NY Fed Releases Money Market Fund Reform Staff Report

On July 19, the NY Fed issued a staff report on money market fund reform to address the equitable distribution of withdrawals out of a distressed fund.  Currently, fundholders who redeem early receive the full amount of their investments, leaving later redeemers to bear any losses.  The report contains several proposals that would disincentivize runs on distressed funds.  NY Fed Release.   NY Fed Paper

SIFMA Statement on Eminent Domain and TBA Trading

On July 19, SIFMA announced a new policy that mortgage loans to borrowers residing in jurisdictions that have initiated condemnation proceedings to seize mortgage loans through eminent domain will not be deliverable into TBA-eligible securities on a going-forward basis.  SIFMA stated that mortgage loans in areas where these eminent domain powers could be exercised would exhibit unpredictable prepayment behavior and destroy the homogeneity among mortgage loans necessary for the proper functioning of the TBA market.  In the event that seizures of mortgage loans occur, SIFMA plans to review the facts and circumstances of the situation periodically and will review its policy in light of any changes.  Statement.  

SEC Guidance on Ratings and Standards of Creditworthiness

On July 17, the SEC published interpretive guidance for the definitions of “mortgage related security” and “small business related security” of the Securities Exchange Act of 1934 in light of Section 939(e) of the Dodd-Frank Act which removed provisions in these definitions which referred to credit ratings and inserted new text that provided that, to satisfy the definitions, a security must meet standards of creditworthiness established by the SEC.  The SEC is providing a transitional interpretation that will be applicable from July 20 until final rules establishing new standards become effective.  Under the transitional interpretation, the standard of creditworthiness for “mortgage related security” continues to mean a security that is rated one of the two highest rating categories by at least one NRSRO and, for “small business related security”, one of the four highest rating categories by at least one NRSRO.  The SEC is also seeking comments, due by 30 days after publication in the Federal Register, on potential standards of creditworthiness.  SEC Guidance.   

CFTC Approves Rules for Funds Held by Futures Commissions Merchants

On July 13, the CFTC approved rules submitted by the National Futures Association for customer funds held by futures commissions merchants.  The new rules require futures commissions merchants to strengthen controls over the treatment and monitoring of funds held for customers trading on U.S. contract markets and for funds held for foreign futures and foreign options customers trading on foreign contract markets. CFTC Release

CFTC Swap No-Action Relief for Registration and Compliance

On July 13, the CFTC announced time-limited no-action relief for commodity pool operators (CPOs) and commodity trading advisors (CTAs) who have been exempt or excluded from registration but, because of recent amendments to Commission Regulations 4.13 and 4.5, now need to register and satisfy compliance obligations.  Under the relief, the CFTC will not take will not take enforcement actions against CPOs or CTAs for failure to register until December 31, subject to satisfaction of requirements including filing of a notice.  CFTC Release

SEC Final Report on Global Accounting Standards

On July 13, the SEC's Office of Chief Accountant published its final staff report on the Work Plan related to the potential adoption of global accounting standards.  The Work Plan was published in February 2010 to consider factors relevant to a determination as to whether, when, and how the current financial reporting system for U.S. issuers should transition to a system incorporating International Financial Reporting Standards (IFRS).  The SEC currently has no timeframe to decide whether to switch to IFRS, so it's uncertain when that decision will be made.  SEC Release.    SEC Report.  

Guidance to Servicers for Making Home Affordable

On July 13, Treasury issued a supplemental directive to provide guidance to servicers for compliance with the requirements of the Dodd-Frank Act and Making Home Affordable requirements related to borrower identity and owner-occupancy for non-GSE mortgages.  Guidance

HUD Accepting Applications to Purchase Troubled Mortgages

On July 13, HUD announced that applications may be submitted for the Distressed Asset Stabilization Program to purchase pools of severely distressed loans formerly insured by the FHA.  Approximately 3,500 loans will be sold in four metropolitan areas: Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL.  HUD Release.