Bloomberg by Charles Williams and Matt Scully (November, 11 2016)

The relaxation of financial regulations following Trump’s victory would have mixed credit implications for structured finance transactions, Moody’s analysts write in research note.

  • “Relaxing or eliminating Dodd-Frank’s risk retention requirements for securitized assets could weaken new transactions in RMBS and also, to some extent, CMBS and auto ABS”
  • Risk retention encourages more diligence in loan origination
  • Relaxation of requirement could result in increase in CLOs, an area that smaller managers could have difficulty raising funds to comply
  • Rollback of mortgage lending provisions under Dodd-Frank would weaken underwriting and RMBS credit quality
  • Easing of regulations that aim to improve accuracy of home appraisals would increase likelihood that collateral behind mortgage pool’s loans is overvalued, which would lower recovery values in the event of borrower default and reduce borrowers’ incentive to keep current on loans
  • Potential rollback of CFPB’s Ability-to-Repay (ATR) rule would also weaken RMBS credit quality owing to increase in number of borrowers who take out mortgages they can’t afford
  • Weakening of certain consumer protection rules could lead to short-term increase in payments received in consumer ABS
  • A credit positive, owing to loosening of constraints on what lenders could do to collect payments
  • Lenders could be more aggressive to pursue collections from delinquent borrowers and eliminate limitations on interest lenders can charge some borrowers
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To contact the reporters on this story:
Charles Williams in New York at; Matt Scully in New York at
To contact the editor responsible for this story: Christopher DeReza at