The following Letter Type A, or variations thereof, was submitted by individuals or entities.

Letter Type A:

VIA EMAIL
Mr. Robert W. Errett
Deputy Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090

Re:       Opposition to Release No. 34-76148; File No. SR-FINRA-2015-036; Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change to Amend FINRA Rule 4210 (Margin Requirements) To Establish Margin Requirements for the TBA Market

Dear Mr. Errett:
I am writing to you to express my opposition to the new rules that FINRA/SEC is considering  to impose on sellers of mortgage-backed securities backed by multifamily and healthcare loans issued by Ginnie Mae MBS and Fannie Mae MBS (collectively  referred  to herein as “MBS”) and sold to broker/dealers in the secondary market.    Such sellers of MBS are predominately the lenders originating and closing such multifamily and healthcare loans in accordance with agency rules, regulations and requirements and who accept such MBS in conjunction with the delivery of these loans to Ginnie Mae or Fannie Mae.  For forward delivery sale of such MBS, I understand that FINRA is considering imposing on such lenders/ sellers:

• A requirement to post 2%  initial good faith deposits, and;
   
• Mark to Market Margin Requirements - A requirement to post additional collateral based on daily margin calls determined by the broker/dealer purchaser/investors.

I understand that FINRA is considering these new regulations to further reduce counterparty exposure in the forward-settle multifamily/healthcare agency securities market.   However, I do not believe that added good faith and mark-to-market margining is necessary given:

• The relatively small size of this multifamily market (approximately $40 billion annually compared to the single-family mortgage market which has approximately $100 billion in transactions daily).  With an annual volume of only $40 billion, the amount of outstanding forward commitments is a small fraction of that amount and therefore doesn’t rise to a systemic risk concern.
   
• There are safeguards in the forward-settle multifamily/healthcare agency securities market already – including (1) good faith deposits (typically 0.50%-1%) and (2) trade confirmation agreements that address counterparty risk and describe how failed deliveries are resolved.
   
• The lenders/sellers are subject to oversight and capital requirements imposed by the federal agencies (Fannie Mae, HUD/FHA, and Ginnie Mae) which limits concern over such lender/seller creditworthiness.
   
• The forward-settle multifamily/healthcare agency securities market functions well.  Delivery defaults are extremely rare and, as stated above, when such defaults do occur, the parties are made whole pursuant to the terms outlined in the trade confirmation agreements.
   

These new rules would place an undue burden on multifamily and healthcare lenders including the added capital (larger good faith and margin) requirements.  Lenders/Sellers will also have additional costs associated with setting up margin accounts, monitoring daily changes and obtaining additional lines of credit.    Given that these markets have operated successfully through many decades (and different market cycles, including the most recent major recession), the new rules would have no meaningful benefit to counterparty exposure and systemic risk concerns.  However, the added costs would likely:

• Severely impact smaller, regional lenders (sellers) who operate in under-served tertiary markets;
• Further concentrate lending activity in larger financial institutions; and
• Add costs and limit access to financing to the multifamily/health care borrower customers (many of which are small business owners). Lenders/Sellers will need to defray the added costs with higher interest rates and limiting financing in certain markets.  This issue will be particularly problematic for borrower customers that are constructing new projects, to the extent the rules require margining for the full period of the construction term before permanent financing is closed.  Furthermore, many of the multifamily agency loans are utilized to finance low to moderate income apartment complexes throughout the country and may adversely affect the future availability of such housing stock.

In summary, I can understand FINRA’s interest to limit counterparty risk and systemic risk in the securities markets.  However, the forward-settle multifamily/healthcare agency securities market functions well and has sufficient safeguards already.   The proposed added regulations do not impact counterparty and systemic risk materially.  However, the proposed regulations will produce unnecessary burdens and costs on the multifamily/healthcare agency lending community and, in turn the multifamily and health care project owner community itself.
Please consider my points here as you deliberate the implementation of the proposed new rules.
Sincerely,

Person’s Name
Person’s Address
Person’s Phone Number

http://www.sec.gov/comments/sr-finra-2015-036/finra2015036-16.htm