Consumer ABS

CIT Group Inc. is rounding out its executive suite, taking another step toward normality for the financing company — and potentially earning regulators' approval for John Thain's planned shift toward a banking model.

Loan securitizers are bracing for an invasion of backseat drivers. By Wednesday, June 2, issuers and rating agencies must comply with a Securities and Exchange Commission (SEC) rule designed to encourage more unsolicited opinions on ABS. The regulator wants to remove the conflicts of interest in the ratings process that led to inflated ratings in the past and contributed to the financial crisis.

One of the recurring themes at the SiLAS 2010 conference was the need for investors to get to know the collateral behind deals like never before.

The SiLAS 2010 conference featured lively discussion of the role of trustees in Latin American transactions. In Mexico, especially, it almost seemed as if trustees were out to lunch while flows were diverted from Metrofinanciera's bridge loans deals, which inevitably led to distress.

The current crisis has drawn into sharp focus concerns that structural features in some securitization transactions may need to be re-assessed to ensure they are adequate in mitigating the impact arising from possible failures of servicers or other transaction parties. Moody's believes that the performance of a securitization transaction depends not only on the underlying collateral performance but also on the effective performance by such transaction parties of their responsibilities. Our November 2009 publication on this topic, Operational Risks in Securitizations to be Revisited, cites several occurrences where nonperformance of a transaction party may have detrimental effects on a transaction's performance regardless of the underlying pool's performance. We refer to this risk as "operational risk,"

Securitization Focus

When the European Central Bank (ECB) unveiled its €750 billion ($952 billion) bailout package to help stabilize the euro against the U.S. dollar, it addressed the crisis of confi dence created by fears of contagion over Greece’s sovereign risk.

ABS players are closely monitoring the Greek government's struggles and assessing how they'll impact European securitizations.

Recently the Securities and Exchange Commission (SEC) granted a temporary exemption from Rule 17g-5(a)(3) for credit ratings provided to most ABS, MBS and other structured finance securities of non-U.S. issuers. This reprieve expires on Dec. 2 and extends from June 2, which is the rule's effective date for domestic firms.

Allonhill hired Fidelity Southern Corp. executive Kathy Ireland as director of securitizations.