A longer statute of limitation and increased disclosure requirements could help attract long-term investors in the MBS and ABS market, industry experts recommend.

The SEC’s Office of Credit Ratings is exploring how it can address conflicts of interest in ratings of MBS and ABS. An increase in performance-related disclosures and boosting unsolicited ratings are being considered.

The biggest asset categories, consumer finance and credit cards, saw declines in bank investment during the fourth quarter, but the industry added ABS backed by auto loans, business finance notes and leases.

Investor demand for MBS and ABS is high but then uncertainty is also increasing, which could prompt more issuance earlier in the year.

Alternative data, machine learning, blockchain and document digitalization in securitization deals have the potential to improve credit quality, but they are untested and come with risks, says Moody’s.

Fitch Ratings expects the SOFR to become the most commonly used index post-LIBOR for new residential mortgage assets.

JPMorgan Chase has issued its first ABS transaction backed by credit card receivables through Chase Issuance Trust since May 2018. A wildcard to the deal, however, is a pending lawsuit involving the issuance trust.

The SEC is facing pressure to address “ratings shopping” in the MBS and ABS markets. Big rating services are not keen to switch from the issuer-pays model.

The coronavirus outbreak may strike little-known pandemic bonds issued by the World Bank in 2017. Travel restrictions in response to the outbreak may also impact ABS backed by aircraft leases.

Banks will no longer have to meet extensive disclosure requirements for their MBS deals to receive investor-friendly protections. The change was met with criticism from an Obama appointee to the FDIC’s board.