80 FR 73680 - Treatment of Financial Assets Transferred in Connection With a Securitization or Participation

FEDERAL DEPOSIT INSURANCE CORPORATION

Federal Register Volume 80, Issue 227 (November 25, 2015)

Page Range		73680-73681
FR Document		2015-29821
The FDIC is proposing a rule that would revise a provision of its Securitization Safe Harbor Rule, which relates to the treatment of financial assets transferred in connection with a securitization or participation, in order to clarify a requirement as to loss mitigation by servicers of residential mortgage loans.
Federal Register, Volume 80 Issue 227 (Wednesday, November 25, 2015)
[Federal Register Volume 80, Number 227 (Wednesday, November 25, 2015)]
[Proposed Rules]
[Pages 73680-73681]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-29821]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AE38


Treatment of Financial Assets Transferred in Connection With a 
Securitization or Participation

AGENCY: Federal Deposit Insurance Corporation (``FDIC'').

ACTION: Notice of proposed rulemaking.

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SUMMARY: The FDIC is proposing a rule that would revise a provision of 
its Securitization Safe Harbor Rule, which relates to the treatment of 
financial assets transferred in connection with a securitization or 
participation, in order to clarify a requirement as to loss mitigation 
by servicers of residential mortgage loans.

DATES: Comments on the Proposed Rule must be received by January 25, 
2016.
    You may submit comments, identified by RIN number, by any of the 
following methods:
     Agency Web site: http://www.FDIC.gov/regulations/laws/federal. Follow instructions for submitting comments on the agency Web 
site.
     Email: [email protected]. Include RIN 3064-AE38 in 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/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7:00 a.m. and 5:00 p.m.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Instructions: All comments will be posted without change to http://www.fdic.gov/regulations/laws/federal/, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: George H. Williamson, Manager, 
Division of Resolutions and Receiverships, (571) 858-8199. Phillip E. 
Sloan, Counsel, Legal Division, (703) 562-6137.

SUPPLEMENTARY INFORMATION

I. Background

    The Federal Deposit Insurance Corporation (FDIC), in regulations 
codified at 12 CFR 360.6 (the Securitization Safe Harbor Rule), set 
forth criteria under which in its capacity as receiver or conservator 
of an insured depository institution the FDIC will not, in the exercise 
of its authority to repudiate contracts, recover or reclaim financial 
assets transferred in connection with securitization transactions. 
Asset transfers that, under the Securitization Safe Harbor Rule, are 
not subject to recovery or reclamation through the exercise of the 
FDIC's repudiation authority include those that pertain to certain 
grandfathered transactions, such as, for example, asset transfers made 
prior to December 31, 2010 that satisfied the conditions (except for 
the legal isolation condition addressed by the Securitization Safe 
Harbor Rule) for sale accounting treatment under generally accepted 
accounting principles (GAAP) in effect for reporting periods prior to 
November 15, 2009 and that pertain to a securitization transaction that 
satisfied certain other requirements. In addition, the Securitization 
Safe Harbor Rule provides that asset transfers that are not 
grandfathered, but that satisfy the conditions (except for the legal 
isolation condition addressed by the Securitization Safe Harbor Rule) 
for sale accounting treatment under GAAP in effect for reporting 
periods after November 15, 2009 and that pertain to a securitization 
transaction that satisfies all other conditions of the Securitization 
Safe Harbor Rule (such asset transfers, together with grandfathered 
asset transfers, are referred to collectively as Safe Harbor Transfers) 
will not be subject to FDIC recovery or reclamation actions through the 
exercise of the FDIC's repudiation authority. For any securitization 
transaction in respect of which transfers of financial assets do not 
qualify as Safe Harbor Transfers but which transaction satisfies all of 
its other requirements, the Securitization Safe Harbor Rule provides 
that, in the event the FDIC as receiver or conservator remains in 
monetary default for a specified period under a securitization due to 
its failure to pay or apply collections or repudiates the 
securitization asset transfer agreement and does not pay damages within 
a specified period, certain remedies can be exercised on an expedited 
basis.
    Paragraph (b)(3)(ii) of the Securitization Safe Harbor Rule sets 
forth conditions relating to the servicing of residential mortgage 
loans. This paragraph includes a condition that the securitization 
documents must require that the servicer commence action to mitigate 
losses no later than ninety days after an asset first becomes 
delinquent unless all delinquencies on such asset have been cured.
    In January, 2013, the Consumer Financial Protection Bureau (CFPB) 
adopted mortgage loan servicing requirements that became effective on 
January 10, 2014. One of the requirements, set forth in Subpart C to 
Regulation X, at 12 CFR 1024.41, in general prohibits a servicer from 
commencing a foreclosure unless the borrower's mortgage loan obligation 
is more than 120 days delinquent. This section of Regulation X also 
provides additional rules that, among other things, require a lender to 
further delay foreclosure if the borrower submits a loss mitigation 
application before the lender has commenced the foreclosure process and 
requires a lender to delay a foreclosure for which it has commenced the 
foreclosure process if a borrower has submitted a complete loss 
mitigation application more than 37 days before a foreclosure sale.\1\
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    \1\ See 12 CFR 1024.41(f) and (g).
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II. Discussion

