelux.

The agreed acquisition is expected to be earnings neutral after taking into account amortisation of the acquisition intangible assets and will be funded in cash from existing resources, with 60% payable on closing and 40% payable 12 months after closing. The acquisition is anticipated to complete in 1H17.

Structured Finance

Arrow names new chief

Securitisation veteran Lee Rochford will replace Tom Drury as group ceo and board director of Arrow Global from 3 January 2017. Drury, who has decided to step down from the role after five years, will remain with the business until end-February to provide an orderly handover.

Rochford was previously cfo of Virgin Money. Before that, he held senior securitisation and financing roles at RBS, Wachovia, Credit Suisse and BNP Paribas.

Structured Finance

Private credit strategies targeted

Eaton Partners has formed a distinct team that will work with and raise capital for unique private credit strategies globally. Targeted strategies include asset-backed and direct corporate lending, distressed debt, real estate credit and other specialty credit.

The team will primarily focus on representing credit managers located in the US, Europe and Asia. The firm says the aim is to work with differentiated private credit fund managers to "showcase their unique stories and risk-return profiles to institutional investors".

In 2016, Eaton has participated in or raised more than US$2.6bn for five credit funds. Since 1998, the firm has participated in or raised more than US$16bn for credit-focused funds globally, including many first-time funds.

Structured Finance

Upstart firm poaches CRE vets

World Class Capital Group has bolstered its team with several former Credit Suisse hires. The firm has brought on board Paul Smyth, Chris Callahan and Cary Williams, as well as bringing in Jeremy Stoler and Ed Mikus, who will both join in January.

Smyth is now executive md for World Class Capital and was previously chief credit officer for Credit Suisse's commercial real estate originations group. Callahan is now co-head of debt strategies at the firm and previously worked for Credit Suisse as head of trading for commercial mortgage bonds and CLOs.

Williams is hired as md for World Class Capital and he was previously a director in Credit Suisse's structured products group. Stoler, whose role is yet to be announced, was previously head of origination in Credit Suisse's commercial real estate team. Mikus has most recently worked within Credit Suisse's CMBS and CRE structuring and analytics team, and his role with World Class Capital is also yet to be confirmed.

World Class Capital has also hired Keith Crandall, who was previously md at C-III Asset Management, but his new role is yet to be announced.

Structured Finance

Independent directors named

TICC Capital Corp has appointed two new independent directors - Richard Neu and George 'Chip' Stelljes - to its board. The appointments expand the number of directors on the TICC Capital board to seven, five of whom are independent. The pair will serve on the company's audit, nominating and corporate governance, valuation and compensation committees.

Neu previously served as a director of MCG Capital Corp from 2007 until its sale in 2015, as well as chairman from 2009 to 2015 and ceo from November 2011 to November 2012. Stelljes is currently the managing partner of St John's Capital. He previously held various senior positions with the Gladstone Companies, including cio, president and director of Gladstone Capital Corp and Gladstone Investment Corp from 2001 to 2013.

CDO

CDO complaint settled

Stifel Nicolaus and its former svp David Noack have admitted wrongdoing and paid over US$24.5m to resolve a US SEC enforcement action involving the sale of synthetic CDOs to five Wisconsin school districts. The SEC's complaint - filed in August 2011 in the US District Court for the Eastern District of Wisconsin - alleged that Stifel and Noack harmed the school districts by selling them US$200m in unsuitably risky and complex synthetic CDOs funded largely with borrowed money. Ultimately, the synthetic CDOs failed and the school districts suffered a complete loss of their cash investment.

A final judgment has been entered permanently enjoining Stifel and Noack from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, and ordering Stifel and Noack to jointly pay disgorgement and prejudgment interest of US$2.44m and to pay civil penalties of US$22.5m and US$100,000 respectively. The judgment requires Stifel to distribute US$12.5m of the penalties to the injured school districts. This distribution - along with the prior Fair Fund distribution of US$30.4m in a related case instituted in September 2011 and settlements obtained in the school districts' private lawsuit - will fully compensate the school districts for their losses.

In addition, the final judgment recites Stifel's and Noack's admissions to misconduct that harmed the five Wisconsin school districts. Section VI of the final judgment reflects that Stifel and Noack admitted that they made certain material misstatements to the school districts that overstated the safety and downplayed the risks of investing in CDOs, as well as failing to disclose certain material facts and independently perform meaningful suitability analysis with respect to the CDO investments.

The court's entry of the final judgment resolves this litigation in its entirety. Noack also has consented to the entry of an SEC order, which imposes industry and penny stock bars, with the right to reapply after five years.

CMBS

CRE platform expands

Silverpeak Real Estate Finance is expanding its product offering to include non-recourse floating-rate balance-sheet debt and fixed-rate or floating-rate subordinate debt for stabilised or transitional properties. These new capabilities will be funded by additional equity investment from affiliates of Elliott Management Corporation.

The new products are offered in addition to what has been the firm's core business for the past three years - non-recourse fixed-rate CMBS debt. The platform will now be able to retain risk for up to ten years through direct retention of loans, subordinate debt, CRE CLO equity and CMBS vertical tranches or traditional CMBS B-pieces. The firm will purchase risk retention-compliant securities for CMBS transactions that contain both its own and partner loans, as well as third-party CMBS transactions.

As part of the expansion, the firm has changed its name to Silverpeak Argentic. Doug Tiesi, ceo, notes: "The expanded platform represents our repositioning of Silverpeak Argentic from exclusively a distribution-based model to a comprehensive investment management company. Sponsors who choose Silverpeak Argentic know we will be their lender throughout the life of their business plan."

The additional equity, along with more borrowing capacity, will allow Silverpeak Argentic to scale the lending group to more than US$3bn of real estate debt investments annually. Since its launch in 2013, the firm has funded more than US$2bn of commercial real estate loans, primarily for contribution to CMBS trusts.

