Hunton & Williams LLP and Digital Risk, LLC Host Managing Credit Risk Transfer Symposium

New York—Law firm Hunton & Williams and mortgage solutions provider Digital Risk recently hosted 80 CFOs, bankers and senior asset managers to explore credit risk transfer issues catching the attention of Wall Street and major banks at the inaugural Managing Credit Risk Transfer Symposium.

Held at Hunton & Williams’ New York office and moderated by Thomas Hiner, partner and co-head of the firm’s Structured Finance and Securitization practice, the discussion addressed agency risk-sharing transactions, other credit risk transfer structures, risk assessment, regulatory aspects, and tax considerations for 2015. The event focused specifically on “synthetic” credit risk transfer transactions, where investors acquire credit risk with respect to a pool of identified assets without acquiring an interest in the assets themselves.

Joseph Buonanno, head of the firm’s Derivatives Group, discussed the evolving regulatory hurdles of risk transfer transactions as a result of increased rulemaking. “While risk-based securities were initially penalized under Dodd-Frank, present restrictions are being loosened and the incentives to do these types of transactions are strong,” Buonanno commented. “It remains to be seen, however, how this will play out when proposed rules finally are issued.”

Hunton & Williams tax partner Cecelia Philipps Horner and structured finance counsel Brent Lewis provided a legal roadmap regarding the structure, applicable credit events, due diligence requirements, servicing terms, legal documentation, and tax issues relevant to such transactions.

Digital Risk’s Senior Vice President of Transaction Management Chris Castoro addressed the importance of a regulatory compliance review as part of a robust due diligence. “With one new rule after another, the importance of a thorough risk transfer due diligence review has never been higher,” Castoro said.

Laurel Davis, vice president for Credit Risk Transfer at Fannie Mae, also spoke at the symposium. Davis reviewed the overall goals of a credit risk transfer program, and highlighted several expectations for Fannie Mae’s continued execution of credit risk transfer transactions in 2015.