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UP Fact-Check: Falcone's Securitization Proposal

abs-cbnnews.comApril 30, 2013

By Prof. Nelson Cainghog

Senatorial candidate Baldomero Falcone said during the Harapan 2013 Senatorial Debat that he will "teach securitization to all [local governmeent officials]…so that we'll have an economic reconnaissance all over the countryside."

While securitization is neatly defined by Investopedia.com as “[t]he process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors”, its definition is still being debated due to the inherent complexity of the securitization process.

Falcone mentioned that it was what MetroPacific Investments Corporation did in its successful bid to acquire Fort Bonifacio. However, the same securitization of mortgage loans, especially the subprime ones, was the root of the US financial crisis in 2008 when subprime mortgagors defaulted with the increase in interest rates. (See Harvard University’s Financial Crisis 101)

Given the complexity of securitization and the dangers it posed if left unregulated, Falcone did not mention the equally crucial regulatory aspect of securitization, considering the track record of the Philippine’s Security and Exchange Commission. For instance, Legacy Consolidated Plans and College Assurance Plans were under SEC regulation when they went into trouble.

He also did not look on the possible fiscal implication of local governments securitizing their Internal Revenue Allotments (IRA). While securitization might enable local governments to get the present value of future IRA flows, the same scheme could give last term administrations a windfall to the detriment of their successors; an invitation to irresponsible spending that needs effective regulation.

(This fact check was conducted by UP Diliman Political Science Assistant Professor Nelson Cainghog. UP is a partner of ABS-CBN News and Current Affairs for the May 13 elections.)

Back to April 2013 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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