U.S. SEC meeting to look at delayed asset-backed securities overhaul

WASHINGTON Tue Aug 26, 2014 8:00pm EDT

WASHINGTON Aug 27 (Reuters) - The U.S. Securities and Exchange Commission will hold a public meeting on its overhaul of the securitization market on Wednesday to consider rules likely to require greater disclosure of the quality of loans and other assets underlying securities.

The SEC first proposed such rules, addressing a core driver of the 2007-2009 financial crisis, more than four years ago.

Many investors were burned after risky mortgages underlying securities soured, sparking collateral damage throughout the global financial system.

But the agency has struggled to craft rules that balance privacy concerns about the disclosure of sensitive loan-level data with investors' desire to know more about the riskiness of such assets.

"From publicly available information ... you can probably identify the house, and from that the individual. And that's the kind of concern that's going on here," said Jerry Marlatt, a lawyer at Morrison & Foerster in New York.

The new rules are expected to lay out a less-onerous disclosure alternative that restricts access to potentially sensitive information.

Last week the SEC announced it would hold a public meeting on Wednesday to "consider whether to adopt" the rules, but did not give details on what they will look like.

Securitization is a way for banks to transfer risk in car loans, credit cards, mortgages and other assets to investors by issuing asset-backed securities (ABS), a common way for the banks to fund their business.

The rules are expected to extend the scope of the SEC's current rules for ABS to non-publicly registered deals between professional investors, who sometimes also apply the rules, but not for some of the most exotic deals.

"While the participants in the public market ... are familiar with (the rules), by expanding the scope there might be a little bit of a learning curve there," said Ann Kenyon, a partner at consultancy firm Deloitte & Touche LLP.

The rules are also likely to impose a 5-day waiting period during which buyers of ABS can still get out of a deal, a measure meant to counter the strong pressure from sellers of the securities during the heyday of the credit boom.

The SEC said last week that it would also look at rules for credit rating agencies, which had given most ABS top-notch ratings despite their imminent implosion, but did not say which part of its 2011 proposed rules it would consider. (Reporting by Douwe Miedema; Editing by Sonya Hepintall)

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