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ARTICLE · 09 AUGUST 2009

Financial Regulation Reform Legislation and Securitization

Mayer Brown
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On July 22, 2009, the Obama administration delivered proposed legislation to Congress that addresses several of the administration’s key policy objectives for the securitization markets.

United StatesFinance and Banking
Robert Hugi
Robert Hugi
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Originally published August 5, 2009

Keywords: securitization, financial regulatory reform, credit risk, securitizers, asset-backed securities, credit ratings

On July 22, 2009, the Obama administration delivered proposed legislation to Congress that addresses several of the administration's key policy objectives for the securitization markets. The proposed legislation is part of the follow-up on the administration's June 17 report entitled "Financial Regulatory Reform: A New Foundation" (the "Report"). We summarize the proposed legislation below.

Requiring Originators or Sponsors to Retain Credit Risk

As contemplated by the Report, the proposed legislation would require the federal banking agencies and the SEC jointly to prescribe regulations that require "securitizers" (defined as issuers and, surprisingly, underwriters) to retain at least 5 percent of the credit risk of securitized assets. The legislation sets a 180-day deadline (post enactment) for

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