Federal Register, Volume 79 Issue 185 (Wednesday, September 24, 2014)

[Federal Register Volume 79, Number 185 (Wednesday, September 24, 2014)]
[Rules and Regulations]
[Pages 57184-57346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21375]

[[Page 57183]]

Vol. 79

Wednesday,

No. 185

September 24, 2014

Part II

Securities and Exchange Commission

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17 CFR Parts 229, 230, 232, et al.

Asset-Backed Securities Disclosure and Registration; Final Rule

Federal Register / Vol. 79 , No. 185 / Wednesday, September 24, 2014
/ Rules and Regulations

[[Page 57184]]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 230, 232, 239, 240, 243, and 249

[Release Nos. 33-9638; 34-72982; File No. S7-08-10]
RIN 3235-AK37

Asset-Backed Securities Disclosure and Registration

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting significant revisions to Regulation AB and
other rules governing the offering process, disclosure, and reporting
for asset-backed securities (``ABS''). The final rules require that,
with some exceptions, prospectuses for public offerings under the
Securities Act of 1933 (``Securities Act'') and ongoing reports under
the Securities Exchange Act of 1934 (``Exchange Act'') of asset-backed
securities backed by real estate related assets, auto related assets,
or backed by debt securities, including resecuritizations, contain
specified asset-level information about each of the assets in the pool.
The asset-level information is required to be provided according to
specified standards and in a tagged data format using eXtensible Markup
Language (``XML''). We also are adopting rules to revise filing
deadlines for ABS offerings to provide investors with more time to
consider transaction-specific information, including information about
the pool assets. We are also adopting new registration forms tailored
to ABS offerings. The final rules also repeal the credit ratings
references in shelf eligibility criteria for ABS issuers and establish
new shelf eligibility criteria.

DATES: Effective Date: November 24, 2014.
Compliance Dates:
Offerings on Forms SF-1 and SF-3: Registrants must comply with new
rules, forms, and disclosures no later than November 23, 2015.
Asset level Disclosures: Offerings of asset-backed securities
backed by residential mortgages, commercial mortgages, auto loans, auto
leases, and debt securities (including resecuritizations) must comply
with asset-level disclosure requirements no later than November 23,
2016.
Forms 10-D and 10-K: Any Form 10-D or Form 10-K that is filed after
November 23, 2015 must comply with new rules and disclosures, except
asset-level disclosures.

FOR FURTHER INFORMATION CONTACT: Rolaine S. Bancroft, Senior Special
Counsel, Michelle M. Stasny, Special Counsel, M. Hughes Bates,
Attorney-Advisor, or Kayla Florio, Attorney-Advisor, in the Office of
Structured Finance at (202) 551-3850, Division of Corporation Finance,
U.S. Securities and Exchange Commission, 100 F Street NE., Washington,
DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Items 512 \1\
and 601 \2\ of Regulation S-K; \3\ Items 1100, 1101, 1102, 1103, 1104,
1105, 1108, 1109, 1110, 1111, 1112, 1113, 1114, 1119, 1121, and 1122
\4\ of Regulation AB \5\ (a subpart of Regulation S-K); Rules 139a,
167, 190, 193, 401, 405, 415, 424, 430B, 430C, 433, 456, and 457,\6\
and Forms S-1 and S-3 \7\ under the Securities Act of 1933 (Securities
Act); \8\ Rules 11, 101, 201, 202, and 305 \9\ of Regulation S-T; \10\
and Rules 3a68-1a, 3a68-1b, 15c2-8, 15d-22, 15Ga-1, and 17g-7 \11\ and
Forms 8-K, 10-K, and 10-D \12\ under the Securities Exchange Act of
1934; \13\ and Rule 103 \14\ of Regulation FD.\15\ We also are adding
new Items 1124 and 1125 \16\ to Regulation AB, and Rule 430D,\17\ Form
SF-1,\18\ Form SF-3,\19\ and Form ABS-EE \20\ under the Securities Act.
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\1\ 17 CFR 229.512.
\2\ 17 CFR 229.601.
\3\ 17 CFR 229.10 et al.
\4\ 17 CFR 229.1100, 17 CFR 229.1101, 17 CFR 229.1102, 17 CFR
229.1103, 17 CFR 229.1104, 17 CFR 229.1105, 17 CFR 229.1108, 17 CFR
229.1109, 17 CFR 229.1110, 17 CFR 229.1111, 17 CFR 229.1112, 17 CFR
229.1113, 17 CFR 229.1114, 17 CFR 229.1119, 117 CFR 229.1121, and 17
CFR 229.1122.
\5\ 17 CFR 229.1100 through 17 CFR 229.1124.
\6\ 17 CFR 230.139a, 17 CFR 230.167, 17 CFR 230.190, 17 CFR
230.193, 17 CFR 230.401, 17 CFR 230.405, 17 CFR 230.415, 17 CFR
230.424, 17 CFR 230.430B, 17 CFR 230.430C, 17 CFR 230.433, 17 CFR
230.456, and 17 CFR 230.457.
\7\ 17 CFR 239.11 and 17 CFR 239.13.
\8\ 15 U.S.C. 77a et seq.
\9\ 17 CFR 232.11, 17 CFR 232.101, 17 CFR 232.201, 17 CFR
232.202, and 17 CFR 232.305.
\10\ 17 CFR 232.10 et seq.
\11\ 17 CFR 240.3a68-1a, 17 CFR 240.3a68-1b, 17 CFR 240.15c2-8,
17 CFR 240.15d-22, 17 CFR 240.15Ga-1, and 17 CFR 240.17g-7.
\12\ 17 CFR 249.308, 17 CFR 249.310, and 17 CFR 249.312.
\13\ 15 U.S.C. 78a et seq.
\14\ 17 CFR 243.103.
\15\ 17 CFR 243.100 et seq.
\16\ 17 CFR 229.1124 and 17 CFR 229.1125.
\17\ 17 CFR 230.430D.
\18\ 17 CFR 239.44.
\19\ 17 CFR 239.45.
\20\ 17 CFR 249.1500.
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Table of Contents

I. Executive Summary
A. Background
B. Problems in the ABS Markets
C. Summary of Final Rules
1. Asset-Level Disclosure
2. Other Disclosure Requirements
3. Securities Act Registration
(a) Certification
(b) Asset Review Provision
(c) Dispute Resolution
(d) Investor Communication
(e) Other Shelf Offering Provisions
4. Other Changes to ABS Rules
5. Proposed Rules Not Being Adopted at This Time
II. Economic Overview
A. Market Overview and Economic Baseline
B. Economic Motivations
C. Potential Effects on the ABS Market
D. Potential Market Participants' Responses
III. Asset-Level Disclosure
A. Asset-Level Disclosure Requirement
1. Background and Economic Baseline for the Asset-Level
Disclosure Requirement
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
2. Specific Asset-Level Data Points in Schedule AL
(a) Disclosure Requirements for All Asset Classes and Economic
Analysis of These Requirements
(b) Asset Specific Disclosure Requirements and Economic Analysis
of These Requirements
(1) Residential Mortgage-Backed Securities
(2) Commercial Mortgage-Backed Securities
(3) Automobile Loan or Lease ABS
(4) Debt Security ABS
(5) Resecuritizations
3. Asset-Level Data and Individual Privacy Concerns
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
4. Requirements Under Section 7(c) of the Securities Act
(a) Section 7(c)(2)(B)--Data Necessary for Investor Due
Diligence
(b) Section 7(c)(2)(B)(i)--Unique Identifiers Relating to Loan
Brokers and Originators
(c) Section 7(c)(2)(B)(ii)--Broker Compensations and Section
7(c)(2)(B)(iii)--Risk Retention by Originator and the Securitizer of
the Assets
B. Asset-Level Filing Requirements
1. The Timing of the Asset-Level Disclosure Requirements
(a) Timing of Offering Disclosures
(1) Proposed Rule
(2) Comments on Proposed Rule
(3) Final Rule and Economic Analysis of the Final Rule
(b) Timing of Periodic Disclosures
(1) Proposed Rule
(2) Comments on Proposed Rule
(3) Final Rule and Economic Analysis of the Final Rule
2. The Scope of New Schedule AL
(a) Proposed Rule
(1) Offering Disclosures
(2) Periodic Disclosures
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
3. XML and the Asset Data File

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(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
4. Asset Related Documents
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
5. New Form ABS-EE
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
6. Temporary Hardship Exemption
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
C. Foreign ABS
IV. Other Prospectus Disclosure
A. Transaction Parties
1. Identification of the Originator
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule
2. Financial Information Regarding a Party Obligated To
Repurchase Assets
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule
3. Economic Interest in the Transaction
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule
4. Economic Analysis Related to the Rules Regarding Transaction
Parties
B. Prospectus Summary
1. Proposed Rule
2. Comments on Proposed Rule
3. Final Rule and Economic Analysis of the Final Rule
C. Modification of Underlying Assets
1. Proposed Rule and Comments on Proposed Rule
2. Final Rule and Economic Analysis of the Final Rule
D. Disclosure of Fraud Representations
E. Static Pool Disclosure
1. Disclosure Required
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
2. Amortizing Asset Pools
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
3. Filing Static Pool Data
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and the Economic Analysis of the Final Rule
F. Other Disclosure Requirements That Rely on Credit Ratings
V. Securities Act Registration
A. Background and Economic Discussion
B. New Registration Procedures and Forms for ABS
1. New Shelf Registration Procedures
(a) Rule 424(h) and Rule 430D
(1) Proposed Rule
(2) Comments on Proposed Rule
(3) Final Rule and Economic Analysis of the Final Rule
(a) Rule 424(h) Filing
(b) New Rule 430D
2. Forms SF-1 and SF-3
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
3. Shelf Eligibility for ABS Offerings
(a) Shelf Eligibility--Transaction Requirements
(1) Certification
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Shelf Certification
Requirement
(i) Paragraph One
(ii) Paragraph Two
(iii) Paragraph Three
(iv) Paragraph Four
(v) Paragraph Five
(vi) Signature Requirement
(vii) Date of the Certification
(viii) Opinion by an Independent Evaluator Alternative
(2) Asset Review Provision
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Asset Review
Provision
(i) Triggers for Review
(a) Delinquency Prong
(b) Investor Vote Prong
(ii) Scope of the Review
(iii) Report of the Findings and Conclusions
(iv) Selection of the Reviewer
(3) Dispute Resolution Provision
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Dispute Resolution
Shelf Requirement
(4) Investor Communication
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Investor
Communication Shelf Requirement
(b) Shelf Eligibility--Registrant Requirements
(c) Annual Evaluation of Form SF-3 Eligibility in Lieu of
Section 10(a)(3) Update
(1) Annual Compliance Check Related to Timely Exchange Act
Reporting
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
(2) Annual Compliance Check Related to the Fulfillment of the
Transaction Requirements in Previous ABS Offerings
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
4. Continuous Offerings
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
5. Mortgage Related Securities
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
C. Exchange Act Rule 15c2-8(b)
1. Proposed Rule
2. Comments on Proposed Rule
3. Final Rule and Economic Analysis of the Final Rule
D. Including Information in the Form of Prospectus in the
Registration Statement
1. Presentation of Disclosure in Prospectuses
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
2. Adding New Structural Features or Credit Enhancements
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
E. Pay-as-You-Go Registration Fees
1. Proposed Rule
2. Comments on Proposed Rule
3. Final Rule and Economic Analysis of the Final Rule
F. Codification of Staff Interpretations Relating to Securities
Act Registration
1. Fee Requirements for Collateral Certificates or Special Units
of Beneficial Interest
2. Incorporating by Reference Subsequently Filed Exchange Act
Reports
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
VI. Filing Requirements for Transaction Documents
A. Proposed Rule
B. Comments Received on Proposed Rule
C. Final Rule and Economic Analysis of the Final Rule
VII. Definition of Asset-Backed Security
A. Proposed Rule
B. Comments on Proposed Rule
1. The Master Trust Exception
2. The Revolving Period Exception
3. The Prefunding Exception
C. Final Rule and Economic Analysis of the Final Rule
VIII. Exchange Act Reporting
A. Distribution Reports on Form 10-D
1. Delinquency Presentation
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
2. Identifying Information and Cross-References to Previously
Reported Information
3. Changes in Sponsor's Interest in the Securities
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
B. Annual Report on Form 10-K
1. Servicer's Assessment of Compliance With Servicing Criteria
(a) Proposed Rule
(b) Comments on Proposed Rule
(c) Final Rule and Economic Analysis of the Final Rule
2. Codification of Prior Staff Interpretations Relating to the
Servicer's Assessment of Compliance With Servicing Criteria
C. Central Index Key Numbers for Depositor, Sponsor and Issuing
Entity

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IX. Transition Period
A. General Transition Period
B. Transition Period for Asset-Level Disclosure Requirements
C. Compliance Dates
X. Paperwork Reduction Act
A. Background
B. Summary of Comment Letters on the PRA Analysis
C. Revisions to Proposals
D. PRA Reporting and Cost Burden Estimates
1. Form ABS-EE
2. Form S-3 and Form SF-3
3. Form S-1 and Form SF-1
4. Form 10-K
5. Form 10-D
6. Form 8-K
7. Regulation S-K and Regulation S-T
E. Summary of Changes to Annual Burden of Compliance in
Collection of Information
XI. Regulatory Flexibility Act Certification
XII. Statutory Authority and Text of Rule and Form Amendments

I. Executive Summary

A. Background

The Commission addressed the registration, disclosure, and
reporting requirements for asset-backed securities in 2004 when it
adopted new rules and amendments under the Securities Act and the
Exchange Act.\21\ Among other changes, the 2004 rules updated and
clarified the Securities Act registration requirements for asset-backed
securities offerings and allowed modified Exchange Act reporting
tailored to asset-backed securities offerings. In April 2010, we
proposed revisions to the registration, disclosure, and reporting
requirements for ABS offerings in an effort to improve investor
protection and promote more efficient asset-backed markets.\22\
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\21\ See Asset-Backed Securities, Release No. 33-8518 (Jan. 7,
2005) [70 FR 1506] (the ``2004 ABS Adopting Release'').
\22\ See Asset-Backed Securities, Release No. 33-9117 (Apr. 7,
2010) [75 FR 23328] (the ``2010 ABS Proposing Release'' or the
``2010 ABS Proposal'').
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In the 2010 ABS Proposing Release we noted that the financial
crisis highlighted that investors and other participants in the
securitization market did not have the necessary information and time
to be able to fully assess the risks underlying asset-backed securities
and did not value asset-backed securities properly or accurately. This
lack of understanding and the extent to which it impacted the U.S. and
global economy prompted us to revisit several aspects of our regulation
of asset-backed securities.\23\ To address these issues, we proposed to
require that, with some exceptions, prospectuses for public offerings
of asset-backed securities and ongoing Exchange Act reports contain
specified asset-level information about each of the assets in the pool
in a standardized tagged data format. Further, we proposed a rule that
asset-backed issuers provide investors with more time to consider
transaction-specific information about the pool assets. We also
proposed to require asset-backed issuers to file a computer program
modeling the flow of funds, or waterfall, provisions of the transaction
to help investors analyze the offering and monitor ongoing performance.
For offerings of asset-backed securities that qualify for shelf
registration, we proposed investor protection-focused shelf eligibility
and offering requirements that would indicate which types of offerings
qualify for delayed shelf eligibility and also proposed to remove the
investment-grade ratings requirement.\24\ Finally, we proposed to
require disclosure provisions in unregistered ABS transaction
agreements as a condition to certain safe harbors for exempt offerings
and resales of ABS.
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\23\ See the 2010 ABS Proposing Release at 23329.
\24\ In this Release, we also refer to such offerings as shelf
offerings.
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In July 2010, subsequent to the 2010 ABS Proposing Release,
Congress passed the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act''),\25\ which directed the
Commission to prescribe several ABS related rules, some of which were
included in the 2010 ABS Proposals and others of which were not. Two of
the proposed shelf eligibility requirements--risk retention and
continued Exchange Act reporting--were addressed by provisions of the
Dodd-Frank Act. After taking the Dodd-Frank requirements into account,
and considering comments received in connection with the 2010 ABS
Proposing Release, in 2011 we re-proposed some of the 2010 ABS
Proposals, including the shelf eligibility requirements. In that same
release, we also sought additional comment on asset-level disclosure,
including comment on how best to implement Section 7(c) of the
Securities Act, as added by Section 942(b) of the Dodd-Frank Act, which
directed the Commission to adopt regulations to require asset-level
information.\26\
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\25\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
\26\ See Re-Proposal of Shelf Eligibility Conditions for Asset-
Backed Securities, Release No. 33-9244 (July 26, 2011) [76 FR 47948]
(the ``2011 ABS Re-Proposing Release'' or the ``2011 ABS Re-
Proposal'').
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In February 2014, the Commission re-opened the comment period \27\
on the 2010 ABS Proposals and the 2011 ABS Re-Proposals to permit
interested persons to comment on an approach for the dissemination of
asset-level data, which is described in a staff memorandum, dated
February 25, 2014, that was posted to the public comment file.\28\
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\27\ See Re-Opening of Comment Period for Asset-Backed
Securities, Release No. 33-9552 (Feb. 25, 2014), [79 FR 11361]
(``the 2014 Re-Opening Release'').
\28\ See Memorandum from the Commission's Division of
Corporation Finance (Feb. 25, 2014), available at http://www.sec.gov/comments/s7-08-10/s70810.shtml (the ``2014 Staff
Memorandum'').
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B. Problems in the ABS Markets

The financial crisis highlighted a number of concerns about the
operation of our rules in the securitization market.\29\ The failures
of credit ratings to accurately measure and account for the risks
associated with certain asset-backed securities have been well
documented by lawmakers, market observers, and academics.\30\ The
collapse of these ``investment-grade'' rated securities was a major
contributor to the financial crisis, and demonstrated the risks to
investors of unduly relying on these securities' credit ratings without
engaging in independent due diligence.\31\ Although academic

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research suggests that some investors might have been able to price ABS
credit risk beyond what the ratings implied, there is also evidence
that investors in triple-A rated tranches were less informed than
investors in lower tranches.\32\
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\29\ For a more detailed discussion of the issues mentioned in
this section and other economic problems that affected the ABS
market, see Section II.B Economic Motivations below.
\30\ See, e.g., H.R. Rep. No. 4173 (2010) (Conf. Rep.) (Dodd-
Frank Wall Street Reform and Consumer Protection Act--Conference
Report) (noting that the performance of credit rating agencies,
particularly their ratings of asset-backed securities, contributed
significantly to the financial crisis); John Griffin & Dragon Tang,
Did Subjectivity Play a Role in CDO Credit Ratings?, 67 J. Fin.
1293-1328 (2012) (discussing discretionary out-of-model adjustments
to collateralized debt obligation (``CDO'') ratings made by one
nationally recognized statistical rating organization); Adam
Ashcraft, Paul Goldsmith-Pinkham & James Vickery, MBS Ratings and
the Mortgage Credit Boom (2010 Working Paper Federal Reserve Bank of
New York) (arguing, among other things, that MBS ratings did not
fully reflect publicly available data).
\31\ See the 2011 ABS Re-Proposal. See also Federal Reserve,
Report to Congress on Risk Retention 49-66 (2010) (documenting the
extent of the collapse of the investment-grade ABS market); Efraim
Benmelech & Jennifer Dlugosz, The Credit Rating Crisis, in 24 NBER
Macroeconomics Ann. 161-207 (Daron Acemoglu, Kenneth Rogoff &
Michael Woodford, eds., Univ. of Chicago Press, Apr. 2010) (2009)
(arguing that credit rating agency models did not adequately
anticipate how poorly the assets underlying many structured finance
products performed during economic downturns, that the ratings
models failed to account for the correlation among underlying assets
(e.g., residential home prices) at the national level, and that
``ratings shopping'' by issuers exacerbated the severity of the poor
performance of structured finance products during the economic
downturn); Patrick Bolton, Xavier Freixas & Joel Shapiro, The Credit
Ratings Game, 67(1) J. Fin. 85-111 (2012) (arguing that credit
rating agency competition can reduce the efficiency of credit
ratings, as it facilitates ``ratings shopping,'' and that ratings
are more likely to be inflated during economic booms and when
investors are more trusting).
\32\ See Manuel Adelino, How Much Do Investors Rely on Ratings?
The Case of Mortgage-Backed Securities, (2009 Working Paper
Dartmouth College) (suggesting that investors in certain RMBS
triple-A rated tranches relied more on ratings because they were
less informed about the quality of the underlying assets than
investors in lower tranches based on a comparison between yield
spreads at securitization and actual defaults). But see Jie Jack He,
Jun QJ Qian & Philip E. Strahan, Are All Ratings Created Equal? The
Impact of Issuer Size on the Pricing of Mortgage-Backed Securities,
67 J. Fin. 2097-2137 (2012) (suggesting that investors did not over
rely on ratings by arguing that investors were able to price the
risk of large RMBS issuers receiving more inflated ratings by
comparing yields on RMBS sold by large issuers against the yields on
RMBS sold by small issuers).
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In addition, investors have expressed concern about a lack of time
to analyze securitization transactions and make informed investment
decisions.\33\ Time to analyze an offering is necessary if investors
are being encouraged to perform their own diligence and to not over
rely on credit ratings. While the Commission has not generally built
waiting periods into its shelf offering registration process,\34\ and
instead has believed investors can take the time they believe is
adequate to analyze securities (and refuse to invest if not provided
sufficient time), investors have indicated that this is not generally
possible in the ABS market, particularly in a heated market.\35\
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\33\ See discussion in Section V.B.1.a) Rule 424(h) and Rule
430D below.
\34\ See, e.g., Section IV.A. of Securities Offering Reform,
Release No. 33-8591 (July 19, 2005) [70 FR 44722] (the ``Securities
Offering Reform Release'') (adopting significant revisions to
registration, communications and offering process under the
Securities Act and stating that Rule 159 would not result in a speed
bump or otherwise slow down the offering process).
\35\ See discussion in Section V.B.1.(a) Rule 424(h) and Rule
430D below.
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Investors and others have also expressed concerns about other
aspects of the securitization market, including concern about a lack of
effective oversight by the principal officers of the ABS issuer.\36\ In
particular, investors have been concerned that these officers have not
conducted sufficient due diligence when reviewing the pool assets and
designing the securitization structure. Additionally, investors have
noted that the mechanisms for enforcing the representations and
warranties contained in the securitization transaction documents are
weak, and thus they are not confident that even strong representations
and warranties provide them with adequate protection.\37\ They have
also noted that difficulties in locating fellow ABS investors have
prevented them from exercising rights under the transaction agreement,
including requirements that an originator or sponsor repurchase an
asset if it does not comply with the representations and
warranties.\38\
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\36\ See, e.g., letters from Better Markets dated Oct. 4, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``Better
Markets''), CFA Institute dated Nov. 9, 2011 submitted in response
to the 2011 ABS Re-Proposing Release (``CFA II''), Securities
Industry and Financial Markets Association dated Aug. 2, 2010
submitted in response to the 2010 ABS Proposing Release (``SIFMA
I'') (expressed views of investors only), and Vanguard dated Aug.
27, 2010 submitted in response to the 2010 ABS Proposing Release
(``Vanguard'').
\37\ See letters from Metropolitan Life Insurance Company dated
Oct. 4, 2011 submitted in response to the 2011 ABS Re-Proposing
Release (``Metlife II''), Prudential Investment Management, Inc.
dated Oct. 4, 2011 submitted in response to the 2011 ABS Re-
Proposing Release (``Prudential II''), and Securities Industry and
Financial Markets Association, Asset Management Group dated Oct. 4,
2011 submitted in response to the 2011 ABS Re-Proposing Release
(``SIFMA II-investors'') (stating that they do not believe the ABS
market will recover without a mechanism to enforce breaches of
representations and warranties). See also Section V.B.3.a)(2) Asset
Review Provision below.
\38\ See letters from CFA II and Investment Company Institute
dated Oct. 4, 2011 submitted in response to the 2011 ABS Re-
Proposing Release (``ICI II'').
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Market participants have also expressed a desire for expanded
disclosure about the assets underlying securitizations in order to
conduct an analysis of the offering.\39\ The financial crisis
underscored that the information available to investors about ABS may
not have provided them with all the information necessary to fully
understand and correctly gauge the risks underlying the securities. As
a result, investors may not have been able to accurately value those
securities.\40\
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\39\ See discussion in Section III.A.1 Background and Economic
Baseline for the Asset-Level Disclosure Requirement below.
\40\ See Sheila Bair, Bull by The Horns: Fighting to Save Main
Street From Wall Street and Wall Street From Itself 52 (2012)
(noting that, based on data analysis conducted by the FDIC, ABS
investors did not look at the quality of the individual loans in the
asset pools and lacked detailed loan-level information and adequate
time to analyze the information before making an investment
decision). See also footnote 882 and discussions in Section III.A.1
Background and Economic Baseline for the Asset-Level Disclosure
Requirement and Section V.B.1.a) Rule 424(h) and Rule 430D below.
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C. Summary of Final Rules

We are adopting significant revisions to the rules governing
disclosure, reporting, registration, and the offering process for
asset-backed securities. The revised rules are designed to address the
problems discussed above and to enhance investor protection in the ABS
market.\41\ In adopting these changes, we have taken into consideration
the comments and recommendations made by commenters in connection with
the 2010 ABS Proposing Release, the 2011 ABS Re-Proposing Release and
the 2014 Re-Opening Release, which are reflected in the changes made in
the final rules.\42\ We received a total of 240 comment letters in
connection with the 2010 ABS Proposals, 2011 ABS Re-Proposal and the
2014 Re-Opening Release.
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\41\ The rules do not affect the applicability of the Investment
Company Act (15 U.S.C. 80a-1 et seq.) to ABS issuers, including the
availability of exclusions from such Act. See, e.g., Section 3(c)(1)
or Section 3(c)(7) (15 U.S.C. 80a-3(c)(1) and 80a-3(c)(7)) (for
unregistered transactions); Rule 3a-7 [17 CFR 270.3a-7] (for
registered and unregistered transactions).
\42\ The 2014 Re-Opening Release provided for a thirty-day
comment period. In response to commenters' requests, on March 28,
2014, we extended the comment period until April 28, 2014.
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The final rules are intended to provide investors with timely and
sufficient information, reduce the likelihood of undue reliance on
credit ratings, and provide mechanisms to help to enforce the
representations and warranties made about the underlying assets. These
revisions are comprehensive and although they will impose new burdens
on issuers, we believe they will protect investors and promote
efficient capital formation. The rules cover the following areas:
Securities Act and Exchange Act disclosures, including new
requirements for certain asset classes to disclose standardized asset-
level information;
Revisions to the shelf offering process, eligibility
criteria, and prospectus delivery requirements; and
Several changes to the Asset-Backed Issuer Distribution
Report on Form 10-D, the Annual Report on Form 10-K, and the Current
Report on Form 8-K.\43\
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\43\ See Section I.C.5 Proposed Rules Not Being Adopted At This
Time for a list of proposed rules that we are not adopting at this
time.
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In addition, we are adopting clarifying, technical, and other
changes to the current rules. Some of the rules we are adopting are
designed to address and improve areas that we believe have the
potential to raise issues similar to those highlighted in the financial
crisis. Furthermore, some of the rules we are adopting respond to
Sections 939A and 942(b) of the Dodd-Frank Act.
1. Asset-Level Disclosure
Investors, other market participants, academics, and policy makers
have increasingly noted that asset-level information is essential to
evaluating an asset-backed security.\44\ We believe that

[[Page 57188]]

all investors and market participants should have access to the
information they need to assess the credit quality of the assets
underlying a securitization at inception and over the life of a
security. In 2010, we proposed to require standardized asset-level
information in prospectuses and on an ongoing basis in periodic
reports. The 2010 ABS Proposals called for ABS issuers to disclose
standardized asset-level information for most asset classes.
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\44\ See, e.g., The Private Mortgage Market Investment Act, Part
I, Hearing on H.R. 3644 Before the Subcomm. on Capital Mkts. & Gov't
Sponsored Enters. of the H. Comm. on Fin. Servs., 112th Cong. 3
(2011) (statement of Rep. Scott Garrett, Chairman, Subcomm. on
Capital Mkts. & Gov't Sponsored Enters.) (stating ``in regards to
transparency and disclosure, investors should be empowered, if you
will, and enabled to do their own analysis of the assets underlying
the securities that they are investing in. So by disclosing more
detailed loan level data, while at the same time protecting the
privacy of the borrowers, and by allowing more time for the
investors to study that additional information, investors will be
able to conduct more due diligence and lessen their reliance on
rating agencies''); Securitization of Assets: Problems & Solutions
Hearing Before the Subcomm. on Secs., Ins., & Inv. of S. Comm. on
Banking, Housing & Urban Affairs, 111th Cong. 39 (2009) (statement
of Patricia McCoy, law professor at the University of Connecticut
School of Law) (recommending that ``[t]he SEC should require
securitizers to provide investors with all of the loan-level data
they need to assess the risks involved'' and ``should require
securitizers and servicers to provide loan-level information on a
monthly basis on the performance of each loan and the incidence of
loan modifications and recourse''). See also letters from Moody's
Investors Service dated Aug. 31, 2010 submitted in response to the
2010 ABS Proposing Release (``Moody's I'') (suggesting increased ABS
data information will restore confidence in the structured finance
market), Prudential Investment Management, Inc. dated Aug. 2, 2010
submitted in response to the 2010 ABS Proposing Release
(``Prudential I'') (supporting the SEC's proposal for investors to
have access to asset-level data in order to provide investors with a
better understanding of risk), and SIFMA I (suggesting that asset-
level data is important to an investor's investment decision and is
needed to restore investor confidence).
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We are adopting standardized asset-level disclosure requirements
because we believe this information will allow an investor to better
conduct his or her own evaluation of the ongoing credit quality of a
particular asset, risk layering of assets, and overall risks in the
pool underlying the ABS. In our discussion below, we refer to each
individual asset-level disclosure requirement as an asset-level data
point. The asset-level data will be provided at the time of the
offering and on an ongoing basis. The disclosures are required to be
provided in a standardized XML format, so that they are more useful to
investors and markets. We have revised the required data points to
address commenters' concerns about a variety of topics that we discuss
further below, such as the availability of data, market practice, need
for increased transparency and privacy concerns. While we are adopting
asset-level disclosure requirements for ABS where the underlying assets
consist of residential mortgages, commercial mortgages, auto loans,
auto leases and resecuritizations of ABS that include these asset
types, or of debt securities,\45\ we are continuing to consider the
best approach for requiring more information about underlying assets
for the remaining asset classes covered by the 2010 ABS Proposal.\46\
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\45\ Under the proposal, this asset class was titled ``corporate
debt.'' However, we are using the term ``debt security ABS'' to
provide clarification because, as we discuss below, the same set of
requirements will also apply to resecuritizations.
\46\ While the 2010 ABS Proposal applied across asset classes,
we had also proposed specific requirements for equipment loans and
leases, student loans, floorplan financings, and credit card
receivables. As discussed below, Section 7(c) of the Securities Act
[15 U.S.C. 77g(c)] also requires, in relevant part, that the
Commission adopt regulations requiring an issuer of an asset-backed
security to disclose, for each tranche or class of security,
information about the assets backing that security, including asset-
level or loan-level data, if such data is necessary for investors to
independently perform due diligence.
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We have modified some of the proposed data points in response to
comments. The new disclosure requirements include the following
standardized data points:
Data points about the payment stream related to a
particular asset, such as the contractual terms, scheduled payment
amounts, basis for interest rate calculations and whether and how
payment terms change over time;
Data points that allow for an analysis of the collateral
related to the asset, such as the geographic location of the property,
property valuation data and loan-to-value (``LTV'') ratio;
Data points about the performance of each asset over time,
for example, data about whether an obligor is making payments as
scheduled; and
Data points about the loss mitigation efforts by the
servicer to collect amounts past due and the losses that may pass on to
the investors.

Other key data points we are adopting will provide data about the
extent to which income and employment status have been verified,
mortgage insurance coverage, and lien position.
We have also made modifications from the 2010 ABS Proposal in light
of privacy concerns. As we discuss below, many commenters were
concerned with the privacy implications of asset-level disclosure,
particularly the risk that the information could be combined with other
publicly available information to discover, or ``re-identify,'' the
identities of the obligors in ABS pools, thereby revealing potentially
sensitive personal and financial information about an obligor. In light
of these concerns, we are omitting or modifying certain asset-level
disclosures for RMBS and securities backed by auto loans and leases
(collectively, ``Auto ABS'') to reduce the potential risk that the
obligors could be re-identified. We refer to this risk throughout the
release as ``re-identification risk''. Additionally, in response to
commenters' suggestions, we have sought and obtained guidance from the
Consumer Financial Protection Bureau (``CFPB'') on the application of
the Fair Credit Reporting Act (``FCRA'') \47\ to the required
disclosures. We believe these steps implement the statutory mandate of
Section 7(c) and will provide investors with the asset-level
information they need while reducing concerns about the potential re-
identification risk associated with disclosing consumers' personal and
financial information.\48\
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\47\ 15 U.S.C. 1681 et seq. FCRA generally regulates the use of
``consumer reports'' furnished by a ``consumer reporting agency,''
as those terms are defined in the statute. The CFPB has authority to
interpret FCRA.
\48\ 15 U.S.C. 77g(c).
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2. Other Disclosure Requirements
We are also adopting other amendments to the prospectus disclosure
requirements, which will require:
A summary of statistical information about the pool of
underlying assets in the prospectus summary;
A description of the provisions in the transaction
agreements about modification of the terms of the underlying assets;
More explanatory language about the static pool
disclosures and standardized delinquency presentation and, for static
pool filings on Form 8-K, a new separate Form 8-K item and exhibit
number;
Expanded disclosure about transaction parties; and
Filing of the transaction documents, by the date of the
final prospectus, which is a clarification of the current rules.
3. Securities Act Registration
ABS issuers have emphasized their desire to access the capital
markets quickly through shelf registration. ABS shelf registration
offers significant flexibility and timing benefits to issuers, but
these interests must be balanced against investors' need for adequate
information and time to make informed investment decisions. Investors
have expressed concerns about not having adequate time to review the
prospectus in order to make a well-informed investment decision,
especially in an

[[Page 57189]]

active market.\49\ This lack of time to adequately review the
transaction contributed to investors placing undue reliance on the
investment-grade ratings of these securities.\50\ Consequently, we are
adopting a requirement that ABS issuers using a shelf registration
statement on new Form SF-3 file a preliminary prospectus under new Rule
424(h) containing transaction-specific information at least three
business days in advance of the first sale of securities in the
offering.\51\ The preliminary prospectus will give investors additional
time to analyze the specific structure, assets, and contractual rights
regarding each transaction. We had originally proposed that any
material change to the preliminary prospectus, other than offering
price, would require the filing of a new preliminary prospectus and re-
starting the waiting period. In response to commenters' concerns, we
are requiring, instead, that issuers file material changes in a
prospectus supplement that provides a clear description of how the
information has changed at least 48 hours before the first sale.
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\49\ See the 2010 ABS Proposing Release at 23334, including
footnote 80, and the 2011 ABS Re-Proposal at 47950, including
footnote 19. See also the discussion in Section V.B.1.a)(1), below
(discussing investors' concerns about the lack of adequate time).
\50\ See, e.g., Securitization of Assets: Problems & Solutions
Hearing Before the Subcomm. on Sec., Ins., & Inv. of the S. Comm. on
Banking, Housing & Urban Affairs, 111th Cong. 71 (2009) (statement
of William W. Irving, Portfolio Manager at Fidelity Investments)
(noting ``high demand [for ABS] put investors in the position of
competing with each other, making it difficult for any of them to
demand better underwriting, more disclosure, simpler product
structures, or other favorable terms'').
\51\ We use the term ``preliminary prospectus'' to mean the Rule
424(h) preliminary prospectus; similarly we use the term ``final
prospectus'' to mean the Rule 424(b)(2) or (5) prospectus.
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As noted above, while we recognize that ABS issuers have expressed
the desire to use shelf registration in order to access the capital
markets quickly, we believe that the shelf eligibility requirements
should be designed to help ensure a certain quality and character for
asset-backed securities eligible for delayed shelf registrations given
the speed of these offerings. Prior to today, one of the shelf
eligibility requirements for offerings of asset-backed securities was
that the securities were investment-grade securities--meaning that at
least one of the nationally recognized statistical rating organizations
(``NRSRO'') rated them in one of its generic rating categories that
signifies investment grade and is typically one of the four highest
categories. As noted above, the financial crisis revealed that credit
rating agencies had generally not appropriately evaluated the credit
risk of the securities and that some investors may have placed too much
reliance on these ratings without conducting their own analysis.\52\ We
proposed to replace the investment-grade ratings requirement with
alternative shelf eligibility criteria. These proposals were part of a
broad ongoing effort to remove references to NRSRO credit ratings from
our rules in order to reduce the risk of undue reliance on ratings and
also to eliminate the appearance of an imprimatur that such references
may create.\53\ Additionally, Section 939A of the Dodd-Frank Act
requires us to review and eliminate the use of credit ratings as an
assessment of creditworthiness in our rules.\54\ Consequently, we are
adopting four transaction requirements for ABS shelf eligibility to
indicate which types of offerings qualify for shelf registration, and
we are removing the prior investment-grade ratings requirement. The
four new transaction requirements are:
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\52\ See footnote 31. See also, e.g., Joshua D. Coval, Jakub W.
Jurek & Erik Stafford, Economic Catastrophe Bonds, 99(3) Am. Econ.
Rev. 628-66 (2009) (arguing that senior CDO tranches have
significantly different risk exposures than their credit rating-
matched single-name counterparts, and thus should command different
risk premia, and that the information provided by the credit ratings
agencies to their customers is inadequate for purposes of accurately
pricing these risks); John Griffin & Dragon Tang, Did Subjectivity
Play a Role in CDO Credit Ratings?, 67(4) J. Fin. 1293-1328 (2012)
(analyzing 916 CDOs and finding that credit rating agencies
frequently made favorable pro-issuer adjustments beyond what their
own risk models suggested, thereby subjectively increasing the size
of triple-A tranches in the CDOs, and, subsequently, the CDOs with
larger subjective adjustments experienced more severe downgrades
during the economic crisis).
\53\ See, e.g., Security Ratings, Release No. 33-9245 (July 27,
2011) [76 FR 46606] (the ``Security Ratings Release'') (amending
rules and forms under the Securities Act and the Securities Exchange
Act); Removal of Certain References to Credit Ratings Under the
Securities Exchange Act of 1934, Release No. 34-64352 (Apr. 27,
2011) [76 FR 26550] (proposing amendments to rules and one form
under the Securities Exchange Act).
\54\ Section 939A of the Dodd-Frank Act requires that the
Commission review any regulation issued by the Commission that
requires the use of an assessment of the credit-worthiness of a
security or money market instrument and any references to or
requirements in such regulations regarding credit ratings. We
completed this review and issued a report on July 21, 2011 (see
Report on Review of Reliance on Credit Ratings, available at http://www.sec.gov/news/studies/2011/939astudy.pdf). We have removed
references from a significant number of rules and forms both as a
result of our broad ongoing effort to remove credit rating
references from our rules as well as in light of the requirements in
Section 939A of the Dodd-Frank Act. See, e.g., Rules 15c3-1 [17 CFR
240.15c3-1], 15c3-3 [17 CFR 240.15c3-3], 10b-10 [17 CFR 240.10b-10]
and 17i-8(a)(4) [17 CFR 240.17i-8(a)(4)] under the Exchange Act,
Form X-17A-5, Part IIB [17 CFR 249.617] under the Exchange Act,
Schedule 14A [17 CFR 240.14a-101] under the Exchange Act, Rule
100(b)(2) of Regulation FD [17 CFR 243.100(b)(2)], Rule 5b-3 [17 CFR
270.5b-3] under the Investment Company Act, Forms N-1A [17 CFR
274.11A], N-2 [17 CFR 274.11a-1] and N-3 [17 CFR 274.11b] under the
Investment Company Act, Rules 134 [17 CFR 230.134], 138 [17 CFR
230.138], 139 [17 CFR 230.139] and 168 [17 CFR 230.168] under the
Securities Act and Forms S-3 (non-ABS) [17 CFR 239.13], S-4 [17 CFR
239.25], F-3 [17 CFR 239.33], F-4 [17 CFR 239.34] and F-9
(rescinded) under the Securities Act.
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A certification by the chief executive officer;
An asset review provision requiring review of the assets
for compliance with the representations and warranties upon the
occurrence of certain trigger events;
A dispute resolution provision; and
Disclosure of investors' requests to communicate.
We believe that these new shelf eligibility and offering
requirements will reduce undue reliance on credit ratings and also help
to ensure that ABS issued in shelf offerings are designed and prepared
with more oversight and care that make them appropriate to be issued
off a shelf, which we define as being ``shelf appropriate'' securities.
(a) Certification
In the aftermath of the financial crisis, investors have expressed
concern that ABS issuers were creating securitization transactions that
could not support the scheduled payments due to investors.\55\ We are
concerned, in particular, that issuers were not adequately reviewing
the disclosure provided in the prospectus, examining the assets
included in the pool, and assessing the security structure and the
expected pool-asset cash flows. To address this concern, we are
adopting, as a shelf eligibility requirement, a certification by the
chief executive officer of the depositor at the time of each takedown
about the disclosures contained in the prospectus and the structure of
the securitization. We believe that a certification should cause the
chief executive officer to participate more extensively in the
oversight of the transaction. The certification will also provide
explicit evidence of the certifier's belief about the securitization at
the time of the takedown.
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\55\ See, e.g., letters from Better Markets and Prudential I
(highlighting the problem with the ``originate-to-distribute'' model
where the focus is on whether the asset can be sold into a
securitization rather than on its likely long-term performance).
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We have made revisions to the certification in order to address
commenters' concerns about the certification constituting a guarantee
about future performance and possibly increased liability for
certifiers. To address commenters' concerns about certifier liability,
we have added a

[[Page 57190]]

paragraph to clarify that the certifier has any and all defenses
available under the securities laws.
(b) Asset Review Provision
We have noted investors' concerns about the effectiveness of
contractual provisions related to the representations and warranties
about the pool assets and the lack of responsiveness by sponsors and
other parties to the transaction about potential breaches.\56\
Commenters shared this concern \57\ and, to address it, we are
requiring, as proposed that the relevant transaction agreements include
provisions providing for a review of the underlying assets for
compliance with the representations and warranties upon the occurrence
of certain post-securitization trigger events. The rule is designed to
address comments received related to the triggers and potential costs,
while at the same time balance the need for stronger mechanisms to
enforce underlying contract terms. Under the final rule, the agreements
must require a review, at a minimum, upon the occurrence of a two-
pronged trigger. The first prong of the trigger is the occurrence of a
specified percentage of delinquencies in the pool. If the delinquency
trigger is met, the second prong of the trigger is the direction of
investors by vote. The report of the reviewer's findings and
conclusions for all assets reviewed will be required to be provided to
the trustee in order for the trustee to determine whether a repurchase
request would be appropriate under the terms of the transaction
agreements, and a summary of the report must be included on the Form
10-D. We believe that this shelf requirement will address investors'
concerns about the enforceability of the representations and warranties
and also will incentivize the obligated parties to better consider the
disclosure, characteristics, and quality of the assets in the pool.
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\56\ See Disclosure for Asset-Backed Securities Required by
Section 943 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, Release No. 33-9175 (Jan. 20, 2011) [76 FR 4489,
4490] (the ``Section 943 Adopting Release''). We also note, for
example, that transaction agreements typically have not included
specific mechanisms to identify possible breaches of representations
and warranties or to resolve a question of whether a breach of the
representations and warranties has occurred.
\57\ See footnotes 1050 and 1051.
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(c) Dispute Resolution
As demonstrated by events surrounding the financial crisis,
investors have not only lacked an effective mechanism to identify
potential breaches of the representations and warranties, they have
also lacked a mechanism to require sponsors to address their repurchase
requests in a timely manner.\58\ We are requiring that the underlying
transaction agreements include a provision providing that, if an asset
subject to a repurchase request is not repurchased by the end of a 180-
day period beginning when notice is received, then the party submitting
such repurchase request would have the right to refer the matter, at
its discretion, to either mediation or third-party arbitration. Under
the final rule, the dispute resolution provision is a separate and
distinct shelf eligibility requirement; investors will be able to take
advantage of the dispute resolution provision regardless of whether
they had utilized the asset review process.
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\58\ See Alex Ulam, Investors Try to Use Trustees as Wedge in
Mortgage Put-Back Fight, Am. Banker, June 24, 2011 (noting that many
attempted put-backs have ``flamed out after investor coalitions
failed to get the 25% bondholder votes that pooling and servicing
agreements require for a trustee to be forced to take action against
a mortgage servicer''). See also Tom Hals & Al Yoon, Mortgage
Investors Zeroing in on Subprime Lender, Thomson Reuters, May 9,
2011 (noting that gathering the requisite number of investors needed
to demand accountability for faulty loans pooled into investments is
a ``laborious'' task).
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(d) Investor Communication
The aftermath of the financial crisis has demonstrated that
investors have also encountered difficulty in locating other investors
in order to enforce rights collectively under the terms of the ABS
transaction, especially those related to repurchase demands due to
breaches of the representations and warranties.\59\ Without an
effective means for investors to communicate with each other, investors
have told us that they are unable to utilize the contractual rights
provided in the underlying transaction agreements. To address this
concern, we are requiring as proposed that the underlying transaction
agreements must include a provision to require that a request by an
investor to communicate with other investors be included in ongoing
distribution reports filed on Form 10-D.
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\59\ See Katy Burne, Banker's Latest Bet: Teamwork on Bonds,
Wall St. J., Jan. 22, 2013 (illustrating the difficulty that
investors encounter in attempting to communicate with one another
and noting one investor's efforts to locate other RMBS investors by
publishing advertisements in national newspapers).
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(e) Other Shelf Offering Provisions
We are also adopting various other changes to the procedures and
forms related to shelf offerings substantially as proposed, with some
changes in response to comments, including:
Limiting registration of continuous ABS shelf offerings to
``all or none offerings.''
Eliminating Rule 415(a)(1)(vii) that provided shelf
eligibility to certain investment-grade mortgage related securities
regardless of the registration statement form.
Permitting a pay-as-you-go registration fee alternative,
allowing ABS issuers to pay registration fees at the time of filing the
preliminary prospectus, as opposed to paying all registration fees
upfront at the time of filing the registration statement.
Creating new Forms SF-1 and SF-3 for ABS issuers that will
replace the usage of current Forms S-1 and S-3 in order to delineate
between ABS filers and corporate filers and to tailor requirements for
ABS offerings.
Eliminating the ABS investment-grade exemptive provision
in Rule 15c2-8(b) so that a broker or dealer will be required to
deliver a preliminary prospectus at least 48 hours before sending a
confirmation of sale.
Revising the current practice of providing a base
prospectus and prospectus supplement for ABS issuers and instead
requiring that a single prospectus be filed for each takedown (except
that it would be permissible to highlight material changes from the
preliminary prospectus in a separate supplement to the preliminary
prospectus).
4. Other Changes to ABS Rules
In addition to the prospectus disclosure changes and shelf
requirements, we are also adopting other changes related to ABS. For
example, we are adopting a revision to the prefunding exception
provided in the definition of ABS, which will decrease the prefunding
limit from 50% to 25% of the offering proceeds. Additionally, we are
adopting several changes to Forms 10-D, 10-K and 8-K.
5. Proposed Rules Not Being Adopted At This Time
We are not adopting at this time, however, several rules that we
proposed in the 2010 ABS Proposing Release or the 2011 ABS Re-Proposing
Release. These proposals remain outstanding. They include:
Requiring issuers to provide the same disclosure for Rule
144A offering as required for registered offerings;
Making the general asset-level requirements applicable to
all asset classes and asset-class specific requirements for equipment
loans and leases, student loans, and floorplan financings;
Requiring grouped-account disclosure for credit and charge
card ABS;

[[Page 57191]]

Filing of a waterfall computer program of the contractual
cash flow provisions of the securities;
Requiring the transaction documents, in substantially
final form, be filed by the date the preliminary prospectus is required
to be filed;
Exempting ABS issuers from current requirements that the
depositor's principal accounting officer or controller sign the
registration statement and in lieu requiring an executive officer in
charge of securitization sign the registration statement; and
Revising when pool disclosure must be updated on Form 8-K.

II. Economic Overview

We are mindful of the economic consequences and effects, including
costs and benefits, of our rules, and we discuss them throughout this
release when we explain the new rules that we are adopting. Further,
Section 2(b) of the Securities Act \60\ and Section 3(f) of the
Exchange Act \61\ require the Commission, when engaging in rulemaking
that requires it to consider whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action would promote efficiency,
competition, and capital formation. In addition, Section 23(a) of the
Exchange Act requires the Commission, when making rules and regulations
under the Exchange Act, to consider the impact a new rule would have on
competition.\62\ Section 23(a)(2) also prohibits the Commission from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\63\
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\60\ 15 U.S.C. 77b(b).
\61\ 15 U.S.C. 78c(f).
\62\ 15 U.S.C. 78w(a).
\63\ 15 U.S.C. 78w(a)(2).
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To assess these economic consequences, we are using as our baseline
the ABS market as it exists at the end of 2013, including applicable
rules adopted by the Commission but excluding the rules adopted herein.
Because activity in the ABS market has changed due to the financial
crisis, we will refer to market statistics that encompass the pre-
crisis period, the crisis period, and the current period as appropriate
in order to provide a more comprehensive picture of the ABS market. To
the extent that certain amendments are mandated by statute, the
economic analysis considers the consequences and effects that stem from
statutory mandates, as well as those that are affected by the
discretion we exercise in implementing the mandates. We provide a
qualitative, and whenever possible quantitative, discussion of the
costs, benefits, and the effects on efficiency, competition, and
capital formation of individual rule provisions in the corresponding
sections of the release. We anticipate, however, that the elements of
the rules will interact with each other and also with other regulations
to generate combined economic effects. Thus, it is appropriate to
expand the analysis to include disparate elements of the rule. While we
make every reasonable attempt to quantify the economic impact of the
rules that we are adopting, we are unable to do so for several
components of the new rules due to the lack of available data.\64\ We
also recognize that several components of the new rules are designed to
change existing market practices and as a result, existing data may not
provide a basis to fully assess the rules' economic impact.
Specifically, the rules' effects will depend on how issuers, their
investors, and other parties to the transactions (e.g., trustees,
underwriters, and other parties that facilitate transactions between
issuers and investors) will adjust on a long-term basis to these new
rules and the resulting evolving conditions. The ways in which these
groups could adjust, and the associated effects, are complex and
interrelated and thus we are unable to predict them with specificity
nor are we able to quantify them at this time.
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\64\ We note the lack of quantitative analysis provided by
commenters about the impact of the proposals on the market. Some
commenters did, however, provide us with some limited qualitative
descriptions of potential impacts, which we took into consideration
in adopting the final rules.
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The new rules are designed to improve investor protections and
promote a more efficient asset-backed market. The new transaction
requirements for shelf eligibility should encourage ABS issuers to
design and prepare ABS offerings with greater oversight and care and
should incentivize issuers to provide investors with accurate and
complete information at the time of the offering. It is these
transactions that are appropriate to be offered to the public off a
shelf without prior staff review. The new requirements for more asset-
level information and more time for investors to review this
information will provide more disclosure and greater transparency about
the underlying assets. The effect of the increased disclosure on
competition, efficiency, and capital formation will depend, in part, on
the level of granularity and standardization of information currently
available and disclosed. The remaining changes to Regulation AB that we
are adopting are refinements to existing Regulation AB. We recognize
that these new and amended rules that we are adopting may impose costs
on asset-backed issuers, investors, servicers, and other transaction
participants and may affect competition, efficiency, and capital
formation. The effect of the refinements to existing Regulation AB will
depend, in part, on issuers' current methods to comply with the
existing rules. While we cannot predict or quantify precisely all
effects the new rules will have on competition, efficiency, and capital
formation, we believe that the rules we are adopting will improve the
asset-backed securities market.

A. Market Overview and Economic Baseline

For many asset classes, the ABS market before the 2007-2009
financial crisis differed significantly from the one immediately after
the crisis, and even from our baseline, the market that exists today,
as illustrated in Figure 1. Private-label (non-U.S. agency) ABS issuers
held $2.6 trillion in assets in 2004, which grew to $4.5 trillion in
2007, and declined to $1.63 trillion in 2013.\65\ This distinction is
most stark in the case of private-label residential mortgage-backed
securities (``RMBS''), including home equity lines of credit. In 2004,
prior to the crisis, new issuances of registered private-label RMBS
totaled $746 billion.\66\ The overwhelming majority of private-label
RMBS deals issued before the crisis were registered offerings. In 2008,
registered private-label RMBS issuance drastically dropped to $12
billion. Today, the private-label RMBS market remains exceptionally
weak overall and consists

[[Page 57192]]

almost exclusively of unregistered RMBS offerings.\67\ For 2013, new
issuances of registered private-label RMBS totaled $4 billion, which
represents 0.54% of the issuance level in 2004. Similarly, a drop in
issuance level was evident with registered commercial mortgage-backed
securities (``CMBS''), which totaled $74 billion in 2004, declined to
$11 billion in 2008, and totaled $53 billion in 2013. The consumer
finance ABS market, including credit card and auto securitizations,
also declined drastically both in terms of number of deals and issuance
volume after the financial crisis. For example, $85 billion of Auto ABS
were issued in 2005, but after the crisis, in 2008, issuance plummeted
to $32 billion. Unlike RMBS, consumer finance ABS, especially Auto ABS,
has since 2008 steadily increased to $42 billion of issuance in 2011
and to $62 billion in 2013. Almost all ABS markets experienced historic
downturns following the crisis, and the recovery of these markets has
not been uniform.
BILLING CODE 8011-01-C
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\65\ See Federal Reserve Board, Financial Accounts of the United
States: Flow of Funds, Balance Sheets, and Integrated Macroeconomic
Accounts (published quarterly), available at http://www.federalreserve.gov/releases/z1/. Each report contains data for
the previous five years; data for earlier years can be accessed
through the Federal Reserve's Data Download Program, available at
http://www.federalreserve.gov/datadownload/Choose.aspx?rel=Z.1. We
use aggregate data for private mortgage pools, consumer credit,
business loans, student loans, consumer leases, and trade credit
securitization.
\66\ The figure and statistics in this section are based on the
issuance data from AB Alert and CM Alert databases. The deals are
categorized by offering year, underlying asset type, and offering
type (SEC registered, Rule 144A, or traditional private offerings).
Private-label RMBS include residential, Alt-A, and subprime RMBS,
and ABS backed by home equity loans and lines of credit. Only
private-label (non-GSE) RMBS deals sold in the United States and
sponsors of such deals are counted. Auto loan ABS include ABS backed
by auto loans, both prime and subprime, motorcycle loans, truck
loans, and RV loans.
\67\ As of December 2013, roughly 99% of new residential
mortgage-related securitizations were government sponsored (market
statistics from the Securities Industry and Financial Markets
Association (SIFMA)). See also Tracy Alloway, ``Private-Label
Mortgage Securities Take Root,'' Fin. Times (Feb. 22, 2013) (noting
a recent spurt in private-label RMBS issuances but also indicating
that the volume of private-label RMBS is likely to remain suppressed
for some time). The outstanding private-label RMBS market fell to
$1.1 trillion in the last quarter of 2013, down from $1.4 trillion
in 2011 and $2.3 trillion in 2007. See also Diana Olick, ``Why
Private Investors Are Staying Away From Mortgages,'' CNBC (Aug. 6,
2012) (citing lack of investor confidence in the quality and ratings
of RMBS).
[GRAPHIC] [TIFF OMITTED] TR24SE14.000

The number of sponsors in the registered ABS markets has undergone
changes similar to the issuance activity described above. In 2004 there
were 131 sponsors of registered ABS, while currently there are 61
sponsors of registered ABS.\68\ The decline in the number of sponsors
is most dramatic in the RMBS segment where only a single sponsor of
private-label RMBS was issuing registered securities as of the end of
2013--down from 52 sponsors in 2004. In the RMBS market, private-label
RMBS issuers encounter competitive pressure from government-sponsored
enterprises, whose mortgage-backed securities are guaranteed and exempt
from registration and reporting requirements. As private-label issuance
has declined, issuance of agency RMBS has increased. Issuances of
Federal National Mortgage Association (``Fannie Mae''), Federal Home
Loan Mortgage Corporation (``Freddie Mac''), and Government National
Mortgage Association (``Ginnie Mae'') mortgage-related securities were
$1.4 trillion in 2004, and grew to $1.9 trillion in 2013.\69\
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\68\ For a description of the data, see footnote 66. The 2004
numbers in this release have been revised from those provided in the
2010 ABS Proposal to include CMBS sponsors from the CM Alert
database.
\69\ See SIFMA, U.S. Mortgage-Related Issuance, available at
http://www.sifma.org/research/statistics.aspx.
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Many factors contributed to the financial crisis, including some
that involved mortgage-backed securities.\70\ The low interest rate
environment prior to the crisis drove investor demand for high-yield,
high-credit rated products, including mortgage-backed securities.\71\

[[Page 57193]]

Among the many factors relating to mortgage-backed securities that
contributed to the financial crisis, mortgage originators largely
exhausted the supply of traditional quality mortgages, and to keep up
with investor demand for mortgage-backed securities, subprime lending
became increasingly popular.\72\ During the crisis, as the default rate
for subprime mortgages soared, such securities, including those with
high credit ratings, lost value (up to 95% for triple-B rated and 70%
for triple-A rated subprime RMBS issued in 2006), making investors
reluctant to purchase these securities.\73\ Some of the decline in the
value began to reverse in 2010 as housing prices started to stabilize
and investors gained a better understanding of the mortgage
modification process. This reversal has been concentrated in the
subprime RMBS tranches that were highly rated. As indicated above,
activity in some parts of the ABS market continues to remain weak.
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\70\ A report by the U.S. Government Accountability Office
(``GAO'') noted that subprime and near-prime mortgages increased
dramatically in popularity during the 2000's, accounting for nearly
40% of mortgage originations by 2006. The high foreclosure and
default rates of these mortgages contributed precipitously to the
financial crisis. See U.S. Government Accountability Office,
Mortgage Reform: Potential Impacts of Provisions in the Dodd-Frank
Act on Homebuyers and the Mortgage Market (July 2011) at 11.
\71\ See, e.g., Eamonn K. Moran, Wall Street Meets Main Street:
Understanding the Financial Crisis, N.C. Banking Inst. 7, 14 & 35
(2009) (``Low interest rates set by the Federal Reserve, as a
result, led to low returns on traditionally safe U.S. Treasury
bonds. Therefore, securitized investments, which yielded a premium
but many of which carried AAA-ratings even if the underlying
mortgages were dubious, were quite attractive to domestic and
foreign investors.'').
\72\ See id. at 35 (noting ``voracious demand exhausted the
supply of prime mortgage loan securitizations and investment bankers
began seeking subprime mortgage loans to continue to generate
mortgage-backed securities'').
\73\ See, e.g., Board of Governors of the Federal Reserve
System, Report to the Congress on Risk Retention, (Oct. 2010) at 50-
51 (discussing the dramatic drop in the triple-A and triple-B ABX.HE
2006-2 index).
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B. Economic Motivations

As described at the end of the previous section, during the
financial crisis, many securitizations performed exceptionally poorly
as investments. This has been attributed to the dual problems of moral
hazard and asymmetric information.\74\ In particular, many believe that
originators and securitizers have more information about the credit
quality and other relevant characteristics of the borrower than the
ultimate investors; for example, they may have been aware that the
underlying assets were of poor quality and, thus, presented greater
risks. This leads to a potential moral hazard problem--the situation
where one party (e.g., the loan originator or ABS sponsor) may have a
tendency to incur risks because another party (e.g., investors) will
bear the costs or burdens of these risks. Hence, when there are
inadequate processes in place to encourage (or require) sufficient
transparency to overcome concerns about informational differences, the
securitization process could lead certain participants to maximize
their own welfare and interests at the expense of other participants.
Before and during the crisis, information regarding the quality of the
underlying assets was not generally known by investors, and certain
originators and sponsors were frequently able to transfer the financial
consequences of poor origination decisions by packaging the assets in
complex and often opaque securitization structures.\75\ The incentives
to maintain opacity were particularly acute for those securitizations
where the originator and securitizer received full compensation for
their services before investors could become informed about the loan
quality of the underlying pool.\76\
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\74\ See, Adam B. Ashcraft & Til Schuermann, Understanding the
Securitization of Subprime Mortgage Credit (Staff Report, Fed.
Reserve Bank of N.Y., Working Paper No. 318, 2008) (identifying at
least seven different frictions in the residential mortgage
securitization chain that can cause agency and adverse selection
problems in a securitization transaction and explaining that given
that there are many different parties in a securitization, each with
differing economic interests and incentives, the overarching
friction that creates all other problems at every step in the
securitization process is asymmetric information).
\75\ See, e.g., Chris Downing, Dwight Jaffee & Nancy Wallace, Is
the Market for Mortgage-Backed Securities a Market for Lemons?,
22(7) Rev. Fin. Stud. 2457-94 (2009) (stating that the quality of
the assets sold to investors through securitizations is lower than
the quality of similar assets that are not sold to investors);
Amiyatosh Purnanandam, Originate-to-Distribute Model and the
Subprime Mortgage Crisis, 24(6) Rev. Fin. Stud. 1881-1915 (2011)
(stating that banks with high involvement in the originate-to-
distribute market originated excessively poor-quality mortgages and
noting that this evidence is consistent with the view that the
originating banks did not expend resources to adequately screen the
quality of their borrowers).
\76\ See also Section C.2.b. Broad Economic Considerations of
the Credit Risk Retention, Release No. 34-70277 (Aug. 28, 2013) [78
FR 57928] (the ``2013 Risk Retention Re-Proposing Release'').
---------------------------------------------------------------------------

At that time, many investors unduly relied upon the major credit
rating agencies for credit analysis of these structures rather than
conducting their own due diligence, and these agencies often failed to
accurately evaluate and rate the securitization structures.\77\ Many
observers believe that inflated and inaccurate credit ratings
contributed to the financial crisis in a significant way.\78\
Investment in securitizations has diminished substantially since the
financial crisis, in part, because investors have significantly less
trust that incentives are properly aligned among originators,
securitizers, independent evaluators (rating agencies), and
investors.\79\
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\77\ See footnotes 30, 31 and 52.
\78\ Observers identified several weaknesses in the credit
rating process, which in many instances contributed to inaccurate
ratings and were made apparent in the aftermath of the financial
crisis. One of the weaknesses is the availability of ratings
shopping, whereby issuers can request and privately observe multiple
ratings and then choose to disclose publicly only the most
favorable. Complex assets that are difficult to rate and that are
likely to generate differences in ratings can create incentives for
issuers to shop for ratings and disclose only those ratings that are
high. Competition among credit rating agencies can exacerbate the
problem, by providing rating agencies with incentive to compete for
business through favorable ratings and providing issuers with
options to choose among the rating agencies--commonly referred to as
a race to the bottom. As a result of these weaknesses in the credit
rating process, overreliance on credit ratings of complex or
potentially opaque assets, such as in the case with asset-backed
securities, can lead to excess investment with poor risk/return
characteristics. See, e.g., Nat'l Comm'n on the Causes of the Fin.
and Econ. Crisis in the U.S., The Financial Crisis Inquiry Report
xxv, 43-44 (2011) (``Participants in the securitization industry
realized that they needed to secure favorable credit ratings in
order to sell structured products to investors. Investment banks
therefore paid handsome fees to the ratings agencies to obtain the
desired ratings.''); Vasiliki Skreta & Laura Veldkamp, Ratings
Shopping and Asset Complexity: A Theory of Ratings Inflation, 56 J.
Monetary Econ. 678-95 (2009); Bo Becker & Todd Milbourn, How Did
Increased Competition Affect Credit Ratings?, 101 J. Fin. Econ. 493-
514 (2011); John Griffin & Dragon Tang, Did Subjectivity Play a Role
in CDO Credit Ratings?, 67(4) J. Fin. 1293-1328 (2012).
\79\ Adam B. Ashcraft & Til Schuermann, Understanding the
Securitization of Subprime Mortgage Credit (Staff Report, Fed.
Reserve Bank of N.Y., Working Paper No. 318, 2008) (discussing the
ways that market participants work to minimize informational
frictions that arise among and between the different participants in
the securitization process and providing thoughts and evidence on
how this process broke down during the financial crisis); Joshua
Coval, Jakub Jurek & Erik Stafford, The Economics of Structured
Finance, 23(1) J. Econ. Persp. 3-25 (2009) (providing a detailed
assessment of the relative importance of rating agency errors,
investor credulity, and perverse incentives and suspect behavior on
the part of issuers, rating agencies, and borrowers).
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The rules we are adopting apply to private-label RMBS
securitizations, and do not apply to Government Sponsored Entities
(GSEs) such as Fannie Mae and Freddie Mac, whose principal and interest
on issued securities is currently guaranteed, while the GSEs remain in
conservatorship,\80\ and otherwise may be perceived by market
participants to carry an implicit guarantee.\81\ Private-label RMBS
securitizations are not guaranteed by the federal government and had a
much higher serious delinquency rate than GSE-purchased

[[Page 57194]]

loans, even after accounting for different underlying loan
characteristics.\82\ This historical performance-based evidence
suggests that GSE underwriting standards offset the incentive to incur
excess risk because of their capital support, at least in relation to
the private-label securitizers that did not have such capital support.
In particular, GSE purchased loans were six times less likely to
default than private-label loans with similar characteristics.\83\ The
focus of the final rules is on private-label securitizations, which is
the segment of the market where investors are more likely to experience
losses.
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\80\ In September 2008, Fannie Mae and Freddie Mac agreed to be
placed under direct government control, through conservatorship.
\81\ N. Eric Weiss, Cong. Research Serv., R40800, GSEs and the
Government's Role in Housing Finance: Issues for the 113th Congress
(2013). For the estimates of the value of the implicit government
guarantee, see Wayne Passmore, The GSE Implicit Subsidy and the
Value of Government Ambiguity, 33(3) Real Est. Econ. 465-86 (2005)
(finding that GSE shareholders benefit substantially from the
ambiguous government relationship, largely due to the fact that
purchasers of the GSEs' debt securities believe the debt is
implicitly backed by the U.S. government (despite the lack of a
legal basis for such a belief)); Deborah Lucas & Robert McDonald,
Valuing Government Guarantees: Fannie and Freddie Revisited, in
Measuring and Managing Federal Financial Risk 131-154 (Deborah
Lucas, ed., Univ. of Chicago Press, Feb. 2010) (2010) (estimating
the value of the implicit guarantee on GSEs' debt issues to be
approximately $28 billion).
\82\ See Joshua White & Scott Bauguess, Qualified Residential
Mortgage: Background Data Analysis on Credit Risk Retention,
Division of Economic and Risk Analysis, U.S. Securities and Exchange
Commission (Aug. 2013) (the ``White-Bauguess Study''), available at
http://www.sec.gov/divisions/riskfin/whitepapers/qrm-analysis-08-2013.pdf.
\83\ Id.
---------------------------------------------------------------------------

We note that the rules are intended to increase transparency about
the potential risks in the ABS market through greater loan-level
disclosure and to provide additional recourse for investors when issues
arise, thus providing better tools for investors to evaluate their
capital allocation decisions. These measures should lessen the risk of
overreliance on credit ratings as investors will now be able to conduct
their own due diligence using more transparent and fuller disclosures
regarding the assets underlying a securitization. Disclosure of higher
quality and more complete data regarding the loan characteristics of
the underlying collateral should result in better capital allocation
decisions, improved capital formation and, ultimately, lower capital
costs by making the markets more informationally-efficient.
One key objective of the final rules is to eliminate the reliance
on credit ratings in the determination of shelf eligibility of asset-
backed securities. Replacing the investment-grade rating requirement
for the purposes of shelf eligibility may result in securitizers
finding it uneconomic or unnecessary to obtain credit ratings for their
securitizations, thus lowering the demand for the services of third-
party evaluators. The rules do not, however, preclude investors from
utilizing credit ratings in their investment analysis and decision-
making, and asset-backed securities issuers are not prohibited from
having their offerings rated. Thus, if there is sufficient demand for
ratings due to a perception of value in the ratings, then securitizers
may continue to obtain ratings and credit rating agencies would suffer
a relatively small decrease in the demand for their ratings services.
The rules we are adopting are designed to work with other
regulations to provide additional disclosures, further align incentives
in the securitization market, and restore confidence in the ABS market.
Specifically, Section 941(b) of the Dodd-Frank Act requires regulations
that mandate that certain securitizers have ``skin in the game''
through the retention of a meaningful risk exposure in securitizations
(at least a 5% economic loss exposure).\84\ The requirement that
securitizers hold risk exposure is likely to affect their decisions
regarding the quality of assets to include in such structures. While we
expect that the risk retention rules required by the Dodd-Frank Act,
when adopted, will result in better underwriting practices, we believe
that further regulation is necessary to align incentives and facilitate
credit evaluation in the securitization market.\85\
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\84\ See 15 U.S.C. 78o-11(b), (c)(1)(A) and (c)(1)(B)(ii). See
also Credit Risk Retention, Release No. 34-64148 (Mar. 30, 2011) [76
FR 24090] (the ``2011 Risk Retention Proposing Release'') and the
2013 Risk Retention Re-Proposing Release (both proposed to implement
the Dodd-Frank requirement).
\85\ We also continue to separately consider the comments
received in connection with the proposal to implement the
prohibition under Section 621 of the Dodd-Frank Act on material
conflicts of interest in connection with certain securitizations.
See Prohibition Against Conflicts of Interest in Certain
Securitizations, Release No. 65355 (Sept. 19, 2011) [76 FR 60320]
(the ``ABS Conflicts Proposal'').
---------------------------------------------------------------------------

In summary, the amendments to our regulations and forms for asset-
backed securities are designed to enhance investor protection by
reducing the likelihood of overreliance on ratings and increasing
transparency to market participants.

C. Potential Effects on the ABS Market

We believe that these amendments will work together to also improve
investors' willingness to invest in asset-backed securities and to help
the recovery in the ABS market with attendant positive effects on
informational and allocative efficiency, competition, and the level of
capital formation. Enhanced ABS disclosures and the potential for
improved pricing accuracy of the ABS market should ultimately benefit
issuers in the form of a lower cost of capital and increased investor
participation. We expect that increased transparency in the market and
more certainty about the quality of underlying assets should result in
lower required yields, and a larger number of investors should be
willing to participate in the market because of reduced uncertainty and
risk. This, in turn, would allow originators to conserve costly capital
and to diversify credit risks among many investors. Further, we believe
that credit risk transfer will result in greater efficiency in the
lending decisions of originators, the lowering of credit costs, and
ultimately greater capital availability through higher loan levels.\86\
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\86\ See, e.g., Darrell Duffie, Innovations in Credit Risk
Transfer: Implications for Financial Stability (Bank for Int'l
Settlements Working Paper No. 255, 2008), available at http://www.bis.org/publ/work255.pdf (stating that innovation in credit risk
transfer through security design (such as ABS) increase the
liquidity of credit markets, lowers credit risk premia, allows for
the efficient distribution of risk among investors, and offers
investors an improved menu and supply of assets and hedging
opportunities); A. Sinan Cebenoyan & Philip E. Strahan, Risk
Management, Capital Structure and Lending at Banks, 28(1) J. Banking
& Fin. 19-43 (2004) (finding that increasingly sophisticated risk
management practices (through activities such as loan sales) in
banking are likely to improve the availability of bank credit, but
are unlikely to reduce bank risk); Benedikt Goderis, Ian W. Marsh,
Judit Vall Castello & Wolf Wagner, Bank Behavior with Access to
Credit Risk Transfer Markets (Oct. 2006) (unpublished manuscript)
(finding that banks that adopt advanced credit risk management
techniques (measured in their study by the issuance of at least one
collateralized loan obligation) experience a permanent increase in
their target loan levels of around 50%, and interpreting their
findings as a confirmation of the general efficiency enhancing
implications of new risk management techniques).
---------------------------------------------------------------------------

Asset-level disclosure requirements will provide information about
underlying asset quality that was not consistently available to
investors prior to these rules. The new rules also standardize the
reporting of asset-level information, thus lowering the cost of
acquiring information and search costs for investors. The disclosure
and the reduction in search costs should directly increase the
transparency of the market and, thus, the informational efficiency in
pricing ABS, both in the primary and secondary markets. This should
lead to increased investor participation and more efficient allocation
of capital.
There are important benefits to issuers from heightened disclosures
of a structured finance asset base. In the absence of adequate
information about the quality of assets in the ABS structure, as was
the case in the RMBS market leading up to the start of the financial
crisis, the market for structured products may break down.\87\ The
continuing problems in the CMBS

[[Page 57195]]

and RMBS markets may be an extended manifestation of this problem.\88\
Investors that previously (and erroneously) relied on credit rating
agencies to mitigate the informational asymmetry problem about asset
quality can avail themselves of improved disclosures that allow them to
conduct their own due diligence on an issuer's structured product. This
will benefit issuers of high quality ABS because if investors are
better able to independently verify the quality of and value underlying
assets, they will be better able to distinguish high quality ABS
issuers from other issuers, where otherwise the distinction between
different types of issuers' disclosures would be obfuscated because the
quality of the underlying ABS assets could not be verified. This
differentiation between good and bad quality issuers would also lead to
more efficient allocation of capital.
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\87\ This is commonly referred to as the ``lemons problem.''
See, e.g., George A. Akerlof, The Market for ``Lemons'': Quality
Uncertainty and the Market Mechanism, 84 Q. J. Econ. 488-500 (1970)
(discussing the difficulty of distinguishing good quality from bad
quality in the business world and suggesting that many economic
phenomena may be explained and understood as a response to the
demand for the need to distinguish).
\88\ See Figure 1 in Section II.A Market Overview and Economic
Baseline and accompanying discussion (noting that the RMBS and CMBS
markets have not recovered since the crisis, whereas the issuance of
consumer finance ABS, especially Auto ABS, has steadily increased in
the recent years and almost reached the pre-crisis levels).
---------------------------------------------------------------------------

Another consequence of the final rules is the increase in
availability of capital through the potential expansion of the set of
ABS eligible for shelf registration. A larger set of ABS will be
eligible for shelf registration if they meet the new shelf eligibility
requirements, namely, non-investment grade ABS tranches that were not
eligible before. This may result in greater credit availability to
issuers of non-investment grade ABS that would have otherwise been
difficult or more costly to obtain.

