Sunday, June 10, 2018

Dead Ducks III: Over at the Securitization Lobby...

Believe it or not, there is an industry group championing the spread of asset securitization. In this day and age of housing contagion, I suppose that the American Securitization Forum (ASF) would get more members if it were the "Root Canal Fun Society" or the "Gary Glitter Kiddie Klub." It seems no one wants a piece of subprime.

A few months ago, I highlighted the rich symbolism of the ASF holding its annual conference in Las Vegas, of all places. This was not apt as the securitization of subprime mortgages and related detritus has played a large part in the fiasco now roiling US and global financial markets. First, Las Vegas is one of the epicentres of the subprime fallout; having risen so much so quickly, home prices in the area now have much room to fall. Second, holding a meeting in gambling capital of the US is not particularly encouraging to those you'd want to market securitized assets as safe investments. Third, Las Vegas is well-known for its fakeries of famous landmarks. In reality, many mistook securitization of subprime loans for real progress, but how wrong they were. Truly, it is "casino capitalism."

Given the rather poor public image of securitized products, the ASF is now mounting a campaign to clean up their image. It has launched the catchily-titled Residential Securitization Transparency and Reporting initiative or (get it?) Project RESTART. The gist of the project is that securitization itself is not flawed. Rather, better transparency regarding the composition of securitized assets and better, more timely reporting should assuage investor concerns. Do you buy it? The ASF's future probably hinges on the response:

On July 16, the American Securitization Forum (“ASF”) announced the public launch of ASF’s Project on Residential Securitization Transparency and Reporting (“ASF Project RESTART” or “Project”) to restore investor confidence in mortgage and asset-backed securities. Restoring this confidence and thereby restoring over time institutional investor capital to the securitization markets should ultimately increase the supply and lower the cost of mortgage and consumer credit in America. The Project has sought to identify areas of improvement in the process of securitization and refashion, in a comprehensive and integrated format, the critical aspects of securitization with market-based solutions and expectations. Each of the Project’s phases has been sequenced to be developed and released for comment throughout the remainder of 2008 for implementation at specific recommended times in 2009. Although the initial focus of the Project has been on the private-label residential mortgage-backed securities (“RMBS”) market, similar efforts are expected to be pursued in other major asset classes such as student loan, credit card and automobile securitizations. In addition to announcing the broad direction of each of the phases of Project RESTART, the ASF has also released the first major deliverable of the Project—a request for comment (“RFC”) on granular recommendations of an ASF RMBS Disclosure Package. Although principle-based topics of transparency, disclosure and diligence have played a critical role in the Project’s discussions over the course of the past year, the request for comment on the ASF RMBS Disclosure Package included in this document reflects the Project’s intense focus on developing specific and detailed market standards and practices that, through market-imposed incentives, will likely result in widespread implementation by applicable industry participants.

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