Editor’s Letter

Welcome to the Winter 2020 issue of The Journal of Structured Finance. This issue starts with an article by Laurie Goodman, Karan Kaul, and Jun Zhu of the Urban Institute. They examine the availability of mortgage credit for self-employed households. They find that tough regulatory standards for documenting borrowers’ incomes (Appendix Q to the Truth-in-Lending regulations) have made credit especially tight for self-employed households. They observe that homeownership has declined more for self-employed households than for salaries households in the period following the 2008-2009 financial crisis.

Next, Oyakhilome Ibhagui, of International Finance Corporation in Washington, DC, examines the effects of exchange-rate shocks on international ABS. He finds that positive shocks to exchange rates produce spread tightening and that the effect is more pronounced on securities at the lower credit grades.

In the third article, Robyn Lawrence, John Ruddy, and David Salerno, all at the University of Scranton, address various accounting issues relating to the demise of LIBOR. They consider both generally accepted accounting principles in the US and international accounting standards. Of note, they explain that companies may be required to update their documentation of hedge relationships in order to preserve hedge accounting treatment.

Then, Vikas Srivastava of the Indian Institute of Management and Surya Dashottar, a chartered accountant and banker in Lucknow, India, present a cashflow simulation model for estimating default probabilities for project finance bank loans in India. They illustrate their approach with a case study involving a toll road in southern India.

Rounding out the issue’s articles, Jon Van Gorp of Mayer Brown examines the use of titling trusts in structured finance transactions. ABS backed by auto leases have used titling trusts since the 1990s. Van Gorp explains that now other types of transactions are starting to use titling trusts as well.

This issue includes my report on the 25th Annual ABS East Conference that took place in September 2019. The report covers 18 sessions from the event, including the general sessions and the keynote addresses. This issue also includes my report on the inaugural annual symposium of the Fixed Income Investor Network. As usual, this issue includes highlights from GlobalCapital and a selection of industry news items from the Structured Finance Association (formerly known as the Structured Finance Industry Group), in both cases covering Q4 2019.

As always, we welcome your submissions. Please encourage those you know who have good papers or who have made good presentations on structured finance- or project finance-related subjects to submit them to us.

Submission guidelines can be found at http://jsf.pm-research.com/authors. If you have comments or suggestions, you can e-mail me directly at M.Adelson{at}PageantMedia.com.

TOPICS: Asset-backed securities (ABS), legal and regulatory issues for structured finance

Mark Adelson

Editor

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