The platform has approximately 30 employees, with offices in New York, Chicago, Los Angeles and Dallas.

ABS

Noteholder committee mooted

A number of investors in the UK student loan ABS, Honours, indicated during a recent noteholder conference call their wish to form a committee to assist the issuer in dealing with the Consumer Credit Act non-compliance investigation (SCI passim). Accordingly, the issuer is proposing that one or more ad hoc committees - representing noteholders or individual classes of noteholders - be formed.

The aim is to assist the issuer and the trustee with the next steps and approaches to the various issues that noteholders may wish the issuer to follow. It is hoped that the ad hoc committees will be made up of noteholders holding at least 40% or more of the principal amount outstanding of the notes. If sufficient numbers of noteholders volunteer to participate in a committee, the issuer will hold a call on 6 December to discuss in more detail the organisation and terms of engagement for the committees, including whether to form separate ad hoc committees representing individual classes of noteholders.

The issuer has made documentation, including the trust deed, available for inspection by noteholders at its offices.

ABS

Precious metals ABS prepped

Monex Deposit Company (MDC) is in the market with a rare public securitisation secured by precious metals. Dubbed Scala Funding Company Series 2016-1, the US$100m ABS is arranged by Piper Jaffray.

The notes are backed by a pool of retail loans originated and serviced by Monex Credit Company (MCC), secured by cash, gold, silver, platinum and palladium. The transaction will revolve for up to 49 months.

Morningstar Credit Ratings notes that the collateral pool is granular, with 1,854 accounts and an average balance of US$51,760. The largest 15 accounts have been with Monex for over a year, for a period averaging 6.2 years.

The underlying loans are US dollar-denominated and offered with a minimum of 25% initial equity requirement. Each loan is secured by all of the metal acquired by the customer.

The interest of 5.9% per year accrues daily and if the minimum equity level of 14% is breached, the servicer may immediately demand additional collateral, up to the initial minimum equity level of 25%. The collateral for any loan with less than 7% equity will be liquidated as soon as possible, although the servicer may delay liquidating the loan collateral if the transaction is performing within outlined thresholds.

The market value of the collateral is calculated daily and any equity shortfalls not addressed through voluntary cash or metal infusions from MDC are resolved via collateral liquidation. Borrowers may pay their loans in part or in full without penalty.

MCC performs no borrower underwriting and looks solely to the collateral for repayment, perfecting its security interest via possession of collateral using an outside metals depository, Brinks. All amounts become due five years after the last loan advance.

Provisionally rated by Morningstar, Scala Funding 2016-1 comprises US$72m double-A rated class A notes, US$14m single-A rated class Ms and US$14m triple-B rated class Bs. The tranches have assumed coupons of 3.35%, 3.70% and 4.70% respectively.

Monex, along with affiliates and predecessor companies, has facilitated and financed investments in precious metals for nearly five decades. The entities have sponsored a number of transactions and none of the rated notes have suffered losses. Annual losses on the originated loans since 1987 peaked at 0.063%.

ABS

Aircraft ABS programme planned

Floreat Group is readying a securitisation programme focused on the aviation sector, with the aim of providing long-term fixed income investments for their institutional and high net-worth clients. The first issuance - of up to US$175m of notes - is planned for this month and will be backed by a portfolio of four Airbus A330s on leases to geographically diversified airlines.

The notes will have a 10-year term in line with the maturity of the underlying leases, pay a fixed coupon of 7% per annum, be issued by a Luxembourg securitisation vehicle and listed on the Euro MTF market of the Luxembourg Stock Exchange. A portion will be structured as Sharia-compliant for Floreat's Middle Eastern investors.

The first asset to be purchased for the portfolio is leased to Virgin Australia; the remaining aircraft are expected to be acquired over the course of December. The total value of the portfolio will be around US$400m and will be funded with the proceeds of the notes and senior debt provided by NordLB.

"We have previously funded individual transactions in the aviation space to satisfy the demand from our core clients for long-term income-producing transactions secured by real assets. The issuance of listed notes was a natural next step for our asset-based lending programme - which, to date, has only been open to the group's core clients," comments Ben Churchill, a partner at Floreat Capital Markets.

Due to anticipated strong demand, Floreat plans to follow this initial issuance with a second ABS, with a view to issuing up to US$1bn in 2017.

Doric has negotiated the acquisitions and leases, and will be responsible for the asset management of the portfolio and eventual remarketing of the aircraft. The notes will be placed by Floreat Merchant Banking, while Deutsche Bank is acting as the primary settlement agent and paying agent. Allen & Overy advised on the transaction.

ABS

Wildfire affects timeshare ABS

Westgate Resorts has reported damage at its Westgate Smoky Mountain Resort in Gatlinburg, Tennessee, following a wildfire that originated around 10 miles away in the Great Smoky Mountain National Park. DBRS notes that it currently rates five ABS transactions which contain collateral from the resort.

The affected transactions are Westgate Resorts 2013-1, Westgate Resorts 2014-1, Westgate Resorts 2015-1, Westgate Resorts 2015-2 and Westgate Resorts 2016-1. The concentration of collateral related to the resort is 21.37%, 15.84%, 12.49%, 13.53% and 24.31% respectively.

Westgate estimates that 69 of the 90 resort buildings, which contained 624 units, were destroyed in the first. Around 356 units were unaffected, along with a range of facilities, and the first 260 of these will be reopened to the public within the next fortnight.

Westgate believes insurance coverage will be sufficient to restore the resort and has already started the process to repair and rebuild all of the damaged buildings. The reconstruction is expected to last 18 months to 30 months.

ABS

Brexit to affect auto ABS

The UK's decision to leave the EU will impact UK auto ABS, although DBRS expects ratings to remain robust. The rating agency predicts a continued softening in demand for new vehicles, driven by uncertainty surrounding Brexit, which could have several implications.

