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Author Topic: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans  (Read 6150 times)

Fred93

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S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« on: April 07, 2010, 11:53:33 pm »
This probably won't affect Prosper directly or immediately, as it is intended I believe for institutions who aggregate a bunch of consumer loans into a bond, but it is closely related to what prosper does (issue notes which depend on individual consumer loans), and the SEC's approach is similar to what many Prosper lenders have suggested is needed to get the middleman (ie Prosper) to have the right incentives.  This tells us the SEC's thinking on the problem of the wrongly incentivized middlemen.

http://www.nytimes.com/2010/04/08/business/08sec.html?hpw

Quote
S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
By EDWARD WYATT
Published: April 7, 2010

WASHINGTON — Credit rating agencies would lose their formal role in evaluating certain bonds backed by consumer loans, like home mortgages, under rules proposed on Wednesday by the Securities and Exchange Commission. Instead, the companies issuing these bonds would have to vouch for their soundness.
...
The bond issuers would also be required to keep a chunk of the securities in their own portfolios so that they retain some of the bonds’ risk, under the S.E.C.’s plan.

The "bond issuer" in the case of Prosper notes would be Prosper.

Quote
Standard & Poor’s credit rating agency said it was still studying the commission’s 667-page proposal.

OMG.  667 pages?  Thank goodness I'm not reading it.
« Last Edit: April 07, 2010, 11:56:53 pm by Fred93 »
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bankomatic

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #1 on: April 08, 2010, 12:24:26 am »
Yeah, this is right in the prosper ballpark. If they had to say own even as little as 5% of every loan they originate I bet they would be a lot more careful which loans they approve, and I guess they would need a lot more money.
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Fred93

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #2 on: April 08, 2010, 12:25:00 am »
Nominate for lobby.
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ira01

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #3 on: April 08, 2010, 12:59:46 am »
Quote from: Fred93 on April 08, 2010, 12:25:00 am
Nominate for lobby.

Seconded.  This is an excellent idea.  I bet if Prosper had to keep 5-10% of each loan, it wouldn't originate every loan with a pulse (so to speak) the last few days of each month.
« Last Edit: April 08, 2010, 01:01:30 am by ira01 »
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divindj

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #4 on: April 08, 2010, 07:50:46 am »
even if this all goes through... wtf is "keep a chunk" EXACTLY?  is it a dollar?  a percentage?

i can see Prosper defining "chunk" as a penny.  since when the loan defaults that penny would be a much larger "chunk" than the loan is worth...
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baeventures

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #5 on: April 08, 2010, 08:07:29 am »
The "chunk" this article refers to wouldn't bother Prosper at all. They clearly don't care about how their VC's money gets spent currently based on their directors salaries, so why would they care if some gets dropped into a bad loan? Just my 2 cents.

BAEVentures
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Staneslav

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #6 on: April 08, 2010, 09:29:27 am »
a
« Last Edit: December 04, 2017, 11:55:22 am by Staneslav »
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112233

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #7 on: April 08, 2010, 10:49:12 am »
PMI Bus Company is not responsible for any lost or stolen property
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Staneslav

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #8 on: April 08, 2010, 11:11:09 am »
a
« Last Edit: December 04, 2017, 11:54:25 am by Staneslav »
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mothandrust

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #9 on: April 08, 2010, 11:29:59 am »
Looks like they don't have a couch either...

http://www.shuttledirect.com/en/airport/PMI
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Please note that transfers by mini bus or coach do not travel in a special seat.
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christoofar215

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #10 on: April 10, 2010, 06:15:08 am »
The idea is to fix the problem with mortgage repackaging.  Investors were duped on MBS because the only thing they understood was "people pay their mortgages" and "we get their mortgage payments!!!"  What could go wrong?   :ninja:
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nonattender

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #11 on: April 10, 2010, 10:29:05 am »
Quote from: Staneslav on April 08, 2010, 11:11:09 am
Quote from: 112233 on April 08, 2010, 10:49:12 am
PMI Bus Company is not responsible for any lost or stolen property

Or for injuries incurred while riding the bus.

http://www.youtube.com/watch?v=rH7dMvVQ2Dc

-t
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Nothing that I ever say is "professional advice" - principally, because I suffer from an infinitely inescapable prinicipal/agent problem, in that I am, in principle, always acting as my own agent.

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112233

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Re: S.E.C. Moves to Tighten Rules on Bonds Backed by Consumer Loans
« Reply #12 on: April 10, 2010, 07:08:20 pm »
Quote from: nonattender on April 10, 2010, 10:29:05 am
Quote from: Staneslav on April 08, 2010, 11:11:09 am
Quote from: 112233 on April 08, 2010, 10:49:12 am
PMI Bus Company is not responsible for any lost or stolen property

Or for injuries incurred while riding the bus.

http://www.youtube.com/watch?v=rH7dMvVQ2Dc

-t
I think I posted this already, but I have this one queued up for august after my last borrower pays off his loan.
http://www.youtube.com/watch?v=rGa70tVYVKo&feature=related
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