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, 934-942 [E9-30540]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 75, Number 4 (Thursday, January 7, 2010)]
[Proposed Rules]
[Pages 934-942]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-30540]


========================================================================
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.

========================================================================


Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / 
Proposed Rules

[[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.

-----------------------------------------------------------------------

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: https://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 https://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.
---------------------------------------------------------------------------

    \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.''
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \2\ 12 U.S.C. 1821(e)(11).
---------------------------------------------------------------------------

    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

[[Page 937]]

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?
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 
``