MBA Responds To SEC Regulatory Proposals On Ratings

The Mortgage Bankers Association (MBA) has submitted a comment letter to the Securities Exchange Commission (SEC) in response to the SEC's proposed amendments to its regulations governing nationally recognized statistical rating organizations (NRSROs). The MBA expressed support for measures in the SEC proposal that would promote transparency, accountability, and credibility of NRSROs and the methodologies used to assign credit ratings.

However, the MBA says it strongly opposes different ratings symbols to be used for structured finance versus other investment products.

‘Recent events have shed light on the important role of credit ratings agencies in the housing finance system,’ states Kieran P. Quinn, chairman of the MBA. ‘We commend the SEC and the ratings agencies themselves for their efforts to restore investor confidence and bring stability back to the market. Nevertheless, it is MBA's view that implementing different ratings symbols for structured and nonstructured securities will only increase confusion and fuel disruption to secondary market transactions."

The MBA's letter notes that structured finance transactions are a vital segment of the capital markets. However, the success or failure of a securitization is attributable to the quality of its underlying assets, not its structure. Consolidating all structured securities under a single, unique identifier could cause investors to focus on the structure of the security rather than its asset quality, the association says. Consequently, the proposal could reinforce the very behavior it seeks to extinguish.

Source: Mortgage Bankers Association

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