    While the Securitization Safe Harbor Rule does not define what 
constitutes action to mitigate losses, the preamble to the notice of 
proposed rulemaking that preceded issuance of the Securitization Safe 
Harbor Rule \2\ stated, ``In this connection, it is important to note 
that action to mitigate losses may include contact with the borrower or 
other steps designed to return the asset to regular payments, but does 
not require initiation of foreclosure or other formal enforcement 
proceedings.'' \3\ Accordingly, it should be unlikely that the 90-day 
loss mitigation requirement of the Securitization Safe Harbor Rule 
would conflict with the foreclosure commencement delays mandated by the 
CFPB under Regulation X. However, as there may be circumstances where 
commencement of foreclosure is the only available and reasonable loss 
mitigation action, the FDIC is proposing

[[Page 73681]]

to amend the Securitization Safe Harbor Rule to make clear that the 
Rule does not require documents governing a securitization transaction 
to require any action prohibited by Regulation X.
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    \2\ 77 FR 27471 (May 17, 2010).
    \3\ 77 FR 27479.
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III. Policy Objective

    The objective of the Proposed Rule is to facilitate regulatory 
compliance and ease regulatory burden by ensuring that regulations are 
clear and consistent with other regulatory initiatives. In particular, 
the objective of the Proposed Rule is to harmonize the residential loan 
servicing condition of the Securitization Safe Harbor Rule with the 
CFPB's loan servicing requirements.

IV. Request for Comment

    The FDIC invites comment from all members of the public on the 
Proposed Rule. Comments are specifically requested on whether 
additional changes to the servicing provisions included in the 
Securitization Safe Harbor Rule need to be modified so as not to 
conflict with other applicable laws or regulations. The FDIC will 
carefully consider all comments that relate to the Proposed Rule.

V. Administrative Law Matters

A. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (44 U.S.C. 3501, et 
seq.) (PRA) the FDIC may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid Office of Management and Budget (OMB) control number. 
The Proposed Rule would not revise the Securitization Safe Harbor Rule 
information collection 3064-0177 or create any new information 
collection pursuant to the PRA. Consequently, no submission will be 
made to the Office of Management and Budget for review. The FDIC 
requests comment on its conclusion that this NPR does not revise the 
Securitization Safe Harbor Rule information collection, 3064-0177.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires an 
agency to provide an Initial Regulatory Flexibility Analysis with a 
proposed rule, unless the agency certifies that the rule would not have 
a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 603-605. The FDIC hereby certifies that the Proposed 
Rule would not have a significant economic impact on a substantial 
number of small entities, as that term applies to insured depository 
institutions.

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat.1338, 1471) requires the Federal banking agencies to use plain 
language in all proposed and final rules published after January 1, 
2000. The FDIC has sought to present the Proposed Rule in a simple and 
straightforward manner.

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 12 CFR part 360 as 
follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

0
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.

0
2. Revise Sec.  360.6(b)(3)(ii)(A) to read as follows:


Sec.  360.6  Treatment of financial assets transferred in connection 
with a securitization or participation.