D. Potential Market Participants' Responses

We recognize that the final rules may have direct and indirect
economic impacts on various market participants. Importantly, as noted
above, the market practices of participants are likely to evolve in
response to the final rules. While we lack the ability to predict those
effects with certainty, we qualitatively consider some of the potential
effects of these rules by discussing the trade-offs various market
participants may face when complying with these rules.
Most of the direct costs of these rules fall onto the sponsors of
ABS, since they will initially bear any increased costs of compliance
and implementation of the new requirements; however, there is some
uncertainty surrounding who will ultimately bear these direct
compliance costs. Depending on market conditions, the degree of
competition at different levels of the securitization chain, and the
availability of other forms of credit, the sponsors may attempt to pass
some or all of these costs on to other market participants.
One way in which the sponsors may elect to pass costs to market
participants is through lower returns paid to investors in
securitizations. Promised returns to investors will typically depend on
the costs of creating and maintaining the securitized credit structure,
including new costs associated with compliance. If investors are
willing to absorb some or all of these costs and yet still expect to
receive an acceptable risk-adjusted return on their investment, then
investor returns could be lower on these investments than in the past.
How much of the higher costs sponsors can realistically pass through to
investors will depend on the risk and return opportunities available
from other similar investments in the market.
We also recognize that some of the new asset-level disclosure and
shelf registration costs may be passed down the chain of securitization
and ultimately to borrowers. In particular, and in the short term when
new reporting and data handling systems have to be developed, borrowers
may ultimately bear higher credit costs to compensate sponsors for
these increased compliance costs. The ability to pass costs on to
borrowers will be constrained by competition from lenders that do not
securitize in the registered market. If the costs of compliance are
significant, the competitive position of firms that are subject to the
requirements of the final rules and that rely on securitization in the
public market for funding, in particular through shelf registrations,
could weaken relative to other financial firms that are not subject to
these requirements, or that have other sources of funding.
If asset-backed issuers are unable to pass along their shelf
registration costs as described above, and thus bear all or most of
these new costs, then they might choose to avoid the shelf registration
process by registering their ABS on Form SF-1 or they might choose to
bypass registration altogether and issue through unregistered offerings
instead to avoid the new shelf registration costs. Similarly, if asset-
backed issuers are unable to pass along the costs incurred to provide
asset-level disclosure (for those asset classes subject to it), then
they may issue through unregistered offerings. Such actions could have
the effect of reducing efficiency and could impede capital formation;
however, there are reasons to believe that some investors may support
the market for registered ABS despite additional costs. First, because
the prospectus disclosure requirements are the same for both types of
registered offerings, a shift from shelf-registration to non-shelf-
registration may occur only due to the new shelf registration costs,
and the shift would be constrained by the speed and convenience of
shelf takedowns. Moreover, the reallocation of newly issued registered
ABS between shelf- and non-shelf registration should not have a
substantial effect on capital formation as long as new and existing
issuers of registered ABS choose to or continue to choose to issue
registered ABS (and accordingly provide the same disclosures). Second,
not all investors satisfy the criteria of qualified institutional
buyers (``QIBs'') under Rule 144A,\89\ and, although such investors
might be interested in investing in Rule 144A ABS, they would not be
able to do so due to inability to qualify to participate in that
market. To the extent that this segment of the investor base is
sufficiently large, ABS issuers might experience substantial demand for
their securities from investors that are not qualified to invest in
unregistered offerings. Such demand would reduce the cost of capital
for public ABS issuers, creating incentives to issue through registered
rather than unregistered offerings. Third, since the final rule applies
to registered offerings of ABS, to the extent that there are investors
willing to pay (in the form of a reduced yield) for the resolution of
uncertainty regarding the asset pool quality and reduced risk of
investments, there again may be a substantial enough demand to fund ABS
in the registered market. Thus, we believe that the shift from the
registered ABS segment to other market segments should not be
substantial. The potential expansion of the registered ABS market and
wider investor participation discussed previously in this section
should allow ABS sponsors to recoup some of the costs introduced by
these rules and, thus, should increase the attractiveness of issuing
ABS through registered offerings as opposed to through unregistered
offerings.
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\89\ The term ``qualified institutional buyer'' is defined in
Rule 144A(a)(1) [17 CFR 230.144A(a)(1)] and includes specified
institutions that, in the aggregate, own and invest on a
discretionary basis at least $100 million in securities of issuers
that are not affiliated with such institutions. Banks and other
specified financial institutions must also have a net worth of at
least $25 million. A registered broker-dealer qualifies as a QIB if
it, in the aggregate, owns and invests on a discretionary basis at
least $10 million in securities of issuers that are not affiliated
with the broker-dealer.

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[[Page 57196]]

The enhancement of registered transactions could potentially reduce
the degree to which credit is intermediated by banks.\90\ In
particular, greater availability of credit for borrowers through
securitizations may result in less reliance on traditional bank loans
and greater reliance on other financial intermediation mechanisms. This
is especially likely to happen if and when the new capital and
liquidity requirements (Basel III) result in an increase in the
regulatory capital costs for financial institutions subject to
regulatory capital and liquidity requirements.
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\90\ See Darrell Duffie, Innovations in Credit Risk Transfer:
Implications for Financial Stability (Bank for Int'l Settlements
Working Paper No. 255, 2008), available at http://www.bis.org/publ/work255.pdf (observing that financial innovations, such as ABS,
designed for more efficient credit risk transfer, have facilitated a
reduction in the degree to which credit is intermediated by banks).
---------------------------------------------------------------------------

One potential source of competition for private-label securitizers
impacted by these rules is the GSEs in the mortgage market. As
previously mentioned, the principal and interest on GSE-issued
securities is currently guaranteed, while the GSEs are in
conservatorship. Even upon resolution of their current status, their
congressional charter and past government intervention will likely
perpetuate a widely held view of an implicit federal guarantee of their
securities.\91\ This explicit or future implicit government support
provides a competitive advantage over private-label securitizers
through lower funding costs. In addition to this cost of capital
advantage, GSEs will not be subject to these new rules and the costs
associated with the enhanced disclosure rules,\92\ which as we
previously discussed are less relevant to investors of GSE securities
because of the government support in the event of credit problems.
Thus, to the extent that the adopted rules impose additional costs on
securitizers, their offerings will either not be as competitive as
those of the GSEs or potentially be crowded out of the market
altogether.
---------------------------------------------------------------------------

\91\ See footnote 81.
\92\ MBS issued by these GSE's and Ginnie Mae have been and
continue to be exempt from registration under the Securities Act and
most provisions of the federal securities laws. For example, Ginnie
Mae guarantees are exempt securities under Section 3(a)(2) of the
Securities Act (15 U.S.C. 77c(a)(2)) and Section 3(a)(12) of the
Exchange Act (15 U.S.C. 78c(a)(12)). The chartering legislation for
Fannie Mae and Freddie Mac contain exemptions with respect to those
entities. See 12 U.S.C. 1723c and 12 U.S.C. 1455g.
---------------------------------------------------------------------------

The current federal guarantee of mortgage-backed securities issued
by GSEs (and/or the market perception of an implicit guarantee) may
explain why, among all the securitized asset categories impacted by the
financial crisis, the private-label RMBS and CMBS have been the slowest
to regain volume.\93\ Thus, while the rules we are adopting are
intended to create transparency in the market for private-label
securitizations, the additional costs imposed on securitizers may be
sufficiently large that, at least as long as the GSEs remain in federal
government conservatorship, the cost differences between GSE and
private-label securitizations may remain large enough to discourage
substantial investment through the latter channel.\94\ Longer-term, the
competitiveness of private-label securitizations may depend as much on
the ultimate fate of the GSEs as on the effectiveness of the rules we
adopt.
---------------------------------------------------------------------------

\93\ See Figure 1 in Section II.A Market Overview and Economic
Baseline and accompanying discussion.
\94\ Even though the GSEs currently collect and disseminate
asset-level information to the public (as discussed in Section
III.A.1 Background and Economic Baseline for the Asset-Level
Disclosure Requirement), the disclosure regime for GSEs would not
change as a result of adopting these rules. Accordingly, the costs
that GSEs incur due to their current asset-level disclosures will
not change, and the GSEs will likely benefit from the cost advantage
over private-label ABS issuers introduced by the rules being
adopted.
---------------------------------------------------------------------------

III. Asset-Level Disclosure

We are adopting a requirement for standardized asset-level
disclosures for ABS where the underlying assets consist of residential
mortgages, commercial mortgages, auto loans, auto leases, and
resecuritizations of ABS that include these asset types or of debt
securities. The disclosure is required to be provided in a standardized
tagged XML format. We are also adopting many of the proposed
refinements to other disclosure requirements. At this time, we are not
adopting our proposal for other asset classes.

A. Asset-Level Disclosure Requirement

1. Background and Economic Baseline for the Asset-Level Disclosure
Requirement
Prior to these amendments, the Commission had not historically
required the disclosure of asset-level data. Instead, issuers were only
required to provide information about the composition and
characteristics of the asset pool, tailored to the asset type and asset
pool involved for the particular offering.\95\ In the past, some
transaction agreements for securitizations required issuers to provide
investors with asset-level information, or information on each asset in
the pool backing the securities, but generally there was no mandatory
regulatory requirement that asset-level data be provided.\96\
Furthermore, such information was generally not standardized or
required to be standardized.
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\95\ See Item 1111 of Regulation AB [17 CFR 229.1111].
\96\ Under Item 1111(b)(9) of Regulation AB [17 CFR
229.1111(b)(9)] as it existed prior to this adoption, if the asset
pool included commercial mortgages, certain non-standardized asset-
level information about the properties underlying the mortgage was
required for all commercial mortgages to the extent material.
Further, for each commercial mortgage that represented, by dollar
value, 10% or more of the asset pool, as measured as of the cut-off
date, additional non-standardized asset-level information about the
properties was required.
---------------------------------------------------------------------------

Many investors and other participants in the securitization market
did not previously have sufficient time and information to be able to
understand the risks underlying the ABS and were not able to value the
ABS accordingly.\97\ This lack of understanding and the extent to which
it impacted the U.S. and global economies prompted us to revisit
several aspects of our regulation of ABS, including the information
available to investors. This review led us to determine that investors
need access to more robust and standardized information about the
assets underlying a particular ABS in order to allow them to make
informed investment decisions. To accomplish this, we proposed in the
2010 ABS Proposing Release several changes to the disclosure
requirements in Regulation AB including, subject to certain exceptions,
a new requirement that issuers provide asset-level information about
each asset in the pool backing the ABS. The asset-level data
requirements were proposed to apply to all asset types, except ABS
backed by credit cards, charge cards and stranded costs. For ABS backed
by credit or charge card receivables, we proposed that issuers provide
standardized grouped-account disclosures about the underlying asset
pool instead of asset-level disclosures. Taken together, we believed
these disclosures would provide robust data about each ABS, which would
allow investors to analyze for each securitization transaction, at the
time of inception and over the life of a security, the characteristics
of each asset, including the collateral supporting each asset and the
cash flows derived from each asset in the transaction.
---------------------------------------------------------------------------

\97\ See footnotes 40 and 44.
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Subsequent to the 2010 ABS Proposing Release, Congress passed the
Dodd-Frank Act. Section 942(b) of the Dodd-Frank Act added Section 7(c)
to the Securities Act, which requires, in relevant part, that the
Commission adopt regulations requiring an issuer of

[[Page 57197]]

an asset-backed security to disclose, for each tranche or class of
security, information regarding the assets backing that security,
including asset-level or loan-level data, if such data is necessary for
investors to independently perform due diligence.\98\ In July 2011, we
re-proposed some of the rules proposed in the 2010 ABS Proposing
Release in light of the provisions added by the Dodd-Frank Act and
comments received on our 2010 ABS Proposals. In the 2011 ABS Re-
Proposing Release, we requested comment on whether the asset-level
disclosure requirements proposed in the 2010 ABS Proposals implemented
Section 7(c) effectively and whether there were any changes or
additions that would better implement Section 7(c). The Commission also
requested comment on whether certain asset-level disclosures enumerated
in Section 7(c) are necessary for investor due diligence.\99\
---------------------------------------------------------------------------

\98\ See Section 7(c) of the Securities Act [15 U.S.C. 77g(c)].
Section 7(c) also requires, among other things, that we set
standards for the format of the data provided by issuers of an
asset-backed security, which shall, to the extent feasible
facilitate the comparison of such data across securities in similar
types of asset classes.
\99\ In particular, the 2011 ABS Re-Proposing Release requested
comment on whether asset-level disclosures of unique identifiers for
loan brokers and originators, broker and originator compensation and
the risk retention held by the originator and the sponsor are
necessary for investor due diligence. As noted below, in general,
most commenters did not believe those particular asset-level
disclosures were necessary for investor due diligence.
---------------------------------------------------------------------------

We received comments on the potential privacy implications of the
proposed asset-level data requirements, including comments suggesting
that the required asset-level information be provided by means other
than public dissemination on the Commission's Electronic Data
Gathering, Analysis, and Retrieval system (``EDGAR'').\100\ In light of
the privacy concerns about the proposed asset-level requirements, we
re-opened the comment period on the 2010 ABS Proposals and the 2011 ABS
Re-Proposals in February 2014 to permit interested persons to comment
on an approach for the dissemination of asset-level data, which was
described in the 2014 Staff Memorandum. The 2014 Staff Memorandum
summarized the comments that had been received related to potential
privacy concerns and outlined an approach that would require issuers to
make asset-level information available to investors and potential
investors through an issuer-sponsored Web site rather than having
issuers file and make all of the information publicly available on
EDGAR (the ``Web site approach''). The Web site approach noted various
ways in which issuers could address potential privacy concerns
associated with the disclosure of asset-level information, including
through restricting Web site access to such information.
---------------------------------------------------------------------------

\100\ See letters from Ally Financial Inc., et al dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release
(``VABSS I''), Ally Financial Inc. et al dated Oct. 13, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``VABSS
III''), and Ally Financial Inc. et al dated Aug. 3, 2012 submitted
in response to the 2011 ABS Re-Proposing Release (``VABSS IV'')
(urging the Commission ``to consider whether loan-level data (or
even grouped data) needs to be made publicly available or could be
made available to investors and other legitimate users in a more
limited manner, such as through a limited access Web site''). See
also letters from Consumer Data Industry Association dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release
(``CDIA'') (suggesting that the Commission require parties that want
to access the data on EDGAR register to use the data, acknowledge
the sensitive nature of the data and agree to maintain its
confidentiality) and Epicurus Institute dated Aug. 1, 2010 submitted
in response to the 2010 ABS Proposing Release (``Epicurus'')
(stating that they believe ``that the prospectus should contain a
hypertext link (with instructions for accessing a Web site to obtain
the data) . . . [and only] prospective investors should have
traceable access to the data, and that they never have the
opportunity to download . . . raw data in any format'').
---------------------------------------------------------------------------

To assess the economic consequences of these asset-level disclosure
requirements, we are using as our baseline the ABS market as it existed
at the end of 2013. Today, we note that for some types of ABS, issuers
have begun or have continued to provide asset-level data. For instance,
some registered RMBS issuers before the financial crisis provided
asset-level disclosures, although the disclosures were not
standardized. Since then, there have been a limited number of
registered RMBS transactions. Those transactions have provided asset-
level disclosures pursuant to recently developed industry
standards.\101\ Further, sellers of mortgage loans to Fannie Mae and
Freddie Mac are required to deliver certain asset-level data in a
standardized electronic form.\102\ In turn, Fannie Mae and Freddie Mac
provide investors loan-level disclosures about the assets underlying
their securitizations.\103\ For CMBS, we note that issuers commonly
provide investors with asset-level disclosures at the time of
securitization and on an ongoing basis pursuant to industry developed
standards.\104\ For other asset classes, we remain unaware of any
publicly available data standards or instances where issuers have
provided asset-level data.
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\101\ Since 2010, only one sponsor has been publicly issuing
private-label RMBS. This issuer has disclosed at the time of
securitization asset-level data about the assets underlying the RMBS
in a format developed by the American Securitization Forum (ASF).
The ASF Project on Residential Securitization Transparency and
Reporting (``Project RESTART'') published a disclosure and reporting
package for residential mortgage-backed securities. See American
Securitization Forum RMBS Disclosure and Reporting Package Final
Release (July 15, 2009), available at http://www.americansecuritization.com/. ASF is a securitization trade
association that represents issuers, investors, financial
intermediaries, rating agencies, legal and accounting firms,
trustees, servicers, guarantors, and other market participants.
\102\ See Fannie Mae Uniform Loan Delivery Dataset available at
https://www.fanniemae.com/singlefamily/uniform-loan-delivery-dataset-uldd. See also Freddie Mac Uniform Loan Delivery Dataset
available at http://www.freddiemac.com/singlefamily/sell/uniform_delivery.html.
\103\ See Section III.A.2.b)(1) Residential Mortgage-Backed
Securities for a discussion of loan-level disclosures provided by
Fannie Mae and Freddie Mac.
\104\ The CRE Finance Council's Investor Reporting Package
includes data points on loan, property and bond-level information
for CMBS at issuance and while the securities are outstanding.
Materials related to the CRE Finance Council Investor Reporting
Package are available at http://www.crefc.org/. The CRE Finance
Council is a trade organization for the commercial real estate
finance industry.
---------------------------------------------------------------------------

We also note that prudential regulators in other jurisdictions
require asset-level data about certain ABS in certain instances. For
instance, the European Central Bank requires asset-level information
for ABS accepted as collateral in the Eurosystem credit
operations.\105\ Additionally, the Bank of England requires that asset-
level information be provided for certain ABS submitted as collateral
against transactions with the Bank of England.\106\ Some asset-level
data is available today through third-party data providers who collect
asset-level information about agency and non-agency mortgage loans and
provide, for a fee, access to the data.\107\ In addition, many third-
party data providers have

[[Page 57198]]

developed products to analyze and model asset-level data.\108\
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\105\ See details about the European Central Bank's loan-level
for ABS accepted as collateral in Eurosystem credit operations
available at http://www.ecb.europa.eu/paym/coll/loanlevel/html/index.en.html.
\106\ See the market notices from the Bank of England discussing
its eligibility requirements for RMBS and covered bonds backed by
residential mortgages, CMBS, small-medium enterprise loan backed
securities and asset-backed commercial paper, and asset-backed
securities backed by consumer loans, auto loans, and leases that are
delivered as collateral against transactions in the Bank's
operations at: http://www.bankofengland.co.uk/markets/Documents/marketnotice121002abs.pdf, http://www.bankofengland.co.uk/markets/Documents/marketnotice111220.pdf, and http://www.bankofengland.co.uk/markets/Documents/marketnotice121217.pdf.
\107\ See, e.g., Blackbox Logic (providing RMBS loan-level data
aggregation and processing services allowing clients to analyze both
current and historical RMBS trends), http://www.bbxlogic.com/, Core
Logic (providing data and analytic services), http://www.corelogic.com/, LPS McDash Online (providing access to loan-
level data), http://www.lpsvcs.com/Products/CapitalMarkets/LoanData/Products/Pages/McDashOnline.aspx and Lewtan (providing data and
analytic services), http://www.lewtan.com/.
\108\ See, e.g., Experian Credit Horizons (providing products to
analyze consumer mortgage and non-mortgage assets), https://www.experian.com/capital-markets/credithorizons-product.html and
Kroll Factual Data (providing data on credit, income collateral,
employment, etc.), http://www.krollfactualdata.com/Industry/Lending/Mortgage.
---------------------------------------------------------------------------

After considering the comments received, the ABS market and the
availability and use of asset-level data regarding ABS as they exist
today, we are adopting, with modifications, the proposed asset-level
disclosure requirements for ABS where the underlying assets consist of
residential mortgages, commercial mortgages, auto loans or auto leases,
resecuritizations of ABS that include these asset types, or of debt
securities.\109\ We provide detail on the final rules below.
---------------------------------------------------------------------------

\109\ In the 2010 ABS Proposing Release, the debt security asset
class was categorized as ``Corporate Debt.''
---------------------------------------------------------------------------

As noted above, the proposed asset-level data requirements were to
apply to all asset types, except ABS backed by credit cards, charge
cards and stranded costs. For ABS backed by credit or charge card
receivables, we proposed that issuers provide standardized grouped-
account disclosures about the underlying asset pool instead of asset-
level disclosures.
Asset-level information should provide investors with information
that allows them to independently perform due diligence and make
informed investment decisions; however, each asset class presents its
own unique considerations. The response to our proposal was mixed, with
some commenters supporting asset-level disclosure across asset classes
and some commenters suggesting that alternative forms of disclosure
were more appropriate for certain asset classes. We believe that the
mix of information needed for analysis varies from asset class to asset
class, and as we discuss in greater detail below, we have tailored the
requirements for each asset class. While we are adopting requirements
for only certain asset classes, we continue to consider the appropriate
disclosure requirements for other asset classes and those proposals
remain unchanged and outstanding.\110\
---------------------------------------------------------------------------

\110\ See footnote 46 and accompanying text and Section I.C.5
Proposed Rules Not Being Adopted At This Time.
---------------------------------------------------------------------------

(a) Proposed Rule
To augment our current principles-based, pool-level disclosure
requirements, we proposed to require that issuers disclose standardized
asset-level information about the assets underlying the ABS at the time
of offering and on an ongoing basis in Exchange Act reports.\111\
Proposed Item 1111(h) and Schedule L of Regulation AB enumerated all of
the data points that were to be provided for each asset in the asset
pool at the time of offering. Proposed Item 1121(d) and Schedule L-D
enumerated all of the data points that were to be provided in periodic
reports required under Sections 13 and 15(d) of the Exchange Act. These
requirements contained data points requiring general information or
item requirements applicable to all asset types underlying an ABS
transaction and specialized item requirements applicable to only
certain asset types. For instance, the proposal included specialized
data points for ABS backed by the following: residential mortgages,
commercial mortgages, auto loans, auto leases, equipment loans,
equipment leases, student loans, floorplan financings, and debt
securities and also for resecuritizations. Each proposed data point
contained a title, definition, and a standardized response. The
standardized response could be a date, number, text, or coded
response.\112\ Finally, in order to facilitate investors' use of the
asset-level data, we proposed that the data be filed with the
Commission on EDGAR in a standardized tagged data format using XML.
---------------------------------------------------------------------------

\111\ See Section III of the 2010 ABS Proposing Release.
\112\ If a data point required a ``coded response,'' we proposed
a set of predefined responses that were coded with a number that an
issuer could select in providing the information.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Support for requiring asset-level disclosures varied across asset
types, and in some cases, between issuers and investors. Some
commenters, mainly investors, generally indicated broad support for
asset-level disclosure across asset types.\113\ In general, these
commenters suggested that asset-level disclosures would lead to better
informed investment decisions,\114\ better evaluation of the risk
profile of the securities,\115\ better pricing,\116\ more transparency
with respect to loan servicing operations,\117\ and a broader range of
opinions and analysis available with respect to ABS.\118\ Certain
commenters noted that the disclosure of

[[Page 57199]]

asset-level data is an existing market practice,\119\ and some
commenters noted that asset-level disclosure requirements already exist
in other jurisdictions.\120\ Some commenters requested that the
Commission require additional asset-level data fields,\121\ and one
commenter noted that asset-level data is necessary for implementation
of the Commission's proposed waterfall computer program.\122\ While
most investors supported requiring asset-level disclosure across asset
types,\123\ some commenters, mainly issuers or entities representing
issuers, generally limited their support for asset-level disclosures to
RMBS and CMBS.\124\ Some commenters expressed concern about whether the
materiality of the information that was proposed to be required has
been considered or shown to affect the performance of the securities or
the pricing of securities.\125\ Some commenters suggested that we
address this concern by either adopting industry standards \126\ or
adopting a ``provide-or-explain'' type regime.\127\
---------------------------------------------------------------------------

\113\ See, e.g., letters from Appraisal Institute dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release
(``AI''), Association of Mortgage Investors dated July 31, 2010
submitted in response to the 2010 ABS Proposing Release (``AMI''),
American Securitization Forum, Auto Issuer Subforum and Auto
Investor Subcommittee dated Aug. 31, 2010 submitted in response to
the 2010 ABS Proposing Release (``ASF II'') (expressed views of
loan-level investors only), California Public Employees' Retirement
System dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``CalPERS''), The Beached Consultancy dated July
8, 2010 submitted in response to the 2010 ABS Proposing Release
(``Beached Consultancy''), Martha Coakley, Massachusetts Attorney
General dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``Mass. Atty. Gen.''), Metropolitan Life
Insurance Company dated Aug. 2, 2010 submitted in response to the
2010 ABS Proposing Release (``MetLife I''), Prudential I, SIFMA I
(expressed views of investors only), Vanguard, Americans for
Financial Reform dated Apr. 21, 2014 submitted in response to the
2014 Re-Opening Release (``AFR'') (suggesting that asset-level
disclosure should be required for all ABS ultimately backed by
loans, including non-public ABS), Committee on Capital Markets
Regulation dated Apr. 28, 2014 submitted in response to the 2014 Re-
Opening Release (``CCMR''), Council of Institutional Investors dated
Mar. 26, 2014 submitted in response to the 2014 Re-Opening Release
(``CII''), CRE Finance Council dated Mar. 2, 2014 submitted in
response to the 2014 Re-Opening Release (``CREFC III''), Lewtan
dated Mar. 28, 2014 submitted in response to the 2014 Re-Opening
Release (``Lewtan''), Prudential Investment Management, Inc. dated
Apr. 28, 2014 submitted in response to the 2014 Re-Opening Release
(``Prudential III'') (noting that loan-level data (e.g., current
asset balance, next interest rate, current delinquency status,
remaining term to maturity) will allow investors to better estimate
the timing of the principal and interest cash flows of the
collateral pool, which will in turn allow investors to better
estimate the cash flow of the securitization and be more confident
in their risk/reward consideration of the security), Allison
Schwartz dated May 21, 2014 submitted in response to the 2014 Re-
Opening Release (``A. Schwartz''), Securities Industry and Financial
Markets Association/Financial Services Roundtable dated Mar. 28,
2014 submitted in response to the 2014 Re-Opening Release (``SIFMA/
FSR I-dealers and sponsors''), Vantage Score Solutions LLC dated
Apr. 17, 2014 submitted in response to the 2014 Re-Opening Release
(``Vantage II'') (supporting industry efforts to align asset-level
disclosure reporting for GSEs and private label securities), and
Wells Fargo & Co. dated Mar. 28, 2014 submitted in response to the
2014 Re-Opening Release (``Wells Fargo III''). But see letters from
ASF II (indicating that, for ABS backed by automotive loans and
leases, part of their investor membership supported loan-level and
part of their investor membership supported grouped account data and
for ABS backed by floorplan receivables their investor members
supported grouped account data), and American Securitization Forum
dated Nov. 2, 2011 submitted in response to the 2011 ABS Re-
Proposing Release (``ASF IV'') (indicating that for ABS backed by
equipment loans and leases part of their investor membership
supported loan-level, another portion supported grouped-account
disclosures, and another portion supported additional pool-level
disclosure).
\114\ See, e.g., letters from CDIA, Investment Company Institute
dated Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release (``ICI I''), MetLife I, and MSCI Inc. dated July 27, 2010
submitted in response to the 2010 ABS Proposing Release (``MSCI'').
\115\ See letter from AMI (stating that the disclosures
described in Schedule L and L-D are essential for investors to
properly evaluate the risk profile of securities offered for
purchase).
\116\ See letter from Vanguard.
\117\ See letter from MetLife I (referring to the loan-level
templates for RMBS).
\118\ See letters from Moody's I and Moody's Investor Service
dated Apr. 28, 2014 submitted in response to the 2014 Re-Opening
Release (``Moody's II'').
\119\ See letters from Lewtan, R&R Consulting dated Mar. 25,
2014 submitted in response to the 2014 Re-Opening Release (``R&R''),
A. Schwartz (noting Fannie Mae has disclosed asset-level data and
stating that such data is available from many commercial vendors and
has not compromised borrower privacy), and SIFMA/FSR I-dealers and
sponsors (noting, however, that the proposed requirements represent
a dramatic departure from the type and amount of asset-level
information issuers provide to investors and others under past
industry asset-level practices).
\120\ See, e.g., letters from American Bar Association dated May
6, 2014 submitted in response to the 2014 Re-Opening Release (``ABA
III'') (noting that the Bank of England requires the disclosure of
anonymized loan-level data and the European Securities and Market
Authority (``ESMA'') recently published a consultation paper that
included draft templates for asset-level disclosures for asset-
backed securities), AFR (noting that other jurisdictions, such as
the European Union and the United Kingdom, are already providing
asset-level information to investors), and Global Financial Markets
Association/Australian Securitisation Forum dated Apr. 28, 2014
submitted in response to the 2014 Re-Opening Release (``GFMA/
AusSF'') (noting that the Bank of England, the European Central
Bank, ESMA and the Reserve Bank of Australia already currently
require, will soon require, or are in the process of developing
templates to require asset-level disclosure at some point in the
future).
\121\ See letters from the Structured Finance Industry Group
dated February 18, 2014 submitted in response to the 2011 ABS Re-
Proposing Release (``SFIG I''), Jeremy Calva dated Mar. 21, 2014
submitted in response to the 2014 Re-Opening Release (``J. Calva'')
(suggesting that certain asset-level data also be required in Form
ABS-15G filings to identify repurchase request activity), CCMR
(supporting additional disclosures, including more detailed
information about obligors), and Vantage II (requesting updated
credit scores and requesting that the rules not specifically refer
to the FICO brand credit score or, in the alternative, refer to FICO
and other credit score types, such as Vantage Score).
\122\ See letter from A. Schwartz.
\123\ See footnote 113.
\124\ See, e.g., letters from American Securitization Forum
dated Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release (``ASF I'') (indicating support for asset-level disclosures
for RMBS), Bank of America dated Aug. 2, 2010 submitted in response
to the 2010 ABS Proposing Release (``BoA I''), Citigroup Global
Markets dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``Citi'') (supporting transparency and meaningful
disclosure in connection with the issuance of ABS), J.P. Morgan
Chase & Co. dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``J.P. Morgan I''), Wells Fargo & Co. dated Aug.
2, 2010 submitted in response to the 2010 ABS Proposing Release
(``Wells Fargo I''), Marc Joffe dated Mar. 27, 2014 submitted in
response to the 2014 Re-Opening Release (``M. Joffe'') (suggesting
asset-level requirements only for RMBS), and R&R (stating that
asset-level information is necessary only for asset classes that are
resecuritized, such as RMBS).
\125\ See, e.g., letters from BoA I (suggesting that while some
investors may suspect that the asset-level information would be
helpful, the ``lack of any historic reliance on some of this data
suggests that it may be per se immaterial''), Citi, and SIFMA I
(expressed views of dealer and sponsors only) (stating that while
they support the disclosure of data that facilitates an informed
investment decision, requiring information that is not material
merely increases the costs to issuers of providing that information
without a corresponding benefit).
\126\ See, e.g., letters from American Bar Association dated
Aug. 17, 2010 submitted in response to the 2010 ABS Proposing
Release (``ABA I''), BoA I, CMBS.Com dated Aug. 2, 2010 submitted in
response to the 2010 ABS Proposing Release (``CMBS.com I''), CoStar
Group dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``CoStar''), CRE Finance Council dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release
(``CREFC I''), Mortgage Bankers Association dated Aug. 2, 2010
submitted in response to the 2010 ABS Proposing Release (``MBA I''),
MERSCorp, Inc. dated July 30, 2010 submitted in response to the 2010
ABS Proposing Release (``MERS''), MetLife I (supporting the use of
an existing CMBS industry standard), Mortgage Industry Standards
Maintenance Organization dated July 30, 2010 submitted in response
to the 2010 ABS Proposing Release (``MISMO''), Real Analytics dated
Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release, Vanguard, and Wells Fargo I.
\127\ See letters from BoA I, Citi, SIFMA I (expressed views of
dealer and sponsors only), and Securities Industry and Financial
Markets Association, Dealers and Sponsors dated Oct. 4, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``SIFMA
III-dealers and sponsors''). These commenters suggested that under a
provide-or-explain regime if an issuer omits any asset-level data
point the issuer would be required to identify the omitted field and
explain why the data was not disclosed. These commenters seemed to
suggest that a provide-or-explain regime should apply to any asset
type required to provide asset-level data.
---------------------------------------------------------------------------

In addition to comments indicating general support or opposition to
the proposal, as discussed further below, we also received comments
expressing more specific concerns about the proposal, such as the costs
to provide the disclosures, the value of the disclosure to investors,
the liability for errors in the data, individual privacy issues, the
potential release of proprietary data, and whether asset-level
disclosures were necessary to evaluate ABS involving certain asset
classes.
Both investors and issuers noted that the disclosure requirements
will impose costs and burdens on ABS issuers. Investors, however, also
believed asset-level information is necessary to properly analyze ABS,
and some investors believed that the concerns about the costs and
burdens of providing such data may be exaggerated. For instance, the
investor membership of one trade association acknowledged that
requiring asset-level disclosures will impose costs and burdens on ABS
issuers, but believed the information is a ``necessary and key element
of restoring investor confidence in the ABS markets.'' \128\ Another
investor acknowledged that the proposed asset-level disclosures, among
other proposed reforms, would increase costs, but the investor believed
the reforms would ``instill stronger origination and servicing of
securitized assets, allow for more complete investor reviews and foster
a more stable securitization market, which is a benefit to all
borrowers, lenders and investors.'' \129\ One investor noted that the
additional costs allegedly arising from some of the proposed reforms,
including asset-level disclosures, may be ``greatly exaggerated.''
\130\ This investor suggested that the deficiencies in ``governance and
transparency have dramatically increased the costs of securitization in
the current market.'' The investor also noted that asset-level
disclosures are routinely provided in various global securitization
sectors, such as U.S. CMBS and Australian CMBS, and these markets have
not shut down.
---------------------------------------------------------------------------

\128\ See letter from SIFMA I (expressed views of investors
only).
\129\ See letter from Prudential II.
\130\ See letter from MetLife II.
---------------------------------------------------------------------------

Several commenters did not support asset-level requirements for
certain asset classes, noting that the value of the disclosures to
investors or market participants may not justify the potential costs
and burdens derived from the disclosures.\131\ Commenters

[[Page 57200]]

expressed these concerns with respect to specific asset types, such as
Auto ABS,\132\ student loan ABS,\133\ equipment ABS \134\ or credit
card ABS.\135\ One commenter stated that for Auto ABS the proposed
disclosure requirements would require significant reprogramming and
technological investment.\136\ Another commenter noted that the
proposal would require sponsors to gather and present data in ways that
differ from the way sponsors currently maintain and evaluate data.\137\
This commenter also believed the preparation of such information would
likely impose burdens upon sponsors' systems, auditing costs and create
management oversight burdens that it believed the Commission had
significantly underestimated. This commenter, however, did not quantify
the amount that the Commission had underestimated these costs and
burdens or provide its own estimate of these costs.\138\ Also without
providing a cost estimate, another commenter suggested that the
Commission had not evaluated the entire cost of ongoing reporting for
RMBS.\139\ Another commenter expressed concern that if the new
standards are not well integrated with existing industry practices, the
data may be less reliable because reformatting data leads to a greater
possibility for errors in the data.\140\ Some commenters advised that
the costs to implement the changes necessary to comply with the
requirements may drive certain issuers from the market.\141\ A few
commenters suggested, without referencing a particular asset type, that
the proposed disclosures may overwhelm investors \142\ and a few
commenters raised a similar concern solely with respect to the
disclosures applicable to Auto ABS.\143\
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\131\ See, e.g., letters from ABA I, ABA III, American Financial
Services Association dated Aug. 2, 2010 submitted in response to the
2010 ABS Proposing Release (``AFSA I''), American Financial Services
Association dated Mar. 28, 2014 submitted in response to the 2014
Re-Opening Release (``AFSA II''), American Bankers Association/ABA
Securities Association dated Aug. 2, 2010 submitted in response to
the 2010 ABS Proposing Release (``ABAASA I''), Capital One Financial
Corporation dated Apr. 28, 2014 submitted in response to the 2014
Re-Opening Release (``Capital One II''), J.P. Morgan I (stating that
the asset-level and grouped-account disclosures will impose
significant costs on issuers and may, for most asset classes other
than RMBS and CMBS, only provide incremental value to investors
relative to what is currently disclosed), SIFMA I (expressed views
of dealers and sponsors only), Equipment Leasing and Finance
Association, dated Apr. 28, 2014 submitted in response to the 2014
Re-Opening Release (``ELFA II''), IPFS Corporation dated Mar. 28,
2014 submitted in response to the 2014 Re-Opening Release (``IPFS
II''), Structured Finance Industry Group dated Apr. 28, 2014
submitted in response to the 2014 Re-Opening Release (``SFIG II''),
and Wells Fargo III.
\132\ See, e.g., letters from AmeriCredit Corp. dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release
(``AmeriCredit''), ASF II (expressed views of dealers and sponsors
only), Capital One II, Financial Services Roundtable dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release
(``FSR''), VABSS I, Vehicle ABS Sponsors dated Nov. 8, 2010
submitted in response to the 2010 ABS Proposing Release (``VABSS
II''), VABSS III, and Wells Fargo I.
\133\ See letter from Student Loan Servicing Alliance dated Aug.
2, 2010 submitted in response to the 2010 ABS Proposing Release
(``SLSA'').
\134\ See, e.g., letters from Equipment Leasing and Finance
Association dated July 22, 2010 submitted in response to the 2010
ABS Proposing Release (``ELFA I''), CNH Capital America LLC dated
Aug. 2, 2010 submitted in response to the 2010 ABS Proposing Release
(``CNH I''), Navistar Financial Corporation dated Aug. 2, 2010
submitted in response to the 2010 ABS Proposing Release
(``Navistar''), and Wells Fargo I.
\135\ See, e.g., letters from BoA I, Capital One Financial
Corporation dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``Capital One I''), Discover Financial Services
dated Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release (``Discover''), and J.P. Morgan I.
\136\ See letter from BoA I.
\137\ See letter from ABA I.
\138\ See letter from ABA I (expressing concerns about the costs
or even the ability to verify certain data, such as property
appraisals, residual value estimates, status of occupancy of the
property, the effect on competition from the public release of
proprietary data, which, for some asset classes, may deter
securitizations, restrict capital formation and eliminate market
access for some issuers and affect the availability of consumer and
business credit without providing additional benefits to investors).
\139\ See letter from MBA I (suggesting that the Commission has
not identified any costs associated with (1) initially establishing
the new fields; (2) the cost of redefining many of the fields
already in existence; (3) the labor cost of collecting and inputting
significant new data elements into the servicing systems; (4) the
costs to validate the new data on an ongoing and operational basis;
(5) the cost for controls needed to ensure the data is accurate and
complete; (6) the need for servicers and their data providers to
build functionality within the project, to test and verify the new
ongoing reporting; (7) introducing new elements not listed in
proposed L-D, such as updated credit scores).
\140\ See letter from eSignSystems dated Aug. 2, 2010 submitted
in response to the 2010 ABS Proposing Release (``eSign''). See also
letter from ABA I (stating that data point descriptions may not be
entirely consistent with how information about obligors is captured
or comparable to other similarly styled information and issuers
should be able to provide narrative analysis of this data in order
to ensure their disclosure is meaningful and not misleading).
\141\ See, e.g., letters from ABAASA I (noting, without further
explanation, that the competitive impact on business models and
potential legal risks in providing asset-level data may drive
issuers from the market or make them pass these costs on to
investors and borrowers) and BoA I. See also SIFMA I (expressed
views of dealers and sponsors only) (expressing concern about the
effect on small originators and that if small originators leave the
securitization market, the value of portfolio of assets would drop
due to lower liquidity).
\142\ See letters from CFA Institute dated Aug. 20, 2010
submitted in response to the 2010 ABS Proposing Release (``CFA I'')
and Epicurus.
\143\ See letters from AmeriCredit and VABSS I.
---------------------------------------------------------------------------

Commenters also raised concerns about liability for
inaccuracies.\144\ Some commenters expressed concern that there will
inevitably be errors in documents including typographical errors,
information entered incorrectly (or not at all) into the files and
other errors.\145\ One concern was that some data may be difficult to
objectively verify,\146\ which one commenter referred to as ``soft
data.'' \147\ This commenter defined soft data as data that ``is often
self-reported by obligors, cannot be verified by issuers at a
reasonable cost, cannot be confirmed by auditors, may not be consistent
with (or comparable to) information obtained or presented by other
issuers and may reflect subjective judgments.'' \148\ A few commenters
noted that some soft data is used to calculate the response to other
item requirements \149\ and one of these commenters suggested issuers
should have the discretion to include or exclude soft data from their
disclosures.\150\ In general, these commenters suggested that the
materiality of individual data points should be determined on an
aggregate basis across the entire asset portfolio, rather than at the
level of the individual loan. Further, these commenters stated that
even if an inaccuracy is material to a particular loan, the inaccuracy
should not subject the issuer to the potential remedy of rescission of
the entire issuance. The commenters urged that liability be based on
the aggregate materiality in the context of the entire asset pool, the
full offering disclosures and whether the securitization structure and
documentation provide adequate remedies. Another commenter echoed this
point.\151\
---------------------------------------------------------------------------

\144\ See, e.g., letters from ASF I, ABA I, and ABAASA I.
\145\ See letters from ABA I and ABAASA I.
\146\ See, e.g., letters from ABA I and ABAASA I. See also BoA I
(noting that numerous disclosure items in proposed Schedule L relate
to information that is obtained from borrowers and verified to the
extent provided by an originator's underwriting policies and
procedures in the application and underwriting process and such
information is not subsequently updated or verified by originators
or servicers in the normal course of business).
\147\ See letter from ABA I (suggesting that the proposal
contained some data points requiring empirically verifiable data,
such as outstanding balances, scheduled payments, interest rates and
pre-payment penalties, while other data points require data which
may not be verifiable because they are ``factual representations''
or ``subjective judgments,'' such as property appraisals, residual
value estimates, or status of occupancy of the property).
\148\ See letter from ABA I.
\149\ See letters from ABA I and ABAASA I.
\150\ See letter from ABA I (suggesting that the Commission
provide issuers the discretion to include or exclude soft data from
their disclosures and, where such information is included, it should
be described as information obtained from third parties and allow
issuers to disclaim liability absent actual knowledge by the issuer
that such information is materially incorrect). See also letter from
ABAASA I (suggesting that the Commission clarify that for liability
purposes soft data is not part of the prospectus or registration
statement).
\151\ See letter from ASF I (suggesting that the extent to which
the data in any individual field or group of fields is material to a
particular transaction should remain a factual matter, based on the
facts and circumstances of the transaction, the underlying loans,
the securities and the individual circumstances of the investor).
---------------------------------------------------------------------------

As noted above, some commenters did not support requiring asset-
level disclosures for certain asset types. For example, several
commenters, mainly

[[Page 57201]]

issuers of ABS backed by automobile loans or leases,\152\ equipment
loans or leases,\153\ floorplan financings,\154\ and student
loans,\155\ opposed asset-level disclosures requirements for these
asset types because the disclosures would raise individual privacy
concerns, result in the release of proprietary data, and the
disclosures would be of limited value to investors. To alleviate these
concerns, some of these commenters suggested grouped-account disclosure
or a combination of grouped account and standardized pool-level
disclosures.\156\ For equipment ABS, some commenters suggested
standardized pool-level data was sufficient.\157\ As discussed below,
individual privacy concerns were also raised with respect to the
proposed asset level disclosures for RMBS \158\ and with respect to the
Web site approach described in the 2014 Staff Memorandum.\159\
---------------------------------------------------------------------------

\152\ See, e.g., letters from ABA I, American Bar Association
dated Nov. 16, 2011 submitted in response to the 2011 ABS Re-
Proposing Release (``ABA II''), AmeriCredit, ASF II (expressed views
of a portion of their investor membership only), BoA I, Capital One
I, VABSS I, and Wells Fargo I.
\153\ See, e.g., letters from CNH I, ELFA I, FSR, Navistar, and
VABSS I.
\154\ See, e.g., letters from ABA I and ASF II. See also
memorandum to comment file dated Mar. 8, 2011 regarding staff's
telephone call with members of the Financial Services Roundtable
with letter attached from the Captive Commercial Equipment ABS
Issuers Group (``Captive Equipment Group''), and VABSS I.
\155\ See, e.g., letters from ABA I, Sallie Mae, Inc. dated Aug.
2, 2010 submitted in response to the 2010 ABS Proposing Release
(``Sallie Mae I''), and SLSA.
\156\ See, e.g., letters from ASF II, Navistar, Sallie Mae I,
and VABSS I.
\157\ See, e.g., letters from Captive Equipment Group, CNH I,
and ELFA I.
\158\ See, e.g., letters from ABA I, ASF I, Consumers Union
dated Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release (``CU''), MBA I, and World Privacy Forum dated Aug. 2010
submitted in response to the 2010 ABS Proposing Release (``WPF I'').
\159\ See, e.g., letters from ABA III, CCMR, Mortgage Bankers
Association dated Mar. 28, 2014 (``MBA IV''), SIFMA/FSR I-dealers
and sponsors (noting that ``[t]his puts issuers in an untenable
position--the more carefully an issuer protects customer data by
restricting access to its Web site, the more risk it bears of an
investor suit for failing to disclose all material information''),
and SFIG II. See also Section III.A.3 Asset-Level Data and
Individual Privacy Concerns.
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(c) Final Rule and Economic Analysis of the Final Rule
As noted above, the public availability of asset-level information
has historically been limited. In the past, some transaction agreements
for securitizations required issuers to provide investors with asset-
level information, or information on each asset in the pool backing the
securities.\160\ Such information is sometimes filed as part of the
pooling and servicing agreement or as a free writing prospectus;
however, the information provided varied from issuer to issuer and was
not standardized.\161\ We believe, however, that all investors and
market participants should have access to information to analyze the
risk and return characteristics of ABS offerings and that asset-level
information about the assets underlying a securitization transaction at
inception and over the life of a security provides a more complete
picture of the composition and characteristics of the pool assets and
the performance of those assets than pool-level information alone, and
forms an integral part of ABS investment analysis.\162\ Therefore, we
are adopting, with modifications, a requirement that standardized
asset-level data be provided, for certain asset types, in the
prospectus and in Exchange Act reports. We are also adopting a
requirement that the required asset-level disclosures be provided in
XML, a machine-readable format.
---------------------------------------------------------------------------

\160\ This usually included, for example, information about the
principal balance at the time of origination, the date of
origination, the original interest rate, the type of loan (e.g.,
fixed, ARM, hybrid), the obligor's debt-to-income (``DTI'') ratio,
the documentation level for origination of the loan, and the LTV
ratio.
\161\ Under our current requirements the servicing agreement
should be filed as an exhibit to the registration statement. See
Item 601 of Regulation S-K and Section III.B.3.c of the 2004 ABS
Adopting Release. See also Item 1108(c)(1) of Regulation AB. We
remind registrants that the pooling and servicing agreement that is
filed must contain all parts of the pooling and servicing agreement,
including, but not limited to, any schedules, exhibits, addendums or
appendices, unless a request for confidential treatment was
submitted and granted to allow for the redaction of such
information. See, e.g., Securities Act Rule 406 [17 CFR 230.406],
Exchange Act Rule 24b-2 [17 CFR 240.24b-2], and Division of
Corporation Finance Staff Legal Bulletins Nos. 1 (Feb. 28, 1997) and
1A (July 11, 2001).
\162\ Others have noted the importance of loan-level data to
investors. See, e.g., footnote 44.
---------------------------------------------------------------------------

At this time, we are adopting asset-level requirements for ABS
where the underlying assets consist of residential mortgages,
commercial mortgages, auto loans or leases, and resecuritizations of
ABS, or of debt securities and we continue to consider whether asset-
level disclosure would be useful to investors across other asset
classes. Prior to the financial crisis, RMBS and CMBS had historically
represented a large portion of the registered ABS market while Auto ABS
represents a large portion of the current registered ABS market.
Accordingly, these disclosures should benefit the largest number of
investors, especially as greater numbers of RMBS and CMBS are issued.
Although comments about the asset-level requirements for Auto ABS were
mixed, with some opposing any asset-level requirements for Auto ABS,
Auto ABS investors have indicated in comment letters that they believe
that asset-level data will strengthen the Auto ABS market and make it
more resilient over the long term.\163\ We also note that the European
Central Bank recently began requiring the disclosure of standardized
asset-level data for all Auto ABS accepted as collateral in the
Eurosystem credit operations.\164\ For these reasons, we prioritized
our efforts to develop asset-level requirements for these asset
classes.
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\163\ See letters from ASF II (expressed views of loan-level
investors only) and Prudential III.
\164\ See details about the European Central Bank's Auto ABS
loan-level requirements at http://www.ecb.europa.eu/paym/coll/loanlevel/html/index.en.html. We have sought to address cost
concerns raised by Auto ABS issuers through our changes to the Auto
ABS requirements, as discussed below.
---------------------------------------------------------------------------

The asset-level disclosure requirements for debt security ABS are
relatively limited in scope and primarily consist of information that
should be readily available to issuers. These disclosures, while
consisting of only the basic characteristics of the debt security, will
provide useful information to investors, such as the cash flows
associated with the debt security, and identifiers, such as the SEC
file number of the debt security. Using the SEC file number of the debt
security, investors will be able to access other disclosures filed with
the Commission about the debt security. No commenters specifically
opposed these requirements.
We are also adopting asset-level disclosure requirements for
resecuritization ABS. In an ABS resecuritization, the asset pool is
comprised of one or more ABS. The new rules require disclosures about
the ABS in the pool and, if the ABS in the asset pool is an RMBS, CMBS
or Auto ABS, issuers are also required to provide asset-level
disclosures about the assets underlying the ABS. We are requiring
disclosures about the ABS being resecuritized for the same reasons we
are requiring disclosure for debt security ABS, which is to provide
investors with information about the ultimate source of cash flows of
assets underlying the resecuritization. As a result, we believe
investors in resecuritization ABS should derive the same benefits as
investors in other ABS.
Under current requirements the securities being resecuritized must
be registered or exempt from registration

[[Page 57202]]

under Section 3 of the Securities Act.\165\ As a result, all
disclosures for a registered offering are required. Therefore,
requiring asset-level data for the assets underlying resecuritizations
of RMBS, CMBS, Auto ABS or debt security ABS is consistent with our
current disclosure requirements, which also prevents issuers from
circumventing our asset-level requirements for these asset classes. We
also note that over the past several years there have been no
registered resecuritizations of RMBS, CMBS or Auto ABS. We recognize,
however, that such a requirement could increase the disclosure costs of
resecuritizations relative to disclosure costs of ABS backed by other
assets should an issuer choose to do a resecuritization of RMBS, CMBS
or Auto ABS in the future because sponsors may need to collect
information about underlying assets from additional sources. We have
made some revisions to the proposal to address some of those costs. To
the extent that the pass-through of required asset level disclosures
imposes costs above that required for the original securitization, this
could limit the benefits of resecuritizations and potentially inhibit
the issuance of resecuritizations.
---------------------------------------------------------------------------

\165\ See Securities Act Rule 190 [17 CFR 230.190]. An asset
pool of an issuing entity includes all instruments which support the
underlying assets of the pool. If those instruments are securities
under the Securities Act, the offering must be registered or exempt
from registration if the instruments are included in the asset pool
as provided in Securities Act Rule 190, regardless of their
concentration in the pool. See Securities Act Rule 190(a) and (b).
See also Section III.A.6.a of the 2004 ABS Adopting Release.
---------------------------------------------------------------------------

We also believe the same benefits will accrue to investors in
resecuritization ABS as to investors in RMBS, CMBS, Auto ABS or debt
security ABS. Similar to a direct investment in an RMBS, CMBS, Auto ABS
or debt security ABS, access to this information should provide further
transparency about the assets underlying the security or securities
underlying the resecuritization ABS. This additional information should
allow investors to analyze the collateral supporting the security being
resecuritized, the cash flows derived from each asset underlying the
security being resecuritized, and the risk of each asset underlying the
security being resecuritized.
We acknowledge commenters' concerns about other asset classes,
which we think warrant further consideration. For instance, we continue
to consider commenters' concerns about how asset-level disclosures
should apply where there is lack of uniformity amongst the types of
collateral or terms of the underlying contracts,\166\ there is a large
volume of assets in a pool,\167\ and there are unique features to the
ABS structure.\168\ For those asset classes where we are deferring
action, we will continue to consider the best approach for providing
more information about underlying assets to investors, including
possibly requiring asset-level data in the future.
---------------------------------------------------------------------------

\166\ See letter from ELFA I.
\167\ See letters from Sallie Mae I and ASF I.
\168\ See letters from ABA I and ABA III.
---------------------------------------------------------------------------

We also believe that, for most investors, the usefulness of asset-
level data is generally limited unless the asset-level data
requirements, which include the following components, are standardized:
The definitions of each data point, the format for providing the asset-
level data (e.g., XML), and the scope of the information required, such
as what data is required about each obligor, the related collateral,
and the cash flows related to each asset. We believe that standardizing
the asset-level disclosures facilitates the ability to compare and
analyze the underlying asset-level data of a particular asset pool as
well as compare that pool to other recent ABS offerings involving
similar assets.\169\ Over time, asset-level information about past ABS
offerings, including asset-level information about the performance of
those offerings, will be available to further facilitate the ability
for issuers to assess expected performance of a new offering based on
the performance of past offerings involving similar assets.
---------------------------------------------------------------------------

\169\ See Statement of Former Federal Reserve Governor Randall
S. Kroszner at the Federal Reserve System Conference on Housing and
Mortgage Markets, Washington, DC, Dec. 4, 2008 (stating that a
necessary condition for the potential of private-label MBS to be
realized going forward is for comprehensive and standardized loan-
level data covering the entire pool of loans backing MBS be made
available and easily accessible so that the underlying credit
quality can be rigorously analyzed by market participants).
---------------------------------------------------------------------------

The asset-level data required will, in general, include information
about the credit quality of the obligor, the collateral related to each
asset, the cash flows related to a particular asset, such as the terms,
expected payment amounts, indices and whether and how payment terms
change over time and the performance of each asset over the life of a
security. This information should allow investors to better understand,
analyze, and track the performance of ABS. We believe the final
requirements we are adopting for RMBS, CMBS, Auto ABS, debt security
ABS and resecuritizations will implement the requirements of Section
7(c) for these asset classes.\170\ Some commenters expressed concern
that the proposed data points require more information than necessary
for investor due diligence and could increase re-identification
risk.\171\ As discussed in further detail below, we have modified the
proposed data set for RMBS and Auto ABS in response to these concerns.
We believe these modifications will help to reduce re-identification
risk without materially affecting investors' ability to evaluate ABS.
We believe that the disclosure requirements that we are adopting will
provide investors with information they need to independently perform
due diligence and make informed investment decisions.
---------------------------------------------------------------------------

\170\ See Section III.A.4 Requirements under Section 7(c) of the
Securities Act for a discussion regarding Section 7(c) and the
requirements applicable to RMBS, CMBS, debt security ABS and
resecuritizations. See Section III.A.2.b)(3) Automobile Loan or
Lease ABS for a discussion regarding Section 7(c) of the Securities
Act and the requirements applicable to Auto ABS.
\171\ See letters from ABA III and MBA IV (with respect to
RMBS).
---------------------------------------------------------------------------

As noted above, we believe the usefulness of the asset-level
information is further increased by our formatting requirements. We
believe providing standardized data definitions and requiring the data
to be in a machine-readable format will provide investors the ability
to download the data into software tools that can promptly analyze the
asset pool. While some investors may need to obtain the software or
other tools needed to analyze the data, we believe such costs would be
offset by a reduction or elimination of the costs investors would incur
to convert non-machine-readable data into a format that makes analyzing
it easier. As a result, this should reduce the time investors need to
analyze the offering. We also believe requiring the data to be in a
machine-readable format addresses concerns that investors will be
overwhelmed by the granularity of the data, because investors can
quickly extract the data most relevant to their analysis. Section 7(c)
also requires that we set standards for the format of the data provided
by issuers of an asset-backed security, which shall, to the extent
feasible, facilitate the comparison of such data across securities in
similar types of asset classes.
The requirements of standardized asset-level information in a
machine-readable format coupled with, as we discuss in Section V.B.1.a
Rule 424(h) and Rule 430D, more time to consider transaction-specific
information provided through the new preliminary prospectus and three-
day offering

[[Page 57203]]

period rules that we are adopting \172\ are aimed at addressing
concerns, highlighted by the recent financial crisis, that investors
and other participants in the securitization market may not have had
the necessary time and information to be able to understand and analyze
the risk underlying those securities and may not have valued those
securities properly or accurately.\173\ Taken together, standardized
asset-level information in a machine-readable format and more time to
consider the information should enable investors to analyze offerings
more effectively and efficiently to better understand and gauge the
risk underlying the securities. This, in turn should lead to better
pricing, a reduced need to rely on credit ratings and a greater ability
of investors to match their risk and return preferences with ABS
issuances having the same risk and return profile. These benefits
should improve allocative efficiency and facilitate capital formation.
---------------------------------------------------------------------------

\172\ See Section V.B.1a) Rule 424(h) and Rule 430D [17 CFR
230.430D].
\173\ See footnote 40.
---------------------------------------------------------------------------

Providing investors access to such information should reduce their
cost of information gathering because they will not need to purchase
the data from intermediaries or otherwise gather the information.
Furthermore, requiring that a single entity, the issuer, provide the
information rather than requiring each investor to collect it will
reduce duplicative information-gathering efforts. Also, data accuracy
may increase because issuers are incentivized to confirm the accuracy
of the required asset-level disclosures provided in public filings.
Finally, we note that the public availability of standardized
machine-readable data may encourage new entities to enter the ABS
credit-analysis industry previously dominated by the top three largest
NRSROs. This could increase competition in that industry and provide
those investors who prefer not to analyze ABS themselves with more
options when purchasing credit-risk assessments and reports from third
parties. In addition, since asset-level information in standardized and
machine-readable format will now be available, investors will have the
ability to better assess the rating performance of NRSROs and other
credit-analysis firms.
While we expect that the asset-level disclosure requirements we are
adopting will generate the benefits described above, we also recognize
that they will impose costs upon the issuers required to provide asset-
level disclosures and on other market participants. We received only a
few quantitative estimates of the potential costs to comply with the
proposed asset-level disclosure requirements.\174\ As discussed above,
however, some commenters did express general concerns about the costs
and burdens that would be imposed in order to comply with the
requirements. After considering comments received, we acknowledge that,
taken together, the asset-level disclosure requirements may result in
the costs detailed immediately below.\175\
---------------------------------------------------------------------------

\174\ See, e.g., letter from VABSS IV (stating that several Auto
ABS sponsors estimated the costs and employee hours necessary to
reprogram systems and business procedures to capture, track, and
report all of the proposed data points for auto loans to be
approximately $2 million, and that the estimated number of employee
hours needed to provide the required disclosures was approximately
12,000). See also letter from ELFA I (suggesting that one computer
systems vendor estimated that the cost to implement a computer
system to monitor and produce the required asset-level information
for equipment ABS would be approximately $250,000 in direct
programming costs plus the additional staff time devoted to
preparing such reports and posting them).
\175\ Costs related to concerns about re-identification risk are
detailed separately in Section III.A.3 Asset-Level Data and
Individual Privacy Concerns.
---------------------------------------------------------------------------

The asset-level disclosures, as commenters noted, will result in
costs related to revising existing information systems to capture,
store and report the data as required. These costs may be incurred by
several parties along the securitization chain, including loan
originators who pass the information to sponsors and ABS issuers who
file the information with the Commission. As we describe later in the
release, there could be significant start-up costs \176\ to sponsors to
comply with the asset level disclosures, but ongoing costs to sponsors
likely will be significantly less than the initial costs. We recognize
that our estimates may not reflect the actual costs sponsors will
incur, particularly to the extent that there are differences in system
implementation costs relative to our estimates. We also recognize that
there are likely to be significant differences across sponsors in their
current internal data collection practices and that implementation
costs will depend on how the new requirements differ from the methods
sponsors and ABS issuers currently use to maintain and transmit data.
Additionally, we recognize that these costs will differ by asset class,
depending on whether sponsors and ABS issuers within an asset class
have a history of collecting and providing the asset-level information
to investors. Further, in the last four years (2010-2013) only 296
registered RMBS, CMBS, Auto ABS, debt security ABS and resecuritization
transactions took place. This limited issuance activity may discourage
issuers and other market participants from investing in the new systems
necessary to provide asset-level disclosures required by the final
rules. As a result, several commenters stated that some entities may
choose to exit the securitization market or not re-enter the market,
which could decrease the availability of credit to consumers and
increase the cost of available credit.\177\ Furthermore, as we
discussed earlier in this release, some sponsors may choose to issue
through unregistered offerings where no asset-level disclosures are
required.\178\
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\176\ See footnote 748.
\177\ See letters from ABAASA I (suggesting that if the costs of
the disclosure, plus the competitive impact on business models and
the potential legal risks outweigh the advantages of securitization,
issuers may choose to leave the market or pass along increased costs
to investors and borrowers, thereby reducing the amount of credit or
increasing the cost of credit), BoA I (stating that the uncertain
costs and burdens associated with building the infrastructure to
capture the data needs to be ``rationalized'' given the fact that
the non-agency securitization markets are not currently robust), and
SIFMA I (expressed views of dealers and sponsors only) (suggesting
the proposed asset-level requirements would most likely prevent some
securitizers, in particular smaller originators, from accessing
capital through the securitization markets because they may not be
able to incur the costs of overhauling their current systems and
practices, and that without these smaller originators the value of
portfolio assets would likely be reduced due to lower liquidity).
See also letter from SIFMA III-dealers and sponsors.
\178\ See Section II.D Potential Market Participants' Responses.
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We also note that sponsors and ABS issuers may pass the costs they
incur to comply with the requirements on to investors in the form of
lower promised returns and/or originators may pass their costs on to
borrowers in the form of higher interest rates or fees. We note,
however, that some of these costs may be offset by a reduction in other
expenses. For example, investors who previously paid data aggregators
for access to relevant information may no longer be required to
purchase this data and, to the extent that they do, lower data
collection costs on the part of the data aggregators may flow through
to investors. Many of the data gathering costs that previously were
borne by several data aggregators and/or investors would be performed
by the sponsor, eliminating the potential duplication of effort. Thus,
the net effect of the new rules could be a reduction in the aggregate
data collection costs imposed on the entire market through more
efficient dissemination of relevant information. As a result, in the
aggregate, the increase of the costs to investors in the form of lower
returns

[[Page 57204]]

may be offset by the reduction of the costs that are no longer paid to
third-party data providers.
The 2010 ABS Proposing Release noted that the proposed standard
definitions for asset-level information for RMBS and CMBS were similar
to, and in part based on, other standards that have been developed by
the industry, such as those developed under the American Securitization
Forum's (ASF) Project on Residential Securitization Transparency and
Reporting (``Project RESTART'') or those developed by CRE Finance
Council (CREFC). We continue to acknowledge that to the extent that
there are differences between standards for asset-level information,
additional costs would be imposed on issuers and servicers to reconcile
differences between standards. Further, servicers may incur some costs
in monitoring their compliance with servicing criteria and requirements
under the servicing agreement given that periodic reports will now
include asset-level information. As we discuss in more depth below in
the discussions about the requirements applicable to each asset type,
we have attempted to reduce burden and cost concerns by further
aligning the disclosure requirements with industry standards where
feasible. Further, as discussed below, we are providing for an extended
implementation timeframe, which we also believe will reduce the burden
of implementing the requirements.\179\ We discuss in greater detail
below in Section III.A.2 Specific Asset-Level Data Points in Schedule
AL the comments received with respect to RMBS, CMBS, Auto ABS, debt
security ABS and resecuritizations and the changes to the final
requirements to address these comments.
---------------------------------------------------------------------------

\179\ See Section IX.B Transition Period for Asset-Level
Disclosure Requirements.
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To further minimize implementation costs, we also removed the
``General'' category. We incorporated the data points proposed under
this category into each of the asset class-specific requirements in
order to tailor the requirements for each asset class.\180\ We believe
removing the General category and tailoring the disclosure requirements
to each asset class minimizes implementation costs because issuers will
not need to respond to generic disclosure requirements that may not be
applicable to the particular asset class or that may not align with how
the particular asset class captures and stores data.
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\180\ Under the proposal, asset pools containing only
residential mortgages would need to provide, as applicable, the
asset-level disclosures for residential mortgages and also the
general item requirements applicable to all ABS. Under the new
rules, if, for example, the asset pool contains residential
mortgages, then issuers only need to provide the asset-level
disclosures applicable to residential mortgages. As noted above,
proposed data points in the general category remain outstanding for
asset classes other than the ones we are adopting today.
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We also understand the asset-level data requirements may also
affect other market participants. For instance, some investors may have
used the services of data providers to obtain the type of data that
will now be mandatory under the requirements we are adopting. As a
result, these data providers may experience reduced demand for their
data aggregation business as investors may no longer seek such services
since these requirements may provide them access to similar data. We
believe, however, that this concern is mitigated as these entities will
also be able to access the publicly available data. As a result, these
data providers may not need to gather this asset-level data from other
sources, thereby reducing their costs to obtain the data. Further,
third-party data providers have developed products to analyze and model
the asset-level data. Since the asset-level data will be standardized
it may increase the utility of their current products or allow them to
develop new products, thus increasing demand for their data analysis
business.
We note that commenters raised other concerns regarding the asset-
level reporting requirements beyond the cost to implement the
requirements. One concern, as noted above, is that the proposed asset-
level data may result in the release of an originator's proprietary
data.\181\ A commenter noted that if originators determine that asset-
level disclosures reveal their proprietary business model to
competitors they may refrain from securitizing assets.\182\ We note,
however, that one commenter believed that the proprietary concerns were
unfounded.\183\ While we acknowledge competitive concerns still may
exist, we believe that information we are requiring about the
underlying assets, including information about the obligors, will
provide investors and potential investors with information they need to
perform due diligence and make informed investment decisions and
therefore should be disclosed. We also note that some of the asset-
level data that we are requiring to be disclosed are available to the
public, for a fee, through third-party data providers.\184\
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\181\ See, e.g., letters from ABA I, AmeriCredit, ABAASA I, ASF
II (expressed views of issuers only), AFSA I, BoA I, FSR, J.P.
Morgan I, SIFMA I, and VABSS I (noting that for Auto ABS a
competitor could take data on values such as credit score, LTV, and
payment-to-income and combine it with other information (e.g., make,
model, interest rate, loan maturity) to ascertain proprietary
scoring models, build their own models or greatly improve the
performance of their existing models).
\182\ See, e.g., letter from ABA I.
\183\ See letter from AMI.
\184\ See footnote 107 and accompanying text.
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Another concern that some commenters raised was the potential for
securities law liability for inaccuracies in data points that require
so-called ``soft data.'' \185\ The commenters suggested that soft data
includes data that may originate from representations provided by an
obligor at origination or may represent a subjective judgment of a
third party, such as property valuations of an appraiser. We note
commenters' concerns about the potential cost to verify data of this
type and whether such data can be verified objectively. We are not,
however, persuaded by commenters' suggestions that we address these
concerns by providing issuers with the discretion to include or exclude
soft data from their disclosures. As noted below, we believe the
discretion to determine what data would be included or excluded from
their disclosures would reduce the comparability of asset pools.
Further, we note that much of the required soft data includes data that
is commonly part of the universe of data that originators use to make a
credit decision, and we believe that investors should have access to
similar data for each loan in order to evaluate the creditworthiness of
the assets that they are dependent upon for payment of the securities.
We note that some soft data, as defined by commenters, has been
included in pool-level information provided in prior registered
offerings and thus is already subject to potential securities law
liability. In some instances the data will provide investors a baseline
to compare how certain characteristics of the asset have changed over
time. Finally, an investor's analysis can take into account the age of
such disclosures.
---------------------------------------------------------------------------

\185\ See letter from ABA I.
---------------------------------------------------------------------------

In addition to concerns about the accuracy of data points requiring
soft data, some commenters expressed concern about potential liability
cost for errors or inaccuracies in the responses provided to other data
points. Assessing materiality for purposes of securities law liability
for an error or inaccuracy in an individual data point would depend on
a traditional analysis of the particular facts and circumstances.\186\

[[Page 57205]]

We agree with commenters that suggested that issuers should be able to
provide narrative analysis of data in order to make their disclosure
not misleading. Such additional explanatory disclosure can and should
be added to the prospectus or the Form 10-D as may be necessary to make
the asset-level disclosures, in the light of the circumstances under
which they are made, not misleading.\187\ Also, issuers that wish to
provide other explanatory disclosure about the asset-level disclosures
can provide such disclosures in a separate exhibit.\188\
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\186\ Whether any particular statement or omission is material
will depend on the particular facts and circumstances. Information
is material if ``there is a substantial likelihood that a reasonable
shareholder would consider it important'' in making an investment
decision. The question of materiality is an objective one involving
the significance of an omitted or misrepresented fact to a
reasonable investor. See TSC Industries, Inc. v. Northway, Inc., 426
U.S. 438, 448-49 (1976) (stating that to fulfill the materiality
requirement, there must be a substantial likelihood that the fact
``would have been viewed by the reasonable investor as having
significantly altered the `total mix' of information made
available''); see also Basic v. Levinson, 485 U.S. 224, 231-32
(1988).
Courts have analyzed materiality under Exchange Act Section
10(b) and Exchange Act Rule 10b-5, and Securities Act Sections 11
and 12(a)(2) in a similar fashion. See, e.g., In re Donald J. Trump
Casino Sec. Litig., 7 F.3d 357, 368 n.10 (3d Cir. 1993) (noting that
while there are substantial differences in the elements that a
plaintiff must establish under these provisions, they all have a
materiality requirement and this element is analyzed the same under
all of the provisions). See also Securities Act Sections 11,
12(a)(2) and 17(a), Securities Act Rule 408 [17 CFR 230.408];
Securities Act Sections 11 [15 U.S.C. 77k(a)], 12(a)(2) [15 U.S.C.
77l] and 17(a) [15 U.S.C. 17(a))]; Exchange Act Section 10(b) [15
U.S.C. 78j(b)); Exchange Act Rule 10b-5 [17 CFR 240.10b-5]; and
Exchange Act Rule 12b-20 [17 CFR 240.12b-20].
\187\ See, e.g., Securities Act Rule 408 and Exchange Act Rule
12b-20 [17 CFR 229.408 and 17 CFR 240.12b-20].
\188\ New Item 601(b)(103) Asset Related Documents of Regulation
S-K is an exhibit that allows for explanatory disclosure regarding
the asset-level data file(s) filed pursuant to Item 601(b)(102)
Asset Data File. Item 601(b)(103) is required to be incorporated by
reference into the prospectus. See Section III.B.5 New Form ABS-EE.
---------------------------------------------------------------------------

We considered several possible alternatives to the new asset-level
requirements we are adopting. Some alternatives we considered to
address various concerns, including re-identification risk, included:
Requiring more pool-level data in lieu of asset-level data, grouped
account data in lieu of asset-level data, allowing a ``provide-or-
explain'' type regime, only defining the type of information to be
provided and allowing the registrant or other market participants to
define the asset-level information or the Web site approach.\189\
---------------------------------------------------------------------------

\189\ See Section III.A.3 Asset-Level Data and Individual
Privacy Concerns.
---------------------------------------------------------------------------

We are concerned that these alternatives would be of limited
benefit to investors, since they will not go far enough in providing
them with information best suited to assessing the risk and return
tradeoff presented by RMBS, CMBS, Auto ABS, debt security ABS and
resecuritizations and to independently perform due diligence. Pool-
level and grouped account data does not provide investors with the
opportunity to develop the same level of understanding, because when
loans or assets are aggregated into groups of information, certain
characteristics of individual assets are lost. For example, investors
may know how many loans fall in a particular loan-to-value range but
may not know whether most loans are at the top, middle or bottom of
that range.\190\ This cross-sectional distribution of loans within a
given loan-to-value range may have important implications for the
pool's expected losses. A grouped account data approach groups loans
based on certain loan characteristics, which does not allow investors
to analyze the asset pool based on the loan characteristics the
investors deem most important to their analysis. As a commenter noted,
however, asset-level data provides investors the opportunity to analyze
a broad set of loan characteristics and to assess risks based on the
characteristics investors believe are most predictive of expected
losses.\191\ With standardized asset-level data in a machine readable
format provided at issuance and over the life of a security, the data
can be run through a risk model at issuance and over the life of a
security to assess the risk profile of the transaction at issuance and
any changes to the risk profile of the asset pool over time.
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\190\ See letter from A. Schwartz (noting that ``[f]rom a
statistical perspective, disclosing asset-level data to investors is
materially superior to providing them with statistical summaries of
the asset pool, because it conveys more information'').
\191\ See letter from Prudential II.
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As noted above, we also considered the alternative suggested by
some commenters that we require asset-level disclosure generally but
allow an issuer or an industry group to define the disclosures. We also
considered a provide-or-explain type regime that would permit an issuer
to omit any asset-level data point and provide an explanation as to why
the data was not disclosed.\192\ We believe such approaches may limit
the value of such disclosures. As noted above, the usefulness of asset-
level data is generally limited unless the individual data points are
standardized in terms of the definitions, the scope of information to
be disclosed, and the format of the data points. A provide-or-explain
regime may result in differing levels of disclosure provided about
similar asset pools, as some may provide the required asset-level
disclosures and others may exclude certain data points and only provide
an explanation of why the information was excluded. This would inhibit
the comparability of disclosures across ABS. Similarly, setting general
asset-level disclosure requirements and allowing the issuer to define
the data to be included and how the information is presented may result
in differing levels of disclosure or different presentations of the
data. This may limit the ability to compare across asset pools within
the same asset class, which may reduce the usefulness of the data.
Standardizing the information facilitates the ability to analyze the
underlying asset-level data of a particular asset pool and the ability
to compare the assets in one pool to assets in other pools.\193\ As we
note elsewhere in this release, we believe standardized disclosure
requirements and making the disclosures easily accessible may
facilitate stronger independent evaluations of ABS by market
participants.
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\192\ See letters from BoA I, Citi, and SIFMA I (expressed views
of dealers and sponsors only). Some commenters also suggested that
issuers should have the flexibility to modify the disclosures to
address privacy concerns. See, e.g., letters from ABA III and
Securities Industry and Financial Markets Association and the
Financial Services Roundtable dated Apr. 28, 2014 responding to the
2014 Re-Opening Release (``SIFMA/FSR II-dealers and sponsors'').
\193\ See letters from MetLife I (stating that the Commission
should require standardized disclosure templates with the relevant
fields for each ABS sector with the key benefit of standard
disclosure being a significantly enhanced ability for investors to
compare and contrast different ABS transactions in connection with
their investment decisions and ongoing portfolio management) and
Prudential I (stating that if two sponsors within the same asset
class can provide information on different standards, it will be
impossible for investors to efficiently compare asset[hyphen]level
files).
---------------------------------------------------------------------------

In addition to considering the alternatives we discussed above, we
also considered adopting industry developed asset-level disclosure
standards already in existence for RMBS and CMBS. We discuss in Section
III.A.2.b.1 Residential Mortgage-Backed Securities and Section
III.A.2.b.2 Commercial Mortgage-Backed Securities our consideration of
adopting industry developed asset-level disclosure standards for these
asset types.
Finally, as mentioned above, the final rules include several
changes from the proposal. The changes are aimed at simplifying the
requirements, addressing cost concerns and conforming our requirements,
to the extent feasible, to other pre-existing asset-level disclosure
templates. The discussions below address, for each asset type, the
economic effects of the specific requirements, such as when the data is
required and the types of

