FDIC finalizes securitization safe harbor

Agency Rule-Making & Guidance FDIC Derivatives Bank Regulatory Deposit Insurance Securities Securitization Safe Harbor Rule RMBS Disclosures Mortgages SEC

On January 30, the FDIC adopted the Final Rule to Revise Securitization Safe Harbor Rule (rule) as recommended by FDIC staff in a memorandum dated January 23. In July, as previously covered by InfoBytes, the FDIC approved a proposal to remove the requirement that, for safe harbor treatment, “the documents governing a securitization issuance require compliance with Regulation AB” of the SEC Regulation AB, “in circumstances where Regulation AB is not, by its terms, applicable to that transaction.” The proposal suggested that “it is no longer clear that compliance with the public disclosure requirements of Regulation AB in a private placement or in an issuance not otherwise required to be registered is needed to achieve the policy objective of preventing a buildup of opaque and potentially risky securitizations such as occurred during the pre-crisis years, particularly where the imposition of such a requirement may serve to restrict overall liquidity.” The final rule—which is unchanged from the proposal—eliminates the “significant disclosure requirements” to no longer mandate that private placements of securitization obligations provide Regulation AB disclosures. With the adoption of the final rule, only those transactions that are subject to Regulation AB are required to make the disclosures. The rule is expected to increase the securitization of residential mortgages and will become effective 30-60 days after it is published in the Federal Register.