Mortgage Investors Association Details Reforms of Mortgage Securities Market

Mar 30, 2010, 14:15 ET from The Association of Mortgage Investors

WASHINGTON, March 30 /PRNewswire/ -- The Association of Mortgage Investors released a detailed set of "guiding principles" to Congress and regulators today for how to overhaul the asset-backed securities market in a manner that will ensure private sector demand for mortgages in the future, saying it is crucial to the recovery of the global economy.

The association, which represents a wide array of institutional investors and asset managers, released a white paper today that outlines the necessary steps to restore the beleaguered securitization market.

"The time for action is now," said Micah Green, who represents the association and is a partner at Patton Boggs LLP. "Investors provide the capital that make securitization markets work yet the lessons learned over the last three years demand greater transparency and empowerment of investors for them to be comfortable buying mortgage products in the future."

Investors have learned during the current crisis they have little access to critical information about their mortgage securities investments and have even less influence over the management of those investments, which is clearly not appropriate given their fiduciary responsibilities managing the investments of pension funds, insurance companies and others, Mr. Green said.

"It is important for the government to consider the policy recommendations of investors, whose participation and capital are needed for there to be a viable mortgage-backed securities market, particularly if the role of Government in the mortgage market could change in the future," Mr. Green said.

Among the association's recommendations:

  • Provide loan-level information that investors, ratings agencies and regulators can use to evaluate collateral and its expected economic performance, both at pool underwriting and continuously over the life of a securitization.

  • Require a "cooling off" period when asset-backed securities are offered so that investors have sufficient time to review and analyze loan-level information before making investment decisions.

  • Make deal documents for all asset-backed securities and structured finance securities publicly available to market participants and regulators.

  • Directly address conflicts of interest of servicers that have economic interests adverse to those of investors.

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Patton Boggs

SOURCE The Association of Mortgage Investors