[[Page 57206]]

disclosures required for each asset type. We also discuss the likely
costs and benefits of the new rules and their effect on efficiency,
competition and capital formation.
2. Specific Asset-Level Data Points in Schedule AL
This section is divided into several parts. Each part discusses the
specific requirements we are adopting today for RMBS, CMBS, Auto ABS,
debt security ABS and resecuritizations and highlights, for each asset
class, the significant changes from the proposal.
(a) Disclosure Requirements for All Asset Classes and Economic Analysis
of These Requirements
In the 2010 ABS Proposing Release, we proposed, between Schedule L
and Schedule L-D, 74 general data points. We believed the proposed
general item requirements captured basic characteristics of assets that
would be useful to investors in ABS across asset types. As discussed
below in Section III.B.2 The Scope of New Schedule AL, we have
condensed the information previously proposed to be provided in either
Schedule L or Schedule L-D into a single schedule, titled Schedule AL.
Schedule AL enumerates all of the asset-level disclosures to be
provided, if applicable, about the assets in the pool at securitization
and on an ongoing basis.
We received a substantial number of comments directed at making
technical changes to the data points and in some cases requesting we
delete or add certain data points or that we change a data point to
accommodate the characteristics of specified assets types.\194\ Many
commenters sought changes to the format of the information,\195\ the
range of possible responses for a particular data point, or the data
point's title or definition in order to increase the usefulness of the
information required, to address cost concerns or to align the data
point with industry standards.\196\
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\194\ See, e.g., letters from ASF I, ASF II, BoA I, CREFC I,
Mass. Atty. Gen., MBA I, Mortgage Bankers Association dated Nov. 22,
2010 submitted in response to the 2010 ABS Proposing Release (``MBA
II''), MetLife I, MISMO, SIFMA I, VABSS I, VABSS IV, Wells Fargo I
and SFIG I.
\195\ For example, proposed Item 1(a)(15) of Schedule L,
``Primary Servicer'' provided that the format of the response should
be a ``text'' entry. Under this format the names of the servicers
could be entered or some other identifier of services, such as the
MERS organization identification number. One commenter suggested
that the format of the response be a number entry and that we
require the MERS ``Mortgage Identification Number'' or ``MIN.'' The
MIN is an 18-digit number used to track a mortgage loan throughout
its life, from origination to securitization to pay-off or
foreclosure. We did not adopt this suggested change because there
may be instances where a servicing organization may not have a MERS
number. See letter from ASF I.
\196\ For example, SIFMA I stated that the title of Item
1(a)(12) of Schedule L ``Amortization Type'' does not describe the
two options, fixed or adjustable. They recommended changing the
title to ``Interest rate type.'' We revised the data point title to
``Original interest rate type.'' SFIG I recommended that we add
explanatory language for interest-only and balloon loans to the
definition of proposed Item 1(a)(9) Original amortization term of
Schedule L. See new Item 1(c)(5) of Schedule AL.
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To address comments that we revise data points to accommodate the
characteristics of certain assets types, we integrated the proposed
Item 1 General Requirements into the asset-specific requirements. This
change permitted us to tailor the data points to each particular asset
type and allowed us to further incorporate applicable industry
standards. The data points we discuss below are incorporated into the
rules for RMBS, CMBS, Auto ABS, debt security ABS and
resecuritizations. In incorporating the proposed General Requirements
into the requirements for each asset type, we are also making changes
to the data points, based in large part on comments received, that we
believe improve or clarify the disclosure, mitigate cost concerns and/
or implement industry standards when we believe doing so would not
materially diminish the value of the disclosures to investors.
Asset Number
We proposed that issuers provide a unique asset number for each
asset that is applicable only to that asset and identify the source of
the asset number.\197\ We did not propose requiring that issuers use a
specific naming or numbering convention. We asked for comment, however,
about whether we should require or permit one type of asset number that
is applicable to all asset types.\198\ In response, several commenters
urged that we recognize a specific type of asset numbering system
currently in use within the industry for each asset type.\199\ A few
commenters were against a uniform number system that would apply across
asset classes.\200\ A few commenters, however, cautioned against
requiring an asset number because privacy issues may arise if the asset
number is associated with an individual.\201\
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\197\ See proposed Items 1(a)(1) and 1(a)(2) of Schedule L. If
an issuer uses its own unique numbering system to track the asset
throughout its life, disclosure of that number would satisfy this
proposed item requirement.
\198\ See the 2010 ABS Proposing Release at 23359.
\199\ See letters from ASF I (supporting the use of CUSIP number
in debt repackagings and resecuritizations and the ASF Loan
Identification Number Code (``ASF LINC^TM'') for
securitizations backed by assets other than securities), eSign,
MERS, MISMO (eSign, MERS and MISMO each support the use of the MERS
``Mortgage Identification Number'' for real estate assets), and
SIFMA I (supporting the use of CUSIP numbers in debt repackagings
and resecuritizations).
\200\ See letters from eSign and MISMO.
\201\ See letters from CDIA and Epicurus (both suggesting that
privacy issues could result if the asset number is published and
then associated with asset records).
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We are adopting, as proposed, that issuers provide for each asset
in the pool a unique asset number applicable only to that asset and the
source of the number.\202\ We believe the use of an asset number is
necessary and to the benefit of market participants, because it will
allow them to follow the performance of an asset from securitization
through ongoing periodic reporting. We remind issuers and underwriters
that they should be mindful of the sensitive nature of the asset number
and ensure that appropriate measures are taken to prevent the number
from being associated with a particular person. While some commenters
requested we adopt a specific type of identifier, we believe that
identifiers for each asset may be generated in many ways and currently
there is no single uniform asset identifier. These data points, as
adopted, provide flexibility to issuers to use any numbering system,
including those numbering systems that commenters recommended, and we
believe this minimizes compliance costs. We are also adopting a data
point, as proposed, that requires the identification of the source of
the asset number. We recognize, however, that by not standardizing the
numbering system, the usefulness of the data will be limited to the
extent that investors intend to combine it with other data already
incorporating a particular numbering system.
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\202\ Under this requirement each asset number should only be
used to reference a single asset within the pool. If an asset in the
pool is removed and replaced with another asset, the asset added to
the pool should be assigned a unique asset number applicable to only
that asset.
---------------------------------------------------------------------------

Underwriting Indicator
We proposed a data point that would disclose whether the loan or
asset was an exception to defined or standardized underwriting
criteria. The response to this data point was mixed. One commenter
suggested that we correlate this data point with the then proposed Item
1111(a)(3) of Regulation AB that would have required disclosure on the
underwriting of assets that deviate from the underwriting criteria
disclosed in the prospectus.\203\ Another commenter

[[Page 57207]]

suggested the data point be omitted because the time and resources to
provide the disclosures were not necessary or desired.\204\ This
commenter also noted that if we adopt the disclosure, then we should
more precisely define what is considered defined and/or standardized
underwriting criteria to avoid confusion.\205\ An Auto ABS commenter
stated that the exception disclosure required by Item 1111(a)(8) is
sufficient and therefore this data point should be eliminated, but if
this data point is adopted, the Commission should instruct registrants
to omit it if no exceptions to the underwriting guidelines are reported
in the prospectus.\206\ Another commenter stated underwriting standards
often contain certain elements of discretionary authority for an
underwriter to vary from the stated criteria and an exercise of this
discretion does not constitute an exception.\207\ This commenter also
noted specific concerns about the application of this data point to
CMBS. The commenter stated that underwriting criteria for commercial
mortgage loans are generally not clearly prescribed and the judgment of
the originator is commonly used rather than an objective test based on
established mathematical or financial models. Therefore, we should only
require disclosure of exceptions to underwriting criteria in cases
where such criteria are well defined, are fundamental to the credit
analysis and are consistently applied.\208\
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\203\ See letter from ASF I. In the 2010 ABS Proposing Release
we proposed to amend Item 1111(a)(3) of Regulation AB. At the time
of the proposal, we proposed to require a description of the
solicitation credit-granting or underwriting criteria used to
originate or purchase the pool assets, including any changes in such
criteria and the extent to which such policies and criteria are or
could be overridden. We proposed to revise the requirement to also
require data to accompany this disclosure on the amount and
characteristics of those assets that did not meet the disclosed
standards. Further, if disclosure was provided regarding
compensating or other factors, if any, that were used to determine
that those assets should be included in the pool despite not having
met the disclosed underwriting standards, then a description of
those factors and data on the amount of assets in the pool that are
represented as meeting those factors and the amount of assets that
do not meet those factors would also be required. We discuss below
that the proposed amendments to Item 1111(a)(3) were incorporated
into Item 1111(a)(8) of Regulation AB.
\204\ See letter from BoA I (without providing a costs
estimate).
\205\ See letter from BoA I (requesting confirmation that the
proposed data point correlates to proposed Item 1111(a)(3)).
\206\ See letter from VABSS IV.
\207\ See letter from ABA I (suggesting that other than possibly
in the context of RMBS, it would be preferable to permit textual
disclosure of originators' trends in underwriting standards and
risk-management activities because more specific disclosure may lead
to the disclosure of proprietary underwriting standards, which may
make the securitization markets unattractive and may also lead to
less specific underwriting standards).
\208\ See letter from ABA I.
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In contrast, one commenter requested additional disclosure because
some market participants use ``exception'' to refer to loans that are
unacceptable under the underwriting guidelines (i.e. they do not comply
with the underwriting guidelines and do not meet the ``compensating
factor'' standard set out in the guidelines to otherwise allow the
approval of such loans) and at other times market participants use the
term ``exception'' to refer to loans that are acceptable under the
underwriting guidelines because they demonstrated sufficient
compensating factors. The commenter suggested we require disclosure on
an asset-level basis of exceptions both with and without the presence
of sufficient compensating factors, the compensating factors relied
upon and the specific underwriting exception.\209\ Another commenter
noted that this data point is not provided in asset-level disclosures
for offerings of CMBS based on market practice and this data point
should only be required if underwriting criteria become defined or
standardized for commercial or multi-family mortgages.\210\
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\209\ See letter from Mass. Atty. Gen.
\210\ See letter from MBA II.
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The proposed amendments to Item 1111(a)(3) were incorporated into
Item 1111(a)(8) of Regulation AB which was added to Item 1111 of
Regulation AB in early 2011.\211\ Item 1111(a)(8) requires issuers, in
part, to disclose how the assets in the pool deviate from the disclosed
underwriting criteria. Rule 193 implements Section 945 of the Dodd-
Frank Act by requiring that any issuer registering the offer and sale
of an ABS perform a review of the assets underlying the ABS.\212\ This
review provides a basis for the Item 1111(a)(8) disclosure discussed
above. Under Rule 193, such review, at a minimum, must be designed and
effected to provide reasonable assurance that the disclosure regarding
the pool assets in the prospectus is accurate in all material respects.
The release adopting Item 1111(a)(8) noted that where originators may
approve loans at a variety of levels, and the loans underwritten at an
incrementally higher level of approval may be evaluated based on
judgmental underwriting decisions, the criteria for the first level of
underwriting should be disclosed. In addition, Item 1111(a)(8) requires
disclosure of the loans that are included in the pool despite not
meeting the criteria for this first level of underwriting criteria.
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\211\ See Issuer Review of Assets in Offerings of Asset-Backed
Securities, Release No. 33-9176 (Jan. 20, 2011) [76 FR 4231] (the
``January 2011 ABS Issuer Review Release'').
\212\ See Securities Act Rule 193 [17 CFR 230.193]. See also the
January 2011 ABS Issuer Review Release.
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In light of comments received and the subsequent adoption of Item
1111(a)(8), we are adopting this data point with modifications.\213\ As
we noted when adopting the changes to Item 1111(a)(8), originators may
approve loans at a variety of levels, and the loans underwritten at an
incrementally higher level of approval are evaluated based on
judgmental underwriting decisions. Therefore, we believe it is
appropriate to base the data point on the standards of Item 1111(a)(8)
and, in particular, on whether the asset met the disclosed underwriting
criteria or benchmark used to originate the asset. We revised this data
point to state: ``indicate whether the loan or asset met the criteria
for the first level of solicitation, credit-granting or underwriting
criteria used to originate the pool asset.'' Since originators may
approve loans at a variety of levels, and the loans underwritten at an
incrementally higher level of approval may be evaluated based on
judgmental underwriting decisions, the data point, as defined, will
capture whether the loan or asset met the criteria for the first level
of underwriting. We believe aligning this data point to Item 1111(a)(8)
responds to comments, including the concerns raised by a commenter with
respect to CMBS, and minimizes confusion because the data point does
not rely on what constitutes an exception to a defined and/or
standardized set of underwriting criteria and instead focuses on
whether the loan or asset met the disclosed underwriting criteria. For
the same reasons, we also believe it addresses concerns that
underwriting standards often contain certain elements of discretionary
authority for an underwriter to vary from the stated criteria without
being considered an exception or that the disclosure may release
proprietary underwriting standards.\214\ We are not persuaded that
disclosures, on an asset-level basis, of exceptions both with and
without the presence of sufficient compensating factors, the
compensating factors relied upon and the specific underwriting
exception, are necessary. We believe such disclosure is unnecessary
because this data point, as adopted, captures

[[Page 57208]]

whether an asset met the first applicable level of underwriting
criteria.
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\213\ See new Items 1(c)(10), 2(c)(13), 3(c)(11), 4(c)(7), and
5(c)(12) of Schedule AL. Each of these items is titled underwriting
indicator.
\214\ See footnote 207.
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We acknowledge a commenter's position, which was provided prior to
the adoption of Rule 193, that a substantial expenditure of time and
resources would be required to enable issuers to provide the proposed
disclosures. We anticipate that in order to provide the new disclosure,
an issuer could rely, in part, on the review that is already required
in order for an issuer to comply with Rule 193. Since issuers can rely,
in part, on the review that is required under Rule 193, issuers should
incur less cost to provide this disclosure than if Rule 193 had not
been implemented. We acknowledge that the information gained through a
Rule 193 review may not provide all of the information needed to
provide the disclosures.
Although issuers will incur potential costs to provide this
disclosure, investors should benefit from the insight these disclosures
will provide about the originator's underwriting of the pool assets and
the originator's ongoing underwriting practices. For instance, the
disclosures should provide investors the ability to identify the
particular assets in the pool that did not meet the disclosed
underwriting standards. Investors can then analyze whether these assets
alter the risk profile of the asset pool and monitor the performance of
these particular assets. In addition, we believe this information will
allow investors to compare, over time, the performance of assets that
met the disclosed underwriting criteria against those assets that did
not meet the disclosed underwriting criteria used to originate the
assets. This should allow investors to better evaluate an originator's
underwriting practices.
Information About Repurchases
We proposed a data point to capture whether an asset had been
repurchased from the pool.\215\ If the asset had been repurchased, then
the registrant would have to indicate through additional data points
whether a notice of repurchase had been received,\216\ the date the
asset was repurchased,\217\ the name of the repurchaser,\218\ and the
reason for the repurchase.\219\
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\215\ See proposed Item 1(i) of Schedule L-D.
\216\ See proposed Item 1(i)(1) of Schedule L-D.
\217\ See proposed Item 1(i)(2) of Schedule L-D.
\218\ See proposed Item 1(i)(3) of Schedule L-D.
\219\ See proposed Item 1(i)(4) of Schedule L-D.
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One commenter suggested we clarify that the repurchase notice data
point is intended to track whether a repurchase request has been made
before the repurchase has been completed and add an option to indicate
whether a repurchase request was made but the parties later agreed that
a repurchase was not required.\220\ Two commenters requested we delete
the repurchase notice data point.\221\
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\220\ See letter from SIFMA I.
\221\ See letters from ASF I (requesting that we not adopt the
repurchase notice data point because RMBS transactions do not
typically require notices in connection with repurchases) and VABSS
IV (noting that repurchase notices are rarely delivered in Auto
ABS).
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The dealer and sponsor members of one commenter suggested we delete
the data point identifying the name of the repurchaser because
transaction documents will contain the name of the person obligated to
make repurchases based on breaches of representations and
warranties.\222\ The investor members of the same commenter, however,
suggested we retain the data point because multiple parties could be
responsible for the repurchase of individual assets.\223\
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\222\ See letter from SIFMA I (dealer and sponsors).
\223\ See letter from SIFMA I (investors).
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We are adopting this group of data points with revisions in
response to comments to align the data points with other disclosures
about asset repurchases now required pursuant to the Dodd-Frank Act. As
one commenter noted, Rule 15Ga-1 was adopted subsequent to the 2010 ABS
Proposing Release.\224\ Unlike the aggregated disclosures under Rule
15Ga-1, these data points provide transparency about fulfilled and
unfulfilled demands for repurchase or replacement on an individual
asset-level basis for investors in a particular transaction. We believe
these data points provide investors with a more complete picture
regarding the number of assets subject to a repurchase demand,
including whether repurchases occur only after the receipt of a
repurchase demand and the potential effects a repurchase may have on
the cash flows generated by pool assets.
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\224\ See letter from VABSS IV (asserting that a repurchase data
point should not be adopted because ``securitizers have been
required to disclose repurchase demands pursuant to Rule 15Ga-1 of
the Securities Exchange Act since February 14, 2012). But see letter
from J. Calva (stating that investors need loan-level data in order
to verify the accuracy of disclosures made under Rule 15Ga-1).
Current Exchange Act Rule 15Ga-1 requires that any securitizer of an
Exchange Act ABS provide tabular disclosure of fulfilled and
unfulfilled demand requests aggregated across all of the
securitizer's ABS that fall within the Exchange Act definition of
ABS, whether or not these ABS are Securities Act registered
transactions. See the Rule 15Ga-1 Adopting Release. With the passage
of the Jumpstart Our Business Startups Act (Pub. L. 112-103, 126
Stat. 306 (2012)) (the ``JOBS Act'') the Exchange Act definition of
ABS was redesignated from section 3(a)(77) to section 3(a)(79). As a
result of these statutory changes, we are adopting with this release
technical amendments throughout the CFR, including in Rule 15Ga-1,
to reflect this redesignation.
---------------------------------------------------------------------------

To address concerns about the costs to capture and report such data
and to make the disclosure most useful and effective, we are aligning
the data points to the type of demands that must be reported pursuant
to Rule 15Ga-1. We believe this should minimize confusion, make the
disclosures consistent with Rule 15Ga-1 disclosures, and help minimize
costs because sponsors will already be required to capture such data to
fulfill the disclosure requirements of Rule 15Ga-1. In particular, we
are revising the titles and definitions of this group of data points in
order to align them with the Rule 15Ga-1 disclosure requirements.\225\
We expect that the information on the asset level should feed the
aggregated disclosures already required pursuant to Rule 15Ga-1.\226\
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\225\ For example, new Item 1(i) Asset subject to demand of
Schedule AL requires disclosure of whether during the reporting
period the loan was the subject of a demand to repurchase or replace
for breach of representations and warranties, including investor
demands upon a trustee. New Item 1(i)(3) Demand resolution date of
Schedule AL requires disclosure of the date the loan repurchase or
replacement demand was resolved, rather than, as proposed, the date
the notice was resolved. See also Items 2(g) and 2(g)(3), 3(h) and
3(h)(3), 4(h) and 4(h)(3), and 5(f) and (5)(f)(3) of Schedule AL.
\226\ For instance, Rule 15Ga-1 requires disclosure of all
demands; it is not limited to only those demands made pursuant to a
transaction agreement. In cases where the underlying contracts do
not require a repurchase notice to be made or where an investor
makes a demand upon a trustee, consistent with Rule 15Ga-1,
disclosure is required. See the Rule 15Ga-1 Adopting Release at
4498.
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We are also adding a data point to capture the status of an asset
that is subject to a demand to repurchase or replace for breach of
representations and warranties.\227\ A commenter suggested that we
should include an option to indicate assets subject to a repurchase or
replacement demand, but where the relevant parties later agreed the
repurchase or replacement was not required.\228\ To address this
concern, we based the coded responses for this data point on the
requirements of Rule 15Ga-1. To this end, the data point captures
whether the asset is pending repurchase or replacement (within the cure
period); whether the asset was repurchased or replaced during the
reporting period; \229\ and whether the demand is in dispute, has been
rejected or withdrawn. Finally, while not a requirement under Rule
15Ga-1, we are also adding ``98=Other'' to the list of coded responses.
We believe adding ``98=Other'' accounts for dispositions of repurchase
requests that

[[Page 57209]]

may not fall into a category listed in the coded responses.
---------------------------------------------------------------------------

\227\ See new Items 1(i)(1), 2(g)(1), 3(h)(1), 4(h)(1) and
5(f)(1) of Schedule AL.
\228\ See letter from SIFMA I.
\229\ If this response is provided it would indicate the asset
is no longer in the pool.
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Two commenters suggested that we include a new data point to
require issuers to provide the amount paid to repurchase the loan or
lease from an Auto ABS transaction.\230\ One of these commenters
recommended that this new item replace the proposed repurchase
indicator data point \231\ because in Auto ABS there is not a lengthy
period of time between an event requiring a repurchase and the actual
repurchase as there may be in RMBS.\232\ This commenter believed the
repurchase amount would give timely indication that the loan has been
repurchased. We believe that investors across asset classes would
benefit from this data point and, therefore, we have added a repurchase
amount data point to the final requirements for each asset class that
is required to provide asset-level disclosures. The proposed repurchase
indicator data point has been subsumed into another data point we are
adopting, based on a comment received, titled ``zero balance code.''
\233\ The zero balance code requires the selection, from a coded list,
of the reason that the loan's balance was reduced to zero. One option
is to select, ``repurchased or replaced,'' which if selected would
indicate the loan balance was reduced to zero because the loan was
repurchased from the pool. In effect, this data point provides the same
information as the repurchase indicator data point would have provided.
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\230\ See letters from VABSS IV and Vanguard.
\231\ See proposed Item 1(i) of Schedule L-D.
\232\ See letter from VABSS IV.
\233\ See letter from ASF I.
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We also are adopting data points that capture the name of the
repurchaser \234\ and the reason for the repurchase or
replacement.\235\ Although the transaction documents will contain the
identity of the party that is obligated to make repurchases based on
breaches of representations and warranties, multiple parties could
provide representations and warranties for a pool of assets and the
party responsible for the repurchase of individual assets may
differ.\236\ We believe this data point will clarify that
responsibility.
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\234\ See new Items 1(i)(4), 2(g)(4), 3(h)(4), 4(h)(4) and
5(f)(4) of Schedule AL.
\235\ See new Items 1(i)(5), 2(g)(5), 3(h)(5), 4(h)(5) and
5(f)(5) of Schedule AL. We aligned the coded list to field 26 from
the ASF Project RESTART RMBS Reporting Package. See letter from ASF
I.
\236\ See letter from SIFMA I. The dealer and sponsor members
represented by this commenter suggested that we not adopt this data
point because the transaction agreements would contain the identity
of the party that is obligated to make repurchases based on breaches
of representations and warranties, but the investor members
represented by the same commenter suggested that we adopt this data
point because multiple parties could provide representations and
warranties for a pool of assets and the party responsible for the
repurchase of an individual asset may differ.
---------------------------------------------------------------------------

Reporting Period Beginning and End Dates
We proposed that the asset-level disclosures in a preliminary
prospectus be provided, unless the data point specified otherwise, as
of a recent practicable date, which we defined as the ``measurement
date.'' \237\ We proposed that asset-level disclosures in a final
prospectus be as of the ``cut-off'' date for the securitization, which
would be the date specified in the instruments governing the
transaction. This is the date on and after which collections on the
pool assets accrue for the benefit of the asset-backed security
holders. On an ongoing basis, the asset-level disclosures would be as
of the end of the reporting period the Form 10-D covered.
---------------------------------------------------------------------------

\237\ For example, proposed Item 1(a)(10) Original interest rate
of Schedule L would require ``the rate of interest at the time of
origination of the asset.''
---------------------------------------------------------------------------

A commenter believed that the proposed measurement dates were
appropriate \238\ and some commenters pointed out that the measurement
date and cut-off date could be the same day.\239\ We also received
comments suggesting that some data points in proposed Schedule L were
seeking data as of a date that was different than when the information
was normally captured. For instance, some commenters noted that certain
data points seek information as of the measurement date, but that the
information is usually obtained during the underwriting process or at
origination.\240\ One of these commenters requested that we revise
certain data points to clarify that the information was collected
during the underwriting process or at origination.\241\ Another
commenter believed that the disclosure of data based on measurement
dates and cut-off dates should be consistent with current industry
practice regarding the frequency with which issuers can generate pool
data.\242\
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\238\ See letter from Prudential I.
\239\ See letters from ABA I (stating that for RMBS the
measurement date used for the preliminary prospectus will be the
same date as the cut-off date used for the final prospectus), MBA I
(noting consistency with standard CMBS industry practice as well as
CMBS investor expectations), and SIFMA I.
\240\ See letters from BoA I (noting that some disclosure items
in proposed Schedule L relate to information obtained from borrowers
and is verified to the extent provided by an originator's
underwriting policies and procedures for the underwriting process)
and Wells Fargo I (noting that some data is collected and possibly
captured on an origination system).
\241\ See letter from Wells Fargo I.
\242\ See letter from ABA I (suggesting that it would be
burdensome or impossible to provide intra-month updates because of
system limitations that would prevent more frequent data collection
and that data is only comparable if consistently collected at the
same point in time).
---------------------------------------------------------------------------

After considering comments received, we are adopting data points
that require the disclosure of reporting period beginning and end dates
in lieu of our proposal to require the measurement date and cut-off
date.\243\ We believe the date the asset-level information is provided
in the prospectus should align with how information is normally
captured and how it will be reported under the ongoing reporting
requirements that will arise after issuance. Therefore, for a
preliminary or final prospectus, the Schedule AL data is required to be
provided as of the end of the most recent reporting period, unless
otherwise specified in Schedule AL.\244\ For periodic reports on Form
10-D, the Schedule AL data is required to be provided as of the end of
the reporting period covered by the Form 10-D, unless otherwise
specified in Schedule AL.
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\243\ See e.g., new Items 1(b)(1) and 1(b)(2), 2(b)(1) and
2(b)(2), 3(b)(1) and 3(b)(2), 4(b)(1) and 4(b)(2), and 5(b)(1) and
5(b)(2) of Schedule AL.
\244\ Information should be provided through the close of
business on the last day of the reporting period and not some
earlier point in time on that day.
---------------------------------------------------------------------------

We recognize that this approach may reduce benefits to investors to
the extent that some of the information disclosed may be stale. We
believe, however, that this change should serve to address concerns
that the proposal would require data to be captured at times different
than when it is normally captured and thus result in undue issuer
costs. To further address those concerns, we also revised some data
points to clarify the ``as of'' date of the data required. If the data
required is typically captured at a time other than the end of a
reporting period, such as at origination, we revised the data point to
clarify the ``as of'' date of the data required.\245\ When making these
changes, we either clarified the title, definition or both. These
changes also help clarify whether we expect the response to a
particular data point to remain static or be updated as new information
becomes available. For instance, some data points request ``original''
or ``initial'' data or data as of ``origination.'' These data points
require

[[Page 57210]]

disclosure of data about the underlying loan at origination before any
modifications.\246\ The responses to these data points will be static
and we do not expect updates to these responses over the life of the
loan. The responses to these data points help to establish a baseline
of the characteristics of each loan and will help investors monitor
changes in the characteristics of an asset over the life of the loan.
Therefore, unless the data point specifies a different ``as of'' date
(e.g., asking for data created at origination or at some other time),
the data should be as of the end of the reporting period.
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\245\ See, e.g., new Items 1(c)(6) Original interest rate;
1(c)(29)(xxi) HELOC draw period; 1(c)(30)(iii) Prepayment penalty
total term; 1(c)(31)(ii) Initial negative amortization recast
period; 1(c)(31)(viii) Initial minimum payment reset period; and
1(d)(2) Occupancy status of Schedule AL.
\246\ If a loan has been modified either prior to securitization
or after securitization, responses to data points titled
``original'' or that are requiring data as of origination or
underwriting should consist of data about the original loan prior to
any loan modification.
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Format of the Responses
We proposed that responses to the asset-level disclosure
requirements be a date, number, text, or coded response. Consistent
with the proposal, the final requirements we are adopting require
responses as a date, a number, text, or a coded response. We received a
number of comments that sought changes to the format of the information
to be collected, the range of possible responses, or the data point's
title or definition.\247\ As noted elsewhere, we considered each of
these comments and are making changes to mitigate cost and burden
concerns and to implement industry standards when we believe doing so
would not materially diminish the value of the disclosures to
investors.
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\247\ For instance, a commenter suggested that for numbers, the
format should indicate whether the number should be displayed as an
integer or as a decimal; for dates, the date field should specify
whether the date should be displayed as a month-year (MM/YYYY) or
month-day-year (MM/DD/YYYY); and for data points requiring a ``Yes''
or ``No,'' the response should be coded as ``1=Yes, 0=No'' rather
than ``1=Yes, 2=No.'' See letter from ASF I.
---------------------------------------------------------------------------

In the 2010 ABS Proposing Release, we also noted that situations
may arise where an appropriate code for disclosure may not be currently
available in the technical specifications. To accommodate those
situations, the proposals provided a coded response for ``not
applicable,'' ``unknown'' or ``other'' and many of the data points we
are adopting include these potential responses. We noted in the
proposing release that a response of ``not applicable,'' ``unknown'' or
``other'' would not be appropriate responses to a significant number of
data points and that registrants should be mindful of their
responsibilities to provide all of the disclosures required in the
prospectus and other reports.\248\ One commenter believed this language
called into question the availability of Rule 409 under the Securities
Act.\249\ This commenter and another commenter requested that we
clarify the circumstances under which issuers may rely on Rule 409 to
omit responses to asset-level data points in a registered
offering.\250\ The rules we are adopting do not affect the availability
of Rule 409 or Exchange Act Rule 12b-21. We remind issuers of the
requirements of Rule 409 and, in particular, that if any required
information is unknown and not reasonably available to the issuer, the
issuer is to include a statement either showing that unreasonable
effort or expense would be involved or indicating the absence of any
affiliation with the person who has the information and stating the
result of a request made to such person for the information. Also, in
situations where an issuer selects ``not applicable,'' ``unknown,'' or
``other,'' we encourage issuers to provide additional explanatory
disclosure in an ``Asset Related Document'' \251\ describing why such a
response was appropriate along with any other relevant detail.\252\
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\248\ See Securities Act Rule 409 [17 CFR 230.409] and Exchange
Act Rule 12b-21[17 CFR 240.12b-21].
\249\ See letter from Citi.
\250\ See letters from Citi and SIFMA I (expressed views of
dealer and sponsors only). See also letters from ABA I (suggesting
that the final rules should recognize that some information may not
be available to the sponsor and, therefore, cannot be provided) and
BoA I (suggesting that due to the significant quantity and detail of
the proposed asset level data requirements that we adopt, consistent
with Securities Act Rule 409, a ``comply-or-explain'' regime in
which data would either be disclosed, or if not disclosed, the basis
for refraining from providing the disclosure would be provided).
\251\ See Item 1111(h)(5) of Regulation AB.
\252\ For example, Item 1(c)(29)(i) Original ARM Index of
Schedule AL requires the issuer to ``specify the code that describes
the type and source of index to be used to determine the interest
rate at each adjustment'' and one possible response is ``98=Other.''
If the issuer selects ``Other'' for this data point we encourage the
issuer to provide detail about the index used to calculate the
adjustable rate. The issuer could file the disclosure in an Asset
Related Document filed as an exhibit to Form ABS-EE.
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(b) Asset Specific Disclosure Requirements and Economic Analysis of
These Requirements
Each section below discusses, for each asset type for which asset-
level disclosure is required, the proposal, comments and final
requirements applicable to each asset class and the anticipated
economic effects arising from the final requirements applicable to each
asset class, including the likely costs and benefits of the
requirements and their effect on efficiency, competition and capital
formation. Each section also discusses changes made to each group of
proposed data points, including the addition of data points to or
deletion of data points from the proposed group of data points.
(1) Residential Mortgage-Backed Securities
The proposal for RMBS included a total of 362 total data points
between the 74 proposed general item requirements and the 288 data
points specific to RMBS in proposed Schedules L and L-D. Based on the
changes described below, the final requirements for RMBS, which are set
forth in Item 1 of Schedule AL, include 270 data points. As noted in
the 2010 ABS Proposing Release, we took into consideration standards
that have been developed for the collection and/or presentation of
asset-level data about residential mortgages. For instance, ASF had
published an investor disclosure and reporting package for residential
mortgage-backed securities. The package is part of the group's Project
RESTART. This disclosure and reporting package includes standardized
definitions for loan or asset-level information and a format for the
presentation of the data to investors.\253\ We also noted that another
organization, the Mortgage Industry Standard Maintenance Organization
(``MISMO''), has been developing a data dictionary of standardized
definitions of mortgage related terms and an XML format for presenting
such data.\254\ We also considered the data that Fannie Mae and Freddie
Mac receive from sellers of mortgage loans. In addition, we considered
the data that the Office of the Comptroller of the Currency and the
Office of Thrift Supervision receive from banks.\255\
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\253\ See American Securitization Forum RMBS Disclosure and
Reporting Package Final Release (July 15, 2009) available at http://www.americansecuritization.com/search/issuesearch.aspx?q=disclosure%20and%20reporting%20package.
\254\ MISMO is a not-for-profit subsidiary of the Mortgage
Bankers Association. The MISMO data dictionary is available at
http://www.mismo.org/Specifications/ResidentialSpecifications.htm.
MISMO standards are used to exchange standardized information about
mortgages among mortgage lenders, investors in real estate and
mortgages, servicers, industry vendors, borrowers and other parties.
\255\ See ``OCC/OTS Mortgage Metrics Loan Level Data Collection:
Field Definitions,'' Jan. 7, 2009, available at http://www.occ.treas.gov/ftp/release/2009-9a.pdf.
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As stated in the 2010 ABS Proposing Release, in developing the
proposal, the staff surveyed the definitions used for data collected by
the organizations mentioned above, as well as other industry sources.
The scope of the

[[Page 57211]]

proposed requirements was based mainly on information required to be
provided to Fannie Mae and Freddie Mac for each loan sold to them or
contained in the disclosure and reporting package for residential
mortgage-backed securities developed by ASF's Project RESTART. We did
not, however, include every requirement included in these packages. The
presentation of the asset-level information was based, in part, on how
information was presented under Project RESTART because that reporting
template was designed specifically for reporting asset-level data about
RMBS transactions to investors.
In response to the proposal, issuers, trade associations, investors
and others generally supported the Commission's effort to increase
transparency in the RMBS market.\256\ Commenters differed, however, on
the approach to requiring standardized asset-level data. Some
commenters, mainly investors, expressed their support for the proposed
data points. One investor group stated the granularity of the proposed
data points was necessary because the information is critical.\257\
They noted that, unlike a corporate security, investors in structured
finance can only look to the assets in the pool for their return and
possibly to external credit enhancement if provided. Another investor
stated that the proposal will enhance the ability of investors to
evaluate the ongoing credit quality of mortgage loan pools and increase
market efficiency.\258\ This investor also noted that the disclosures
will provide new transparency into loan servicing operations. Another
commenter believed that granular asset-level data is essential to
restoring investor confidence in the RMBS markets and a critical
component in encouraging greater analysis by investors of RMBS
transactions and reducing reliance on credit ratings.\259\
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\256\ See, e.g., letters from the American Society of Appraisers
dated Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release (``ASA''), Beached Consultancy, BoA I, Capital One I, Citi,
Community Mortgage Banking Project dated July 30, 2010 submitted in
response to the 2010 ABS Proposing Release (``CMBP''), and MetLife
I.
\257\ See letter from AMI.
\258\ See letter from MetLife I.
\259\ See letter from ASF I.
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In addition to the concerns commenters raised with asset-level
disclosure requirements that applied across asset classes, some
commenters expressed concerns with certain proposed RMBS requirements.
For instance, commenters were concerned with the granularity of some
proposed data points,\260\ with the potential for certain disclosure to
compromise individual privacy,\261\ and whether some of the disclosures
were necessary or material to an investment decision.\262\ Several
commenters suggested we follow the MISMO data standards \263\ and two
commenters suggested we incorporate more of the reporting package
developed under Project RESTART into the final requirements.\264\
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\260\ See letter from CMBP (suggesting that the following data
points proposed in Schedule L fell into the category of requiring
excessive detail and, without explaining why, suggesting they would
not be useful to investors: Items 2(a)(18)(xv) ARM round indicator;
2(a)(18)(xvi) ARM round percentage; 2(b)(6) Original property
valuation type; (2)(b)(7) Original property valuation date; 2(b)(8)
Original automated valuation model name; 2(b)(9) Original AVM
confidence score; 2(b)(10) Most recent property value; 2(b)(11) Most
recent property valuation type; 2(b)(12) Most recent property
valuation date; 2(b)(13) Most recent AVM model name; 2(b)(14) Most
recent AVM confidence score). We are adopting most of these data
points as we believe they provide valuable information to investors
with respect to property valuations and ARM loans. See new Items
1(c)(29)(xiv) ARM round indicator; 1(c)(29)(xvi) ARM round
percentage; 1(d)(5) Most recent property value; 1(d)(6) Most recent
property valuation type; 1(d)(7) Most recent property valuation
date; 1(d)(8) Most recent AVM model name; and 1(d)(9) Most recent
AVM confidence score. But see letter from AI (indicating support for
the Commission's proposal to increase transparency and investor
understanding of loan and property level information and the
``tremendous amount of information contained in real estate
appraisals today that is underutilized by investors'').
\261\ See, e.g., letters from ASF I, CU, and WPF I. See also
Section III.A.3 Asset-Level Data and Individual Privacy Concerns.
\262\ See, e.g., letters from Citi (stating that many data
points had ``not been weighed for materiality or shown to affect the
performance of the securities or the pricing of securities''), MBA I
(suggesting that we limit the amount of ongoing information to only
those items that are critical to investors) and SIFMA/FSR I-dealers
and sponsors (requesting clarity on whether any of the asset-level
data may be considered ``material'' under the securities laws and
whether disclosure of asset-level data as proposed complies with
privacy laws).
\263\ See, e.g., letters from eSign, MBA I, MERS, and MISMO.
\264\ See letters from ASF I and Wells Fargo I.
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After considering the comments received, we are adopting, as
proposed, asset-level disclosures specific to RMBS, with some
modification to individual data points, and the addition and deletion
of some data points from the group of proposed data points, as
described in more detail below. Under the final rules, issuers are
required to disclose the information described in Item 1 of Schedule AL
for each mortgage in the pool, as applicable.\265\ These requirements
include information about the property, mortgage, obligor's
creditworthiness, original and current mortgage terms,\266\ and loan
performance information.\267\
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\265\ Our reference to ``as applicable'' means that if a
particular data point enumerated in the requirements does not apply
to the assets underlying the security, then a response to that data
point is not required. For example, if the asset pool of residential
mortgages consists only of fixed-rate mortgages, responses to all of
the data points related to adjustable rate mortgages need not be
included in the data file.
\266\ This includes, but is not limited to, information about
loans with adjustable-rates, interest only, balloon payment and
negative amortization features.
\267\ This includes, but is not limited to, information about
payments scheduled and received, loan modifications and other loss
mitigation activities.
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We believe that the asset-level requirements we are adopting for
RMBS will benefit investors and other market participants by providing
them with a broader picture of the composition, characteristics and
performance of pool assets, which we believe is critical to an
investor's ability to make an informed investment decision about the
securities. Further, while the requirements are granular, we believe
the scope of the disclosures is consistent with the information that
Fannie Mae and Freddie Mac require for each loan sold to them or that
would likely be collected by participants in Project RESTART.\268\ We
believe the disclosures will facilitate investor due diligence
regarding RMBS, allow investors to better understand, analyze and track
the performance of RMBS, and will, in turn, allow for better pricing,
reduce the need to rely on credit ratings and increase market
efficiency.
---------------------------------------------------------------------------

\268\ We are not adopting certain proposed requirements that are
not required by Fannie Mae and Freddie Mac or would not likely be
collected by participants in Project RESTART because some of the
information is too granular and some of the same activity is
captured by other data points. For example, proposed Items
2(b)(19)(i) through 2(b)(19)(xiii) related to manufactured housing
and proposed Items 1(l)(2)(i) through 1(l)(2)(ii) related to pledged
prepayment penalties are being omitted from the final requirements.
---------------------------------------------------------------------------

The format of the final asset-level requirements remains based, at
least in part, on how information was presented under Project RESTART.
In developing the final requirements, we considered, however, the
different formats currently available for the presentation of asset-
level data about residential mortgages. For instance, we note that
since the 2010 ABS Proposing Release, Fannie Mae and Freddie Mac have
begun receiving asset-level data prepared in accordance with MISMO data
standards for each loan they purchase.\269\ As a result, we understand
that a number of market participants, including mortgage

[[Page 57212]]

originators and servicers, likely capture, store and communicate data
in a MISMO format. Therefore, we considered whether the asset-level
disclosures should be provided following the MISMO format.\270\
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\269\ See Fannie Mae Loan Delivery Data requirements available
at https://www.fanniemae.com/singlefamily/uniform-loan-delivery-dataset-uldd. See also Freddie Mac Product Delivery requirements
available at http://www.freddiemac.com/singlefamily/secmktg/uniform_delivery.html.
\270\ In considering this alternative, we noted that MISMO had
developed a data dictionary of standardized definitions of mortgage
related terms and an XML format for presenting such data. We also
recognized that the MISMO package does not define what data should
be provided in any particular circumstance, but instead is a
dictionary of defined loan or asset-level terms that could be used
in the development of a reporting standard. We also recognized that
the definitions used in MISMO's data dictionary are defined for a
general purpose and are not structured for a particular purpose,
such as investor reporting.
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We are not persuaded, however, that our reporting requirements
should follow the MISMO format. We believe that the format for the
presentation of the asset-level data we are adopting is more investor-
friendly, standardizes how the information is to be provided to
investors and is easier to review. Also, the reporting package
developed under ASF's Project RESTART was designed with the involvement
of RMBS investors and issuers, which we believe provides some
indication that issuers and investors support the disclosure and
reporting of asset-level data about RMBS transactions based on that
format. Furthermore, we note that since the Project RESTART standards
were released, the few registered offerings of RMBS that have occurred
have provided data based on the standards set under Project RESTART as
part of their offering materials. We also believe this provides some
indication that issuers and investors support this disclosure format.
We also note that investors did not submit comment letters suggesting
asset-level data for RMBS be presented in a MISMO format. Finally, we
also considered that asset-level information being released by Fannie
Mae and Freddie Mac does not appear to be presented in a MISMO format,
although we note that the disclosures are likely compiled from asset-
level information submitted to them that is in a MISMO format.\271\
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\271\ Currently, Fannie Mae and Freddie Mac provide on their Web
sites a portion of the information they receive about the loans they
purchase. At this time, Fannie Mae publicly discloses approximately
50 items of asset-level disclosure at issuance and on a monthly
basis for their newly-issued single-family MBS. See Fannie Mae's
Uniform Loan Delivery Dataset available at https://www.fanniemae.com/singlefamily/uniform-loan-delivery-dataset-uldd.
Also, Freddie Mac currently publicly discloses approximately 85
items of asset-level disclosure at issuance and on a monthly basis
for all newly issued fixed-rate and adjustable-rate mortgage
participation certificate securities. See Freddie Mac's Loan-Level
Delivery Dataset available at http://www.freddiemac.com/singlefamily/sell/uniform_delivery.html.
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While some data points we are adopting have minor differences to
comparable data definitions contained in MISMO's data dictionary, we
believe that most data points we are adopting are consistent with the
information included in the MISMO data dictionary.\272\ We believe that
systems could be programmed, albeit at some cost, to combine data
provided in response to multiple MISMO data definitions to one of our
required data points.\273\ Therefore, we believe that data originating
in the MISMO data format could be compiled to comply with the new rules
for reporting to RMBS investors so the costs of implementing the
requirements may be limited to the extent that some MISMO data
definitions overlap with data points we require.
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\272\ See footnote 254. See also letter from MISMO (indicating
that for RMBS the data points proposed in Item 1 General
Requirements of Schedule L approximately 80% of the proposed data
requested is a direct match to the MISMO standards, with 14% a close
match and 6% with no match and that other tables applicable to RMBS
had a similar pattern).
\273\ For instance, we note that in many cases there is a direct
match between a proposed data point and the MISMO data definition.
Further, in many instances multiple fields in the MISMO data
dictionary could be combined to respond to a data point. An example
will best illustrate the differences between the asset-level
requirements adopted today and how information would be reported
under a MISMO format. For instance, we are adopting Item
1(c)(30)(iii) Prepayment penalty total term, which requires the
total number of months after the origination of the loan that the
prepayment penalty may be in effect. This single data point defines
the information required (prepayment penalty period), how to report
the information (in months) and the time frame the information
represents (from origination). In contrast, we believe under MISMO,
this data point would be provided through the responses to several
MISMO data definitions. One MISMO data definition defines the form
of count, such as the number of periods the prepayment penalty
applies. A second MISMO data definition would define what
constitutes a period (e.g., day, week, month, and year). A third
MISMO data definition indicates, for a group of responses, whether
the information was as of closing, the current reporting period, at
modification or at some other time frame. This approach allows the
entity reporting the information to define prepayment penalty period
by day, week, month or year.
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We understand, however, that requiring data points that deviate
from how issuers capture and store data may raise costs for both
issuers and investors because issuers will need to create new systems
or adjust their current systems to provide the data to satisfy our
rules. In addition, investors will need to adjust their existing tools
to read and analyze the newly required data. To further minimize the
need to revise systems to provide the required data, we are revising
data points to better align with MISMO data definitions. If a proposed
data point and a MISMO data definition require the same or similar data
and aligning to the MISMO data definition would not affect the value of
the information or deviate from how information is reported under the
requirements, we revised the proposed data point to better align with
the MISMO data definition.\274\ We believe these changes will help to
minimize any burden or costs that may arise from the reporting of
similar information under different standards.
---------------------------------------------------------------------------

\274\ See, e.g., letters from eSign, MBA I, MERS, and MISMO (all
suggesting that the final requirements follow the MISMO standards).
---------------------------------------------------------------------------

We also acknowledge that some disclosures we are requiring are not
part of the MISMO data dictionary or provided to Fannie Mae and Freddie
Mac. Many of these disclosures relate to the ongoing performance of
pool assets. We are requiring these disclosures so that an investor may
conduct his or her own evaluation of the risk and return profile of the
pool assets at issuance and throughout the life of the investment.
We also considered the alternative of requiring asset-level data
generally and allowing the industry to develop the reporting
requirement. While issuers in recent RMBS offerings have been providing
asset-level disclosure in line with the disclosure templates developed
by Project RESTART, providing such data to investors in this format is
not mandatory. As noted above, we believe that, unless asset-level
disclosures are standardized across all issuers, the benefits of asset-
level data is generally limited. We believe that, without requiring and
standardizing the asset-level requirements, issuers may choose to not
provide asset-level data to investors, provide it inconsistently, or
provide it under differing standards. These alternatives would limit
the ability for investors and market participants to cost-effectively
compare and analyze offerings of RMBS.
Finally, we also received many comments directed at individual data
points, many of which were seeking changes to the format of the
information, the range of possible responses for a particular data
point, or the data point's title or definition. Other commenters made
suggestions on how we could make the data points better align with an
industry standard. We also received comments suggesting that certain
data points should not be required if the data is derivable from other
required data points.\275\ We considered each of these comments, and we
made changes that we believe improve or clarify the disclosure,\276\

[[Page 57213]]

mitigate cost and burden concerns and/or implement industry standards
when doing so would not materially diminish the value of the
disclosures to investors.
---------------------------------------------------------------------------

\275\ See letters from ASF I and Wells Fargo I.
\276\ For example, we proposed a data point that would require
issuers to indicate the percentage of mortgage insurance coverage
obtained. In response to comments, we revised the data point to
confirm that the percentage disclosed should represent the total
percentage of the original loan balance that is covered by insurance
(e.g., 40% for an insurance policy that covers payment default only
from 60% of the loan balance to 100% of the balance). See new Item
1(f)(2) of Schedule AL.
---------------------------------------------------------------------------

In addition to revising the data points to align with industry
standards or to address comments received,\277\ we omitted some data
points that were proposed for other reasons, such as to address
concerns about disclosure of sensitive information or reduce
repetition. As discussed below, certain proposed data points would have
required disclosure of sensitive information and could have increased
the re-identification risk.\278\ While the changes we are making should
reduce the risk of re-identification and the related privacy concerns,
we do not believe that the changes will limit investors' ability to
conduct due diligence and make informed investment decisions.
---------------------------------------------------------------------------

\277\ As noted elsewhere, we made revisions to the title,
definition or required response of some data points, in part, based
on comments received. As noted in Section III.A.2.a) Disclosure
Requirements for All Asset Classes and Economic Analysis of These
Requirements, these changes include changes to the definition or
title to clarify when the data should be captured. Other changes
include, based on comments received, technical changes to clarify
how the information should be reported. For instance, data points
capturing ``Date'' were changed to ``YYYY/MM'' and data points
requiring a ``%'' were changed to ``number.'' We also made revisions
to make the terminology used throughout the template consistent. For
example, in some instances, certain data points used the term ``note
rate'' and others used ``interest rate.'' For consistency, we use
``interest rate'' throughout.
\278\ See Section III.A.3 Asset-Level Data and Individual
Privacy Concerns.
---------------------------------------------------------------------------

As noted below, proposed Schedules L and L-D contained identical or
substantially identical data points, so by aggregating the schedules we
are able to omit one of the identical or nearly identical data
points.\279\ We also proposed data points that would have required
information about ARM loans that were modified during a reporting
period. This information would have included pre-modification and post-
modification characteristics of the ARM loans. We are not adopting the
pre-modification data points since investors will have access to pre-
modification information through other asset-level data.\280\ We also
aggregated several data points into either one data point or fewer data
points based on comments received.\281\ We are omitting some proposed
data points in favor of other data points that we are adding to the
requirements to address comments received. For instance, as discussed
further below, we replaced some data points that capture advances with
data points that disclose different categories of advances and how
those advances were reimbursed.\282\ We are also omitting, based on
comments received, data points that relate to the Home Affordable
Modification Program, a temporary government program, over concerns
about the value of these data points over other modification data
points and about adopting data points for a temporary government
program.\283\ We also are not adopting a proposed data point that
commenters suggested would provide limited value to investors.\284\
---------------------------------------------------------------------------

\279\ See Section III.B.2 The Scope of New Schedule AL.
\280\ The following proposed data points were omitted from
Schedule AL: Items 2(e)(4) Pre-modification interest (note) rate;
2(e)(7) Pre-modification P&I payment; 2(e)(10) Pre-modification
initial interest rate decrease; 2(e)(12) Pre-modification subsequent
interest rate increase; 2(e)(14) Pre-modification payment cap;
2(e)(17) Pre-modification maturity date: 2(e)(19) Pre-modification
interest reset period (if changed); 2(e)(21) Pre-modification next
interest rate change date; and 2(e)(26) Pre-modification interest
only term.
\281\ For instance, a data point was added to the final
requirements to capture why a loan balance was reduced to zero. See
new Item 1(32)(g)(ii) of Schedule AL. This data point includes a
coded list of reasons why the loan balance was reduced to zero, such
as the loan was liquidated, repurchased, or paid off. As a result,
the following proposed data points contained in Schedule L-D were
omitted from the final requirements: Items 1(i) Repurchase
indicator; 1(l)(1) Paid-in-full indicator; 1(j) Liquidated
indicator; 1(k) Charge-off indicator; 2(h) Deed-in-lieu date; and
2(l)(7) Actual REO sale closing date.
\282\ See the discussion further below in this section titled
Advances: Principal, Interest, Taxes and Insurance, and Corporate.
\283\ See proposed Items 2(e)(47) through 2(e)(47)(x) of
Schedule L-D.
\284\ We proposed a data point that would have required issuers
to provide the date on which the original LTV ratio was calculated.
See proposed Item 2(b)(17) of Schedule L. Some commenters suggested
we not adopt this data point as this date is immaterial because the
date on which the value used in the calculation was determined is
more important. See letters from ASF I and SIFMA I. We are not
adopting this data point as we agree with commenters that this date
is not necessary given that the date on which the value used in the
calculation was determined is required to be provided.
---------------------------------------------------------------------------

Some commenters, however, suggested we expand the asset-level
disclosures to include more data points than proposed.\285\ For
instance, commenters suggested adding data points that would correlate
to information captured in ASF's Project RESTART disclosure and
reporting template,\286\ that would capture information about
government sponsored loan modification programs,\287\ and debt-to-
income (``DTI'') ratios or property valuations.\288\ Another commenter
suggested that we add data points that increase the granularity of
certain obligor-related data.\289\ A commenter also suggested adding
data points that captured more information about the characteristics of
modified loans.\290\ We added those data points to the extent we
believe the data point improves or clarifies the proposed requirements
or aids an investor's ability to make an informed investment decision,
monitor loan performance for ongoing investment decisions, or
understand loss mitigation efforts without significantly increasing re-
identification risk.\291\ We also took into consideration whether
issuers have ready access to the information and whether requiring the
information in the format requested would place an undue burden on
issuers or market participants. The final requirements do not include
every data point that commenters recommended we add because we are
concerned they could impose an undue burden and we are not persuaded
that the data would aide an investor's ability to analyze or price the
security or monitor its ongoing performance. We believe that, to the
extent issuers want to provide additional asset-level disclosures in
order to capture the unique attributes of a particular pool, issuers
can provide the additional asset-level disclosures in an Asset Related
Document.\292\
---------------------------------------------------------------------------

\285\ See, e.g., letters from ASF I, CU, MSCI, Wells Fargo I and
SFIG I.
\286\ See letters from ASF I and Wells Fargo I. For example, ASF
I suggested that, like in Project RESTART, we include a 4506-T
indicator data point, a paid-in-full amount data point and master
servicer, special servicer and subservicer data points. Because
these data points are consistent with our other requirements and
capture information that should be readily available to issuers, we
have added them. See new Items 1(e)(8), 1(g)(30), 1(h)(3), 1(h)(4)
and 1(h)(5) of Schedule AL.
\287\ See letter from Wells Fargo I.
\288\ See letter from Mass. Atty. Gen.
\289\ See letter from SFIG II (also suggesting changes to
clarify certain asset-level data points).
\290\ See letter from Wells Fargo I.
\291\ See Section III.A.3 Asset-Level Data and Individual
Privacy Concerns.
\292\ See Section III.B.4 Asset Related Documents.
---------------------------------------------------------------------------

We discuss below the significant comments we received about
individual data points along with the revisions we have made in
response to those comments.
Information About Payment Status and Payment History
The proposal included a group of data points that would require
disclosure of information about the status of required payments. These
data points would capture, both at the time of the offering and on an
ongoing basis, current

[[Page 57214]]

delinquency status,\293\ the number of days a payment is past due,\294\
and current payment status.\295\ In addition, on an ongoing basis, a
data point would capture the payment history over the past twelve
months.\296\
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\293\ See proposed Items 1(b)(5) of Schedule L and 1(f)(12) of
Schedule L-D.
\294\ See proposed Items 1(b)(6) of Schedule L and 1(f)(13) of
Schedule L-D.
\295\ See proposed Items 1(b)(7) of Schedule L and 1(f)(14) of
Schedule L-D.
\296\ See proposed Item 1(f)(15) of Schedule L-D.
---------------------------------------------------------------------------

One commenter suggested that we add, revise or delete data points
in this group in order to align with servicing practices or to increase
transparency.\297\ In lieu of the proposed data points capturing
current delinquency status, current payment status and the number of
days a payment is past due, we are adopting, based on comments
received, the following data points: Most recent 12-month pay
history,\298\ number of payments past due \299\ and paid through
date.\300\ We discuss below the group of data points we are adopting.
Taken together, we believe this group of data points should provide
insight into the payment performance of each pool asset and allow
investors to track delinquencies.
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\297\ See letter from ASF I.
\298\ See new Item 1(g)(33) of Schedule AL.
\299\ See new Item 1(g)(34) of Schedule AL.
\300\ See new Item 1(g)(28) of Schedule AL.
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Paid Through Date
The proposed data point titled ``Number of days payment is past
due'' would have required disclosure, at the time of the offering, of
the number of days between the scheduled payment date and the cut-off
date if the obligor did not make the full scheduled payment. The
proposed ongoing disclosure requirements included a similar data point,
but required the number of days between the scheduled payment date and
the reporting period end date, instead of the cut-off date. A commenter
indicated the final requirements should omit the proposed data point
because servicers currently track delinquencies in 30-day intervals,
measured on a monthly basis, rather than number of days past due at any
given date, including the reporting date, and because the cost to
capture the proposed information is not justifiable.\301\ As an
alternative, the commenter suggested the number of days past due could
be derived from the interest paid through date reported in proposed
Item 2(a)(14) of Schedule L and the measurement date.
---------------------------------------------------------------------------

\301\ See letter from ASF I.
---------------------------------------------------------------------------

We are not adopting, as a commenter suggested, the data point
titled ``Number of days payment is past due'' because the proposed data
point may have required data that differs from how data is
captured.\302\ We believe an alternative approach may provide investors
similar information with lower costs to issuers. We believe investors
can derive information about the number of days payment is past due
from the date through which the loan is paid. Therefore, to address the
commenter's concern and provide information in each report to derive
the number of days a payment is past due, we are adopting a data point
titled ``Paid through date'' which requires disclosure of the date the
loan's scheduled principal and interest is paid through as of the end
of the reporting period.\303\ For each reporting period the response to
this data point will disclose, regardless of when the last payment was
made, the date the loan is paid through. The response to this data
point will also indicate when a loan is paid several months in advance.
We believe this approach addresses the commenter's cost concerns
because the required information should be readily available.\304\
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\302\ We do not agree, however, with the alternative the
commenter suggested, that the number of days a payment is past due
could be derived from the interest paid through date reported in
proposed Item 2(a)(14) of Schedule L and the measurement date,
because the interest paid through date is calculated on the payment
due for that period. Therefore, in future periods where a payment is
missed, the response to this data point would not provide the paid
through date since no payment was made.
\303\ See new Item 1(g)(28) of Schedule AL.
\304\ We also note that this data has been provided in some RMBS
offerings.
---------------------------------------------------------------------------

Most Recent 12-Month Pay History
The proposed data point titled ``Current delinquency status'' would
have required that issuers disclose the number of days the obligor is
delinquent at the time of the offering \305\ and on an ongoing
basis.\306\ One commenter suggested that for RMBS we replace this data
point with a data point contained in the Project RESTART disclosure
package that required a string indicating the payment status per month
over the most recent 12 months.\307\ The commenter stated this string,
with the addition of foreclosure and REO disclosures, would provide
considerably more useful information than the proposed data point and
would subsume the proposed data point instead of requiring the number
of days an obligor is past due. We are persuaded that a payment history
data point indicating the payment status per month over the most recent
12 months would provide more useful information than the number of days
an obligor is past due. In addition, we believe, as a commenter
suggested, that the payment history data point subsumes the proposed
data point. Therefore, we are adopting a payment history data point and
omitting the proposed current payment status data point.\308\ Because
this information should be readily available to issuers for the entire
history of the loan, we believe any additional costs incurred from
providing the disclosures in the format requested, to the extent that
such format differs from how such information is collected and stored,
will be limited.
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\305\ See proposed Item 1(b)(5) of Schedule L.
\306\ See proposed Item 1(f)(12) of Schedule L-D.
\307\ See letter from ASF I (suggesting the adoption of field 97
of the ASF RMBS Disclosure Package--Most Recent 12-month Pay
History). ASF provided this comment with respect to proposed Item
1(b)(5) Current Delinquency Status of Schedule L. They did not
provide a similar comment with respect to proposed Item 1(f)(12) of
Schedule L-D. We believe under the one schedule format that we are
adopting the payment history string subsumes the data captured by
this data point. Therefore, we are not adopting the proposed Current
delinquency status data point.
\308\ See new Item 1(g)(33) of Schedule AL. This data point
requires an issuer to provide a string that indicates the payment
status per month listed from oldest to most recent. The possible
responses based on field 97 of ASF's RMBS Disclosure Package are:
0=Current; 1=30-59 days delinquent; 2=60-89 days delinquent; 3=90-
119 days delinquent; 4=120+ days delinquent; 5=Foreclosure; 6=REO;
7=Loan did not exist in period; 99=Unknown. The value furthest to
the left in the string would be the most recent month and the value
furthest to the right would be the 12th month. For example, for a
loan that was current in the most recent month, 30-59 days
delinquent from months two to five and current from months six to
twelve the string would be as follows: 011110000000.
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Number of Payments Past Due
We also proposed a data point titled ``Current payment status''
that would capture the number of payments the obligor is past due.\309\
We are revising the title to ``Number of payments past due'' to more
accurately convey the information the data point requires.\310\ A
commenter requested we omit the proposed data point because it would be
redundant with the proposed the ``Current delinquency status'' data
point, which would have captured the number of days the obligor is
delinquent.\311\ There are many ways to present the status of payments,
and the data point we are adopting will require disclosure of the
number of payments an obligor is behind at any point in time.
Therefore, we are not adopting the ``Current delinquency status'' data
point

[[Page 57215]]

which should eliminate any potential redundancy.
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\309\ See proposed Items 1(b)(7) of Schedule L and 1(f)(14) of
Schedule L-D.
\310\ See new Item 1(g)(34) of Schedule AL.
\311\ See proposed Items 1(b)(5) of Schedule L and 1(f)(12) of
Schedule L-D.
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Information About Junior Liens and Senior Liens
We proposed data points that would require disclosure, at the time
of the offering, about the junior liens and senior liens that existed
at origination. For loans with subordinate liens at origination, the
combined balances of all subordinate loans would be required.\312\ For
junior loans being securitized, the combined balances of all senior
mortgages at the time the junior loan was originated would be
required.\313\ Where the associated most senior lien is a hybrid, the
hybrid period of the most senior lien would be required.\314\ Where the
associated most senior lien features negative amortization, the
negative amortization limit of the senior mortgage as a percentage of
the senior lien's original unpaid principal balance would be
required.\315\ We did not propose a data point to capture the effort an
originator or sponsor made to discover if the same property secures
other loans, but we asked if this type of disclosure should be
required.\316\
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\312\ See proposed Item 2(a)(16) of Schedule L.
\313\ See proposed Item 2(a)(17)(i) of Schedule L.
\314\ See proposed Item 2(a)(17)(iii) of Schedule L.
\315\ See proposed Item 2(a)(17)(iv) of Schedule L.
\316\ See the 2010 ABS Proposing Release at 23363.
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Comments on this group of data points varied. A few commenters
requested that the data points capturing junior lien balances include
an ``if known'' or similar qualifier to address concerns that
originators may not always have knowledge of, or access to, balance
information on loans not originated by them.\317\ A few commenters also
suggested that the combined senior loan and combined junior loan
balances, if known, be captured on an ongoing basis.\318\ Two
commenters supported a data point capturing what effort an originator
or sponsor made to discover if the same property secures other
loans.\319\ One of these commenters noted, however, that there may be
difficulties providing this disclosure because the existence of a debt
obligation may not be discovered before the required asset-level
disclosures are provided.\320\ The other commenter noted that the
disclosure should be required because the failure to account for an
additional loan will result in an inaccurately reported combined LTV
ratio and, therefore, investors would want to know if the verification
was made.\321\
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\317\ See letters from ASF I and SIFMA I.
\318\ See letters from ASF I and Wells Fargo I.
\319\ See letters from Epicurus and Mass. Atty. Gen.
\320\ See letter from Epicurus (suggesting that, to address the
problem, the attorney or title company at closing should be required
to certify that a title search was completed and whether that title
search identified the existence of other debts, if any, held against
the property).
\321\ See letter from Mass. Atty. Gen.
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We are adopting the group of data points described above, but with
revisions to address comments received.\322\ In response to comments
that expressed concern that originators may not always have knowledge
of, or access to, balance information on loans not originated by them,
we revised this group of data points to require that the information be
provided if the information was obtained or available to them.
Regardless of whether the loan being securitized was originated by
parties affiliated or unaffiliated to the issuer, we expect, however,
that an issuer would make efforts to discern whether junior loans were
originated concurrently to or immediately following the origination of
the loan being securitized and the balances of those loans. We believe
the review required under existing Rule 193 of the Securities Act,
which requires a review of the pool assets underlying the asset-backed
security may address concerns about verification. The review required
under Rule 193 must be designed and effected to provide reasonable
assurance that the disclosure regarding the pool assets in the
prospectus, which includes the asset-level disclosures, is accurate in
all material respects. We believe a Rule 193 review would necessarily
include consideration of whether the disclosures about junior or senior
liens are accurate in all material respects. We are not adopting a
separate data point that would require disclosure of the effort an
originator or sponsor made to discover if the same property secures
other loans.\323\ This data would be difficult to capture in a
standardized way, and we are uncertain, at this time, whether this
information is best captured within these particular asset-level
requirements.
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\322\ See new Items 1(c)(12)(i) Most recent junior loan balance;
Item 1(c)(12)(ii) Date of most recent junior loan balance;
1(c)(13)(i) Most recent senior loan amount; 1 (c)(13)(ii) Date of
most recent senior loan amount; 1(c)(13)(iii) Original loan type of
most senior lien; 1(c)(13)(iv) Hybrid period of most senior lien;
and 1(c)(13)(v) Negative amortization limit of most senior lien of
Schedule AL.
\323\ See the 2010 ABS Proposing Release at 23363.
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We believe investors will benefit from ongoing disclosure about the
aggregate balances of all known senior and junior lien(s) and,
therefore, we are revising the data points to capture the most recent
senior lien(s) and junior lien(s) balances.\324\ We understand,
however, that obtaining updated balances on an ongoing basis may
involve some burden and cost, particularly if the junior liens are
originated by parties unaffiliated with the issuer. Therefore, to
address burden concerns, these data points do not require that issuers
obtain updated information each month. Instead, the definitions of
these data points indicate that a response is required if the most
recent junior or senior mortgage balances are obtained or
available.\325\
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\324\ See new Items 1(c)(12)(i) Most recent junior loan balance
and 1(c)(13)(i) Most recent senior loan amount of Schedule AL. We
are also adopting data points that capture the dates of the most
recent loan balances. See new Items 1(c)(12)(ii) Date of most recent
junior loan balance and 1(c)(13)(ii) Date of most recent senior loan
amount.
\325\ For example, if the asset in an RMBS is a senior lien, and
subsequent to the securitization, a junior lien is originated by an
affiliate of the depositor, the information about the junior lien
would be available to the issuer and should be reported to the
investors in the RMBS in an ongoing report.
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Information About the Property
We proposed a group of data points that would capture information
related to the property, such as the property type, occupancy status,
geographic locations and valuations.\326\ Taken together, these data
points would provide insight into the physical asset underlying the
mortgage. The response to this group of data points varied with some
commenters suggesting the group of data points was too granular \327\
and others suggesting we expand the information captured about
valuations.\328\ We discuss below the significant comments we received
about this group of data points and the revisions we have made to data
points within this group.
---------------------------------------------------------------------------

\326\ See proposed Items 2(b)(2) through 2(b)(19) of Schedule L.
\327\ See, e.g., letter from CMBP.
\328\ See, e.g., letter from Mass. Atty. Gen.
---------------------------------------------------------------------------

Property Location
We proposed to require that the location of the property by
Metropolitan Statistical Area, Micropolitan Statistical Area or
Metropolitan Division (collectively, ``MSA'') be provided in lieu of
zip code due to privacy concerns arising from providing the property's
zip code.\329\ The response to this

[[Page 57216]]

approach varied. On the one hand, we received some comments suggesting
we not require zip code because it would make the ability to identify
an obligor within a loan pool easier.\330\ On the other hand, some
commenters indicated that 5-digit zip codes or 3-digit zip codes should
be provided instead of MSA because zip codes provide more information
about the property.\331\ For instance, one commenter was concerned that
disclosing only the MSA would result in less information than is
currently available.\332\ As another commenter noted, the zip code
provides information such as whether the property is in a flood plain
or earthquake zone.\333\ One commenter indicated that using MSA rather
than zip codes would restrict the information available to investors
and, as such, issuers expect to receive substantially lower pricing for
new RMBS offerings resulting in substantially higher costs for
consumers of residential mortgage loans.\334\ Another commenter echoed
this concern.\335\ Another commenter suggested that the ``County
Code,'' which is a federal information processing standard code, is an
appropriate alternative to other geographic location identifiers.\336\
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\329\ MSAs are geographic areas designated by a 5-digit number
defined by the U.S. Office of Management and Budget (OMB) for use by
Federal statistical agencies in collecting, tabulating and
publishing Federal Statistics. A Metropolitan Statistical Area
contains a core urban area of at least 10,000 (but less than 50,000)
population. Each Metro or Micro area consists of one or more
counties and includes the counties containing the core urban area,
as well as any adjacent counties that have a high degree of social
and economic integration (as measured by commuting to work) with the
urban core. The OMB also further subdivides and designates New
England City and Town Areas. The OMB may also combine two or more of
the above designations and identify it as a Combined Statistical
Area.
\330\ See letters from CU and WPF.
\331\ See letter from ASF I (expressed views of investors only).
See also letter from Beached Consultancy (suggesting use of 3-digit
zip codes).
\332\ See letter from ASF I (expressed views of investors only).
\333\ See letter from Epicurus.
\334\ See letter from Wells Fargo I.
\335\ See letter from ASF I (noting that not disclosing zip
codes for the property would be a step backwards in disclosure
practice).
\336\ See letter from MERS.
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As discussed below in response to the 2014 Re-Opening Release,
several commenters stressed the importance of geography in assessing
re-identification risk and recommended requiring issuers to identify
assets by a broader geographic area to reduce the ability to re-
identify.\337\ One commenter recommended that, instead of requiring MSA
as proposed, we require geography by 2-digit zip code.\338\ Based on
the reasons discussed in Section III.A.3 Asset-Level Data and
Individual Privacy Concerns, we are requiring disclosure of the 2-digit
zip code, which will allow investors to assess market risk associated
with a particular geographic location without resulting in unnecessary
re-identification risk.
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\337\ See letters from ABA III, ELFA II, Lewtan, SIFMA/FSR I-
dealers and sponsors, SFIG II, the Treasurers of Royal Bank of
Canada, Canadian Imperial Bank of Commerce, The Bank of Nova Scotia,
The Toronto-Dominion Bank, Bank of Montreal and National Bank of
Canada dated Apr. 28, 2014 submitted in response to the 2014 Re-
Opening Release (``Treasurer Group''), and Wells Fargo III.
\338\ See letter from ABA III.
---------------------------------------------------------------------------

Property Valuations
We proposed a group of data points that would capture information
about original property valuations.\339\ The comments we received on
this group of data points varied with some commenters seeking more
granularity and others seeking less granularity. Commenters seeking
more granularity suggested expanding this group of data points to
require data about recent property sales, more detail about the
characteristics of the property, such as the gross living area, room
count, and construction style,\340\ and the disclosure of appraiser
credentials and prior complaints against them.\341\ A commenter also
recommended including valuations captured as part of a ``valuation
diligence'' process, including recalculated loan-to-value ratios and
combined loan-to-value ratios based on these valuations.\342\ Another
commenter said there is no uniformity in how values are determined
because the proposal would allow issuers to select from a long menu of
valuation methods, approaches and sources for establishing property
values.\343\ This flexibility would allow issuers to pick-and-choose
which valuation method best serves their purposes, and the proposed
rule would not establish any qualification requirements or standards of
care and/or competency for valuations performed in connection with
mortgage-backed securities.
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\339\ See proposed Items 2(b)(5), 2(b)(6), 2(b)(7), 2(b)(8), and
2(b)(9) of Schedule L.
\340\ See letter from AI.
\341\ See letter from Epicurus. See also letter from ASA
(suggesting issuers of mortgage-backed securities (and those with
ongoing Exchange Act reporting requirements relative to those
securities) be required to use state certified and licensed
professional real property appraisers and require adherence to the
Uniform Standards of Professional Appraisal Practice to value loan-
level real estate and real property collateral assets).
\342\ See letter from the Mass. Atty. Gen.
\343\ See letter from the ASA.
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One commenter stated that the data captured about property
valuations was too granular and not relevant to an investor.\344\ With
respect to the data point capturing the valuation date, a commenter
suggested the purpose of disclosing the valuation date is to ensure
that the loan-to-value ratio used in the underwriting process was
current enough to not overstate the collateral value of the mortgaged
property, particularly during periods of declining home prices.\345\
The commenter stated that the precise date of the valuation may be
difficult for some originators to track. As an alternative, the
commenter suggested that we permit issuers to either provide the
valuation date or represent in the relevant transaction agreement that
the valuation was conducted not more than a specified number of days
prior to the original closing of the loan. According to the commenter,
such a representation would ensure that the issuer or originator is
allocated the risk of stale valuation. Further, to address any concern
about the effectiveness of a representation in lieu of disclosure, the
commenter's suggested alternative would only apply in a transaction in
which the transaction agreements provide for a robust third-party
mechanism for evaluating and resolving breaches of representations.
---------------------------------------------------------------------------

\344\ See letter from CMBP.
\345\ See letter from ASF I.
---------------------------------------------------------------------------

As discussed in Section III.A.3 Asset-Level Data and Individual
Privacy Concerns below, we are concerned that providing data about
original property valuations may increase re-identification risk;
therefore, we are not adopting any of the proposed data points related
to original property valuations. In particular, we are concerned that
data about original property valuations could provide a close
approximation of sales price, and thus raise the same re-identification
concern as sales price. Although we are not adopting the proposed data
points related to original property valuations, we are adopting other
data points, such as Original loan amount and Original loan-to-value,
which will provide investors with key information that they need to
perform due diligence and make an informed investment decision.
We also proposed data points requiring disclosure about the most
recent property value, if an additional property valuation was obtained
after the original appraised property value.\346\ One commenter
indicated that these data points appeared to relate only to valuations
obtained by the originator.\347\ The commenter suggested that we
require any sponsor who obtains an alternative property valuation as
part of due diligence to disclose that value to the extent it is the
most recent property value. The commenter also suggested that we
consider disclosure of the lowest alternative property value in the
last six months (in addition to the most recent property value) to
prevent the sponsor from evading the requirements

[[Page 57217]]

by getting alternate values only when the most recent value is lower
than the sponsor would like. Another commenter also suggested that the
``Most recent property value'' data point should only require property
values obtained by the securitization sponsor, although the investor
members of this commenter recommended that this include affiliates of
the securitization sponsor.\348\
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\346\ See proposed Items 2(b)(10), 2(b)(11), 2(b)(12), 2(b)(13),
and 2(b)(14) of Schedule L.
\347\ See letter from Mass. Atty. Gen.
\348\ See letter from SIFMA I.
---------------------------------------------------------------------------

We are adopting these data points, as proposed, with revisions to
address comments received.\349\ In particular, we revised the
definitions to require disclosure of any valuation obtained by or for
any transaction party or their affiliates.\350\ This revision addresses
comments that these data points appear to relate to valuations obtained
only by the originator. The reference to ``obtained by or for any
transaction party or its affiliates'' contained in each definition
should be construed broadly and should include, but not be limited to,
valuations obtained as part of any due diligence conducted by credit
rating agencies, underwriters or other parties to the transaction. We
also made conforming changes to the titles and definitions ``Most
recent AVM model name'' and ``Most recent AVM confidence score''
because these disclosures are providing information about the most
recent property value.
---------------------------------------------------------------------------

\349\ See new Items 1(d)(5) Most recent property value; 1(d)(6)
Most recent property valuation type; 1(d)(7) Most recent property
valuation date; 1(d)(8) Most recent AVM model name; and 1(d)(9) Most
recent AVM confidence score of Schedule AL.
\350\ The final rules also require disclosure of the date on
which the most recent property value was reported.
---------------------------------------------------------------------------

We also considered, as a commenter suggested, adopting data points
to capture the lowest alternative property valuation obtained in the
last six months by, in addition to the originator, the sponsor or its
affiliates. We did not adopt these data points because we are not
persuaded, at this time, that the potential benefits investors may
receive from such information would justify the potential costs and
burdens that may be associated with providing the data. If, however,
alternative property valuations are obtained that reflect substantially
lower valuations, an issuer should consider whether these valuations
need to be disclosed or whether additional narrative disclosure is
necessary so that the disclosure about property valuations is not
misleading.\351\ Originators, sponsors or other transaction parties are
not required to obtain updated valuations in order to respond to the
data points capturing information about recent valuations. Instead,
this requirement is meant to capture valuations conducted subsequent to
the original valuation for whatever reason, such as updated valuations
obtained in the normal course of their business or because other facts
or circumstances required an updated valuation.
---------------------------------------------------------------------------

