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�� THE 2013 FIVE STAR CONFERENCE AND EXPO IS PLEASED TO ANNOUNCE AUCTION.COM AS THE 2013 HOSTING SPONSOR As The Five Star Conference and Expo celebrates its 10th year, we are preparing for what will be our biggest event ever. New groundbreaking academics. The industry���s largest exhibit hall. More engagements for connecting and collaborating. And we can think of no better company to join us in this celebration than Auction.com. FiveStarConference.com 214.525.6766 VISIT US ONLINE @ DSNEWS.COM OCC BILLS SECONDARY MARKET AS POISED FOR REBOUND, FED BLAMES MBS FOR RISKY LENDING Conditions in the housing sector may have finally improved enough to bring life back to the securitization market, the head of the Office of the Comptroller of the Currency (OCC) said in remarks at the American Securitization Forum���s 2013 conference on January 28. Comptroller of the Currency Thomas Curry noted that the credit market has shifted dramatically in its efforts to prevent the practices that paved the way for the financial meltdown but has gone too far���an expected reaction, he said. However, as the market stabilizes, it will become important for lenders to adjust appropriately and find a balance, according to Curry. As poor performance of underlying assets, home price instability, and a lack of demand for private securities abate, ���underwriting standards will need to find a new equilibrium of risk and reward for a sustainable mortgage market,��� Curry said. One of the most critical components in turning things around, he said, is ���[g]etting the securitization pipeline flowing again.��� According to Curry, there are two key prerequisites to achieving this: ���clear evidence of stability in the value of the underlying asset������in other words, evidence that prices won���t drop out again���and a resolution of ���the legal and regulatory uncertainties that have kept many investors on the sidelines.��� Regarding the first prerequisite, Curry said, ���We are starting to see signs of stabilization, with modest price increases in some markets and slowdown in foreclosures and defaults. Housing today is lending strength to the economic recovery, rather than sapping it.��� As far as regulatory uncertainties go, the comptroller said clarity and predictability about regulatory policy ���is an area in which I believe we have made significant progress,��� pointing to the recent issuance of the long-anticipated qualified mortgage (QM) rule and the imminent release of the qualified residential mortgage (QRM) definition. While conceding the MBS market ���is an important innovation and has several merits,��� a study released by the Federal Reserve Bank of New York just days after Curry���s remarks revealed an inauspicious side to the market. ���Our findings suggest that existing securitization practices did adversely affect the screening incentives of lenders,��� the Fed researchers stated. About 60 percent of outstanding mortgage debt in the United States is traded as MBS, ���making the U.S. secondary mortgage market the largest fixed-income market in the world,��� according to the report. Observing more than 1 million loans originated from 2001 to 2006, the Fed researchers found MBS portfolios ended up defaulting 10 to 25 percent more often than portfolios of similar characteristics that were less likely to be securitized. ���That we find any effect on default behavior in one portfolio compared to another with virtually identical risk profiles, demographic characteristics, and loan terms suggest that the ease of securitization may have a direct impact on incentives elsewhere in the subprime housing market, as well as in other securitized markets,��� the Fed researchers stated. The researchers suggest lenders lacked sufficient ���skin in the game.��� If they held more of the risk themselves, there would be less variance in portfolio defaults. Additionally, the study found that while full-documentation loans increased by about 445 percent from 2001 to 2005, low-documentation loans increased by more than twice that���972 percent. The study concludes that an over-reliance on information such as FICO scores is insufficient in ascertaining risk, as it overlooks ���essential elements of strategic behavior on the part of lenders which are likely to be important.��� The yet to be drafted QRM rule will establish guidelines that are expected to lend themselves to safer asset-backed securities. Curry told attendees at the American Securitization Forum conference that the OCC and other regulatory agencies involved in the formulation of the QRM rule are working hard to achieve their objectives: ���encouraging the availability of consumer credit on reasonable terms, facilitated by the secondary mortgage market, on the one hand, and sound credit market practices and investor protection on the other.��� KNOW THIS National foreclosure inventory was reduced to 1.2 million homes as of the end of 2012, by Lender Processing Services��� tally. 45

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