Recent weeks have seen a number of legal, regulatory and political developments in the realm of asset securitization, culminating for the moment on September 27 with the issuance by the FDIC of a long-awaited “safe harbor” rule specifying the conditions under which U.S. banks and thrifts may issue mortgage-backed and other asset-backed securities without the threat that the FDIC will attempt to unwind the transaction in the event of the issuer’s seizure by the FDIC.

Below we offer a summary of the FDIC’s final safe harbor rule. We leave it to the reader to reach her or his own assessment of where the securitization market is, where it is headed, and at what speed.

What Now? FDIC’s Final Safe Harbor Restrains Bank Securitization

They said they were going to do it—and now, some critics say, “they’ve really done it.”

On September 27, 2010, the Board of Directors of the Federal Deposit Insurance Corporation (“FDIC”) resolved by a four-to-one vote to issue a final rule amending 12 C.F.R. § 360.6 (the “Securitization Rule”) relating to the FDIC’s treatment, as conservator or receiver, of financial assets transferred by an insured depository institution (“IDI”) in connection with a securitization or participation.1 Although initially prompted by the need to address changes to accounting standards on which the original Securitization Rule, adopted in 2000, was premised, the FDIC capitalized on the opportunity to address at the same time perceived structural failures inherent in the “originate to sell” securitization model widely believed to have contributed to the recent financial meltdown. As adopted, the Final Rule contains a number of reform-oriented qualitative conditions that securitizations must satisfy in order to be afforded safe harbor protections under the rule.