\351\ See footnote 186 and accompanying text.
---------------------------------------------------------------------------

Information About the Obligor(s)
We proposed a group of asset-level data points that would provide
data about an obligor's credit quality.\352\ This group of data points
was intended to capture information about the obligor(s) income, debt,
employment, credit score and DTI ratio. In light of privacy concerns,
the proposal included ranges, or categories of coded responses, instead
of requiring disclosure of an exact credit score, income or debt amount
in order to prevent the identification of specific information about an
individual. We discuss below the significant comments we received about
this group of data points and the revisions we have made in response to
those comments.
---------------------------------------------------------------------------

\352\ See proposed Items 2(c)(1) through 2(c)(31) of Schedule L.
---------------------------------------------------------------------------

Use of Coded Ranges, Updated Information and Information About Co-
Obligors
The comments we received on this group of data points varied. As
discussed below, several commenters noted that some data points related
to obligors may cause individual privacy concerns if linked to the
obligor even if that information, like obligor credit score, was
provided in ranges.\353\ On the other hand, some commenters generally
opposed coded ranges because they believe exact credit scores are
necessary to evaluate risk, appropriately price the securities or
verify issuer disclosures.\354\
---------------------------------------------------------------------------

\353\ See, e.g., letters from ABA I, AFSA I, CDIA, CU, Epicurus,
SIFMA I, TYI LLC dated Aug. 2, 2010 submitted in response to the
2010 ABS Proposing Release (``TYI''), and WPF I. See also Section
III.A.3 Asset-Level Data and Individual Privacy Concerns.
\354\ See letters from ASF I (expressed views of investors
only), Interactive Data Corporation dated August 2, 2010 submitted
in response to the 2010 ABS Proposing Release (``Interactive''),
Prudential I, and Wells Fargo I.
---------------------------------------------------------------------------

With respect to whether updated obligor information should be
required, one commenter believed that servicers should provide updated
borrower information whenever such information is obtained by the
servicer.\355\ Other commenters, without providing a reason, also
suggested updated credit score information should be provided.\356\
Another commenter, however, suggested that updated credit scores are
obtained infrequently, if at all, and the benefit investors may receive
from updated monthly credit scores across all securitized loans would
not justify the costs to provide such disclosures.\357\ The commenter
recommended requiring this information only if the servicer obtains the
information. We also received a few comments suggesting that we
eliminate the co-obligor categories for various reasons,\358\ and
received a comment suggesting that we provide obligor information for
up to four different obligors.\359\
---------------------------------------------------------------------------

\355\ See letter from MetLife I (suggesting that certain obligor
information be disclosed whenever a servicer obtains updated
information).
\356\ See letters from ASF I and Wells Fargo I.
\357\ See letter from MBA I.
\358\ See letters from BoA I (suggesting that for proposed Items
2(c)(1)-2(c)(12), 2(c)(23) and 2(c)(26)-2(c)(31), if there are
multiple borrowers the data should be aggregated (e.g., income or
assets) and if the data cannot be aggregated (e.g., DTI) the most
conservative value should be used) and CMBP (suggesting that
separate obligor and co-obligor categories are unnecessary because
total obligor income to service the debt and the nature of that
income is sufficient).
\359\ See letter from SFIG I.
---------------------------------------------------------------------------

We are eliminating certain data about obligor income based on
comments received and in light of the recent adoption by the CFPB of
the ability-to-repay requirements under the Truth in Lending Act or
Regulation Z, which includes minimum standards for creditors to
consider in making an ability-to-pay determination when underwriting a
mortgage loan.\360\ We note that all originators will need to adhere to
these requirements and, therefore, it is appropriate to align our
disclosure requirements with how originators will be required to assess
the obligor's income when considering their ability to repay a loan
while not requiring the disclosure of a significant amount of
potentially sensitive obligor information that could increase re-
identification risk.\361\ To achieve this, we omitted the data points
capturing obligor and co-obligor wage income,\362\ obligor and co-
obligor other income,\363\ all obligor wage income,\364\ all obligor

[[Page 57218]]

total income,\365\ and monthly debt.\366\ A commenter suggested that we
require monthly income used to calculate the DTI ratio.\367\ However,
as discussed below in Section III.A.3 Asset-Level Data and Individual
Privacy Concerns, to help reduce re-identification risk, we are not
adopting a number of data points that disclose potentially sensitive
obligor information, such as debt or income.
---------------------------------------------------------------------------

\360\ 12 CFR 1026. See also Ability-to-Repay and Qualified
Mortgage Standards Under the Truth in Lending Act (Regulation Z)
(Jan. 30, 2013) [78 FR 6407], as amended by Ability-to-Repay and
Qualified Mortgage Standards Under the Truth in Lending Act
(Regulation Z) (June 12, 2013) [78 FR 35429] and Amendments to the
2013 Mortgage Rules Under the Real Estate Settlement Procedures Act
(Regulation X) and the Truth in Lending Act (Regulation Z) (July 24,
2013) [78 FR 44686].
\361\ Accordingly, we are not requiring that obligor information
such as credit score, credit score type, income verification,
employment verification, asset verification and length of employment
be provided for more than one obligor.
\362\ See proposed Items 2(c)(26) and 2(c)(27) of Schedule L.
\363\ See proposed Item 2(c)(28) and 2(c)(29) of Schedule L.
\364\ See proposed Items 2(c)(30) of Schedule L.
\365\ See proposed Item 2(c)(31) of Schedule L.
\366\ See proposed Item 2(c)(15) of Schedule L.
\367\ See letter from Mass. Atty. Gen.
---------------------------------------------------------------------------

We are also adopting data points capturing the obligor credit
score, modified from the proposal.\368\ The proposal would have
required issuers to indicate the credit score type and score. If the
score used was FICO, issuers would have been required to indicate the
code that represented a range of FICO credit scores within which the
score fell. The rules we are adopting require disclosure of the exact
credit score used to evaluate the obligor during the origination
process.\369\ We are persuaded by commenters that exact credit scores
are necessary to evaluate risk and to appropriately price
securities.\370\ We also added, in response to comments received, data
points that capture the most recent credit score, credit score type and
credit score date.\371\ We are persuaded that updated scores should be
provided, if obtained, since such information will provide investors
with a picture of the obligor's ongoing ability to repay the loan.
These data points do not require originators, sponsors or transaction
parties to obtain updated information. Instead, this requirement is
meant to capture credit scores obtained, for whatever reason, after the
original score was obtained.
---------------------------------------------------------------------------

\368\ See new Items 1(e)(2) Original obligor credit score and
1(e)(3) Original obligor credit score type of Schedule AL.
\369\ The 2010 ABS Proposal required a coded response
representing ranges of FICO score, if FICO was used. If another type
of credit score was used, an exact score would have been required.
\370\ See letters from ASF I (requesting exact credit score be
required because it has historically been provided on a loan-level
basis and stating that investor members were concerned that moving
from disclosing precise scores to score ranges ``would represent a
significant step backwards in loan-level transparency''), ASF II
(noting that actual FICO score has been provided for some time in
the RMBS industry and that loan-level investors ``believe that it
would be extremely useful in the auto space as well'') Capital One I
(stating that current FICO scores would be very useful for an
investor's credit analysis), Interactive (stating that providing
FICO score ranges would reduce precision by assuming that all loans
within a certain band will behave the same), MetLife I (requesting
specific FICO score for each loan), Prudential I (stating that
ranges of FICO scores or grouped data disclosure are not sufficient
to appreciate the linkages between collateral characteristics),
Prudential III (discussing the importance of certain data points,
such as credit score, to an investor's credit risk analysis and
asserting that predictive risk factors, such as FICO score must be
evaluated in conjunction with other factors, as the combination of
individual loan characteristics and economic environment can add or
diminish the risk of a given loan), Vanguard (stating that providing
investors with specific data, such as FICO scores, that is updated
periodically should foster independent analysis in the ABS market
and improve pricing), and Wells Fargo I (expressing its concern that
by providing investors with ranges of credit scores, issuers would
receive substantially lower pricing for new offerings, which would
lead to substantially higher costs for consumers). In addition,
Ginnie Mae, Fannie Mae and Freddie Mac all disclose exact credit
scores. We understand that certain asset-level information about an
obligor, including credit score, may be considered a ``consumer
report'' subject to regulation under FCRA. As discussed below, the
CFPB has provided guidance to the Commission stating that FCRA will
not apply to asset-level disclosures where the Commission determines
that disclosure of certain asset-level information is ``necessary
for investors to independently perform due diligence,'' in
accordance with the mandate of Securities Act Section 7(c). For a
discussion of the importance of credit scores to predicting
delinquency, see Section III.A.3 below.
\371\ See new Items 1(e)(4) Most recent obligor credit score,
1(e)(5) Most recent obligor credit score type and 1(e)(6) Date of
most recent obligor credit score of Schedule AL. See letters from
ASF I, MetLife I, and Wells Fargo I.
---------------------------------------------------------------------------

Length of Employment
We proposed data points requiring information about the length of
time the obligor and co-obligor have been employed.\372\ We received a
comment that this level of detail about the obligor's length of
employment is unnecessary.\373\ As an alternative, the commenter stated
that it would be sufficient to know if the obligor has been employed by
his or her current employer for 24 months or less or more than 24
months because this is the standard demarcation in industry
underwriting standards. In line with the commenter's suggestion, we
revised the data point to require the issuer to indicate whether the
obligor has been employed by his or her current employer for greater
than 24 months as of the origination date. We believe this approach
will mitigate the burden on issuers, but still provide investors with
valuable information about the obligor's length of employment.
---------------------------------------------------------------------------

\372\ See proposed Items 2(c)(22) and 2(c)(23) of Schedule L.
\373\ See letter from CMBP.
---------------------------------------------------------------------------

Months Bankruptcy and Months Foreclosure
We proposed a data point that would require disclosure of the
number of months since any obligor was discharged from bankruptcy.\374\
We also proposed a data point that would require disclosure, if the
obligor has directly or indirectly been obligated on any loan that
resulted in foreclosure, of the number of months since the foreclosure
date.\375\ We received a comment suggesting this information may be
difficult or costly for many lenders to capture, and that a suitable
substitute would consist of a representation designed to ensure that
the obligor has not recently been discharged from bankruptcy and a
representation designed to ensure that the obligor has not recently
been obligated on a loan that resulted in a foreclosure sale.\376\ The
commenter suggested requiring representations in the relevant
transaction agreements, in lieu of the disclosure of the number of
months since the obligor was discharged from bankruptcy or the number
of months since the foreclosure date, to the effect that at least a
specified number of years have passed since any obligor was discharged
from bankruptcy or was a direct or indirect obligor on a loan that
resulted in a foreclosure sale.
---------------------------------------------------------------------------

\374\ See proposed Item 2(c)(24) of Schedule L.
\375\ See proposed Item 2(c)(25) of Schedule L.
\376\ See letter from ASF I.
---------------------------------------------------------------------------

Another commenter stated, with respect to the data point capturing
the number of months since an obligor has directly or indirectly been
obligated on any loan that resulted in foreclosure, that its dealer and
sponsor members believe that this data point should be limited to
direct obligations, whereas its investor members believed that
guaranteed or co-signed obligations should be included.\377\ Both
groups agreed that this disclosure should be limited to obligations on
residential property that resulted in foreclosure within the last seven
years (so that such foreclosure would appear on a credit report).
---------------------------------------------------------------------------

\377\ See letter from SIFMA I.
---------------------------------------------------------------------------

In response to privacy concerns, we are not adopting either
proposed data point. Section III.A.3 Asset-Level Data and Individual
Privacy Concerns below provides a discussion of these and other related
data points that we are not adopting due to the potential re-
identification risk. As noted below, if an obligor had experienced a
past bankruptcy or foreclosure, we would expect that those events would
have been considered in generating a credit score. Because we are
requiring disclosure of an exact credit score, investors will receive
information they need about past payment behavior to perform due
diligence.
Debt-to-Income
We proposed data points that would require at the time of
securitization disclosure about the total DTI ratio used

[[Page 57219]]

by the originator to qualify the loan.\378\ In addition, at the time of
securitization and on an ongoing basis the front-end and back-end DTI
\379\ ratios would be required for any modified loans.\380\
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\378\ See proposed Item 2(c)(16) of Schedule L.
\379\ The front-end DTI is calculated by dividing the obligor's
total monthly housing expense by the obligor's total monthly income.
The back-end DTI is calculated by dividing the obligor's total
monthly debt expense, which includes expenses such as mortgage
payments, car loan payments, child support and alimony payments,
credit card payments, student loans payments and condominium fees,
by the obligor's total monthly income.
\380\ See proposed Items 2(a)(21)(iv)-(v) of Schedule L and
Items 2(e)(23) and 2(e)(25) of Schedule L-D.
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One commenter suggested DTI ratio disclosure provided at
origination include both front-end and back-end DTI ratios.\381\ The
commenter also suggested we require the DTI ratio for an ARM loan to be
recalculated using the fully indexed interest rate and that we require
disclosure of any subsequent calculations.\382\
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\381\ See letter from Mass. Atty. Gen.
\382\ Id. (also requesting other updated information be
provided, for instance, any values that have been corrected as a
result of due diligence process, such as monthly income and DTI, as
well as any post-modification DTI ratios).
---------------------------------------------------------------------------

The data points we are adopting today require, as proposed and
consistent with the comment received, front-end and back-end DTI ratios
calculated during the loan origination process and at the time of any
loan modification.\383\ We believe both front-end and back-end DTI
ratios provide important data about the total debt load of the obligor,
which provides insight into the obligor's ability to repay the loan. We
are not adopting, as one commenter recommended, data points capturing
information about the DTI ratio recalculated using the fully indexed
interest rate. We believe the DTI figures provided in response to this
data point will be adequate for investors to use, in part, to assess a
borrower's ability to repay. We also note that our approach is
generally consistent with Regulation Z, which requires all loans
covered by Regulation Z to consider DTI ratios calculated using the
fully indexed interest rate.
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\383\ See new Items 1(e)(9) Originator front-end DTI, 1(e)(10)
Originator back-end DTI, 1(m)(12) Modification front-end DTI, and
1(m)(13) Modification back-end DTI of Schedule AL.
---------------------------------------------------------------------------

Information About Servicer Advances
Servicer Advances
We made various changes to the group of data points capturing
information about servicer advances. The proposal included information
about the servicer's responsibility, if any, to advance principal or
interest on a delinquent loan, the method of those advances, the
outstanding cumulative balance advanced and how those advances were
subsequently reimbursed. The requirements we are adopting today include
the information proposed and described above, but also include the
addition and deletion of some data points capturing advances to address
comments received. We discuss immediately below the various changes to
the group of data points capturing information about servicer advances.
Advancing Method
The final rule includes a data point suggested by a commenter
titled ``Advancing method.'' \384\ The data point includes a coded list
that indicates the servicer's responsibility for advancing principal or
interest on delinquent loans. We believe that the response to this data
point will help investors understand the servicer's responsibility with
respect to advances for each particular loan and the pool as a whole.
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\384\ See new Item 1(g)(5) Advancing method of Schedule AL. See
letter from ASF I.
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Advances: Principal, Interest, Taxes and Insurance, and Corporate
We proposed a general disclosure data point that would require, if
amounts were advanced by the servicer during the reporting period, the
disclosure of the amount advanced.\385\ One commenter \386\ suggested
that for RMBS, we split this information into three categories that
would capture principal and interest advances,\387\ tax and insurance
advances,\388\ and corporate advances because these categories of
information are more useful.\389\ In addition, the investor membership
of another commenter requested disclosure about the servicer's
methodologies regarding advances of interest and principal on
delinquent loans, the reimbursement of those advances,\390\ and, for
modified loans, disclosure about non-capitalized and capitalized
advances.\391\ The commenter also suggested aggregating the data points
capturing, for liquidated loans, the various advances the servicer had
made to cover expenses incurred due to concerns that the information
was too granular and the information is immaterial to investors.\392\
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\385\ See proposed Item 1(g)(4) of Schedule L-D.
\386\ See letter from ASF I.
\387\ Id. (noting that principal and interest advances consist
of due but unpaid principal and/or interest on the loan for the
period, as required by the methodology specified in the transaction
agreements).
\388\ Id. (stating that tax and insurance advances consist of
due but unpaid escrow amounts for payment of property taxes and
insurance payments with respect to the mortgaged property).
\389\ Id. (defining corporate advances as consisting of property
inspection and preservation expenses with respect to defaulted
loans).
\390\ See letter from SIFMA I (suggesting that we amend current
pool-level disclosure requirements so that more disclosure is
provided about a servicer's methodologies for advancement of
principal and interest and the reimbursement of advances).
\391\ Id. (referring to the disclosures required under proposed
Items 2(e)(45) Reimbursable modification escrow and corporate
advances (capitalized) and 2(e)(46) Reimbursable modification
servicing fee advances (capitalized) of Schedule L-D).
\392\ See proposed Items 2(m)(1)(iv) through 2(m)(1)(xii) of
Schedule L-D.
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In light of these comments, we have split the final data points
into the following four categories: Principal advances, interest
advances, taxes and insurance advances, and corporate advances. While
one commenter recommended aggregating the principal advances and
interest advances into one data point, the final rule includes data
points capturing interest and principal advances separately since that
is consistent with how other information that relates to principal and
interest is captured in Schedule AL.
We agree with commenters that requiring disclosures about advances
made by the servicer, the outstanding cumulative balance advanced and
how those advances were subsequently reimbursed or addressed will
provide investors insight into the payment status of a particular asset
within the pool and the potential losses that may pass on to the trust.
Therefore, in order to capture how these advances were reimbursed, the
final rule includes additional data points that capture for these same
categories of advances, the cumulative outstanding advanced amount or,
if these advances were subsequently reimbursed, how they were
reimbursed or resolved, such as through the obligor becoming current on
payments, or being reimbursed at the time the loan was liquidated.
Since this information is likely readily available to issuers, we
believe the cost to provide this data should be low.
We have omitted from the final requirements, as a commenter
recommended, proposed data points that would have required the
disclosure of the amount of various expenses advanced and reimbursed,
such as property inspection expenses, insurance premiums, attorney fees
and property taxes paid for liquidated loans. Since the asset-level
reporting requirements do not require that advances be reported in this
fashion at each reporting period, we are uncertain at this time whether
this level of granularity about outstanding advances at loan
liquidation would be beneficial to

[[Page 57220]]

investors. In general, we believe these expenses are captured by other
data points that detail reimbursements at loan liquidation for advances
of taxes and insurance and corporate expenses.\393\
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\393\ See new Items 1(t)(1)(iii) Servicer advanced amounts
reimbursed--principal; 1(t)(1)(iv) Servicer advanced amounts
reimbursed--interest; 1(t)(1)(v) Servicer advanced amount
reimbursed--taxes and insurance; and 1(t)(1)(vi) Servicer advanced
amount reimbursed--corporate of Schedule AL.
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Information About Modified Loans
We proposed a group of data points that would capture information
about modified loans. The responses to this group of data points would
provide data about whether a loan has been modified, the modification
terms and the loan characteristics that were modified. We received
comments suggesting we add \394\ or delete \395\ data points from this
group of data points, and comments suggesting we revise certain data
points within this group.\396\ A commenter suggested adding a
requirement for data that details the number of modification requests
that are granted and denied and the average time that elapses between a
borrower's request for a loan modification and a determination of that
application.\397\ The commenter also requested disclosure of the number
and percentage of modified loans which have re-defaulted.
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\394\ See letters from ASF I and Wells Fargo I.
\395\ See letter from ASF I.
\396\ See letter from SIFMA I.
\397\ See letter from CU.
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We are adopting most of this group of proposed data points,\398\ as
well as additional data points, mainly based on comments received to
provide further transparency around modifications, including any change
in loan characteristics or other loan features.\399\ For instance, the
final requirements include, in addition to the proposed data points,
data points that capture information about step provisions,\400\ the
actual and scheduled ending balances of the total debt owed,\401\ the
date a trial modification was violated,\402\ and the interest rate and
amortization type after modification.\403\ For loans that remain an
adjustable rate mortgage after a modification, additional data points
capture information, such as the index look-back, the post-modification
initial interest rate, the maximum amount a rate can increase or
decrease and information about negative amortization caps.\404\ We did
not add, as a commenter suggested, requirements about the number of
modification requests received, the average time that elapses between a
borrower's request for a loan modification and when a determination is
made, or the number and percentage of modified loans which have re-
defaulted.\405\ We are not persuaded these disclosures would provide a
clear benefit to investors, especially in light of the costs issuers
would incur to provide such information.
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\398\ We are not adopting certain items related to a
modification that would be captured elsewhere in the requirements,
such as information on servicer advances. See, e.g., proposed Items
2(e)(44) through 2(e)(46) of Schedule L-D.
\399\ See letters from ASF I and Wells Fargo I.
\400\ See new Items 1(m)(24)(i) Post-modification interest rate
step indicator; 1(m)(24)(ii) Post-modification step interest rate;
1(m)(24)(iii) Post-modification step date; 1(m)(24)(iv) Post-
modification--step principal and interest; and 1(m)(24)(v) Post-
modification--number of steps of Schedule AL.
\401\ See new Items 1(m)(19) Actual ending balance--total debt
owed and 1(m)(20) Scheduled ending balance--total debt owed of
Schedule AL.
\402\ See new Item 1(n)(3) Most recent trial modification
violated date of Schedule AL.
\403\ See new Items 1(m)(4) Post-modification interest rate type
and 1(m)(5) Post-modification amortization type of Schedule AL.
\404\ See, e.g., new Items 1(m)(21)(vi) Post-modification index
look-back; 1(m)(21)(vii) Post-modification ARM round indicator;
1(m)(21)(viii) Post-modification ARM round percentage; 1(m)(21)(xi)
Post-modification ARM payment recast frequency; 1(m)(21)(xx) Post-
modification ARM interest rate teaser period; 1(m)(21)(xxiii) Post-
modification ARM negative amortization cap; 1(m)(22)(ii) Post-
modification interest only last payment date; 1(m)(24)(ii) Post-
modification step interest rate and 1(m)(24)(iv) Post-modification--
step principal and interest. The group of data points capturing data
about modifications include some data points beyond those proposed
or those that commenters suggested be added. These additional data
points were added to make the required disclosure about modified ARM
loans consistent with the required disclosure about original ARM
loans. See new Items 1(m)(21)(ii) Post-modification ARM Index;
1(m)(21)(ix) Post-Modification initial minimum payment;
1(m)(21)(xiv) Post-modification initial interest rate increase;
1(m)(21)(xvii) Post-modification subsequent interest rate decrease;
and 1(m)(21)(xix) Post-modification payment method after recast of
Schedule AL.
\405\ See letter from CU.
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Most Recent Loan Modification Event Type
We also proposed a data point as part of the ongoing disclosure
requirements that would require the issuer to specify, if the loan has
been modified, the code that describes the type of action that has
modified the loan terms.\406\ The proposed codes were:
1=capitalization-fees or interest have been capitalized into the unpaid
principal balance; 2=change of payment frequency; 3=construction to
permanent; and 4=other. One commenter requested we delete this data
point because the coded list only describes a subset of possible loan
modifications and the type of modification can be determined based on a
comparison of pre-modification and post-modification
characteristics.\407\ Another commenter recommended we expand the coded
list to add forgiveness of principal, rate reductions, maturity
extensions and forgiveness of interest to the list of possible
responses.\408\
---------------------------------------------------------------------------

\406\ See proposed Item 2(a)(21)(ii) of Schedule L.
\407\ See letter from ASF I.
\408\ See letter from SIFMA I.
---------------------------------------------------------------------------

We are adopting this data point because we believe this disclosure
will allow investors to focus on what terms may have changed due to a
modification, which should allow investors to quickly assess whether
changes in the terms of an asset will affect future cash flows or the
risk profile of the asset pool.\409\ We added, as a commenter
recommended, additional codes to the coded list.\410\ We also note that
a loan may go through several loan modifications. Therefore, we revised
the data point to clarify that information about the most recent loan
modification is required each time the disclosure is filed.\411\
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\409\ See new Item 1(m)(1) Most recent loan modification event
type of Schedule AL.
\410\ The coded list was revised to also include the following
possible responses: 4=forgiveness of principal, 5=rate reductions,
6=maturity extensions and 7=forgiveness of interest. If, however,
the type of action that has modified the loan terms is not
identified in the list of possible responses, the issuer should
select the code ``other'' and we encourage the issuer to provide
explanatory language in an Asset Related Document. See Section
III.B.4 Asset Related Documents for a discussion on providing
additional explanatory disclosure about the asset-level disclosures.
\411\ Because asset-level data will be provided monthly,
investors will be able to track previous loan modifications.
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Effective Date of the Most Recent Loan Modification
We proposed a data point titled ``Loan modification effective
date,'' which is the date on which the most recent modification of the
loan has gone into effect. A commenter suggested omitting this data
point from the RMBS requirements because loan modifications are
effective on the mortgage loan's next due date after entry.\412\ While
we acknowledge that may be current practice, we are adopting this data
point as we are mindful that other practices regarding loan
modifications may develop. Further, since responses to this data point
will be provided on an ongoing basis after a loan is modified, we
believe this date will provide a clear indication about the length of
time that has passed since the loan was last modified. We are adopting
this data point with a revision to clarify that only information about
the most recent loan modification is required because, as noted above,
a loan

[[Page 57221]]

may go through several modifications.\413\
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\412\ See letter from ASF I.
\413\ See new Item 1(m)(2) Effective date of the most recent
loan modification of Schedule AL.
---------------------------------------------------------------------------

(2) Commercial Mortgage-Backed Securities
Between Schedule L and Schedule L-D, we proposed 108 data points
that relate specifically to CMBS. The data points we proposed to
require in Schedule L and Schedule L-D were primarily based on the data
template included in the CREFC Investor Reporting Package (``CREFC
IRP''), current Regulation AB requirements, and staff review of current
disclosure. We did not propose, however, to include every piece of
information exactly as specified in the CREFC IRP for two reasons.
First, some of the disclosures required by the CREFC IRP would have
already been captured by proposed data points in the Item 1 General
Requirements, and we believed that those data points would apply to all
types of ABS. Second, we did not believe the level of detail in the
CREFC IRP was necessary for investor analysis because we believed that
the most important data for CMBS is data that relates to the loan term
and the property.
The response to the proposal indicated a general preference for
CREFC IRP in lieu of the proposed requirements.\414\ The preference
applied to both information in the prospectus and ongoing
reporting.\415\ For asset-level reporting at the time of
securitization, commenters seemed to favor initial reporting schedules
commonly attached by issuers to the prospectus (typically referred to
as Annex A) that frequently contain asset-level data based on the
specific types of commercial mortgages in the transaction. Some of
these commenters suggested that the proposed requirements would
duplicate the data provided in the Annex A schedules provided with the
prospectus \416\ and the existence of duplicative data may confuse
investors.\417\ One commenter, who supported requiring Annex A in lieu
of the proposed Schedule L disclosures, suggested that Schedule L does
not reflect the practices that CMBS market participants have developed
to provide ``CMBS investors with clear, timely and useful disclosure
specifically tailored for use by those investors.'' \418\ Finally, one
investor believed it is reasonable to require the disclosures because
much of the same information is currently provided in Annex A of the
offering documents.\419\ The investor suggested, however, that
additional disclosure items to improve current industry disclosure
practices, such as requiring disclosure of actual versus underwritten
property performance metrics, including disclosure of the same
performance metrics for the preceding three years, complete tenant
information versus top three tenant information, rent rolls, full
indebtedness information for each property and standardized tenant and
borrower information.
---------------------------------------------------------------------------

\414\ See, e.g., letters from ABA I (suggesting that we conform
Schedule L data points to IRP standards and the Schedules L and L-D
standards should be a ``guideline'' and that the ``traditional
standards of materiality'' should be the overriding factor in
determining the appropriateness of the disclosure in the offering
document), BoA I (suggesting that we require asset-level disclosure
generally, but allow the industry to set the requirements for
disclosure in the prospectus because requiring a separate Schedule L
would be repetitive of the relevant information already provided in
CREFC's Annex A), CREFC I (suggesting that we conform proposed
Schedule L asset-level data disclosure to the then-current ``Annex
A'' data points formulated by the CREFC ``Annex A'' Committee and/or
consider that the Schedule L filing requirement be satisfied if the
issuer files a Schedule L with the data points identical to the
then-current form of ``Annex A'' adopted by CREFC), CREFC III, MBA I
(suggesting that to the extent we believe more standardized
terminology and a defined core of shared data points for Schedule L
would be benefit investors, that we adopt the core disclosures in
the current industry Annex A schedules and leverage the definitions
already provided in CREFC's IRP), MBA IV, and Wells Fargo I
(suggesting that proposed Schedule L asset-level data disclosure
conform to the then-current ``Annex A'' data points contained in
CREFC's IRP).
\415\ See letters from ABA I, BoA I, CMBS.com I (suggesting that
we establish rules consistent with existing standards where possible
to limit disruptions and costs), CoStar, CREFC I, CREFC III, MBA I,
MBA IV, MetLife I, and Wells Fargo I.
\416\ See letters from BoA I, MBA I, and MBA IV.
\417\ See letter from MBA I (urging that we consider any
increase in cost to be incurred by the issuer to provide the
additional data and cautioning against including duplicative or
extraneous data points at securitization that may hinder rather than
enhance investor review of the loans in the pool).
\418\ See letter from Wells Fargo I.
\419\ See letter from MetLife I.
---------------------------------------------------------------------------

For ongoing reporting, commenters indicated a preference for
previously established industry standards in lieu of the proposal for
several reasons.\420\ For instance, one commenter was concerned that
requiring data points unrelated to CMBS, such as those found in the
general requirements, would cause undue programming burdens without a
material benefit to investors.\421\ Another commenter stated that ``IRP
guidelines identify which data points are restricted (i.e., only
available to certain users), while the SEC data filings to be contained
in Schedule L-D would be public information.'' \422\ The commenter then
stated that publicly disclosing certain sensitive information could put
the underlying properties at a competitive disadvantage, which could
negatively influence the securities. Other commenters also believed
that proprietary information should be considered sensitive
information, and therefore CMBS issuers should not be required to
publicly disclose such information on EDGAR.\423\ Commenters also noted
that based on current requirements, investors would receive CREFC IRP
disclosures 15 days prior to the required filing date of the Schedule
L-D disclosure.\424\ One of these commenters also stated that CMBS
transactions often involve multiple loans with different financial
reporting dates, and the information has to be reviewed by the
appropriate parties, and therefore, any particular reporting date may
not reflect information for the current reporting period.\425\ One
investor suggested, in lieu of adopting our ongoing disclosure
proposal, that we require disclosure of complete rent rolls at least
once per year, the alternatives evaluated with respect to
modifications, all terms related to a modification or assumption and
that we require the format of the industry reporting standard to be in
XML.\426\
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\420\ See letters from CREFC I (suggesting that we tailor
Schedule L-D to take into consideration the data already captured by
the IRP), CREFC III, CoStar, MBA I, MBA IV, MetLife I, and Wells
Fargo I (suggesting that all of the data captured by Schedule L-D is
either captured by the IRP or is not applicable to CMBS with the
exception of only two data points, which they indicated would be
added to what is captured by the IRP).
\421\ See letter from CREFC I.
\422\ See letter from Wells Fargo I.
\423\ See letters from CREFC III (stating that ``the CRE Finance
Council's member constituencies, including investment-grade
investors, believe that most--if not all--of the information on
Schedule L and Schedule L-D should be considered sensitive, and
therefore should continue to be hosted on the issuer's (or trustee's
or third-party's) Web site''), MBA IV, and SFIG II.
\424\ See letters from CREFC I, MetLife I, MBA IV, and Wells
Fargo I.
\425\ See letter from Wells Fargo I.
\426\ See letter from MetLife I.
---------------------------------------------------------------------------

After considering the comments we received, we are adopting a
requirement that issuers of CMBS provide the disclosures contained
under Item 2 of Schedule AL. We believe that investors and market
participants should have access to information to assess the credit
quality of the assets underlying a securitization transaction at
inception and over the life of a security. While we recognize the
current market practice is to include provisions in CMBS transactions
that provide investors with asset-level data for each pool asset, we
note that this market practice is not a mandatory requirement and is
subject to change. As such, we believe the asset-level disclosure
requirements that we are adopting will require a minimum level of
standardized asset-level

[[Page 57222]]

disclosures in the prospectus and over the life of a security
regardless of market practices. We acknowledge commenters' concerns
that requiring asset-level disclosures that deviate from the data
template in the CREFC IRP may raise costs for both issuers and
investors because users are accustomed to working with the CREFC IRP
data templates. We also understand that investors are involved in the
ongoing development of the CREFC IRP. For these reasons, we made
efforts to align our requirements, as much as possible, with pre-
established industry codes, titles and definitions to allow for the
comparability of future offerings with past offerings and to minimize
the burden and cost of reporting similar information in different
formats.
The requirements that we are adopting contain several revisions
from the proposal aimed at aligning our standards with the CREFC IRP.
We reconsidered and are not adopting some data points that do not
correspond to the CREFC IRP or are typically disclosed in Annex A
because they are no longer necessary due to other changes we made, such
as aggregating Schedules L and L-D, or because we are adding data
points based on the CREFC IRP to capture the same or similar
information.\427\ Some data points that we are adopting, however, do
not correspond exactly to data captured by the CREFC IRP, but we
believe the responses to these data points will improve or clarify the
requirements, or aid an investor's ability to make an investment
decision.\428\ We are also adding some data points that correspond to
data captured by the CREFC IRP based on comments received, because the
responses to these data points clarify other data points or they add
more granularity to the data captured by other data points.\429\ In
total, the proposal for CMBS included a total of 182 data points
between the proposed general item requirements of Schedules L and L-D
and the data points specific to CMBS in proposed Schedules L and L-D.
Based on the changes described above, the final requirements include
152 data points.
---------------------------------------------------------------------------

\427\ See, e.g., proposed Items 1(a)(17) Servicing fee--flat
dollar; 1(b)(5) Current delinquency status; 1(b)(6) Number of days
payment is past due; 3(a)(9) Current hyper-amortizing date of
Schedule L and 1(f)(3) Actual principal paid; 1(f)(4) Actual other
amounts paid; 1(f)(14) Current payment status; 1(g)(5) Cumulative
outstanding advanced amount; 1(g)(8) Other loan level servicing
fee(s) retained by servicer; 1(g)(9) Other assess but uncollected
servicer fees; 1(l)(2)(ii) Pledged prepayment penalty waived;
1(l)(2)(iii) Reason for not collecting pledged prepayment penalty;
3(a)(4)(i) Rate at next reset; and 3(a)(4)(iii) Payment at next
reset of Schedule L-D.
\428\ See new Items 2(a)(1) Asset number type; 2(b)(1) Reporting
period begin date; 2(b)(2) Reporting period end date; 2(c)(1)
Originator; 2(c)(2) Origination date; 2(c)(11) Original interest-
only term; 2(c)(13) Underwriting indicator; 2(c)(25) Prepayment
premium indicator; 2(d)(15) Valuation source at securitization;
2(e)(16)(i) Servicing advance methodology; 2(f)(1) Primary servicer;
2(g) Asset subject to demand; 2(g)(3) Demand resolution date;
2(g)(4) Repurchaser; 2(g)(5) Repurchase or replacement reason;
2(k)(5) Post-modification maturity date and 2(k)(6) Post-
modification amortization period of Schedule AL.
\429\ See, e.g., new Items 2(c)(18) Scheduled principal balance
at securitization; 2(d)(2) Property address; 2(d)(3) Property city;
2(d)(4) Property state; 2(d)(5) Property zip code; 2(d)(6) Property
county; 2(d)(13) Year last renovated; 2(d)(28)(i) Date of financials
as of securitization; 2(d)(28)(xiv) Most recent debt service amount;
2(d)(28)(xxi) Date of the most recent annual lease rollover review;
2(e)(3) Reporting period beginning scheduled loan balance; 2(e)(10)
Unscheduled principal collections; 2(e)(14) Paid through date;
2(e)(16)(iv) Total taxes and insurance advances outstanding;
2(e)(16)(v) Other expenses advance outstanding; 2(e)(17) Payment
status of loan; 2(e)(18)(i) ARM index rate; 2(f)(2) Most recent
special servicer transfer date; 2(f)(3) Most recent master servicer
return date; 2(h) Realized loss to trust; 2(i)(1) Liquidation/
Prepayment code; 2(i)(2) Liquidation/Prepayment date; 2(k)(2)
Modification code of Schedule AL. We are also adopting a few data
points that do not correspond to data captured by the CREFC IRP
because our data points clarify the requirements or we received
comments requesting the data points be added and we believe the data
points aid an investor's ability to make an informed investment
decision. See, e.g., new Items 2(d)(19) Most recent valuation
source; 2(e)(1) Asset added indicator; 2(g)(1) Status of asset
subject to demand; and 2(g)(2) Repurchase amount of Schedule AL.
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Finally, we are adjusting the codes, titles, and definitions of
many of the data points to make them largely comparable to the data
definitions set in the CREFC IRP.\430\ We believe that through these
changes and by making the asset-level data requirements for CMBS
largely align with the CREFC IRP many of the disclosures provided under
the CREFC IRP can be used to provide the required disclosures. As a
result, we believe we have mitigated, to a great extent, cost and
burden concerns expressed by commenters and the concern that CMBS
investors will not be able to compare the data with the data from past
deals.
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\430\ See, e.g., new Items 2(c)(28)(xi) Rate of reset frequency;
2(d)(7) Property type; 2(d)(11) Number of units/beds/rooms at
securitization; 2(d)(15) Valuation source at securitization;
2(d)(24) Defeasance status; 2(d)(28)(vii) Operating expenses; and
2(d)(28)(xii) Net operating income/net cash flow indicator at
securitization.
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We also considered concerns raised by commenters as well as
alternatives to the final rules. For instance, one commenter suggested
that the proposed ongoing reporting requirement would add no value to
investors since the industry standard is to make ongoing asset-level
disclosures available earlier than when the proposal would require
them.\431\ We are not persuaded by this comment. We believe that many
transaction agreements, while they provide investors with access to
asset-level disclosures on an ongoing basis, they do not guarantee that
these disclosures will remain available or continue. We believe that
requiring asset-level disclosures, which to a large extent aligns with
how data is currently provided to investors, to be filed on EDGAR will
preserve the information and result in greater transparency in the CMBS
market.
---------------------------------------------------------------------------

\431\ See letter from Wells Fargo I.
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We also considered the concerns raised by some commenters about
requiring disclosure of proprietary information due to the sensitive
nature of the entire data set.\432\ While we acknowledge this concern,
we believe that information about the underlying properties, including
information about the borrowers, will provide CMBS investors and
potential investors with information they need to perform due diligence
and make informed investment decisions and therefore should be
disclosed. We also note that some of the asset-level data that we are
adopting is available to the public, for a fee, through third-party
data providers.\433\
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\432\ See letters from CREFC III, MBA IV, SFIG II, and Wells
Fargo I. Commenters did not identify specific data points that
should be revised or eliminated to help address potential
competitive harm.
\433\ See, e.g., Trepp (providing CMBS data and analytics
services), https://www.trepp.com/cmbs/.
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We considered, as an alternative to the final rules, that issuers
provide standardized asset-level disclosures based solely on an
industry standard, such as the CREFC IRP. We are not persuaded that
this alternative is appropriate because as market practices evolve the
consistency of the data provided by each transaction may differ since
there is no mandatory requirement that all transactions provide the
same type of data. Therefore, we believe adopting a standardized set of
asset-level disclosures helps ensure that investors and other market
participants will always have access to a minimum set of asset-level
disclosures, both at the time of the offering and on an ongoing basis.
While we have tailored the asset-level disclosure requirements for each
asset class, we also understand from comments received that certain
commercial mortgages in a pool may have unique features and that the
standardized set of requirements may not capture all of the unique
attributes of a particular asset or pool due to the various types of
commercial properties.\434\ Although we are not adopting all of the
data points in the CREFC IRP, CMBS issuers may provide

[[Page 57223]]

those data points as additional asset-level disclosures in an Asset
Related Document, as appropriate.\435\
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\434\ See letter from CREFC I.
\435\ See Section III.B.4 Asset Related Documents for further
discussion on how to provide such additional disclosures.
---------------------------------------------------------------------------

With respect to ongoing reporting, we are not adopting a
commenter's suggestion that disclosures about alternatives evaluated
related to a modification or disclosure of all terms related to a
modification or assumption be provided. We believe this information
would be difficult to capture in a standardized way, and we are
uncertain, at this time, whether this information is best captured
within these particular asset-level requirements. We are adopting as
proposed, with revisions to address comments received, expanded
disclosures about tenants. We discuss the comments received on tenant
disclosures below. We are also requiring that asset-level disclosures
be provided in XML. We discuss the requirement that asset-level
disclosures be provided in XML in Section III.B.3 XML and the Asset
Data File.
Tenant Disclosures
We proposed data points about the three largest tenants (based on
square feet), including square feet leased by the tenant and lease
expiration dates of the tenant. Several commenters suggested that we
expand the scope of these disclosures.\436\ For instance, one
commenter, an investor, suggested the initial reporting requirements
include a requirement to capture rent roll information (i.e., detailed
schedules of lease payments for each tenant over time) and additional
tenant and operating performance information, full indebtedness
information and a way to identify borrowers and tenants.\437\ This
commenter also suggested that we require full rent rolls for every
property in a transaction at least once per year. Other commenters also
supported requiring full rent roll and tenant information.\438\
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\436\ See letters from CMBS.com I, CoStar, MetLife I, and
Realpoint LLC dated Aug. 2, 2010 submitted in response to the 2010
ABS Proposing Release (``Realpoint'').
\437\ See letter from MetLife I (suggesting that we also
require: (1) A minimum 3-year history of operating performance for
each underwriting performance metric such as NOI, NCF, etc.; (2)
complete tenant information versus providing information on just the
top three tenants; (3) rent rolls for every property detailing lease
terms for every tenant; (4) full indebtedness information for each
property and terms for any other debt that is serviced with the cash
flows from the property regardless of the ranking of such other debt
in relation to the securitized debt and the conditions under which
borrowers are permitted under the transactions documents to place
additional debt on the same property in the future; and (5) a
practical way to quickly identify borrowers and tenants, perhaps
through a standardized convention to allow investors to more easily
be able to identify their portfolio level exposures). See also
letters from CMBS.com I and Realpoint (suggesting that we require
similar information).
\438\ See letters from CoStar (suggesting that we require
disclosures of the full rent roll rather than just the largest three
tenants and that these disclosures should include: (1) Tenant name
(unless a residential property); (2) tenant business line; (3) lease
start date; (4) lease amount including any concessions or associated
expenses such as tenant improvements; (5) expense sharing
arrangements; (6) co-tenancy clauses; and (7) lease renewal
options), CMBS.com I, and Realpoint (suggesting that we require
disclosure of either the entire rent roll, or at least the largest
tenants and all other tenants with lease expiration dates that occur
within five years of the cut-off date, and that these disclosures
should include: (1) Base rent; (2) pass-through expense
reimbursements (taxes, insurance, repairs, maintenance, utilities
and other operating expenses); and (3) capital improvement
reimbursements because these disclosures would permit them to
conduct testing of gross rents, net operating income, net cash flow,
debt service coverage ratio and other financial metrics).
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We are adopting as proposed data points about the three largest
tenants (based on square feet), including square feet leased by the
tenant and lease expiration dates of the tenant.\439\ While some
commenters requested several changes to the tenant disclosures for
CMBS, the consensus among commenters was that rent roll information for
each property supporting the mortgages underlying the CMBS was needed.
We are not adopting a requirement within the asset-level requirements
to require rent roll information at this time because it is not clear
how to standardize detailed schedules of lease payments for each tenant
over time on an asset-level basis, and we did not receive comment
suggesting how this could be done.
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\439\ See new Items 2(d)(25)(i) Largest tenant; 2(d)(25)(ii)
Square feet of largest tenant; 2(d)(25)(iii) Date of lease
expiration of largest tenant; 2(d)(26)(i) Second largest tenant;
2(d)(26)(ii) Square feet of second largest tenant; 2(d)(26)(iii)
Date of lease expiration of second largest tenant; 2(d)(27)(i) Third
largest tenant; 2(d)(27)(ii) Square feet of third largest tenant and
2(d)(27)(iii) Date of lease expiration of third largest tenant of
Schedule AL.
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Valuations
Proposed Schedule L and Schedule L-D both included data points
aimed at capturing valuation information on the properties underlying
the commercial mortgages.\440\ The valuation data points contained in
Schedule L would provide disclosure of the most recent property
valuation as of the measurement date in the prospectus. The valuation
data points contained in Schedule L-D would require the most recent
property valuation available as of the reporting period that the
Schedule L-D covered. One commenter suggested that the final rule
should capture data on periodic updating and monitoring of commercial
real estate assets because periodic (annual) appraisal and evaluation
``updates'' of commercial real estate are commonly performed.\441\
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\440\ See proposed Items 3(b)(7), 3(b)(8) and 3(b)(9) of
Schedule L.
\441\ See letter from AI.
---------------------------------------------------------------------------

We are adopting, with some revisions, data points that capture the
most recent appraisals or valuations available at the time of the
securitization and on an ongoing basis.\442\ While the information
required by these data points is substantially similar to information
captured by the CREFC IRP, the data points that we are adopting
specifically require, in line with revisions made to RMBS property
valuation data points, disclosure of any valuation ``obtained by or for
any transaction party or its affiliates.'' The reference to ``obtained
by or for any transaction party or its affiliates'' contained in each
definition should be construed broadly to include, but not be limited
to, valuations obtained as part of any due diligence conducted by
credit rating agencies, underwriters or others parties to the
transaction. We are also adopting data points that identify the source
of the property valuation and the date of the valuation.\443\ These
data points do not require that originators, sponsors or transaction
parties obtain updated valuations. Instead, this requirement is meant
to capture valuations conducted subsequent to the original valuation
for whatever reason, such as updated valuations obtained in the normal
course of their business or because other circumstances require an
updated valuation. We believe providing investors updated valuation
information will allow them to understand changes in the value of
collateral that is meant to protect against losses. Furthermore, since
we are requiring issuers to disclose the information only if it is
already available to them, we believe that the disclosures will not be
unduly burdensome.
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\442\ See Items 2(d)(14) Valuation amount at securitization and
2(d)(17) Most recent value of Schedule AL.
\443\ See Items 2(d)(15) Valuation source at securitization,
2(d)(16) Valuation date at securitization, 2(d)(18) Most recent
valuation date, and 2(d)(19) Most recent valuation source of
Schedule AL.
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(3) Automobile Loan or Lease ABS
Between Schedule L and Schedule L-D, we proposed 110 data points
that relate to ABS backed by auto loans and 116 data points that relate
to ABS backed by auto leases. These proposed data points were comprised
of a combination of data points, some of which were proposed to apply
to all

[[Page 57224]]

asset types and others which were proposed to apply only to auto loans
or auto leases. The proposed data points were derived from the
aggregate pool-level disclosure that has been commonly provided in Auto
ABS prospectuses. The proposal also included data points related to
obligor and co-obligor income, assets, employment and credit scores.
For Auto ABS, support for the proposal varied between issuers and
investors. Many investors supported the asset-level model with certain
modifications from the proposal.\444\ Investor commenters stated that
``the provision of loan-level data will strengthen the Auto ABS market
and make it more resilient over the long term.'' \445\ We note,
however, that even the investors that support asset-level disclosure
have suggested various modifications and limitations to address issues
such as privacy and competitive concerns. One investor commenter
acknowledged that the incremental benefit of some proposed fields may
be difficult to justify as compared to the costs of providing such
information.\446\ In light of standard industry practices and issuer
concerns about costs and the disclosure of proprietary information,
investor commenters recommended adopting fewer data points than were
originally proposed.\447\
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\444\ See letters from ASF II (expressed views of loan-level
investors only), MetLife I, and Vanguard. There were, however, other
investors who did not support the asset-level model. See letters
from ASF II (expressed views of grouped-account investors only)
(supporting a grouped account approach for Auto ABS) and Capital One
II (noting that they invest in more senior tranches of Auto ABS and
recommending that no additional asset-level disclosure be adopted
for Auto ABS).
\445\ See letter from ASF II (expressed views of loan-level
investors only).
\446\ See letter from MetLife I.
\447\ See letters from ASF II (expressed views of loan-level
investors only), MetLife I, and Vanguard.
---------------------------------------------------------------------------

Issuers typically commented that asset-level reporting was not
necessary for Auto ABS because they claimed that the Auto ABS market
continues to be robust and active despite no material changes to
disclosure practices.\448\ One group of issuers also raised concerns
that asset-level data requirements would push certain investors \449\
and issuers \450\ out of the Auto ABS market. They were also concerned
that the auto industry could be affected if Auto ABS sponsors have to
pass increased costs to automobile purchasers because Auto ABS sponsors
are unable to access more cost-effective financing through the Auto ABS
market.\451\ These issuer commenters noted that several Auto ABS
sponsors estimated the costs and employee hours necessary to reprogram
systems and business procedures to capture, track and report all of the
items for auto loans currently set forth in the proposal. The average
cost estimated by those sponsors was approximately $2 million, and the
average number of employee hours was approximately 12,000.\452\ This
group of issuer commenters also argued that Congress never intended to
require asset-level data for Auto ABS by pointing to a Senate report
published three months prior to the adoption of the Dodd-Frank
Act.\453\ One trade association commented that such requirements were
not necessary for Auto ABS because ``most investors have been able to
adequately underwrite auto loan transactions--including during the
economic downturn--on the basis of current disclosure, due to the
conservative nature of the structure, the deleveraging and granularity
of the underlying assets, and their understanding of the issuer's
servicing capabilities.'' \454\ One group of issuer commenters noted
possible re-identification risks.\455\ These same commenters also
expressed concern about the potential release of proprietary
information.\456\
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\448\ See letter from VABSS IV.
\449\ See letter from VABSS IV (stating that they ``understand
that some investors who do not have the internal resources to
analyze data at the loan-level may choose not to invest in Auto ABS
because they perceive that they would be at an informational and
analytic disadvantage to other investors or because they believe
they have a potential risk of liability to their own investors for
not being able to utilize all the available data in their
analysis'').
\450\ See letter from VABSS IV (stating that they ``believe that
loan-level disclosure requirements could act as a barrier to entry
for smaller finance companies that may not have the necessary
systems, personnel or resources to capture, track and report loan-
level data, thus discouraging the entry of new issuers into the Auto
ABS market . . . [and] that these sponsors that are unable to access
the Auto ABS markets due to concerns about loan-level disclosure
could be placed at a competitive disadvantage to banks and more
highly-rated sponsors that are able to either comply with loan-level
disclosure or access other less burdensome sources of funding (e.g.,
bank deposits)'').
\451\ See letter from VABSS IV.
\452\ Id.
\453\ See letter from VABSS III (quoting a portion of the
Committee on Banking, Housing, and Urban Affairs' discussion of
Section 942 of the Dodd-Frank Act in Senate Report No. 111-176:
``The Committee does not expect that disclosure of data about
individual borrowers would be required in cases such as
securitizations of credit card or automobile loans or leases, where
asset pools typically include many thousands of credit agreements,
where individual loan data would not be useful to investors, and
where disclosure might raise privacy concerns'').
\454\ See letter from ASF II (expressed views of issuer members
and grouped account investors only).
\455\ See letter from VABSS IV.
\456\ See letter from VABSS IV (noting that Auto ABS sponsors
make ``considerable investments in technology and human capital to
capture, maintain and analyze [the asset-level] data, and to build
proprietary credit scoring models and models that predict residual
value of leased vehicles'' and stating that making such data
publicly available could harm them in the marketplace).
---------------------------------------------------------------------------

Issuer commenters generally noted that, if any data reporting was
to be required, alternative models such as grouped account data, more
robust pool-level reporting or some combination of the two would be
sufficient.\457\ Several commenters argued that alternatives such as
grouped account data or expanded pool stratification would provide
additional meaningful information to investors while at the same time
addressing individual privacy concerns and proprietary concerns.\458\
One group of issuer commenters suggested we consider conditioning the
provision of asset-level reporting to compliance with potential risk
retention rules.\459\ These commenters also stated that certain data
points are often the same for all assets in an Auto ABS.\460\ They
suggested that, if we adopt asset-level reporting for Auto ABS such
data points should not be required if (1) the responses would be
identical for each asset in the pool \461\ and (2) adequate pool-level
disclosure is given in the prospectus. In response to the 2014 Re-
Opening Release, some commenters expressed opposition to asset-level
requirements for Auto ABS.\462\
---------------------------------------------------------------------------

\457\ See, e.g., letters from ABA I, AmeriCredit, ASF II
(expressed views of dealers and sponsors only), BoA I, Capital One
I, VABSS I, and Wells Fargo I.
\458\ See letters from ABA I and VABSS IV (in which the
commenters also conceded that ``presenting grouped data is in many
ways more difficult, as it required more time and resources to
gather the loan-level data and then compile it for presentation as
grouped data).
\459\ See letter from VABSS IV (suggesting that we consider ``an
outright exemption from all loan-level data requirements for any
Auto ABS sponsor that satisfies the final risk retention
requirements adopted by the Commission'' or, at the very least, ``an
exemption for Auto ABS sponsors who retain a horizontal or first-
loss position as required by the final risk retention requirements
given the direct alignment of interests of sponsors, servicers and
investors in Auto ABS and the absorption of all possible losses on
these structures by the horizontal `slice' retained by the
sponsor'').
\460\ See letter from VABSS IV.
\461\ These commenters also suggested that a response to a data
point may be omitted if no more than 1% of the securitized pool
would have a different response. See letter from VABSS IV.
\462\ See, e.g., letters from AFSA II (opposing requirements for
Auto ABS for several reasons including its belief that the Auto ABS
market is liquid, many proposed data points would not apply to Auto
ABS and for proprietary concerns), Capital One II (opposing
requirements for Auto ABS by suggesting that asset-level data is not
necessary for investor due diligence, and also noting that the
benefits for Auto ABS do not outweigh the costs), SFIG II (noting
auto loan ABS has not traditionally included asset-level
disclosures), and Wells Fargo III (suggesting that asset-level data
for Auto ABS would provide little to no incremental value to
investors).

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

[[Page 57225]]

As we developed the standards we are adopting today, we took into
consideration how the proposed data points relate to how information is
collected, tracked and reported in the Auto ABS marketplace, as well as
how auto loans and leases differ from RMBS and CMBS, and how those
differences impact the type of information available for collection and
the utility of such information to investors. We also considered
potential impacts on the automobile industry if Auto ABS sponsors pass
down higher financing costs to consumers. After considering the
comments received, we are adopting, as proposed, with some modification
to individual data points and some reduction in the amount of data
required to be provided, asset-level disclosures specific to Auto ABS.
We did consider, as an alternative, whether asset-level reporting
should be required in Auto ABS at all. We considered the legislative
history of Section 942 of the Dodd-Frank Act, which was cited by
commenters.\463\ We also considered whether an alternative reporting
model, such as grouped account data, pool stratifications or some
combination of the two, would provide adequate information to
investors. In the end, we concluded that none of these alternatives
provide the benefits that we believe investors should receive. We
agreed with investors that ``[g]rouped data is preset, which prohibits
a customizable analysis of pool information by an investor and
presupposes that critical credit metrics and indicators do not change
over time . . . [while] the transparency afforded by loan-level data
will allow all investors to evaluate, in any market and on an
independent basis, whether the pools and structures are robust and the
ratings assigned are appropriate.'' \464\ We also do not agree that
Auto ABS sponsors should be exempt from providing asset-level data if
that sponsor has retained a certain amount of risk. As stated in
Section II.A Economic Motivations, while we expect risk retention rules
will result in better underwriting practices, we believe that more is
needed to fully restore incentive alignment and credit screening in the
securitization market. If sponsors are exempt from asset-level
disclosure based on compliance with risk retention requirements,
investors and market participants would have fewer Auto ABS pools
available for asset-level comparisons. Finally, we are not making any
data points optional on the basis that such data point may be the same
across an Auto ABS pool. While we understand that commenters intended
to consolidate repetitive data points, we believe that the asset-level
presentation of data in a standardized format is an important tool to
investors who want to make asset-to-asset comparisons across different
Auto ABS pools. If responses to certain data points are omitted, an
investor wanting to make pool-to-pool comparisons would first have to
locate the omitted information in one or more prospectuses and then
recreate portions of the asset-level data files before accurate
comparisons could be made.
---------------------------------------------------------------------------

\463\ We note that we first proposed asset-level disclosure
requirements for Auto ABS prior to the enactment of the Dodd-Frank
Act. While we believe the asset-level disclosure requirements being
adopted today are consistent with the mandate in Section 7(c) of the
Securities Act, as added by Section 942 of the Dodd-Frank Act, we do
not view that mandate as limiting our long standing authority to
prescribe disclosure standards, as necessary and appropriate, for
purposes of federal securities laws.
\464\ See letter from ASF II (expressed views of loan-level
investors only).
---------------------------------------------------------------------------

We believe that the requirements we are adopting for Auto ABS will
provide a better picture of the composition and characteristics of the
pool assets, which is critical to an investor's ability to make an
informed investment decision about the securities. We have considered
commenters' concerns that Auto ABS is, in many ways, different from
RMBS and CMBS, including that Auto ABS generally fared better during
the recent financial crisis. We do not believe, however, that the
grouped account data model proposed by commenters would provide
information in sufficient detail for investors to compare and evaluate
various Auto ABS pools and structures. With asset-level data, users
would not have to rely on pre-determined groupings of information, and
instead would be able to compare and evaluate the underlying assets
using the individual pieces of information they consider to be
material.\465\
---------------------------------------------------------------------------

\465\ Id. See also letter from Prudential I.
---------------------------------------------------------------------------

While we are requiring that Auto ABS issuers provide asset-level
data, we have significantly reduced the scope of the asset-level data
required from the amount proposed. In doing so, we considered an
estimate provided by several Auto ABS sponsors that, if we only adopted
the data points proposed in their comment letter,\466\ the average
costs and employee hours necessary to reprogram systems and otherwise
comply with the asset-level disclosures would be approximately $750,000
and 3,500, respectively.\467\ In line with this suggestion, we have
attempted to reduce burden and cost concerns by reducing the scope of
the asset-level data required to align with the smaller scope of
information that commenters, including investors, believed should be
required for Auto ABS. While the final rules do not exactly mirror the
scope of information the group of Auto ABS sponsors suggested be
required, we believe that the significantly smaller scope of
information we are requiring, coupled with revisions to align the data
points with current industry standards should lead to substantially
lower costs versus what was originally proposed. These substantially
lower costs should also reduce any potential impact on the automobile
industry. We also believe that the smaller scope of information and the
revisions we made to the data points still provide investors with
sufficient information to evaluate the security. Under the final
requirements we are adopting, issuers are required to disclose the
information described in Item 3, with respect to auto loans, and Item
4, with respect to auto leases, of Schedule AL for each auto loan or
lease in the pool, as applicable. As noted above, we proposed 110 data
points that relate to ABS backed by auto loans and 116 data points that
relate to ABS backed by auto leases. In addition to the data points
that were eliminated when Schedules L and L-D were condensed,\468\ 40
of the proposed data points for auto loans are not being adopted and 57
of the proposed data points for auto leases are not being adopted. We
are adopting 12 new data points for auto loans and 15 new data points
for auto leases.\469\ Accordingly, the final rules will require issuers
to provide 72 data points for ABS backed by auto loans and 66 data
points for ABS backed by auto leases. Fewer data points should reduce
the cost of providing asset-level data for Auto ABS issuers and also
should help to address

[[Page 57226]]

individual privacy concerns.\470\ We also believe that this reduction
in scope should help address competitive concerns that were raised by
issuers. While we acknowledge that some competitive concerns may still
exist, we believe that the information we are requiring about the
underlying assets will provide Auto ABS investors and potential
investors with information they need to perform due diligence and make
informed investment decisions and therefore should be disclosed. We
also note that some of the asset-level data that we are adopting is
available to the public, for a fee, through third-party data
providers.\471\
---------------------------------------------------------------------------

\466\ See letter from VABSS IV. For ABS backed by auto loans,
these commenters proposed that 29 data points should be adopted
unconditionally (i.e., for each asset regardless of the response or
the structure of the transaction) and 28 data points be adopted
conditionally (i.e., they may be omitted if certain conditions are
met, such as homogenous responses). For ABS backed by auto leases,
these commenters proposed that 30 data points should be adopted
unconditionally and 26 data points be adopted conditionally.
\467\ The estimate of $750,000 and 3,500 hours is in contrast to
this commenter's estimate of $2 million and 12,000 hours for all of
the Auto ABS data points as originally proposed.
\468\ When the Schedules L and L-D were condensed (as discussed
in Section III.B.2 The Scope of New Schedule AL), we eliminated 10
repetitive data points for ABS backed by auto loans and 8 repetitive
data points for ABS backed by auto leases.
\469\ Data points that have been added since the proposing
release were either based on comments or added for purposes of
clarity or consistency.
\470\ See Section III.A.3 Asset-Level Data and Individual
Privacy Concerns.
\471\ See letter from VABSS II (stating that there are
relatively inexpensive databases containing car owner information
linked to vehicle make, model, year, and more). New and used vehicle
values can also be obtained for free via publicly available sources.
See, e.g., www.kbb.com.
---------------------------------------------------------------------------

We are not adopting a significant number of data points where we
agreed with commenters that the data point was not applicable to Auto
ABS or where we are concerned that the benefits investors may receive
from the disclosures may not justify the potential costs and burdens to
issuers to provide the disclosures.\472\ Solely with respect to ABS
backed by auto leases, we are also not adopting several data points
that were part of the general schedule of data points proposed for all
asset classes because the information required to be provided in the
items is not something that is relevant for auto leases (for example,
items that require issuers to provide interest, principal or
amortization information would not be relevant because auto leases do
not have amortization, interest, interest rates or principal
balances).\473\
---------------------------------------------------------------------------

\472\ For all Auto ABS, these include the following Schedule L
data points: Item 1(a)(3) Asset group number; Item 1(a)(9) Original
amortization term; Item 1(b)(6) Number of days payment is past due;
Item 1(b)(7) Current payment status; Items 4(b)(1) and 5(b)(1)
Geographic location of dealer; Items 4(c)(13) and 5(c)(13)--Length
of employment: obligor; and Items 4(c)(11) and 5(c)(11) Obligor
asset verification. And the following Schedule L-D data points: Item
1(c) Asset group number; Item 1(f)(8) Current scheduled asset
balance; Item 1(f)(13)--Number of days payment is past due; Item
1(f)(14) Current payment status; Item 1(f)(15) Pay history; Item
1(f)(16) Next due date; Item 1(g)(5) Cumulative outstanding advance
amount; Item 1(g)(7) Stop principal and interest advance date; Item
1(j) Liquidated indicator; Item 1(k) Charge-off indicator; Item
1(k)(2) Charged-off interest amount; Item 1(l)(1) Paid-in-full
indicator; Item 1(l)(2)(i) Pledged prepayment penalty paid; Item
1(l)(2)(ii) Pledged prepayment penalty waived; and Item 1(l)(2)(iii)
Reason for not collecting pledge prepayment penalty.
\473\ For ABS backed by auto leases, these include the following
additional Schedule L data points: Item 1(a)(11) Interest type; Item
1(a)(12) Amortization type; Item 1(a)(13) Original interest only
term; and Item 1(b)(3) Current interest rate. And the following
Schedule L-D data points: Item 1(f)(2) Actual interest paid; Item
1(f)(3) Actual principal paid; Item 1(f)(4) Actual other amounts
paid; Item 1(f)(17) Next interest rate; and Item 1(k)(1) Charged-off
principal.
---------------------------------------------------------------------------

As with RMBS and CMBS, we believe that, unless the individual data
points are standardized across all issuers of Auto ABS, the utility of
asset-level data is generally limited. While commenters have pointed
out several areas where there is a difference between how we have
proposed that data be presented and how information is generally
collected in Auto ABS,\474\ we are unaware of any publicly available
investor reporting data standards for Auto ABS. We also received many
comments directed at individual data points, many of which were seeking
changes to the format of the information, the range of possible
responses for a particular data point, or the data point's title or
definition. Some commenters also made suggestions on how we could make
the data point better align with common business practices.
Accordingly, we considered each of these comments, and we made changes
that we believe improve or clarify the disclosure, mitigate cost
concerns, and/or implement industry standards when doing so would not
materially diminish the value of the disclosures to investors. We
discuss below the significant comments we received about individual
data points along with the revisions we have made in response to those
comments.
---------------------------------------------------------------------------

\474\ See letter from VABSS IV.
---------------------------------------------------------------------------

Information About the Obligors
We proposed a group of asset-level data points that would provide
data about an obligor's credit quality.\475\ This group of data points
was intended to capture information about the obligor(s) income, debt,
employment, credit score and assets. In light of privacy concerns, the
proposal proposed ranges, or categories of coded responses instead of
requiring disclosure of an exact credit score, income or amount of
assets in order to prevent the identification of specific information
about an individual. We discuss below the significant comments we
received about this group of data points and the revisions we have made
in response to those comments.
---------------------------------------------------------------------------

\475\ See proposed Items 4(c)(1) through 4(c)(21) and Items
5(c)(1) through 5(c)(21) of Schedule L.
---------------------------------------------------------------------------

Obligor Income and Payment-to-Income Ratio
We proposed ten obligor income data points (five for auto loans and
five for auto leases) that would require issuers to provide responses
to various data points that relate to the obligor's income.\476\
Several commenters suggested that these proposed obligor income data
points be replaced with a new payment-to-income ratio data point, where
the issuer would specify the code indicating the scheduled monthly
payment amount as a percentage of the total monthly income of all
obligors at the origination date while providing its methodology for
determining monthly income in the prospectus.\477\ We agree that the
new payment-to-income ratio data point provides investors with
sufficient information about the obligor's income, and accordingly, we
are not adopting any of the ten proposed obligor income data points and
instead are adopting the new payment-to-income ratio data point
proposed by commenters.\478\
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\476\ See proposed Items 4(c)(6), 4(c)(15), 4(c)(17), 4(c)(19)
and 4(c)(20) of Schedule L-D for auto loans and proposed Items
5(c)(6), 5(c)(15), 5(c)(17), 5(c)(19) and 5(c)(20) of Schedule L-D
for auto leases.
\477\ See letters from ASF II (expressed views of loan-level
investors only) and VABSS IV.
\478\ See new Items 3 (e)(6) and 4 (e)(6) of Schedule AL.
---------------------------------------------------------------------------

Obligor Income and Employment Verification
We proposed data points that would require issuers to indicate the
codes describing the extent to which the obligor's income and
employment have been verified.\479\ One group of issuer commenters
stated that it is standard industry practice for obligors to self-
report income and employment on the credit application and this
information is only verified for the riskiest customers, but then went
on to say that Auto ABS sponsors do not systematically capture this
information in their origination files, and if they do, they do not
keep it for more than 90 days.\480\ We cannot reconcile these two
comments. If most income and employment information is self-reported on
the credit application, then that information should be captured in the
loan file. Furthermore, if it is standard industry practice to not
verify the self-reported information except for the riskiest customers,
we assume that such verification is part of the loan or lease approval
process that goes to the creditworthiness of the obligor or lessee.
These same commenters also argued that obligor income and employment
verification data points would only provide marginal additional value
if other data points, such as obligor FICO

[[Page 57227]]

score, payment-to-income ratio and LTV ratio, were provided. Investor
commenters stated that obligor income and employment verification data
points would provide valuable information.\481\ Accordingly, we are
adopting these data points substantially as proposed.\482\
---------------------------------------------------------------------------

\479\ See proposed Items 4(c)(7) and 4(c)(9) of Schedule L-D for
auto loans and proposed Items 5(c)(7) and 5(c)(9) of Schedule L-D
for auto leases.
\480\ See letter from VABSS IV.
\481\ See letter from ASF II (expressed views of loan-level
investors only) (``Verifying a borrower's income and employment can
offset not having a top credit score. Conversely, not verifying
these items can exacerbate an average or below average credit
score.'').
\482\ See new Items 3(e)(3), 3(e)(4), 4(e)(3), and 4(e)(4) of
Schedule AL.
---------------------------------------------------------------------------

Co-Obligor Items
We proposed a total of eighteen co-obligor data points (nine for
auto loans and nine for auto leases) that would require issuers to
provide information about co-obligors such as credit score data \483\
and data about income, employment and assets used for qualification
purposes.\484\ Several commenters suggested that all eighteen of the
proposed co-obligor data points be deleted as they are not particularly
relevant to the analysis of Auto ABS \485\ and that providing all of
these co-obligor data points is not warranted given the additional time
and expense associated with gathering the information.\486\ These
commenters suggested that the proposed co-obligor data points be
replaced with a data point that would indicate whether the loan or
lease has a co-obligor.\487\ A group of commenters representing Auto
ABS investors commented that it is sufficient to note the presence of a
co-obligor, which would indicate that the primary obligor was not
creditworthy enough to sustain the loan or lease on its own.\488\ We
agree, and we are not adopting any of the eighteen proposed co-obligor
data points and instead are adopting only the co-obligor (or co-lessee,
as applicable) present indicator data point suggested by
commenters.\489\
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\483\ See proposed Items 4(c)(4), 4(c)(5) and 4(c)(6) of
Schedule L-D for auto loans and proposed Items 5(c)(4), 5(c)(5) and
5(c)(6) of Schedule L-D for auto leases.
\484\ See proposed Item 4(c)(8), 4(c)(10), 4(c)(12), 4(c)(14),
4(c)(16) and 4(c)(18) of Schedule L-D for auto loans and proposed
Item 5(c)(8), 5(c)(10), 5(c)(12), 5(c)(14), 5(c)(16) and 5(c)(18) of
Schedule L-D for auto leases.
\485\ See letter from VABSS IV.
\486\ See letter from ASF II (expressed views of loan-level
investors only).
\487\ See letters from ASF II (expressed views of loan-level
investors only) and VABSS IV.
\488\ See letter from ASF II (expressed views of loan-level
investors only).
\489\ See new Items 3 (e)(5) and 4 (e)(5) of Schedule AL.
---------------------------------------------------------------------------

Information About Terms of the Loan or Lease and Payment Activity
We proposed a group of data points that would capture information
related to the terms of the loan or lease and payment activity, such as
original and current loan or lease terms, interest rates, prepayments,
interest paid-through dates and servicer advances. Taken together, the
responses to these data points would provide insight into how the loan
or lease has performed versus how it was intended to perform when
originated. Commenters' response to this group of data points varied,
with some commenters suggesting that some data points in this group
were unnecessary or redundant and others advising that these data
points provide valuable information about the loan or lease. We discuss
below the significant comments we received about this group of data
points and the revisions we have made to data points within this group.
Original and Current Terms and Initial Grace Periods
We proposed data points that would require issuers to indicate
original and current loan terms in months.\490\ One group of issuer
commenters noted that, for marketing reasons, auto loans and leases are
occasionally offered with first payment dates that are deferred for up
to 90 days, during which time interest or financing fees accrue but no
payments are due.\491\ These commenters proposed that these items
should be reported to reflect the number of scheduled payments due or
remaining (converting non-monthly pay loans to monthly pay) to clearly
indicate the payments on the loan in order to avoid odd month
terms.\492\ We believe it is important for investors to be provided the
actual number of months in the term, even if such number includes a
grace period where no payments are being made. We agree with
commenters, however, that any grace period should be accounted for.
Therefore, in addition to adopting the original and current term data
points (with minor revisions for timing clarifications, as detailed in
other sections of this release), we are also adopting a new initial
grace period data point, which requires the issuer to indicate the
number of months during which interest accrues but no payments are due
from the obligor (or, for auto leases, the number of months during the
term of the lease for which financing fees are calculated but no
payments are due from the lessee).\493\ If there is no initial grace
period for an auto loan or lease, the response to this new data point
would be zero.
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\490\ See proposed Items 1(a)(7) and 1(a)(8) of Schedule L and
Item 1(f)(18) of Schedule L-D.
\491\ See letter from VABSS IV.
\492\ Id.
\493\ See new Items 3(c)(12) and 4(c)(8) of Schedule AL.
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Original Interest Rate
We proposed a data point that would require issuers to provide the
rate of interest at the time of origination.\494\ One group of issuer
commenters believed that this item is generally not readily available
or easily trackable by Auto ABS sponsors because it is industry
practice to track only the current interest rate on auto loans.\495\
Although we understand that there may be some costs to the sponsor or
issuer associated with tracking the original interest rate, we believe
it is important for investors to be able to compare the current
interest rate to the original interest rate and we note that any costs
associated with tracking the original interest rate would be one-time
costs, as the response to this data point would be static. Therefore,
we are adopting the original interest rate data point for ABS backed by
auto loans substantially as proposed, with minor clarifying
modifications as described elsewhere in this release.\496\ Because auto
leases do not have interest rates in the same manner as auto loans, we
are not adopting this data point for ABS backed by auto leases.
---------------------------------------------------------------------------

\494\ See proposed Item 1(a)(10) of Schedule L.
\495\ See letter from VABSS IV.
\496\ See new Item 3(c)(5) of Schedule AL.
---------------------------------------------------------------------------

Scheduled Payments and Actual Amounts Collected
We proposed data points that would require issuers to provide the
principal and interest payments that were scheduled to be collected for
the reporting period\497\ and provide any unscheduled principal or
interest adjustments during the reporting period.\498\ We also proposed
data points that would require issuers to indicate actual amounts
collected during the reporting period.\499\ As suggested by commenters,
we are not adopting data points that separate interest and principal
payment streams for ABS backed by auto leases.\500\ Instead, for ABS
backed by auto leases, we are adopting one data point that will capture
the payment amount that was scheduled to be collected for the

[[Page 57228]]

reporting period and another requiring issuers to provide the total of
any other amounts collected during the reporting period.\501\ With
respect to ABS backed by auto loans, a group of issuer commenters
stated that the scheduled payment data points are not relevant because
auto loans are simple interest loans which have no scheduled principal
or interest payment amounts and are not subject to principal or
interest adjustments.\502\ These same commenters stated that data
points relating to actual amounts collected should only be required to
be disclosed if a transaction is structured with separate interest and
principal waterfalls or separate allocations of other amounts paid to
the investors.\503\ One investor commenter asked that both the
scheduled payment and actual amounts collected data points be included
for ABS backed by auto loans.\504\ We believe that the scheduled
interest amount, scheduled principal amount and other principal
adjustments data points provide valuable information about payments
that are expected to be received, and we are adopting these data points
as proposed. The scheduled interest amount and scheduled principal
amount data points will require the issuer to provide the amount of
interest and principal, respectively, that were due to be paid during
the reporting period, which will show quantitatively how far in advance
a loan was paid or how far behind the obligor is in making
payments.\505\ The other principal adjustments data point would show
the amount of any adjustments that are made to the principal balance of
the loan, including but not limited to prepayments.\506\ We agree with
the issuer commenters that the other interest adjustment data point is
unnecessary as interest adjustments would be reflected between
responses to the original interest rate data point and the current
interest rate data point. Accordingly, we are not adopting the other
interest adjustment data point. We also believe that the actual
payments collected data points provide relevant information about how
each asset is performing, regardless of whether the transaction is
structured with separate principal and interest waterfalls or a single
waterfall. Furthermore, only requiring that responses to these data
points be provided for transactions that have separate principal and
interest waterfalls runs counter to the goal of facilitating investors'
ability to compare the underlying asset-level data of a particular
asset pool with other pools. Therefore, we are adopting each of these
proposed data points for ABS backed by auto loans.
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\497\ See proposed Items 1(f)(10) and 1(f)(11) of Schedule L-D.
\498\ See proposed Items 1(f)(5) and 1(f)(6) of Schedule L-D.
\499\ See proposed Items 1(f)(2), 1(f)(3) and 1(f)(4) of
Schedule L-D.
\500\ See letter from VABSS IV.
\501\ See new Items 4(f)(13) and 4(f)(15) of Schedule AL.
\502\ See letter from VABSS IV.
\503\ Id.
\504\ See letter from Vanguard.
\505\ See new Items 3(f)(13) and 3(f)(14) of Schedule AL.
\506\ See new Item 3(f)(15) of Schedule AL.
---------------------------------------------------------------------------

