FDIC Removes Disclosure Requirement in Securitization Safe Harbor Rule

The amendment is intended to eliminate a requirement that the securitization documents require compliance with Regulation AB of the SEC in circumstances where Regulation AB by its terms would not apply to the issuance of obligations backed by such financial assets. The policy objective of this final rule is to remove an unnecessary barrier to securitization transactions, particularly the securitization of residential mortgages, without adverse effects on the safety and soundness of insured depository institutions. The Securitization Safe Harbor Rule addresses circumstances that may arise if FDIC is appointed receiver or conservator for an insured depository institution that has sponsored one or more securitization transactions. FDIC is removing the requirement of the Securitization Safe Harbor Rule that the documents governing a securitization transaction require compliance with Regulation AB of the SEC in circumstances where Regulation AB is not applicable to the transaction under the terms of the regulation. 

Regulation AB imposes significant asset-level disclosure requirements in connection with registered securitization issuances. While SEC has not applied the Regulation AB disclosure requirements to private placement transactions, the Securitization Safe Harbor Rule has required (except for certain grandfathered transactions) that these disclosures be required as a condition for eligibility for benefits of the Securitization Safe Harbor Rule. The net effect appears to have been a disincentive for insured depository institutions to sponsor securitizations of residential mortgages that are compliant with the rule.

FDIC had proposed these amendments on August 22, 2019, with the comment period of the proposed rule ending on October 21, 2019. FDIC received ten comment letters—five from trade organizations, one from an insured depository institution, two from individuals, one from a financial reform advocacy group, and one from a financial market public interest group. FDIC considered all of the comments it received when developing the final rule. The final rule, however, remains unchanged from the proposed rule.

Related Link: Final Rule

Effective Date: May 04, 2020

Keywords: Americas, US, Banking, Securities, Securitization, Disclosures, Securitization Safe Harbor Rule, Regulation AB, SEC, FDIC