First, a reduction in demand for new cars could lead to customers holding their vehicles to the maturity of the underlying finance contract, which would reduce early settlement rates and potentially expose the transaction to increased credit losses through either non-payment or voluntary termination. Second, manufacturer initiatives to stimulate new car sales could lead to downward pressure on residual values, although DBRS believes this could potentially be offset by an increase in demand for used car purchases and new vehicle price increases.

Third, residual value volatility could occur within specific vehicle subsets as customer demand shifts from luxury to more practical vehicles, which is what was observed in 2008 and 2009. This would result in small car pricing remaining resilient, but premium vehicles being subject to downward price pressure.

Finally, DBRS says subsequent movements in vehicle pricing may expose transactions to a greater level of voluntary termination risk under agreements regulated by the Consumer Credit Act. The rating agency does not expect to take rating actions based on these changes.

ABS

Equipment, card ABS 'to stay strong'

Both US equipment and credit card ABS will remain strong in 2017, says Moody's. Issuance should be along the same lines as 2016 for equipment ABS, but should pick up for credit card ABS.

New agriculture and construction transactions should look similar to those issued in 2016 in terms of structure and collateral credit quality. Strong farm balance sheets will shield the agriculture sector from heavy losses, despite declines in net income. While agriculture and construction transactions have begun to experience higher losses, they remain below 1%.

Weakened manufacturing should not prevent transportation ABS performance from remaining strong, despite the correlation between the strength of manufacturing and demand in the trucking industry. There may, however, be slightly higher collateral losses than in the past few years, largely due to lower recovery rates on defaulted loans.

However, while credit quality for small-ticket leases and loans is expected to remain strong, Moody's warns that new business formation could increase risk and says losses in new deals will rise slightly. Economic trends will drive losses higher as small businesses expand and increase their risk, while the formation of new businesses which increase competition could also lead to a reduction in underwriting standards and weakening credit performance.

In the credit card space, performance, credit quality and sponsors are all expected to remain strong. Deals will continue to benefit from the high credit quality and strong performance of the collateral backing the transactions.

Charge-off rates are expected to remain low, while principal payment rates may increase marginally. This is underpinned by improvements in the macro economy and labour market.

Excess spread is expected to remain high, despite the Fed's likely increase in short-term interest rates. Credit card ABS issuance should pick up, due both to consumer revolving credit breaking the US$1trn mark next year and the high cumulative ABS balance maturing in 2017, most of which is expected to be refinanced with new deals.

"The increase in issuance will mark a rebound from two years of consecutive declines. The rising interest rate environment will also make securitisation a relatively more attractive source of funding as the cost of deposits increases," says Moody's.

The agency adds: "In 2015 and 2016, new issuance has refinanced about two-thirds of maturing ABS. If that relationship holds, we expect approximately US$35bn in new issuance in 2017, up from US$23bn in 2016 and US$31bn in 2015."

ABS

SLABS to see strong performance

A major theme in the US private student loan market in 2017 will be the continued origination and securitisation of loans with strong credit quality from new marketplace lenders that specialise in the refinancing or consolidation of loans using online platforms, Moody's says. The agency notes that the credit quality of new private student loan ABS from traditional lenders will also continue to be good, reflecting their strong underwriting standards.

"The newer marketplace lenders - such as CommonBond, Darien Rowayton Bank (DRB), Earnest and Social Finance (SoFi) - target borrowers with relatively high credit quality," says Moody's vp Joseph Grohotolski. "The quality of originations from these lenders will be strong in 2017, although somewhat weaker than the loan pools backing their 2016 deals, as the lenders continue to broaden their borrower base."

In addition to strong collateral pools, private student loan ABS from traditional lenders will maintain high levels of credit enhancement in the form of overcollateralisation, subordination and excess spread - similar to the levels seen in their deals over the past few years. The credit performance of outstanding transactions is also expected to remain strong across the sector, as defaults and delinquencies continue to fall.

Voluntary prepayments for non-seasoned loans that traditional lenders originate will continue to increase gradually, from about 3% to as much as 8% over roughly the first five years since origination, according to Moody's. "An interest rate increase by the Federal Reserve could accelerate prepayments for variable rate loans," says Moody's vp Pedro Sancholuz Ruda. "Consistent with our view that the economy will continue to grow at a healthy pace, we project two to three more rate increases in 2017, after a likely increase later this month."

Structured Finance

Vertical retention upped

The European Parliament's Economic and Monetary Affairs Committee (ECON) yesterday adopted the European Commission's securitisation package, with a number of amendments (SCI 8 December). Most significantly, risk retention requirements for vertical retention has been increased to 10%.

Risk retention requirements for horizontal retention will remain at 5%. However, revolving transactions may become subject to 10% risk retention.

Now that ECON has voted on its common stance to the new bills, they will move on to the trilogue negotiations with the European Commission and European Council. Rabobank credit analysts suggest that this process will begin early next year.

"Although the European Parliament's tough stance on risk retention will certainly be discussed in this trilogue, we are of the opinion that regulators are likely to have some hurry, as the securitisation bills are a crucial element of the EU's big Capital Markets Union project. As such, we would not be surprised if the Commission and Council will agree with most of the Parliament's amendments," they observe.

Once the European Commission, Council and Parliament agree on a common text, the bills can be adopted. The Rabobank analysts believe that this could occur in 1H17, with enforcement possible in 2H17 or early 2018.

The new rules will apply to all deals launched after the date of entry of the new regulations.

Structured Finance

Proposals 'counter to ABS revival'

New European Parliament proposals do not go far enough to help revive securitisation in Europe, according to AFME. This follows a vote today by the Parliament on the simple, transparent securitisation (STS) framework.

