Says Tony Ward, CEO of due diligence specialist Clayton Euro Risk
November 13, 2015: UK-domiciled issuers of mortgage-backed securities should stop seeing the US Dodd-Frank Act as just another regulatory hurdle and start thinking of it as a driver for greater transparency and better business. This is the message Tony Ward, CEO of due diligence specialist Clayton Euro Risk, delivered to the Council for Mortgage Lenders (CML) annual conference yesterday.
Speaking to an audience of over 200 mortgage professionals, Ward said: “Regardless of whether these are US or UK securities, Dodd-Frank is a step towards better disclosure and independent rules which is seen as best practice and greater transparency. All too often I hear businesses in the UK moaning about its impact, but the reality is the Act is five-years old and has proved itself worthy.
“Dodd-Frank has helped to create a new era of transparency and operational excellence—raising the bar for accuracy, validity and quality for both issuers and third-party reviewers. This is an achievement we in the mortgage sector should be applauding.”
Ward continued: “Both the US Securities and Exchange Commission and the American Securitisation Forum are calling for issuers and servicers to provide significantly more extensive data disclosure to identify trends and issues at the loan, deal and industry levels.
“To truly gauge the performance of mortgage loans, all interested parties now need to have access to databases and systems equipped to store origination data that is tied directly to monthly performance data at securitisation. This is a positive step, providing the transparency and confidence needed to keep the markets moving.”
Under Section 945 of Dodd-Frank, an ABS deal (asset backed securities) which is registered under the Securities Act in the US has to be subjected to an independent review of the underlying assets, such as mortgages, and make certain disclosures about those reviews. The SEC has also adopted rules relating to the ongoing reporting of asset-backed issuers under the Exchange Act. This applies to UK residential mortgage-backed securities (RMBS) issuers, who issue US$ denominated bonds into the US that qualify under these rules.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as Dodd-Frank, became law in the US in 2010. It was created in response to the 2007–2010 financial crisis with the objective of preventing another economic collapse of the same magnitude. According to some commentators, the Act marked the end of the deregulation of US financial markets, which began under the Reagan administration.