Prepayment and Interest Paid Through Date
One commenter suggested we add a new ``voluntary prepayment'' data
point.\507\ We agree that an asset-level prepayment data point will
provide valuable information to investors about how prepayments will
alter the timing of expected cash flows. Accordingly, we have slightly
modified this commenter's suggestion for clarification purposes and to
better coordinate with other asset-level requirements. For ABS backed
by auto loans, we are adopting an interest paid through date data point
that requires issuers to provide the date through which interest is
paid with the current payment, which is the effective date from which
interest will be calculated for the application of the next
payment.\508\ For ABS backed by auto leases, we are adopting a similar
data point which requires issuers to provide the date through which
scheduled payments have been made, which is the effective date from
which amounts due will be calculated for the application of the next
payment.\509\
---------------------------------------------------------------------------

\507\ See letter from Vanguard.
\508\ See new Item 3(f)(23) of Schedule AL.
\509\ See new Item 4(f)(18) of Schedule AL.
---------------------------------------------------------------------------

Servicer Advanced Amount
We proposed a data point that would require issuers to specify the
amount advanced by the servicer during the reporting period (if any
such amounts were advanced).\510\ One group of issuer commenters stated
that this information was already provided under the proposed current
delinquency status data point.\511\ We do not agree that the responses
to these two data points provide the same information, as servicing
advances can be made if payment on a loan or lease is less than 30 days
late (depending on when payments to investors are due in relation to
the due date of the loan or lease payment). The current delinquency
status data point only provides information to investors after the loan
or lease becomes more than 30 days delinquent. Therefore, we are
adopting the servicer advanced amount data point as proposed.\512\
---------------------------------------------------------------------------

\510\ See proposed Item 1(g)(4) of Schedule L-D.
\511\ See letter from VABSS IV.
\512\ See new Items 3(f)(22) and 4(f)(17) of Schedule AL.
---------------------------------------------------------------------------

Modifications and Extensions
We proposed a data point that would require issuers to indicate
whether an asset was modified from its original terms during the
reporting period.\513\ A group of investor commenters suggested that
this data point be replaced with a new modification type data
point.\514\ As suggested by commenters, the modification type data
point would require issuers to indicate the code that describes the
reason for the modification and would only be required if the asset was
modified.\515\ A group of issuer commenters suggested that the
modification indicator data point be replaced with a new payment
extension data point.\516\ The payment extension data point would
require issuers to indicate the number of months the loan was extended
during the reporting period and would only be required if the loan or
lease was extended beyond its original terms during the applicable
reporting period.\517\ Investor commenters also suggested that we
replace the proposed lease term extension indicator data point \518\
with a lease extension data point that would require the issuer to
indicate whether the lease has been extended and would capture any
incremental lease payments to the trust.\519\ We agree with the
commenters that these new and modified items are both useful and
applicable to Auto ABS. We believe that it is important to include the
proposed modification indicator data point so that investors can easily
confirm whether the loan was modified during the reporting period. We
also believe that the suggested modification type data point provides
valuable information to investors based on the concerns that were
raised by issuer commenters. If, in fact, modifications other than
payment and term extensions are rare and usually lead to a repurchase,
investors should

[[Page 57229]]

be alerted to loans or leases that have these rare modifications.
Accordingly, we are adopting the proposed modification indicator data
point for all Auto ABS, as well as the modification type data point and
the payment extension data point for ABS backed by auto loans and the
lease extension data point for ABS backed by auto leases (rather than
adopting the lease term extension indicator data point as
proposed).\520\
---------------------------------------------------------------------------

\513\ See proposed Item 1(h) of Schedule L-D.
\514\ See letter from ASF II (expressed view of loan-level
investors only).
\515\ Id.
\516\ See letter from VABSS IV. This commenter opposed including
the modification type data point suggested by loan-level investors,
stating that ``[o]ther than payment extensions and term extensions,
there simply are not a material number of credit-related
modifications to auto loans [and leases] where the auto loan [or
lease] is not required to be repurchased by the servicer and
therefore remains in the Auto ABS transaction.''
\517\ Id.
\518\ See proposed Item 5(h) of Schedule L-D.
\519\ See letter from ASF II (expressed views of loan-level
investors only).
\520\ See new Items 3(f)(3), 3(j)(1), 3(j)(2), 4(f)(3), and
4(j)(2) of Schedule AL.
---------------------------------------------------------------------------

Lease-Specific Data Points
We proposed several data points that only apply to ABS backed by
auto leases that relate to information such as residual values,
termination, wear and tear, mileage, sale proceeds, and
extensions.\521\ Commenters also pointed out several proposed data
points in the general item requirements that were not applicable to ABS
backed by auto leases. For instance, a group of issuer commenters noted
that the securitization value, which is widely used in the lease
securitization industry, is the correct valuation of the size of the
lease.\522\ The same group of commenters also suggested that the
proposed original asset amount data point \523\ be revised to an
acquisition cost data point that requires the issuer to provide the
original acquisition cost of the lease.\524\ We agree with both
comments, so we are adopting the securitization value and
securitization value discount rate data points,\525\ rather than the
asset balance data points,\526\ and are adopting the acquisition cost
data point \527\ rather than the proposed original asset amount data
point.
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\521\ See proposed Items 5(b)(9) through 5(b)(10) of Schedule L
and Items 5(b) through 5(h) of Schedule L-D.
\522\ See letter from VABSS IV.
\523\ See proposed Item 1(a)(6) of Schedule L.
\524\ See letter from VABSS IV.
\525\ See new Items 4(f)(5) and 4(f)(6) of Schedule AL.
\526\ See proposed Items 1(f)(7) and 1(f)(8).
\527\ See new Item 4(c)(3) of Schedule AL.
---------------------------------------------------------------------------

With respect to the residual value of the lease, we proposed
several data points that require the issuer to provide the base and
updated residual values of the vehicle and provide the source of such
residual values.\528\ Both issuer and investor commenters agreed that
the base residual value data point should be adopted (although one
group of issuer commenters suggested that the data point be amended to
capture ``the securitized residual value of the leased vehicle, as
determined by the sponsor and described in the prospectus'').\529\
Investor commenters also stated that it is important for the issuer to
disclose how the base residual value is calculated.\530\ One group of
issuer commenters stated that neither the updated residual value nor
the source of the updated residual value data points should be adopted
because the Auto ABS structure for leases is set up based on an
original residual value that does not change, that it is enhanced to
withstand residual losses and any gains just benefit investors while
the costs and burdens to provide this information would be high.\531\
While investor commenters did not specifically comment on either the
updated residual value or the source of the updated residual value data
points, they did request that we adopt a contractual residual value
data point, as it would be valuable in determining the likelihood that
the lessee will purchase the vehicle at the end of the lease or turn it
back in.\532\ Issuer commenters noted that the contractual residual
value data point suggested by investor commenters is not as relevant as
the base residual value or securitization residual value.\533\ We agree
with investors that the base residual value data point, the source of
the base residual value data point and the contractual residual value
data point each provide different and valuable information about a
lease. Therefore, we are adopting the base residual value and source of
base residual value data points as proposed as well as the new
contractual residual value data point as suggested by investor
commenters.\534\ We are not adopting the proposed updated residual
value data point or the source of updated residual value data point as
these data points do not provide enough additional beneficial
information to investors to justify the additional costs that would be
imposed upon issuers.
---------------------------------------------------------------------------

\528\ See proposed Items 5(b)(9) and 5(b)(10) of Schedule L and
Items 5(b) and 5(c) of Schedule L-D.
\529\ See letters from ASF II (expressed views of loan-level
investors only) and VABSS IV.
\530\ See letter from ASF II (expressed views of loan-level
investors only).
\531\ See letter from VABSS IV.
\532\ See letter from ASF II (expressed views of loan-level
investors only) (suggesting that under this contractual residual
value data point, issuers would provide the stated amount that a
lessee needs to pay to purchase the vehicle at the end of the lease
term).
\533\ See letter from VABSS IV.
\534\ See new Items 4(d)(8), 4(d)(9), and 4 (d)(10) of Schedule
AL.
---------------------------------------------------------------------------

(4) Debt Security ABS
We proposed that issuers of debt security ABS provide responses to
the general data points enumerated in Item 1 of Schedule L and the nine
data points specific to debt security ABS.\535\ The comment we received
on the proposal suggested that we require the disclosure of the CUSIP
number, ISIN number, or other industry standard identifier of the debt
security.\536\
---------------------------------------------------------------------------

\535\ The asset-level requirements for debt security ABS were
proposed under the title ``corporate debt.'' ABS backed by corporate
debt securities are typically issued in smaller denominations than
the underlying security and the ABS are typically registered under
Section 12(b) of the Exchange Act for trading on an exchange.
Additionally, a pool and servicing agreement may also permit a
servicer or trustee to invest cash collection in corporate debt
instruments which may be securities under the Securities Act. An
asset pool of an issuing entity includes all other instruments
provided as credit enhancement or which support the underlying
assets of the pool. If those instruments are securities under the
Securities Act, the offering must be registered or exempt from
registration if the instruments are included in the asset pool as
provided in Securities Act Rule 190, regardless of their
concentration in the pool. See Securities Act Rule 190(a) and (b).
See also Section III.A.6.a of the 2004 ABS Adopting Release.
\536\ See letter from SIFMA I.
---------------------------------------------------------------------------

As noted above, under the final rule we are integrating the general
item requirements into the requirements for each asset type. Therefore,
under the final rule, issuers of debt security ABS are only required to
provide the asset-level disclosures required under new Item 5 Debt
Securities. After integrating the proposed general data points, the
final requirements for debt security ABS have been reduced from 83
possible proposed data points to 60 data points.
Also, in response to comments received, we have revised the asset
number data point to require a standard industry identifier assigned to
the security be provided for each security, if such number is
available. Public access to the responses to these data points and to
the responses to other data points that require disclosure of the SEC
file number and Central Index Key (``CIK'') number for the debt
security will provide investors, including secondary market investors,
access to more information about each debt security in the pool. As
proposed, the final rules will require that issuers provide more
standardized information to investors about the debt securities
underlying the ABS. The disclosures we are adopting today require the
title of the underlying security, origination date, the minimum
denomination of the underlying security, the currency of the underlying
security, the trustee, whether the security is callable, the frequency
of payments that will be made on the security and whether an underlying
security or agreement is interest bearing along with other basic
characteristics of the debt securities. At a minimum, these asset-level
disclosures will provide investors with

[[Page 57230]]

the basic characteristics of the underlying debt securities in a
standardized format.
Public availability of all of the asset-level information we are
requiring to be disclosed regarding debt security ABS should reduce the
burden on investors, including secondary market investors, to obtain
this information, which should reduce investors' costs of conducting
their own independent analysis and, thereby, reduce their need to rely
on credit ratings. In addition, we believe that having an issuer
collect and report asset-level information will improve efficiency,
since a single entity, as opposed to multiple investors, will incur the
information gathering costs.
We recognize that although investors will benefit from receiving
these asset-level disclosures, issuers will face an increase in
information gathering and reporting costs, including costs related to
system re-programming and technological investment. We recognize that
the costs registrants may face will depend on the extent to which the
information required to be disclosed is already available to issuers or
will have to be newly collected, as well as the extent to which the
information is already being disclosed to investors in some
transactions. Although we are unable to estimate the magnitude of these
costs with any precision, we believe the costs registrants will incur
to provide the data should be nominal since the data that is required
should already be readily available to registrants, especially since
the asset-level disclosures required primarily relate to the
performance of the security and the basic characteristics of the
security, such as the title of the security, payment frequency, or
whether it is callable. A description of each data point required for
debt security ABS is provided in Item 5 of Schedule AL.
(5) Resecuritizations
In a resecuritization, the asset pool is comprised of one or more
ABS. We proposed that issuers of a resecuritization provide, at the
time of the offering and on an ongoing basis, asset-level data for each
ABS in the pool and for each asset underlying each ABS in the pool.
Under the proposal, resecuritizations would provide the same data as
required for debt security ABS for each ABS in the asset pool. In
addition, issuers would provide asset-level data for the assets
underlying each ABS in the asset pool in accordance with the asset-
level disclosure applicable to that particular asset class.
We received several comments that expressed concern about the
proposal. Some commenters expressed concern over the cost and burden to
provide the asset-level disclosures for the assets underlying the
securities in comparison to what they believed to be a limited
benefit.\537\ One of these commenters was concerned about securities
law liability for the asset-level disclosures of the assets underlying
the securities.\538\ Other commenters were concerned that asset-level
data may not be available for the assets underlying an ABS that was
originated prior to the compliance date of the rule.\539\ Finally, to
address some of these concerns, some commenters suggested exemptions
from the asset-level disclosure requirements for some
resecuritizations.\540\
---------------------------------------------------------------------------

\537\ See, e.g., letters from MBA I (stating that asset-level
data about the underlying ABS would not be useful because only
certain classes of an ABS are resecuritized, and the loans backing a
particular class are typically supported by the underlying loan pool
and do not correlate to specific classes of ABS) and Wells Fargo I
(suggesting that the asset-level data required for a
resecuritization would be of little benefit to investors in cases
where a resecuritization involved a mixture of bonds because
investors would have to understand the payment structure of each
underlying ABS and the effort involved in doing this would likely be
prohibitive for most investors in such cases). See also SIFMA I
(expressing concerns about the cost to provide the information
without providing their own cost estimate).
\538\ See letter from Wells Fargo I (suggesting that with
respect to the proposed ongoing disclosure requirements that
subjecting the issuer, underwriter or any other resecuritization
transaction party to securities law liability for such information
is not appropriate because (i) such information has already been
filed, subject to securities law liability, with respect to the
underlying transactions, and (ii) there is no practical way for the
resecuritization parties to do the due diligence with respect to the
underlying filings that would need to be done to accept securities
law liability for them).
\539\ See, e.g., letters from ABA I, ASF I, BoA I, J.P. Morgan
I, MBA I (with respect to RMBS), and SIFMA I. See also letter from
Citi (indicating that issuers will often be unable to meet the
disclosure requirements because they generally do not have access to
the underlying asset-level files).
\540\ See letters from SIFMA I (suggesting an exemption from the
proposed asset-level disclosures requirements for (1)
resecuritizations with ``seasoned'' pool assets or (2)
resecuritizations where the underlying securities fall below some
percentage of the asset pool (e.g., 10 percent as supported by the
dealers and sponsor members or ``a substantially lower percentage''
as supported by the investor members)) and Wells Fargo I (suggesting
an exemption from the proposed asset-level disclosures requirements
for ``all bonds that are re-securitized that are from transactions
which closed prior to the effective date of Regulation AB'' because
a failure to do so ``would eliminate the availability of re-
securitizations as an important tool for investors to prudently
restructure or de-risk legacy positions'' and it ``could impair the
value of such positions due to the resultant illiquidity'').
---------------------------------------------------------------------------

After considering the comments received, we are adopting the
proposal with revisions. For each registered resecuritization, issuers
must provide, at the time of the offering and on an ongoing basis for
each ABS in the asset pool, the same disclosures that are required for
debt security ABS. Therefore, information about the security, such as
the title of the security, payment frequency, whether it is callable,
the name of the trustee and the underlying SEC file number and CIK
number is required.\541\ If a resecuritization consists of securities
where we have adopted asset-level disclosure requirements (i.e., RMBS,
CMBS, or Auto ABS), then a second tier of asset-level information is
required. The second tier of asset-level disclosure is about the assets
(such as each mortgage, loan or lease) underlying the ABS being
resecuritized. For instance, in an offering where the asset pool
includes RMBS, then the data points in Item 5 of Schedule AL would be
required for every RMBS security in the asset pool, as well as the data
points in Item 1 for each loan underlying each RMBS security.
Accordingly, if asset-level disclosures are not required for a
particular asset type, then an issuer is only required to provide the
debt security ABS disclosures for each ABS in the underlying asset
pool.
---------------------------------------------------------------------------

\541\ See Section III.A.2.b)(4) Debt Security ABS.
---------------------------------------------------------------------------

We are adopting an exemption from the new requirement to provide
asset-level disclosure about the underlying ABS if the underlying ABS
was issued prior to the compliance date for the asset-level disclosure
requirements. We noted concerns about the cost to provide the
disclosures, whether the information would be available, securities law
liability for information provided by third parties and the other
concerns raised by commenters. We acknowledge that investors will not
have access to asset-level data for the resecuritized ABS for some
period of time. We do not believe that providing this exemption would
negatively affect investors because the resecuritization will still be
subject to existing disclosure requirements, including pool-level
disclosure requirements and the exemption will be limited over time by
the underlying ABS becoming subject to the asset-level disclosure
requirements. We also note that there have been no registered
resecuritization offerings in the last few years. Further, as noted
above, existing Securities Act Rule 190 requires that all information
about the underlying ABS be disclosed in accordance with our
registration rules and forms.\542\ Therefore, if the underlying ABS was
issued prior to the compliance date for the asset-level disclosure
requirements, investors in a resecuritization will receive updated and
current information about pool data, static pool, risk factors,

[[Page 57231]]

performance information, how the underlying securities were acquired,
and whether and when the underlying securities experienced any trigger
events or rating downgrades.
---------------------------------------------------------------------------

\542\ See Securities Act Rule 190. See also Section III.A.6.a of
the 2004 ABS Adopting Release.
---------------------------------------------------------------------------

The final requirement to provide asset-level data in the prospectus
and in periodic reports will require that issuers provide more
information to investors about resecuritizations than previously
required. The asset-level disclosures about the ABS in the asset pool
will provide investors, at a minimum, with the basic characteristics of
a resecuritization. Further, by requiring disclosure of the SEC file
number and CIK number for ABS being resecuritized, it will be easier
for investors to locate more information about each resecuritized ABS.
Public access to such information, including, when applicable, access
to information about the assets underlying the ABS being resecuritized,
should reduce investors' burden to obtain this information, and reduce
their need to rely on credit ratings because investors will have access
to the information in order to conduct their own independent analysis.
In turn, this will allow for a more effective and efficient analysis of
the offering and should help foster more efficient capital formation.
We do not agree with a commenter's view that there is a limited
correlation between loan performance and bond performance and, as a
result, there is little benefit from investors receiving asset-level
data about the assets underlying the ABS being resecuritized.
Specifically, the commenter believed that the asset-level data about
the underlying ABS would not be useful because only certain classes of
an ABS are resecuritized, and the loans backing a particular class are
typically supported by the entire underlying loan pool, and therefore
do not correlate to any specific classes of ABS. We disagree and
believe that to determine the performance of any particular
resecuritization, an understanding of each loan in the underlying loan
pool is necessary in order to analyze how the underlying loans impact
the cash flows to the resecuritization.
In addition, with respect to the availability of information,
Section 942(a) of the Dodd-Frank Act eliminated the automatic
suspension of the duty to file under Section 15(d) of the Exchange Act
for ABS issuers and granted the Commission the authority to issue rules
providing for the suspension or termination of such duty.\543\ As a
result, ABS issuers with Exchange Act Section 15(d) reporting
obligations will be required to report asset-level information, thereby
easing concerns that the asset-level information for residential
mortgages, commercial mortgages, auto loans, auto leases, or debt
securities underlying the ABS in the resecuritization would not be
available on an ongoing basis.
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\543\ See Suspension of the Duty to File Reports for Classes of
Asset-Backed Securities Under Section 15(d) of the Securities
Exchange Act of 1934, Release No. 34-65148 (Aug. 17, 2011) [76 FR
52549].
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With respect to the cost and burden to provide the disclosures and
concerns about securities law liability for information obtained from
third parties, we believe the existing ability to reference third party
information, in part, addresses these concerns. As is the case today,
issuers may satisfy their disclosure requirements by referencing third-
party reports if certain conditions are met.\544\ New Forms SF-1 and
SF-3 require that the asset-level information be filed on Form ABS-EE
and incorporated into the prospectus.\545\ Similarly, revised Form 10-D
requires incorporation by reference to Form ABS-EE.\546\ If the
underlying ABS is of a third-party, we will permit issuers to reference
the third-party's filings of asset-level data provided that they
otherwise meet the existing third-party referencing conditions.
Consequently, reports of all third parties, not only those that are
significant obligors, may be referenced. Because issuers are not
incorporating third-party filings by reference, but instead merely
referencing these filings, we believe we have addressed concerns about
issuers' filing burdens and securities law liability for asset-level
information filed by third parties.
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\544\ See Item 1100(c)(2) of Regulation AB [17 CFR
229.1100(c)(2)]. In many instances, the issuer of the ABS being
resecuritized would be considered a significant obligor as defined
in Item 1101(k) of Regulation AB. If so, issuers may reference
information about the significant obligors located in third-party
reports as set forth in Item 1100(c)(2).
\545\ See Section III.B.5 New Form ABS-EE, General Instruction
IV and Item 10 of Form SF-1 and General Instruction IV and Item 10
of Form SF-3.
\546\ See Item 1A of Form 10-D.
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While some commenters raised concerns about the cost to implement
such requirements, commenters did not provide any quantitative cost
estimates to comply with this requirement. Implementation of this
requirement, even if a registrant can reference third-party filings,
will require system re-programming and technological investment. In
addition, registrants will incur a nominal cost to provide data about
the securities being resecuritized. In general, the data about the
securities, which track the debt security ABS requirements, should
include data already readily available to issuers, especially since the
requirements primarily include basic characteristics of the security,
such as the title of the security, payment frequency, and whether it is
callable. Registrants will incur a nominal cost to provide this data in
the format requested. If asset-level data is required for the assets
underlying the securities being resecuritized, registrants will, to the
extent they cannot otherwise incorporate by reference or reference
third-party filings, incur costs to obtain the data required about the
assets underlying the securities being resecuritized or to convert data
available to them into the required format. These costs were discussed
earlier in the release in the context of complying with asset-level
disclosure for RMBS, CMBS and Auto ABS. We believe such costs are
appropriate because investors should receive information about the
securities that will allow them to conduct their own independent
analysis. In addition to the items noted above that mitigate cost
concerns, we also believe the extended timeframe for compliance of 24
months lowers the overall burden placed on registrants and market
participants and should provide ample time for registrants and market
participants to assess the availability of the asset-level information
required for resecuritizations and to put the information in the format
required.
3. Asset-Level Data and Individual Privacy Concerns
(a) Proposed Rule
As we noted in the 2010 ABS Proposing Release and the 2011 ABS Re-
Proposing Release and as the staff noted in the 2014 Staff Memorandum,
we are sensitive to the possibility that certain asset-level
disclosures may raise concerns about the underlying obligor's personal
privacy. In particular, we noted that asset-level data points requiring
disclosures about the geographic location of the obligor or the
collateralized property, credit scores, income and debt may raise
privacy concerns. We also noted, however, that information about credit
scores, employment status and income would permit investors to perform
better risk and return analysis of the underlying assets and therefore
of the ABS.
In light of privacy concerns, we did not propose to require issuers
to disclose an obligor's name, address or other identifying
information, such as

[[Page 57232]]

the zip code of the property.\547\ We also proposed ranges, or
categories of coded responses, instead of requiring disclosure of an
exact credit score \548\ or income or debt amounts in order to prevent
the identification of specific information about an individual.\549\
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\547\ We proposed to require the broader geographic delineations
of MSAs in lieu of the narrower geographic delineation of zip codes.
\548\ For asset-level data points that require disclosure of
obligor credit scores, we proposed coded responses that represent
ranges of credit scores (e.g., 500-549, 550-599, etc.). The ranges
were based on the ranges that some issuers used in pool-level
disclosure.
\549\ For monthly income and debt ranges, we developed the
ranges based on a review of statistical reporting by other
governmental agencies (e.g., $1,000-$1,499, $1500-$1,999, etc.). See
the 2010 ABS Proposing Release at 23357.
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The 2014 Staff Memorandum summarized the comments received related
to potential privacy concerns and outlined an approach to address these
concerns that would require issuers to make asset-level information
available to investors and potential investors through an issuer-
sponsored Web site rather than having issuers file on EDGAR and make
all of the information, including potentially sensitive information,
publicly available. Under the Web site approach, issuers could take
steps to address potential privacy concerns associated with asset-level
disclosures, including through restricting Web site access to
potentially sensitive information. The Web site approach also would
require issuers to file a copy of the information disclosed on a Web
site with the Commission in a non-public filing to preserve the
information and to enable the Commission to have a record of all asset-
level information provided to investors. The prospectus would need to
disclose the Web site address for the information, and the issuer would
have to incorporate the Web site information by reference into the
prospectus. In addition, issuers would be required to file asset-level
information that does not raise potential privacy concerns on EDGAR in
order to provide the public with access to some asset-level
information.
(b) Comments on Proposed Rule
In response to the 2010 ABS Proposal, several commenters noted that
the asset-level requirements would raise privacy concerns.\550\ These
commenters suggested that, while the proposed asset-level disclosures
would not include direct identifiers, if the responses to certain
asset-level data requirements are combined with other publicly
available sources of information about consumers it could permit the
identity of obligors in ABS pools to be uncovered or ``re-identified.''
\551\ A number of commenters noted that, if an obligor was identified
through this process, then the obligor's personal financial status
could be determined.\552\ The commenters noted that if obligors are re-
identified, then information about an obligor's credit score, monthly
income and monthly debt would be available to the general public
through the EDGAR filing. Commenters also noted that if personal
information was linked to an individual through the asset-level
disclosures this may conflict with \553\ or undermine \554\ the
consumer privacy protections provided by federal and foreign laws
restricting the release of individual information and increase the
potential for identity theft and fraud.\555\
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\550\ See, e.g., letters from ABA I, CU, MBA I (suggesting that
the use of Metropolitan Statistical Areas or Divisions in lieu of
zip code would not mask the location of particular properties),
VABSS I, and WPF I (also suggesting that the proposed asset-level
disclosures would not mask the location of particular properties and
additionally that they may provide information useful in the re-
identification process). In general, these commenters were concerned
that it may be possible to identify an individual obligor by
matching asset-level data about the underlying property or asset
with data available through other public or private sources about
assets and their owners.
\551\ See, e.g., letter from WPF I (suggesting that attempts to
mask the location of particular properties and the identity of
borrowers are not workable because there is too much information
about mortgages available that would allow the location of a
particular property to be found).
\552\ See, e.g., letters from ABA I, AFSA I, American Resort
Development Association dated July 22, 2010 submitted in response to
the 2010 ABS Proposing Release, ASF II, CDIA, CNH I, CU, Anita B.
Carr dated May 12, 2010 submitted in response to the 2010 ABS
Proposing Release, Daniel Edstrom dated May 12, 2010 submitted in
response to the 2010 ABS Proposing Release, Epicurus, ELFA I, FSR,
MBA I, National Association of Federal Credit Unions dated Aug. 2,
2010 submitted in response to the 2010 ABS Proposing Release,
Navistar, SIFMA I, SLSA, TYI, VABSS I, Vantage Score Solutions LLC
dated Aug. 2, 2010 submitted in response to the 2010 ABS Proposing
Release (``Vantage I''), and WPF I.
\553\ See, e.g., letters from ABA I (stating that the asset-
level disclosures would potentially result in release to the public
of detailed non-public personal financial information (as defined in
Title V of the Gramm-Leach-Bliley Act (``GLBA'')) as well as
consumer report information (as defined in FCRA), CDIA (suggesting
that certain data may fall under the protections of FCRA, GLBA, or
both), Epicurus, TYI (suggesting that if the disclosures could be
used to identify a borrower in a European-based ABS, this may
violate European privacy laws), and WPF I.
\554\ See letter from WPF I (suggesting that if data that may
fall under the scope of FCRA is posted on EDGAR and subsequently
linked to an individual, the data may become public and, therefore,
the transfer of this information to others may contravene FCRA
restrictions).
\555\ See letters from CDIA, VABSS II, and WPF I (suggesting
that the cost of identity theft would not only fall on borrowers,
but also on asset holders and, therefore, investors would demand
higher returns to protect against those losses).
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Most commenters did not support the use of coded ranges, noting it
would not address privacy concerns \556\ and would not further the
Commission's objective of improving disclosure for ABS investors. Two
commenters noted that using coded ranges would not mitigate privacy
concerns because the ranges are so narrowly defined they would identify
the actual score or dollar amount of income.\557\ Other commenters
believed that the use of ranges for disclosures, such as credit scores
and income, or requiring a broader geographic identifier for the
property, such as MSAs, would greatly reduce the utility of the
information.\558\ Commenters also noted that disclosure of data that
relates to the credit risk of the obligor, such as an obligor's exact
credit score, income, or employment history, would strengthen
investors' risk analysis of ABS involving consumer assets.\559\
Commenters also suggested that exact income and credit scores are
necessary to appropriately price the securities \560\ and verify issuer
disclosures.\561\
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\556\ But see letters from CDIA (noting that the proposed ranges
or categories may provide some privacy protection) and ASF II
(expressed views of loan-level investors only) (suggesting the use
of range-based reporting for certain credit sensitive fields may
also provide a solution to privacy concerns).
\557\ See letters from CDIA and MBA I.
\558\ See letters from ASF I (expressed views of investors
only), Beached Consultancy (suggesting that the metropolitan area is
too broad to be useful, and, therefore, a ``3-digit zip code''
should be permitted), and Wells Fargo I.
\559\ See letters from ASF I (requesting disclosure of exact
credit score and noting that requiring ranges would be a step back
in terms of transparency), Interactive (noting that asset-level
granularity is essential for robust evaluation of loss, default and
prepayment risk associated with RMBS), Prudential I (suggesting that
ranges of FICO score bands are not sufficient to appreciate the
linkages between collateral characteristics), and Wells Fargo I
(expressing concern that restricting information available to
investors could result in substantially lower pricing for new
residential mortgage backed securities offerings). See also SIFMA I
(expressed views of investors only) (recommending 25-point buckets
for credits scores rather than the 50-point buckets as proposed).
\560\ See, e.g., letters from ASF I, Prudential I, and Wells
Fargo I.
\561\ See letter from ASF I (expressed views of investors only)
(suggesting that exact income allows them to double check the
issuer's DTI calculations).
---------------------------------------------------------------------------

We received few suggestions for alternative approaches to balancing
individual privacy concerns and the needs of investors to have access
to detailed financial information about obligors. Commenters suggested
we work with other federal agencies to evaluate whether the proposed
asset-level information was in fact anonymized \562\ and to assess
whether the required asset-level disclosures would subject issuers to
liability under

[[Page 57233]]

the federal privacy laws.\563\ Many commenters that supported grouped-
account disclosures rather than asset-level disclosures indicated that
grouped disclosures also could address privacy concerns with asset-
level disclosures.\564\ Other commenters suggested addressing privacy
concerns by changing the disclosure format, such as by requiring that
disclosure be presented in ratios rather than dollar amounts,\565\
requiring a default propensity percentage in lieu of a credit
score,\566\ or only requiring narrative disclosure.\567\
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\562\ See letters from ABA I and ASF I.
\563\ See letter from ABA I.
\564\ See, e.g., letters from ASF II (expressed views of issuers
and a portion of investors only) and VABSS II.
\565\ See letter from CU (suggesting that liquid cash reserves
be expressed as a ratio relative to the borrower's debt).
\566\ See letter from Vantage I (describing default propensity
as the chance that a consumer will become 90 or more days late on a
debt that he or she owes expressed as a percentage).
\567\ See letter from ABAASA I.
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We also received suggestions that we should restrict access to or
impose conditions on the use of sensitive data. For instance, a
commenter suggested that we establish a central ``registration system''
where access to sensitive data is only made to persons who have
independently established their identities as investors, rating
agencies, data providers, investment banks or other categories of users
while forbidding others to use the data or include the data in
commercially distributed databases.\568\ Another commenter suggested
that the Commission consider restricting access to registered users who
acknowledge the potentially sensitive nature of the data and agree to
maintain its confidentiality.\569\ This commenter suggested that
requiring users to identify themselves and accept appropriate terms of
use would provide a deterrent to those who might attempt to abuse
personal financial data and permit identification of such users should
any abuse occur. Another commenter suggested establishing rules
applicable to the posting, use and dissemination of potentially
sensitive data disclosed on EDGAR, including penalties for violation of
the rules.\570\
---------------------------------------------------------------------------

\568\ See letter from VABSS II.
\569\ See letter from CDIA.
\570\ See letter from Epicurus.
---------------------------------------------------------------------------

In light of the comments received raising individual privacy
concerns and the requirements of new Section 7(c) of the Securities
Act, we requested additional comment on privacy generally in the 2011
ABS Re-Proposing Release.\571\ We received limited additional feedback
on how to address the potential privacy issues surrounding the proposed
asset-level disclosures. Commenters again stated that the asset-level
requirements, as proposed, would raise privacy concerns.\572\ One
commenter suggested that the Commission could address privacy concerns
by not requiring the disclosure of social security numbers, only
requiring MSA information about the property instead of a property's
full address, and replacing borrower name with an ID number.\573\ Other
commenters stated or reiterated that for some asset classes a grouped-
account or pool-level disclosure format may mitigate privacy
concerns.\574\ One commenter repeated the suggestions that it provided
in previous comment letters that the Commission could establish and
manage (or have a third-party manage) a central ``registration system''
that could provide restricted access.\575\
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\571\ For instance, we asked how asset-level data could be
required, both initially and on an ongoing basis, to implement
Section 7(c) effectively, while also addressing privacy concerns. We
asked which particular data elements could be revised or eliminated
for each particular asset class in a manner that would address
privacy concerns, while still enabling an investor to independently
perform due diligence. We also requested comment on whether it would
be appropriate to require issuers to provide an obligor's credit
score and income on a grouped basis in a format similar to the
proposal for credit cards in the 2010 ABS Proposing Release.
\572\ See, e.g., letter from Mortgage Bankers Association dated
Oct. 4, 2011 submitted in response to the 2011 ABS Re-Proposing
Release (``MBA III'') (reiterating that several of the data points
proposed could allow someone to identify the obligor and that ``the
income and credit score ranges do not mitigate privacy issues
because the suggested ranges are so narrowly defined that they
virtually identify the actual score or dollar amount of income'').
\573\ See letter from MetLife II.
\574\ See letters from Sallie Mae, Inc. (SLM Corporation) dated
Oct. 4, 2011 submitted in response to the 2011 ABS Re-Proposing
Release (``Sallie Mae II'') (suggesting that ``data presented on a
grouped basis should address all privacy concerns''), VABSS III
(again suggesting that a grouped data approach minimizes, but does
not eliminate, privacy concerns), and VABSS IV (stating that they
believe a grouped data approach is the best way to provide
additional information to investors while addressing obligor privacy
and competitive concerns).
\575\ See letters from VABSS III (suggesting that it would not
be an ``overwhelming process to establish and maintain a restricted-
access system'' and that Section 7(c) does not require that data
that raises privacy concerns be made publicly available) and VABSS
IV.
---------------------------------------------------------------------------

On February 25, 2014, we re-opened the comment period to permit
interested persons to comment on the Web site approach described in the
2014 Staff Memorandum. Only a few commenters indicated support for the
Web site approach.\576\ Most commenters generally opposed the Web site
approach as a means to address privacy concerns,\577\ and some
commenters also noted that the Web site approach creates or shifts
legal and reputational risks to issuers.\578\ Commenters expressed
concern about whether the Web site approach could result in issuer
liability under applicable privacy laws.\579\ Several commenters were
specifically concerned that the Web site approach might create a risk
that the issuer could be considered a ``consumer reporting agency''
under the FCRA and thus subject to its rules and regulations.\580\ One
commenter noted that the FCRA would not be relevant most of the time
because the type of information contemplated by the Web site approach
would be beyond the reach of the FCRA while also noting that privacy
laws do not protect most consumer data, including the proposed asset-
level data, regardless of how it may be disseminated.\581\ A number of

[[Page 57234]]

commenters requested that the Commission obtain an authoritative
interpretation or some other form of guidance from the CFPB to clarify
issuer liability under the privacy laws when an issuer provides asset-
level data before moving forward.\582\ A few commenters suggested that
under the Web site approach data could still be widely
distributed,\583\ and two commenters stated that taking steps to reduce
the ability to re-identify a person would be more appropriate than
limiting access to sensitive data.\584\ Some other general concerns
about the Web site approach included: the costs and burdens of the Web
site approach; \585\ the possibility of data breaches and the impacts
from data breaches; \586\ potential negative market impacts; \587\ and
the possibility that inconsistencies in technical standards between Web
sites may make the Web sites difficult to use.\588\
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\576\ See letters from AFR (noting the advantages of the Web
site approach include the disclosure of more granular data and the
ability to restrict the data to those who agree to accept legal
liability for privacy violations), CII (stating, however, that the
restrictions placed on accessing the Web site should not be any more
restrictive than user accounts and confidentiality agreements and
that issuers should provide, instead of coded ranges, specific
credit scores, income, and debt), A. Schwartz (stating that the Web
site approach places the liability for errors in the asset-level
data on issuers and preserves the privacy interests of borrowers),
and World Privacy Forum dated Apr. 18, 2014 submitted in response to
the 2014 Re-Opening Release (``WPF II'') (suggesting, however, that
the Commission rather than issuers be responsible for maintaining
the data).
\577\ See, e.g., letters from ABA III, AFSA II, Capital One II,
Deutsche Bank dated Mar. 28, 2014 submitted in response to the 2014
Re-Opening Release (``Deutsche Bank''), MBA IV (with respect to
RMBS), SIFMA/FSR I-dealers and sponsors, and Treasurer Group.
\578\ See, e.g., letters from AFSA II (also suggesting that the
Web site approach did not conform to the White House's Consumer
Privacy Bill of Rights because the Web site approach does not
specify requirements to provide control or choice to consumers on
the sharing of their data with others), Deutsche Bank, MBA IV (also
stating that the Web site approach shifts operational risks to
issuers), and SFIG II.
\579\ See, e.g., letters from AFSA II, CCMR, Deutsche Bank,
Lewtan (suggesting that there is uncertainty surrounding FCRA
liability for issuers, investors, and all deal parties who touch
data originally obtained in the process of underwriting a loan to
the consumer), MBA IV, SFIG II (also noting that issuers may be
subject to restrictions under state laws), SIFMA/FSR I-dealers and
sponsors, and Wells Fargo III. See also letters from ELFA II (noting
that the dissemination of asset-level data under the Web site
approach or through EDGAR would create legal and reputational
risks), and Treasurer Group (noting the requirements of Canada's
privacy laws).
\580\ See letters from ABA III, CCMR, Lewtan, SIFMA/FSR I-
dealers and sponsors, SFIG II, and Wells Fargo III (noting, for
example, that if an issuer is considered a consumer reporting
agency, among other things, it will have a duty to update and
correct information about the consumer and failure to comply with
these duties could subject the issuer to consumer actions and CFPB
enforcement).
\581\ See letter from WPF II.
\582\ See, e.g., letters from SIFMA/FSR II-dealers and sponsors,
Wells Fargo III, MBA IV (with respect to RMBS), and SFIG II (noting
concerns that the CFPB has not affirmed past FTC guidance on the
transfer of information incident to the transfer of an asset in a
securitization and stating that while it strongly believed that an
issuer would not become a consumer reporting agency under FCRA by
disclosing asset-level information, the CFPB needs to provide a rule
or authoritative interpretation that the data posted in accordance
with the Web site approach would not be a consumer report and that
the issuer would not become a consumer reporting agency). See also
letter from CCMR (requesting that the Commission, CFPB and Federal
Trade Commission (FTC) provide assurance that misuse of disclosures
made under the Web site approach would not render the issuer liable
for privacy law violations).
\583\ See, e.g., letters from ABA III (stating that in the case
of registered offerings ABS may be sold to any person, including
individuals, without restriction, resulting in a potentially
unlimited pool of investors and potential investors), Capital One
II, and SFIG II.
\584\ See letters from ABA III and Treasurer Group. These
comments are discussed in more detail below.
\585\ See letters from AFSA II, ELFA II, Lewtan, MBA IV (with
respect to RMBS) (suggesting that the costs would include improving
security protocols and designing controls to minimize sharing of the
information once a party accesses the Web site), SFIG II, SIFMA/FSR
I-dealers and sponsors (objecting to a requirement that issuers file
non-sensitive data on EDGAR because it is redundant, imposes
unnecessary costs and is incomplete since certain fields would be
omitted), and Wells Fargo III.
\586\ See, e.g., letters from ABA III, AFSA II, ELFA II, Lewtan,
MBA IV (with respect to RMBS), and Wells Fargo III.
\587\ See, e.g., letters from ELFA II (expressing concern that
issuers may leave the ABS capital markets due to cost and liability
concerns) and Lewtan (noting that issuers and investors may leave
the market or move to the Rule 144A market because they cannot get
comfortable with the risks associated with FCRA, while acknowledging
that similar risks exist in the Rule 144A market).
\588\ See letter from AFR.
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Some commenters disagreed with the description in the 2014 Staff
Memorandum of how issuer Web sites were being used at the time the 2014
Staff Memorandum was released.\589\ For instance, one commenter noted
that while Web sites were being used at that time to provide
information to investors, the information is not the same as what the
Commission had proposed to require and does not raise the same privacy
concerns.\590\ Another commenter noted that current disclosure of
asset-level information through Web sites is available only to a
limited number of known institutional investors.\591\
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\589\ See letters from ABA III, AFSA II, and SFIG II.
\590\ See letter from AFSA II. See also letter from ABA III
(noting that the amount of information proposed for release under
the Web site approach exceeds the amount of information typically
made available through Web sites).
\591\ See letter from SFIG II.
---------------------------------------------------------------------------

Several commenters stated that additional information was necessary
to fully assess the potential implications of the Web site approach.
For instance, commenters requested clarity on the scope of asset-level
disclosures that the Commission is considering adopting, what data
would be disclosed on EDGAR and on the Web site, what type of
restrictions on access would be reasonable and what information is
``necessary'' for investor due diligence.\592\ Another commenter sought
information about whether the Commission is still considering asset-
level disclosures for certain non-RMBS asset classes.\593\ Five
commenters urged the Commission to re-open the 2010 ABS Proposal and
the 2011 ABS Re-Proposal, in general, to permit further consideration
of the concerns surrounding asset-level disclosures.\594\
---------------------------------------------------------------------------

\592\ See, e.g., letters from ABA III, Deutsche Bank, Lewtan
(noting that they did not comment on data point requirements due to
the brief comment period and uncertainty about which aspects of the
2010 ABS Proposals remain under consideration), SIFMA/FSR I-dealers
and sponsors (requesting clarity on whether any of the asset-level
data may be considered ``material'' under the securities laws and
whether disclosure of asset-level data as proposed complies with
privacy laws), and Wells Fargo III (requesting clarification of
which data points would require specific values in order to evaluate
privacy issues).
\593\ See letter from SIFMA/FSR I-dealers and sponsors.
\594\ See letters from Capital One II, ELFA II (asking the
Commission to reconsider requirements for equipment ABS), SFIG II
(noting uncertainty as to whether ranges or specific values will be
required for sensitive data points and whether the rules will apply
to the Rule 144A market), SIFMA/FSR I-dealers and sponsors
(suggesting that any re-proposal should include definitive,
coordinated federal guidance about compliance with privacy laws,
whether the disclosure requirements will apply to the Rule 144A
market, which asset classes will be subject to the disclosure
requirements and assurances about whether the data can be re-
identified), and Wells Fargo III.
---------------------------------------------------------------------------

A number of commenters responded to the 2014 Re-Opening Release by
commenting generally on privacy concerns. Several commenters reiterated
the re-identification concerns that were raised in response to the 2010
ABS Proposing Release and the 2011 ABS Re-Proposing Release.\595\
Commenters again suggested that obligors may suffer harm if personal
data is used to re-identify them.\596\ Several commenters noted that
the asset-level requirements, as proposed in 2010, contain a variety of
highly sensitive personal information that consumers would not expect
to be available to the general public, such as information about debt,
income, bankruptcies, foreclosures, job losses, and even whether the
consumer has experienced marital difficulties.\597\ One commenter
raised particular concern with disclosure of actual income as such data
is highly desirable to the consumer data industry but hard to
obtain.\598\ One commenter requested that the Commission provide
assurance that the data required to be filed on EDGAR could not be
reasonably linked to an individual consumer.\599\ Some commenters
expressed concern that the proposed requirements could result in the
disclosure of ``Personally Identifiable Information'' or ``PII,'' which
could result in legal liability or reputational damage.\600\ In
addition, a few commenters identified various laws that may apply to
the asset-level disclosures, including non-privacy related laws.\601\
Another commenter noted, however, that the availability of potentially
sensitive obligor data is not new to the market.\602\ Another commenter
believed criminal actors

[[Page 57235]]

would prefer to obtain access to other databases containing information
more conducive to identity theft, such as social security numbers and
date of birth, neither of which would be required by the
Commission.\603\
---------------------------------------------------------------------------

\595\ See, e.g., letters from ABA III, Capital One II, Deutsche
Bank, SFIG II (noting that whether an obligor underlying a foreign
loan can be re-identified through the proposed asset-level data will
depend on the jurisdiction), SIFMA/FSR I-dealers and sponsors,
Treasurer Group (suggesting that the final requirements not include
geographic identifiers or other individual identifiers that can
identify a borrower), and WPF II.
\596\ See, e.g., letters from ABA III, SFIG II, and SIFMA I
(expressed view of issuers and sponsors only).
\597\ See, e.g., letters from Deutsche Bank, SIFMA/FSR I-dealers
and sponsors, and Wells Fargo III.
\598\ See letter from WPF II.
\599\ See letter from SIFMA/FSR I-dealers and sponsors.
\600\ See letter from SIFMA/FSR I-dealers and sponsors
(questioning whether some or all of the asset-level information
could be considered PII under federal and state laws). See also
letters from ABA III and MBA IV (with respect to RMBS).
\601\ See letters from ABA III (noting questions about the
application of the GLBA, FCRA and Freedom of Information Act
(``FOIA'')), and SIFMA/FSR-dealers and sponsors (noting questions
about the application of GLBA and the Fair Debt Collections
Practices Act, and whether the information would be subject to
FOIA).
\602\ See letter from Lewtan (noting that they collect and
disseminate ABS-related data, including asset-level data).
\603\ See letter from AFR. Despite its belief that the Web site
approach would not create a new target for criminal actors, AFR
recommended that the Commission not adopt such an approach because:
(i) Issuers could inappropriately discriminate in providing access
to the restricted Web site; (ii) there is a potential that not all
issuers would have the technical capacity to implement appropriate
privacy controls; and (iii) if the design of the data is left to
issuers, standardization of the data format would not be possible,
making it more difficult to use.
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Many commenters expressed particular concern with the disclosure of
a property's geographic location because it, along with other data
points, can be used with other public databases to match a property
with a specific borrower.\604\ Commenters' recommendations to revise
the geographic data point varied. One commenter recommended that the
Commission limit disclosure of the zip code to only the first two
digits.\605\ Another commenter, without providing a specific
recommendation, believed that any geographic data point must be
sufficiently broad to ensure that there is no risk of re-
identification.\606\ One commenter reiterated its support for
aggregation of geographic location.\607\ In contrast, another commenter
noted its opposition to the 2010 ABS Proposal to require only MSA
because it would compromise the utility of the data for investors.\608\
---------------------------------------------------------------------------

\604\ See letters from ABA III, ELFA II, Lewtan, SIFMA/FSR I-
dealers and sponsors, SFIG II, Treasurer Group, and Wells Fargo III.
\605\ See letter from ABA III (noting that the Department of
Health and Human Services, as part of its efforts to keep consumers'
health information anonymous, has limited disclosure of zip codes to
the first three digits, and also noting that the European Securities
and Market Authority has created draft templates for asset-level
disclosure, including for RMBS, in which it requires only the first
two or three digits of the postal code).
\606\ See letter from Treasurer Group.
\607\ See letter from CFA Institute dated Apr. 28, 2014
submitted in response to the 2014 Re-Opening Release.
\608\ See letter from AFR.
---------------------------------------------------------------------------

Several commenters suggested various alternatives and modifications
to the Web site approach. Three commenters suggested aggregating the
asset-level data.\609\ These commenters, however, did not specify what
they meant by ``aggregated.'' \610\ Another commenter suggested
development of a system that permits investors to conduct analysis and
produce models without providing access to asset-level
information.\611\ One commenter said the requirements should mirror the
disclosures that the GSEs make with respect to RMBS and that issuers
should have the discretion not to disclose sensitive information.\612\
Others suggested that issuers should have the flexibility to modify the
disclosures and decide the method of delivery to address privacy
concerns.\613\ Another commenter agreed that the better approach would
be to modify the disclosure requirements such that the data increases
transparency while still respecting the privacy of borrowers'
information, but did not specify how those disclosures should be made
available to investors.\614\ Several commenters suggested that we adopt
mechanisms or controls to restrict access to asset-level information
filed with the Commission to investors and potential investors.\615\
---------------------------------------------------------------------------

\609\ See letters from ABA III, Lewtan (noting that aggregation
would significantly reduce the risk of re-identification and data
security breaches, but data security concerns related to internal
operations would remain), and MBA IV (with respect to RMBS).
\610\ For example, they did not specify whether they were
referring to pool-level data, grouped-account data similar to the
disclosures proposed for credit card ABS in the 2010 ABS Proposal,
less granular loan-level information or some other form of data
aggregation.
\611\ See letter from Treasurer Group.
\612\ See letter from MBA IV (with respect to RMBS).
\613\ See, e.g., letters from ABA III (suggesting that if the
Commission adopts the Web site approach, then issuers should be able
to aggregate, group or anonymize the data, as needed, to comply with
the privacy laws or be allowed to omit data under Securities Act
Rule 409, and also suggesting that issuers should have the
flexibility to determine the method of delivery of the disclosure)
and SIFMA/FSR II-dealers and sponsors (suggesting that issuers be
allowed to withhold, aggregate, or otherwise modify the asset level
disclosures in order to comply with legal and regulatory
obligations, reduce re-identification risk or otherwise protect
consumer privacy, or to limit disclosure of information that is not
material to an investment decision).
\614\ See letter from Capital One II.
\615\ See letters from CDIA (suggesting that the Commission
require parties that want to access the data on EDGAR register to
use the data, acknowledge the sensitive nature of the data, and
agree to maintain its confidentiality), Epicurus (suggesting that
the Commission establish rules applicable to the posting, use and
dissemination of potentially sensitive data disclosed on EDGAR,
including penalties for violation of the rules), WPF I, and WPF II.
---------------------------------------------------------------------------

Another commenter suggested a central repository or ``aggregated
data warehouse'' to house the asset-level data because such an approach
would simplify enforcement of access policies, ensure consistent data
formats and lower incentives to exclude certain users.\616\ Similarly,
another commenter suggested that issuers disclose all asset-level data
to a consumer reporting agency administered repository, along with a
unique identification number for each asset, which would allow
investors to access all the asset-level data for these assets.\617\
Another commenter also suggested that credit bureaus, instead of
issuers, should provide credit related information.\618\ One commenter
outlined revisions to the Web site approach that it believed are
necessary if such an approach is adopted, including a data chain of
custody, privacy and security rules and public disclosure of each
issuer's privacy and security policies.\619\
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\616\ See letter from AFR (suggesting either a single data
warehouse managed by a federal agency (e.g., the Commission, the
Federal Reserve (similar to the Bank of England model), or the
Office of Financial Research) or a non-profit data warehouse owned
and managed by private sector entities under Commission oversight
(similar to the European Data Warehouse).
\617\ See letter from SIFMA/FSR II-dealers and sponsors (noting
that this approach would apply to all ABS asset classes and also
noting certain developmental challenges, such as identifying a
consumer reporting agency willing to act as a repository and
application of FCRA). See also SFIG II (stating that issuers should
have the option to use third party agents (which may be a consumer
reporting agency or a central Web site data aggregator) to make the
data available and control access, but also noting that such an
approach still raises privacy law concerns and concerns about who
pays for the third-party service).
\618\ See letter from ABA III.
\619\ See letter from WPF II. The commenter also outlined the
elements of an appropriate data use agreement, such as disclosure
restrictions, standards to qualify recipients, and providing
consumers a private right of action for those who misuse the data.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments received related to privacy concerns
and on the Web site approach, and our obligations under Section 7(c) of
the Securities Act,\620\ we are adopting new rules to require that
issuers file asset-level disclosures on EDGAR both at the time of the
offering and on an ongoing basis in periodic reports. We are revising
the required disclosures contained in the proposal to address the risk
of parties being able to re-identify obligors and the associated
privacy concerns. Specifically, as discussed below, we are modifying or
omitting certain asset-level disclosures relating to RMBS and Auto ABS
to reduce both the amount of potentially sensitive data about the
underlying obligors and the potential risk that the obligors could be
re-identified. In addition, in response to commenters' suggestions, we
have sought and obtained guidance from the CFPB on the application of
the FCRA to the required disclosures. As discussed

[[Page 57236]]

below, the CFPB has issued a letter \621\ to the Commission stating
that the FCRA will not apply to asset-level disclosures where the
Commission determines that disclosure of certain asset-level
information is ``necessary for investors to independently perform due
diligence,'' in accordance with Section 7(c). We believe these steps
implement the statutory mandate of Section 7(c) and will provide
investors with the asset-level information they need while reducing
concerns about potential re-identification risk associated with
disclosing consumers' personal and financial information.
---------------------------------------------------------------------------

\620\ As noted above, Section 7(c) of the Securities Act
requires that we adopt rules to require ABS issuers to disclose
asset-level information if the data is necessary for investors to
independently perform due diligence.
\621\ See letter from the Consumer Financial Protection Bureau
dated August 26, 2014.
---------------------------------------------------------------------------

While we have considered the Web site approach described in the
2014 Staff Memorandum, as discussed below, we are not adopting this
approach due to concerns about the practical difficulties and
unintended consequences of limiting access to only investors and
potential investors.\622\ Commenters also indicated that the Web site
approach could negatively affect the ability of investors and the
broader ABS market to have adequate access to the data.\623\
---------------------------------------------------------------------------

\622\ See, e.g., letters from ABA III (noting concern that
without guidance as to who is a potential investor issuers may apply
their own bias filters to public offerings, such as limiting public
offerings to only institutional investors), AFR (expressing concern
that if issuers are given the ability to limit access to asset-level
data they may use this ability to discriminate between investors by,
for example, giving investors with more market power preferential
access to the data), CCMR, MBA IV, and SFIG II.
\623\ See, e.g., letters from ABA III, Moody's II, and R&R.
---------------------------------------------------------------------------

We continue to believe that the disclosure of data that relates to
the credit risk of the obligor, such as an obligor's credit score,
income, or employment history, would strengthen investors' risk
analysis of ABS involving consumer assets.\624\ We believe these
disclosures, combined with other asset-level disclosures, such as the
terms and performance of the underlying loan and information about the
property, will enable investors to conduct their own due diligence for
ABS involving consumer assets, and thus facilitate capital formation in
the ABS market. Consequently, it is critically important that the
manner in which such information is disseminated enables all investors
to receive access to the required asset-level disclosures. The ability
of other market participants, such as analysts and academics, to access
this information may also benefit the market by encouraging a broader
range of commentary and analysis with respect to ABS.\625\
---------------------------------------------------------------------------

\624\ See footnotes 559, 560 and 561 (discussing commenters'
views on the importance of receiving granular data about obligors,
such as exact income and credit scores).
\625\ See letters from ABA III, Moody's I, Moody's II, M. Joffe,
and R&R.
---------------------------------------------------------------------------

Although we did not propose to require that an obligor's name,
address, or other identifying information be disclosed, we are
sensitive to the possibility that an obligor in an asset pool could be
identified (now or in the future) due to the availability of the
required disclosures (coupled with the XML requirement), the amount of
data about obligors that is publicly available through other sources,
and information about real estate transactions and other types of
transactions that is available or that may become available in the
future. In the event the obligor was re-identified, the information
that would have been required by the proposal, even in ranges, might
reveal information about the obligor's financial condition.
This issue is especially pronounced for securitizations backed by
residential mortgages, as an obligor could potentially be re-identified
using a combination of asset-level disclosures and real estate
transaction data that is routinely disclosed by certain local
governments.\626\ Commenters noted that property address, sales price,
and closing date are typically disclosed by local governments and could
be used to link the asset-level disclosures to an individual.\627\ If a
specific mortgage is re-identified, sensitive financial data about an
obligor (e.g., credit score, DTI, and payment history) could
potentially be connected to the obligor.
---------------------------------------------------------------------------

\626\ These issues potentially exist but are less pronounced for
Auto ABS. We are not aware of any public databases of auto loan and
lease records made available by local governments. It is possible
that these types of databases could be available from other sources
for a fee. After the time of purchase, an obligor may move and
register the automobile in a different state. In contrast, the
property that is collateral for a mortgage is connected to a
permanent address and therefore could be matched more easily with
publicly available information from land records.
\627\ See, e.g., letters from ABA III, CU, SIFMA/FSR I-dealers
and sponsors, SFIG II, and Treasurer Group.
---------------------------------------------------------------------------

In light of this concern, we are revising the proposed data set for
RMBS as follows.\628\ First, we are modifying the required geographic
identifier from MSA, as proposed, to a 2-digit zip code.\629\ Several
commenters emphasized the importance of geography in assessing the re-
identification risk for RMBS asset-level disclosure.\630\ We believe
that, because publicly available information like property records is
typically sorted and searchable by geography, requiring issuers to
identify assets by a broader geographic area should decrease the
ability to re-identify individual obligors. In considering how to
broaden the geographic area, we considered both the specific
recommendations of commenters as well as current disclosure practices,
including those of the GSEs and Ginnie Mae.\631\ As noted above, one
commenter specifically recommended that we require disclosure of either
a 2-digit or 3-digit zip code.\632\ There are currently less than 99
distinct 2-digit zip codes and approximately 900 distinct 3-digit zip
codes.\633\ By contrast, our proposal would have required disclosure of
MSA, which represents approximately 960 unique geographic areas. We
understand that Ginnie Mae currently discloses state (60 distinct
areas, including Washington, DC and U.S. territories and associated
states).\634\ Depending on the data set, Fannie Mae and Freddie Mac
disclose MSA, 3-digit zip code or state.\635\ After considering the
various alternatives, we are adopting a 2-digit zip code. In reaching
this conclusion, we considered that a 3-digit zip code would not
significantly reduce the re-identification risk relative to the
proposal's use of MSA and that use of state may be too broad of an area
to be useful to RMBS investors.\636\
---------------------------------------------------------------------------

\628\ Although the changes discussed relate to RMBS data points,
we also indicate, where relevant, corresponding changes we have made
to the data points for Auto ABS that address privacy concerns.
\629\ See new Item 1(d)(1) of Schedule AL. For Auto ABS, at the
suggestion of commenters, we are modifying the geographic identifier
of the obligor to state. See new Items 3(e)(7) and 4(e)(7). See also
letters from ASF II (expressed views of loan-level investors only)
and VABSS IV. We are not adopting proposed data points that would
have disclosed the geographic location of the dealership. See
proposed Items 4(b)(1) and 5(b)(1) of Schedule L.
\630\ See letters from ABA III, ELFA II, Lewtan, SIFMA/FSR I-
dealers and sponsors, SFIG II, Treasurer Group, and Wells Fargo III.
\631\ See letter from MBA IV (with respect to RMBS).
\632\ See letter from ABA III.
\633\ See the U.S. Postal Service Web site for a list of 3-digit
zip codes, http://pe.usps.com/text/LabelingLists/L002.htm.
\634\ See Ginnie Mae's MBS Loan-Level Disclosure File available
at http://www.ginniemae.gov/doing_business_with_ginniemae/investor_resources/mbs_disclosure_data/Lists/LayoutsAndSamples/Attachments/105/mbsloanlevel_layout.pdf.
\635\ See Fannie Mae's Loan-Level Disclosure File available at
http://www.fanniemae.com/resources/file/mbs/pdf/filelayout-lld.pdf
and Loan Performance Data Disclosure File available at https://loanperformancedata.fanniemae.com/lppub-docs/lppub_file_layout.pdf. See also Freddie Mac's Loan-
Level Disclosure requirements available at http://www.freddiemac.com/mbs/docs/fs_lld.pdf and Single Family
Loan-Level Dataset General User Guide available at http://www.freddiemac.com/news/finance/pdf/user_guide.pdf.
\636\ See also footnote 670 and accompanying text.
---------------------------------------------------------------------------

To further reduce the risk of re-identification, we are also
omitting several data points that, while

[[Page 57237]]

potentially useful to investors, could increase the ability to identify
underlying obligors. Specifically, we are omitting the unique broker
identifier data point \637\ as well as the sales price,\638\
origination date, and first payment date \639\ data points. In
addition, we are omitting some information about an obligor's
bankruptcy and foreclosure history,\640\ although, if an obligor had
experienced a past bankruptcy or foreclosure, we would expect that
those events would have been considered in generating a credit score.
As noted above, the final rules require disclosure of an exact credit
score.
---------------------------------------------------------------------------

\637\ See proposed Item 2(a)(11) of Schedule L. For RMBS, we are
adopting a data point that indicates whether or not a broker
originated or was involved in the origination of the loan as well as
a data point that discloses the National Mortgage License System
registration number for the company that originated the loan. These
data points will allow investors to compare loans by particular
originators and across originators. Investors will also be able to
compare loans where a broker was used. Together, these data points
will provide investors with information they need to perform due
diligence and make informed investment decisions. See new Items
1(c)(24) and 1(c)(26) of Schedule AL. These data points were not
proposed and are not relevant for Auto ABS.
\638\ See proposed Item 2(b)(3) of Schedule L. We are also
omitting the original property valuation data points because we
believe they could provide a close approximation of sales price, and
thus could have raised the same re-identification concern as sales
price. See also proposed Items 2(b)(5), 2(b)(6), 2(b)(7), 2(b)(8),
and 2(b)(9) of Schedule L. For RMBS, we believe that certain other
data points we are adopting, such as Original loan amount and
Original loan-to-value, will provide investors with information they
need to perform due diligence and make informed investment
decisions. See new Items 1(c)(3) and 1(d)(11) of Schedule AL. For
Auto ABS, we are adopting data points that capture the vehicle
value, as these values are already made publicly available from
sources such as the Kelly Blue Book. See new Items 3(d)(7), 3(d)(8),
4(d)(6) and 4(d)(7) of Schedule AL.
\639\ See proposed Items 1(a)(5) and 1(a)(14)of Schedule L. See
also letters from ABA III, Lewtan, MBA I, and SFIG II. We believe
that certain other data points we are adopting, such as Original
loan maturity date, Original amortization term and Remaining term to
maturity, will provide investors with information they need to
perform due diligence and make informed investment decisions. See
new Items 1(c)(4), 1(c)(5) and 1(g)(2) of Schedule AL. Because the
same publicly available property records are not available for auto
loans and leases, we are adopting data points that capture the month
and year of origination and the original first payment date for Auto
ABS. See new Items 3(c)(2), 3(c)(10), 4(c)(2), and 4(c)(10) of
Schedule AL.
\640\ See proposed Items 2(c)(24) and 2(c)(25) of Schedule L and
proposed Items 2(c)(1), 2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6),
2(c)(7), 2(c)(8), 2(h), 2(k)(2), 2(k)(3), 2(k)(4), 2(k)(5), 2(k)(7),
2(k)(8), 2(k)(11), 2(k)(12), 2(k)(13), and 2(m)(3) of Schedule L-D.
While commenters did not specifically note that these data points
would pose re-identification risk, we received letters about the
sensitivity of the data. See, e.g., letters from Deutsche Bank, MBA
IV, and SIFMA/FSR I-dealers and sponsors. RMBS issuers will,
however, be required to provide information about an asset in the
pool that is subject to a foreclosure, or if the reason for non-
payment by an obligor is due to bankruptcy. See new Items 1(g)(33),
1(r)(1), 1(r)(2), 1(r)(3), 1(r)(4), 1(r)(5), 1(v)(1) and 1(v)(2) of
Schedule AL. These data points were not proposed and are not
relevant for Auto ABS.
---------------------------------------------------------------------------

Another step that we are taking to address commenters' concerns
about re-identification risk is to omit the proposed income and debt
data points. While we believe that income and debt information would
strengthen an investor's risk analysis of ABS involving consumer
assets,\641\ we are not requiring them based on concerns about the
sensitive nature of this information and increased re-identification
risk posed by this information.\642\ As discussed in Section
III.A.2.b)(1) Residential Mortgage-Backed Securities, however, we are
requiring DTI ratios.\643\ These are key calculations used to assess an
obligor's ability to repay the loan that, we believe, will permit
investors to perform due diligence in the absence of specific debt and
income data points.
---------------------------------------------------------------------------

\641\ Investor members of one commenter noted that this
information is useful for verifying DTI calculations. See letter
from ASF I.
\642\ See letters from VABSS IV, Wells Fargo III, and WPF II.
\643\ See Section III.A.2.b)(3) Automobile Loan or Lease ABS
above for a discussion of the payment-to-income ratio data points
that are being adopted in lieu of proposed data points that would
have collected obligor or lessee income information. There were no
data points proposed for Auto ABS that would have collected obligor
or lessee debt information.
---------------------------------------------------------------------------

We also are revising \644\ or removing \645\ certain other proposed
data points to further mitigate re-identification risk concerns since
the responses to these items will be made available to the public
through EDGAR.\646\ We do not believe these proposed requirements
necessarily would have increased re-identification risk alone, but we
have concluded that these data points, if adopted as proposed, could
disclose sensitive obligor data without providing additional
information necessary for investor due diligence.
---------------------------------------------------------------------------

\644\ See, e.g., proposed Item 2(l)(13) Eviction start date of
Schedule L-D (revised to new Item 1(s)(8) Eviction indicator of
Schedule AL). Similar data points were not proposed for Auto ABS.
\645\ See, e.g., proposed Items 2(c)(13) Liquid/cash reserves,
2(c)(14) Number of mortgages properties, 2(c)(18) Percentage of down
payment from obligor own funds, 2(c)(20) Self-employment flag;
2(c)(21) Current other monthly payment, 2(d)(6) Mortgage insurance
certificate number, 2(a)(1) Non-pay reason, and 2(l)(14) Eviction
end date of Schedule L-D. Similar data points were not proposed for
Auto ABS.
\646\ These changes involved modifying the possible responses,
such as removing certain responses from the coded list of possible
responses. For example, in new Item 1(c)(1) Original loan purpose of
Schedule AL, which was proposed as Item 2(a)(1) of Schedule L, we
are removing certain possible responses from the enumerated list of
codes due to privacy concerns.
---------------------------------------------------------------------------

Finally, in response to commenters' suggestions, we have obtained
guidance from the CFPB on the application of the FCRA to the proposed
disclosure requirements.\647\ In a letter issued to the Commission
dated August 26, 2014, the CFPB stated that the FCRA will not apply to
asset-level disclosures that exclude direct identifiers where the
Commission determines that disclosure of such information is
``necessary for investors to independently perform due diligence.''
\648\ Specifically, the CFPB letter confirms that (i) issuers and the
Commission would not become consumer reporting agencies by obtaining
and disseminating asset level information, and (ii) no violation of
Section 604(f) of the FCRA \649\ would occur if issuers or the
Commission obtain or disseminate any information that is a consumer
report (such as a credit score), in each case if the Commission
determines that disclosure of the information is necessary for
investors to independently perform due diligence and that the
information should be filed with the Commission and disclosed on EDGAR
to best fulfill a Congressional mandate. As noted above, we have
revised or eliminated certain asset-level data points that implicate
consumer privacy concerns where we determined that doing so would not
compromise investors' ability to perform due diligence on the
underlying assets. We believe the asset-level data points that we are
requiring about underlying obligors for ABS involving consumers assets
are necessary for investors to perform due diligence, as required by
Section 7(c). After taking these steps and after careful consideration
of alternative means of disseminating such information, we have
determined that having the information filed with the Commission and
disclosed on EDGAR is the most effective means of ensuring that
investors have access to asset-level data.
---------------------------------------------------------------------------

\647\ Commenters also raised concerns about the applicability of
other federal and state privacy laws and analogous foreign laws. We
do not believe the final rules are likely to implicate these other
laws for a variety of reasons, including that they do not require
disclosure of direct identifiers (PII) and because certain of these
laws provide an exemption for the disclosure of information in order
to comply with federal, state or local laws and other applicable
legal requirements. More generally, we believe the changes we are
adopting to help address privacy concerns should help to mitigate
concerns about the applicability of other privacy laws.
\648\ See Section 7(c) of the Securities Act [15 U.S.C. 77g(c)].
\649\ 15 U.S.C. 1681b(f).
---------------------------------------------------------------------------

As discussed above, we have taken significant steps to reduce the
re-identification risk associated with providing certain asset-level
data while adhering to the statutory mandate in Section 7(c) to require
disclosure of such information to the extent necessary

[[Page 57238]]

for investors to independently perform due diligence. We do recognize,
however, that the final rules do not completely eliminate the risk of
obligor re-identification \650\ and there may be costs associated with
providing certain sensitive information required by the final rules.
These costs may include costs to issuers of consulting with privacy
experts to understand the impact of providing these disclosures. We
also recognize that some issuers and investors may move to unregistered
offerings, which may affect capital formation.\651\ Alternatively, the
increased costs may be passed on to the underlying obligors in the form
of a higher cost to borrowers (e.g., interest rates or fees).
---------------------------------------------------------------------------

\650\ In this regard we note that there is continuing debate
about the ability to fully anonymize or ``de-identify'' a data set
and whether it is possible to have any confidence that re-
identification risk can be totally mitigated. See, e.g., Paul Ohm,
``Broken Promises of Privacy: Responding to the Surprising Failure
of Anonymization,'' 57 UCLA L. Rev. 1701 (2010); Arvind Narayana and
Vitaly Shmatikov, ``Myths and Fallacies of `Personally Identifiable
Information,''' 53 Comm. ACM 24, 26 n.7 (2010) (``The emergence of
powerful reidentification algorithms demonstrates not just a flaw in
a specific anonymization technique(s), but the fundamental
inadequacy of the entire privacy protection paradigm based on `de-
identifying' the data.''). But see Jane Yakowitz, ``Tragedy of the
Data Commons,'' 25 Harv. J.L. & Tech., 1 (2011) (expressing concern
about the impact of reducing the availability of de-identified data
for medical research purposes).
\651\ But see letter from Lewtan (noting that this course is
less likely, because although unregistered offerings may provide for
more customized data delivery where an issuer has more direct
control, the issues surrounding FCRA exposure are the same as if the
securitization were made through a registered offering).
---------------------------------------------------------------------------

Re-identification risk can also increase the cost of capital due to
obligor preferences. If an obligor is particularly sensitive to the
possibility of re-identification, the obligor may prefer to transact
with originators that offer additional methods for preserving
anonymity, which could increase that obligor's cost of or access to
capital. For example, if a loan agreement gives an obligor the ability
to opt out of disclosure, thereby prohibiting the ability to securitize
the loan where asset-level information would be disclosed, originators
may pass costs on to the obligor. Originators could also bear some
increased costs if, as a result of being unable to securitize the loan
or sell it to the GSEs, the originator would hold the asset on its
balance sheet, thus limiting its ability to redeploy capital to more
productive or efficient uses. In addition, the risk of re-
identification could limit an obligor's access to capital if the
obligor is unable to obtain assurances, even at a higher cost, that his
or her loan would not be securitized in a way that gives rise to a
potential risk of re-identification. Ultimately, an obligor's
sensitivity to re-identification risk could lead to a reduction in the
number of loans available for securitization. This could, in turn, lead
to a reduction in liquidity of ABS markets and a corresponding increase
in cost of capital even for those loans that are otherwise securitized
through registered offerings.\652\ In general, for these reasons, we
believe that reducing the likelihood of obligor re-identification will
reduce the impact of these potential costs of asset-level disclosure
for the ABS market.
---------------------------------------------------------------------------

\652\ See letter from SIFMA/FSR I-dealers and sponsors (noting
that increased costs would ultimately be passed on to consumers,
including an increase in financing costs and a decrease in credit
availability).
---------------------------------------------------------------------------

As discussed above, in considering how to modify the proposed
disclosures to reduce the risk of re-identification, we considered the
specific recommendations of commenters and current disclosure
practices. Although we received various suggestions for reducing re-
identification risk, commenters did not provide any data or analysis
that quantified the likelihood of re-identification based on the
proposed disclosures or their suggested approaches to addressing re-
identification risk. Some commenters indicated that using less precise
geographic identifiers would reduce the risk that an obligor could be
re-identified.\653\ Using less precise data points for sales price and
origination date would also reduce the risk of re-identification.
---------------------------------------------------------------------------

\653\ See, e.g., letters from ABA III (recommending 2-digit zip
code), CFA II (suggesting aggregation of geographic location), and
Treasurer Group.
---------------------------------------------------------------------------

To help confirm the effect of requiring less precise information,
we performed an analysis of various modifications to the required data
points. In particular, we have estimated the likelihood of isolating a
unique mortgage in a sample pool of mortgage loans by considering
different levels and combinations of precision for the geographic
location of the property, sales price, and origination date. Our
analysis examined mortgages collected from mortgage loan servicer
providers and reported in the MBSData, LLC, dataset, which includes
asset-level data for most of the mortgages securitized in the private-
label RMBS market during the period from 2000 to 2012.\654\
Categorizing loans according to their uniqueness is the first step
someone could take to re-identify an obligor. Each of the 19.3 million
mortgages reported during this period were sorted according to
uniqueness of three loan characteristics--geographic location, sales
price, and origination date--which could potentially link the mortgage
to another publicly available dataset that contains obligors'
identities.\655\ We assume that loans that have unique values for these
three variables, when compared to all other loans in the MBSData
dataset, have an elevated potential for obligor re-identification. We
note, however, that our analysis is not an actual measure of re-
identification risk. Importantly, in order to actually re-identify an
obligor, a unique mortgage must also be matched with publicly available
data sources, such as from local government real estate transaction
ledgers and tax records that contain information on property addresses,
sales prices, and origination dates.\656\ We have not attempted to
quantify the likelihood that a unique mortgage, once isolated, can be
matched with publicly available data sources. Instead, we have focused
our analysis on this first step of the re-identification process, which
is to isolate a unique mortgage.
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\654\ Loan-level data is available on Fannie Mae and Freddie Mac
Web sites; however, we did not incorporate this data into our
analysis because we believe that historically the characteristics of
loans purchased and securitized by GSEs have been somewhat different
from the characteristics of loans securitized through private-label
RMBS. We do not expect that incorporating the GSE data would
significantly reduce the likelihood of finding records with unique
characteristics among properties bought with mortgages securitized
through private-label RMBS.
\655\ Because the required asset-level disclosures do not
include sales price, in our analysis, we have imputed it from the
reported loan amount and LTV ratio and rounded to the nearest $100.
Although the origination date is not required to be disclosed, it
can be approximated in many cases using other required data points,
such as Original loan maturity date, Original amortization term and
Remaining term to maturity. See new Items 1(c)(4), 1(c)(5) and
1(g)(2).
\656\ We have not analyzed re-identification techniques using
commercially available datasets (e.g., datasets from consumer
reporting agencies) because even though using such data may be more
effective in re-identification, providers of such datasets usually
charge a fee and impose restrictions on their usage, such as, access
controls and user identity verification.
---------------------------------------------------------------------------

