[Federal Register: January 7, 2010 (Volume 75, Number 4)]
[Proposed Rules]
[Page 934-942]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ja10-12]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 934]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 360
RIN 3064-AD55
Treatment by the Federal Deposit Insurance Corporation as
Conservator or Receiver of Financial Assets Transferred by an Insured
Depository Institution in Connection With a Securitization or
Participation After March 31, 2010
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Advance Notice of Proposed Rulemaking.
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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') is
issuing this Advance Notice of Proposed Rulemaking to solicit public
comment regarding proposed amendments regarding the treatment by the
FDIC, as receiver or conservator of an insured depository institution,
of financial assets transferred by the institution in connection with a
securitization or a participation after March 31, 2010 (the ``ANPR'').
In November 2009, the FDIC issued an Interim Final Rule amending its
regulation, Treatment by the Federal Deposit Insurance Corporation as
Conservator or Receiver of Financial Assets Transferred by an Insured
Depository Institution in Connection With a Securitization or
Participation, to provide for safe harbor treatment for participations
and securitizations until March 31, 2010 (the ``Interim Rule''). The
ANPR requests comments on the standards that should be adopted to
provide safe harbor treatment in connection with participations and
securitizations issued after March 31, 2010.
The ANPR seeks comment for forty-five (45) days on a range of
issues that are implicated by proposed standards for a safe harbor for
participations and securitizations issued after March 31, 2010. To
provide a basis for consideration of the questions and the relationship
of different conditions for such a safe harbor, the ANPR includes
preliminary regulatory text that could be considered to set specific
standards for such a safe harbor. This draft of regulatory text should
be considered as one example of regulatory text, and not the only
option to be considered. The Board's approval of the ANPR should not be
considered as signifying adoption or recommendation of the preliminary
regulatory text, but the text does provide context for response to the
questions.
DATES: Comments on this ANPR must be received by February 22, 2010.
ADDRESSES: You may submit comments on the ANPR, by any of the following
methods:
Agency Web Site: http://www.FDIC.gov/regulations/laws/
federal/notices.html. Follow instructions for submitting comments on
the Agency Web Site.
E-mail: Comments@FDIC.gov. Include RIN 3064-AD55
on the subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7 a.m. and 5 p.m.
Instructions: All comments received will be posted generally
without change to http://www.fdic.gov/regulations/laws/federal/
propose.html, including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Michael Krimminger, Office of the
Chairman, 202-898-8950; George Alexander, Division of Resolutions and
Receiverships, (202) 898-3718; Robert Storch, Division of Supervision
and Consumer Protection, (202) 898-8906; or R. Penfield Starke, Legal
Division, (703) 562-2422, Federal Deposit Insurance Corporation, 550
17th Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
In 2000, the FDIC clarified the scope of its statutory authority as
conservator or receiver to disaffirm or repudiate contracts of an
insured depository institution (``IDI'') with respect to transfers of
financial assets by an IDI in connection with a securitization or
participation when it adopted a regulation codified at 12 CFR 360.6
(``the Securitization Rule''). This rule provided that the FDIC as
conservator or receiver will not use its statutory authority to
disaffirm or repudiate contracts to reclaim, recover, or recharacterize
as property of the institution or the receivership any financial assets
transferred by an IDI in connection with a securitization or in the
form of a participation, provided that such transfer meets all
conditions for sale accounting treatment under generally accepted
accounting principles (``GAAP''). The rule was a clarification, rather
than a limitation, of the repudiation power because such power
authorizes the conservator or receiver to breach a contract or lease
entered into by an IDI and be legally excused from further performance
but it is not an avoiding power enabling the conservator or receiver to
recover assets that were previously sold off balance sheet by the IDI.
The Securitization Rule provided a ``safe harbor'' by confirming
``legal isolation'' if all other standards for sale accounting
treatment, along with some additional conditions focusing on the
enforceability of the transaction, were met by the transfer.
Satisfaction of ``legal isolation'' was vital to securitization
transactions because of the risk that the pool of financial assets
transferred into the securitization trust could be recovered in
bankruptcy or in a bank receivership. Generally, to satisfy the legal
isolation condition, the transferred financial asset must have been
presumptively placed beyond the reach of the transferor, its creditors,
a bankruptcy trustee, or in the case of an IDI, the FDIC as conservator
or receiver. The Securitization Rule provided the necessary
confirmation of ``legal isolation'' and has served as a central
component of securitization by providing assurance that investors could
look to securitized financial assets for payment without concern that
the financial assets would be interfered with by the FDIC as
conservator or receiver.
Recently, the implementation of new accounting rules has created
uncertainty for securitization participants. On June 12, 2009, the
Financial Accounting Standards Board (``FASB'') finalized modifications
to GAAP through Statement of Financial Accounting Standards No. 166,
Accounting for Transfers of Financial Assets, an
[[Page 935]]
Amendment of FASB Statement No. 140 (``FAS 166'') and Statement of
Financial Accounting Standards No. 167, Amendments to FASB
Interpretation No. 46(R) (``FAS 167'') (the ``2009 GAAP
Modifications''). The 2009 GAAP Modifications are effective for annual
financial statement reporting periods that begin after November 15,
2009. For most IDIs, the 2009 GAAP Modifications will be effective for
reporting periods beginning after January 1, 2010. The 2009 GAAP
Modifications made changes that affect whether a special purpose entity
(``SPE'') must be consolidated for financial reporting purposes,
thereby subjecting many SPEs to GAAP consolidation requirements. These
accounting changes will require some IDIs to consolidate an issuing
entity to which financial assets have been transferred for
securitization on to their balance sheets for financial reporting
purposes.\1\ Given the likely accounting treatment, securitizations
could be considered to be an alternative form of secured borrowing. As
a result, the safe harbor provision of the Securitization Rule may not
apply to the transfer.
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\1\ Of particular note, Paragraph 26A of FAS 166 introduces a
new concept that was not in FAS 140, as follows: ``* * * The
transferor must first consider whether the transferee would be
consolidated by the transferor. Therefore, if all other provisions
of this Statement are met with respect to a particular transfer, and
the transferee would be consolidated by the transferor, then the
transferred financial assets would not be treated as having been
sold in the financial statements being presented.''
