Abs East2010 Cfp Presentation1


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Due Diligence, Reporting Standards and Transparency …?

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Abs East2010 Cfp Presentation1

  1. 1. Due Diligence, Reporting Standards and Transparency …? ABS East 2010 Miami, Fl October 5th, 2010 John Joshi Managing Principal CapitalFusion Partners, LLC
  2. 2. Contact Information John Joshi: Firm: CapitalFusion Partners Phone: 818.294.3381 Email jjoshi@capitalfusionpartners.com
  3. 3. 3 Disclaimer Notice This confidential presentation has been prepared for informational purposes only and is not an offer to buy or sell any security or instrument or to participate in any particular trading strategy. This presentation is based on information that is believed to be reliable. No representation is made that it is accurate or complete. Certain assumptions have been made arriving at any returns detailed herein. No representation is made that any of the returns indicated will be achieved. Changes to the assumptions may have a material impact on any returns detailed. Past performance is not necessarily indicative of future returns. Price and availability are subject to change without notice. CapitalFusion Partners, (“CFP”), will provide additional information if available on request.
  4. 4. Why do we need regulation?
  5. 5. …the best and the brightest go to Wall Street
  6. 6. What Joe the Plumber thinks of the ABS Sector?  Matt Wueker, Politico.com
  7. 7. Can we out run the regulators?
  8. 8. Need to change our standards?
  9. 9. Who should make the rules?
  10. 10. No really … we know we do create value!
  11. 11. I was only trying to help….
  12. 12. Failure of Regulation – The Shadow Banking System
  13. 13. The New Normal?
  14. 14. 14 Headlines  Financial Regulatory Reform Terms Set by Conference Committee  S&P Warns on Europe’s mortgage market • Withdrawal of backing by government programs set to be cut for securitization • Costs could rise and loans become scare  ICP Asset Management Sued By SEC Over $11 Billion CDO Deal  Goldman Sued by SEC for Subprime Mortgage Bond Fraud  Ambac Assurance struck a deal to wipe out insurance contracts – called credit default swaps – on $16.4bn of CDOs as the insurer hovered on the brink of bankruptcy  Demand for structured finance – the type of securities that fuelled hundreds of billions of dollars of losses and a global financial crisis – is also hampered by uncertainty about regulation and capital rules
  15. 15. Sec Proposes New Securitization Rules  SEC proposes risk retention in securitization transactions • Income Verification Clarity • proposal would require new securitization deals to disclose how borrowers' incomes were confirmed for the loans being sold • Standardized Loan-Level Data Provided • The new proposal would require computerized loan-level data provided initially and on an on-going basis • Additional Time for Analysis • The SEC proposes investors have more time to ponder the information about the loans in the securitization pool before purchase • Issuer CEO Certification • 5% Skin in the Game • The assertion is that if the bank creating these assets had some skin in the game, then they would care more about the quality of the bonds they sell to investors • SEC Computer Model for Analyzing Securities
  16. 16. SEC Timetable
  17. 17. SEC Timetable – con’t
  18. 18. Key Changes for Securitization Markets  Improved Transparency - Alignment of economic interests between originators and investors, we think a mandatory minimum retention of risk in respect of securitized assets must address a number of important issues in order to be practical and beneficial.  Standardized Disclosure - Certain high-risk practices, such as “no doc” loans, should be prohibited outright. Moreover, we believe the current disclosure regime and underwriting practices can be improved. Specifically, we would increase loan-level disclosures, and encourage regulators to study ways of improving the standardized public disclosure package.  Rating Agency Reform - Reforms relating to credit rating agencies (CRAs) is vital to reinvigorating the securitized debt markets  Reps & Warranty - Originators, whether banks or brokers, need stronger incentives to originate loans that are in conformity with what they have promised  Effective Regulation - The financial reform bill is a good 1st step in introducing regulation in some previously unregulated areas  Stakeholder Alignment - Compensation structure for all stake-holders needs better alignment  Transparency on Leverage - Stronger capital requirements and better reporting of leverage. Improve Netting Capabilities across markets and exchanges
  19. 19. How do we go from here ….
  20. 20. Here … Role of Securitization and Finance
  21. 21. Contact Us John Joshi CapitalFusion Partners LLC 818-294-3381 jjoshi@capitalfusionpartners.com