The SEC recently issued a concept release inviting public input aimed at refining the regulatory framework for residential mortgage-backed securities (RMBS) and other asset-backed securities (ABS). The move comes amid a prolonged absence of public RMBS offerings and signals the Commission’s interest in reenergizing this market segment. (SEC)
Why the Public RMBS Market Matters
Public offerings of RMBS ceased after 2013, yet these instruments remain critical to a healthy mortgage-finance ecosystem. They enable broader issuer participation and diversify investor sources, helping to reduce mortgage costs for consumers. By improving access to this market, the SEC believes the housing finance chain could benefit in downstream ways. (SEC)
Key Issues for Stakeholder Input
Regulatory Impediments to Public RMBS Offerings
The Commission notes that the absence of new public RMBS offerings may stem from regulatory burden, structural impediments or outdated disclosures. Stakeholders are asked:
- Should disclosure requirements be revisited to make public RMBS more feasible? (SEC)
- How should underlying-mortgage data be shared with investors given evolving privacy and confidentiality concerns? (SEC)
Treatment of ABS Generally
Beyond RMBS, the concept release explores whether regulatory definitions and rules around ABS ought to be updated. Input is sought on:
- Whether definitions used in the ABS rules remain fit for purpose. (SEC)
- Whether removing or revising certain regulatory barriers would facilitate greater access to public ABS markets.
How Stakeholders Can Participate
The SEC’s concept release functions as an early stage in its rule-making process: it outlines the issues, proposes different approaches, and raises questions for public comment. (SEC) The Commission has invited comment on the potential costs, burdens or benefits of regulatory responses to these issues. Comments may reflect a single approach, an alternative, or a hybrid structure. (SEC)
The public comment period will remain open for 60 days after the release is published in the Federal Register. (SEC)
The Housing-Market Context and Strategic Implications
Homeownership is often described as the cornerstone of the American Dream. Yet rising mortgage costs and access constraints continue to challenge many households. The SEC believes a revived public RMBS market may help address part of that challenge by introducing greater liquidity, more diverse issuers and ultimately downward pressure on consumer costs. (SEC)
From a strategic vantage:
- Issuers and underwriters may view the process as a potential opportunity to return to public RMBS issuance—if the rules become more workable.
- Investors should monitor how commentary influences the SEC’s next steps, since new or revised rules could change risk-return dynamics in RMBS/ABS.
- Market observers should assess whether these regulatory changes could meaningfully shift the structure of the mortgage-finance market, especially in terms of private-label issuance and liquidity.
Implications for Legal and Compliance Professionals
For legal counsel, compliance officers and counsel involved in securitization:
- You’ll want to review the concept release’s questions and consider preparing responses or coordination with industry associations.
- Stay alert for potential rule-making timelines: after the comment period closes, the SEC may propose amendments to RMBS/ABS rules that will have drafting, disclosure and process-implementation implications.
- Consider how underlying-loan-level data disclosure issues may intersect with privacy laws, vendor contracts, investor data rights, and operational process changes.
- Assess how changes might affect existing RMBS/ABS programmes (even if currently private) — for example whether a public-market regime becomes more attractive or feasible, and whether that influences transaction design, documentation or underwriting.
Next Steps for Stakeholders
If you or your organisation have a stake in RMBS or ABS markets, now is the time to:
- Read the full concept release from the SEC and identify the specific questions posed. (SEC)
- Map how the issues raised (disclosure, definitions, data access, regulatory burden) intersect with your current or planned transactions.
- Consider preparing comment-letter drafts or position papers, either individually or through trade groups, to ensure your operational viewpoint is heard.
- Monitor the Federal Register notices for posting of the comment period, and set internal timelines for response, review and coordination across legal, capital markets and investor-relations teams.
By proactively engaging at this initial stage, market participants can influence the shape of any future rule-making and position themselves ahead of potential structural shifts in the RMBS/ABS landscape.
For more information, contact the securities lawyers at Sallah Astarita & Cox, at 212-509-6544 or visit Securities Lawyer