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As a result of the changes by FASB, most securitizations will not
be treated as sales for accounting purposes. Given this likely
accounting treatment, securitizations alternatively could be considered
to be a form of secured financing. In 2005 Congress enacted
11(e)(13)(C) of the FDI Act. In relevant part, this provision requires
the consent of the conservator or receiver for 45 or 90 days,
respectively, before any action can be taken by a secured creditor
against collateral pledged by the IDI. If a securitization is not given
sale accounting treatment under the changes to GAAP, but is treated as
a secured financing, section 11(e)(13)(C) could prevent the security
holders from recovering monies due to them by up to 90 days in a
receivership. During that time, interest on the securitized debt
theoretically could remain unpaid.
The FDIC has been advised that this 90-day delay would cause
substantial downgrades in the ratings provided on existing
securitizations and could prevent planned securitizations for multiple
asset classes, such as credit cards, automobile loans, and other
credits, from being brought to market. The changes in GAAP may also
affect the ratings of securitizations that qualify under the Federal
Reserve's Term Asset-Backed Securities Loan Facility.
FAS 166 also affects the treatment of participations issued by an
IDI, in that it defines participating interests as pari-passu pro-rata
interests in a financial assets, and subjects the sale of a
participation interest to the same conditions as the sale of financial
assets. FAS 166 provides that transfers of participation interests that
do not qualify for sale treatment will be viewed as secured borrowings.
While the GAAP Modifications have some effect on participations, most
participations are likely to continue to meet the conditions for sale
accounting treatment under GAAP.
The 2009 GAAP Modifications affect the way securitizations are
viewed by the rating agencies and whether they can achieve ratings that
are based solely on the credit quality of the financial assets,
independent from the rating of the IDI. Rating agencies are concerned
with several issues, including the ability of a securitization
transaction to pay timely principal and interest in the event the FDIC
is appointed receiver or conservator of the IDI. Moody's, Standard &
Poor's, and Fitch have expressed the view that because of the 2009 GAAP
Modifications and the extent of the FDIC's rights and powers as
conservator or receiver, bank securitization transactions are unlikely
to receive AAA ratings and would have to be linked to the rating of the
IDI. Securitization practitioners have asked the FDIC to provide
assurances regarding the position of the conservator or receiver as to
the treatment of both existing and future securitization transactions
to enable securitizations to be structured in a manner that enables
them to achieve de-linked ratings.
The FDIC believes that several of the issues of concern for
securitization participants regarding the impact of the 2009 GAAP
Modifications can be addressed simply by clarifying the position of the
conservator or receiver under established law. The ability of the FDIC
as conservator or receiver to reach financial assets transferred by an
IDI to an issuing entity in connection with a securitization is limited
by the statutory provision prohibiting the conservator or receiver from
avoiding a legally enforceable or perfected security interest, except
where such an interest is taken in contemplation of insolvency or with
the intent to hinder, delay, or defraud the institution or the
creditors of such institution.\2\ Accordingly, in the case of a
securitization that satisfies the standards set by the FDIC, the
conservator or receiver will not, in the exercise of its statutory
repudiation power, attempt to reclaim or recover financial assets
transferred by an IDI in connection with a securitization if the
financial assets are subject to a legally enforceable and perfected
security interest under applicable law.
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\2\ 12 U.S.C. 1821(e)(11).
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Pursuant to 12 U.S.C. 1821(e)(13)(C), no person may exercise any
right or power to terminate, accelerate, or declare a default under a
contract to which the IDI is a party, or to obtain possession of or
exercise control over any property of the IDI, or affect any
contractual rights of the IDI, without the consent of the conservator
or receiver, as appropriate, during the 45-day period beginning on the
date of the appointment of the conservator or the 90-day period
beginning on the date of the appointment of the receiver. In order to
address concerns that the statutory stay could delay repayment of
investors in a securitization or delay a secured party from exercising
its rights with respect to securitized financial assets, the FDIC may
provide by regulation for the consent by the conservator or receiver,
subject to certain conditions, to the continued payment of regularly
scheduled payments under the securitization documents and continuing
servicing of the assets, as well as the ability to exercise self-help
remedies ten (10) days after a payment default by the FDIC or the
repudiation of a transfer agreement during the stay period of 12 U.S.C.
1821(e)(13)(C).
Purposes of the ANPR. The FDIC, as deposit insurer and receiver for
failed insured depository institutions, has a unique responsibility and
interest in ensuring that loans and other financial assets, as
described in the ANPR, made by insured banks and thrifts are originated
for long-term sustainability. The supervisory interest in origination
of quality loans and other financial assets is shared with other bank
and thrift supervisors. However, the FDIC's responsibilities to protect
insured depositors and resolve failed insured banks and thrifts, and
its fiduciary responsibility to the Deposit Insurance Fund, require it
to ensure that, where it provides consent to special relief from the
application of its receivership powers, it should do so in a manner
that fulfills these responsibilities.
Securitization can be a valuable tool for liquidity for insured
banks and thrifts and other financial institutions if it is supported
by properly underwritten
[[Page 936]]
loans or other financial assets and structured to align incentives
among all parties to the transactions for long-term sustainable
lending. The FDIC supports sustainable securitization to provide
balance sheet liquidity and, where appropriate, off balance sheet
transactions that enhance prudent credit availability. Securitization,
properly structured, can play an important role in recovery from the
financial crisis.
However, the evident defects in many subprime and other mortgages
originated and sold into securitizations requires attention by the FDIC
to fulfill its responsibilities as deposit insurer and receiver in
addition to its role as a supervisor. The defects and misalignment of
incentives in the securitization process for residential mortgages was
a significant contributor to the erosion of underwriting standards
throughout the mortgage finance system. While many of the troubled
mortgages were originated by non-bank lenders, insured banks and
thrifts also made many troubled loans as underwriting standards
declined under the competitive pressures created by the returns
achieved by lenders, and service providers, through the ``originate to
distribute'' model.
Securitizations of other asset classes have not suffered the
dramatic declines in issuance experienced by securitizations of newly
originated mortgages. While mortgage securitizations have been
extremely limited during 2009, and exclusively focused on seasoned
mortgages, securitizations of credit card and other consumer loans have
continued. However, securitizations of all asset classes are affected
by the accounting changes and the changes in the application of the
Securitization Rule consequent upon them.
