ASF Publishes Model Reps

The American Securitization Forum (ASF), as part of its Project on Residential Securitization Transparency and Reporting (Project RESTART), has published its final version of model representations and warranties for residential mortgage-backed securities (RMBS) transactions.

The Model Reps, as ASF calls them, were developed by a broad-based working group consisting of issuers, originators, credit rating agencies, financial guarantors, primary mortgage insurance companies and institutional investors. They are intended to improve upon the traditional representations and warranties, which, in securitizations, allocate the risk of defective mortgage loans between the issuers of the securities and the investors who purchase them.

The Model Reps, whose development and goals ASF outlines in a 30-page explanation, are also meant to promote risk retention, but through means other than the 5% retention requirement recently passed in the House of Representatives. ASF calls a 5% to 10% retention requirement "economically unmanageable" for many asset classes and institutions.

"The purpose of the Model Reps is to enable market participants to easily determine the type of representations and warranties included in a transaction and the extent to which they are more or less expansive than the Model Reps," the ASF paper says. "By making departures from an accepted market standard more transparent to investors, rating agencies and other transaction parties, the Model Reps enable those parties to more easily and better assess their willingness or unwillingness to assume risk."

In July, ASF released final model versions of a RMBS Disclosure package (which discloses loan-level information to be provided by issuers prior to a sale of private-label RMBS) and of an RMBS reporting package (a package of loan-level information to be updated monthly by RMBS servicers).

SOURCE: American Securitization Forum


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