To provide a basis for comparison, we first considered the
likelihood of identifying a unique loan using a 5-digit zip code for
the property location, the exact sales price and the exact origination
date. Approximately 76% of the 19.3 million loans analyzed are unique
when these three characteristics are compared across all mortgages in
the database. That is, these loans could be distinguished from all
other loans with respect to geography, imputed sales price, and
origination date, and they were originated in states for which there

[[Page 57239]]

is no prohibition on public disclosure of the property sales
price.\657\
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\657\ Some states (or counties within states) consider the
property sales value to be private and confidential information and
therefore do not release these numbers publicly. These states
include: Alaska, Idaho, Indiana, Kansas, Louisiana, Maine,
Mississippi, Missouri, Montana, New Mexico, North Dakota, Texas,
Utah and Wyoming. The analysis does not account for non-disclosure
counties that lie within a state that allows for disclosure.
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We next considered the likelihood of identifying a unique loan
using the required disclosures in the final rules. As discussed above,
we are modifying the required geographic identifier from MSA, as
proposed, to a 2-digit zip code and are requiring securitizers to
report only the original amortization term, and remaining term to
maturity, from which year and month of origination can be approximated,
but not the precise origination or sales date.\658\ Based on the
historical data and the same method described above of determining
uniqueness, we estimate that by requiring 2-digit zip code, imputed
sales price, and the month and year of origination, less than 20% of
mortgages in the sample pool could be unique in their characteristics.
This is also significantly lower than the almost 30% likelihood of
isolating a unique loan determined based on the required disclosure
items in the 2010 ABS Proposal.\659\
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\658\ As discussed below, this change should not materially
impact an investor's ability to price RMBS tranches, but will
significantly lower the probability that a mortgage is unique in its
characteristics.
\659\ As noted above, the proposal would have required a
geographic identifier of MSA, exact sales price and the month and
year of origination.
---------------------------------------------------------------------------

These estimates, however, do not fully reflect the difficulty of
actually re-identifying an underlying obligor.\660\ As noted above, the
loan would have to be matched to a record in the relevant public
database of real estate transactions. As noted, some counties within
states do not release property sale values. Even in those jurisdictions
that do make property sale information publicly available, matching the
loans to a particular property record might be challenging to do
because the jurisdiction providing the information might not offer
access in a way that would make the information easily accessible or in
convenient format. For example, knowing the 5-digit zip code of the
unique property would not necessarily be helpful in a jurisdiction that
requires a street name in order to search and view records. Hence, in
some cases it may be too burdensome to find the matching loan even if
that information is publicly available, particularly if such search is
part of a large scale matching effort (i.e., for commercial purposes).
We also note that public property databases contain, in addition to
property transactions with mortgages securitized through private-label
RMBS, property transactions without using borrowed funds, property
transactions with mortgages that are never securitized, or property
transactions with mortgages that are securitized through GSEs. The
addition of these other transactions only compounds the burden of
matching a particular loan with a particular property record.
---------------------------------------------------------------------------

\660\ This technique is based on historical data and may not
necessarily reflect future re-identification likelihoods. Also, in
the future, securitizers that are conscious of privacy implications
may avoid securitizing loans that have high risk of being identified
(i.e., loans that are unique in their characteristics).
---------------------------------------------------------------------------

Although the approach that we are adopting does not eliminate the
possibility of obligor re-identification, we believe it strikes the
appropriate balance between privacy and transparency. Some obligors may
still be particularly sensitive to the possibility of re-identification
and may seek originators that offer additional methods of preserving
their anonymity. We do not, however, anticipate that this will have an
adverse effect on the functioning of the private-label RMBS market or
the cost of capital to the originators of mortgages and their obligors
because of the relatively low likelihood of re-identification
associated with the revised data points. Moreover, as noted above,
asset-level information has been provided by issuers and third-party
data providers for private-label RMBS (although not standardized), as
well as by the GSEs and Ginnie Mae,\661\ and this availability has not
led to market disruption or adverse effects on cost of capital for
obligors. We believe that there will be significant benefits to RMBS
investors by having access to obligor-specific financial information in
their evaluation of the potential default risk of the securitized
assets, thus improving their ability to price registered RMBS tranches.
This information also will allow investors to better understand,
analyze and track the performance of RMBS, and, in turn, will allow for
more accurate ongoing pricing and increase market efficiency.\662\
---------------------------------------------------------------------------

\661\ See Section III.A.1 Background and Economic Baseline for
the Asset-Level Disclosure Requirement.
\662\ This would also apply to other asset classes where
obligor-specific financial information may be disclosed, such as
Auto ABS.
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We acknowledge that further modification of certain data points
could further reduce the risk of obligor re-identification. For
example, several commenters emphasized the importance of geographic
location in potentially re-identifying an underlying obligor.\663\
Based on our analysis, eliminating a geographic identifier reduces the
likelihood of isolating a unique mortgage in the sample pool to less
than 2%. We considered whether further modification to certain data
points will reduce transparency of critical data points for ABS
investors. As we discuss below, we believe that a geographic location
identifier is critical to pricing RMBS and is therefore necessary for
investors to perform due diligence.
---------------------------------------------------------------------------

\663\ See, e.g., letters from ABA III, SIFMA/FSR 2014 I-dealers
and sponsors, SFIG II, and Treasurer Group.
---------------------------------------------------------------------------

To confirm our view, and the views of commenters,\664\ that certain
data points are critical for ABS investment decisions, we analyzed the
potential pricing impact of various data points on RMBS transactions.
Our analysis indicates that, for RMBS, certain characteristics and loan
term features, such as geographic location, are key determinants of
expected performance of underlying mortgage loans as measured by the
historical rate of serious delinquency (``SDQ'').\665\ We used a model
to predict the presence or absence of SDQ within a historical dataset
of private-label securitized loans.\666\ We found that, by a wide
margin, the following four data points make the largest contribution to
explaining SDQ: \667\ the year of

[[Page 57240]]

origination, the LTV ratio, the geographic location of the property as
measured by 2-digit zip code, and the obligor's credit score (FICO
score was reported in the dataset). Our analysis shows that the year of
origination provides the greatest contribution to the measure of how
well these factors explain the likelihood of serious delinquency.\668\
LTV, geographic location of the property and FICO score provide the
next greatest contribution to explaining the likelihood of serious
delinquency and have a similar magnitude in overall contribution.\669\
Eliminating any of these three variables from the final disclosure
requirements significantly and negatively affects the predictive
ability of the model. On the other hand, in the instances we studied,
providing a geographic location that represents a smaller area or the
exact origination date only marginally improves the model's predictive
ability,\670\ but it could significantly increase the possibility of
obligor re-identification.
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\664\ See, e.g., letters from ABA III (recommending that the
Commission consider using 2-digit zip code), ASF I (supporting exact
credit score), and Mass. Atty. Gen. (noting that the DTI ratio and
LTV are important metrics in an investor's assessment of risk of
loss).
\665\ SDQ is defined as a loan having ever been 90 days late,
foreclosed, or real estate owned.
\666\ We used a binomial logistic predictive model that is also
referred to as a logit regression. Binomial logistic regression
deals with situations in which the observed outcome for a dependent
variable can have only two possible types (for purposes of this
analysis--presence or absence of a serious delinquency). Logistic
regression is used to predict the odds of being a case based on the
value of the independent variables (i.e., the predictors). We
estimate the regression model with commonly used predictive factors
identified by the industry and the academic literature, such as
combined LTV ratio, credit score, and DTI ratio and analyze the
effects of various loan characteristics observable at origination on
the ability of a researcher to forecast serious delinquency. For
more details and references, see footnote 82, the White-Bauguess
Study, Section V. Logit Regression Analysis (for the description of
the model) and Appendix B (for variable definitions and references
to studies supporting the variables choice). The analysis is based
on a sample of 2,456,548 mortgages from 2000-2009 included in the
MBSData dataset that have complete information for all variables of
interest, in particular, DTI information.
\667\ The model uses a goodness-of-fit measure (pseudo-R\2\) to
describe how well an SDQ can be modeled with given predictive
variables. Higher R\2\ represents higher predictive ability of a
model in forecasting SDQ of mortgages. We consequently eliminate
each individual factor from predictive regression and record its
impact on the reduction in the goodness-of-fit measure. Higher
reduction represents higher contribution of a factor to predictive
ability of the full model. The R\2\ that we find here is in line
with R\2\ found in academic studies that perform similar analyses.
See id.
\668\ We believe this primarily is due to the fact that the year
of loan origination served as a proxy for unobservable factors like
the quality of underwriting standards during the years immediately
preceding the financial crisis when serious delinquency rate was
higher, and a large portion of the loans in the sample were
originated during that time. The importance of the origination year
is smaller for sub-samples that do not include loans originated in
2006-2007.
\669\ Origination year contributed 5% to the goodness-of-fit
measure. LTV, 2-digit zip code, and the obligor's credit score
contributed about 1.5% each. All other 12 data points we considered
made a comparatively smaller contribution to the predictive ability
of the model (1.5% combined), but are still important in predicting
SDQ. These 12 data points include: Interest rate on the loan, DTI,
indicators whether a loan had full documentation, had prepayment
penalty provisions, was interest-only, had a balloon payment, had
negative amortization, was a first lien, was long term, had a teaser
rate, had private mortgage insurance, and whether the property was
owner-occupied.
\670\ The analysis indicated that the goodness-of-fit of the
complete model (i.e., the model that includes all predictive
variables considered in this study) would increase from 15.5% to
15.7% if an MSA is used instead of a 2-digit zip code, and to 16.0%
if a 3-digit zip code is used instead of a 2-digit zip code.
---------------------------------------------------------------------------

Another approach we considered, although not specifically suggested
by commenters, was an approach that rounds the loan amount, other loan
balance-related data points, and monthly performance data points to
further hinder potential obligor re-identification.\671\ The rounding
of loan amount would result in an imputed sales price that may be
sufficiently different from the true sales price so as to lessen the
possibility of a match to other publicly accessible real estate
datasets. Rounding the loan balance to the nearest $1,000 results in
the reduction of the likelihood of isolating a unique mortgage in the
MBSData dataset to 11%. It would, however, come at a loss of precision
in the cash flow variables that we believe is necessary for
investors.\672\ As noted above, such precision is key to investors'
ability to analyze and track the performance of various parties
involved in RMBS transactions.
---------------------------------------------------------------------------

\671\ To be effective in reducing the probability of isolating a
loan that is unique with respect to location, imputed sales price,
and origination date, rounding loan amount (and other loan balance
related variables like most recent appraised value, sales price,
paid-in-full amount, etc.) to the nearest $1,000 ($10,000) must be
accompanied by rounding monthly payment performance related
variables approximately to the nearest $10 ($100).
\672\ See letter from Prudential III (noting that loan-level
data (e.g., current asset balance, next interest rate, current
delinquency status, remaining term to maturity) will allow investors
to better estimate the timing of the principal and interest cash
flows of the collateral pool, which will in turn allow investors to
better estimate the cash flow of the securitization and be more
confident in their risk/reward consideration of the security).
---------------------------------------------------------------------------

We considered several alternative approaches to disseminating
asset-level data as potential means to address privacy concerns,
including the Web site approach.\673\ Most commenters were generally
opposed to the Web site approach as the appropriate means to address
privacy concerns.\674\ For example, commenters raised concerns about
the difficulty in determining who would be a potential investor and
thus should have access to asset-level data; \675\ the liability for
failing to disclose all material information to investors in the event
a potential investor was denied access to asset-level data; \676\ the
need for guidance on what controls are necessary to address privacy;
\677\ and access to the data by other market participants.\678\ Given
these concerns and our belief that it is critically important that
investors receive access to asset-level information, we are not
adopting the Web site approach. We believe the final asset-level
requirements, which have been modified from the proposal to address
privacy concerns, provide investors with information they need to
perform due diligence and make informed investment decisions, and
therefore, we are requiring the asset-level information to be filed on
EDGAR where it will be readily available to and accessible by
investors. For similar reasons, we do not think it would be appropriate
to restrict access to such information on EDGAR.
---------------------------------------------------------------------------

\673\ See the 2014 Re-Opening Release and the 2014 Staff
Memorandum.
\674\ See letters from ABA III, AFSA II, Capital One II,
Deutsche Bank, MBA IV (with respect to RMBS), SIFMA/FSR I-dealers
and sponsors, and Treasurer Group.
\675\ See, e.g., letters from ABA III (noting concern that
without guidance as to who is a potential investor, issuers may
apply their own bias filters to public offerings, such as limiting
public offerings to only institutional investors), CCMR, MBA IV, and
SFIG II.
\676\ For example, issuers have expressed concern about possible
claims for failure to disclose material information by a potential
investor who is denied access to the Web site or refuses to agree to
the terms of access but nonetheless purchases the security. See,
e.g., letters from ABA III, CCMR, ELFA II, SIFMA/FSR II-dealers and
sponsors, and SFIG II.
\677\ Some commenters noted that in order to determine whether a
user should be granted access it would need to screen parties,
conduct reviews of these parties' data protection controls, and
obtain appropriate disclosure agreements, among other controls. See
letters from MBA IV (noting, for example, that issuers would be
faced with the burden of determining how to control the spread of
the information once a credentialed entity accesses the Web site),
SIFMA/FSR I-dealers and sponsors (noting that issuers would
generally not be equipped to verify any prospective user's identity
or credentials or be able to enforce compliance with the terms of
access), SFIG II (noting that investors do not want the liability
risk that may be imposed with the access restrictions), and Wells
Fargo III.
\678\ See, e.g., letters from ABA III, Moody's II, and R&R.
---------------------------------------------------------------------------

Commenters suggested a central repository or ``aggregated data
warehouse'' to house the asset-level data because such an approach
would simplify enforcement of access policies, ensure consistent data
formats and lower incentives to exclude certain users.\679\ Similarly,
another commenter suggested that issuers disclose all asset-level data
to a consumer reporting agency administered repository, along with a
unique identification number for each asset, which would allow
investors to access all the asset-level data for these assets.\680\
Another commenter also

[[Page 57241]]

suggested that credit bureaus, instead of issuers, should provide
credit-related information.\681\ While these suggestions have the
potential to address privacy concerns, as noted by one commenter, they
are not currently in use, would require further development, and would
depend upon the willing participation of certain third parties in order
to function as a viable means of disseminating asset-level data.\682\
---------------------------------------------------------------------------

\679\ See letters from AFR (suggesting either a single data
warehouse managed by a federal agency (e.g., the Commission, the
Federal Reserve (similar to the Bank of England model), or the
Office of Financial Research) or a non-profit data warehouse owned
and managed by private sector entities under Commission oversight
(similar to the European Data Warehouse) and VABSS II (recommending,
as one option to address privacy concerns, to establish a central
``registration system'' managed by the Commission or a third party
that would permit access to sensitive asset-level data only to
persons who had established their identities as investors, rating
agencies, data providers, investment banks or other permitted
categories of users).
\680\ See letter from SIFMA/FSR II-dealers and sponsors (noting
that this approach would apply to all ABS asset classes and also
noting certain developmental challenges, such as identifying a
consumer reporting agency willing to act as a repository, and
application of FCRA). See also SFIG II (stating that issuers should
have the option to use third party agents (which may be a consumer
reporting agency or a central Web site data aggregator) to make the
data available and control access, but also noting that such an
approach still raises privacy law concerns and concerns about who
pays for the third-party service).
\681\ See letter from ABA III.
\682\ See letter from SIFMA/FSR II-dealers and sponsors.
---------------------------------------------------------------------------

4. Requirements Under Section 7(c) of the Securities Act
As we note elsewhere, subsequent to the 2010 ABS Proposing Release,
Congress adopted the Dodd-Frank Act. Section 942(b) of the Dodd-Frank
Act added Section 7(c) to the Securities Act which requires the
Commission to adopt regulations requiring an issuer of ABS to disclose,
for each tranche or class of security, information regarding the assets
backing that security. It specifies, in part, that in adopting
regulations, the Commission shall require issuers of asset-backed
securities, at a minimum, to disclose asset-level or loan-level data,
if such data are necessary for investors to independently perform due
diligence including--data having unique identifiers relating to loan
brokers or originators; the nature and extent of the compensation of
the broker or originator of the assets backing the security; and the
amount of risk retention by the originator and the securitizer of such
assets.\683\
---------------------------------------------------------------------------

\683\ See Section 7(c)(2) of the Securities Act, as added by
Section 942(b) of the Dodd-Frank Act.
---------------------------------------------------------------------------

In the 2011 ABS Re-Proposing Release, we requested comment as to
whether our 2010 ABS Proposals implemented Section 7(c) effectively and
whether any changes or additions to the proposals would better
implement Section 7(c). We discuss below the comments we received in
response to the requests for comment regarding the requirements of
Section 7(c).
(a) Section 7(c)(2)(B)--Data Necessary for Investor Due Diligence
Section 7(c)(2)(B) states, in part, that we require issuers of
asset-backed securities, at a minimum, to disclose asset-level or loan-
level data, if such data are necessary to independently perform due
diligence. We requested comment in the 2011 ABS Re-Proposing Release
whether the 2010 ABS Proposal implements Section 7(c) effectively. In
response, two investors supported requiring asset-level disclosures for
all asset types, except for credit cards.\684\ The investor membership
of one trade association suggested that the disclosure of relevant
asset-level data is necessary for well-functioning markets \685\ and
another commenter suggested that the 2010 ABS proposals would
successfully implement Section 7(c) of the Securities Act.\686\ Two
other commenters, however, questioned whether borrower data proposed in
the 2010 ABS proposals was ``necessary'' for investors to perform their
own due-diligence.\687\ These commenters, however, did not specifically
identify the asset-level disclosures that are necessary for investors
to independently perform due diligence.
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\684\ See letters from MetLife II and Prudential II.
\685\ See letter from SIFMA II-investors (stating that well-
functioning markets require the disclosure of as much relevant
asset-level data as is reasonably available).
\686\ See letter from Chris Barnard dated Aug. 22, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``C.
Barnard'').
\687\ See letters from ABA III and MBA IV.
---------------------------------------------------------------------------

We are adopting asset-level requirements for RMBS, CMBS, Auto ABS,
debt security ABS, and resecuritizations. We prioritized these asset
classes for various reasons that we discuss above.\688\ Our decision to
adopt these requirements is based on our belief that investors should
have access to robust information concerning the pool assets that
provides them the ability to independently perform due diligence. We
continue to consider the appropriate disclosures for other asset
classes. We believe the data points we are adopting fulfill, for those
asset types, the Section 7(c) requirement that we adopt asset-level
disclosures that are necessary for investors to independently perform
due diligence. To the extent issuers believe additional data is needed,
we encourage them to provide such additional disclosures in an Asset
Related Document.\689\
---------------------------------------------------------------------------

\688\ See Section III.A.1 Background and Economic Baseline for
the Asset-Level Disclosure Requirement.
\689\ See Section III.B.4 Asset Related Documents for further
discussion on how to provide such additional disclosures.
---------------------------------------------------------------------------

(b) Section 7(c)(2)(B)(i)--Unique Identifiers Relating to Loan Brokers
and Originators
Section 7(c)(2)(B)(i) requires the Commission to require disclosure
of asset-level or loan-level data, including, but not limited to, data
having unique identifiers relating to loan brokers or originators if
such data are necessary for investors to independently perform due
diligence. In the 2010 ABS Proposing Release, we proposed to require
issuers to provide the originator's name for all asset types and, if
the asset is a residential mortgage, the MERS number \690\ for the
originator, if available. We also proposed requiring RMBS issuers to
provide the National Mortgage License System registration number
required by the Secure and Fair Enforcement for Mortgage Licensing Act
of 2008, otherwise known as the NMLS number, for the loan originators
and company that originated the loan.\691\
---------------------------------------------------------------------------

\690\ MERS has developed a unique numbering system and reporting
packages to capture and report data at different times during the
life of the underlying residential or commercial loan.
\691\ The NMLS numbers for the originator and the company refer
to the individual and company taking the loan application, which
would include loan brokers and the company that the broker works
for. We noted in the 2011 ABS Re-Proposing Release that we were
unaware of any other unique identifying systems used for the purpose
of identifying brokers or originators of other asset types, across
all asset types or within an asset type.
---------------------------------------------------------------------------

In the 2011 ABS Re-proposing Release, we stated our belief that the
proposal to require NMLS numbers would implement the requirements of
Section 7(c) with respect to mortgages by requiring a numerical
identifier for a loan broker.\692\ We requested comment on whether
unique identifiers for loan brokers and/or originators were necessary
to permit investors to independently perform due diligence for asset
classes other than RMBS or CMBS and, if so, whether there is a unique
system of identifiers for brokers and originators for other asset
classes.\693\ We did not receive any comments suggesting this
requirement would not satisfy the requirements of Section 7(c),
although one commenter opposed requiring an NMLS identifier (for RMBS)
because disclosure should focus on the collateral and its performance
and an NMLS identifier does not provide investors with information they
can use to value the assets.\694\
---------------------------------------------------------------------------

\692\ See the 2011 ABS Re-Proposing Release at 47965-66.
\693\ See the 2011 ABS Re-Proposing Release at 47966.
\694\ See letter from MBA III.
---------------------------------------------------------------------------

For RMBS, we are adopting the requirement that issuers provide for
ABS backed by residential mortgages the NMLS number of the loan
originator company. As noted above, we are not adopting the requirement
that issuers provide a unique broker identifier, (i.e., the NMLS number
of the specific loan originator) because we are concerned this
disclosure may increase re-identification risk.\695\ Even though we

[[Page 57242]]

are not requiring disclosure of the NMLS loan originator number, we
believe disclosure of the NMLS number of the loan originator company
satisfies Section 7(c)(2)(B)(i) regarding the asset-level disclosure of
unique identifiers for loan brokers or originators. We believe this
disclosure should, over time, allow investors to compare loans
originated by particular loan originator companies and determine
whether there is any correlation to the performance of the loan. This
should facilitate independent investor due diligence with respect to
the loan pools underlying RMBS.
---------------------------------------------------------------------------

\695\ See Section III.A.3 Asset-Level Data and Individual
Privacy Concerns.
---------------------------------------------------------------------------

We are unaware of unique identifiers for loan originators and, if
applicable, brokers within the commercial mortgage, auto loan and
lease, and debt security markets. We note the ongoing development of
certain identifiers, but we are uncertain, at this time, especially due
to the lack of response to our request for comment, whether a unique
identifier for loan originators for these asset classes is necessary
for investor due diligence. Therefore, at this time, we are not
adopting unique identifiers for loan originators or brokers within the
CMBS, Auto ABS or debt security markets.
(c) Section 7(c)(2)(B)(ii)--Broker Compensations and Section
7(c)(2)(B)(iii)--Risk Retention by Originator and the Securitizer of
the Assets
In the 2010 ABS Proposing Release, we did not propose requiring
asset-level disclosures of broker compensation or risk retention held
by loan originators or securitizers. Section 942(b) of the Dodd-Frank
Act, however, amended Section 7(c) of the Securities Act to require
disclosure on an asset-level or loan-level basis with respect to the
nature and extent of the compensation of the broker or originator of
the assets backing the security and the amount of risk retention by the
originator and the sponsor of such assets if these disclosures are
necessary for investor due diligence. In the 2011 ABS Re-Proposing
Release, we requested comment on whether these disclosures were
necessary for investor due diligence.
We received few comments on these portions of Section 7(c) in
response to our requests for comments. One commenter stated that
disclosure of broker compensation was appropriate to require because it
``is necessary for evaluating how the compensation structure associated
with an asset--including possible conflicts of interest--might affect
its quality.'' \696\ The same commenter believed that asset-level or
loan-level disclosure of risk retention held by an originator or
sponsor ``would undoubtedly be of value to investors as they perform
due diligence and assess the quality of the offering.'' \697\ This
commenter stated that we must require asset-level risk retention
disclosure because of the ``many forms of risk retention that have been
proposed in accordance with Section 941(b) of the Dodd-Frank Act,
including vertical, horizontal, and other configurations'' and because
``[e]ach of those forms of risk retention presents a different risk
profile, depending on the specific underlying assets that are subject
to the risk retention.'' \698\
---------------------------------------------------------------------------

\696\ See letter from Better Markets.
\697\ Id.
\698\ Id.
---------------------------------------------------------------------------

A CMBS issuer and a trade association did not believe that broker
compensation disclosure in the prospectus would be useful to investors
in performing due diligence on the assets in the pool.\699\ The CMBS
issuer stated that the general due diligence focus for CMBS was whether
the income-producing potential of the underlying commercial property
was sufficient to service the debt that it secures and broker
compensation does not assist that analysis.\700\ Another trade
association stated that it did not support disclosure of asset-level
risk retention disclosures because its ``members do not believe this
would add any value in the CMBS industry.'' \701\
---------------------------------------------------------------------------

\699\ See letters from MBA III and Wells Fargo & Co. dated Oct.
4, 2011 submitted in response to the 2011 ABS Re-Proposing Release
(``Wells Fargo II'').
\700\ See letter from Wells Fargo II.
\701\ See letter from CRE Finance Council dated Oct. 4, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``CREFC
II'').
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We did not receive any comments from investors suggesting that
disclosure of broker compensation is necessary for their due diligence.
While the disclosure of broker compensation on an asset-level basis may
provide some value to investors in assessing possible conflicts of
interest, we are not persuaded at this time that such information is
necessary for investors to independently conduct due diligence.
With respect to asset-level risk retention, we are not persuaded at
this time that additional requirements relating to risk retention, on
an asset-level basis, are needed for investors to independently conduct
due diligence. A sponsor, however, will be required to provide
information, on an aggregate basis, about its retained interest in a
securitization transaction. As explained below, we are adopting
amendments to Items 1104, 1108, and 1110 of Regulation AB that will
require disclosure regarding the sponsor's, a servicer's, or a 20%
originator's interest retained in the transaction, including the amount
and nature of that interest.\702\ The disclosure would be required for
both shelf and other offerings. We note the recent re-proposal of the
credit risk retention rules, issued jointly by the Commission and other
agencies, implementing Section 941 of the Dodd-Frank Act.\703\ When
adopted, we will review the final credit risk retention rules to
determine whether additional asset-level or other disclosure
requirements, if any, are appropriate. The asset-level requirements we
are adopting should provide investors with transparency about the
quality of the assets in a securitization.
---------------------------------------------------------------------------

\702\ See Items 1104, 1108 and 1110 of Regulation AB [17 CFR
229.1104, 17 CFR 229.1108 and 17 CFR 229.1110].
\703\ See the 2013 Risk Retention Re-Proposing Release.
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B. Asset-Level Filing Requirements

1. The Timing of the Asset-Level Disclosure Requirements
This section, Section III.B.1, is divided into two parts covering
when asset-level information must be provided. Section III.B.1.a
discusses when asset-level disclosures are required at the time of the
offering. Section III.B.1.b discusses the frequency with which the
asset-level disclosures are required on an ongoing basis. Section
III.B.2 discusses the scope of asset-level data required at the time of
the offering and on an ongoing basis.
(a) Timing of Offering Disclosures
(1) Proposed Rule
In the 2010 ABS Proposing Release, we proposed to require asset-
level information of asset pool characteristics at the following times
during the offering process:
At the time the preliminary prospectus is filed.
At the time the final prospectus is filed.
With an Item 6.05 Form 8-K if the requirements of Item
6.05 were triggered.\704\
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\704\ Under the existing Item 6.05 requirement, if any material
pool characteristic of the actual asset pool at the time of issuance
of the securities differs by five percent or more (other than as a
result of the pool assets converting to cash in accordance with
their terms) from the description of the asset pool in the
prospectus filed for the offering pursuant to Securities Act Rule
424, the issuer must provide certain disclosures regarding the
actual asset pool, such as that required by Items 1111 and 1112 of
Regulation AB. Under a proposed revision to Item 6.05 of Form 8-K,
we proposed that a new Schedule L be filed if assets are added to
the pool during the reporting period, either through prefunding
periods, revolving periods or substitution, and the triggers of Item
6.05 are met. See footnote 235 of the 2010 ABS Proposing Release.

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[[Page 57243]]

(2) Comments on Proposed Rule
Only one commenter responded to our proposal that the asset-level
disclosures be required at the time of the offering. This commenter
stated the proposal seemed to cover the period of offering
sufficiently.\705\
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\705\ See letter from MBA I (stating that if the Commission
requires a Schedule L for CMBS, then they do not recommend the
inclusion of Schedule L data at other times as the proposal seems to
cover the period of offering sufficiently).
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(3) Final Rule and Economic Analysis of the Final Rule
Under the final rule, as proposed, those issuers that are required
to provide asset-level data must provide all of the required asset-
level disclosures in a preliminary prospectus and the final prospectus.
Requiring that asset-level disclosures be filed by the same time a
preliminary prospectus is filed will provide investors more time to
analyze the asset-level data in advance of an investment decision. We
acknowledge that every time asset-level disclosures are filed issuers
likely will incur filings costs and costs to verify the data. We
believe the costs incurred to provide this information are justified in
order to provide investors access to relevant data about the assets
underlying the particular ABS offering in advance of their investment
decision. In addition, we believe providing investors time to analyze
the asset-level data may result in better pricing and therefore may
improve allocative efficiency and facilitate capital formation.
Compliance costs are minimized, to some extent, because if there has
been no change to the asset-level information provided with the
preliminary prospectus, then under current requirements, this
information can be incorporated by reference into the final prospectus.
This eliminates the costs associated with re-filing the information.
Under the proposal, an issuer would have been required to provide
updated asset-level disclosures about the pool composition, including
characteristics of new assets added to the pool, if an Item 6.05 Form
8-K was triggered.\706\ Under the final rules, asset-level information
about the actual pool composition is required with each Form 10-D.
Therefore, we do not believe that issuers should also incur the cost to
provide asset-level information if an Item 6.05 is triggered.
---------------------------------------------------------------------------

\706\ See footnote 235 of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

(b) Timing of Periodic Disclosures
(1) Proposed Rule
We also proposed in the 2010 ABS Proposing Release to require
ongoing asset-level disclosures. Under the proposal, asset-level
disclosures would be required at the time of each Form 10-D, which
under current requirements is within 15 days after each required
distribution date on the ABS.
(2) Comments on Proposed Rule
With respect to when and how frequently the ongoing asset-level
disclosures should be provided, comments varied. One commenter
recommended that the required disclosures be provided on the
distribution date rather than 15 days thereafter.\707\ Some commenters
noted that industry standards for CMBS make ongoing disclosures
available earlier than when the proposal would require them.\708\
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\707\ See letter from MetLife I.
\708\ See letters from BoA I, MBA I, MBA IV, and Wells Fargo I
(referring to the CREFC IRP making disclosures available 15 days
earlier than what the proposal would require).
---------------------------------------------------------------------------

With respect to how frequently the ongoing asset-level disclosures
should be provided, comments varied. For instance, a few commenters
suggested we require disclosure on the day of an ``observable event,''
or promptly thereafter.\709\ Alternatively, one commenter suggested
requiring less asset-level data each month or allowing issuers to
provide the data annually or quarterly.\710\ Other commenters stated
that the asset-level disclosures should not be required on a daily
basis or on a timeframe that occurs less than monthly.\711\ Relatedly,
one commenter stated that the final rule should include an instruction
clarifying that the ongoing asset-level information reported for any
particular reporting period may be reporting information from a prior
reporting period due to delays that can occur between the time when
asset-level information is received and such information is ready to be
reported.\712\
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\709\ See letters from TYI and CoStar (both defining
``observable events'' as any of the following: (1) Payment (and the
amount thereof) by the obligor on such loan or receivable; (2)
failure by the obligor to make payment in full on such loan or
receivable on the due date for such payment; (3) amendment or other
modification with respect to such loan or receivable; or (4) the
billing and collecting party becomes aware that such obligor has
become subject to a bankruptcy or insolvency proceeding).
\710\ See letter from AFSA I (suggesting that monthly reports
are cumbersome and the data does not change that often).
\711\ See letters from ABA I (suggesting that it would be
burdensome or impossible to provide intra-month updates because of
system limitations that would prevent more frequent data collection
and that data is only comparable if consistently collected at the
same point in time) and Wells Fargo I (suggesting that, for RMBS and
CMBS, requiring ongoing disclosures on a daily basis or less than
monthly is inappropriate because the marginal benefit to investors
would not justify the costs).
\712\ See letter from Wells Fargo I (stating that CMBS
transactions often involve multiple loans with different financial
reporting dates, and the information has to be reviewed by the
appropriate parties, including the servicer, and normalized before
it is provided to the filer, which can result in substantial delays
between the time information is received and is reported on Form 10-
D).
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(3) Final Rule and Economic Analysis of the Final Rule
The final rule requires, as proposed, that issuers provide the
asset-level disclosures at the time of each Form 10-D. As discussed,
however, in Section III.B.2 the scope of information required with each
Form 10-D has changed to also include the same set of data points that
were required in the prospectus. We are not persuaded by commenters'
suggestions that the ongoing asset-level disclosures be provided
quarterly, annually or monthly, because reporting at these times may be
outside the time when such disclosures are normally collected. The
requirement to file a Form 10-D is tied to the distribution date on the
ABS, as specified in the governing documents for the securities. In
effect, tying the asset-level disclosures to each Form 10-D filing
aligns the frequency of the disclosures to the payment cycle (when data
about the collections and distributions is captured) which should
minimize the burdens and costs to issuers of collecting such
information. For investors, receiving asset-level data tied to the
payment cycle should allow them to conduct their own valuation and risk
analysis of each asset in the pool at periods close in time to when the
data is captured and other distribution information is already being
reported. This should allow investors to understand, on an ongoing
basis for the life of the investment, how the performance of any
particular asset is affecting pool performance.
We also believe that only requiring asset-level disclosures on a
quarterly or monthly basis may not provide investors with timely access
to data about the performance of pool assets because it ties the
reporting of asset-level disclosures to a timeframe that may be outside
the payment cycle when the data is normally captured, which may
increase costs or inhibit investors' ability to make timely and
informed ongoing investment decisions. For instance, if asset-level
reporting was required monthly, but the payment cycle occurred every
six months, then requiring a filing on a monthly basis

[[Page 57244]]

may unnecessarily increase costs without a corresponding benefit. If
reporting was required on a quarterly basis, but the payment cycle was
monthly, then in instances where the performance of pool assets
deteriorates or the pool assets change, investors would not receive
timely updates about such events. This may impact their ability to spot
developing trends, thus limiting their ability to make informed ongoing
investment decisions with respect to the ABS.
We are also not persuaded that we should require reporting any time
an ``observable event'' occurs with respect to a single asset because
we do not believe that the benefits to investors of such a requirement
would justify the costs to issuers of capturing and reporting data in a
timeframe that falls outside when data is typically captured and
reported. Reporting on an observable event basis could result in the
issuer constantly updating the data. As noted above, we believe
providing investors access to timely and relevant asset-level
disclosures and minimizing costs to issuers is best achieved by
requiring asset-level disclosures be provided with each Form 10-D,
which means the disclosures will be provided in a timeframe that is in
line with the payment cycle and when the data is typically captured.
The final rule also requires that the asset-level disclosures be
provided for each asset that is in the pool at any point in time during
the reporting period. Therefore, if a substitution occurred during the
reporting period, then asset-level disclosures are required for both
the loan added and the loan removed during the reporting period in
which the change occurred. Providing investors with disclosure about
assets that are added and removed will allow investors to understand
the actual composition of the asset pool over the life of a security.
This will benefit investors by allowing them to assess on an ongoing
basis the current risk of the collateral pool and to compare the
characteristics of the assets involved in a substitution. We recognize
that this benefit to investors will result in increased reporting costs
to sponsors and ABS issuers.
A commenter suggested the final rule include an instruction
clarifying that the information reported for any particular reporting
period may be information from a prior reporting period due to delays
that can occur between the time when asset-level information is
received and such information is ready to be reported.\713\ We are not
persuaded that this is a significant problem for issuers; therefore the
final rule does not include such an instruction. The transaction
agreements specify a distribution date to investors that is generally
sometime after the end of a reporting period so that the amounts of a
distribution may be calculated so that reports may be prepared.
Consistent with current requirements, the Form 10-D is required to be
filed 15 days after each required distribution date on the ABS and
accordingly, because the asset-level disclosures are included in the
Form 10-D disclosure requirements, they are due at the same time. Based
on current market practice, the amount of time between the end of a
reporting period and filing of a Form 10-D may be four weeks or more.
Therefore, we believe aligning the timing of filing the asset-level
disclosure with current Form 10-D reporting requirements will not be
costly and will provide a sufficient period of time for the appropriate
parties to review the information before filing.
---------------------------------------------------------------------------

\713\ See letter from Wells Fargo I.
---------------------------------------------------------------------------

2. The Scope of New Schedule AL
Section III.B.1 discussed when asset-level disclosures are required
at the time of offering and on an ongoing basis. This section discusses
the scope of those required asset-level disclosures required at the
time of the offering and on an ongoing basis.
(a) Proposed Rule
(1) Offering Disclosures
As noted above, in the 2010 ABS Proposing Release, we proposed to
add the prospectus disclosure requirements in new Item 1111(h) and new
Schedule L to Regulation AB. We also proposed data points related to
each asset. Proposed Schedule L focused, in general, on providing
investors asset-level data about the credit quality of the obligor, the
collateral related to each asset and the cash flows related to a
particular asset, such as the terms, expected payment amounts, indices
and whether and how payment terms change over time. Schedule L
contained some data points capturing some loan performance data.\714\
As noted above, proposed Schedule L would have been provided at the
time of the preliminary prospectus. We also proposed that an updated
Schedule L be provided with the final prospectus.\715\ Finally, we
proposed that, if issuers are required to report changes to the pool
under Item 6.05 of Form 8-K, then an updated Schedule L would be
required.\716\ We also requested comment on whether Schedule L data
should be required at any other time.\717\
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\714\ See, e.g., proposed Items 1(b)(5) and 1(b)(6) of Schedule
L.
\715\ See proposed Item 1125 of Regulation AB and the 2010 ABS
Proposing Release at 23356.
\716\ In footnote 235 of the 2010 ABS Proposing Release we
stated that if a new asset is added to the pool during the reporting
period, an issuer would be required to provide the asset-level
information for each additional asset pursuant to proposed revisions
to both Item 1111 of Regulation AB and Item 6.05 of Form 8-K. See
the 2010 ABS Proposing Release at 23356.
\717\ See the 2010 ABS Proposing Release at 23356.
---------------------------------------------------------------------------

Under our proposed revisions to Item 6.05 of Form 8-K, we proposed
that a new Schedule L be filed if any material pool characteristic of
the actual asset pool at the time of issuance of the asset-backed
securities differs by 1% or more from the description of the asset pool
in the prospectus.\718\ Based on comments received, it seemed that it
may not be clear that an Item 6.05 Form 8-K would be required when
prefunding or revolving assets increased or changed the pool by 1% or
more, although that was the intent of the proposal. Therefore, in the
2011 ABS Re-Proposing Release, we requested additional comment about
whether we should clarify that a new Schedule L would be required with
an Item 6.05 Form 8-K when assets are added to the pool after the
issuance of the securities either through prefunding periods, revolving
periods or substitution and the triggers in Item 6.05 are met.\719\ The
Schedule L provided with an Item 6.05 Form 8-K would provide investors
with the current pool composition including data related to the cash
flows related to a particular asset, data that allows for better
prepayment analysis or credit analysis and data about the property. We
also requested comment on whether the updated Schedule L should include
all assets in the pool and whether the Schedule L should be an exhibit
to a Form 8-K or to a Form 10-D.\720\
---------------------------------------------------------------------------

\718\ See the 2010 ABS Proposing Release at 23392. As proposed,
if any material pool characteristic of the actual asset pool at the
time of issuance of the asset-backed securities differs by 1% or
more than the description of the asset pool in the prospectus filed
for the offering pursuant to Securities Act Rule 424, an issuer
would be required to file an Item 6.05 Form 8-K and provide the
disclosures required under Item 1111 and Item 1112 of Regulation AB.
Under proposed Item 1111(h) of Regulation AB issuers would be
required to provide a Schedule L. In addition, the item, as proposed
to be revised, also would require a description of the changes that
were made to the asset pool, including the number of assets
substituted or added to the asset pool.
\719\ See the 2011 ABS Re-Proposing Release at 47970.
\720\ Id.
---------------------------------------------------------------------------

(2) Periodic Disclosures
In the 2010 ABS Proposing Release, we also proposed ongoing
disclosure requirements in Item 1121(d) and Schedule L-D. Proposed
Schedule L-D

[[Page 57245]]

would require, in general, disclosures corresponding to payments
received during the payment cycle, as well as amounts past due and the
servicer's efforts during the payment cycle to collect past due
amounts. Proposed Item 1121(d) and Schedule L-D disclosure would be
provided at the time of each Form 10-D. We also requested comment in
the 2010 ABS Proposing Release about whether Schedule L-D data should
be provided at other times.\721\
---------------------------------------------------------------------------

\721\ See the 2010 ABS Proposing Release at 23368.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
We received limited response to the request for comment on whether
Schedule L and Schedule L-D data should be provided at any other time.
Commenters generally indicated that the disclosures enumerated in
Schedule L and Schedule L-D may be appropriate at other times than
proposed. For instance, one investor stated that the same disclosures
for all ABS sectors (other than CMBS) should be required for offering
documents and ongoing reports.\722\ The investor recognized that
certain data will be static, while other data will change from month to
month. Another investor stated that for transactions involving a
prefunding period or revolving period, a new Schedule L should be filed
monthly when new collateral is added.\723\
---------------------------------------------------------------------------

\722\ See letter from MetLife I (suggesting that the same
disclosure be required for offering documents and ongoing reports,
but that for CMBS the loan originator and the loan servicer are not
affiliated and therefore, the same requirement may be impractical
for CMBS).
\723\ See letter from Prudential I (opposing additions to the
collateral pool after the filing of the final prospectus except for
substitutions for defaulted assets after closing).
---------------------------------------------------------------------------

In response to the questions asked in the 2011 ABS Re-Proposing
Release about clarifying that a new Schedule L would be required with
an Item 6.05 Form 8-K, an investor reiterated its earlier position that
issuers should file a Schedule L at issuance and each month new assets
are added to the collateral pool.\724\ The investor added that this
would allow investors to evaluate the changing nature of the risk
layering introduced by the new assets and it would allow investors to
confirm that the quality of the newly added collateral meets the
expected origination practices of the issuer.\725\
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\724\ See letter from Prudential II.
\725\ See letter from Prudential II (also suggesting that the
newly originated collateral should also appear on Schedule L-D, ``so
investors can efficiently assess how the new assets influence the
risk profile of the overall collateral pool'').
---------------------------------------------------------------------------

One commenter noted that current rules require that updated
information about the characteristics of the collateral in the pool be
provided with the Form 10-D, rather than in a Form 8-K.\726\ The
commenter, however, also believed requiring an updated Schedule L for
assets added after the measurement date for revolving asset master
trusts is inappropriate because the asset composition of these trusts
changes on a daily basis during its revolving period and, therefore, an
issuer would be filing both a Schedule L and Schedule L-D each
month.\727\ Another commenter suggested that a new Schedule L should
not be required when assets are added to the pool after issuance,
either through prefunding periods, revolving periods or substitution
unless the triggers under Item 6.05 of Form 8-K are met. If the 5%
threshold under Item 6.05 was met, then the commenter asserted filing
the Schedule L with the Form 10-D would be more efficient.\728\
---------------------------------------------------------------------------

\726\ See letter from VABSS II (noting that existing Item
1121(b) of Regulation AB requires disclosure for changes in pool
composition during revolving periods and prefunding periods, and
Item 1121(b) states that the information is to be provided in
distribution reports on Form 10-D, rather than in a Form 8-K).
\727\ See letter from VABSS III.
\728\ See letter from Sallie Mae II.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments received, we are adopting a rule,
based on a commenter's suggestion that the same asset-level disclosures
be provided, if applicable, at the time of the offering and on an
ongoing basis. Therefore, we have condensed information previously
proposed to be provided in either Schedule L or Schedule L-D into a
single schedule, titled Schedule AL. Schedule AL in new Item 1125 of
Regulation AB enumerates all of the asset-level disclosures to be
provided, if applicable, about the assets in the pool at securitization
and on an ongoing basis. The asset-level disclosures apply to each
asset in the pool during the reporting period covered by Schedule
AL.\729\
---------------------------------------------------------------------------

\729\ See Item 1111(h)(7) of Regulation AB [17 CFR 229.1111].
---------------------------------------------------------------------------

We believe aggregating Schedule L and Schedule L-D into one unified
schedule simplifies the new rules to the benefit of both issuers and
investors. For investors, we believe a unified schedule will make it
easier to understand the actual pool composition and the performance of
the asset pool both at issuance and on an ongoing basis. We recognize
that, in certain circumstances, the pool composition may continue to
change even after the final prospectus is filed. As a result, the
asset-level information provided with the final prospectus may not
reflect the pool composition at closing.\730\ On an ongoing basis, the
composition of the asset pool may change due to prefunding or revolving
periods, or substitution. Under the proposal, if the assets in the pool
changed after the filing of the final prospectus, then investors would
have only received updated disclosures about the characteristics of the
current asset pool, if an Item 6.05 of Form 8-K was triggered. Some
assets could be added or removed from the pool without investors
receiving updated disclosures about the changes to the composition and
characteristics of the asset pool. As a result, the assets identified
in the most recent Schedule L-D would not exactly match the assets
identified in the last Schedule L that was filed.
---------------------------------------------------------------------------

\730\ The requirement to file Schedule AL data with the final
prospectus does not impact the analysis regarding the timing and
adequacy of information conveyed to the investor at the time the
investment decision is made. Under Securities Act Rule 159,
information conveyed after the time of the contract of sale (e.g., a
final prospectus) is not taken into account in evaluating the
adequacy of information conveyed to the investor at the time the
investment decision was made. Therefore, registrants should be
mindful of their obligations under Securities Act Rule 159.
---------------------------------------------------------------------------

Requiring that the asset-level information provided with the Form
10-D include information about the characteristics of each asset will
make it easier to understand the actual pool composition at any point
in time and, in particular, when the asset composition has changed
through additions, substitutions or removal of assets.\731\ This
requirement will also make it easier to compare the characteristics of
the current asset pool with the pool characteristics for a prior period
or date. As a result, we believe investors will be able to better
assess any potential risk layering introduced by changes to the
composition of the asset pool and confirm that the quality of the newly
added collateral meets expected origination practices.
---------------------------------------------------------------------------

\731\ For instance, if a loan was added to an RMBS pool during a
reporting period, the next Schedule AL that is filed will include
all relevant disclosures about the asset, including all disclosures
that would have been included if the loan was part of the pool at
the time of securitization and all required ongoing asset-level
disclosures about the asset. The final rules include a data point
that captures whether an asset was added to the pool during the
reporting period.
---------------------------------------------------------------------------

Another benefit is that investors at the time of the offering will
receive a more complete picture of any seasoned assets in the ABS pool,
including the current performance of these assets. As we noted in the
2010 ABS Proposing Release, proposed Schedule L-D focused on whether an
obligor is making payments as scheduled, the efforts by the servicer to
collect amounts past due,

[[Page 57246]]

and the losses that may pass on to investors.\732\ We believe these
disclosures, if made at the time of the offering, will also assist an
investor in its investment analysis, especially with respect to asset
pools involving seasoned assets.
---------------------------------------------------------------------------

\732\ See the 2010 ABS Proposing Release at 23367.
---------------------------------------------------------------------------

We recognize that the one schedule format may benefit issuers, but
it may also result in some increased compliance costs. We believe that
it may be easier to revise, amend and file one schedule than two
separate schedules. Also, as discussed above, because we are not
adopting the proposed requirement that an updated Schedule L be
provided if an Item 6.05 is triggered, issuers will not need to bear
the burden or cost of assessing whether an updated Schedule L is
required if the requirements of Item 6.05 were triggered.\733\
---------------------------------------------------------------------------

\733\ The current disclosures required under existing Item 6.05
of Form 8-K are still required if the triggers of Item 6.05 are met.
Item 6.05 is not limited to the reporting of differences in material
pool characteristics that result only from changes in the pool
composition and, in fact, it excludes only changes that occur as a
result of the pool assets converting into cash in accordance with
their terms. For example, absent a change in pool composition, if
payment activity after the cut-off date would result in a change to
the delinquency or payment statistics that were presented in the
prospectus by more than 5% after the cut-off date, but prior to
closing, then disclosure would be required under Item 6.05.
---------------------------------------------------------------------------

We also recognize that aggregating the data points proposed in
Schedules L and L-D into one schedule may increase the number of data
points that an issuer will need to respond to at the time of the
offering and on an ongoing basis. We do not believe that this change
increases the data issuers must collect about the assets beyond what
was proposed as the unified schedule primarily consists of information
proposed to be provided under Schedule L and Schedule L-D. Under the
rule we are adopting, the issuer will be required, at the time of the
offering, to provide all the information relating to the underwriting
of the asset (e.g., terms of the asset, obligor characteristics
determined at origination) and any applicable performance related
information for the most recent reporting period. On an ongoing basis,
the issuer will be required to provide the relevant ongoing performance
information for the most recent reporting period and the underwriting
information previously provided about the asset. Issuers may incur some
increased filing costs compared to what they would have incurred under
the proposal because they will be verifying and filing more data at
each filing. Although we cannot quantify the increase in filing costs
that issuers may incur, our qualitative assessment is that the increase
will not be significant over what was proposed.\734\
---------------------------------------------------------------------------

\734\ By aggregating the schedules we are able to omit any
duplicate data points found on both schedules. For instance, the
following data points were in proposed Schedule L-D and were omitted
from Schedule AL since they were similar or identical to other data
points: Items 1(a) Asset number type; 1(b) Asset number; 1(c) Asset
group number; 1(f)(7) Current asset balance; 1(f)(12) Current
delinquency status; 1(f)(13) Number of days payment is past due;
1(f)(14) Current payment status; 1(f)(15) Pay history; 1(f)(18)
Remaining term to maturity; 1(g)(6) Servicing advance methodology;
2(b)(2) Next interest rate change date; 2(b)(5) Option ARM
indicator; 2(e)(1) Modification effective payment date; 2(e)(3)
Total capitalized amount; 2(e)(29) Forgiven principal amount
(cumulative); and 2(e)(30) Forgiven interest amount (cumulative).
The following data points were in proposed Schedule L and were
omitted from Schedule AL since they were similar or identical to
other data points: Items 1(a)(15) Primary servicer; 2(a)(21)(iv)
Updated DTI (front-end) and 2(a)(21)(iv) Updated DTI (back-end).
---------------------------------------------------------------------------

We considered, as an alternative, requiring information to be
provided only about assets added to the pool during a reporting period.
We believe asset-level information is most useful when it reflects all
the assets actually in the pool. Therefore, we believe that current
investors and potential secondary market investors should have access
through the current Form 10-D to the asset-level information reflecting
the assets in the pool at that time. Otherwise those parties may have
to piece together various tables of information to construct the
current pool. Piecing together various tables may lead to confusion and
errors and, as a result, market participants may base their analysis on
data that does not provide an accurate picture of the asset pool.
Further, investors rather than issuers would bear the cost of piecing
together the disclosures and having each investor doing so would create
duplicative costs.
One investor commenter who supported the same asset-level
disclosure in offering documents and in ongoing reports for most asset
classes did not support this format for CMBS.\735\ For CMBS, this
commenter stated the loan originator and the loan servicer are not
affiliated and, therefore, unifying items in Schedule L and Schedule L-
D may be impractical for the CMBS sector. We considered this concern,
but we believe the information is available to issuers, albeit perhaps
at some cost. Thus, Schedule AL enumerates for issuances of CMBS all of
the asset-level disclosures to be provided, if applicable, about the
assets in the pool at securitization and on an ongoing basis.
---------------------------------------------------------------------------

\735\ See letter from MetLife I.
---------------------------------------------------------------------------

In the end, we believe this approach is reasonable despite the
increased compliance costs, because this approach provides investors
with access, both at the time of the offering and on an ongoing basis,
to more data about the characteristics and performance of the pool
assets. As a result, investors can evaluate the characteristics of the
pool with the benefit of a more complete picture of the pool assets'
characteristics and performance.
3. XML and the Asset Data File
(a) Proposed Rule
In the 2010 ABS Proposing Release, we proposed requiring that
asset-level information be provided in XML. We believed that requiring
the asset-level data file in XML, a machine-readable language, would
allow users to download the data directly into spreadsheets and
databases, analyze it using commercial off-the-shelf software, or use
it within their own models in other software formats.
(b) Comments on Proposed Rule
In response to the 2010 ABS Proposing Release, several commenters
supported the use of XML to report loan-level data \736\ and some
commenters noted that the residential mortgage industry already uses
XML to transmit data about loans.\737\ For CMBS, some commenters
suggested not requiring XML at this time.\738\ A few commenters
suggested that we not adopt the XML requirement for RMBS, but instead
require the information in comma separated values (``CSV'').\739\

[[Page 57247]]

Other commenters also suggested the use of another standard, such as
XBRL.\740\
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\736\ See, e.g., letters from ActiveState Software Inc. dated
July 29, 2010 submitted in response to the 2010 ABS Proposing
Release, Beached Consultancy, CMBS.Com I, CREFC I (recognizing the
importance of XML format, but requesting we not adopt the
requirement for CMBS until such time that CREFC IRP adopts a version
of the CREFC IRP in XML), Interactive, MetLife I, Risk Management
Association dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``RMA''), and Alberto Zonca dated July 26, 2010
submitted in response to the 2010 ABS Proposing Release (``A.
Zonca'').
\737\ See letters from eSign, MBA I, MERS, and MISMO (each
supporting the use of XML, but suggesting the use of MISMO XML
standards).
\738\ See letters from CREFC I (indicating that requiring XML
would be a significant burden on those institutions who largely work
under an alternative platform to convert to XML and the conversion
could create data quality issues), MBA I, and Wells Fargo I (each
suggesting that the Commission wait until the CMBS industry develops
the XML format).
\739\ See letters from ASF I (suggesting requiring RMBS files be
in text format with each value in the file separated by a comma
because market participants should focus staff and information
technology resources on efforts to standardize the data) and Wells
Fargo I (suggesting the format of the data be in CSV format).
\740\ See letters from RMA (supporting the use of XML schemas
specified either with the XSD language or the more specialized
XBRL), UBMatrix, Inc. dated July 31, 2010 submitted in response to
the 2010 ABS Proposing Release (recommending requiring XBRL), and
XBRL.US dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (suggesting the use of XBRL because it is
consistent with their recommended waterfall output format).
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As we note above, subsequent to the 2010 ABS Proposing Release,
Congress adopted the Dodd-Frank Act. Section 942(b) of the Dodd-Frank
Act added Section 7(c) to the Securities Act, which requires the
Commission to set standards for the format of the data provided by
issuers of an asset-backed security, which shall, to the extent
feasible, facilitate the comparison of such data across securities in
similar types of asset classes. We requested comment in the 2011 ABS
Re-Proposing Release as to whether the proposed XML format was an
adequate standard for the format of data that facilitated the
comparison. We did not receive any comments suggesting that requiring
that asset-level data be provided in XML did not, as it relates to data
standardization, implement Section 7(c) effectively.
Instead, comments on the 2011 Re-Proposing Release reiterated
concerns raised in prior comment letters. For instance, some commenters
reiterated their belief that XML should not be required for CMBS at
this time \741\ and one of these commenters said requiring XML should
be tied to investor demand.\742\ These commenters were concerned with
the cost to implement the standard,\743\ the cost of providing the data
in duplicate formats,\744\ data quality risks,\745\ and the time needed
to implement the standard.\746\ On the other hand, one commenter
believed that the current format of CMBS reports (CSV, Excel and even
PDF) ``greatly limits the transparency of CMBS.'' \747\
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\741\ See letters from CREFC II, MBA III, and Wells Fargo II.
\742\ See letter from MBA III.
\743\ See letter from CREFC II. This commenter did not provide a
specific cost to implement XML.
\744\ See letter from MBA III (stating that CMBS investors
generally do not currently utilize XML formatting for reporting and
even if XML is required, issuers will likely continue to provide
investors the disclosures in the format they currently provide them
and use XML format ``solely for filings with the Commission.'').
\745\ See letters from CREFC II and Wells Fargo I.
\746\ See letter from Wells Fargo I.
\747\ See letter from CMBS.com and Commercial Mortgage Industry
Standards Maintenance Organization dated Oct. 4, 2011 submitted in
response to the 2011 ABS Re-Proposing Release.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments received, we are adopting the
proposed XML requirement. We believe requiring asset-level information
in a standardized machine-readable format should lower the cost for
investors of collecting data about ABS offerings and should allow data
to be analyzed by investors and other end-users more quickly than if
the data was provided in a non-machine readable format. For instance,
if the asset-level data is made available to investors in a format that
is not machine-readable, it would require the manual key-entry of the
data into a format that allows statistical analysis and aggregation.
Thus, investors seeking to gain a broad understanding of ABS offerings
would either need to spend considerable time manually collecting the
data and manually entering the data into a format that allows for
analysis, thus increasing the time needed to analyze the data, or incur
the cost of subscribing to a financial service provider that
specializes in this data aggregation and comparison process. Further,
manual entering of data can lead to errors, thereby reducing data
accuracy and usefulness. Requiring companies to report asset-level data
in a standardized machine-readable format, such as XML, should lower
both the time and expense for each investor to access this data. Since
asset-level disclosures will be tagged and can be immediately
downloaded into a larger, more comprehensive database that may include
data about other ABS offerings, investors will not need to manually
enter the data or subscribe to a third-party data aggregator. With more
information readily available in a usable format, investors may be able
to better distinguish the merits of various investment choices, thereby
allowing investors to better match their risk and return preferences
with ABS issuances having the same risk and return profile. Thus, we
expect that this reduction in the costs of accessing, collecting and
analyzing information about the value of ABS will lead to better
allocation of capital. We believe that the requirements we are adopting
to require standardized asset-level disclosures in XML fulfill, for the
asset types subject to these requirements, the requirement under the
Dodd-Frank Act that we set a standard for the format of data that
facilitates comparison across securities in similar types of assets.
We understand that some commenters expressed concerns regarding the
burden and cost to implement the standard. We recognize that requiring
asset-level disclosures in XML will result in substantial initial set-
up costs to filers.\748\ In a further attempt to mitigate costs to
issuers, as we discuss below in Section IX.B, we are requiring that
issuers comply with the asset-level disclosures no later than November
23, 2016, which we believe reduces the burden of implementation by
providing time for market participants to reprogram their systems. With
respect to the costs of implementation, we believe that the costs are
justified because we believe investors need the asset-level disclosures
in a standardized machine-readable format that makes the data
transparent and comparable. We continue to believe that having the
asset-level data in a standardized machine-readable format will enable
investors to use commercial off-the-shelf software for analysis of
underlying asset-level data, which will allow them to aggregate,
compare and analyze the information.
---------------------------------------------------------------------------

\748\ We estimate the direct costs of converting data from
internal formats to rule-compliant XML format the following way: We
assume that a sponsor would work with all asset types and would need
to convert the total of 680 distinct data columns, with 80% of them
having direct mapping from internal data types (i.e., no additional
conversion or modification would be necessary) and 20% being coded
(i.e., column value be a combination or modification of existing
data values) and requiring 3 times the effort for direct columns.
One simple column would require 6 hours of work, with a total of
5,712 hours. The deployment (documentation, internal ``roll out''
with the first filing, etc.) would add another 10% to the costs,
leading to the total 6,283 hours, or 3.5 full-time equivalents
(Senior Database Administrator, Senior Business Analyst and one and
a half Junior Business Analysts). Using salary data from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified by Commission staff to account for a 1,800-hour work-year
and multiplied by 5.35 to account for bonuses, firm size, employee
benefits and overhead, we estimate the initial costs would be about
$1,445,000 per sponsor. The hardware cost increment would be de
minimis and the maintenance in subsequent periods would be only 5%
of build cost. For some sponsors that specialize on a limited number
of asset types the costs could be significantly lower because they
would need to transform fewer data points from their internal format
to the rule-compliant XML format. After necessary adjustments have
been made, we expect that the ongoing costs for providing the data
in XML will be minimal.
---------------------------------------------------------------------------

We also considered, as several commenters suggested, alternative
formats to XML, such as PDF, CSV and XBRL. We do not believe PDF format
is a suitable alternative because it is not a convenient medium for
tabular structured data and it is not designed to convey machine-
readable data. As explained above, the ability of investors to easily
utilize the asset-level data required of issuers is crucial to its
usefulness. We believe that the CSV format is not suitable either,
since any given dataset reported will require more than a single set of
uniformly structured

[[Page 57248]]

rows and CSV format will not support the disclosure of such datasets
easily. Finally, while XBRL allows issuers to capture the rich
complexity of financial information presented in accordance with U.S.
Generally Accepted Accounting Principles, we do not believe that it is
appropriate for the asset-level disclosure requirements we are
adopting.\749\ The Asset Data File will present relatively simpler
characteristics of the underlying loan, obligor, underwriting criteria,
and collateral, among other items, that is better suited for XML.
Further, the data extensions available in XBRL are not appropriate for
this dataset where comparability of data is critical and the nature of
the repetitive data lends itself to an XML format. In addition, the XML
schema can be easily updated. \750\
---------------------------------------------------------------------------

\749\ XBRL was derived from the XML standard. See Interactive
Data to Improve Financial Reporting Adopting, Release No. 34-59324
(Jan. 30, 2009) [74 FR 6776].
\750\ A schema is a set of custom tags and attributes that
defines the tagging structure for an XML document. Extension data is
not permitted in the asset-level data file because we believe it
would defeat the purpose of standardizing data elements. Extension
data allows issuers to add their own data elements to our defined
data elements.
---------------------------------------------------------------------------

4. Asset Related Documents
(a) Proposed Rule
We understand that a situation may arise where an issuer would need
to disclose other asset-level data not already defined in Schedule AL.
To address this situation, we proposed to include a limited number of
``blank'' data tags in our XML schema to provide issuers with the
ability to present additional asset-level data not required under the
proposal.\751\ We also proposed an ``Asset Related Document'' that
would allow registrants to disclose the definitions or formulas of any
additional asset-level data or provide further explanatory disclosure
regarding the Asset Data File.\752\
---------------------------------------------------------------------------

\751\ See the 2010 ABS Proposing Release at 23375.
\752\ Id.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
We received some comments, which were mixed, on the blank tag
proposal, but we did not receive any comments regarding the use of an
Asset Related Document. With regard to the blank tag proposal, one
commenter suggested that as long as the information in the blank data
tag is clearly described, neither the number of blank data tags nor the
information would add complexity to the requirements.\753\ One
commenter, however, did not see the benefit of the proposed blank tags
because new data points can be added as business and reporting needs
evolve.\754\ Another commenter did not believe a blank tag was
appropriate or consistent with ``good XML syntax.'' \755\
---------------------------------------------------------------------------

\753\ See letter from Prudential I.
\754\ See letter from MISMO.
\755\ See letter from MBA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We continue to believe, given the possible variety of assets and
structures for securitization and that business and reporting needs may
evolve faster than changes can be made to the asset-level requirements,
issuers should have the flexibility to provide asset-level data in
addition to what is required by Schedule AL. For instance, we note that
some commenters suggested we adopt data points that we had not
proposed.\756\ While we are adopting some of the data points commenters
suggested, we are not adopting all the additional data points
recommended for various reasons that we describe above. We encourage
issuers to provide any additional asset-level data that may be
appropriate. We believe the flexibility to provide additional data in a
machine-readable format will provide benefits to investors and issuers
at no significant cost.
---------------------------------------------------------------------------

\756\ See, e.g., letters from ASF I (suggesting additional RMBS
data points), CU, and Wells Fargo I (suggesting additional RMBS data
points as well as additional RMBS data points regarding government-
sponsored assets).
---------------------------------------------------------------------------

Under the final requirements, issuers can provide additional asset-
level disclosures in an Asset Related Document and such Asset Related
Document(s) must then disclose the tags, definitions, and formulas for
each additional asset-level disclosure.\757\ As we stated in the 2004
ABS Adopting Release and 2010 ABS Proposing Release, issuers and
underwriters should be mindful of any privacy, consumer protection or
other regulatory requirements when providing additional loan-level
information, especially given that the information would be publicly
filed on EDGAR.\758\ Finally, issuers may also provide other
explanatory disclosure regarding the asset-level data in an Asset
Related Document.\759\ As with any information that is part of the
prospectus or ongoing reports, all Asset Related Documents must be
filed concurrently with the Schedule AL it supplements. We are not
adopting the blank tag proposal as we are persuaded by comments that
the blank tags are not appropriate, may provide limited benefits and
may not be consistent with ``good XML syntax.''
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\757\ See Item 1111(h)(5) of Regulation AB.
\758\ See Section III.C.1.c. of the 2004 ABS Adopting Release
and Section III.A.(b)(i) of the 2010 ABS Proposing Release.
\759\ See Item 1111(h)(4) of Regulation AB.
---------------------------------------------------------------------------

5. New Form ABS-EE
(a) Proposed Rule
We proposed that the new Asset Data File be filed as an exhibit to
certain filings. Therefore, we proposed changes to Item 601 of
Regulation S-K, Rule 11 and 101 of Regulation S-T, and Form 8-K to
accommodate the filing of Asset Data Files. We proposed to define the
XML file required by Schedules L and L-D as an Asset Data File in Rule
11 to Regulation S-T and proposed corresponding changes to Rule 101 of
Regulation S-T mandating electronic submission. For asset-level
disclosures required at the time of the offering, we proposed,
regardless of whether the issuer was registering the offering on Form
SF-1 or SF-3, that the Asset Data File be filed as an exhibit to the
appropriate Form 8-K (in the case of an offering) under proposed Item
6.06 of Form 8-K. Proposed Item 6.06 would have required that issuers
file the Asset Data File as an exhibit to a Form 8-K on the same date a
preliminary or final prospectus is filed or an Item 6.05 of Form 8-K is
filed. The proposed requirement would have also required that any Asset
Related Document be filed at the same time the Asset Data File is filed
on EDGAR.
For ongoing reporting of asset-level disclosure, we proposed to
require the Asset Data File and any Asset Related Document be filed
with the appropriate Form 10-D. As noted above, we also proposed an
additional exhibit, an Asset Related Document, for registrants to
disclose the definitions or formulas of any additional asset-level data
or to provide further explanatory disclosure regarding the Asset Data
File.
(b) Comments on Proposed Rule
We did not receive any comments with respect to the requirement of
filing the Asset Data Files or Asset Related Documents with the Form 8-
K (in the case of an offering) or with the Form 10-D (in the case of a
periodic distribution report).
(c) Final Rule and Economic Analysis of the Final Rule
We are adopting new Form ABS-EE to facilitate the filing of the new
Asset Data Files \760\ and Asset Related Documents.\761\ The Asset Data
Files and the Asset Related Documents are

[[Page 57249]]

required to be filed as exhibits to new Form ABS-EE.\762\
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\760\ See new Item 601(b)(102) of Regulation S-K [17 CFR
229.601(b)(102)].
\761\ See new Item 601(b)(103) of Regulation S-K [17 CFR
229.601(b)(103)].
\762\ See Item 1111(h)(3) of Regulation AB [17 CFR
229.1111(h)(3)].
---------------------------------------------------------------------------

We had proposed that the Asset Data Files and Asset Related
Documents be filed with the Form 8-K because, in the case of a shelf
offering, a Form 8-K is typically used to file other documents related
to a registration statement. We had proposed filing the documents with
Form 10-D to keep periodic disclosures on the same form. We believe,
however, that requiring the information on a single Form ABS-EE will
facilitate the filing of the Asset Data Files and Asset Related
Documents because EDGAR programming for XML files can be specifically
tailored for these types of documents, therefore simplifying filing
obligations for issuers. Form ABS-EE will benefit investors by making
it easier for users to run queries on EDGAR to locate these documents
for download.
The fact that the disclosures are filed as exhibits does not impact
the fact that the data contained in the Asset Data Files and the Asset
Related Documents are disclosures that are part of a prospectus or a
periodic report, as applicable.\763\ As noted earlier, they are
required to be incorporated by reference into the prospectus or the
Form 10-D, as applicable. Accordingly, there is no change to the timing
and frequency requirements for filing information to meet our offering
and periodic disclosure rules and the corresponding Form ABS-EE, with
the proper attachments, must be on file and be incorporated by
reference into those filings by the time those filings are made or are
required to be made.
---------------------------------------------------------------------------

\763\ Forms SF-1, SF-3, and 10-D each include an instruction
requiring that any disclosures provided pursuant to Item 1111(h) of
Regulation AB [17 CFR 229.1111(h)] filed as exhibits to Form ABS-EE
in accordance with Items 601(b)(102) or 601(b)(103) [17 CFR
229.601(b)(102) and (b)(103)].
---------------------------------------------------------------------------

6. Temporary Hardship Exemption
(a) Proposed Rule
We proposed to revise Rule 201 of Regulation S-T to include a self-
executing temporary hardship exemption for filing the Asset Data
File.\764\ We also proposed to exclude Asset Data Files from the
continuing hardship exemption under Rule 202 of Regulation S-T. Rule
202 generally allows an issuer to apply for a continuing hardship if it
cannot file all or part of a filing without undue burden or expense.
Under the proposed temporary hardship exemption, if the registrant
experiences unanticipated technical difficulties preventing the timely
preparation and submission of an Asset Data File, a registrant would
still be considered timely if: The Asset Data File(s) containing the
asset-level data is posted on a Web site on the same day it was due to
be filed on EDGAR; an Asset Data File is filed on EDGAR that contains
the Web site address, a legend is provided in the Asset Data File filed
on EDGAR claiming the hardship exemption; and the Asset Data File(s)
are filed on EDGAR within six business days.
---------------------------------------------------------------------------

\764\ [17 CFR 232.201]. Rule 201 of Regulation S-T generally
provides for a temporary hardship exemption from the electronic
submission of information, without staff or Commission action, when
a filer experiences unanticipated technical difficulties that
prevent timely preparation and submission of an electronic filing.
The temporary hardship exemption permits the filer to initially
submit the information in paper format but requires the filer to
submit a confirming electronic copy of the information within six
business days of filing the information in paper format.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
We did not receive any comments regarding our proposed self-
executing temporary hardship exemption. We also did not receive any
comments on the proposal to exclude Asset Data Files from the
continuing hardship exemption under Rule 202 of Regulation S-T.
(c) Final Rule and Economic Analysis of the Final Rule
We are adopting, as proposed, a temporary hardship exemption. Under
the requirement, if an issuer experiences unanticipated technical
difficulties preventing the timely preparation and submission of an
Asset Data File required to be filed on EDGAR, it may still be
considered timely. For the Asset Data File, an issuer will still be
considered timely if: The Asset Data File is posted on a Web site
accessible to the public on the same day it was due to be filed on
EDGAR; a Form ABS-EE is filed that identifies the Web site address
where the file can be located; a legend is provided claiming the
hardship exemption; and the Asset Data File is filed on EDGAR within
six business days.\765\ We believe that the hardship exemption will
benefit both issuers and investors, because it will allow issuers to
maintain compliance with our rules while providing investors with
access to the information required to be disclosed without further
delay.
---------------------------------------------------------------------------

\765\ See Rule 201(d) and (e) of Regulation S-T [17 CFR
232.201].
---------------------------------------------------------------------------

We are also excluding the Asset Data File, as proposed, from the
continuing hardship exemption under Rule 202 of Regulation S-T. We
continue to believe that a continuing hardship exemption is not
appropriate with respect to the Asset Data File because the Asset Data
File is an integral part of the prospectus and periodic reports. We
also believe that for ABS issuers the information in machine-readable
format is generally already collected and stored on a servicer's
systems. Therefore, we do not believe it would be appropriate for
issuers to receive a continuing hardship exemption for the Asset Data
File. We believe all investors will benefit from receiving the
disclosures specified in Schedule AL in a format that will allow them
to effectively utilize the information.

