MIAMI — The first securitization offerings that come out in 2017 are going to be “trial and error” for many, as lenders prepare for phase two of Regulation AB II — which requires issuers to provide standardized loan-level information, GM Financial’s Senior Vice President Sheli Fitzgerald, told attendees at the IMN ABS East 2016 conference.
However, most issuers “are going to be prepared to roll out loan level data,” potentially by January, she added.
The Securities and Exchange Commission adopted Reg AB II in 2014 to revise the offering process, reporting, and disclosure requirements for registered offerings of asset-backed securities, according to documents published in the Federal Register by the SEC.
Registered offerings of ABS became subject to the new rule in November of last year, except for the loan level data disclosure and reporting requirements — information on the performance of each loan and the incidence of loan modifications and recourse. The disclosure and reporting requirements will go into effect after Nov. 23 of this year.
The SEC believes that disclosing more loan level data “will allow an investor to better conduct his or her own evaluation of the ongoing credit quality of a particular asset, risk layering of assets, and overall risks in the pool underlying the ABS,” according to the document.
“I feel like we [GMF and other issuers] are in a good position,” Fitzgerald said. “A lot of us participated in the test filing exercise with the SEC, and that’s helpful in getting feedback along the way.”
Compliance and Reg AB II has “certainly been a focus for us for the past two years,” said Bryan Romano, assistant treasurer at World Omni Financial Corp. “In terms of its affect to [securitization] activity, it’s been very time consuming but the effects of the program have been pretty manageable.”
To that end, issuers seem to be “at full steam” with phase one of Reg AB II, Fitzgerald said. Phase one requires issuers to accelerate the date by which transaction agreements must be filed, adopts new registration forms tailored to ABS offerings, and repeals the credit ratings references in shelf eligibility criteria for ABS issuers and establish new shelf eligibility criteria.
Implementing changes of Reg AB II has been a learning process to see what flexibility you have and what you don’t have at this point when it comes to offerings and timing, and flexibility in sizing the transactions or upsizing the transactions,” Fitzgerald said. GM Financial is starting to get its arms around phase one of Reg AB II, because “there’s a lot of words to put on a page,” she added, but “we are content with the timing constraints that we have now.”
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