* * * * *
    (b) * * *
    (3) * * *
    (ii) * * *
    (A) Servicing and other agreements must provide servicers with 
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. Servicers shall have the authority to modify assets to address 
reasonably foreseeable default, and to take other action to maximize 
the value and minimize losses on the securitized financial assets. The 
documents shall require that the servicers apply 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, that the servicer 
maintain records of its actions to permit full review by the trustee or 
other representative of the investors and that the servicer must 
commence action to mitigate losses no later than ninety (90) days after 
an asset first becomes delinquent unless all delinquencies have been 
cured, provided that this requirement shall not be deemed to require 
that the documents include any provision concerning loss mitigation 
that requires any action that may conflict with the requirements of 
Regulation X (12 CFR part 1024), as Regulation X may by amended or 
modified from time to time.
* * * * *

    Dated at Washington, DC, this 22nd day of October, 2015.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2015-29821 Filed 11-24-15; 8:45 am]
 BILLING CODE P
73680 Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Proposed Rules

SUPPLEMENTARY INFORMATION: Since the www.fdic.gov/regulations/laws/federal/, securitization due to its failure to pay or
NPRM was published on September 8, including any personal information apply collections or repudiates the
2015 (80 FR 53933), participating provided. securitization asset transfer agreement
departments and agencies have received FOR FURTHER INFORMATION CONTACT: and does not pay damages within a
requests to extend the comment period George H. Williamson, Manager, specified period, certain remedies can
to allow sufficient time for a full review Division of Resolutions and be exercised on an expedited basis.
of the NPRM. The departments and Receiverships, (571) 858–8199. Phillip Paragraph (b)(3)(ii) of the
agencies listed in this document are E. Sloan, Counsel, Legal Division, (703) Securitization Safe Harbor Rule sets
committed to affording the public a 562–6137. forth conditions relating to the servicing
meaningful opportunity to comment on of residential mortgage loans. This
SUPPLEMENTARY INFORMATION
the NPRM and welcome comments. paragraph includes a condition that the
I. Background securitization documents must require
Dated: November 20, 2015.
The Federal Deposit Insurance that the servicer commence action to
Sylvia Burwell, mitigate losses no later than ninety days
Secretary of the Department of Health and Corporation (FDIC), in regulations
codified at 12 CFR 360.6 (the after an asset first becomes delinquent
Human Services. unless all delinquencies on such asset
[FR Doc. 2015–30122 Filed 11–24–15; 8:45 am] Securitization Safe Harbor Rule), set
forth criteria under which in its capacity have been cured.
BILLING CODE 4150–36–P In January, 2013, the Consumer
as receiver or conservator of an insured
Financial Protection Bureau (CFPB)
depository institution the FDIC will not,
adopted mortgage loan servicing
in the exercise of its authority to
FEDERAL DEPOSIT INSURANCE requirements that became effective on
repudiate contracts, recover or reclaim January 10, 2014. One of the
CORPORATION
financial assets transferred in requirements, set forth in Subpart C to
12 CFR Part 360 connection with securitization Regulation X, at 12 CFR 1024.41, in
transactions. Asset transfers that, under general prohibits a servicer from
RIN 3064–AE38 the Securitization Safe Harbor Rule, are commencing a foreclosure unless the
not subject to recovery or reclamation borrower’s mortgage loan obligation is
Treatment of Financial Assets
through the exercise of the FDIC’s more than 120 days delinquent. This
Transferred in Connection With a
repudiation authority include those that section of Regulation X also provides
Securitization or Participation
pertain to certain grandfathered additional rules that, among other
AGENCY: Federal Deposit Insurance transactions, such as, for example, asset things, require a lender to further delay
Corporation (‘‘FDIC’’). transfers made prior to December 31, foreclosure if the borrower submits a
ACTION: Notice of proposed rulemaking. 2010 that satisfied the conditions loss mitigation application before the
(except for the legal isolation condition lender has commenced the foreclosure
SUMMARY: The FDIC is proposing a rule addressed by the Securitization Safe process and requires a lender to delay
that would revise a provision of its Harbor Rule) for sale accounting a foreclosure for which it has
Securitization Safe Harbor Rule, which treatment under generally accepted commenced the foreclosure process if a
relates to the treatment of financial accounting principles (GAAP) in effect borrower has submitted a complete loss
assets transferred in connection with a for reporting periods prior to November mitigation application more than 37
securitization or participation, in order 15, 2009 and that pertain to a days before a foreclosure sale.1
to clarify a requirement as to loss securitization transaction that satisfied
mitigation by servicers of residential certain other requirements. In addition, II. Discussion
mortgage loans. the Securitization Safe Harbor Rule While the Securitization Safe Harbor
DATES: Comments on the Proposed Rule provides that asset transfers that are not Rule does not define what constitutes
must be received by January 25, 2016. grandfathered, but that satisfy the action to mitigate losses, the preamble
You may submit comments, identified conditions (except for the legal isolation to the notice of proposed rulemaking
by RIN number, by any of the following condition addressed by the that preceded issuance of the
methods: Securitization Safe Harbor Rule) for sale Securitization Safe Harbor Rule 2 stated,
• Agency Web site: http:// accounting treatment under GAAP in ‘‘In this connection, it is important to
www.FDIC.gov/regulations/laws/federal. effect for reporting periods after note that action to mitigate losses may
Follow instructions for submitting November 15, 2009 and that pertain to include contact with the borrower or
comments on the agency Web site. a securitization transaction that satisfies other steps designed to return the asset
• Email: Comments@FDIC.gov. all other conditions of the Securitization to regular payments, but does not
Include RIN 3064–AE38 in the subject Safe Harbor Rule (such asset transfers, require initiation of foreclosure or other
line of the message. together with grandfathered asset formal enforcement proceedings.’’ 3
• Mail: Robert E. Feldman, Executive transfers, are referred to collectively as Accordingly, it should be unlikely that
Secretary, Attention: Comments, Federal Safe Harbor Transfers) will not be the 90-day loss mitigation requirement
Deposit Insurance Corporation, 550 17th subject to FDIC recovery or reclamation of the Securitization Safe Harbor Rule
Street NW., Washington, DC 20429. actions through the exercise of the would conflict with the foreclosure
• Hand Delivery/Courier: Guard FDIC’s repudiation authority. For any commencement delays mandated by the
station at the rear of the 550 17th Street securitization transaction in respect of
srobinson on DSK5SPTVN1PROD with PROPOSALS