Richard Hopkin, head of fixed income at AFME, states that the association welcomes the fact that the European Parliament and Council have now endorsed the establishment of an STS framework and that MEPs support in principle the introduction of a regime for both third country STS securitisations and for non-EU participants. "However, we are concerned that many aspects of the proposals run counter to the objective of reviving securitisation in Europe and, if adopted as currently proposed, will discourage the use of securitisation as a funding and risk transfer technique. Unless these concerns are addressed in the trilogue discussions, this key component of the Capital Markets Union will not succeed," he says.

AFME suggests that while European securitisation has performed well through the financial crisis, issuance in European has been very low at only €40.2bn by the end of 3Q16 and the market has stalled due to "punitive regulation which does not recognise this strong performance". Additionally, the trade body says that key provisions of the European Parliament's compromises - not only STS - need to be amended to enable securitisation in Europe to thrive and fund the real economy.

The association adds that certain areas need to be addressed in the Parliament's final proposals. One of these areas is capital and proxy data, so as to allow European banks to use proxy data to enforce a true Capital Markets Union by opening up a much wider range of investors.

AFME adds that provisions need to be made for proper recognition of private transactions, including appropriately adjusted, yet prudent standards for disclosure for private transactions. Additionally, the association believes that transparency and standards of disclosure are already very high in Europe, so further transparency rulings would be burdensome for investors and issuers.

Further amendments should be made, according to AFME, in terms of the restrictions on market participants and that the securitisation sector should be opened to a larger number of players and not just institutional investors, as proposed. Finally, the association suggests that risk retention requirements in Europe for all securitisation, not just STS, should not be increased as it "will damage the efficiency of securitisation as a funding tool and make it more difficult for banks to transfer risk, thereby reducing their ability to lend to the real economy."

Structured Finance

LatAm outlook 'stable'

Latin American structured finance transactions should enjoy a stable credit environment next year, despite subdued economic growth, says Fitch. Around 86% of the agency's rating outlooks for the sector are stable or positive, compared to 80% at the end of last year.

Fitch's sector outlook is stable for consumer ABS, where adequate credit enhancement and structural features continue to protect Brazilian transactions against unfavourable macro conditions and Mexican deals are also expected to continue to perform well. RMBS ratings are broadly stable, thanks to seasoned portfolios and as-expected delinquencies and prepayments, so Fitch-rated RMBS should be stable in spite of economic contraction in Brazil.

Brazil's commercial property market has experienced consecutive quarters of declining cashflows after a long upward growth trend, yet Brazilian CMBS continue to perform near expectations.

Transaction ratings are sensitive to the credit quality of the relevant sovereign environments in the region and certain negative sovereign rating pressures have emerged. Fitch notes that a prolonged recession in Brazil with higher-than-expected unemployment growth could harm asset performance and drive negative rating actions to certain transactions.

Structured Finance

Trump may shake up SF regs

Donald Trump's election victory has the potential to dramatically alter the regulatory landscape for banks and the structured finance industry, observes DBRS. Trump's transition website calls to dismantle the Dodd-Frank Act and replace it with a series of new policies to encourage economic growth and job creation.

The Dodd-Frank Act was enacted in July 2010, creating new financial regulatory processes to enforce transparency and accountability and creating CFPB. Market efforts to comply with the law have been time-consuming and expensive, with the American Action Forum putting the cost to the industry at US$36bn.

DBRS believes it is unlikely the Dodd-Frank will be entirely dismantled, but reckons certain provisions will be affected. One of these would be stripping power away from the Financial Stability Oversight Council. The powers of the CFPB could also be limited.

If the Republicans implement their intended Financial Choice Act, the source of funding for the CFPB would change from the Federal Reserve to Congress and the CFPB would be required to do more cost-benefit analysis before instituting new rules. The CFPB's director would be replaced by a commission subject to congressional oversight and the authority to ban bank products or services it deems abusive would be repealed.

As well as a legislative approach, the CFPB could also be the subject of executive action. A recent District of Columbia court of appeals ruling has led the CFPB to operate as an executive agency, meaning President Trump will have the power to direct the CFPB director.

"Regulatory reform that scales back some of the cumbersome federal rules may serve to reinvigorate some markets, particularly the RMBS market. Additionally, broader regulatory reform (eg; accounting rule changes and capital withholding requirements) could have an even further expansive impact thus stimulating the wider ranging ABS markets," says DBRS.

Structured Finance

North American outlook 'stable'

Stability will likely remain for structured finance ratings in the US and Canada next year, although some modest asset-level deterioration is likely as performance in many sectors has peaked, says Fitch. The rating agency adds that annualised net losses for subprime auto ABS could reach 12% in 2017, particularly for less established sub-prime issuers Fitch does not rate.

The rating agency adds that in certain CMBS including hotel and multifamily, performance is at or near peaks but "neither that nor a mixed picture for office and retail properties will be enough to dent rating performance for investment grade Fitch-rated CMBS". The firm adds that the CMBS outlook is more positive due to the greatly diminished fear over the loan maturity wall, thanks to borrowers taking advantage of low interest rates by defeasing and refinancing their loans. Fitch adds that while some of the remaining loans may run into some problems refinancing, it will not be enough to affect investment grade CMBS.

The firm comments that RMBS and CLOs will perform strongly in 2017, although risk retention will remain an unanswered question for CLOs through 2017. Strong underwriting and positive home price trends have positively impacted collateral for new and recently originated RMBS, Fitch concludes.

Structured Finance

Mortgage-linked ABS prepped

The £292.4m Towd Point Mortgage Funding 2016-Granite 3 has hit the market. The transaction represents the term take-out of the warehouses that were put in place to finance the acquisition of the assets by Cerberus.

The portfolio comprises 27,212 unsecured personal loans to borrowers in the UK, which were initially originated by Landmark Mortgages (formerly Northern Rock) under the 'Together' mortgage-linked and 'Mortgage Plus Unsecured Loan' products offered at the same time as they took out a secured mortgage loan. Moody's notes that obligations of the borrower under the unsecured personal loans are independent of the obligations of the borrower to pay the amounts due under the associated mortgage loans. Neither do the loans benefit from any security provided by the borrowers in respect of any linked mortgage.

