On June 30, 2010, the U.S. House of Representatives passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act") and on July 15, 2010, the United States Senate followed suit. President Obama signed the Act into law on July 21, 2010. The Act contains numerous provisions that will have far reaching effects on the securitization industry, most notably by instituting requirements relating to risk retention and by establishing new rules governing the regulation of credit rating agencies and the procedure for obtaining ratings of securities. Major industry groups, such as the American Securitization Forum and the CRE Finance Council, were successful in convincing Congress to implement a significant number, but by no means all, of their preferred provisions. The Act is highly deferential to regulatory agencies, and therefore the effect of significant portions of the legislation will be delayed and will be highly dependent upon the rules eventually promulgated by federal regulators. Industry participants will likely be heavily engaged with the regulators over the course of the coming months and years in an effort to influence the content of the implementing regulations.
The following provisions of the Act are expected to have a substantial impact on the securitization industry:
- requirements that "securitizers" (and "originators" in certain instances) retain some portion of the risk in any asset being securitized;
- new regulations governing rating agencies and the procedures for obtaining credit ratings;
- rules governing the use of representations and warranties and related enforcement mechanisms;
- new disclosure, reporting and due diligence obligations;
- conflict of interest regulations; and
- changes to the regulations governing investment advisers.
This memorandum provides a general overview of the provisions of
the Act that are expected to affect securitization, including
commentary that addresses specific issues.
View Sonnenschein's Summary and Analysis of
the Effect of the Dodd-Frank Wall Street Reform and Consumer
Protection Act on the Securitization Industry
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