C. Foreign ABS

We requested comment on whether there are other privacy issues that
arise for issuers of ABS backed by foreign assets.\766\ The responses
we received indicated concerns regarding foreign privacy laws,\767\ as
well as concerns related to variations in the characteristics of
consumer receivables originated in different jurisdictions,\768\ the
inconsistencies between our proposal and other countries' disclosure
and reporting standards,\769\ and certain terms or structures used in
the proposed rule that lack a direct European equivalent.\770\ As an
alternative to our proposal, some commenters requested that the
disclosure standards for transactions involving assets located outside
the United States be based on local requirements.\771\ In response to
the

[[Page 57250]]

2014 Re-Opening Release, a few commenters raised cost and burden
concerns about foreign ABS issuers' compliance with overlapping
regulatory regimes.\772\ A few commenters suggested flexible
requirements for foreign ABS issuers to account for differences in the
applicability and availability of information or a substitute
compliance regime to account for differences between jurisdictions,
including differences between the privacy laws of foreign
jurisdictions.\773\
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\766\ See Section III.A(b)(i) of the 2010 ABS Proposing Release.
We asked: (1) Are there other privacy issues that arise for issuers
of ABS backed by foreign assets? (2) How do the privacy laws of
foreign jurisdictions differ from U.S. privacy laws? (3) If the
privacy laws of foreign jurisdictions are more restrictive regarding
the disclosure of information how should we accommodate issuers of
ABS backed by foreign assets? (4) Is there substitute information
that could be provided to investors?
\767\ See letters from ABA I, Association for Financial Markets
in Europe/European Securitisation Forum dated Aug. 2, 2010 submitted
in response to the 2010 ABS Proposing Release (``AFME/ESF''), and
Association for Financial Markets in Europe dated Oct. 4, 2011
submitted in response to the 2011 ABS Re-Proposing Release
(``AFME'').
\768\ See letter from Australian Securitisation Forum dated Aug.
2, 2010 submitted in response to the 2010 ABS Proposing Release
(``AusSF'').
\769\ See letter from AFME/ESF.
\770\ Id.
\771\ See letters from AusSF (requesting that Australian issuers
need only satisfy the Australian Securities and Investments
Commission requirements and that differences between U.S. and
Australian standards be disclosed in the offering documents), AFME/
ESF (suggesting that the Commission permit the satisfaction of
certain requirements by European issuers if they provide relevant
information in compliance with any local or other relevant
requirements and allow the adjustment of the requirements to reflect
the information available outside of a U.S. context) and AFME
(suggesting a similar regime, but stating that if compliance with
local requirements was not appropriate, then a ``provide-or-
explain'' regime would be a helpful alternative).
\772\ See letters from ABA III, GFMA/AusSF, SFIG II, SIFMA/FSR
I-dealers and sponsors, and Treasurer Group.
\773\ See, e.g., letters from ABA III, GFMA/AusSF, and Treasurer
Group (stating that substitute compliance is allowing the issuer to
provide the disclosure required under a foreign jurisdiction).
---------------------------------------------------------------------------

We have reviewed the requirements we are adopting against the
requirements adopted by the European Central Bank \774\ and the Bank of
England.\775\ We note several similarities and differences between our
requirements and theirs, and we believe that perfect agreement between
the Commission's requirements and the requirements of all foreign
jurisdictions may not be achievable. We believe U.S. investors may
expect data in a certain format and/or a certain level of disclosure
that is not required under the requirements of other jurisdictions,
some of which require the information for supervisory purposes and not
specifically for the benefit of investors.\776\ In addition, the
underlying assets, the form of issuance, parties to the structures,
terms and definitions and the structures themselves vary across
jurisdictions. We also note that the privacy laws vary across
jurisdictions, resulting in disclosure requirements of one jurisdiction
that may conflict with the privacy laws in another jurisdiction.
---------------------------------------------------------------------------

\774\ See Data Templates, European Central Bank (2013), http://www.ecb.eu/mopo/assets/loanlevel/transmission/html/index.en.html.
\775\ See Bank of England Loan Level Data: Reporting Template
for Residential Mortgage Pools, Bank of England (Nov. 2010), http://www.bankofengland.co.uk/markets/Documents/money/documentation/RMloanleveldata-template.pdf.
\776\ See, e.g., details about the European Central Bank's loan-
level requirements for ABS accepted as collateral in Eurosystem
credit operations available at http://www.ecb.europa.eu/paym/coll/loanlevel/html/index.en.html. See also the market notices from the
Bank of England discussing their eligibility requirements for RMBS
and covered bonds backed by residential mortgages; CMBS, small-
medium enterprise loan backed securities and ABS backed by
commercial paper; and ABS backed by consumer loans, auto loans, and
leases that are delivered as collateral against transactions in the
Bank's operations at http://www.bankofengland.co.uk/markets/Documents/marketnotice121002abs.pdf, http://www.bankofengland.co.uk/markets/Documents/marketnotice111220.pdf, http://www.bankofengland.co.uk/markets/Documents/marketnotice121217.pdf.
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We are not persuaded, however, that the Commission should implement
a regime that would recognize the asset-level data requirements
developed by foreign authorities, for example the European Central Bank
and the Bank of England, that are tailored to assets originated outside
of the U.S. or a ``provide-or-explain'' type regime that would permit
selective disclosure based upon foreign laws. We continue to believe,
as for U.S. originated assets, the usefulness of asset-level data is
generally limited unless the data is standardized. We believe adopting
another disclosure regime for foreign asset ABS would reduce
standardization and, thereby, the comparability of ABS backed by assets
originated outside of the U.S. and ABS backed by assets originated
within the U.S. Further, a provide-or-explain regime lowers the
comparability of ABS pools comprised of assets originated outside the
U.S. against each other as the scope of disclosures provided by each
issuer for each ABS may differ depending on the privacy laws of the
home jurisdiction of the issuer. We acknowledge that compliance
challenges and increased costs for foreign market participants may
arise; however, we believe U.S. investors should receive the same data
about ABS backed by assets originated outside the U.S. as ABS backed by
assets originated within the U.S. This approach is consistent with our
approach for corporate issuers, under which foreign private issuers
generally provide comparable information to U.S. issuers.

IV. Other Prospectus Disclosure

A. Transaction Parties

1. Identification of the Originator
(a) Proposed Rule
In the 2010 ABS Proposing Release, we noted that Item 1110(a) of
Regulation AB, prior to the adoption of today's amendments, required
identification of originators apart from the sponsor or its affiliates
only if the originator has originated, or expects to originate, 10% or
more of the pool assets. We noted that in situations where many of the
pool assets have been purchased from originators other than the sponsor
and each of these originators originated less than 10% of the pool
assets that the requirement requires very little, if any, information
about the originators. Therefore, we proposed to amend the item to
require that an originator originating less than 10% of the pool assets
would be required to be identified if the cumulative amount of
originated assets by parties other than the sponsor or its affiliates
comprises more than 10% of the total pool assets.
(b) Comments on Proposed Rule
Comments on the proposal were focused on the scope of the
requirement. Commenters argued that the rule should require disclosure
identifying the originator of each asset without exception.\777\
Another commenter recommended that the requirement be modified to
include a low threshold (e.g., 2% of the original pool assets) under
which identification of the non-affiliated originators would not be
required.\778\ In contrast, one commenter believed that the proposal
was excessive with the costs outweighing the benefits and recommended
keeping the current requirement and supplementing it with disclosure of
``additional originators to the extent necessary so that information
about the originators of at least 85% of the pool assets has been
included in the prospectus.'' \779\ Another commenter stated that
disclosure of only third parties who originated more than 10% of the
pool and all originators who provided 5% or more of the pool by dollar
value would be more valuable to investors.\780\
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\777\ See, e.g., letters from Prudential I (suggesting that
Schedule L should specify the originator of each asset, which will
allow investors to identify and differentiate originators that are
providing riskier collateral to structured product transactions) and
Realpoint (recommending that for CMBS transactions every originator
be identified).
\778\ See letter from BoA I.
\779\ See letter from VABSS I (without providing a cost
estimate).
\780\ See letter from CFA I (without describing why this
disclosure would be more valuable to investors).
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(c) Final Rule
After considering the comments received, we are adopting the
amendment to Item 1110(a) of Regulation AB, as proposed, with a slight
modification to clarify the change that we are making to the existing
requirement. Under the final rule that we are adopting, if the
cumulative amount of originated assets by parties, other than the
sponsor or its affiliates, comprises more than 10% of the total pool
assets, then those originator(s) originating less than 10% of the pool
assets will also be required to be identified in the prospectus. We
continue to believe that where the sponsor securitizes assets of a
group of originators that are not affiliated with the sponsor, more
disclosure regarding the originators of the assets is needed. We
believe investors will benefit from these disclosures because they will
be

[[Page 57251]]

better able to assess pools comprising assets from these originators.
We acknowledge that the revised rule will likely result in more
originators having to be identified in the prospectus than is currently
required; however, we do not think that it will result in significant
costs to issuers since the information is readily available and the
disclosure is limited only to identification of the originator. In
addition, while we note that some commenters requested that we impose
an additional minimum threshold before issuers would be required to
identify unaffiliated originators,\781\ we do not believe that such a
distinction would be appropriate for the same reasons.
---------------------------------------------------------------------------

\781\ See letters from BoA I, CFA I, and VABSS I.
---------------------------------------------------------------------------

2. Financial Information Regarding a Party Obligated To Repurchase
Assets
(a) Proposed Rule
In the 2010 ABS Proposing Release, we noted that in the events
arising out of the financial crisis, the financial condition of the
party obligated to repurchase assets pursuant to the transaction
agreement governing an asset securitization became increasingly
important as to whether repayments on asset-backed securities would be
made.\782\ We proposed to require disclosure of the financial condition
of certain parties required to repurchase assets when there is a
breach, pursuant to the transaction agreements, of a representation and
warranty related to pool assets. Under the proposal, information
regarding the financial condition of a 20% originator would be required
if there is a material risk that the financial condition could have a
material impact on the origination of the originator's assets in the
pool or on its ability to comply with provisions relating to the
repurchase obligations for those assets. Information about the
sponsor's financial condition similarly would be required to the extent
that there is a material risk that the financial condition could have a
material impact on its ability to comply with the provisions relating
to the repurchase obligations for those assets or otherwise materially
impact the pool.
---------------------------------------------------------------------------

\782\ See the 2010 ABS Proposing Release at 23382. In the 2010
ABS Proposing Release, we also proposed to amend Item 1104 and Item
1110 of Regulation AB to require disclosure of the amount, if
material, of publicly securitized assets originated or sold by the
sponsor or an identified originator that were the subject of a
demand to repurchase or replace any of the assets for breach of the
representations and warranties concerning the pool assets in the
last three years pursuant to the transaction agreements. This
proposal and the comments on this proposal were considered in
connection with the rules implementing Section 943 of the Dodd-Frank
Act. See the Section 943 Adopting Release. Therefore, the proposal
and related comments are not addressed in this release.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
The response to the proposal was mixed with some commenters
supporting the proposal,\783\ some commenters opposing the
proposal,\784\ and other commenters who did not express whether they
supported or opposed the proposal, but suggested certain
revisions.\785\ One concern, raised by some commenters who opposed the
proposal, was that investors may perceive the disclosure and the
existence of representations and warranties as suggesting that the
obligated parties are providing credit or liquidity support to the
transaction.\786\ Some commenters stated that the disclosure
requirement may act as a barrier to entry for participation in the
securitization markets, may potentially be misleading because it would
likely be provided long before repurchase demands would be made, and in
most instances disclosure would be required because an obligated
party's financial condition would likely always impact a party's
ability to perform its repurchase-related obligations.\787\
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\783\ See letters from ASF I (supporting the proposal, but
suggesting that we revise the standard for when such disclosure is
required to mirror the requirement regarding financial information
of certain servicers included in Item 1108(b)(4) of Regulation AB,
with a focus on whether the sponsor's or originator's financial
condition would have an effect on origination of the pool assets or
on its ability to comply with any repurchase obligations in a manner
that could have a material impact on pool performance or performance
of the asset-backed securities) and CFA I (stating that benefits to
investors in the form of better knowledge about the source of pool
assets outweighs the costs of compliance).
\784\ See letters from BoA I, CMBP (disagreeing with the
proposed disclosure requirement as it relates to a 20% originator)
CREFC I, IPFS Corporation dated Aug. 2, 2010 submitted in response
to the 2010 ABS Proposing Release (``IPFS I'') (responding with
respect to private offerings of insurance premium finance loans),
and MBA I.
\785\ See letters from AusSF (stating that if we require
financial statements that we should allow the submission of IFRS-
compliant financial statements to satisfy the requirement) and KPMG
LLP dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``KPMG'') (noting that the impact of the proposal
will vary depending, in part, on whether the financial information
must be audited and urging the Commission to weigh the cost of
requiring audited financials against such benefit). See also letters
from Center for Audit Quality dated Aug. 2, 2010 submitted in
response to the 2010 ABS Proposing Release and Ernst & Young dated
Aug. 2, 2010 submitted in response to the 2010 ABS Proposing Release
(``E&Y'') (requesting other revisions). These commenters contended
that the proposed amendments to Item 1104 and Item 1110(b) would
require a subjective evaluation of the materiality of the risk and
recommended, instead, to expand the scope of the definition of
significant obligor in Item 1112 (i.e., to incorporate the obligated
party that is required to repurchase assets for breach of a warranty
or representation) or to expand the scope of Item 1114, the
requirement relating to disclosure of significant credit
enhancements, to include repurchase and replacement obligations--
thereby providing an objective standard for determining when and how
the requisite financial disclosure should be provided. Under this
standard, the required financial information would be (1) the
selected financial data specified by Item 301 of Regulation S-K when
the obligation exceeds 10% of the asset pool, and (2) audited
financial statements that comply with Regulation S-X when the
obligation exceeds 20% of the asset pool.
\786\ See letters from BoA I, CREFC I, and MBA I.
\787\ See letters from CREFC I and MBA I. See also letter from
CMBP (recommending instead to require sponsors to certify that: all
the originators that have sold assets to the pool backing the ABS
meet the sponsor's standards of creditworthiness, the sponsor's
standards are customary and commercially reasonable, and based on
the sponsor's assessment that each originator has the financial
means to discharge their obligations under the representations and
warranties regarding the pool assets).
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(c) Final Rule
After considering the comments received, we are adopting the
amendments to Item 1104 and Item 1110, with some modification. We have
revised the amendments so that the standard for when disclosure of
financial information is required mirrors the existing standard for
disclosures required about certain servicers.\788\ Under the revised
rules, the standard focuses on whether the sponsor or 20% originator's
financial condition would have an effect on its ability to comply with
any repurchase obligations in a manner that could have a material
impact on pool performance or performance of the asset-backed
securities.
---------------------------------------------------------------------------

\788\ See Item 1108(b)(4) of Regulation AB (requiring
information regarding the servicer's financial condition to the
extent that there is a material risk that the effect on one or more
aspects of servicing resulting from such financial condition could
have a material impact on pool performance or performance of the
asset-backed securities).
---------------------------------------------------------------------------

We are adopting these amendments because we believe an investor's
ABS investment decision includes consideration of obligations from
certain parties to repurchase assets if there is a breach of the
representations and warranties relating to those assets and the
capacity of those parties to repurchase those assets. As evident from
the crisis, the mere existence of a repurchase provision provides
investors with little comfort as to the ability of the party obligated
to repurchase assets for a breach of a representation or warranty.\789\
The expanded disclosure

[[Page 57252]]

that we are requiring will provide investors insight into the capacity
of the obligated parties to repurchase assets. We acknowledge that the
financial condition of these parties may change between the time of the
transaction, when the disclosure is provided, and when a repurchase is
required. We believe that investors will nonetheless benefit from the
required information because it will allow investors to assess, at the
time of their investment decision, whether the representations and
warranties provided regarding the pool assets are made by entities
financially capable of fulfilling their obligations.
---------------------------------------------------------------------------

\789\ See Transparency in Accounting: Proposed Changes to
Accounting for Off-Balance Sheet Entities Before the Subcomm. on
Sec., Ins., & Inv. of the S. Comm. on Banking, Housing & Urban
Affairs, 110th Cong. 3 (2008) (statement of Joseph Mason, Professor
at Louisiana State University) (stating that `` `representations and
warranties' have become a mechanism for subsidizing pool
performance, so that no asset- or mortgage-backed security investor
experiences losses--until the seller, itself, fails and is no longer
able to support the pool'').
---------------------------------------------------------------------------

We also note the concerns that some of these parties are private
companies who may choose to exit the securitization market rather than
provide financial disclosures. While we acknowledge this possibility,
we believe that this information is material for investors in order to
make an informed investment decision. Furthermore, we believe this
concern is minimized, to some extent, because the requirement does not
necessarily require financial statements, but only information about
their financial condition similar to the type of disclosure required
under current rules regarding financial information of certain
servicers, some of which may be private companies. Where disclosure is
required, the type and extent of information regarding certain
originators' and sponsors' financial condition would depend upon the
particular facts. We note that sponsors will typically conduct due
diligence regarding the pool assets when purchasing assets to include
in the ABS pool, including assessing the financial condition of
originators that are obligated to repurchase or replace any asset for
breach of a representation and warranty pursuant to the transaction
agreements. We believe that when the trigger for disclosure of the
financial information of sponsors and 20% originators is met, as
outlined in the rule, investors should have the same information. We
are mindful, however, of the costs that originators and sponsors would
incur if we required audited financial information, especially for
those originators and sponsors that have not previously been subject to
an audit; therefore, we are not requiring that financial information
included be audited.
3. Economic Interest in the Transaction
(a) Proposed Rule
In the 2010 ABS Proposing Release, we noted that existing Item
1103(a)(3)(i) of Regulation AB required disclosure of the classes of
securities offered by the prospectus and any class of securities issued
in the same transaction or residual or equity interests in the
transaction that are not being offered by the prospectus.\790\ We also
noted our belief that information regarding the sponsor's, a
servicer's, or a 20% originator's continuing interest in the pool
assets is important to an ABS investor and, therefore, we proposed to
revise Items 1104, 1108, and 1110 to require disclosure regarding the
sponsor's, a servicer's, or a 20% originator's interest retained in the
transaction, including the amount and nature of that interest.\791\ The
disclosure would be required for both shelf and other offerings.\792\
---------------------------------------------------------------------------

\790\ 17 CFR 229.1103(a)(3)(i).
\791\ For example, if the originator has retained a portion of
each tranche of the securitization, then disclosure regarding each
amount retained for each tranche would be required.
\792\ We also proposed that if the offering was being registered
on Form SF-1, the issuer would be required to provide clear
disclosure that the sponsor is not required by law to retain any
interest in the securities and may sell any interest initially
retained at any time.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Several commenters supported the proposed rule but recommended
certain revisions.\793\ Some of these commenters suggested that the
required disclosures include the effect of hedging.\794\ For instance,
one commenter stated that the rule should state that the disclosure
should be net of hedging,\795\ and the other commenter recommended
requiring the sponsor to disclose ``any hedge (security specific or
portfolio) that was entered into by the sponsor or, to the extent it
has actual knowledge of such a hedge, an affiliate in an effort to
offset any risk retention position held by the sponsor or an
affiliate.'' \796\
---------------------------------------------------------------------------

\793\ See letters from ABA I (supporting this requirement in
lieu of the proposed risk retention shelf eligibility requirement
because this disclosure will ensure that investors are fully aware
of the alignment of interests in each offering), ASF I (expressed
views of investors only) (believing that if the sponsor of the
securitization retains exposure to the risks of the assets, the
sponsor will likely have greater incentives to include higher
quality assets), Mass. Atty. Gen., and Prudential I.
\794\ See letters from Mass. Atty. Gen. and Prudential I.
\795\ See letter from Mass. Atty. Gen.
\796\ See letter from Prudential I.
---------------------------------------------------------------------------

Another commenter requested that we limit the retention disclosure
requirements ``to those required in any risk retention construct that
may be included in the final rules.'' \797\ The commenter acknowledged
that it ``is difficult for investors to ascertain how many securities
cleared the market and how many were taken down by the issuer or
sponsor,'' but that disclosure of any retention held above a required
amount would be impractical and misleading because accurate information
about retention interests may not be known until closing, which is
after investors make their investment decision, and the retention
interests often change during the period between the time of sale and
closing.
---------------------------------------------------------------------------

\797\ See letter from CREFC I.
---------------------------------------------------------------------------

(c) Final Rule
After considering the comments received, we are adopting the
proposed revisions to Items 1104, 1108, and 1110 with some
modifications.\798\ As noted below, the requirements that we are
adopting for shelf eligibility do not contain a requirement for risk
retention in light of the risk retention proposals currently being
considered by regulators under the Dodd-Frank Act.\799\ Because
commenters noted that disclosure about a sponsor's, a servicer's, or a
20% originator's continuing interest in the pool assets is an important
factor that investors consider when analyzing the alignment of
interests among various parties in the securitization chain, we are
adopting this rule.\800\ We are also persuaded by commenters that this
disclosure should describe the effect of hedging because a hedge could
effectively reduce the actual exposure that the party may face from its
continuing interest in the pool assets.\801\ We do not believe that
providing disclosure of the interests retained by the sponsor,
servicer, or 20% originator net of hedging alone, as suggested by one
commenter, provides investors with

[[Page 57253]]

sufficient insight into the hedging activities used by these entities
to minimize exposure to their interests. Therefore, we are adopting the
rule that each of these parties disclose their continuing interest in
the pool assets, including the amount and nature of that interest, and
disclose any hedge (security specific or portfolio) materially related
to the credit risk of the securities that was entered into by these
parties or, if known, by any affiliate of these parties to offset any
risk position held.\802\ We believe this approach provides investors
with appropriate information about these entities' continuing interest
in the pool assets and how these parties may be managing those
exposures.
---------------------------------------------------------------------------

\798\ For purposes of describing any interest that the sponsor,
servicer, or 20% originator, retained in the transaction, such
disclosure must also include any interest held by an affiliate of
such entity, except as described below for certain hedges entered
into by affiliates, disclosure is required to the extent known. We
have made conforming changes to the final rule to clarify the
treatment of affiliates. As discussed later in Section VIII.A.3
Changes in Sponsor's Interest in the Securities, we are also
adopting a requirement that any material change in the sponsor's
interest in the securities must be disclosed on Form 10-D.
\799\ See the 2011 Risk Retention Proposing Release and the 2013
Risk Retention Re-Proposing Release.
\800\ See also footnote 1320 (describing one commenter's views
on the importance of requiring disclosure of any material change in
the sponsor's interest in the transaction).
\801\ We also note that Section 15G of the Exchange Act, as
added by Section 941 of the Dodd-Frank Act, requires that the risk
retention rules, to be finalized by regulators, must prohibit a
securitizer from directly or indirectly hedging the credit risk
required to be retained under the rules.
\802\ Because we believe that a security-specific hedge is more
likely to be material to investors, we anticipate that issuers will
need to provide more detailed disclosure about such hedge in order
for investors to understand the impact such hedge may have on the
ABS.
---------------------------------------------------------------------------

We also acknowledge the concerns that the exact amount retained by
these parties may not be known until closing and that these retention
interests may and do often change during the period between the time of
sale and closing.\803\ To address these concerns, the parties will only
need to describe in the preliminary prospectus the amount and nature of
the interest that they intend to retain. The parties must, however,
also disclose in the preliminary prospectus the amount and nature of
risk retention that they have retained in order to comply with law (for
example, to comply with the final risk retention rules once they are
adopted).\804\ In order to clarify the requirement, we have included an
instruction specifying that the amount and nature of the interest or
asset retained in compliance with law must be separately stated in the
preliminary prospectus.\805\ For purposes of the final prospectus, the
parties must also disclose the actual amount and nature of the interest
to be retained.
---------------------------------------------------------------------------

\803\ See letter from CREFC I.
\804\ See the 2013 Risk Retention Re-Proposing Release.
\805\ See letter from CREFC I (noting that the nature and amount
of retained interests held to fulfill risk retention requirements
could be disclosed in the prospectus).
---------------------------------------------------------------------------

4. Economic Analysis Related to the Rules Regarding Transaction Parties
The rules discussed in this section seek to provide ABS investors
with greater information about the transaction parties to a
securitization, thereby allowing them to make more informed investment
decisions. First, investors will now be able to identify a potentially
larger number of the originators of pool assets, which will improve
their ability to compare the loan performance across originators and
assess the relative stringency of these originators' underwriting
standards as well as their historical performance. Second, at the time
of an ABS offering, investors will now be able to better assess the
ability of parties obligated to repurchase assets to actually fulfill
those obligations. This will allow investors to more accurately assess
the representations and warranties in the transaction agreements, since
the enforceability of these depends on the ability of the obligated
party to repurchase breached assets. Third, investors will now have
information about the sponsor's, servicer's, or a 20% originator's
interest retained in the transaction net of hedging. Investors have
indicated that this information will be beneficial to them because the
information will allow them to consider the incentives of the various
parties involved in the securitization chain.
The costs of the revised rule will be borne primarily by issuers,
who will be required to provide additional disclosure about the
transaction parties to a securitization. The magnitude of the costs
will depend on the extent to which issuers already gather the required
information. For instance, on the one hand, issuers likely already
obtain the identities of originators; therefore, providing that
information should not impose significant additional costs. On the
other hand, issuers may need to gather some additional information from
third parties regarding the financial condition of an originator who
originated 20% or more of the pool assets and is obligated to
repurchase assets under the transaction agreements. As a result,
issuers may incur costs to gather the financial data and then prepare
and provide the required disclosure. However, we believe that the
revised rule strikes the appropriate balance between the benefit of
providing investors with useful information about the originators and
the burden of requiring the identification of all originators,
regardless of the amount they contributed to the pool.
Some commenters were concerned that disclosing the financial
condition of a party obligated to repurchase assets may impose an
indirect cost on investors, if investors misinterpret this disclosure
and the existence of representations and warranties as the obligated
parties providing credit or liquidity support to the transaction. In
light of our other rules on disclosure of credit and liquidity support,
we believe investors will see a clear distinction between the
representations and warranties and any credit or liquidity support
provided. Similarly, some commenters were concerned that the disclosure
may be misleading to investors because the financial condition of the
party may have changed between the time of the transaction when the
disclosure was provided and the repurchase demand. We believe that
investors will still benefit from the required information since it
will allow investors to assess at the time of making their investment
decision whether the entities that provided representations and
warranties regarding the pool assets are, at least as an initial
matter, financially capable of fulfilling their obligations.

B. Prospectus Summary

1. Proposed Rule
In the 2010 ABS Proposing Release, we noted that a prospectus
summary should briefly highlight the material terms of the transaction,
including an overview of the material characteristics of the asset
pool. We also noted our belief that the prospectus summaries provided
in ABS prospectuses may not adequately highlight the material
characteristics, including material risks, particular to the ABS being
offered. Instead, these prospectus summaries often summarize types of
information that are common to all securitizations of a particular
asset class.\806\ Accordingly, we proposed a new instruction to clarify
the prospectus summary disclosure requirements.\807\ Specifically, the
proposed instruction noted that the prospectus summary disclosure may
include, among other things, statistical information of: The types of
underwriting or origination programs, exceptions to underwriting or
origination criteria, and, if applicable, modifications made to the
pool assets after origination.
---------------------------------------------------------------------------

\806\ See the 2010 ABS Proposing Release at 23383.
\807\ 17 CFR 229.1103(a)(2).
---------------------------------------------------------------------------

2. Comments on Proposed Rule
Comments on the proposal were mixed.\808\ One commenter, who was
supportive of the proposal, stated that the instruction would help
``highlight potential risks relating to the underwriting of the
underlying pool assets.'' \809\ Another commenter, who opposed the
proposed instruction, requested an exception for CMBS transactions
stating that each commercial mortgage is unique and, as

[[Page 57254]]

a result, the proposed disclosures would not enhance an investor's
understanding of the risks and characteristics of a particular CMBS
loan pool.\810\ One commenter stated that the instruction runs counter
to the Commission's plain English rules because it requires the
repeating of disclosure in different sections of the document without
enhancing the quality of the information.\811\ This commenter also
contended that the proposed instruction seems to encourage reliance on
a summary of information that should be considered in the fuller
context of the narrative in the body of the prospectus. The commenter
suggested that we reconsider the proposal or, in the alternative,
require only a cross-reference in the summary to the location of this
information in the body of the prospectus.\812\
---------------------------------------------------------------------------

\808\ See letters from BoA I, CFA I, Prudential I, and Realpoint
(all supporting the proposal). But see letters from ASF I (expressed
views of dealers and sponsors only) and CREFC I (opposing the
proposed rule).
\809\ See letter from CFA I.
\810\ See letter from CREFC I.
\811\ See letter from ASF I (expressed views of dealers and
sponsors only) (``find[ing] it unusual that the Commission is
proposing such a specific disclosure requirement as an instruction
to an Item requirement that is otherwise by design very general'').
\812\ See letter from ASF I (expressed views of dealers and
sponsors only).
---------------------------------------------------------------------------

3. Final Rule and Economic Analysis of the Final Rule
After considering comments received, we are adopting the proposed
instruction with revisions. From our experience, the prospectus
summaries often summarize types of information that are common to all
securitizations of a particular asset class rather than the material
characteristics of the particular ABS, such as statistics regarding
whether the loans in the asset pool were originated under various
underwriting or origination programs, whether loans were underwritten
as exceptions to the underwriting or originations programs, or whether
the loans in the pool have been modified.\813\ We believe that
investors would benefit from a prospectus summary that summarizes the
disclosures in the prospectus regarding this type of information
because presenting this information in a summarized format may aid
investors' understanding of material characteristics. In that regard,
we also believe that the final instruction is less prescriptive than
one commenter suggested since it does not require specific disclosure
but rather indicates the types of information that may be summarized.
We acknowledge that the prospectus summary should be brief and should
not contain, and is not required to contain, all of the detailed
information in the prospectus and, therefore, issuers should not simply
repeat the disclosure found elsewhere in the prospectus in the
prospectus summary. We also acknowledge that more fulsome narrative
disclosures discussing these summary statistics may provide greater
context about these disclosures; therefore, we added as part of the
final instruction a requirement to include a cross-reference in the
prospectus summary to the location of corresponding disclosure in the
body of the prospectus.
---------------------------------------------------------------------------

\813\ For example, the prospectus summary should include
summarized information about the disclosure required as part of the
issuer review performed under Securities Act Rule 193. In
particular, Item 1111 of Regulation AB requires an ABS issuer to
disclose the nature of its review of the assets and the findings and
conclusions of the issuer's review of the assets, which includes its
conclusion that the review was designed and effected to provide
reasonable assurance that the disclosure in the prospectus regarding
the assets is accurate in all material respects.
---------------------------------------------------------------------------

The costs associated with this disclosure should be minimal as the
issuer should already have this information, or be able to easily
generate the information, in light of the more detailed disclosure
required by other item requirements in Regulation AB. Furthermore, this
is not a new requirement, but rather a clarification of our position on
what should be provided in the prospectus summary. Finally, if this
disclosure is not appropriate for a particular asset class, then
existing Item 1103(a) addresses this concern by indicating that the
disclosure is only required where applicable.\814\
---------------------------------------------------------------------------

\814\ See Item 1103(a) of Regulation AB [17 CFR 229.1103(a)]
(stating in providing the information required by Item 503(a) of
Regulation S-K, provide the following information in the prospectus
summary, as applicable).
---------------------------------------------------------------------------

C. Modification of Underlying Assets

1. Proposed Rule and Comments on Proposed Rule
In the 2010 ABS Proposing Release, we proposed to replace Item
1108(c)(6) of Regulation AB with a more detailed and specific
disclosure requirement in Item 1111.\815\ Item 1108(c)(6) requires
disclosure to the extent material of any ability of the servicer to
waive or modify any terms, fees, penalties, or payments on the assets
and the effect of exercising such ability, if material, on the
potential cash flows from the assets. The proposed requirement in Item
1111 would require a description of the provisions in the transaction
agreements governing modification of the assets and disclosure
regarding how modifications may affect cash flows from the assets or to
the securities. We received only one comment on the proposal, which
supported the proposed amendments.\816\
---------------------------------------------------------------------------

\815\ 17 CFR 229.1111. In the 2010 ABS Proposing Release, we
proposed to amend Item 1111 to require disclosure regarding
deviations to disclosed underwriting standards. The proposal would
have also required disclosure of the steps taken by the originator
to verify information received during the underwriting process.
These proposals and the comments on the proposals were later
considered and acted upon in connection with the rules implementing
Section 945 of the Dodd-Frank Act. See Issuer Review of Assets in
Offerings of Asset-Backed Securities, Release No. 33-9176 (Jan. 20,
2011).
\816\ See letter from MBA I.
---------------------------------------------------------------------------

2. Final Rule and Economic Analysis of the Final Rule
We are adopting the final rule, as proposed. We continue to believe
that the ability of the servicer to modify any terms, fees, and
penalties and the effect of this ability on potential cash flows
remains an important factor to investors. We believe that more granular
data about this ability will enable investors to better assess the
possibility of a potential change in the cash flows, which should, in
turn, promote more efficient allocation of capital. To the extent
issuers will be providing more detail than they previously provided,
issuers' costs to provide the required disclosure will likely increase.

D. Disclosure of Fraud Representations

We also proposed to revise Item 1111(e) to require disclosure of
whether a representation was included among the representations and
warranties that no fraud has taken place in connection with the
origination of the assets on the part of the originator or any party
involved in the origination of the assets. In proposing this
requirement, we believed that it was important that any fraud
representation be highlighted to investors.
Several commenters were opposed to the proposed requirement.\817\
One commenter noted that both its investor and issuer members agreed
that the absence of fraud in the origination is an element of several
representations and warranties concerning the pool assets, such as the
representation and warranty stating that the pool assets were
originated in compliance with the requirements of law and applicable
underwriting standards, and that the pool assets are legal, valid, and
binding payment obligations of the related obligors.\818\ This
commenter further noted that singling out a fraud representation in the
disclosure was unnecessary and duplicative in light of our other
proposal that would require issuers to provide disclosure on
representations and warranties. Another commenter stated that the
proposed requirement did not pass a reasonable

[[Page 57255]]

cost-benefit test and, without clarifying why, stated that the
disclosure would not benefit investors.\819\ This commenter suggested
that we not adopt the proposed requirement and instead require a
restatement or identification of the specific fraud representation, if
any, included in the transaction ``rather than including a binary
response to whether or not there is a fraud representation.'' \820\
---------------------------------------------------------------------------

\817\ See letters from ASF I, ELFA I, and MBA I.
\818\ See letter from ASF I.
\819\ See letter from ELFA I (noting that a general ``fraud
representation'' is difficult to make due to the potential chain of
parties involved in a single lease/loan including the lessee,
manufacturer, dealer, broker, lessor/lender and servicer).
\820\ See letter from ELFA I.
---------------------------------------------------------------------------

After considering the comments we received, we are not adopting the
proposed revisions to Item 1111(e). As one commenter noted, the absence
of fraud may be an element of several representations and warranties
concerning the pool assets and therefore is already adequately
disclosed under the current requirements of Item 1111(e).

E. Static Pool Disclosure

1. Disclosure Required
(a) Proposed Rule
In the 2010 ABS Proposing Release, we noted that since the adoption
of Regulation AB we have observed that static pool information provided
by asset-backed issuers may vary greatly within the same asset class.
Variations exist not only with the type or category of information
disclosed but also with the manner in which it is disclosed. As a
result, static pool information between different sponsors has not
necessarily been comparable, which reduces its value to investors.
To address this problem, we proposed revisions to Item 1105 of
Regulation AB \821\ to increase the clarity, transparency, and
comparability of static pool information. Some of the proposed rules
would apply to all issuers, and other proposed rules would apply only
to amortizing asset pools and not to revolving asset master trusts. For
all issuers, we proposed the following five requirements.\822\ First,
we proposed to require appropriate introductory and explanatory
information to introduce the characteristics. Second, we proposed to
require that issuers describe the methodology used in determining or
calculating the characteristics and describe any terms or abbreviations
used. Third, we proposed to require a description of how the assets in
the static pool differ from the pool assets underlying the securities
being offered. Fourth, we proposed to require additional disclosure if
an issuer does not include static pool information or includes
disclosure that is intended to serve as alternative static pool
information. Finally, we proposed to require graphical presentation of
the static pool information, if doing so would aid in understanding.
---------------------------------------------------------------------------

\821\ 17 CFR 229.1105.
\822\ See the 2010 ABS Proposing Release at 23385.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Commenters were generally supportive of these proposed rules \823\
and mostly requested that the Commission clarify certain aspects.\824\
Some commenters were supportive of the proposal to provide narrative
disclosure.\825\ One commenter stated that the inclusion of explanatory
information introducing the characteristics of the static pool would
increase the clarity of the required static pool disclosure.\826\ Other
commenters requested greater clarification about the narrative
disclosure requirements. For instance, one commenter believed that it
was unclear whether ``narrative disclosure'' would permit presentation
in tabular format.\827\ Another commenter expressed concern with the
RMBS example provided in the 2010 ABS Proposing Release and noted that
one of the aspects we listed--the number of loans that were exceptions
to standardized underwriting--is qualitatively different and more
granular and detailed than the other aspects listed (i.e., number of
assets and types of mortgages).\828\
---------------------------------------------------------------------------

\823\ See letters from AMI, ASF I, BoA I, CFA I, MSCI,
Prudential I, and Realpoint.
\824\ See letters from ASF I and VABSS I.
\825\ See letters from AMI and ASF I.
\826\ See letter from ASF I.
\827\ See letter from VABSS I.
\828\ See letter from ASF I. See also the 2010 ABS Proposing
Release at 23385. In the 2010 ABS Proposing Release, we illustrated
the narrative disclosure that would be required using RMBS as an
example. We noted that for a pool of RMBS the disclosure would
include the number of assets, the types of mortgages, and the number
of loans that were exceptions to the standardized underwriting
criteria.
---------------------------------------------------------------------------

One commenter, supportive of the proposal to require a description
of the methodology used in determining or calculating the
characteristics, urged the Commission to require that the methodologies
used by issuers be standardized to facilitate comparison of securities
within the same asset class.\829\ This commenter also emphasized that
key defined terms, such as ``delinquency'' and ``default'' must be
standardized.
---------------------------------------------------------------------------

\829\ See letter from AMI.
---------------------------------------------------------------------------

Several commenters provided differing views on whether the proposal
to require a description of how the assets in the static pool differ
from the pool assets underlying the securities being offered was
necessary or helpful to investors. One commenter indicated that this
disclosure is helpful in understanding ``pool construction risk.''
\830\ Another commenter, however, argued that it did not understand how
this requirement adds anything to the proposed narrative
disclosure.\831\
---------------------------------------------------------------------------

\830\ See letter from Prudential I (recommending that ``[t]he
prospectus should highlight the extent to which the current
collateral pool was originated with the same or differing
underwriting criteria, loan terms, and/or risk tolerances than the
static pool data'').
\831\ See letter from VABSS I (stating its hope that the
Commission is not suggesting that, for each offering, registrants
should include a description of how the securitized pool differs
from each of the 3 to 25 static pools, as the commenter believes
that such disclosure would simply compare the disclosed metrics for
each pool and therefore would provide no incremental value to
investors).
---------------------------------------------------------------------------

With respect to requiring an issuer to explain why it did not
provide static pool information or provided alternative information,
one commenter interpreted this proposal as capable of being satisfied
through summary disclosure stating that either the data are not
available or that static pool disclosure is immaterial.\832\
---------------------------------------------------------------------------

\832\ See letter from BoA I (urging reconsideration of any
standard that would require disclosure of a ``detailed analysis of
materiality'' and stating that ``[a]n analysis of an issuer's
methodology for making materiality determinations is not a proper
subject of prospectus disclosure'').
---------------------------------------------------------------------------

One commenter opposed requiring the graphical presentation of
static pool information in addition to the proposed narrative
description.\833\ This commenter asserted its belief that graphical
presentation is not market practice, has ``highly questionable
utility'' and is possibly misleading. This commenter supported,
however, graphical presentation of delinquency, loss, and prepayment
information for amortizing pools.
---------------------------------------------------------------------------

\833\ See letter from BoA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments provided, we are adopting the
requirements as proposed.\834\ First, we are amending Item 1105 to
require narrative disclosure that provides introductory and explanatory
information to introduce the static pool information presented. We
continue to believe that a brief snapshot of the static pool
information presented will benefit investors by providing them with
context in which to evaluate the information, especially for those
investors who lack sophisticated

[[Page 57256]]

analytical tools.\835\ We do not intend for the requirement to cause
issuers to repeat the underlying static pool disclosure in the
narrative; rather we intend for the requirement to serve as a clear and
brief introduction of the static pool disclosure in order to provide
context to investors. We do believe, however, that the type of
narrative disclosure that we are requiring is best presented in
paragraph format, and not in tabular format as one commenter
recommended, in order for the narrative description to clearly convey
to investors the differences in the assets being securitized in the
deal and the assets comprising the static pools.\836\
---------------------------------------------------------------------------

\834\ See Item 1105 of Regulation AB [17 CFR 229.1105].
\835\ See the 2010 ABS Proposing Release at 23385.
\836\ See letter from VABSS I. Issuers can supplement the
narrative disclosure that is required to be provided in paragraph
format with graphical presentation if doing so would aid in
understanding.
---------------------------------------------------------------------------

To aid issuers in understanding what the narrative disclosure would
typically include, and as commenters noted, we provided an example in
the 2010 ABS Proposing Release, as we have done in other releases, to
illustrate the disclosure principle.\837\ In our example, for a pool of
RMBS, the disclosure would typically include, among other things, the
number of loans that were exceptions to the standardized underwriting
criteria. As noted above, one commenter expressed concern and noted
that the number of loans that were exceptions to the standardized
underwriting criteria was qualitatively different and granular than the
other two characteristics in the example and raised questions for
issuers as how to apply the disclosure standard in a principled way to
distinguish among various credit characteristics of the pool.\838\ We
believe that for RMBS, the number of exceptions to the standardized
underwriting criteria is an important credit characteristic for issuers
to highlight in the narrative disclosure. Inclusion of a significant
number of mortgages that deviate from the underwriting standards could
pose a risk to the performance of the RMBS. We believe disclosure of
the number of loans that were exceptions to standardized underwriting
criteria is likely to be important to highlight for other asset classes
as well. Issuers should highlight those characteristics that would be
most important for investors to be aware of before analyzing the actual
static pool disclosure, which for some asset classes can be extensive.
---------------------------------------------------------------------------

\837\ See the 2010 ABS Proposing Release at 23385.
\838\ See letter from ASF I. We discuss amendments to Item 1111
requiring specific data about the amount and characteristics of
assets that deviate from the disclosed origination standards in
Section III.A.2.a) Disclosure Requirements for All Asset Classes and
Economic Analysis of These Requirements.
---------------------------------------------------------------------------

Second, we are adopting, as proposed, an amendment to require
issuers to describe the methodology used in determining or calculating
the characteristics and also to describe any terms or abbreviations
used.\839\ We believe that this requirement will provide clarity and
transparency to investors and assist them in determining whether the
calculations or terms are comparable across issuers. This will benefit
investors because it will facilitate their ability to make better
informed investment decisions. One commenter urged the Commission to
direct that the methodologies and key terms used by issuers be
converged and standardized over time so that investors can compare
securities within the same asset class.\840\ Although we are not
adopting standardized methodologies and terms for static pool
disclosure, the proposal we are adopting requires asset-level
disclosures for ABS backed by certain asset types.\841\ As a result of
the new asset-level requirements, the data used to produce the static
pool information for these asset classes will be standardized.
---------------------------------------------------------------------------

\839\ See Item 1105 of Regulation AB [17 CFR 229.1105].
\840\ See letter from AMI.
\841\ See also Section III.A Asset-Level Disclosure Requirement.
---------------------------------------------------------------------------

Third, we are requiring a description of how the assets in the
static pool differ from the pool assets underlying the securities being
offered.\842\ We continue to believe that this requirement benefits
investors by providing them with context in which to evaluate the
information without sophisticated data analysis tools and, as one
commenter noted, to evaluate pool construction risk. If the pool in the
offering is materially different from prior pools, then the issuer
should describe the difference so that investors can factor in that
difference when examining the static pool information. We agree with
one commenter's statement that ``[t]he prospectus should highlight the
extent to which the current collateral pool was originated with the
same or differing underwriting criteria, loan terms and/or risk
tolerances than the static pool data.'' \843\ We also believe that in
cases where the assets of the pool being securitized were underwritten
through different origination channels (e.g., loans originated directly
through an originator's retail channel or through unaffiliated mortgage
brokers) compared to prior securitized pools, disclosure of the
proportion of assets originated through each channel should be
provided. To address commenters' concerns, we are clarifying that we
are requiring ``a clear and concise description'' of the material
differences, if any, from the pool being securitized, but not a
detailed comparison.\844\
---------------------------------------------------------------------------

\842\ See Item 1105 of Regulation AB [17 CFR 229.1105].
\843\ See letter from Prudential I.
\844\ See letter from VABSS I.
---------------------------------------------------------------------------

Fourth, as proposed, the final rule states that the static pool
information should be presented graphically if doing so would aid in
understanding.\845\ As with the other requirements discussed above, we
believe graphical presentations help investors to more easily evaluate
material information, without the use of sophisticated analytical
tools. One commenter stated that the graphical presentation has
``highly questionable utility'' and also may be misleading under many
circumstances.\846\ We are requiring the issuer to provide a graphical
illustration only if it would be helpful; therefore, if an issuer
believes that providing graphical presentation of the static pool
information would not be useful for understanding the data or
misleading, then the issuer would not be required to provide it.
However, we generally believe that graphical presentation of
information can be beneficial to investors by helping them to quickly
spot trends, which may not be evident by looking at the numbers alone.
---------------------------------------------------------------------------

\845\ See Item 1105 of Regulation AB [17 CFR 229.1105].
\846\ See letter from BoA I.
---------------------------------------------------------------------------

Finally, in addition to providing investors with a clear and brief
introduction of the static pool data, we are also requiring issuers to
provide disclosure in cases where an issuer does not include static
pool information or includes disclosure that is intended to serve as
alternative static pool information.\847\ It is not always apparent why
one issuer does not provide static pool information or provides
alternative disclosure in lieu of such information, when other issuers
within the same asset class provide the information. Therefore, we are
requiring that issuers explain why they have not included static pool
disclosure or why they have provided alternative information. One
commenter interpreted this requirement as capable of being satisfied
through summary disclosure, such as stating that the data is not
available or not material.\848\ While we are not requiring that the
issuer provide an extensive explanation, the issuer should provide some
explanation beyond a conclusory statement that the information is not

[[Page 57257]]

available or not material. If the information is not included because
it is not material, an issuer should explain why the data is
immaterial, such as if the assets differ so significantly from the
assets in the pool being offered.
---------------------------------------------------------------------------

\847\ See Item 1105 of Regulation AB [17 CFR 229.1105].
\848\ See letter from BoA I.
---------------------------------------------------------------------------

We believe that taken together the static pool disclosure
requirements adopted will benefit investors by providing them with more
clearly explained and more consistently presented information about
static pools, thereby facilitating their understanding of how the
performance of the static pools may or may not be indicative of how the
current pool may perform. This will help investors make better informed
investment decisions and lead to more efficient allocation of capital.
The requirements will be costly to issuers to the extent that they
require reformatting information such as in graphical format. We expect
that these costs will be minimal because issuers can use off-the-shelf
software to create the graphs. Issuers will also incur costs for
analyzing prior pools as compared to the current offering, but these
costs should not be significant since they will have all the necessary
information.
2. Amortizing Asset Pools
(a) Proposed Rule
We proposed to add an instruction to Item 1105(a)(3)(ii) of
Regulation AB to require the static pool information related to
delinquencies, losses, and prepayments be presented in accordance with
the existing guidelines outlined in Item 1100(b) \849\ for amortizing
asset pools. Additionally, we proposed to amend Item 1105(a)(3)(iv) to
require graphical presentation of delinquency, losses, and prepayments
for amortizing asset pools.
---------------------------------------------------------------------------

\849\ 17 CFR 229.1100(b). Item 1100(b) requires that information
be presented in a certain manner. For example, it requires that
information regarding delinquency be presented in 30-day increments
through the point that assets are written off or charged off as
uncollectable.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Comments received on the proposed changes for amortizing asset
pools were mixed. With respect to requiring that delinquencies, losses,
and prepayments be presented in accordance with Item 1100(b), several
commenters supported the proposal,\850\ and several other commenters
opposed.\851\ Those commenters opposing the requirement were most
concerned about the one-size-fits-all approach to Item 1100(b)(1). They
stated, for example, that reporting delinquencies, losses, and
prepayments in 30- or 31-day increments through charge-off would be for
a longer period of time than required under general principles of
materiality.\852\ In regard to the graphical presentation requirement,
one commenter noted that graphical presentations provide immediate
recognition of changes in asset performance.\853\ Commenters that
opposed the requirement argued that not all graphical presentations are
useful or meaningful, especially for asset classes with extensive
data.\854\
---------------------------------------------------------------------------

\850\ See letters from BoA I and Realpoint.
\851\ See letters from ASF I and VABSS I.
\852\ Id. These commenters requested that the Commission tailor
Item 1100(b) according to asset class. For instance, ASF requested
that the Commission modify Item 1100(b)(1) for RMBS and CMBS as
follows: Present delinquency information in 30- or 31-day increments
through the point that the loans are 179 or 180 days delinquent,
followed by an additional 180-day increment (i.e., through the point
that the loans are 359 or 360 days delinquent), and a final
increment of 359 or 360 days or more. For ABS supported, directly or
indirectly, by motor vehicles, equipment and other similar physical
assets with finite lives over which their value depreciates, ASF and
VABSS requested that Item 1100(b)(1) be modified so that delinquency
information is presented in 30- or 31-day increments through the
point that the loans are 119 or 120 days delinquent, followed by a
final increment of 119 or 120 days or more.
\853\ See letter from CFA I. See also letters from AMI and BoA I
(supporting the graphical requirement for amortizing asset pools).
\854\ See letters from ASF I and VABSS I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We are adopting the proposed rules for amortizing asset pools with
modification in response to comments. We remain concerned that the
inconsistent presentation of delinquencies, losses, and prepayments
across issuers within the same asset class has resulted in a lack of
clarity and comparability.\855\ To address this concern, we are adding
an instruction to Item 1105(a)(3)(ii) of Regulation AB to require for
amortizing asset pools that the static pool information related to
delinquencies, losses, and prepayments be presented in accordance with
Item 1100(b) with respect to presenting such information in 30- or 31-
day increments. In response to commenters' concerns with requiring such
presentation through charge-off, the final instruction requires that
delinquencies, losses, and prepayments be presented in 30- or 31-day
increments through no less than 120 days.\856\ We believe that this
revised time period balances commenters' concerns with the cost and
burden of having to track and report this information in a more
granular manner for a longer period of time while still providing
investors with a more comprehensive picture of the delinquencies,
losses, and prepayments in a uniform manner across asset classes. We
also note that this revised time period is consistent with the new
asset-level data requirement for presentation of delinquencies and
losses in RMBS.\857\ While investors will not receive as granular a
presentation as proposed (through charge-off), investors investing in
asset classes required to provide asset-level disclosures will be
receiving more detailed information about the payment status of each
individual asset, such as the paid through date.\858\ We recognize that
to the extent that issuers will now be required to present
delinquencies and losses for a longer period of time than previously
provided in the distribution reports, such issuers will incur some
costs. We believe, however, the benefits gained from standardized and
comparable delinquency and loss disclosure justify the costs issuers
may incur to provide the information.
---------------------------------------------------------------------------

\855\ See the 2010 ABS Proposing Release at 23385.
\856\ See letters from ASF I and VABSS I.
\857\ See new Item 1(g)(33) of Schedule AL.
\858\ See new Item 1(g)(28) of Schedule AL. See Section
III.A.2.b Asset Specific Disclosure Requirements and Economic
Analysis of These Requirements. Due to the transition period for
implementing the loan-level requirements, there will be a period of
time during which investors will not have access to this more
granular data about assets in prior securitized pools. See Section
IX.B Transition Period for Asset-Level Disclosure Requirements.
---------------------------------------------------------------------------

In addition to requiring that delinquencies, losses, and
prepayments be presented in accordance with Item 1100(b) through no
less than 120 days, we are amending Item 1105(a)(3)(iv) to require the
graphical presentation of this information for amortizing asset pools.
We acknowledge commenters' concern that the substantial quantitative
data associated with some prior securitized pools could make graphical
presentation of the data ``unintelligible'' and that investors may
prefer actual data over graphs because they cannot ascertain the data
from the graphs and they can take the tabular data and create their own
graphs.\859\ We believe, however, that static pool data alone,
depending on the volume and type of data, can be difficult to analyze
without the use of sophisticated analytical tools. Requiring graphical
presentation of this information will benefit investors by enabling
them to analyze the information without such tools.\860\ In addition,
graphical presentation of the information highlights possible data
segments that warrant further analysis and may therefore facilitate a
more

[[Page 57258]]

tailored and efficient in-depth analysis. We also note that the
inherent function of static pool information (i.e., analyzing trends
within a sponsor's program by comparing originations at similar points
in the assets' lives) is well-suited for graphical presentation as it
allows for better detection of patterns that may not necessarily be
evident from overall portfolio numbers.
---------------------------------------------------------------------------

\859\ See letter from VABSS I.
\860\ See letters from AMI, BoA I, and CFA I (noting that
graphical representation of this information provides investors with
an immediate recognition of changes in asset performance in
successive pools and thus an indication of the underwriting
standards of the issuers).
---------------------------------------------------------------------------

3. Filing Static Pool Data
(a) Proposed Rule
We proposed to permit issuers to file their static pool information
required under Item 1105 of Regulation AB on EDGAR in Portable Document
Format (``PDF'') as an official filing in lieu of, as currently
required, including the information directly in the prospectus (or
incorporating by reference) in ASCII or HTML format.\861\
---------------------------------------------------------------------------

\861\ Rule 312 of Regulation S-T permitted issuers for ABS filed
on or before June 30, 2012, to post their static pool information on
an Internet Web site under certain conditions in lieu of filing the
static pool information on EDGAR. We are not removing Rule 312 of
Regulation S-T in connection with this rulemaking since issuers that
previously provided static pool information via a Web site are
required to retain all versions of the information provided through
the Web site for a period of not less than five years. Issuers are
no longer able to use Rule 312 as a means to provide their static
pool information. We are, however, removing Item 512(l) of
Regulation S-K, the undertaking previously required for providing
static pool information on a Web site under Rule 312 of Regulation
S-T because this undertaking is no longer applicable. We are also
removing paragraph (d)(6)(iii) of Securities Rule 433 which had
permitted issuers to include a Web site address for static pool
information in a free writing prospectus.
---------------------------------------------------------------------------

As is the case today, however, issuers can incorporate static pool
information filed on a Form 8-K or as an exhibit to a Form 8-K by
reference into a prospectus.\862\ We proposed that all static pool
disclosure, if filed on a Form 8-K, be filed under a new item number so
that investors could easily locate the information that is incorporated
by reference into the prospectus. We also proposed to create a new
exhibit number to Item 601 of Regulation S-K for static pool
information filed as an exhibit to a Form 8-K or prospectus.
---------------------------------------------------------------------------

\862\ See the 2004 Adopting Release at 1541.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Commenters were generally opposed to our PDF proposal, favoring
data formats other than PDF for static pool information. One commenter
stated that PDF makes detailed analysis ``difficult'' and ``time-
consuming.'' \863\ Another commenter preferred a format that is readily
importable to Excel or a comparable database program.\864\ One
commenter stated its belief that EDGAR in its current form will not
facilitate the usability of static pool information, such as allowing
investors to download the data in a format that investors can use with
their own analytical tools and applications.\865\ With respect to our
proposal to house all static pool information filed on Form 8-K under a
new item number, commenters were supportive of the proposal.\866\
---------------------------------------------------------------------------

\863\ See letter from CFA I.
\864\ See letter from Prudential I.
\865\ See letter from ASF I. See also letter from American
Securitization Forum regarding the filing of static pool information
dated May 4, 2012 submitted in response to the 2010 ABS Proposing
Release (``ASF V'') (noting that its investor members supported
upgrading EDGAR to allow for a number of file types, including PDF
and Excel, but did not specify whether PDF would in fact facilitate
the usability of the static pool data).
\866\ See letters from MBA I and Prudential I. Prudential
suggested requiring the issuer to include a link in the prospectus
to the relevant information in order to assist investors in locating
the information. As is the case today, filers may reference a
previously submitted filing in the prospectus; however, filers are
generally not permitted to include external references. See EDGAR
Manual (Volume II), Section 5, for additional information and
instruction about acceptable external references.
---------------------------------------------------------------------------

(c) Final Rule and the Economic Analysis of the Final Rule
Given commenters' concerns regarding the usability of static pool
information in PDF, we are not adopting our proposal to permit issuers
to file their static pool information in PDF as an official filing.
This decision benefits investors because they will continue to receive
static pool information in a more usable format compared to PDF.
Issuers, however, will be precluded from taking advantage of any cost
savings that could be achieved by filing the static pool information in
PDF.
We are adopting the proposed rules to amend Form 8-K and Item 601
of Regulation S-K. We believe that these amendments will benefit
investors in searching and locating the static pool information filed
on EDGAR. Therefore, if the issuer wishes to incorporate static pool
information by reference to a Form 8-K filing rather than to include it
in the prospectus, then an issuer must file it under new Item 6.06 of
Form 8-K. If the issuer files the static pool information as an exhibit
to a Form 8-K to be incorporated into a prospectus, the issuer must
file the static pool information as Exhibit 106. Under the final rule,
issuers will be required to include a statement in the prospectus that
the static pool information incorporated by reference is deemed to be a
part of the prospectus and also identify the Form 8-K on which the
static pool information was filed by including the CIK number, file
number, exhibit number (if applicable) and the date on which the static
pool information was filed. Investors will benefit by being able to
more easily search and locate static pool information incorporated by
reference into the prospectus, and the only cost issuers are likely to
incur is to update their information systems to reflect the new Form 8-
K item requirement and exhibit number, which we believe should be
minimal.
We also proposed that the information should be filed with the Form
8-K on the same date that the preliminary prospectus is required to be
filed.\867\ We are adopting that proposal with one clarification.
Consistent with current practices under existing requirements, issuers
may incorporate by reference the same static pool information into the
prospectus of one or more offerings of the same asset class as long as
the information meets the requirements of Item 1105 of Regulation
AB,\868\ which states that the most recent periodic increment for the
static pool data must be of a date no later than 135 days after the
first use of the prospectus.\869\ The amended requirement clarifies
that issuers are required to provide information by the date that the
prospectus is required to be filed rather than on the same date the
prospectus is filed (i.e., permitting incorporation of a previously-
filed Form 8-K), and thereby allows issuers to continue to have the
flexibility to incorporate the static pool information by reference
into prospectuses of multiple deals.
---------------------------------------------------------------------------

\867\ In the 2010 ABS Proposing Release, we proposed that
``[t]he static pool disclosure must be filed as an exhibit with this
report by the time of effectiveness of a registration statement on
Form SF-1, on the same date of the filing of a form of prospectus,
as required by Rule 424(h) (17 CFR 230.424(h)) and a final
prospectus meeting the requirements of section 10(a) of the
Securities Act (15 U.S.C. 77j(a)) filed in accordance with Rule
424(b) (17 CFR 230.424(b)).''
\868\ 17 CFR 229.1105(a)(3)(ii).
\869\ We established a requirement regarding the age of the most
recent periodic increment to ensure the currency of the data. See
the 2004 Adopting Release at 1540.
---------------------------------------------------------------------------

F. Other Disclosure Requirements That Rely on Credit Ratings

Items 1112 and 1114 of Regulation AB require the disclosure of
certain financial information regarding significant obligors of an
asset pool and significant credit enhancement providers relating to a
class of asset-backed securities. An instruction to Item 1112(b)
provides that no financial information regarding a significant obligor
is required if the obligations of the significant obligor, as they
relate to the pool assets, are backed by the full faith and credit of a
foreign government and the pool assets are securities that

[[Page 57259]]

are rated investment grade by an NRSRO.\870\ Item 1114 of Regulation AB
contains a similar instruction that relieves an issuer of the
obligation to provide financial information when the obligations of the
credit enhancement provider are backed by a foreign government and the
credit enhancement provider has an investment-grade rating.\871\ We
proposed to revise Item 1112 and Item 1114 to eliminate the exceptions
based on investment-grade ratings.
---------------------------------------------------------------------------

\870\ Instruction 2 to Item 1112(b) of Regulation AB [17 CFR
229.1112(b)].
\871\ Instruction 3 to Item 1114 [17 CFR 229.1114]. Under both
Items 1112 and 1114, to the extent that pool assets are not
investment-grade securities, information required by paragraph (5)
of Schedule B of the Securities Act may be provided in lieu of the
required financial information. Paragraph 5 of Schedule B requires
disclosure of three years of the issuer's receipts and expenditures
classified by purpose in such detail and form as the Commission
prescribes.
---------------------------------------------------------------------------

We received only one comment on this proposal, which supported the
proposal.\872\ We are adopting the amendments to Items 1112 and 1114 as
proposed. We continue to believe that these changes are consistent with
the requirements of Section 939A of the Dodd-Frank Act, which requires
us to reduce regulatory reliance on credit ratings, and our revisions
to eliminate ratings from the shelf eligibility criteria for asset-
backed issuers. We believe that this will allow investors to directly
consider the financial condition of significant obligors and credit
enhancement providers rather than rely solely on the implication of
these parties' credit ratings. Because the information now required to
be disclosed is likely available to the issuer, the revisions to Item
1112 and Item 1114 will not impose substantial costs or burdens on an
asset-backed issuer.
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\872\ See letter from BoA I.
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V. Securities Act Registration

A. Background and Economic Discussion

Securities Act shelf registration provides important timing and
flexibility benefits to issuers. An issuer with an effective shelf
registration statement can conduct delayed offerings ``off the shelf''
under Securities Act Rule 415 without staff action.\873\ Asset-backed
securities are often registered on a Form S-3 registration statement
and later offered ``off the shelf'' if, in addition to meeting other
specified criteria,\874\ the securities are rated investment grade by
an NRSRO. We continue to recognize that ABS issuers have expressed the
desire to use shelf registration to access the capital markets quickly.
ABS issuers' interest in shelf registration is also evidenced by the
lack of ABS issuers using Form S-1.\875\
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\873\ As discussed in the 2010 ABS Proposing Release,
contemporaneous with the enactment of the Secondary Mortgage Market
Enhancement Act of 1984 (SMMEA), which added the definition of
``mortgage related security'' to the Exchange Act, we amended
Securities Act Rule 415 to permit mortgage related securities to be
offered on a delayed basis, regardless of which form is utilized for
registration of the offering (Pub. L. No. 98-440, 98 Stat. 1689).
SMMEA was enacted by Congress to increase the flow of funds to the
housing market by removing regulatory impediments to the creation
and sale of private mortgage-backed securities. An early version of
the legislation contained a provision that specifically would have
required the Commission to create a permanent procedure for shelf
registration of mortgage related securities. The provision was
removed from the final version of the legislation, however, as a
result of the Commission's decision to adopt Rule 415, implementing
a shelf registration procedure for mortgage related securities. See
H.R. Rep. No. 994, 98th Cong., 2d Sess. 14, reprinted in 1984 U.S.
Code Cong. & Admin. News 2827. See also Shelf Registration, Release
No. 33-6499 (Nov. 17, 1983) [48 FR 52889] at footnote 30 (noting
that mortgage related securities were the subject of pending
legislation). In 1992, in order to facilitate registered offerings
of asset-backed securities and eliminate differences in treatment
under our registration rules between mortgage related asset-backed
securities (which could be registered on a delayed basis) and other
asset-backed securities of comparable character and quality (which
could not), we expanded the ability to use ``shelf offerings'' to
other asset-backed securities. See Simplification of Registration
Procedures for Primary Securities Offerings, Release No. 33-6964
(Oct. 22, 1992) [57 FR 32461]. Under the 1992 amendments, offerings
of asset-backed securities rated investment grade by an NRSRO
(typically one of the four highest categories) could be shelf
eligible and registered on Form S-3. The eligibility requirement's
definition of ``investment grade'' was largely based on the
definition in the existing eligibility requirement for non-
convertible corporate debt securities.
\874\ In addition to investment-grade rated securities, an ABS
offering is shelf-eligible only if the following conditions are met:
delinquent assets must not constitute 20% or more, as measured by
dollar volume, of the asset pool as of the measurement date; and
with respect to securities that are backed by leases other than
motor vehicle leases, the portion of the securitized pool balance
attributable to the residual value of the physical property
underlying the leases, as determined in accordance with the
transaction agreements for the securities, does not constitute 20%
or more, as measured by dollar volume, of the securitized pool
balance as of the measurement date. To the extent the depositor or
any issuing entity previously established, directly or indirectly,
by the depositor or any affiliate of the depositor are or were at
any time during the twelve calendar months and any portion of a
month immediately preceding the filing of the registration statement
on Form S-3 subject to the requirements of Section 12 or 15(d) of
the Exchange Act (15 U.S.C. 78l or 78o(d)) with respect to a class
of asset-backed securities involving the same asset class, such
depositor and each such issuing entity must have filed all material
required to be filed regarding such asset-backed securities pursuant
to Section 13, 14 or 15(d) of the Exchange Act (15 U.S.C. 78m, 78n
or 78o(d)) for such period (or such shorter period that each such
entity was required to file such materials). Such material (except
for certain enumerated items) must have been filed in a timely
manner. We did not propose changes to these other eligibility
conditions.
\875\ According to EDGAR, since 2008, no ABS issuer has filed a
registration statement on Form S-1 that went effective.
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In the 2010 ABS Proposing Release, we proposed, among other things,
new registration procedures, registration forms and shelf eligibility
requirements for asset-backed security issuers. The 2010 ABS Proposals
sought to address a number of concerns about the ABS offering process
and ABS disclosures that were subsequently addressed in the Dodd-Frank
Act, while others were not addressed by the Dodd-Frank Act. Two of the
proposed shelf eligibility requirements--risk retention \876\ and
continued Exchange Act reporting \877\--were addressed by provisions of
the Dodd-Frank Act. In July 2011, we re-proposed some of the 2010 ABS
Proposals in light of the changes made by the Dodd-Frank Act and
comments we received.
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\876\ In the 2010 ABS Proposing Release, we proposed to require
that sponsors of ABS transactions retain a specified amount of each
tranche of the securitization, net of hedging. Section 941 of the
Dodd-Frank Act added new Section 15G of the Exchange Act. Section
15G generally requires the Federal Reserve Board, the Federal
Deposit Insurance Corporation, the Office of the Comptroller of the
Currency, the Commission and in the case of the securitization of
any ``residential mortgage asset,'' together with the Department of
Housing and Urban Development and the Federal Housing Finance
Agency, to jointly prescribe regulations relating to risk retention.
In March 2011, the agencies proposed rules to implement Section 15G
of the Exchange Act. In August 2013, the agencies re-proposed the
rules. See the 2011 Risk Retention Proposing Release and the 2013
Risk Retention Re-Proposing Release.
\877\ The Commission proposed in the 2010 ABS Proposals to
require that an ABS issuer undertake to file Exchange Act reports
with the Commission on an ongoing basis as a condition to shelf
eligibility. The 2010 ABS Proposals also proposed to require an
issuer to confirm, among other things, whether Exchange Act reports
required pursuant to the undertaking were current as of the end of
the quarter in order to be eligible to use the effective
registration statement for takedowns. Section 942(a) of the Dodd-
Frank Act eliminated the automatic suspension of the duty to file
under Section 15(d) of the Exchange Act for ABS issuers, and granted
authority to the Commission to issue rules providing for the
suspension or termination of such duty. In the 2011 ABS Re-Proposing
Release, we stated that due to the amendment to Section 15(d), the
proposed shelf eligibility requirement to undertake to file Exchange
Act reports is no longer necessary, including the quarterly
evaluation by issuers of compliance with the undertaking. In August
2011, we adopted rules to provide for suspension of the reporting
obligations for asset-backed securities issuers when there are no
asset-backed securities of the class sold in a registered
transaction held by non-affiliates of the depositor. See footnote
543.
---------------------------------------------------------------------------

The 2011 ABS Re-Proposals for ABS shelf registration eligibility
were also part of several rule revisions we are considering in
connection with Section 939A of the Dodd-Frank Act. Section 939A of the
Dodd-Frank Act requires

[[Page 57260]]

that we review any regulation issued by us that requires the use of an
assessment of the credit-worthiness of a security or money market
instrument and any references to or requirements in such regulations
regarding credit ratings. Once we have completed that review, the
statute provides that we modify any regulations identified in our
review to remove any reference to or requirement of reliance on credit
ratings and to substitute in such regulations such standard of credit-
worthiness as we determine to be appropriate. In that connection, we
take into account the context and purposes of the affected rules.