Nonetheless, defects in the incentives provided by securitization
through immediate gains on sale for transfers into securitizations and
fee income directly led to material adverse consequences for insured
banks and thrifts. Among these consequences were increased repurchase
demands under representations and warranties contained in
securitization agreements, losses on purchased mortgage- and asset-
backed securities, severe declines in financial asset values and in
asset and asset-backed security values due to spreading market
uncertainty about the value of structured finance investments, and
impairments in overall financial prospects due to the accelerated
decline in housing values and overall economic activity. These
consequences, and the overall economic conditions, directly led to the
failures of many insured depository institutions and to significant
losses to the Deposit Insurance Fund. In this context, it would be
imprudent for the FDIC to provide consent or other clarification of its
application of its receivership powers without imposing certain
conditions on securitizations designed to realign incentives.
Additional considerations are present in connection with residential
mortgage loan securitizations (``RMBS'') to avoid the devastating
effects witnessed in the financial crisis.
The FDIC's adoption of 12 CFR 360.6 in 2000 provided clarification
of ``legal isolation'' and facilitated legal and accounting analyses
that supported securitization. In view of the accounting changes and
the effects they have upon the application of the Securitization Rule,
it is crucial that the FDIC provide clarification of the future
application of its receivership powers in a way that reduces the risks
to the Deposit Insurance Fund by better aligning the incentives in
securitization to support sustainable lending and structured finance
transactions.
II. Request for Comments
The FDIC has included preliminary regulatory text to provide
context for the responses to the questions posed in the ANPR. We
believe that inclusion of the preliminary text will assist responders
by offering a possible approach to integrating the potential conditions
into a regulation and by providing context to how different conditions
could be related to each other in a complete regulation. This does not
imply that the Board will not make significant changes to the
preliminary regulatory text at a later stage of the rulemaking.
An overall consideration is whether any future regulation should
apply different conditions to different asset classes. There appears to
be a need for greater transparency and clarity in all securitizations,
but there is no question that greater difficulties have been
demonstrated in residential mortgage-backed securities. With this
background, it may be appropriate to make the conditions applicable to
RMBS more detailed and explicit to address these issues. The
preliminary regulatory text takes this approach and may be a useful
contextual document for comparing how different standards could be
applied.
General Questions
1. Do the changes to the accounting rules affect the application of
the pre-existing Securitization Rule to participations? If so, are
there changes to the Securitization Rule that are needed to protect
different types of participations issued by IDIs?
2. If the FDIC were to adopt changes to the conditions required for
the safe harbor similar to those contained in the preliminary
regulatory text, what transition period would be required to permit
implementation? Do you have other comments on the transitional safe
harbor current in place until March 31, 2010?
The following sections of this document identify different issues
that could be addressed by a final rule, and follow the subdivisions
within the preliminary regulatory text.
Capital Structure
For all securitizations, the FDIC believes that the benefits of a
future safe harbor rule should only be available to securitizations
that are readily understood by the market, increase liquidity of the
financial assets and reduce consumer costs. A consideration is that
lenders may have greater incentives to originate well underwritten
loans and sponsors may have greater incentives to participate in
securitizations of such loans if payments of principal and interest on
the obligations are primarily dependent on the performance of the
financial assets supporting the securitization. In this context, it is
appropriate to consider whether external credit support, beyond loan-
specific guarantees or other credit support, should be allowed.
Specific Questions on Capital Structure
3. Should certain capital structures be ineligible for the future
safe harbor? For example, should securitizations that include leveraged
tranches that introduce market risks (such as leveraged super senior
tranches) be ineligible?
4. For RMBS specifically, in order to limit both the complexity and
the leverage of RMBS, and therefore the systemic risk introduced by
them in the market, should the capital structure of the securitization
be limited to a specified number of tranches? If so, how many, and why?
If no more than six tranches were permitted, what would be the
potential consequence?
5. Should there be similar limits to the number of tranches that
can be used for other asset classes? What are the benefits and costs of
taking this approach?
6. Should re-securitizations (securitizations supported by other
securitization obligations) be required to include adequate disclosure
of the obligations including the structure and asset quality supporting
each of the underlying securitization obligations
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and not just the obligations that are transferred in the re-
securitization?
7. Should securitizations that are unfunded or synthetic
securitizations that are not based on assets transferred to the issuing
entity or owned by the sponsor be eligible for expedited consent?
8. Should all securitizations be required to have payments of
principal and interest on the obligations primarily dependent on the
performance of the financial assets supporting the securitization?
Should external credit support be prohibited in order to better realign
incentives between underwriting and securitization performance? Are
there types of external credit support that should be allowed? Which
and why?
Disclosures
For all securitizations, disclosure serves as an effective tool for
increasing the demand for high quality financial assets and thereby
establishing incentives for robust financial asset underwriting and
origination practices. By increasing transparency in securitizations,
investors (which may include banks) can decide whether to invest in a
securitization based on full information with respect to the quality of
the asset pool and provide additional liquidity only for sustainable
origination practices.
Specific Questions on Disclosure
9. What are the principal benefits of greater transparency for
securitizations? What data is most useful to improve transparency? What
data is most valuable to enable investors to analyze the credit quality
for the specific assets securitized? Does this differ for different
asset classes that are being securitized? If so, how?
10. Should disclosures required for private placements or issuances
that are not otherwise required to be registered include the types of
information and level of specificity required under Securities and
Exchange Commission Regulation AB, 17 CFR 229.1100-1123, or any
successor disclosure requirements?
11. Should qualifying disclosures also include disclosure of the
structure of the securitization and the credit and payment performance
of the obligations, including the relevant capital or tranche
structure? How much detail should be provided regarding the priority of
payments, any specific subordination features, as well as any waterfall
triggers or priority of payment reversal features?
12. Should the disclosure at issuance also include the
representations and warranties made with respect to the financial
assets and the remedies for such breach of representations and
warranties, including any relevant timeline for cure or repurchase of
financial assets.
13. What type of periodic reports should be provided to investors?
Should the reports include detailed information at the asset level? At
the pool level? At the tranche level? What asset level is most relevant
to investors?