CFPB under Regulation X. However, as
Building (located on F Street) on which transfers of financial assets do there may be circumstances where
business days between 7:00 a.m. and not qualify as Safe Harbor Transfers but commencement of foreclosure is the
5:00 p.m. which transaction satisfies all of its only available and reasonable loss
• Federal eRulemaking Portal: http:// other requirements, the Securitization mitigation action, the FDIC is proposing
www.regulations.gov. Follow the Safe Harbor Rule provides that, in the
instructions for submitting comments. event the FDIC as receiver or 1 See 12 CFR 1024.41(f) and (g).
Instructions: All comments will be conservator remains in monetary default 2 77 FR 27471 (May 17, 2010).
posted without change to http:// for a specified period under a 3 77 FR 27479.

VerDate Sep<11>2014 17:49 Nov 24, 2015 Jkt 238001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\25NOP1.SGM 25NOP1
Federal Register / Vol. 80, No. 227 / Wednesday, November 25, 2015 / Proposed Rules 73681

to amend the Securitization Safe Harbor C. Plain Language require that the documents include any
Rule to make clear that the Rule does Section 722 of the Gramm-Leach- provision concerning loss mitigation
not require documents governing a Bliley Act (Pub. L. 106–102, 113 that requires any action that may
securitization transaction to require any Stat.1338, 1471) requires the Federal conflict with the requirements of
action prohibited by Regulation X. banking agencies to use plain language Regulation X (12 CFR part 1024), as
in all proposed and final rules Regulation X may by amended or
III. Policy Objective
published after January 1, 2000. The modified from time to time.
The objective of the Proposed Rule is FDIC has sought to present the Proposed * * * * *
to facilitate regulatory compliance and Rule in a simple and straightforward Dated at Washington, DC, this 22nd day of
ease regulatory burden by ensuring that manner. October, 2015.
regulations are clear and consistent with By order of the Board of Directors.
other regulatory initiatives. In List of Subjects in 12 CFR Part 360
Federal Deposit Insurance Corporation.
particular, the objective of the Proposed Banks, Banking, Bank deposit
insurance, Holding companies, National Robert E. Feldman,
Rule is to harmonize the residential loan
servicing condition of the Securitization banks, Participations, Reporting and Executive Secretary.
Safe Harbor Rule with the CFPB’s loan recordkeeping requirements, Savings [FR Doc. 2015–29821 Filed 11–24–15; 8:45 am]
servicing requirements. associations, Securitizations. BILLING CODE P