The majority of the collateral was originated in 2005-2007 and is currently financed through two outstanding warehouse transactions rated by Moody's - Neptune Unsecured Warehouse 1 and 2 (SCI 16 November 2015).

The agency has assigned the following provisional ratings to the Towd Point 2016-Granite 3 notes: Aaa to the class As; Aa2 to the class Bs; A2 to the class Cs; Baa2 to the class Ds; Ba2 to the class Es; B2 to the class Fs. The subordinated class Z1 and Z2 notes, as well as the SDC, DC1 and DC2 certificates are unrated.

Separately, Cerberus has released initial price thoughts for its new UK RMBS, Towd Point Mortgage Funding 2016-Vantage 1. The £821.7m deal is backed by re-performing/non-conforming mortgages originated by GE Money, First National Bank and Igroup. Pricing is expected by the end of this week.

Structured Finance

Ratings watch follows classification error

S&P has placed the ratings of CAN Capital Funding Series 2014-1's class A and B notes on creditwatch with negative implications. A correction by CAN Capital Funding of the delinquency statuses of previously misclassified assets has triggered a rapid amortisation event.

The misclassified assets should have been classified as either defaulted or subject to a material modification, but the servicer's information system did not classify these assets properly, leading to reporting errors. The defaulted assets need to be taken out of the adjusted performing asset balance.

After a recalculation of the adjusted performing asset balance, it has been determined that such balance is below the target asset balance, triggering the rapid amortisation event. Breaching the rapid amortisation trigger terminated the revolving period six months earlier than its original scheduled date and has resulted in approximately US$46m being distributed to class A noteholders on the most recent payment date.

S&P notes that, as of the November 2016 payment date, the outstanding note balance is US$124.85m for class A and US$20m for class B notes. The portfolio has not breached any concentration limitations.

CAN Capital Funding has subsequently put three senior executives on leave. It is also slowing down lending until at least the end of the year.

Structured Finance

Chinese CLO outlook 'negative'

The performance of assets backing Chinese auto loan ABS and RMBS will be stable throughout 2017, but negative for CLOs, according to Moody's. The rating agency adds that future deals with high exposures to China's lower-tier cities or industries facing overcapacity issues will underperform.

Chinese auto ABS collateral is expected to be of good credit quality, so delinquencies will remain low throughout 2017. While China's economic growth may slow, in general growth rates are robust, supporting the performance of auto loans.

In regard to Chinese RMBS, Moody's comments that the assets backing the deals will be of good credit quality through 2017, while delinquency and cumulative default rates on existing deals will remain low due to loan seasoning, low interest rates and property value appreciation. The agency adds that deals with high exposure to loans from lower-tier cities could be at added risk.

For Chinese CLOs, Moody's anticipates that asset quality will be good for new deals issued in 2017, compared with earlier vintages, as lenders have tightened their underwriting policies over the past two years. The agency's outlook for outstanding deals is negative, however, because it sees delinquencies increasing "in light of high levels of corporate leverage and corporate loan delinquencies."

The agency adds that defaults in CLOs will remain low, due to access that distressed corporates should have for funding to refinance debt. The firm concludes that securitisation of NPLs will grow throughout 2017, due to an increase in the number of NPLs.

CDO

Zohar II policy bolstered

MBIA Insurance Corp has accepted a binding commitment letter from certain holders of its 14% fixed-to-floating rate surplus notes, pursuant to which they will provide senior financing of up to US$325m. Together with subordinated financing of US$38m from MBIA Inc and approximately US$60m from its own resources, the funds will be used to pay an anticipated claim on its insurance policy insuring certain notes issued by Zohar II 2005-1, which mature on 20 January 2017.

MBIA Inc has agreed to provide up to an additional US$50m of subordinated financing to MBIA Corp under the facility, if needed, to provide additional liquidity. The facility will be secured by MBIA Corp's rights to reimbursement and recovery with respect to the claim it paid under its policy insuring the class A1 and A2 notes issued by Zohar CDO 2003-1 (Zohar I) and its rights to any claim paid under its policy insuring the Zohar II notes.

The Zohar I notes defaulted in November 2015 (SCI 23 November 2015) and the Zohar II notes are expected to default in January, representing approximately US$1.3bn in CDO collateral. MBIA says it "remains prepared to work with Patriarch Partners and the collateral manager of the Zohar entities to institute a transparent and comprehensive plan to sell or refinance the assets owned by the Zohar entities in an orderly manner to ensure that their obligations are fully satisfied".

The insurer notes that while a consensual approach is preferable and in the interest of all parties, in the absence of the implementation of a good faith plan, it will continue to aggressively seek to enforce its rights to the full reimbursement of the insurance claims paid. The latest attempt to liquidate Zohar I collateral is said to have been postponed due to the emergence of new information.

MBIA currently owns Zohar II notes with an outstanding principal amount of US$38m and expects them to be paid in full on the maturity date, subject to consummation of the facility. The closing of the facility is subject to specified conditions, including MBIA Corp acquiring the Zohar II notes with an outstanding principal amount of approximately US$347m from Assured Guaranty Corp in connection with the sale of MBIA UK.

CLOs

Risk retention preparedness polled

Maples Fiduciary has surveyed its US CLO manager clients to provide an update on manager strategies and preparedness for risk retention. The findings suggest that overall preparedness has increased, compared to the firm's last survey in February, while implemented or planned strategies have been refined ahead of the impending deadline.

The Maples Fiduciary survey results show that 89% of respondents have risk retention structures in place or will imminently, representing a 16% increase from February. A few managers are looking at multiple risk retention structures on a deal-by-deal basis.