14. Should reports included detailed information on the ongoing
performance of each tranche, including losses that were allocated to
such tranche and remaining balance of financial assets supporting such
tranche as well as the percentage coverage for each tranche in relation
to the securitization as a whole? How frequently should such reports be
provided?
15. Should disclosures include the nature and amount of broker,
originator, rating agency or third-party advisory, and sponsor
compensation? Should disclosures include any risk of loss on the
underlying financial assets is retained by any of them?
16. Should additional detailed disclosures be required for RMBS?
For example should property level data or data relevant to any real or
personal property securing the mortgage loans (such as rents,
occupancy, etc.) be disclosed?
17. For RMBS, should disclosure of detailed information regarding
underwriting standards be required? For example, should securitizers be
required to confirm that the mortgages in the securitization pool are
underwritten at the fully indexed rate relying on documented income,\3\
and comply with existing supervisory guidance governing the
underwriting of residential mortgages, including the Interagency
Guidance on Non-Traditional Mortgage Products, October 5, 2006, and the
Interagency Statement on Subprime Mortgage Lending, July 10, 2007, and
such additional guidance applicable at the time of loan origination?
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\3\ Institutions should verify and document the borrower's
income (both source and amount), assets and liabilities. For the
majority of borrowers, institutions should be able to readily
document income using recent W-2 statements, pay stubs, and/or tax
returns. Stated income and reduced documentation loans should be
accepted only if there are mitigating factors that clearly minimize
the need for direct verification of repayment capacity. Reliance on
such factors also should be documented. Mitigating factors might
include situations where a borrower has substantial liquid reserves
or assets that demonstrate repayment capacity and can be verified
and documented by the lender. A higher interest rate is not
considered an acceptable mitigating factor.
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18. What are the primary benefits and costs of potential approaches
to these issues?
Documentation and Recordkeeping
For all securitizations, the operative agreements should define all
necessary rights and responsibilities of the parties, including but not
limited to representations and warranties consistent with industry best
practices and ongoing disclosure requirements. It must include
appropriate measures to avoid conflicts of interest. The contractual
rights and responsibilities of each party to the transactions must
provide each party with sufficient authority and discretion for such
party to fulfill its respective duties under the securitization
contracts.
Additional requirements could be applied to RMBS to address a
significant issue that has been demonstrated in the mortgage crisis by
improving the authority of servicers to mitigate losses on mortgage
loans consistent with maximizing the net present value of the
mortgages, as defined by a standardized net present value analysis. In
addition, there has been considerable criticism of securitizations that
give control of servicing discretion to a particular class of
investors. Many have urged that future securitizations require that the
servicer act for the benefit of all investors rather than maximizing
the value of to any particular class of investors. There have also been
concerns expressed that a prolonged period of servicer advances in a
market downturn misaligns servicer incentives with those of the RMBS
investors. Servicing advances also serve to aggravate liquidity
concerns, exposing the market to greater systemic risk. These and other
issues related to the contractual provisions, and allocations of
responsibilities in securitizations, may create significant risks, and
in some cases rewards, for different parties to securitizations.
Specific Questions on Documentation and Recordkeeping
19. With respect to RMBS, a significant issue that has been
demonstrated in the mortgage crisis is the authority of servicers to
mitigate losses on mortgage loans consistent with maximizing the net
present value of the mortgages, as defined by a standardized net
present value analysis. For RMBS, should contractual provisions in the
servicing agreement provide for the authority to modify loans to
address reasonably foreseeable defaults and to take such other action
as necessary or required to maximize the value and minimize losses on
the securitized financial assets?
20. Loss mitigation has been a significant cause of friction
between
[[Page 938]]
servicers, investors and other parties to securitizations. Should
particular contractual provisions be required? Should the documents
allow allocation of control of servicing discretion to a particular
class of investors? Should the documents require that the servicer act
for the benefit of all investors rather than maximizing the value of to
any particular class of investors?
21. In mitigating losses, should a servicer specifically be
required to commence action to mitigate losses no later than a
specified period, e.g., ninety (90) days after an asset first becomes
delinquent unless all delinquencies on such asset have been cured?
22. To what extent does a prolonged period of servicer advances in
a market downturn misalign servicer incentives with those of the RMBS
investors? To what extent to servicing advances also serve to aggravate
liquidity concerns, exposing the market to greater systemic risk?
Should the servicing agreement for RMBS restrict the primary servicer
advances to cover delinquent payments by borrowers to a specified
period, e.g., three (3) payment periods, unless financing facilities to
fund or reimburse the primary servicers are available? Should limits be
placed on the extent to which foreclosure recoveries can serve as a
``financing facility'' for repayment of advances?
23. What are the primary benefits and costs of potential approaches
to these issues?
Compensation
Due to the demonstrated issues in the compensation incentives in
RMBS, the FDIC has concerns that compensation to all parties involved
in the RMBS issuance should provide incentives for sustainable credit
and the long-term performance of the financial assets and
securitization. This has been of particular concern in the compensation
provided to servicers for RMBS with some arguing that the compensation
structure for servicers provides perverse incentives contrary to the
interests of effective action to mitigate losses.
In this regard, please note that the preliminary regulatory text on
compensation would apply only to RMBS. This does not mean that
compensation issues may not be of concern in other asset classes.
Specific Questions on Compensation
24. Should requirements be imposed so that certain fees in RMBS may
only be paid out over a period of years? For example, should any fees
payable to the lender, sponsor, credit rating agencies and underwriters
be payable in part over the five (5) year period after the initial
issuance of the obligations based on the performance of those financial
assets? Should a limit be set on the total estimated compensation due
to any party at that may be paid at closing? What should that limit be?
25. Should requirements be imposed in RMBS to better align
incentives for proper servicing of the mortgage loans? For example,
should compensation to servicers be required to take into account the
services provided and actual expenses incurred and include incentives
for servicing and loss mitigation actions that maximize the value of
the financial assets in the RMBS?
26. What are the primary benefits and costs of potential approaches
to these issues?
27. Should similar or different provisions be applied to
compensation for securitizations of other asset classes?
Origination and Retention Requirements
The FDIC also is concerned that further incentives for quality
origination practices may be appropriate conditions for any future safe
harbor treatment. In particular, if a sponsor were required to retain
an economic interest in the asset pool without hedging the risk of such
portion, the sponsor would be less likely to originate low quality
financial assets. Many proposals have required retention of some
percentage, usually five or ten percent, of the credit risk of the
financial assets. Limiting the ability to hedge this risk has also been
proposed, but this raises issues as well.
