Along with SMMEA
eligibility, CMBSs typically have been afforded favorable treatment under the capital reserve requirements developed by the National Association of Insurance Commissioners (NAIC).
A very compelling argument made by the private sector during the hearing process was the impact SMMEA legislation would have on home mortgage interest rates.
However, the changes proposed to the Fannie Mae and Freddie Mac Charter Acts were an important element in getting SMMEA passed.
Today's housing finance market strongly reflects the positive effects of SMMEA.
Unfortunately, these positive effects may be diminished by actions being taken recently in many states to override provisions of the SMMEA statute.
Modifications to SMMEA are not being proposed and voted on because of any problems with these securities.
The impetus for these changes really began in January of this year when the National Association of Insurance Commissioners sent out a notice to all 50 state commissioners reminding them that they only had until October 3 of this year to override the legal investment and blue-sky pre-emption of SMMEA.
New York's decision on SMMEA is critical for several reasons.
If the legislation that was passed by both houses in July is signed by the governor, then New York Assembly Bill 6753 will override SMMEA.
The pre-emption of state law by SMMEA paved the way for an expanded market for investment in PMBS.
This cursory view of statistics provides ample evidence that SMMEA, with its state law pre-emptions, was the catalyst for the growth and development of private mortgage-related securities by enhancing the market liquidity of these securities.
States have until October 3, 1991 to enact legislation that effectively overrides the SMMEA preemption.