FDIC Issues Advance Notice of Proposed Rulemaking on Securitization Safe Harbor; Seeks Comments on Securitization Reform


As a follow-up to its announcement at its November 15, 2009 meeting that it would propose additional changes to 12 C.F.R. §360.6 (the “Securitization Rule”) concerning the treatment by the Federal Deposit Insurance Corporation (the “FDIC”), as conservator or receiver, of financial assets transferred in connection with a securitization or participation, the Board of Directors of the FDIC issued, at its December 15, 2009 meeting, an advance notice of proposed rulemaking (the “Notice”) regarding possible amendments to the Securitization Rule.1 The Notice includes a draft of “sample” regulatory text (the “Sample Rule”) that contains a provocative array of possible standards that must be satisfied in order for securitizations issued after March 31, 2010 to qualify for safe harbor treatment under the Securitization Rule. The Notice seeks public comment on such possible securitization standards and poses a number of questions intended to stimulate submission of comments. Further, the Notice underscores that the FDIC is not adopting or recommending the Sample Rule, but only offering it to “provide context” for responses to the questions posed.

The Notice was issued on the heels of the House of Representatives’ December, 11, 2009 passage of the Wall Street Reform and Consumer Protection Act (the “Wall Street Reform Bill”), which includes a number of reforms targeted at asset-backed securitizations, including requirements that loan originators or securitizers retain an economic interest in the credit risk of the underlying loans and increased disclosure obligations for issuers of asset-backed securities.2

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