To avoid retaining risk in securitization deals, mortgage lenders are joining hands with investors who act as “co-sponsors” and take on the first-loss position.
Issuance of marketplace lending ABS is expected to increase slightly, led by optimism in the economy and improved underwriting criteria, according to rating services.
An SEC committee hosted a panel discussion in November regarding the compensation model for rating services. The regulator hasn't made a decision on whether reforms are needed to the issuer-pays model.
Presidential candidate Elizabeth Warren has flagged concerns about the issuer-pays model used by credit rating agencies for securitized products. She said the SEC hasn’t done enough to address the conflicts of interest tied to the model.
For the third straight year, in 2018, marketplace lenders held the top spot in the unsecured personal lending space. Meanwhile the share of banks dropped to 28%.
Several key issues remain unresolved as the securitization industry attempts to move away from the London Interbank Offered Rate. It’s not clear which parties should enact transitions away from the benchmark rate and, moreover, a replacement hasn’t been developed yet.
The creation of a U.S. sovereign wealth fund could grease the skids for an end to the conservatorships of Fannie Mae and Freddie Mac.
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