Another issue raised in securitizations has been the high number of
early payment defaults in some securitizations of RMBS during the
crisis. One way to address this would be to require that mortgage loans
be seasoned, i.e., originated more than twelve (12) months prior to the
initial issuance of the RMBS. Of course, this raises issues for both
originators and sponsors of securitizations.
An alternative to accomplish the goals of ensuring quality
mortgages go into securitizations would be to require, at a minimum,
representations and warranties on legal enforceability of the mortgage
loan, verification of borrower income, occupancy status and compliance
with the requirement of an underlying property appraisal. The
securitization documents could then designate a contract party to
verify these specific representations and warranties, as well as any
additional representations and warranties so designated by the
documentation, within a specified period after issuance of obligations
under the securitization. The documentation could also require the
sponsor to repurchase any financial assets that breach such
representation and warranties within thirty (30) days of notice thereof
from the Trustee and/or Custodian. To support this requirement, the
possible approach would hold five (5) percent of the proceeds due to
the sponsor back for twelve (12) months to fund any repurchases
required after this review.
In addition, it may be appropriate to require originations of
residential mortgage loans in an RMBS to comply with all statutory and
regulatory standards in effect at the time of origination. This could
also reduce potential future problems with repurchases of securitized
loans.
Specific Questions on Origination and Retention Requirements
28. For all securitizations, should the sponsor retain at least an
economic interest in a material portion of credit risk of the financial
assets? If so, what is the appropriate risk retention percentage? Is
five percent appropriate? Should the number be higher or lower? Should
this vary by asset class or the size of securitization? If so how?
29. Should additional requirements to incentivize quality
origination practices be applied to RMBS? Is the requirement that the
mortgage loans included in the RMBS be originated more than 12 months
prior to any transfer for the securitization an effective way to align
incentives to promote sound lending? What are the costs and benefits of
this approach? What alternatives might provide a more effective
approach? What are the implications of such a requirement on credit
availability and institutions' liquidity?
30. Would the alternative outlined above, which would require a
review of specific representations and warranties after 180 days and
the repurchase of any mortgages that violate those representations and
warranties, better fulfill the goal of aligning the sponsor's interests
toward sound underwriting? What would be the costs and benefits of this
alternative?
31. Should all residential mortgage loans in an RMBS be required to
comply with all statutory and regulatory standards and guidance in
effect at the time of origination? Where such standards and guidance
involve subjective standards, how will compliance with the standards
and guidance be determined? How should the FDIC treat a situation where
a very small portion of the mortgages backing an RMBS do not meet the
applicable standards and guidance?
[[Page 939]]
32. What are appropriate alternatives? What are the primary
benefits and costs of potential approaches to these issues?
Additional Questions
In looking at the preliminary regulatory text provided for context,
the FDIC would like to pose the following additional questions:
33. Do you have any other comments on the conditions imposed by
paragraphs (b) and (c) of the preliminary regulatory text?
34. Is the scope of the safe harbor provisions in paragraph (d) of
the preliminary regulatory text adequate? If not, what changes would
you suggest?
35. Do the provisions of paragraph (e) of the preliminary
regulatory text provide adequate clarification of the receiver's
agreement to pay monies due under the securitization until monetary
default or repudiation? If not, why not and what alternatives would you
suggest?
Paperwork Reduction Act
At this stage of the rulemaking process it is difficult to
determine with precision whether any future regulations will impose
information collection requirements that are covered by the Paperwork
Reduction Act (``PRA'') (44 U.S.C. 3501 et seq.). Following the FDIC's
evaluation of the comments received in response to this ANPR, the FDIC
expects to develop a more detailed description regarding the treatment
of participations and securitizations issued after March 31, 2010, and,
if appropriate, solicit comment in compliance with PRA.
List of Subjects in 12 CFR Part 360
Banks, Banking, Bank deposit insurance, Holding companies, National
banks, Participations, Reporting and recordkeeping requirements,
Savings associations, Securitizations.
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation proposes to amend title 12 CFR part 360
as follows:
PART 360--RESOLUTION AND RECEIVERSHIP RULES
1. The authority citation for part 360 continues to read as
follows:
Authority: 12 U.S.C. 1821(d)(1), 1821(d)(10)(C), 1821(d)(11),
1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. 401(h),
Pub. L. 101-73, 103 Stat. 357.
2. Section 360.6 is revised to read as follows:
Sec. 360.6 Treatment of financial assets transferred in connection
with a securitization or participation.
(a) Definitions. (1) Financial asset means cash or a contract or
instrument that conveys to one entity a contractual right to receive
cash or another financial instrument from another entity.
(2) Investor means a person or entity that owns an obligation
issued by an issuing entity.
(3) Issuing entity means an entity created at the direction of a
sponsor that owns a financial asset or financial assets or has a
perfected security interest in a financial asset or financial assets
and issues obligations supported by such asset or assets. Issuing
entities may include, but are not limited to, corporations,
partnerships, trusts, and limited liability companies and are commonly
referred to as special purpose vehicles or special purpose entities. To
the extent a securitization is structured as a two-tier transfer, the
term issuing entity would include both the issuer of the obligations
and any intermediate entities that may be a transferee.
(4) Monetary default means a default in the payment of principal or
interest when due following the expiration of any cure period.
(5) Obligation means a security that is primarily serviced by the
cash flows of one or more financial assets, either fixed or revolving,
that by their terms convert into cash within a finite time period, plus
any rights or other assets designed to assure the servicing or timely
distributions of proceeds to the security holders issued by an issuing
entity. The term does not include any instrument that evidences
ownership of the issuing entity, such as LLC interests, common equity,
or similar instruments.
(6) Participation means the transfer or assignment of an undivided
interest in all or part of a financial asset, that has all of the
characteristics of a ``participating interest,'' from a seller, known
as the ``lead,'' to a buyer, known as the ``participant,'' without
recourse to the lead, pursuant to an agreement between the lead and the
participant. ``Without recourse'' means that the participation is not
subject to any agreement that requires the lead to repurchase the
participant's interest or to otherwise compensate the participant upon
the borrower's default on the underlying obligation.