Of those polled, 71% prefer the capitalised majority-owned affiliate (C-MOA) or majority-owned affiliate (MOA) risk retention structure, up from 55% in February. Managers planning to use a capitalised manager vehicle (CMV) have decreased from 25% in February to just 20% currently.

The majority (67%) of respondents are using risk retention structures that are both US and EU compliant, 48% of which are originator vehicles. Of those with US risk retention structures, only 9% would consider a dual-compliant structure.

A combination of internal and external financing accounts for the most popular (45%) way of funding CLO risk retention. Internal financing has increased to 38% from 26% in February.

For the 5% retention piece, 58% of managers indicated that they would take a horizontal slice, while 34% favoured the vertical slice.
The Cayman Islands and Delaware remain the dominant jurisdictions for US CLO risk retention structures, with 93% of respondents using one or both - an increase of 13% from February.

Maples Fiduciary collected data from over 60% of active US CLO managers for the survey.

CLOs

SMART CLO objections flagged up

The potential disposal of non-performing assets, as previously proposed by SMART SME CLO 2006-1, has been opposed by noteholders who assert that it would be in breach of the terms of a CDS between the issuer and swap counterparty, Deutsche Bank Frankfurt. As well as problems with the CDS, the noteholders have identified issues with the bank account agreement.

The noteholders say the non-performing asset disposal would breach the terms of the CDS and would be a violation of the servicing standards and credit collection policies. Deutsche Bank, as swap counterparty, denies any breaches or violation.

The noteholders say there have been multiple breaches of the conditions to settlement under the CDS, resulting in the improper payment of floating amounts to the swap counterparty. The noteholders assert that such improper payments give rise to an obligation on Deutsche Bank to reimburse the issuer for such amounts.

The noteholders also say that certain reference obligations were removed from the reference portfolio because they either failed to satisfy the eligibility criteria or replenishment conditions at the time they were added, or were otherwise improperly included in the reference portfolio for the time that they comprised part of it. Additionally, the noteholders point to failures by Deutsche Bank in its capacities as swap counterparty and deposit bank to take timely actions as prescribed in the CDS and bank account agreement upon Deutsche Bank Frankfurt's credit ratings being downgraded below the required ratings set out in the CDS and bank account agreement.

Following these failures, the issuer advised the trustee, BNY Mellon, that it believed the deposit bank had failed to fulfil its remedial obligations as per the bank account agreement and therefore an event of default had occurred. This permits the trustee to withdraw sums standing to the credit of the SMART account and deposit these sums in an account established with a replacement bank.

Last month, the trustee asked the deposit bank to nominate a suitable replacement bank. However, the deposit bank has contested the ability to enforce the right to withdraw the balance of the SMART account.

In response to the issues raised by the noteholders, the trustee requested that the issuer provide an officer's certificate confirming that all parties have maintained compliance with all relevant terms of the CDS, indenture and other relevant transaction documents. The issuer declined to do this, but did provide an officer's certificate of compliance in accordance with its obligation to section 7.9 of the indenture covering the year ending 31 December 2015.

The trustee is not bound to investigate facts or matters unless under the written direction of the majority of the controlling class or one of the rating agencies used for the deal. If the trustee does not believe payment of the expenses and liabilities of such an investigation is reasonably assured, it may require indemnity satisfactory to it against such expenses and liabilities. It has not, as of yet, received any such written direction or indemnity.

CMBS

Call likelihood examined

Fitch anticipates that an increasing number of US CMBS approaching the end of their expected life will have clean-up call options exercised over the next several years. Obstacles that may impede them from being exercised efficiently include ambiguity in deal documents, a lack of standardisation of processes and potential litigation costs.

Fitch notes that PSAs for more recently-issued conduit transactions allow a clean-up call at a 1% threshold, while large loan and single-borrower transactions have typically higher thresholds closer to 10%. The agency examined its legacy CMBS portfolio to identify transactions that may be eligible for clean-up calls. Through end-3Q16, 174 transactions have less than 10% of their original pool balance remaining.

Fitch found that the decision to exercise a clean-up call is highly dependent on the performance of the remaining loans in the pool. For transactions with less than 1% of the original principal balance remaining, 12 of the 17 currently have no loans in special servicing and are likely candidates for clean-up calls. However, adverse selection remains a concern as the remaining properties are generally smaller balance (averaging US$1.2m), retail (representing over 50% by outstanding balance), located in secondary/tertiary markets, occupied by a single tenant with binary risk or older in age.

For transactions with between 1%-5% of their original pool balance remaining, 43 of the 88 have no loans in special servicing and are likely candidates for clean-up calls. Conversely, two large loan transactions (US$143m) each have their one remaining loan in special servicing and are unlikely to be cleaned up.

For transactions in the 5%-10% bucket, one-third of (11 transactions totalling US$1.86bn) have at least half of their loans in special servicing. Three of them have no loans in special servicing.

Fitch suggests that master servicers may benefit most from exercising the option as the number of loans remaining in a trust decreases, the economics of servicing diminishes.

CMBS

CMBS pay-offs dip

Trepp reports that the percentage of US CMBS loans that paid off on their balloon date dipped in November to 66.8%, just below the October level of 68.6%. Over the last four months, the range between the highest and lowest levels has been less than 2%, as a little over two-thirds of the aggregate balance has consistently paid off.

Last month's tally remains higher than the 12-month moving average of 65.6%, however. By loan count as opposed to balance, 74% of loans paid off in November. On this basis, the pay-off rate was about three points lower than the October level of 77.1%.

The 12-month rolling average by loan count is now 70.1%.

CMBS

CMBS record volume observed

US CMBS private-label pricing volume totalled US$11.9bn in November, which was the highest monthly volume since September 2014. However, Kroll Bond Rating Agency notes that year-to-date supply of US$64.5bn is still down 28.8% year-over-year.

There was only one rating downgrade in the month, as well as 364 affirmations. The rating for one class of STRIPs 2012-1 was placed on watch upgrade.

