Editor’s Letter

This issue has three sections, with three articles on the effects of the far-reaching Dodd-Frank Wall Street Reform and Consumer Protection Act on structured finance and securitization, three on lessons learned in the field of structured finance from the financial crisis, and three that provide updates on the auto dealer floorplan, student loan, and life settlements asset classes.

Joel Telpner outlines things we know, many things we don’t know, and many things that remain ambiguous under the Dodd-Frank Act and outlines the rules and regulations that must be issued under the Act to address these unknowns and ambiguities. Paul Forrester and Jeffrey Taft review the provisions of the Dodd-Frank Act most germane to structured finance, pointing out that the exact nature and degree of the effects have to be established in more than 300 mandated regulatory rulemakings, studies, and reports in a relatively short period with an uncertain degree of effective coordination across the many regulatory agencies involved. They challenge the reader to judge whether all these reforms really address the basic causes of the financial crisis. LoisWeinroth and Richard Fried explain the provisions of Dodd-Frank that affect securitization, noting that their full impact will not be known for some time. Taken together these three articles provide a comprehensive and readable explanation of the aspects of the Dodd- Frank Act that are most relevant to structured finance.

Starting our section on lessons learned from the financial crisis, John Kiff, Steve Mennill, and Graydon Paulin describe how various features of Canada’s housing finance and bank regulatory system helped that country weather the financial crisis with far less pain than the United States experienced. Roberto Violi analyzes the factors behind the alleged inaccurate rating of mortgage-backed securities and the surge in the downgrades of those ratings, describes inherent weaknesses in tranched securities and the models used to rate them, and looks at the probable effect of the credit crisis on the future of structured finance. Laurie Goodman, Roger Ashworth, Brian Landy, and Lidan Yang point to flaws in the residential mortgage securitization process that became apparent during the financial crisis.

Starting our asset-class update section, Hylton Heard and John Bella explain reasons for the improved outlook along with key trends metrics driving the overall performance of dealer floorplan assetbacked securities (ABS). Gary Santo and Lauris Rall explore the rapidly changing legislative and regulatory landscape affecting student loan ABS and how the asset class is evolving as a result; they highlight opportunities in the non-federally guaranteed private student loan marketplace. Craig Seitel reviews the current state of the life settlements industry, including recent challenges to its vitality and future growth.

We conclude as usual with Highlights from Total Securitization from editor Joy Wiltermuth that focus on European collateralized loan obligations, the U.K. non-conforming market, a court case involving the redirection of a cash flow waterfall, a description of recent Australian U.S. dollar deals, and new ABS disclosure rules and rating agency liability issues.

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