Comments will be brief in light of the US holiday.
Risk retention rules for marketplace lending took force this past week. Risk retention rules were introduced as a part of the Dodd-Frank regulation to promote an alignment of interests between sponsors and investors of securitization.
Risk retention has slowed the pace of issuance and lending in CLO and leveraged loan markets. Issuers and sponsors are hopeful for regulatory relief on risk retention in the incoming administration. We refer readers to our PeerIQ Goes to Washington letter for more insight on the regulatory outlook.
We note that risk retention will have no meaningful impact to balance sheet lenders whose business model is to retain risk (in part to improve execution through “skin-in-the-game”).
The risk retention rule slows down the capital velocity for thinly-capitalized issuers whose primary strategy is to purchase whole loans, securitize loan pools, book gains on sale, distribute residual interests, and recycle sales proceeds. Further, the combination of risk retention and current (and impending) regulatory capital charges will reduce the willingness of banks to sponsor securitizations.
Conferences:
- SFIG Vegas on February 26-March 1.
- LendIt on March 6-7 in New York.
PeerIQ in the News:
- Monday December 19th 2016, Daily News Digest (LendingTimes, 12/19/16)
- Marketplace Lending News Roundup – December 24 (LendingTimes, 12/24/16)
Industry Update:
-
Notice of PMI7 / TransUnion Migration, Rated: AAA (LendingTimes, 12/22/16)
- Surging Dollar Upends China’s Huge Bond Market (WSJ, 12/16/16) China’s bond markets impacted by recent Fed rate increases.
- The New Intersection of Banks and Marketplace Lending (LendAcademy, 12/21/16) Peter Renton argues that lines continue to blur lines between traditional banks and marketplace lenders, and institutional capital is key for mass adoption.
- U.S. Sues Barclays Over Toxic Mortgage-Backed Securities (WSJ, 12/22/16) US DOJ files suit against Barclays for pre-crisis practices.
- Avant Restarts Growth Engine with Planned 2017 Credit Card Launch (Crain’s, 12/20/16) In a pivot to growth, Avant has plans to launch a credit card in July.
- What Happens When You Roll an Online Lender, a Robo-Adviser, and Bitcoin into One? (WSJ, 12/23/16) LendingRobot is launching a new credit fund.
- A Whole Lot of Hurt in Auto Lending May Be Coming (AmericanBanker, 12/23/16) Recent RMBS litigation has exposed vulnerabilities in the origination and securitization process.
- Argon Credit Files for Chapter 11 Bankruptcy (Lending-Times, 12/20/16) Argon bankruptcy may have been triggered by a spike in defaults due to the transfer of the servicing function to a 3rd party.
- SoFi Pushes Back IPO Plans Amid Financial Tech Sector Struggles (Bloomberg, 12/19/16) SoFi i is delaying plans for an IPO in order to focus on developing new business lines.
- CMHC Ends 30-Year Monopoly of the Custody of Mortgage Records in Canada (Financial Post, 12/19/16) Canada Mortgage and Housing Corp. has broken up a 30-year monopoly related to the custody of mortgage records in the country, potentially opening up the multi-billion dollar securitization business to others.
Lighter Fare:
- New York City’s Tech Community Is Getting A $250 Million Home Base At Union Square (FastCompany, 12/21/16) New economic development planned to open in 2020 in NYC will be a central hub for technology and innovation.