The transactions that were reviewed contained 30 Kroll loans of concern (K-LOCs), which means they are either in default or at heightened risk of default in the near term. Of the K-LOCs, nine were outstanding at the time of a prior transaction review, resulting in a net increase of 21 for the month.

The transactions featuring K-LOCs are: CLNY 2014-FL2; FREMF 2013-K35; GSMS 2015-GS1; GSMS 2012-GCJ9; RCMT 2015-2; CLNY 2014-FL2; COMM 2014-UBS6; GSMS 2012-GCJ9; GSMS 2015-GS1; MSBAM 2013-C13; RCMT 2015-2; and JPMCC 2014-FL6.

2016 has witnessed three consecutive quarters of increases to the barbell credit indicator, which is used to identify transaction skewness in regard to leverage. The metric is the sum of the loans with LTVs below 70% and above 120% and it increased in excess of two times from 1Q16 to 3Q16, largely due to increasing numbers of low leverage loans being added to pools. That trend broke in October, before the barbell indicated experienced a marked increase in November.

The three-month rolling average Kroll IO index, which measures CMBS exposure to interest-only loans, increased for the third consecutive month to hit an all-time high of 47.9%, up from 43.2% in October. Kroll attributes the increase to six deals with an average IO index of 52.5% being added in November, while two with an average index of 38.1% were removed.

"The growth in the IO Index was driven by an increase in full-term IO loans, which have experienced a marked increase since September. Among the deals added this month, was CD 2016-CD2, which has the highest IO index (70.2%) of all KBRA-rated conduits. Without this transaction, the IO index would have been 46.2%," says Kroll.

Kroll debt service coverage inched past its all-time record high from 2.06x in October to 2.07x in November. The three-month average debt yield decreased from 10.1% to 9.9% at the same time.

CMBS

Maturity defaults inch up

The 12-month rolling loan maturity default rate for the European CMBS in S&P's rated universe increased to 21.8% from 21.1% at end-November. The delinquency rate for continental European senior loans decreased to 67.9% from 68.6%, while the rate for UK loans remained at 34%. Overall, the senior loan delinquency rate decreased to 54.7% from 55.4%.

RMBS

First CSP release rolled out

Freddie Mac has implemented the Common Securitization Platform (CSP) for certain single-family fixed-rate MBS. Dubbed Release 1, the development paves the way for Release 2, which will enable a combined Freddie Mac and Fannie Mae US$3.5trn market of to-be-announced (TBA) MBS.

The successful implementation of the CSP's core infrastructure and operations is a critical milestone on the path to the implementation of the Single Security Initiative. Freddie Mac and Fannie Mae have been working together - along with their joint venture, Common Securitization Solutions (CSS) - under the direction of the FHFA to create a common fungible security that will be issued and guaranteed by either of the GSEs.

Release 1, which launched on 21 November, enables Freddie Mac to transfer certain securities operations for its Gold participation certificates (PCs) and Giant PCs to CSS and the CSP. This will enable both GSEs to implement the Single Security Initiative by issuing the new uniform MBS (UMBS) and commingled resecuritisations through CSS and the CSP. Commingled resecuritisations of UMBS - which can combine UMBS issued by Freddie Mac and/or Fannie Mae - will be called Supers (the UMBS counterpart to Giant PCs).

There are approximately US$1.4trn in Freddie Mac 45-day PCs, of which an estimated US$1.1trn are expected to be exchangeable by PC holders for 55-day UMBS once the new security is officially launched. UMBS and Supers have the potential to transform the separate multi-trillion dollar TBA markets for Freddie Mac and Fannie Mae MBS into a single TBA market of US$3.5trn, second in size only to the global market for US Treasuries.

Separately, Freddie Mac unveiled Dealer Direct, its online securitisation portal. Through this portal, authorised dealers can efficiently form Freddie Mac Giant securities and access the Freddie Mac REMIC Structure Validation Tool.

In the future, the GSE plans to introduce Dealer Direct functionality that will permit the exchange of legacy PCs for the new UMBS single security or, if applicable, another new twenty-fifth pay date security.

RMBS

Disease insurance 'credit positive'

A growing proportion of mortgages backing Japanese bank-issued RMBS include specified disease insurance, in addition to group life insurance. Moody's says the trend is credit positive for such transactions.

Specified disease insurance covers mortgage borrowers for serious illnesses - such as cancer, heart attack and stroke - thereby negating the risk that borrowers will default on their loans if they fall ill and suffer a loss of income or incur higher medical expenses. If a mortgage borrower with specified disease insurance suffers from a serious illnesses and is in a prescribed condition for longer than a stipulated period, insurers pay out benefits to the mortgage lender and the borrower is exempted from paying the residual outstanding amount of their loans. The specified disease insurance benefits that mortgage lenders receive are used in the redemption of RMBS as collections, thereby reducing the likelihood of losses in RMBS deals.

Moody's reports that the proportion of mortgages with specified disease insurance has increased in RMBS deals issued by both Japan's large mega banks and newer banking groups (which are mainly internet banks or banks affiliated with large retailers). For example, in Sumitomo Mitsui Banking Corporation (SMBC) RMBS, the proportion of mortgages with specified disease insurance is around 70%-80% for deals issued in 2016, compared with around 40%-50% for deals issued in 2010 and 10%-20% for deals issued in 2006.

For RMBS issued by new-type banks, the share of mortgages with specified disease insurance doubled to around 40% in 2016 from 2011. RMBS issued by these banks are backed mainly by refinance mortgage loans, whose borrowers are less likely to take up specified disease insurance than mortgage borrowers for purchase.

Japanese banks have been promoting specified disease insurance as a way to differentiate themselves to customers in the highly competitive, low interest rate mortgage market in Japan. The cost of specified disease insurance does not generally place a significant burden on mortgage borrowers, which pay for specified disease insurance by either an insurance premium or via an additional interest charge on their loans.