For the reasons stated above, the
IV. Request for Comment
Board of Directors of the Federal
The FDIC invites comment from all Deposit Insurance Corporation proposes DEPARTMENT OF TRANSPORTATION
members of the public on the Proposed to amend 12 CFR part 360 as follows:
Federal Aviation Administration
Rule. Comments are specifically
requested on whether additional PART 360—RESOLUTION AND
RECEIVERSHIP RULES 14 CFR Part 39
changes to the servicing provisions
included in the Securitization Safe ■ 1. The authority citation for Part 360 [Docket No. FAA–2006–25970; Directorate
Harbor Rule need to be modified so as Identifier 99–NE–12–AD]
continues to read as follows:
not to conflict with other applicable RIN 2120–AA64
laws or regulations. The FDIC will Authority: 12 U.S.C. 1821(d)(1),
1821(d)(10)(C), 1821(d)(11), 1821(e)(1),
carefully consider all comments that 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. Airworthiness Directives; Turbomeca
relate to the Proposed Rule. 401(h), Pub. L. 101–73, 103 Stat. 357. S.A. Turboshaft Engines
V. Administrative Law Matters ■ 2. Revise § 360.6(b)(3)(ii)(A) to read as AGENCY: Federal Aviation
A. Paperwork Reduction Act follows: Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
§ 360.6 Treatment of financial assets
In accordance with the Paperwork transferred in connection with a (NPRM).
Reduction Act (44 U.S.C. 3501, et seq.) securitization or participation.
(PRA) the FDIC may not conduct or SUMMARY: We propose to supersede
* * * * * airworthiness directive (AD) 2006–23–
sponsor, and a person is not required to (b) * * *
respond to, a collection of information 17, which applies to certain Turbomeca
(3) * * *
unless it displays a currently valid S.A. Turmo IV A and IV C turboshaft
(ii) * * *
Office of Management and Budget (A) Servicing and other agreements engines. AD 2006–23–17 currently
(OMB) control number. The Proposed must provide servicers with authority, requires repetitive inspections of the
Rule would not revise the Securitization subject to contractual oversight by any centrifugal compressor intake wheel
Safe Harbor Rule information collection master servicer or oversight advisor, if (inducer) blades for cracks and
3064–0177 or create any new any, to mitigate losses on financial corrosion, replacement of parts that fail
information collection pursuant to the assets consistent with maximizing the inspection, and replacement of the TU
PRA. Consequently, no submission will net present value of the financial asset. 197 standard centrifugal compressor.
be made to the Office of Management Servicers shall have the authority to This proposed AD would require the
and Budget for review. The FDIC modify assets to address reasonably same inspections but at revised
requests comment on its conclusion that foreseeable default, and to take other intervals, add the replacement of the TU
this NPR does not revise the action to maximize the value and 215 standard centrifugal compressor,
Securitization Safe Harbor Rule minimize losses on the securitized and require replacement of parts that
information collection, 3064–0177. financial assets. The documents shall fail inspection. We are proposing this
require that the servicers apply industry AD to prevent failure of the centrifugal
B. Regulatory Flexibility Act compressor inducer, which could lead
best practices for asset management and
The Regulatory Flexibility Act, 5 servicing. The documents shall require to an uncontained blade release, damage
U.S.C. 601–612, requires an agency to the servicer to act for the benefit of all to the engine, and damage to the
provide an Initial Regulatory Flexibility investors, and not for the benefit of any airplane.
Analysis with a proposed rule, unless particular class of investors, that the DATES: We must receive comments on
the agency certifies that the rule would servicer maintain records of its actions this proposed AD by January 25, 2016.
srobinson on DSK5SPTVN1PROD with PROPOSALS

not have a significant economic impact to permit full review by the trustee or ADDRESSES: You may send comments,
on a substantial number of small other representative of the investors and using the procedures found in 14 CFR
entities. 5 U.S.C. 603–605. The FDIC that the servicer must commence action 11.43 and 11.45, by any of the following
hereby certifies that the Proposed Rule to mitigate losses no later than ninety methods:
would not have a significant economic (90) days after an asset first becomes • Federal eRulemaking Portal: Go to
impact on a substantial number of small delinquent unless all delinquencies http://www.regulations.gov. Follow the
entities, as that term applies to insured have been cured, provided that this instructions for submitting comments.
depository institutions. requirement shall not be deemed to • Fax: 202–493–2251.

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Document Created: 2018-03-01 11:15:02
Document Modified: 2018-03-01 11:15:02
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking.
Dates		Comments on the Proposed Rule must be received by January 25, 2016.
Contact		George H. Williamson, Manager, Division of Resolutions and Receiverships, (571) 858-8199. Phillip E. Sloan, Counsel, Legal Division, (703) 562-6137.
FR Citation		80 FR 73680
RIN Number		3064-AE38