(7) Securitization means the issuance by an issuing entity of
obligations collateralized by, or representing interests in, one or
more specific financial assets where the payments on the obligations
are generated by such financial assets and the investors are relying on
the cash flow or market value characteristics and the credit quality of
such financial assets (together with any identified external credit
support) to repay the obligations. To qualify as a securitization the
transaction must properly identify and segregate the financial assets
that are being securitized with appropriate provisions to accommodate
revolving structures for certain asset pools.
(8) Servicer means any entity responsible for the management or
collection of some or all of the financial assets on behalf of the
issuing entity or making allocations or distributions to holders of the
obligations, including reporting on the overall cash flow and credit
characteristics of the financial assets supporting the securitization
to enable the issuing entity to make payments to investors on the
obligations.
(9) Sponsor means a person or entity that organizes and initiates a
securitization by transferring financial assets, either directly or
indirectly, including through an affiliate, to an issuing entity,
whether or not such person owns an interest in the issuing entity or
owns any of the obligations issued by the issuing entity.
(10) Transfer means:
(i) The conveyance of a financial asset or financial assets to an
issuing entity; or
(ii) The creation of a security interest in such asset or assets
for the benefit of the issuing entity.
(b) Coverage. This section shall apply to securitizations that meet
the following criteria:
(1) Capital Structure and Financial Assets.
(i) The following requirements apply to all securitizations:
(A) The securitization shall not consist of re-securitizations of
obligations unless the disclosures required in paragraph (b)(2) of this
section are available to investors for the underlying assets supporting
the securitization at initiation and while obligations are outstanding.
For re-securitizations which include financial assets that were not
originated by the sponsor, disclosures provided by the originator of
such financial assets that meet the standards in paragraph (b)(2) of
this section will comply with this paragraph (b)(1); and
(B) The payment of principal and interest on the securitization
obligation must be primarily based on the performance of financial
assets that are transferred to the issuing entity or owned by the
sponsor and, except for interest rate risk or currency risk, shall not
be contingent on market or credit events that are independent of such
[[Page 940]]
financial assets. The securitization may not be unfunded or synthetic.
(ii) The following requirements apply only to securitizations in
which the financial assets include residential mortgage loans:
(A) The capital structure of the securitization shall be limited to
no more than six credit tranches and cannot include ``sub-tranches,''
grantor trusts or other structures designed to further increase the
leverage in the capital structure. Notwithstanding the foregoing, the
most senior credit tranche may include time-based sequential pay sub-
tranches; and
(B) The credit quality of the obligations cannot be enhanced at the
issuing entity or pool level through external credit support or
guarantees. However, the temporary payment of principal and interest
may be supported by liquidity facilities. Individual financial assets
transferred into a securitization may be guaranteed, insured or
otherwise benefit from credit support at the loan level through
mortgage and similar insurance or guarantees, including by private
companies, agencies or other governmental entities, or government-
sponsored enterprises, and/or through co-signers or other guarantees.
(2) Disclosures. The sponsor, issuing entity, and/or servicer, as
appropriate, shall make available to investors, information describing
the financial assets, obligations, capital structure, compensation of
relevant parties, and relevant historical performance data as follows:
(i) The following requirements apply to all securitizations:
(A) Prior to issuance of obligations and monthly while obligations
are outstanding, information about the obligations and the securitized
financial assets shall be disclosed to all potential investors at the
financial asset, pool, and security-level sufficient to permit
evaluation and analysis of the credit risk and performance of the
obligations and financial assets. Information shall be presented in
such detail and in such format so as to facilitate investor evaluation
and analysis of the obligations and financial assets securitized and,
at a minimum, shall comply with the requirements of Securities and
Exchange Commission Regulation AB, 17 CFR 229.1100 through 229.1123, or
any successor disclosure requirements for public issuances, even if the
obligations are issued in a private placement or are not otherwise
required to be registered. Information that is unknown or not available
to the issuer without unreasonable effort or expense, may be omitted if
the issuer includes a statement in the offering document verifying that
the specific information is otherwise unavailable;
(B) Prior to issuance of obligations, the structure of the
securitization and the credit and payment performance of the
obligations shall be disclosed, including the capital or tranche
structure, the priority of payments and specific subordination
features; representations and warranties made with respect to the
financial assets, the remedies for and the time permitted for cure of
any breach of representations and warranties, including the repurchase
of financial assets, if applicable; liquidity facilities and any credit
enhancements, any waterfall triggers or priority of payment reversal
features; and policies governing delinquencies, servicer advances, loss
mitigation, and write-offs of financial assets;
(C) While obligations are outstanding, information shall be made
available on the performance of the obligations, including periodic and
cumulative financial asset performance data, delinquency and
modification data for the financial assets, substitutions and removal
of financial assets, servicer advances, as well as losses that were
allocated to such tranche and remaining balance of financial assets
supporting such tranche, if applicable; and the percentage of each
tranche in relation to the securitization as a whole; and
(D) In connection with the issuance of obligations, and thereafter
if the information changes, information shall be made available on the
nature and amount of compensation paid to the originator, sponsor,
rating agency or third-party advisory, and any mortgage or other
broker, compensation and expenses of servicer(s), and the extent to
which any risk of loss on the underlying assets is retained by any of
them for such securitization.
(ii) The following requirements apply only to securitizations in
which the financial assets include residential mortgage loans:
(A) Prior to issuance of obligations, sponsors shall disclose loan
level information about the financial assets including, but not limited
to, loan type, loan structure (for example, fixed or adjustable,
resets, interest rate caps, balloon payments, etc.), maturity, interest
rate and/or Annual Percentage Rate, and location of property; and
(B) Prior to issuance of obligations, sponsors shall affirm
compliance with all applicable statutory and regulatory standards for
origination of mortgage loans and shall include loan level data to
confirm that the mortgages in the securitization pool are underwritten
at the fully indexed rate relying on documented income, and comply with
existing supervisory guidance governing the underwriting of residential
mortgages, including the Interagency Guidance on Non-Traditional
Mortgage Products, October 5, 2006, and the Interagency Statement on
Subprime Mortgage Lending, July 10, 2007, and such additional guidance
applicable at the time of loan origination. Sponsors shall also
identify the percentage of financial assets in the pool that are
underwritten using underwriter discretion or similar qualitative
application of the underwriting criteria, and a third party due
diligence report confirming compliance with such standards.
