Treasury Should Help Rebuild Trust Among PLS Market Participants
Lack of trust, regulatory uncertainty is preventing PLS market from reopening
Washington, DC— In a letter sent to the U.S. Department of the Treasury Secretary Jacob Lew today, the Financial Services Roundtable’s Housing Policy Council urged the Department’s officials to take steps that rebuild trust among Private Label Securities market participants so the market can reopen.
“Treasury could perform a key role in stimulating growth in the PLS market by convening the major counterparties — investors, issuers, trustees and servicers — and mediating a dialogue that seeks to rebuild trust among these market participants,” FSR’s Housing Policy Council President John Dalton wrote. “Indeed, ongoing activity only serves to paralyze these actors until some semblance of certainty can return.”
HPC’s letter was in response to the Treasury’s request for input on how the private label residential mortgage backed securities market can be revived after its collapse during the 2008 financial crisis. Currently, the PLS market is extremely small and the overwhelming majority of mortgage loans are backed by the federal government through the GSEs and FHA.
HPC also noted in the letter that completion of housing finance reform legislation and finalizing other regulatory issues are necessary to create the environment for the return of the PLS market. Housing finance reform legislation is needed to establish what the federal role in the mortgage market will be going forward, which will influence the development of the private label market. HPC urged Treasury and other federal regulators to use their authority to resolve key outstanding regulatory issues that are creating market uncertainty and delaying the relaunch of the PLS market. Issues that still need to be resolved include the Volcker Rule, Basel III implementation and TILA/RESPA, among others.
FSR, HPC and its member companies are committed to continue collaborating with lawmakers and the federal government to ensure the nation’s financial system remains strong, safe and promotes the growth of the American economy.
The Financial Services Roundtable represents the largest integrated financial services companies providing banking, insurance, payment and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. FSR member companies provide fuel for America’s economic engine, accounting for $92.7 trillion in managed assets, $1.2 trillion in revenue, and 2.3 million jobs. Learn more at FSRoundtable.org.