November 9, 2015
Mr. Robert W. Errett, Deputy Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
RE: Request for Extended Comment Period
SR-FINRA-2015-036, Proposed Rule to Amend FINRA Rule 4210 Margin Requirements for To Be Announced Transactions
Dear Mr. Errett:
I am employee with a HUD-approved mortgage lender that specializes in financing multifamily and healthcare projects with FHA mortgage insurance. My firm routinely finances projects with Government National Mortgage Association (GNMA) mortgage-backed securities (MBS). I have been in the mortgage banking business for over 36 years when I began my career in mortgage banking in 1979 with Merrill Lynch. In my 36 years of mortgage banking, I have seen firsthand how the combination of FHA mortgage insurance and GNMA MBS has provided a long-term, stable and affordable source of capital for housing and healthcare projects.
I am respectfully requesting that the Commission and FINRA extend the current 21-day comment period (ending November 10, 2015) to at least 45 days for the proposed margin rule. Our industry representatives, including the Mortgage Bankers Association (MBA) and Committee on Healthcare Financing (COHF) are concerned that the 21-day comment period is insufficient for its members and all business participants to fully review and provide substantive and helpful comments on such a far-reaching rule. I agree with many in the industry that an abbreviated comment period will result in a final rule with unintended consequences, causing serious disruptions to the financing markets for the healthcare and multifamily housing that depend on FHA mortgage insurance and MBS for access to affordable capital.
From my review of the proposed rule is that it will impose daily “margin requirements” on GNMA (and FNMA) multifamily and healthcare MBS transactions to ensure protection to investors from the risk of a failed delivery of the mortgage-backed security. These margin requirements would be in effect from the time the interest rate is set on the security to the closing of the underlying FHA-insured loan; they would be in addition to the industry-standard good faith deposit, which is currently .5% but is slated to be increased to 2.00% in the proposed rule.
While the rule may be well-intentioned in its efforts to protect investors, I agree with many in the industry that it is an unnecessary intrusion into a long-standing, efficient and well-functioning market that has historically benefitted from clear rules of the road with respect to delivery standards and investor expectations. Moreover, the proposed rule has the potential for unintended – and negative - consequences in the FHA-insured/GNMA marketplace, summarized as follows:
Again, the proposed rule is well intentioned, but if implemented as described will likely have a detrimental impact on lenders, business participants and borrowers seeking FHA mortgage insurance for their financing needs. Your office should strongly extend the comment period to allow business participants in the space the opportunity to comment on the proposed rule. Thank you in advance for your cooperation and assistance.
Jose A. (Tony) Perez