(3) Documentation and Recordkeeping. The documentation creating the
securitization must clearly define the respective contractual rights
and responsibilities of all parties as described below and use as
appropriate any available standardized documentation for each different
asset class.
(i) The following requirements apply to all securitizations:
(A) The documentation must define all necessary rights and
responsibilities of the parties, including but not limited to
representations and warranties consistent with industry best practices,
ongoing disclosure requirements, and appropriate measures to avoid
conflicts of interest.
(B) The contractual rights and responsibilities of each party to
the transaction, including but not limited to the originator, sponsor,
issuing entity, servicer, and investors, must provide sufficient
authority for the parties to fulfill their respective duties and
exercise their rights under the contracts and clearly distinguish
between any multiple roles performed by any party.
(C) The sponsor must maintain records of its securitizations
separate from records of its other business operations. The sponsor
shall make these records readily available for review by the FDIC
promptly upon written request.
(ii) The following requirements apply only to securitizations in
which the financial assets include residential mortgage loans:
(A) Servicing and other agreements must provide servicers with full
authority, subject to contractual oversight by any master servicer or
oversight advisor, if any, to mitigate losses on financial assets
consistent with maximizing the net present value of the financial
asset, as defined by a net present value analysis. Servicers shall
[[Page 941]]
have the authority to modify assets to address reasonably foreseeable
default, and to take such other action as necessary or required to
maximize the value and minimize losses on the securitized financial
assets applying industry best practices for asset management and
servicing. The documents shall require the servicer to act for the
benefit of all investors, and not for the benefit of any particular
class of investors. The servicer must commence action to mitigate
losses no later than ninety (90) days after an asset first becomes
delinquent unless all delinquencies on such asset have been cured. A
servicer must maintain sufficient records of its actions to permit
appropriate review; and
(B) The servicing agreement shall not require a primary servicer to
advance delinquent payments of principal and interest for more than
three payment periods, unless financing or reimbursement facilities are
available, which may include, but are not limited to, the obligations
of the master servicer or issuing entity to fund or reimburse the
primary servicer, are available. Such ``financing or reimbursement
facilities'' under this paragraph shall not depend on foreclosure
proceeds.
(4) Compensation. The following requirements apply only to
securitizations in which the financial assets include residential
mortgage loans. Compensation to parties involved in the securitization
of such financial assets must be structured to provide incentives for
sustainable credit and the long-term performance of the financial
assets and securitization as follows:
(i) Any fees or other compensation for services payable to the
lender, sponsor, credit rating agencies, and underwriters shall be
payable, in part, over the five (5) year period after the first
issuance of the obligations based on the performance of those financial
assets, with no more than eighty (80) percent of the total estimated
compensation due to any party at closing; and
(ii) Compensation to servicers shall provide incentives for
servicing and loss mitigation actions that maximize the value of the
financial assets as shown by a net present value analysis, and may be
provide payment for any of services provided and reimbursement of
actual expenses, an incentive fee structure, or any combination of the
foregoing that provides such incentives.
(5) Origination and Retention Requirements.
(i) The following requirements apply to all securitizations:
(A) The sponsor must retain at least an economic interest in a
material portion, defined as not less than five (5) percent, of the
credit risk of the financial assets. This retained interest may be
either in the form of an interest in each of the credit tranches of the
securitization or in a representative sample of the securitized
financial assets equal to at least five (5) percent of the principal
amount of the financial assets at transfer.
(B) This retained interest may not be transferred or hedged during
the term of the securitization.
(ii) The following requirements apply only to securitizations in
which the financial assets include residential mortgage loans:
(A) All residential mortgage loans transferred into the
securitization must be seasoned loans that were originated not less
than twelve (12) months prior to such transfer;
(B) All assets shall have been originated in compliance with all
statutory, regulatory, and originator underwriting standards in effect
at the time of origination. Residential mortgages included in the
securitization shall be underwritten at the fully indexed rate, based
upon the borrowers' ability to repay the mortgage according to its
terms, and rely on documented income and comply with all existing
supervisory guidance governing the underwriting of residential
mortgages, including the Interagency Guidance on Non-Traditional
Mortgage Products, October 5, 2006, and the Interagency Statement on
Subprime Mortgage Lending, July 10, 2007, and such additional guidance
applicable to insured depository institutions at the time of loan
origination. Residential mortgages originated prior to the issuance of
such guidance shall meet all supervisory guidance governing the
underwriting of residential mortgages then in effect at the time of
loan origination.
(c) Other requirements.
(1) The transaction should be an arms length, bona fide
securitization transaction, and the obligations shall not be sold
predominately to an affiliate or insider;
(2) The securitization agreements are in writing, approved by the
board of directors of the bank or its loan committee (as reflected in
the minutes of a meeting of the board of directors or committee), and
have been, continuously, from the time of execution in the official
record of the bank;
(3) The securitization was entered into in the ordinary course of
business, not in contemplation of insolvency and with no intent to
hinder, delay or defraud the bank or its creditors;
(4) The transfer was made for adequate consideration;
(5) The transfer and/or security interest was properly perfected
under the UCC or applicable State law;
(6) The transfer and duties of the sponsor as transferor must be
evidenced in a separate agreement from its duties, if any, as servicer,
custodian, paying agent, credit support provider or in any capacity
other than the transferor; and
(7) The bank properly segregates any financial assets and records
that relate to the securitization from the general assets and records
of the bank.
(d) Safe Harbor.
(1) Participations. With respect to transfers of financial assets
made in connection with participations, the FDIC as conservator or
receiver shall not, in the exercise of its statutory authority to
disaffirm or repudiate contracts, reclaim, recover, or recharacterize
as property of the institution or the receivership any such transferred
financial assets provided that such transfer satisfies the conditions
for sale accounting treatment set forth by generally accepted
accounting principles, except for the ``legal isolation'' condition
that is addressed by this paragraph (d).