In general, insurance premium amounts can vary from as little as hundreds of yen a month to more than ¥10,000, depending on the extent of the disease coverage, a borrower's characteristics - such as gender and age - loan amounts and tenures. Borrowers who choose the premium payment option can typically cancel the specified disease insurance at any time. However, borrowers who opt to pay an additional interest rate cannot cancel the policy and must continue paying a higher rate of interest until the loan is fully paid.

RMBS

RMBS proposals praised

A new R&W form and a common communication platform between investors and issuers proposed by SFIG are 'credit positive' for RMBS, according to Moody's. The ideas are outlined in SFIG's latest RMBS 3.0 fifth edition green papers.

This edition includes SFIG's Deal Agent Agreement, Recommendations on Bondholder Communications, MISMO/SFIG Data Standardization Recommendations, and Considerations for Materiality Standards and Enforcement in the Event of Breaches.

SFIG's RMBS 3.0 taskforce and green papers seek to create standardisation where possible and clarify differences in alternative standards in a centralised and easily comprehendible manner to improve RMBS deal transparency. Furthermore, the taskforce works to develop new solutions to challenges in the RMBS market, as well as draft or enforce model contractual provisions, or alternative 'benchmark' structural approaches.

Moody's comments that SFIG's new representations and warranties (R&Ws) comparison form, produced as part of SFIG's RMBS 3.0 initiative, would be a credit positive for the sector by improving market transparency. The agency says that it would do this by providing a comprehensive list of all types of R&Ws in a transaction, making it easier for investors to evaluate R&Ws during a transaction's marketing period. Moody's suggests that currently investors may have difficulty assessing R&Ws from deal to deal, "even from the same securitisation shelf", largely because investors receive either too much information or not enough about a deal's R&Ws.

Additionally, the form would facilitate an easier comparison of R&Ws across transactions and allow for better assessment of the relative credit risks as a result of differences, if any, according to Moody's. This would be aided by the simplicity of a one-page form, along with a benchmark and blacklines that will ease comparison across deals from the same issuer or across different issuers.

Furthermore, in establishing a benchmark for comparisons by either choosing SFIG's proposed R&Ws or its own set, a seasoned issuer provides investors with a reference point they can use to "evaluate the extent to which origination risks the issuer retains passes through to the capital markets", the agency says.

As part of the RMBS 3.0 proposals, SFIG has also proposed a common communication platform for RMBS issuers and investors, although it is in a formative stage and subject to review. This would, however, be a credit positive for future transactions if adopted, Moody's suggests. The firm comments that this is because it would facilitate communication among transaction parties, reduces information asymmetry and improves transparency.

Further benefits of such a platform are that it could improve and streamline voting and consent processes, potentially avoiding some losses, according to Moody's. The overarching principles for such a platform would be that it is administered by a third party, provides free access to all investors and that it supports notifications sent by transaction parties, communication among authenticated bondholders and voting process for consent solicitations.

In terms of how a common communication platform between all transaction parties would boost sector transparency, Moody's suggests that it would help with ongoing governance and monitoring of the transactions. Common reasons investors and issuers wish to communicate are requests for proxy votes, soliciting consent for amendments and resolutions, notifications to and from various transaction parties and investors, and general enquiries.

The firm adds that a communication platform would improve transaction asset quality and governance by encouraging investors of any size to raise concerns with the issuer and greater investor group. Currently, Moody's suggests the costs and efforts of raising and resolving issues may deter smaller investors to bring up issues.

A common communication platform could potentially make it easier for investors or issuers to raise issues and vote on certain topics, according to Moody's, especially in relation to investigating particular assets for breaches of R&Ws and whether to approve amendments or change transaction parties. The agency adds that with inefficient communication methods currently in place, it is difficult for investors to bring issues to review and resolution in a timely manner, which encourages issuers to find ways of amending deals without investor consent.

Furthermore, delay in voting or consent on certain topics can result in losses for a transaction. A common communication platform, the agency concludes, could potentially avert such scenarios by expediting the voting or consent timeline.

RMBS

RMBS 'to perform well' in 2017

US RMBS will continue to perform well in 2017, with several trends from 2016 continuing into next year, according to Moody's. The agency believes there will be more diversified collateral and some structural changes in new deals, while existing deals will remain strong or improve.

The rating agency says that the GSEs will encourage broader access to credit and so the credit quality of loans backing credit risk transfer (CRT) transactions will become more varied, with new structures then emerging or the mix of structures the GSEs have used to transfer risk to date changing in response to market feedback they have solicited. RPLs, NPLs and seasoned loan transaction issuance will grow amid GSE RPL and NPL sales, with credit quality dependent on issuers' acquisition strategies.

Moody's comments that after two years of sporadic non-prime RMBS issuance, the market will develop in 2017 on the back of increased demand for loans from both borrowers with impaired credit, as well as investors looking for higher yielding assets. While these transactions might be of lower credit quality than post-2010 prime jumbo deals, they will still be stronger than pre-2010 subprime and Alt-A transactions.

As the SFR market matures, the credit quality of these deals will improve next year, with SFR operators becoming more efficient at controlling expenses, while refinancings will bring more seasoned loans into transactions, according to Moody's. Finally, the agency adds that post-2010 transaction performance for outstanding deals will remain strong and pre-2010 transaction performance will continue to improve.

RMBS

CAS listings heading east

Fannie Mae has listed all of its previously-issued Connecticut Avenue Securities on the Singapore Exchange. It expects that all future CAS offerings will also be listed in Singapore.

Fannie Mae is also delisting from the Irish Stock Exchange, as fellow GSE Freddie Mac has announced it will do with its STACR transactions (SCI 1 December). Fannie Mae has not given a reason for its delisting, but it would be subject to the same regulatory concerns that prompted Freddie Mac's move. It will propose in its delisting application that delisting should occur in March 2017.