On August 6, 2014, the Structured Finance Industry Group (SFIG) released the first in a series of papers referred to collectively as "RMBS 3.0," which is designed to overcome the legacy of the housing crisis and revive the so-called "private-label" residential mortgage-backed securities (RMBS) market. The initiative focuses on restoring investor trust through the use of representations and warranties in RMBS transaction documentation, as well as through diligence, disclosure and other mechanisms. Private-label RMBS are RMBS that are collateralized by a pool of mortgages that are not guaranteed by government sponsored enterprises (GSEs) Fannie Mae or Freddie Mac. It is an asset class that has been largely dormant since the onset of the financial crisis.

RMBS 3.0 was created by 200 market participants from approximately 50 organizations involved in the RMBS market. The objective of RMBS 3.0 is to restore faith in the RMBS market among market participants by recommending standard contract language designed to increase transparency in RMBS.

RMBS 3.0 focuses on the following three areas related to RMBS transactions:

In its first proposal, representations and warranties, RMBS 3.0 adopts a framework that seeks to protect against certain types of fraud and misrepresentation. The proposal presents issuers with three alternative iterations of the model fraud representation language. In the case where an issuer chooses a particular form, it can highlight or present these differences to investors in its disclosure for the transaction in the interest of transparency.

The first RMBS 3.0 proposal also adopts a framework related to regulatory compliance. RMBS 3.0 presents recommendations to make the current standard representation and warranty language covering the following three areas more efficient:

In its second proposal, RMBS 3.0 recommends due diligence, disclosure, and data standards. It suggests an effective method for disclosure of underwriting guidelines used to originate mortgage loans that would be included in RMBS 3.0 transactions. This would improve disclosure and aid investor understanding of the guidelines used to underwrite the mortgages in the securitized asset pool for these transactions. The proposal also outlines the need for due diligence and disclosure methods that take into account key legal issues such as privacy and selective disclosure.

Finally, in its third proposal, RMBS 3.0 discusses SFIG's current assessment of the roles that parties to an RMBS transaction should have in future securitizations. This includes mapping out the specific functions of trustees, master servicers, securities administrators, custodians and other potential parties.