(2) Transition Period Safe Harbor. With respect to any
participation or securitization for which transfers of financial assets
were made or, for revolving trusts, for which obligations were issued
on or before March 31, 2010, the FDIC as conservator or receiver shall
not, in the exercise of its statutory authority to disaffirm or
repudiate contracts, reclaim, recover, or recharacterize as property of
the institution or the receivership any such transferred financial
assets notwithstanding that such transfer does not satisfy all
conditions for sale accounting treatment under generally accepted
accounting principles as effective for reporting periods after November
15, 2009, provided that such transfer satisfied the conditions for sale
accounting treatment set forth by generally accepted accounting
principles in effect for reporting periods before November 15, 2009,
except for the ``legal isolation'' condition that is addressed by this
section.
(3) For Securitizations Meeting Sale Accounting Requirements. With
respect to any securitization for which transfers of financial assets
were made, or for revolving trusts for which obligations were issued,
after March 31, 2010, and which complies with the requirements
applicable to that securitization as set forth in paragraphs (b) and
(c) of this section, the FDIC as conservator or receiver shall not, in
the exercise of its
[[Page 942]]
statutory authority to disaffirm or repudiate contracts, reclaim,
recover, or recharacterize as property of the institution or the
receivership such transferred financial assets, provided that such
transfer satisfies the conditions for sale accounting treatment set
forth by generally accepted accounting principles in effect for
reporting periods after November 15, 2009, except for the ``legal
isolation'' condition that is addressed by this rule.
(4) For Securitization Not Meeting Sale Accounting Requirements.
With respect to any securitization for which transfers of financial
assets were made, or for revolving trusts for which obligations were
issued, after March 31, 2010, and which complies with the requirements
applicable to that securitization as set forth in paragraphs (b) and
(c) of this section, but where the transfer does not satisfy the
conditions for sale accounting treatment set forth by generally
accepted accounting principles in effect for reporting periods after
November 15, 2009, the FDIC as conservator or receiver consents to the
exercise of the rights and powers listed in 12 U.S.C. 1821(e)(13)(C),
and will not assert any rights to which it may be entitled pursuant to
12 U.S.C. 1821(e)(13)(C), after the expiration of the specified time,
and the occurrence of the following events:
(i) If at any time after appointment, the FDIC as conservator or
receiver is in a monetary default under a securitization, as defined
above, and remains in monetary default for ten (10) business days after
actual delivery of a written request to the FDIC pursuant to paragraph
(d) of this section to exercise contractual rights because of such
monetary default, the FDIC hereby consents pursuant to 12 U.S.C.
1821(e)(13)(C) to the exercise of any such contractual rights,
including obtaining possession of the financial assets, exercising
self-help remedies as a secured creditor under the transfer agreements,
or liquidating properly pledged financial assets by commercially
reasonable and expeditious methods taking into account existing market
conditions, provided no involvement of the receiver or conservator is
required.
(ii) If the FDIC as conservator or receiver of an insured
depository institution provides a written notice of repudiation of the
securitization agreements, and the FDIC does not pay the damages due
pursuant to 12 U.S.C. 1821(e) by reason of such repudiation within ten
(10) business days after the effective date of the notice, the FDIC
hereby consents pursuant to 12 U.S.C. 1821(e)(13)(C) for the exercise
of any contractual rights, including obtaining possession of the
financial assets, exercising self-help remedies as a secured creditor
under the transfer agreements, or liquidating properly pledged
financial assets by commercially reasonable and expeditious methods
taking into account existing market conditions, provided no involvement
of the receiver or conservator is required.
(e) Consent to certain actions. During the stay period imposed by
12 U.S.C. 1821(e)(13)(C), the FDIC as conservator or receiver of the
sponsor consents to the payment of regularly scheduled payments to the
investors made in accordance with the securitization documents and to
any servicing activity with respect to the financial assets included in
securitizations that meet the requirements applicable to that
securitization as set forth in paragraphs (b) and (c) of this section.
(f) Notice for Consent. Any party requesting the FDIC's consent as
conservator or receiver under 12 U.S.C. 1821(e)(13)(C) pursuant to
paragraph (d)(4)(i) of this section shall provide notice to the Deputy
Director, Division of Resolutions and Receiverships, Federal Deposit
Insurance Corporation, 550 17th Street, NW., F-7076, Washington, DC
20429-0002, and a statement of the basis upon which such request is
made, and copies of all documentation supporting such request,
including without limitation a copy of the applicable agreements and of
any applicable notices under the contract.
(g) Contemporaneous Requirement. The FDIC will not seek to avoid an
otherwise legally enforceable agreement that is executed by an insured
depository institution in connection with a securitization or in the
form of a participation solely because the agreement does not meet the
``contemporaneous'' requirement of 12 U.S.C. 1821(d)(9), 1821(n)(4)(I),
or 1823(e).
(h) Limitations. The consents set forth in this section do not act
to waive or relinquish any rights granted to the FDIC in any capacity,
pursuant to any other applicable law or any agreement or contract
except the securitization transfer agreement or any relevant security
agreements. Nothing contained in this section alters the claims
priority of the securitized obligations.
(i) No waiver. This section does not authorize, and shall not be
construed as authorizing the waiver of the prohibitions in 12 U.S.C.
1825(b)(2) against levy, attachment, garnishment, foreclosure, or sale
of property of the FDIC, nor does it authorize nor shall it be
construed as authorizing the attachment of any involuntary lien upon
the property of the FDIC. Nor shall this section be construed as
waiving, limiting or otherwise affecting the rights or powers of the
FDIC to take any action or to exercise any power not specifically
mentioned, including but not limited to any rights, powers or remedies
of the FDIC regarding transfers taken in contemplation of the
institution's insolvency or with the intent to hinder, delay or defraud
the institution or the creditors of such institution, or that is a
fraudulent transfer under applicable law.
(j) No assignment. The right to consent under 12 U.S.C.
1821(e)(13)(C) may not be assigned or transferred to any purchaser of
property from the FDIC, other than to a conservator or bridge bank.
(k) Repeal. This section may be repealed by the FDIC upon 30 days
notice provided in the Federal Register, but any repeal shall not apply
to any issuance made in accordance with this section before such
repeal.
Dated at Washington, DC, this 17th day of December 2009.
By Order of the Board of Directors.
Robert E. Feldman,
Executive Secretary, Federal Deposit Insurance Corporation.
[FR Doc. E9-30540 Filed 1-6-10; 8:45 am]
BILLING CODE 6714-01-P