LAS VEGAS — Competitors will soon be able to reverse engineer the asset-level data now required when a public ABS transaction is filed with the Securities and Exchange Commission, thanks to Reg AB II, said Stuart Litwin, co-head of securitizations at Mayer Brown LLP.
“Somebody will find market opportunities to make all of these data points more digestible for investors, and that will also make it more digestible for your competitors,” he said, while speaking at SFIG Vegas 2017 last week.
The data now required under the new regulation is aimed at increasing transparency for investors, and includes loan terms; scheduled payment amounts; how payment terms change over time; geographic location of the collateral; LTVs; the performance of each asset over time; and loss mitigation efforts by the servicer to collect amounts past due and the losses that may pass on to the investor. However, whether it will have a negative impact in the secondary market is still in question, Litwin said.
Hesitation could arise among investors based on the performance evident in the data between multiple issuances over time, he said.
“You’re doing deal number three and losses have an uptick, and now you’ve changed the input that goes into the fair value determination, everyone can see that,” Litwin said. “Well, those investors aren’t looking at just this deal, they’re also looking at the other bonds in your portfolio: How does that affect the secondary market?”
Increased competition is a guarantee, he said. “I’ve already had a client that told me they are reverse engineering one of their competitors,” Litwin said. “Why wouldn’t you take the opportunity to learn more about your competition?”