B. New Registration Procedures and Forms for ABS

1. New Shelf Registration Procedures
Under existing rules, as with current offerings of other types of
securities registered on Form S-3 and Form F-3, the shelf registration
statement for an offering of ABS will often be effective weeks or
months before a takedown is contemplated. The prospectus in an
effective registration statement must describe, among other things, the
type or category of assets to be securitized, the possible structural
features of the transaction, and identification of the types or
categories of securities that may be offered.\878\ Pursuant to existing
Securities Act Rules 409 and 430B,\879\ the prospectus in the
registration statement may omit the specific terms of a takedown if
that information is unknown or not reasonably available to the issuer
when the registration statement is made effective.\880\ For ABS
offerings off the shelf, because assets for a pool backing the
securities will not be identified until the time of an offering,
information regarding the actual assets in the pool and the material
terms of the transaction are typically only included in a prospectus or
prospectus supplement that is required to be filed with the Commission
by the second business day after first use.\881\ This information
includes information about the structure of the cash flows, the pool,
underwriting criteria for the assets and exceptions made to the
underwriting criteria, identification of the originators of the assets
and other information that is related to the identification of specific
assets for the pool. We understand that the creation of an asset pool
to support securitized products is a dynamic and ongoing process in
which changes can take place up until pricing. As a result, the new
rules we are adopting maintain the fundamental framework of shelf
registration for delayed ABS offerings, but provide new important
protections for investors who choose to commit capital to the ABS
transactions.
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\878\ The form of prospectus in an effective registration
statement should also include disclosure about the risks associated
with changes in interest rates or prepayment levels as well as the
various scenarios under which payments on the ABS could be impaired.
\879\ 17 CFR 230.409 and 17 CFR 230.430B.
\880\ The prospectus disclosure in the registration statement is
often presented through a ``base'' or ``core'' prospectus and a
prospectus supplement. We are eliminating this type of presentation
for ABS issuers. See Section V.D.1 Presentation of Disclosure in
Prospectuses.
\881\ An instruction to Rule 424(b) [17 CFR 230.424(b)] requires
that a form of prospectus or prospectus supplement relating to a
delayed offering of mortgage-backed securities or an offering of
asset-backed securities be filed no later than the second business
day following the date it is first used after effectiveness in
connection with a public offering or sales, or transmitted by a
means reasonably calculated to result in filing with the Commission
by that date.
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We also recognize that it is important for investor protection
that, in addition to receiving adequate information to make an
investment decision, ABS investors also have adequate time to analyze
the information and the potential investment. For the most part, each
ABS offering off of a shelf registration statement involves securities
backed by different assets, so that, in essence, from an investor point
of view, each offering requires a new investment analysis. Information
about the underlying assets is an important piece of information for
analyzing the ability of those assets to generate sufficient funds to
make payments on the securities. Furthermore, some have noted the lack
of time to review transaction-specific information as hindering
investors' ability to conduct adequate analysis of the securities.\882\
We believe that a process for ABS offerings where investors and
underwriters have additional time to conduct their review of offerings
will result in improved investor protections and promote a more
efficient asset-backed market, even if issuers may not always be able
to complete their offering as swiftly as they could in the past.
Therefore, we are adopting rules designed to increase the amount of
time that investors have to review information about a particular shelf
takedown, which we believe will allow for better analysis of ABS in
lieu of undue reliance on security ratings.
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\882\ See, e.g., Section I.B. of CFA Institute Centre for
Financial Market Integrity and Council of Institutional Investors,
U.S. Financial Regulatory Reform: The Investor's Perspective, July
2009 (noting that securitized products are sold before investors
have access to a comprehensive and accurate prospectus, noting that
each ABS offering involves a new and unique security, and
recommending that the Commission adopt rules to improve the
timeliness of disclosures to investors); Securitization of Assets:
Problems & Solutions Hearing Before the Subcomm. on Sec., Ins., &
Inv. of the S. Comm. on Banking, Housing & Urban Affairs, 111th
Cong. 11 (2009) (statement of William W. Irving) (recommending that
there be ample time before a deal is priced for investors to review
and analyze a full prospectus and not just a term sheet); The State
of Securitization Markets Hearing Before the Subcomm. on Sec., Ins.,
& Inv. of the S. Comm. on Banking, Housing & Urban Affairs, 112th
Cong. 9 (2011) (statement of Chris J. Katopis, Executive Director of
the Association of Mortgage Investors) (recommending that there be a
``cooling off period'' when ABS are offered to provide investors
with enough time to review and analyze prospectus information prior
to making investment decisions). See also footnote 885 listing those
commenters supporting the waiting period proposal.
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a) Rule 424(h) and Rule 430D
(1) Proposed Rule
In the 2010 ABS Proposing Release, we proposed to require that an
ABS issuer using a shelf registration statement on proposed Form SF-3
file a preliminary prospectus containing transaction-specific
information at least five business days in advance of the first sale of
securities in the offering. This requirement would allow investors
additional time to analyze the specific structure, assets and
contractual rights of each transaction. We proposed this requirement in
response to investors' concerns that ABS issuers were not providing
them enough time to review the transaction-specific information, which
hindered their ability to conduct adequate analysis of the securities.
We noted in the 2011 ABS Re-Proposal that the five business-day waiting
period was also intended to reduce undue reliance on security ratings,
thus part of our efforts to remove the prior investment-grade ratings
requirement.\883\ We believed that requiring such information to be
filed at least five business days before the first sale of securities
in the offering balances the interest of ABS issuers in quick access to
the capital markets and the need of investors to have more time to
consider transaction-specific information. In the 2010 ABS Proposing
Release, we explained that we considered whether a longer minimum time
period than five business days would be more appropriate.\884\ We had
proposed five business days because we believed that the companion
proposals requiring the filing of standardized and tagged asset-level
information and a computer program could reduce the amount of time
required by investors to

[[Page 57261]]

consider transaction specific information. The proposal also provided
that a material change from the information provided in the preliminary
prospectus, other than offering price, would require a new preliminary
prospectus to be filed and therefore, a new five business-day waiting
period.
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\883\ See the 2010 ABS Proposing Release at 23334, including
footnote 80, and the 2011 ABS Re-Proposal at 47950, including
footnote 19.
\884\ Some have suggested that investors be provided with up to
two weeks to analyze asset information. See, e.g., Joshua Rosner,
Securitization: Taming the Wild West, in Roosevelt Institute, Make
Markets be Markets 73 (2010).
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(2) Comments on Proposed Rule
Comments received on this proposal were mixed. Several commenters
supported the proposal that a preliminary prospectus be filed five
business days in advance of the first sale.\885\ Two commenters
generally supported the proposed five business-day waiting period and
also provided additional feedback on other time periods.\886\ One of
the commenters recommended that investors should have not less than
three days to evaluate an ABS offering,\887\ while the other stated
that two business days for repeat issuers may be sufficient.\888\
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\885\ See letters from AFL-CIO dated Aug. 2, 2010 submitted in
response to the 2010 ABS Proposing Release, AMI, CalPERS, CFA I,
CREFC I, Rylee Houseknecht dated Apr. 26, 2010 submitted in response
to the 2010 ABS Proposing Release, ICI I, Jamie L. Larson dated Apr.
27, 2010 submitted in response to the 2010 ABS Proposing Release,
MetLife I, MBA I, Prudential I, and Realpoint.
MBA also requested that issuers, particularly CMBS issuers, also
have the ability to update without restarting the five business-day
period. See letter from MBA I (noting that while a five business-day
minimum waiting period prior to the first sale will occasionally
impose an ``unwelcome timing constraint,'' the minimum waiting
period is unlikely to make shelf registration sufficiently less
attractive if the rule provides flexibility for issuers to provide
updates with a shorter waiting period). Comments about the waiting
period for updates are addressed below.
\886\ See letters from ICI I (noting that if the Commission
considers a shorter period, investors should be provided with no
less than a three-day period) and CFA II (reiterating their support
for the proposed five business-day waiting period).
\887\ See letter from ICI I.
\888\ See letter from CFA I.
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Other commenters opposed the five business-day waiting period \889\
and suggested shorter alternatives such as two business days prior to
the first sale,\890\ one business day,\891\ or no waiting period.\892\
One commenter suggested that the waiting period vary by asset
class.\893\ Another commenter recommended a one business-day waiting
period for a category of ``well-known seasoned asset-backed sponsors''
that meet certain issuer classification (e.g., seasoned depositors and
sponsors with established securitization programs that have issued more
than a threshold aggregate amount and/or over a specified period of
time), asset class classification (e.g., master trusts where the asset
pool does not change materially from transaction to transaction and a
specified dollar amount of transactions have been issued and supported
by the pool), or transaction structure (e.g., transactions by the same
depositor or sponsor, where issuances involve waterfall structures that
do not change materially from transaction to transaction).\894\ Along
the same lines, another commenter suggested that certain types of ABS
offerings do not warrant any mandatory waiting periods because of their
frequency and nature (e.g., where a sponsor, its parent or a subsidiary
has completed at least one public offering within the preceding two
years of securities in the same asset class and where the cash flows
and structure are substantially similar to a prior public
offering).\895\ Several commenters argued that a five business-day
waiting period is more consistent with the time delays associated with
an equity initial public offering (``IPO''), and noted that the
proposed rule could lead to the ``perverse result'' that a well-known
seasoned issuer can issue relatively risky forms of capital such as
equity or unsecured debt without any required waiting period, but
secured debt, generally regarded as less risky, would have a waiting
period.\896\
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\889\ See letters from ABA I, ASF I, AmeriCredit, CNH I, SIFMA
I, and Wells Fargo I.
\890\ See letters from ABA I (suggesting two business days for
all ABS transactions other than those by widely followed, well-known
ABS issuers), ASF I, AmeriCredit, BoA I, CNH I, Vanguard, VABSS I
(recommending no mandatory minimum waiting period, but suggesting
two business days if a minimum is imposed), and Wells Fargo I.
\891\ See letter from ABA I (one business day is appropriate for
widely-followed, well-known ABS issuers, sponsors or asset classes
or structures, similar to the well-known seasoned issuer concept).
\892\ See letter from VABSS I.
\893\ See letter from SIFMA I (suggesting a two business-day
period for bank credit card or charge card receivables; three
business days for private-label credit card or charge card
receivables, motor vehicle loans/leases, student loans, or equipment
loans or leases; and five business days for any other asset class,
including RMBS and CMBS).
\894\ See letter from ABA I (noting that some programmatic
issuers have issued hundreds of billions of dollars of ABS over
decades, using securitization programs that have consistent
documentation from deal to deal, and are well-known to their
investor base which, as a result, needs less time to absorb
transaction details).
\895\ See letter from VABSS I.
\896\ See letters from AmeriCredit and VABSS I.
---------------------------------------------------------------------------

While we did not specifically request further comment on this topic
in the 2011 ABS Re-Proposing Release, several commenters offered
comment on the proposal. For the most part, commenters reiterated their
suggestions from their comment letters on the 2010 ABS Proposing
Release. Several commenters agreed that a preliminary prospectus should
be provided to investors in advance.\897\ Some commenters noted concern
if the proposed time period were to be shortened.\898\ One commenter
reiterated its suggestion for different filing requirements based on
asset class.\899\ Another commenter suggested a one business-day
waiting period for ``widely followed, programmatic ABS issuers'' and a
two business-day waiting period for all others.\900\
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\897\ See letters from ABA II, AFME, and CFA II.
\898\ See letters from Better Markets and ICI II (also
suggesting a time period of no less than three business days).
\899\ See letter from SIFMA III-dealers and sponsors (stating
that ``at least two business days before the date of the first sale
in the offering, in the case of ABS backed by bank credit card or
charge card receivables; at least three business days before the
date of the first sale in the offering, in the case of ABS backed by
private-label credit card or charge card receivables, motor vehicle
loans or leases, student loans, or equipment loans or leases; and at
least five business days before the date of the first sale in the
offering, in the case of ABS backed by any other asset class,
including residential or commercial mortgage loans'').
\900\ See letter from ABA II.
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As noted above, the proposal provided that a material change from
the information provided in a preliminary prospectus, other than
offering price, would require a new preliminary prospectus and
therefore, a new five business-day waiting period. Some investor
commenters supported the proposal to require a new waiting period for
any material changes.\901\ However, several commenters recommended
changes to this aspect of the proposal.
---------------------------------------------------------------------------

\901\ See letters from AMI, MetLife I, and Prudential I.
---------------------------------------------------------------------------

Some commenters, believing the five business-day waiting period
after material changes was too long, suggested shorter periods.\902\
Commenters recommending shorter periods generally argued that in most
cases a material change can be easily identified and reviewed and will
not

[[Page 57262]]

take investors the same amount of time to consider as compared to the
first review of the entire preliminary prospectus.\903\ Some investor
commenters suggested that the waiting period should be shortened
because investors will have the opportunity to become familiar with the
transaction documents during the initial marketing period.\904\ One
commenter stated that a five business-day waiting period unnecessarily
exposes well-established sponsors to market and execution risk without
providing a meaningful benefit to investors and recommended both a
shorter waiting period and a requirement that material changes be
disclosed in a supplement to the preliminary prospectus to facilitate
easy identification of such changes.\905\
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\902\ See letters from ABA I, ASF I (expressed views of issuers
and investors only) (supporting a one business-day minimum if a
minimum period is imposed but noting that even a one business-day
minimum period could be overly rigid and unnecessarily long in some
cases), AmeriCredit, AMI, BoA I, CNH I, CREFC I (suggesting a
waiting period up to five business days based upon the nature of the
change and the length of time that would be needed for the market to
digest that change in accordance with past experience, and that
sponsors should be given the latitude to determine the appropriate
length of review on a case-by-case basis based on their ``unique''
understanding of the CMBS market and experience with the investor
community), MBA I, Prudential I, SIFMA I (expressed views of issuers
and investors only), VABSS I, and Wells Fargo I (asserting that one
business day should be sufficient where a material change was made
during the first day of the initial waiting period, and two business
days if made later in the initial period).
\903\ See letters from BoA I and SIFMA I (expressed views of
issuers and investors only). See also AmeriCredit (suggesting an
additional waiting period should apply only in cases where the
material changes significantly affect the asset pool, the cash flows
or the transaction structure, otherwise no waiting period should be
required, such as when ``upsizing'' a transaction due to strong
investor demand), CREFC I (stating that a free writing prospectus
that highlights a material change will expedite and improve the
review of changes by the investor community rather than requiring
review of an entirely new 424(h) filing), and MBA I (noting that
investors in CMBS do not need five business days to understand all
material changes, and that CMBS issuers commonly issue ``pre-pricing
updates,'' often no more than one or two pages, to investors prior
to pricing to convey any material changes since the preliminary
prospectus and also suggesting that the period be shortened to one
day or have the rule focus more on the length of time necessary for
an investor to understand the change rather than the materiality of
the change).
\904\ See letters from AMI and Prudential I.
\905\ See letter from ABA I.
---------------------------------------------------------------------------

Some commenters suggested that no additional waiting period after
material changes may be necessary.\906\ One investor commenter
recommended a new filing and a new five business-day period only if a
change to the transaction occurs that a reasonable investor would
consider material to an investment decision, such as: Changes to more
than 1% of the collateral pool, including changes at the property,
tenant or borrower level; any changes to the priority of payment (i.e.,
waterfall); any changes of any service provider or party to the
transaction; or any changes to the terms in the documents related to
the transaction, including changes to any representations and
warranties, covenants or indemnities originally contained in such
documents.\907\
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\906\ See letters from ASF I (expressed views of issuers and
investors only) and BoA I. These commenters reasoned that existing
Rule 159 provides adequate protections by promoting the delivery of
updated information in a manner that provides investors with an
opportunity to evaluate the disclosure prior to contract of sale.
\907\ See letter from MetLife I.
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Commenters also requested that we provide additional clarity
regarding the material changes to the preliminary prospectus that would
trigger a new five business-day waiting period.\908\ One of those
commenters stated that changes in pool composition as a result of
ordinary events, such as payments of interest or principal, should not
require additional disclosure or a renewed waiting period unless such
payments reflect another material change.\909\ Several commenters
recommended that the requirement should not focus so much on the
materiality of the change in terms of its economic impact or
importance, but rather on the likely extent of the effect of such a
change on the disclosure itself and the need for more time to
review.\910\
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\908\ See letters from ABA I, BoA I, CREFC I, ICI I, and MBA I.
\909\ See letter from ABA I.
\910\ See letters from BoA I, CREFC I, and MBA I (noting that
many material changes (e.g., a change in payment priority) that are
important can nevertheless be easily described and quickly
understood, particularly if one has already received a preliminary
prospectus).
---------------------------------------------------------------------------

We also received comments on our proposal to permit omission of
pricing information in the required preliminary prospectus. One
commenter recommended that we define what is contemplated by the phrase
``information dependent on pricing'' and whether this would include
only quantitative pricing terms, or whether it could also include other
additional information that is typically determined at pricing (e.g.,
selection of a swap counterparty, weighted average life calculations,
or, in the case of credit card master trusts, transaction size and
minimum principal receivables balance requirements).\911\ Along the
same lines, several commenters suggested an accommodation for
transactions involving derivative contracts.\912\ Another commenter
suggested that the preliminary prospectus should have a section that
specifically discusses any aspect of the transaction that is ``to be
determined'' at the time of the filing.\913\
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\911\ See letter from ABA I.
\912\ See letters from ASF I and BoA I (explaining that in these
cases the preliminary prospectus could not include information
relating to a specific swap counterparty or other information
dependent on the pricing because the optimal pricing of the
derivative and the counterparty with the most competitive bid cannot
be determined by the issuer until the time of pricing for the
offered securities).
\913\ See letter from Prudential I.
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We did not receive comments on our proposed conforming revisions to
the undertakings that are required by Item 512 of Regulation S-K \914\
in connection with a shelf registration statement for ABS. We also did
not receive comments on our proposed addition to Item 512 to require an
issuer to undertake to file the information required to be contained in
a preliminary prospectus.
---------------------------------------------------------------------------

\914\ 17 CFR 229.512.
---------------------------------------------------------------------------

(3) Final Rule and Economic Analysis of the Final Rule
(a) Rule 424(h) Filing
Under the final rule, with respect to any takedown of securities in
a shelf offering of asset-backed securities where information is
omitted from an effective registration statement in reliance on new
Rule 430D, as discussed below, a form of prospectus meeting certain
requirements must be filed with the Commission in accordance with the
new Rule 424(h) preliminary prospectus at least three business days
prior to the first sale of securities in the offering.\915\ After
considering the various comments received on the initial five-business
day waiting period, we have shortened the waiting period as proposed
from five business days to three business days. We believe that three
business days balances the benefit to investors of providing additional
time to conduct an analysis of the offering--a longstanding concern of
ABS investors \916\--and the concerns of issuers expressed in the
comment letters. While the final rule imposes a minimum three-day
waiting period, issuers may provide additional time to potential
investors to consider the offering.
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\915\ Sale includes ``contract of sale.'' See footnote 391 and
accompanying text of the Securities Offering Reform Release. We are
clarifying the final rule to note that the preliminary prospectus
must be filed two business days after first use but no later than
three business days before first sale. See also letter from SIFMA I
(noting that the Commission should make clear that a preliminary
prospectus must be filed not later than the earlier of (i) the
applicable number of business days before the date of the first
sale, or (ii) or the second business day after fist use).
\916\ See the 2004 ABS Adopting Release at 1527. Although the
investment analysis does not have to be completely done anew for
master trust transactions since the asset pools do not necessarily
change with each takedown, we believe that the three business-day
waiting period is still important for investors in such transactions
as investors are not only reviewing the assets but also any changes
to the structure to ensure that it will produce the expected cash
flows, which can be intricate and complex for master trusts.
---------------------------------------------------------------------------

We recognize that the final rule will require issuers to provide
information to investors earlier in the process than was often provided
for ABS issued before the crisis. During the required waiting period,
issuers may be exposed to the risk of changing market conditions
because they may have to hold the underlying assets on their balance
sheets (inventory risk), and the risk may have larger impact on small
sponsors with smaller balance sheets. To assess the magnitude of this
risk and the costs that it may impose on issuers, we

[[Page 57263]]

analyzed time series changes in the price of the Bank of America
Merrill Lynch U.S. Fixed Rate Asset Backed Securities Index
(R0A0).\917\ Average index returns for the pre-crisis, crisis, and
post-crisis periods are presented in Table 1. To assess the cost of the
three business-day waiting period that we are adopting against the cost
of reasonable alternatives, we calculated index returns over one,
three, five and ten days. Outside of the volatile 2008-2009 crisis
period, the average change in ABS market conditions as measured by
index returns is below 1.5 basis points (bps) for all horizons (1, 3,
5, and 10 days) with the standard deviation below 15bp for three-day
returns. These results suggest that the economic exposure of issuers to
market conditions (opportunity cost) is relatively small for all
waiting period lengths in the range from 1 day to 10 days, but
increases with the horizon. Further, reducing the waiting period from 5
days to 3 days lowers the riskiness of returns by more than 15% (the
standard deviation drops from 17bps to 14bps). To put these numbers in
perspective, for a $100 million ABS issuance that is similar to the
above-mentioned R0A0 ABS index, a three business-day waiting period
during the analyzed period would result in an expected change of less
than $10,000 and a 10% likelihood of a more than $230,000 increase or
decrease in the value of the issuance. Additionally, exposure to
several sources of risk, for example, the three-day interest rate risk
or credit spread risk, can be hedged with forward contracts, further
reducing potential exposure to losses due to a three-day delay in
offering.\918\
---------------------------------------------------------------------------

\917\ The Bank of America Merrill Lynch U.S. Fixed Rate Asset
Backed Securities Index (the ``Index'') tracks the performance of
U.S. dollar denominated investment-grade fixed rate asset-backed
securities issued in the U.S. domestic market. Qualifying securities
must have an investment-grade rating (based on an average of
Moody's, S&P, and Fitch ratings). In addition, qualifying securities
must have the following: (1) A fixed rate coupon (including callable
fixed-to-floating rate securities); (2) at least one year remaining
term to final stated maturity; (3) at least one month to the last
expected cash flow; (4) an original deal size for the collateral
group of at least $250 million; (5) a current outstanding deal size
for the collateral group greater than or equal to 10% of the
original deal size; and (6) a minimum outstanding tranche size of
$50 million for senior tranches and $10 million for mezzanine and
subordinated tranches. Floating rate, inverse floating rate,
interest only, and principal only tranches of qualifying deals are
excluded from the Index as are all tranches of re-securitized and
agency deals. Securities to be sold in reliance on Securities Act
Rule 144A qualify for inclusion in the Index.
\918\ The inventory risk can also be transferred to underwriters
that would commit to buy the issue from securitizers.

Table 1--Index Returns Are Calculated Using the Price of Bank of America Merrill Lynch U.S. Fixed Rate Asset Backed Securities Index for the 5/6/2004 to
12/31/2013 Period. Three, Five, and Ten Day Returns Are Overlapping.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1-day 3-day 5-day 10-day
Number of -------------------------------------------------------------------------------------------------------
Time period daily Standard Standard Standard Standard
observations Average deviation Average deviation Average deviation Average deviation
--------------------------------------------------------------------------------------------------------------------------------------------------------
5/6/2004-12/31/2007............... 954 0.0000 0.0011 -0.0001 0.0017 -0.0002 0.0020 -0.0003 0.0025
1/1/2008-12/31/2009............... 524 -0.0001 0.0021 -0.0003 0.0037 -0.0005 0.0050 -0.0009 0.0077
1/1/2010-12/31/2013............... 1046 0.0000 0.0006 0.0000 0.0011 0.0000 0.0014 0.0000 0.0020
2004-2013 excl. 2008-2009......... 2000 0.0000 0.0009 0.0000 0.0014 -0.0001 0.0017 -0.0001 0.0022
--------------------------------------------------------------------------------------------------------------------------------------------------------

As noted above, comments received on the waiting period were mixed
on the appropriate length of time for the initial waiting period before
first sale with mostly investors supporting \919\ an initial waiting
period of five business days and issuers mostly opposing \920\ such a
requirement. Commenters opposing five business days provided various
suggested alternatives to the proposal--ranging from two business days
prior to first sale to no waiting period at all.\921\ Some of these
commenters recommended that the length of the waiting period be
determined based on asset class or whether the issuer is a repeat
issuer.\922\ Because we believe that, regardless of the asset class or
whether the issuer is well-known, investors should have more time to
conduct their analysis before making an investment decision than was
provided previously, we are not adopting such distinctions based on
asset class or type of issuer. We also believe that given the
complexity of ABS transactions that two-business days, and especially
one-business day, would not provide investors with enough time to
conduct their due diligence.\923\ As a result, we believe that a
minimum of three business days strikes the appropriate balance of
providing investors with more time to analyze the information related
to the transaction while also minimizing issuers' exposure to changing
market conditions and giving them flexibility in timing of ABS
issuance.
---------------------------------------------------------------------------

\919\ See footnote 885.
\920\ See footnote 889.
\921\ See footnotes 890, 891, and 892.
\922\ See footnote 893.
\923\ Even though most ABS offerings are structured as shelf
offerings, each takedown off a shelf registration statement is more
akin to an IPO given that each ABS offering consists of new assets
and a new structure, which requires investors to conduct their
investment analysis anew to make an informed investment decision.
---------------------------------------------------------------------------

Finally, while we have observed that post-crisis ABS issuers have
provided investors with additional time, we are concerned that market
practice could change in a heated market with many issuers possibly
reverting to the practice of providing investors with insufficient time
and causing investors to place undue reliance on ratings. Because of
this concern and our belief that investors should conduct their own due
diligence rather than unduly rely on ratings, we are mandating a
waiting period of at least three-business days as part of our
rules.\924\ We are persuaded by commenters that neither a new
preliminary prospectus nor a restart of the waiting period is necessary
for material changes because, in most cases, a material change can be
easily identified and reviewed and therefore may not take an investor
as long to review compared to the first review of the preliminary
prospectus.\925\ The final rule will require that the issuer disclose
any material changes in a supplement to the preliminary prospectus that
must be filed with the Commission at least 48 hours before the date and
time of the first sale.\926\ The supplement must

[[Page 57264]]

provide a description of how the information in the initial preliminary
prospectus has changed so that the changes are apparent to investors.
---------------------------------------------------------------------------

\924\ See letter from ICI I (noting that although they support
an initial five-business day waiting period, should the Commission
decide to reduce the waiting period, that investors should have not
less than three business days to evaluate an ABS shelf offering).
\925\ See, e.g., letters from ABA I, AmeriCredit, ASF I (issuers
and investors), SIFMA I, VABSS I, and Wells Fargo I.
\926\ The changes must be filed in a supplement in accordance
with Rule 424(h)(2); provided that if the material change relates to
the assets within the pool also provide the information required by
Item 1125. Whether a change is material for purposes of the
requirement will depend on the facts and circumstances. See TSC
Industries, Inc. v. Northway, Inc., 426 U.S. 438, 448-49 (1976). See
also Basic v. Levinson, 485 U.S. 224, 231 (1988).
---------------------------------------------------------------------------

This revision will help to address cost and other concerns
expressed by issuers and others about the proposed amount of waiting
time after a material change and the concerns about filing an entirely
new preliminary prospectus. It should reduce some commenters' concerns
regarding exposure to market risk and unnecessary delay. We are
concerned, however, that extensive material changes, even after an
initial waiting period for the preliminary prospectus, could be
difficult for investors to review in this shortened timeframe;
therefore, we are requiring issuers to clearly delineate in a
prospectus supplement what material information has changed and how the
information has changed from the initial preliminary prospectus. We
expect that the asset-level disclosure requirements that we are
adopting, which will provide investors with standardized machine-
readable data about the pool assets, will facilitate investors' ability
to update their investment analysis quickly. As a result, we do not
believe that investors will need as much time to review the supplement
as they will need for their initial review of the preliminary
prospectus.
(b) New Rule 430D
Prior to the rules we are adopting, the framework for ABS shelf
offerings, along with shelf offerings for other securities, was
outlined in Rule 430B of the Securities Act. Rule 430B describes the
type of information that primary shelf-eligible and automatic shelf
issuers may omit from a base prospectus in a Rule 415 offering and
include instead in a prospectus supplement, Exchange Act reports
incorporated by reference, or a post-effective amendment, and addresses
both the treatment of prospectuses filed pursuant to Rule 424(b) and
effective date triggers for securities sold off the shelf registration
statement.\927\ As discussed above, we are adopting new Rule 430D to
provide the framework for shelf offerings of asset-backed securities
pursuant to revised Rule 415(a)(1)(vii) or (xii); therefore, ABS
issuers eligible to conduct shelf offerings are no longer eligible to
use Rule 430B. By removing ABS shelf offerings from existing Rule 430B
and creating new Rule 430D, we are providing a shelf offering framework
that is appropriately tailored to ABS shelf offerings and that
incorporates the new preliminary prospectus requirement.\928\
---------------------------------------------------------------------------

\927\ See Section V.B.1.b of the Securities Offering Reform
Release.
\928\ For offerings of ABS on Form SF-1, existing Securities Act
Rule 430A would apply.
---------------------------------------------------------------------------

New Rule 430D requires that, with respect to each offering, all the
information previously omitted from the prospectus filed as part of an
effective registration statement must be filed at least three business
days in advance of the first sale of securities in the offering in
accordance with new Rule 424(h), except for the omission of information
with respect to the offering price, underwriting syndicate (including
any material relationships between the registrant and underwriters not
named therein), underwriting discounts or commissions, discounts or
commissions to dealers, amount of proceeds or other matters dependent
upon the offering price to the extent such information is unknown or
not reasonably available to the issuer pursuant to Rule 409. The
information required to be filed pursuant to Rule 424(h) includes,
among other things, information about the specific asset pool that is
backing the securities in the takedown and the structure of the
transaction. As summarized above, commenters requested that we clarify
what we mean by information with respect to the offering price. We note
that new Rule 430D largely conforms to existing Rule 430B but is
tailored to ABS shelf offerings; therefore, the type of information
permitted to be omitted from a preliminary prospectus is the same as
the information that Rule 430B permitted to be omitted from the base
prospectus in a shelf offering prior to this rulemaking.
As we stated in the 2010 ABS Proposing Release, so long as a form
of prospectus has been filed in accordance with Rule 430D,\929\ asset-
backed issuers can continue to utilize a free writing prospectus or ABS
informational and computational materials in accordance with existing
rules.\930\ Because we believe that investors should have access to a
comprehensive prospectus that contains all of the required information,
a free writing prospectus or ABS informational and computational
materials could not be used for the purpose of meeting the requirements
of new Rule 424(h). As proposed, the Rule 424(h) preliminary prospectus
filing will be deemed part of the registration statement on the earlier
of the date such form of prospectus is filed with the Commission or, if
used earlier, the date of first use.\931\ A final prospectus for ABS
shelf offerings should continue to be filed pursuant to Rule 424(b).
Consistent with Rule 430B for shelf offerings of corporate issuers,
under new Rule 430D, the filing of the final prospectus under Rule
424(b) will trigger a new effective date for the registration statement
relating to the securities to which such form of prospectus relates for
purposes of liability.
---------------------------------------------------------------------------

\929\ Rule 430D(c) provides that a form of prospectus that omits
information as provided in the rule will be a permitted prospectus.
Thus, after a registration statement is filed, offering participants
can use a form of prospectus that omits information in accordance
with the rule.
\930\ ABS informational and computational materials, as defined
in Item 1101 of Regulation AB [17 CFR 229.1101], may be used in
accordance with Securities Act Rules 167 and 426 [17 CFR 230.167 and
17 CFR 230.426]. Materials that constitute a free writing
prospectus, as defined in Securities Act Rule 405 [17 CFR 230.405]
may be used in accordance with Securities Act Rules 164 and 433 [17
CFR 230.164 and 17 CFR 230.433].
\931\ This is consistent with the existing provisions for other
preliminary prospectuses. See Rule 430B(e).
---------------------------------------------------------------------------

To reflect the requirements under new Rule 424(h) and new Rule
430D, we are also adopting, as proposed, conforming revisions to the
undertakings that are required by Item 512 of Regulation S-K \932\ in
connection with a shelf registration statement. For the most part, ABS
issuers will continue to provide the same undertakings that have been
required of ABS issuers conducting delayed shelf offerings. In light of
adopting the new Rule 424(h) preliminary prospectus, we are adopting
conforming revisions to the undertakings relating to the determination
of liability under the Securities Act as to any purchaser in the
offering. In particular, the issuer must undertake that information
that was omitted from an effective registration statement and then
later included in a Rule 424(h) preliminary prospectus shall be deemed
part of and included in the registration statement on the earlier of
the date the Rule 424(h) preliminary prospectus was filed with the
Commission, or if used earlier, the date it was first used after
effectiveness. Also, in light of the new Rule 424(h) preliminary
prospectus, under our revisions to Item 512 of Regulation S-K, an
issuer is required to undertake to file the information required to be
contained in a Rule 424(h) filing with respect to any offering of
securities.
---------------------------------------------------------------------------

\932\ 17 CFR 229.512.
---------------------------------------------------------------------------

2. Forms SF-1 and SF-3
(a) Proposed Rule
In order to delineate between ABS filers and corporate filers and,
more importantly, to tailor requirements for ABS offerings, we proposed
to add new

[[Page 57265]]

registration forms that would be used for any sales of a security that
is an asset-backed security, as defined in Item 1101 of Regulation
AB.\933\ New forms named Form SF-1 and Form SF-3 would require all the
items applicable to ABS offerings that are currently required in Form
S-1 and Form S-3 as modified by the proposals in the 2010 ABS Proposing
Release and the 2011 ABS Re-Proposal. Under the proposal, ABS offerings
that qualify for shelf registration would be registered on proposed
Form SF-3, and all other ABS offerings would be registered on Form SF-
1.\934\
---------------------------------------------------------------------------

\933\ 17 CFR 229.1101(c).
\934\ We also proposed to make conforming changes throughout our
rules to refer to the new forms. See, e.g., proposed revisions to
Securities Act Rules 167 and 190(b)(1) and the exhibit table in Item
601 of Regulation S-K.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Several commenters specifically supported adopting new Forms SF-1
and SF-3 and none opposed.\935\
---------------------------------------------------------------------------

\935\ See letters from ABA I and MBA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We are adopting new Forms SF-1 and SF-3 for ABS offerings, which
are largely based on existing Forms S-1 and S-3. ABS offerings that
qualify for shelf registration will be registered on Form SF-3, and all
other ABS offerings will be registered on Form SF-1. These new
registration forms are tailored to ABS offerings and incorporate the
offering and disclosure changes that we are adopting. The new forms
will help in providing organizational clarity to our registration forms
and their requirements.\936\ In addition to providing organizational
clarity to our forms, the new forms will facilitate easy identification
of registered ABS offerings. We acknowledge, however, that ABS issuers
may incur some costs in revising their information systems to reflect
the new forms, but we believe that such one-time costs will be
justified by the benefits of tailoring the registration system for ABS
offerings.\937\
---------------------------------------------------------------------------

\936\ For example, prior to the adoption of these new
registration forms for ABS, ABS form requirements were included with
some other form requirements that were not applicable to ABS
offerings. New Form SF-1, as proposed, does not include the
instructions as to summary prospectuses. We also note that we are
adopting, as proposed, some disclosure requirements that were
previously located in Form S-3 that are now in Form SF-3, such as
transaction requirements from Form S-3 relating to delinquent assets
and residual value for certain securities. See General Instruction
I.B.1(e)-(f) of Form SF-3. We are also retaining the existing
registrant requirement in Form S-3 relating to delinquent filings of
the depositor or an affiliate of the depositor for purposes of new
Form SF-3.
\937\ Economic analysis of the new disclosure requirements
required by the new forms, such as asset-level data, and the new
shelf eligibility requirements are discussed in the sections
describing those changes.
---------------------------------------------------------------------------

3. Shelf Eligibility for ABS Offerings
In the 2010 ABS Proposing Release, we proposed revisions to both
the registrant and the transaction shelf eligibility requirements for
ABS issuers.\938\ In particular, ABS issuers would no longer establish
shelf eligibility through an investment-grade credit rating. The
proposals were part of a broad ongoing effort to remove references to
NRSRO credit ratings from our rules in order to reduce the risk of
undue ratings reliance and eliminate the appearance of an imprimatur
that such references may create.\939\ In place of credit ratings, we
had proposed to establish four shelf eligibility criteria that would
apply to mortgage-related securities and other asset-backed securities
alike.\940\ Similar to the existing requirement that the securities
must be investment grade, the 2010 ABS Proposal for registrant and
transaction requirements were designed to provide that asset-backed
securities that are eligible for delayed shelf registrations are shelf
appropriate. As noted above, the 2011 ABS Re-Proposal for registrant
and transaction requirements for shelf did not contain a requirement
for risk retention or a requirement to include an undertaking to
provide Exchange Act reports in light of the changes mandated by the
Dodd-Frank Act.\941\
---------------------------------------------------------------------------

\938\ See the 2010 ABS Proposing Release at 23338.
\939\ See the Security Ratings Release.
\940\ The four proposed shelf criteria from the 2010 ABS
Proposing Release included: (1) A certification filed at the time of
each offering off of a shelf registration statement, or takedown, by
the chief executive officer of the depositor that the assets in the
pool have characteristics that provide a reasonable basis to believe
that they will produce, taking into account internal credit
enhancements, cash flows to service any payments on the securities
as described in the prospectus; (2) Retention by the sponsor of a
specified amount of each tranche of the securitization, net of the
sponsor's hedging (also known as ``risk retention'' or ``skin-in-
the-game''); (3) A provision in the pooling and servicing agreement
that requires the party obligated to repurchase the assets for
breach of representations and warranties to periodically furnish an
opinion of an independent third party regarding whether the
obligated party acted consistently with the terms of the pooling and
servicing agreement with respect to any loans that the trustee put
back to the obligated party for violation of representations and
warranties and which were not repurchased; and (4) An undertaking by
the issuer to file Exchange Act reports so long as non-affiliates of
the depositor hold any securities that were sold in registered
transactions backed by the same pool of assets. See the 2010 ABS
Proposing Release at 23338-48.
\941\ See footnotes 876 and 877.
---------------------------------------------------------------------------

We believe the new transaction and registrant shelf eligibility
requirements being adopted will continue to allow ABS issuers to access
the market quickly by conducting delayed shelf offerings (rather than
registering each offering on Form SF-1), while imposing conditions that
we think are appropriate in light of the compressed timing and lack of
staff review inherent in the shelf offering process. These new shelf
eligibility conditions should encourage ABS issuers to design and
prepare ABS offerings with greater oversight and care and, along with
providing investors stronger enforcement mechanisms in the transaction
agreements, should incentivize issuers to provide investors with
accurate and complete information at the time of the offering. We
believe that such transactions are appropriate for public offerings off
a shelf without prior staff review.
(a) Shelf Eligibility--Transaction Requirements
The new transaction requirements for shelf offerings include:
A certification filed at the time of each offering from a
shelf registration statement, or takedown, by the chief executive
officer of the depositor concerning the disclosure contained in the
prospectus and the structure of the securitization;
A provision in the underlying transaction agreements
requiring review of the assets for compliance with the representations
and warranties following a specific level of defaults and security
holder action;
A provision in the underlying transaction agreements
requiring repurchase request dispute resolution; and
A provision in the underlying transaction agreements to
include in ongoing distribution reports on Form 10-D a request by an
investor to communicate with other investors.
In both the 2010 ABS Proposing Release and the 2011 ABS Re-
Proposing Release, we did not propose to change the other current ABS
shelf offering transaction requirements related to the amount of
delinquent assets in the asset pool and the residual values of
leases.\942\ Therefore, those transaction requirements remain unchanged
and have been moved to new Form SF-3.
---------------------------------------------------------------------------

\942\ See footnote 874.
---------------------------------------------------------------------------

(1) Certification
(a) Proposed Rule
As part of the 2010 ABS Proposing Release, we proposed to require a
certification by the depositor's chief executive officer as a criterion
for shelf eligibility.\943\ After considering the

[[Page 57266]]

comments received on the proposed certification in the 2010 ABS
Proposing Release, we re-proposed the requirement in the 2011 ABS Re-
Proposing Release. The re-proposed requirement would require the CEO or
the executive officer in charge of securitization for the depositor to
certify that:
---------------------------------------------------------------------------

\943\ In the 2010 ABS Proposing Release, we proposed that the
depositor's chief executive officer certify that to his or her
knowledge, the assets have characteristics that provide a reasonable
basis to believe they will produce, taking into account internal
credit enhancements, cash flows at times and in amounts necessary to
service payments on the securities as described in the prospectus.
Under the 2010 ABS Proposal, the chief executive officer would also
certify that he or she has reviewed the prospectus and the necessary
documents for this certification.
---------------------------------------------------------------------------

The executive officer has reviewed the prospectus and is
familiar with the structure of the securitization, including without
limitation the characteristics of the securitized assets underlying the
offering, the terms of any internal credit enhancements, and the
material terms of all contracts and other arrangements entered into to
effect the securitization;
Based on the executive officer's knowledge, the prospectus
does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading;
Based on the executive officer's knowledge, the prospectus
and other information included in the registration statement of which
it is a part, fairly present in all material respects the
characteristics of the securitized assets underlying the offering
described therein and the risks of ownership of the asset-backed
securities described therein, including all credit enhancements and all
risk factors relating to the securitized assets underlying the offering
that would affect the cash flows sufficient to service payments on the
asset-backed securities as described in the prospectus; and
Based on the executive officer's knowledge, taking into
account the characteristics of the securitized assets underlying the
offering, the structure of the securitization, including internal
credit enhancements, and any other material features of the
transaction, in each instance, as described in the prospectus, the
securitization is designed to produce, but is not guaranteed by the
certification to produce, cash flows at times and in amounts sufficient
to service expected payments on the asset-backed securities offered and
sold pursuant to the registration statement.
In the 2011 ABS Re-Proposal, we stated, as we did when we proposed
the certification for Exchange Act periodic reports, that a
certification may cause these officials to review more carefully the
disclosure, and in this case, the transaction, and to participate more
extensively in the oversight of the transaction, which is intended to
result in shelf-eligible ABS being of a higher quality than ABS
structured without such oversight.\944\
---------------------------------------------------------------------------

\944\ See the 2011 ABS Re-Proposal at 47951-52 and the 2010 ABS
Proposal at 23345. See also Certification of Disclosure in
Companies' Quarterly and Annual Reports, Release No. 34-46079 (June
14, 2002) and Concerning Implementation of the Sarbanes-Oxley Act of
2002: Hearing Before the S. Comm. on Banking, Housing, and Urban
Affairs, 108th Cong. (2003) (statement of William H. Donaldson,
Chairman of the U.S. Securities and Exchange Commission) (noting
that a consequence of ``the combination of the certification
requirements and the requirement to establish and maintain
disclosure controls and procedures has been to focus appropriate
increased senior executive attention on disclosure responsibilities
and has had a very significant impact to date in improving financial
reporting and other disclosure'').
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Comments on the certification requirement in the 2010 ABS Proposing
Release were mixed. Some commenters supported our proposed
certification by noting, among other things, that the certification
would create accountability at the highest levels of an issuer's
organization and more careful issuer review of the securitization.\945\
Other commenters generally opposed the proposed certification in the
2010 ABS Proposing Release for various reasons, including that the
certification would constitute a guarantee or would cause undue
reliance on the certification.\946\
---------------------------------------------------------------------------

\945\ See letters from CalPERS, CFA I, Mass. Atty. Gen., SIFMA I
(expressed views of investors only), and Vanguard.
\946\ See letters from ABA I, ABAASA I, ASF I, BoA I, CNH I,
CREFC I, FSR, J.P. Morgan I, MetLife I, MBA I, Sallie Mae I, SIFMA I
(expressed views of dealers and sponsors only), and Wells Fargo I.
---------------------------------------------------------------------------

In response to comments on the proposed certification, in the 2011
ABS Re-Proposing Release, we re-proposed the certification taking into
account commenters' concerns and recommendations. Comments received on
the re-proposed certification requirement were mixed. Several
commenters generally supported the re-proposed certification for
similar reasons as articulated in comments on the 2010 proposed
certification.\947\ For example, one commenter agreed with our view
that the certification may result in a more careful review of the
disclosure and transaction by the issuer, and ultimately in higher-
quality ABS eligible for shelf.\948\ Other commenters generally opposed
the re-proposed certification shelf requirement.\949\ Although the
investors of a trade association applauded the intention behind the
proposed certification requirement and concurred with us that executive
oversight of a securitization transaction is important, they also
expressed concern about the certification imposing a barrier to new ABS
issuance.\950\ Some of these commenters contended that the proposed
certification would not provide any additional benefits by noting the
existing regulatory framework for accountability and their trust in the
market's determination of the issuer's soundness.\951\
---------------------------------------------------------------------------

\947\ See letters from Better Markets, CFA II, and ICI II.
\948\ See letter from CFA II (also noting support for the
proposed requirement that an officer sign the certification, as
opposed to engaging ``an independent evaluator'').
\949\ See letters from ABA II, Bank of America Corp. dated Oct.
4, 2011 submitted in response to the 2011 ABS Re-Proposing Release
(``BoA II''), CREFC II, Kutak Rock, LLP dated Sept. 27, 2011
submitted in response to the 2011 ABS Re-Proposing Release
(``Kutak''), MBA III, SIFMA II-investors, SIFMA III-dealers and
sponsors, and Wells Fargo II.
\950\ See letter from SIFMA II-investors (noting that, as
investors, they would like nothing more than to have individual
officers stand firmly behind the product of their employers;
however, also noting that the certification requirements, as
proposed, were broad and executives would fear litigation if, in
fact, the securities failed to perform as expected).
\951\ See letters from BoA II, CREFC II, Kutak, and Sallie Mae
II.
---------------------------------------------------------------------------

Commenters provided differing views on the scope of the
certification. Some commenters believed the certification should
encompass both the structure of the transaction and the prospectus
disclosure, as proposed.\952\ One commenter, supportive of the re-
proposed certification, emphasized that the quality of an ABS offering
is fundamentally a function of whether the assets and structure are
capable of producing sufficient cash flows to service payments.\953\ On
the other hand, several commenters believed that the certification
should focus only on the disclosure in the prospectus and not on the
performance of the assets for various reasons, including the role of
the executive officers and their limited credit analysis
expertise.\954\
---------------------------------------------------------------------------

\952\ See letters from Better Markets (specifically stating that
the certification must cover expected cash flows from the offering)
and ICI II.
\953\ See letter from Better Markets.
\954\ See letters from ABA II, American Bankers Association/ABA
Securities Association dated Nov. 10, 2011 submitted in response to
the 2011 ABS Re-Proposing Release (``ABAASA II''), AFME, American
Securitization Forum dated Oct. 4, 2011 submitted in response to the
2011 ABS Re-Proposing Release (``ASF III''), CREFC II, Kutak, SIFMA
II-investors, SIFMA III-dealers and sponsors, and Wells Fargo II
(suggesting that the certification should consist only of paragraph
2).
---------------------------------------------------------------------------

Many commenters also offered alternative language or specific
changes

[[Page 57267]]

to the text of the certification to address their concerns. The
specific changes included: Using defined terms, adding materiality to
certain parts of the certification, replacing the term ``fairly
presented,'' and permitting the certifier to take into consideration
external credit enhancement. We considered these specific changes and
made revisions to the certification, which are reflected in the final
version of the certification that we are adopting. Below we discuss
these recommendations and the revisions made to each paragraph of the
certification in order to highlight how we have addressed commenters'
concerns.
(c) Final Rule and Economic Analysis of the Shelf Certification
Requirement
After taking into consideration the comments we received and
alternatives to the re-proposed certification, we are adopting as one
of the transaction requirements for shelf eligibility that a
certification about the disclosures contained in the prospectus and the
structure of the securitization be provided by the chief executive
officer of the depositor at the time of each takedown. We believe, as
discussed more fully below, that requiring the chief executive officer
to sign a certification at the time of each takedown will help to
ensure that he or she is actively involved in the oversight of the
transaction when the actual structuring occurs. We have made
significant changes to the language of the certification to address
commenters' concerns, which are described below.
The financial crisis revealed several failures of the ABS market.
Some issuers of asset-backed securities were creating securitization
transactions without considering whether the assets or the structuring
of cash flows could support the scheduled distributions due to
investors.\955\ In addition, it has been difficult to hold senior
officers of ABS issuers accountable for the failure to provide accurate
information.
---------------------------------------------------------------------------

\955\ See, e.g., Susanne Craig & Kara Scannell, Goldman Settles
Its Battle with SEC, Wall St. J., July 16, 2010, at A1 and John
Griffin and Gonzalo Maturana, ``Who Facilitated Misreporting in
Securitized Loans?,'' working paper, 2013 (for evidence that
underwriters were aware of some types of asset quality
misrepresentation by loan originators, but nevertheless facilitated
issuance of RMBS backed by such assets).
---------------------------------------------------------------------------

At the time of filing a shelf registration statement, the chief
executive officer of the depositor, as well as the depositor's other
principal officers, are required to sign the registration statement and
are liable under Securities Act Section 11 for material misstatements
or omissions in the registration statement, subject to a due diligence
defense. As a result, signers of a registration statement are expected
to satisfy themselves about the accuracy of disclosure at the time of
effectiveness. The disclosure at the time of effectiveness of the shelf
registration statement does not typically include transaction specific
information because the shelf registration process permits a separation
between the time of effectiveness and the time securities are offered
in a takedown. Shelf takedowns sometimes occur long after the
effectiveness of the registration statement, and the signers of a
registration statement are not required to sign a prospectus supplement
for a takedown. Thus, the process that an officer signing the
registration statement would undertake at the time of shelf
effectiveness might not necessarily be followed at the time of a
takedown. At the time of a takedown, some of these officers may not
have carefully reviewed the prospectus disclosures for the accuracy of
the disclosures of the pool assets, cash flows, and other transaction
features. We believe that investors' willingness to participate in ABS
offerings may have suffered, in part, because of a belief by investors
that sufficient attention may not have been devoted to the preparation
of the disclosures in prospectuses, especially in asset classes
characterized by the largest losses and due diligence failures.
Prior to today, a certification by the chief executive officer of
the depositor has not been a requirement at the time of registered
offerings of ABS. As part of the Sarbanes-Oxley Act (``SOX'') enacted
in 2002, CEOs of operating companies are required to certify to the
accuracy of the financial statements of their companies.\956\ Those SOX
certifications are filed with their periodic reports and then
incorporated by reference into their shelf registration statements. The
same does not apply to ABS. The SOX certifications that are provided by
ABS issuers are limited to the disclosures regarding periodic
distributions and servicing of the underlying assets since ABS issuers
do not provide financial statements. Further, the information in
periodic reports relates to an individual ABS transaction, and
therefore in most cases, periodic reports of one ABS offering would be
unrelated to future offerings of ABS off the same shelf. Thus, the
periodic reports of an ABS issuer are not typically incorporated into
the shelf registration statement.
---------------------------------------------------------------------------

\956\ Pub. L. 107-204, Section 302, 116 Stat. 745 (2002).
---------------------------------------------------------------------------

We believe, therefore, that because of the market failures
described above and where the depositor is a limited purpose entity
created by the sponsor for a particular securitization program, it is
appropriate to condition shelf eligibility on a certification
requirement that should result in a review of the disclosure at the
time of a takedown similar to what would occur if the offering were
being conducted at the time of effectiveness of the initial
registration statement. As noted above, the shelf requirements and
practices under the existing regulatory structure were not sufficient
to address the failures in the market to provide accurate and full
information to investors. An ABS offering most resembles an IPO,\957\
which under our rules would not be eligible for shelf registration. The
principal executive officer signs the registration statement for an
IPO, but no similar process is involved at the time of an offering of
ABS off a shelf registration statement. Corporate issuers that are
eligible for shelf registration file periodic reports that are
certified by their principal executive and financial officers and, for
Section 11 purposes, the filing of the annual report on Form 10-K is
considered an amendment to a shelf registration statement with a new
effective date. We believe that requiring the certification with each
takedown will put ABS issuers on a similar footing in that this
requirement will provide an incentive for all CEOs to participate more
extensively in the oversight of the transaction at the time of
takedown. We acknowledge that the certification shelf transaction
requirement will impose additional costs on ABS issuers, as discussed
more fully below.
---------------------------------------------------------------------------

\957\ See footnote 923.
---------------------------------------------------------------------------

The depositor's chief executive officer will need to certify to the
characteristics of the asset pool, the payment and rights allocations,
the distribution priorities and other structural features of the
transaction. We note that because the chief executive officer could
rely, in part, on the review that is already required in order for an
issuer to comply with Securities Act Rule 193, much of the additional
costs will relate to reviewing the securitization structure to have a
reasonable basis to conclude that the expected cash flows are
sufficient to service payments or distributions in accordance with
their terms.\958\ We also

[[Page 57268]]

note that the certification requirement does not dictate that the chief
executive officer follow any particular procedures in order to make the
certification. By allowing the issuers to determine what procedures are
necessary to meet the obligations of the certification, we have
attempted to mitigate the costs associated with compliance. The new
certification, however, is intended to increase oversight by the chief
executive officer, which will likely require that issuers create or
strengthen internal controls and procedures to enable the chief
executive officer to meet the certification obligation under the new
requirement. To the extent that issuers already regularly monitor and
evaluate their policies and procedures, their incremental costs will be
lower than those issuers with less robust controls and procedures.
Because the size and scope of these internal systems is likely to vary
among issuers, it is difficult for us to provide an accurate cost
estimate.\959\
---------------------------------------------------------------------------

\958\ See Securities Act Rule 193 (requiring, at a minimum, that
the issuer review must be designed and effected to provide
reasonable assurances that the disclosure regarding the pool assets
in the prospectus is accurate in all material respects). In that
rulemaking, we also added Item 1111(a)(7) to Regulation AB [17 CFR
229.1111(a)(7)] to require disclosure in the prospectus regarding
the nature of the review performed by the issuer, and the findings
and conclusions of the review of the assets. See the January 2011
ABS Issuer Review Release.
\959\ The number of ABS deals by each depositor annually varies
widely. According to ABS issuance databases ABAlert and CMAlert, the
maximum annual number of ABS issued by a single depositor was 175
(Countrywide Home Loans in 2005), the maximum annual number issued
post-crisis was 15 (Citibank in 2013), and, in the real estate
sector, 14 (Redwood Trust in 2013), the median is 2 deals per year
per depositor both pre- and post-crisis.
---------------------------------------------------------------------------

The final rules may also affect competition in the asset-backed
securities market. For example, the requirement that the chief
executive officer provide a certification concerning the disclosures
contained in the prospectus and the structure of the securitization is
based on the intent that the certification will strengthen oversight
over the transaction. Prior to today, a certification by the chief
executive officer has not been a requirement of public offerings of
ABS. Just as every issuer in an IPO must go through a process to
satisfy itself with the disclosure in a prospectus, ABS issuers must
institute controls in order to provide the certification. The burden of
the certification requirements will likely fall disproportionately on
smaller-sized sponsors to the extent that there are direct fixed (i.e.,
non-scalable) costs related to administrative and legal expenses. This
could ultimately result in smaller sponsors not registering their
offerings on shelf (by registering their ABS on Form SF-1 instead),
offering them through unregistered offerings, or quitting the
securitization markets altogether, thereby reducing competition.\960\
---------------------------------------------------------------------------

\960\ We considered academic studies that examined the overall
impact of the SOX requirements, which included officer certification
as one element, for information about the possible differential
impact of a certification requirement on differently-sized sponsors.
Because the SOX requirements apply primarily to operating companies
and include the internal control report requirement and the
auditor's attestation of the report in addition to officer
certification, we do not believe these studies provide a direct
comparison for assessing the impact of the certification alone. For
a general discussion of costs related to these requirements under
the Sarbanes-Oxley Act, see, e.g., Office of Economic Analysis,
Study of the Sarbanes-Oxley Act of 2002 Section 404 Internal Control
over Financial Reporting Requirements (2009), available at http://www.sec.gov/news/studies/2009/sox-404_study.pdf (finding
that the start-up costs related to SOX Section 404 compliance and
the internal control report requirement weighed proportionally more
on smaller companies, but dissipated over time and noting that 79%
of executives surveyed acknowledged that compliance had a positive
impact on the quality of their internal control structure); Cindy R.
Alexander, Scott W. Bauguess, Gennaro Bernile, Yoon-Ho Alex Lee, &
Jennifer Marietta-Westberg, Economic Effects of SOX Section 404
Compliance: A Corporate Insider Perspective, 56 J. Acct. & Econ. 267
(2013) (finding that corporate executives perceived significant
benefits from compliance, particularly for larger companies); Ehud
Kamar, Pinar Karaca-Mandic & Eric Talley, Sarbanes-Oxley's Effects
on Small Firms: What is the Evidence?, in In the Name of
Entrepreneurship? The Logic and Effects of Special Regulatory
Treatment for Small Business 143 (Susan M. Gates & Kristin J.
Leuschner, eds., Kauffman-RAND Inst. for Entrepreneurship Pub. Pol'y
2007) (discussing the impact of the entire Sarbanes-Oxley Act, not
only the CEO certification requirement); Ellen Engel, Rachel M.
Hayes & Xue Wang, The Sarbanes-Oxley Act and Firms' Going Private
Decisions, J. Acct. & Econ. (2007) (finding that the frequency of
going-private transactions increased after the passage of SOX, that
SOX compliance costs were more burdensome for smaller and less
liquid firms, and that small firms with highly concentrated
ownership structures had higher going-private announcement returns);
and Peter Iliev, The Effect of SOX Section 404: Costs, Earnings
Quality and Stock Prices, J. Fin. (2010) (finding that among small
companies, SOX compliance reduced the market value of those that had
to comply with Section 404 relative to those that did not because
they were under the $75 million compliance threshold).
---------------------------------------------------------------------------

As noted above, commenters expressed concern that the certification
could be interpreted as a guarantee of the future performance of the
assets underlying the ABS. In an attempt to mitigate these costs and
taking into account commenters' suggestions, we have revised the
certification language to reflect that it is a statement of what is
known by the certifier at the time of the offering and that he or she
has a reasonable basis to conclude that the securitization is
structured to produce, but the certification is not a guarantee that it
will produce, expected cash flows at times and in amounts to service
scheduled payments of interest and the ultimate repayment of principal
on the securities (or other scheduled or required distributions on the
securities, however denominated) in accordance with their terms as
described in the prospectus.\961\ In addition, to address some
commenters' concerns about increased certifier liability, which would
in turn increase costs, the final certification includes a new
paragraph that clarifies that the certifier has any and all defenses
available under the securities laws.\962\
---------------------------------------------------------------------------

\961\ See, e.g., letters from AFME, J.P. Morgan Chase & Co.
dated Oct. 4, 2010 submitted in response to the 2010 ABS Proposing
Release (``J.P. Morgan II''), SIFMA III-dealers and sponsors, and
Wells Fargo II.
\962\ See, e.g., letters from ABA II, ABAASA II, ASF V, and J.P.
Morgan II.
---------------------------------------------------------------------------

When deciding whether to conduct a shelf offering, an issuer may
consider the review and due diligence costs, the liability
implications, and the reputational consequences to the chief executive
officer of signing the certification. We believe that for
securitizations of low-risk pool assets, simple structures, or
structures used previously that have performed well in the past,
issuers likely will conclude that the due diligence, liability, and
reputation costs will be relatively low. For such securitizations these
costs will likely be justified by the benefits of quick access to the
capital markets, and these securitizations will continue to be offered
off a shelf registration statement. On the other hand, for
securitizations of high-risk assets and complex cash-flow structures,
the expected costs of shelf offerings may increase. Issuers may choose
not to use shelf registration because the chief executive officer may
need to dedicate additional time to review the pool assets and the
securitization structure in order to provide the assurances included in
the certification. In addition, for such securitizations, the potential
litigation risk to the chief executive officer may be higher, even when
prudent measures are employed to structure an offering, thus further
increasing the costs of shelf registration.
We also acknowledge a commenter's concern that certification is not
a requirement for any other debt or equity offering and another
commenter's opinion that the certification requirement will impose a
barrier to new ABS issuance.\963\ We note, however, unlike other
offerings, ABS issuers can go directly to shelf without any reporting
and operating experience for the trust or any size requirement designed
to be a proxy for market following.\964\ We also note that the

[[Page 57269]]

principal executive and financial officers certify the Exchange Act
reports that are incorporated by reference into a shelf prospectus of a
corporate issuer. The certification requirement is not intended to be a
barrier to new issuance of ABS since the certification is not a
condition for selling or registering ABS as they may be offered in
unregistered transactions or registered on new Form SF-1. The
certification requirement, along with the other shelf transaction
requirements, should encourage ABS issuers to design and prepare ABS
offerings with greater oversight and care and should incentivize
issuers to provide investors with accurate and complete information at
the time of the offering. It is these transactions that are appropriate
to be offered to the public off a shelf without prior staff review. For
these reasons, we are not limiting the certification to disclosure
alone as suggested by some commenters, but we have taken into account
those commenters' concerns in developing the text of the final
certification.
---------------------------------------------------------------------------

\963\ See letters from Kutak and SIFMA II-investors.
\964\ We further note that we have replaced the investment-grade
rating shelf criterion for non-convertible securities with
alternative criteria that serve as proxies for market following. See
the Security Ratings Release.
---------------------------------------------------------------------------

Other financial regulators, including foreign counterparts, have
adopted similar rules designed to enhance accountability for the
transaction structure. For example, the European Union adopted
requirements that ABS issuers disclose in each prospectus that the
securitized assets backing the issue have characteristics that
demonstrate a capacity to produce funds to service any payments due and
payable on the securities.\965\ Although we considered adopting an
issuer disclosure requirement, we believe that requiring the chief
executive officer to provide a certification is a stronger approach and
more appropriate for purposes of determining shelf eligibility.
---------------------------------------------------------------------------

\965\ Annex VIII, Disclosure Requirements for Asset-Backed
Securities Additional Building Block, Section 2.1 (European
Commission Regulation (EC) No. 809/2004 (Apr. 29, 2004). See also
the North American Securities Administrators Association's
(``NASAA'') guidelines for registration of asset-backed securities,
in which sponsors are required to demonstrate that for securities
without an investment-grade rating, based on eligibility criteria or
specifically identified assets, the eligible assets being pooled
will generate sufficient cash flow to make all scheduled payments on
the asset-backed securities after taking certain allowed expenses
into consideration. The guidelines are available at http://www.nasaa.org/.
---------------------------------------------------------------------------

Therefore, while we recognize that the new shelf certification
requirement introduces new costs to issuers, we believe that its net
effect on capital formation in the ABS markets would be positive. The
certification will help to ensure that the chief executive officer of
the depositor is actively involved in the oversight of the transaction,
and, as discussed above, along with the other shelf transaction
requirements, it should encourage ABS issuers to design and prepare ABS
offerings with greater oversight and care and should incentivize
issuers to provide investors with accurate and complete information at
the time of the offering. As a result, we believe that the
certification may also improve investor perceptions about the accuracy
and completeness of the disclosures, which may, in turn, help restore
investors' willingness to invest and participate in the ABS markets.
The impact of certification requirements in other contexts--in
particular, certification requirements under the Sarbanes-Oxley Act--
provides information about the potential consequences of certification
in the securitization market.\966\ Several academic studies found that
the overall effect on issuer's capitalization and on measures of market
efficiency has been estimated to be either neutral \967\ or
positive,\968\ suggesting that many investors perceived that the
benefits of SOX certification outweighed the costs. We believe there
will be potentially similar benefits for capital formation and market
efficiency resulting from the new shelf certification. The final
certification consists of five paragraphs.\969\ We discuss each one in
order below.
---------------------------------------------------------------------------

\966\ We note that there are some differences between the SOX
certification requirements and the certification requirements in the
rule we are adopting. First, the burdens are different, as SOX
mandates that a CEO sign certifications that require a sizeable
commitment of resources, whereas the rule we are adopting may
require hundreds of ABS deals to be certified each year (see
footnote 959 for the estimates of annual certification burden per
depositor) but with a significantly lower burden for each
certification. Second, the SOX CEO certification carries both civil
and criminal penalties for false certification, and, thus, due in
part to the availability of criminal penalties, likely imposes
higher litigation costs for certifying officers and issuing
corporations than the new shelf certification.
\967\ See Utpal Bhattacharya et al., Is CEO Certification of
Earnings Numbers Value-Relevant?, 14 J. Empirical Fin., 611 (2007)
and Brett R. Wilkinson & Curtis E. Clements, Corporate Governance
Mechanisms and the Early-Filing of CEO Certification, 25 J. Acct. &
Pub. Pol'y, 121 (2006). These papers examined the market reaction to
early filing of CEO certifications that the Commission required in
advance of the passage of SOX using event-study methodology and
found no reaction to early filing for the market as a whole. The
Battacharya et al. study also found that certification had a neutral
effect on returns, volatility of returns, and volume of trade not
only for early certifiers around their certification date, but for
the non-certifiers as well.
\968\ See Hsihui Chang et al., CEOs'/CFOs' Swearing by the
Numbers: Does It Impact Share Price of the Firm?, 81 Acct. Rev. 1
(2006) (finding also that certifying firms benefited from a
significant decline in information asymmetry, as measured by bid-ask
spread, after certification) and Beverly Hirtle, Stock Market
Reaction to Financial Statement Certification by Bank Holding
Company CEOs, 38 J. Money Credit and Banking, 1263 (2006) (finding a
positive market reaction to certification requirements among bank
holding companies, given the inherent opacity in the banking system,
with the certification providing valuable information to investors).
Because we are requiring new asset-level disclosure to address
asymmetric information in addition to the shelf certification, we
recognize that the results from these studies may not provide a
fully comparable basis for the potential impact of requiring
certification for asset-backed securities.
\969\ Consistent with other certifications, the language of the
certification must not be revised in providing the required
certification. See the 2004 ABS Adopting Release at 1570.
---------------------------------------------------------------------------

(i) Paragraph One
The first paragraph of the final certification is substantially
similar to the re-proposed text, with some modifications made in
response to comments. The chief executive officer must make the
following statement:

I have reviewed the prospectus relating to [title of all
securities, the offer and sale of which are registered] (the
``securities'') and am familiar with, in all material respects, the
following: The characteristics of the securitized assets underlying
the offering (the ``securitized assets''), the structure of the
securitization, and all material underlying transaction agreements
as described in the prospectus;

As proposed, the certifier is required to certify that he or she
has reviewed the prospectus and the necessary documents to make the
certification. We believe that the chief executive officer should be
sufficiently involved in overseeing the transaction and should review
the prospectus and the documents necessary to make the certification.
Several commenters suggested that we clarify that the chief executive
officer may rely on senior officers under his or her supervision that
are more familiar and involved with the structuring of the transaction
in order to more accurately reflect the team-oriented nature of the
transaction.\970\ We understand that a principal officer of the
depositor may rely on the work of other parties, thus we are not
requiring that the chief executive officer actually structure the
transaction. We continue to believe, however, that the chief executive
officer should provide appropriate oversight so that he or she is able
to make the certification. Furthermore, the text of this certification
in this respect is consistent with the text of other certifications,
which do not specifically state that the certifier relied on the work
of others.\971\
---------------------------------------------------------------------------

\970\ See letters from ABA II, ABAASA II, ASF V, BoA II, and
Wells Fargo II.
\971\ See, e.g., the 2004 ABS Adopting Release at 1569 (amending
Item 601 of Regulation S-K to add specific form and content of the
required ABS Section 302 certification to the exhibit filing
requirements).

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[[Page 57270]]

At the suggestion of commenters, we are adding defined terms for
``securities'' and ``securitized assets'' for purposes of the
certification and incorporating those defined terms throughout the
remainder of the certification to ease readability.\972\ In the final
rule, the term ``securities'' refers to all of the securities that are
offered and sold with the related prospectus. The term ``securitized
assets'' refers to the assets underlying the securities that are being
offered.
---------------------------------------------------------------------------

\972\ See letters from ABA II, ABAASA II, ASF V, CREFC II, and
J.P. Morgan II.
---------------------------------------------------------------------------

Commenters also requested that the paragraph be revised to make it
more explicit that the certifier is responsible for knowing material
aspects of the assets and the material underlying transaction
agreements.\973\ Commenters argued that ``material'' is consistent with
customary disclosure principles, including Regulation AB, and therefore
provides consistency.\974\ Additionally, commenters explained that the
contracts for the transaction and the documents for each underlying
asset are extensive and that the certifying officer should not be
expected to be familiar with all of the terms in these documents.\975\
We have revised the first paragraph to clarify that the certifier is
speaking of material facts by inserting ``in all material respects.''
We have also used this phrase at the beginning of paragraphs three and
four to address similar concerns by commenters.
---------------------------------------------------------------------------

\973\ See letters from ABA II, ABAASA II, AFME, ASF V, BoA II,
CREFC II, J.P. Morgan II, SIFMA III-dealers and sponsors, and Wells
Fargo II.
\974\ See, e.g., letter from ABA II.
\975\ See, e.g., letter from Wells Fargo II.
---------------------------------------------------------------------------

We have deleted ``including without limitation'' in response to
commenters' suggestions that this language made the scope of the
certification unclear.\976\ In addition, some commenters requested that
we add ``described therein'' following ``am familiar with the structure
of the securitization'' to clarify that the certification is based on
the certifier's review of the prospectus.\977\ The final text does not
incorporate this suggestion because we do not believe the chief
executive officer's review should necessarily be based solely on the
review of the prospectus, which we discuss in more detail below.
---------------------------------------------------------------------------

\976\ See letters from ABA II, ABAASA II, ASF V, BoA II, CREFC
II, and J.P. Morgan II.
\977\ See letters from ABA II, ABAASA II, ASF V, CREFC II, and
J.P. Morgan II.
---------------------------------------------------------------------------

Finally, under the re-proposed rule, the certifying officer could
take into account only internal credit enhancements in making the
certification.\978\ Commenters, however, believed that the certifier
should be permitted to take into consideration external credit
enhancement in providing the certification. One commenter noted, for
example, that investors in ABS with external credit enhancement rely on
and give credit for external credit enhancement just as they do for
internal credit enhancement.\979\ Another commenter noted that external
credit enhancements can play an integral role in maximizing the
likelihood that securities will receive payment.\980\ Further, one
issuer noted that it could not provide the certification unless it is
able to take into account external credit enhancements.\981\
---------------------------------------------------------------------------

\978\ See footnotes 33 and 55 in the 2011 ABS Re-Proposal. In
the 2011 ABS Re-Proposing Release, we noted that internal credit
enhancement would include subordination provisions,
overcollateralization, reserve accounts, cash collateral accounts or
spread accounts, as well as guarantees applicable to an underlying
loan, whereas, external credit enhancement would include third-party
insurance to reimburse losses on the pool assets or the securities.
\979\ See letter from SIFMA III-dealers and sponsors.
\980\ See letter from ASF V.
\981\ See letter from Sallie Mae II (noting that it could not
certify student loan transactions without taking into account
related government guarantees). In the 2011 ABS Re-Proposing
Release, we noted internal credit enhancement would include
guarantees applicable to the underlying loans.
---------------------------------------------------------------------------

In light of comments, under the final rule, the certifier is
permitted to consider internal and external credit enhancement in
providing the certification. We continue to believe, however, that the
primary focus of the certification should be on the underlying assets
rather than on any credit enhancement since, consistent with the
Regulation AB definition of asset-backed security, the cash flows from
the pool assets should primarily service distributions on the ABS.\982\
We also note that we decided not to list ``credit enhancement''
specifically in the final certification because we believe that the
phrase ``the structure of the securitization'' encompasses, among other
things, credit enhancement and cash flows.
---------------------------------------------------------------------------

\982\ See Regulation AB definition of asset-backed security in
Item 1101(c) of Regulation AB.
---------------------------------------------------------------------------

(ii) Paragraph Two
We did not receive any comments suggesting specific changes to
paragraph two and we continue to believe that it is appropriate to
expect signers of a registration statement to satisfy themselves about
the accuracy of the disclosure at the time of each takedown. The chief
executive officer must make the following statement:

Based on my knowledge, the prospectus does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading;
(iii) Paragraph Three
The third paragraph of the final certification is substantially
similar to the proposed text, with some modifications. The chief
executive officer must make the following statement:

Based on my knowledge, the prospectus and other information
included in the registration statement of which it is a part fairly
present, in all material respects, the characteristics of the
securitized assets, the structure of the securitization and the
risks of ownership of the securities, including the risks relating
to the securitized assets that would affect the cash flows available
to service payments or distributions on the securities in accordance
with their terms; and

Paragraph three requires a certification that the disclosures in
the prospectus and other information in the registration statement are
fairly presented.\983\ Several commenters requested that we delete the
term ``fairly present'' and suggested that we use alternative
language.\984\ Some commenters noted that the term ``fairly presents''
is customarily used by experts primarily in certifying the accuracy of
the financial information.\985\ For example, one commenter stated that
because the certifying officer is not certifying to the accuracy of the
financial information, but rather to the adequacy of the disclosure in
the prospectus regarding the securitization it would be more
appropriate to use a different term.\986\ Commenters differed as to an
appropriate replacement. Several commenters recommended ``describe,''
\987\ and several other commenters suggested ``disclose.'' \988\ The
term ``fairly presents'' is used in our regulations with respect to
financial information; however, we do not intend for the term to have
the same meaning in this context. We are retaining the phrase in the
certification because we

[[Page 57271]]

believe it articulates the appropriate standard for the certification.
The term ``fairly presents,'' as adopted, will require the CEO to
consider whether the disclosure is tailored to the risks of the
particular offering and presented in a clear, non-misleading fashion.
Commenters also requested that we insert the term ``material'' in
certain places in the paragraph similar to their requests in connection
with paragraph one.\989\ We are not adding the term ``material'' in
multiple parts of the paragraph as requested because we believe that
the phrase ``in all material respects'' sufficiently captures
materiality across all the statements in the paragraph and therefore
use of the term ``material'' elsewhere in the paragraph would be
redundant.
---------------------------------------------------------------------------

\983\ For the same reasons articulated in our discussion of
paragraph one, we have also added ``structure of the
securitization'' here in paragraph three and in paragraph four.
\984\ See letters from ABA II, ABAASA II, AFME, ASF V, BoA II,
CREFC II, J.P. Morgan II, SIFMA III-dealers and sponsors, and Wells
Fargo II.
\985\ See letters from ABA II, ASF V, J.P. Morgan II, SIFMA III-
dealers and sponsors, and Wells Fargo II.
\986\ See, e.g., letter from ABA II.
\987\ See letters from ABAASA II, ASF V, BoA II, J.P. Morgan II,
and Wells Fargo II.
\988\ See letters from ABA II (recommending the term ``disclose
fairly''), AFME, CREFC II, and SIFMA III-dealers and sponsors.
\989\ See, e.g., letters from ABA II, AFME, BoA II, SIFMA III-
dealers and sponsors, and Wells Fargo II (recommending adding
``material'' before ``credit enhancements''). See also letters from
BoA II and Wells Fargo II (proposing to add ``material'' before
``characteristics of the securitized assets'').
---------------------------------------------------------------------------

In addition, paragraph three, as re-proposed, would have required
that the certifier consider the risk factors relating to the
securitized assets underlying the offering that would affect the cash
flows sufficient to service payments on the asset-backed securities as
described in the prospectus. Commenters requested that we revise our
reference to ``risk factors'' \990\ so that the certifier considers
instead ``all material risks'' because disclosure of risks related to
the securitized assets is not limited to the information included under
the risk factors section of the prospectus but also includes
information in other parts of the prospectus, such as historical static
pool ``loss'' data.\991\ One commenter recommended that instead of
referring to ``all risk factors,'' as proposed, that the certification
be limited to only the most significant risks because a certifying
officer cannot reasonably anticipate that an insignificant risk might
cause significant losses at the time the officer signs the
certification.\992\ The same commenter noted that the existing standard
for risk factor disclosure requires ``a discussion of the most
significant risk factors that make the offering speculative or risky''
and expressed concern that the language in paragraph three could lead
to increased disclosure of risk factors that are not significant to the
ABS transaction.\993\
---------------------------------------------------------------------------

\990\ See letters from ABA II, ABAASA II, and ASF V. See also
letter from CREFC II (recommending a slightly different
qualification, namely that ``all risks relating to the Assets that
would materially and adversely affect the cash flows'') (emphasis
added).
\991\ See, e.g., letter from ABA II.
\992\ See letter from BoA II.
\993\ See id. See also Item 1103(b) of Regulation AB and Item
503(c) of Regulation S-K.
---------------------------------------------------------------------------

We have considered the comments received and are revising the
language of the certification to replace the phrase ``all risk
factors'' with ``the risks relating to the securitized assets that
would affect the cash flows available to service payments or
distributions on the securities in accordance with their terms.'' We
agree with commenters that the disclosure related to the risks of the
securitized assets is not limited to only the risk factor section of
the prospectus and may be appropriately presented in other parts of the
prospectus. Some commenters also believed that the certification with
regard to material risks related to the securitized assets should be
further qualified to include only those that would ``adversely'' affect
the cash flows ``available'' to service payments on the ABS ``in
accordance with their terms.'' \994\ We are not inserting the word
``adversely'' because we believe that the concept is incorporated in
the term ``risk'' and therefore would be redundant to include. We are,
however, revising the phrase ``cash flows sufficient'' to ``cash flows
available'' in order to more accurately reflect the nature of pass-
through certificates and junior tranches of registered ABS. We are also
adding the phrase ``in accordance with their terms'' as suggested,
because we believe it better describes the certification that we are
requiring by paragraph three (i.e., fair presentation of the risks
relating to the securitized assets that would affect the cash flows
available to service payments or distributions on the securities in
accordance with their terms).\995\
---------------------------------------------------------------------------

\994\ See letters from ASF V and J.P. Morgan II.
\995\ We are also making revisions to enhance readability by
listing each element of the certification in paragraph three, which
eliminates redundancies from the proposed language, as phrases in
the proposed language such as ``described therein'' and ``as
described in the prospectus'' are no longer necessary to include.
See letters from ABAASA II, ASF V, BoA II, J.P. Morgan II, and Wells
Fargo II (noting that it was unclear how the language after the
third comma modifies the prior portion of the sentence and also
whether this language is intended to extend the certification beyond
the disclosure to the performance of the transaction and
recommending that ``including all material credit enhancements''
should be moved to follow ``the material characteristics of the
securitized assets underlying the offering described therein'').
---------------------------------------------------------------------------

(iv) Paragraph Four
Paragraph four of the final certification has also been modified.
As described below, we have also added a fifth paragraph to address
concerns related to paragraph four. The chief executive officer must
make the following statement:

Based on my knowledge, taking into account all material aspects
of the characteristics of the securitized assets, the structure of
the securitization, and the related risks as described in the
prospectus, there is a reasonable basis to conclude that the
securitization is structured to produce, but is not guaranteed by
this certification to produce, expected cash flows at times and in
amounts to service scheduled payments of interest and the ultimate
repayment of principal on the securities (or other scheduled or
required distributions on the securities, however denominated) in
accordance with their terms as described in the prospectus.

We have made revisions to this paragraph similar to revisions made
to paragraph one. First, commenters suggested that we add the word
``material'' because, in general, the paragraph should relate only to
material information about the securitized assets, the structure of the
securitization (as discussed below, which includes any credit
enhancement) and the related risks of the offering.\996\ We are adding
the phrase ``all material aspects of'' to paragraph four. Second,
commenters asked that we remove the limitation that the certifier
consider only internal credit enhancement in providing the
certification.\997\ In response to comments, we have revised paragraph
four to remove this limitation for the same reasons articulated in our
discussion of paragraph one.\998\
---------------------------------------------------------------------------

\996\ See letters from ABA II, ABAASA II, ASF V, BoA II, CREFC
II, J.P. Morgan II, and Wells Fargo II.
\997\ Several commenters contended that the certifying officer
must be permitted to take into account the external credit
enhancements given that they can play a critical role in certain
transactions. See letters from ABAASA II, ASF V, AFME, and SIFMA
III-dealers and sponsors. Another commenter requested that the
Commission clarify that external credit enhancement that is
ultimately backed by the full faith and credit of the United States
government may be considered by the certifying officer. See letter
from Sallie Mae II. This commenter explained that a certifying
officer cannot certify that ``a transaction backed by FFELP loans is
designed to produce cash flows at times and in amounts sufficient to
service expected payments on the ABS'' unless it is able to take
into account external credit enhancement. To address this issue,
this commenter recommended that the Commission either exempt ABS
transactions backed by FFELP loans from the proposed certification
requirement or clarify that external credit enhancements from
sources backed by the full faith and credit of the United States
government may be considered by the certifying officer.
\998\ As we emphasized in connection with paragraph one, while
we are permitting the certifier to consider credit enhancement in
providing the certification, the primary focus in providing the
certification should be on the assets, not the credit enhancement.
We note that we have also removed the phrase ``any other material
features of the transaction'' from paragraph four since we also
believe that ``structure of the securitization'' encompasses such
features.

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

[[Page 57272]]

We also received several detailed comments on the remaining text of
paragraph four. Some commenters suggested that we replace the word
``designed'' with ``structured'' when certifying to the cash flows that
will service payments on the securities.\999\ Commenters explained that
the term ``structured'' is better understood in the context of these
transactions and also reflects the nature of these securitizations as a
type of structured finance.\1000\ Several commenters recommended adding
that the securitization is structured ``to be expected to produce''
rather than just ``structured to produce'' for further clarification
that paragraph four does not constitute a guarantee.\1001\ We are
revising the final certification to use the term ``structured'' as
requested by some commenters; however, we note that we believe the term
``structured'' to encompass more than tranching to include, among other
things, selection of the assets, credit enhancement, and other
structural features designed to enhance credit and facilitate timely
payment of monies due on the pool assets to security holders.\1002\ We
are not inserting the term ``expected'' before ``to produce'' because
we believe that the concept of expected is implicit in the phrase
``structured to produce'' and that the phrase ``is not guaranteed by
this certification to produce'' adequately addresses some commenters'
concern about paragraph four constituting a guarantee.
---------------------------------------------------------------------------

\999\ See letters from ABA II, ABAASA II, AFME, ASF V, BoA II,
CREFC II, J.P. Morgan II, SIFMA III-dealers and sponsors, and Wells
Fargo II.
\1000\ See, e.g., letter from ABA II.
\1001\ See letters from J.P. Morgan II and Wells Fargo II.
\1002\ See, e.g., Item 1113 of Regulation AB (describing the
disclosure required for the structure of transaction).
---------------------------------------------------------------------------

Many commenters stressed that they were unsure what the ``expected
payments'' would be with respect to any particular securitization, such
as with pass-through certificates or more junior tranches of registered
ABS. With respect to the issue of pass-through certificates, one
commenter noted that ``no fixed principal payments are required to be
made.'' \1003\ Additionally, several commenters explained that the
proposed language failed to account for the possibility that more
junior tranches of registered ABS may bear a moderate credit risk
somewhere in between the most senior registered tranches and the most
subordinated unregistered tranches.\1004\ Several commenters
recommended deleting ``expected payment'' and inserting ``the assets
will produce cash flows at times and in amounts sufficient to service
payments on the offered securities in accordance with the terms
described in the prospectus.'' \1005\ One commenter expressed concern
that the proposed form of the certification could be interpreted to
suggest that the adverse effects of the potential risk had been negated
through structuring.\1006\ Therefore, this commenter supported
modifying the certification so that it clearly states that the risks
described in the prospectus could adversely affect the cash
flows.\1007\ Other commenters similarly noted that the certification
fails to acknowledge the Commission's intent, as stated in the 2010 ABS
Proposing Release, to qualify the certification by the disclosure in
the prospectus.\1008\
---------------------------------------------------------------------------

\1003\ See letter from ABA II (noting that many pass-through
securities ``require payment only to the extent of cash flows
actually received and available in accordance with the priority of
payments waterfall'' and also indicating that credit rating
agencies, in evaluating the likelihood of the payment on ABS
classes, typically refer to ``scheduled payments'' of interest and
``ultimate'' repayment of principal and recommended using those
terms here).
\1004\ See letters from AFME, J.P. Morgan II, and SIFMA III-
dealers and sponsors.
\1005\ See letters from AFME, J.P. Morgan II, SIFMA III-dealers
and sponsors, and Wells Fargo II.
\1006\ See letter from ABA II. See also letter from Wells Fargo
II (stating that the certification, as currently drafted, could be
interpreted to say that the certifying officer has taken into
consideration all the material information included in the
prospectus and that, notwithstanding the risks and uncertainties
described in the prospectus, the certifying officer has certified
that the securitization is designed to produce cash flows sufficient
to service the ABS).
\1007\ See letter from ABA II (recommending the following
language: ``provided that the risks described in the prospectus may
adversely affect such cash flows'').
\1008\ See letters from ABAASA II, AFME (stating that it is
important that the certification specifically state that its
conclusion takes into account any assumptions described in the
prospectus, and also that it state that cash flows may vary if and
to the extent that any of the risk factors described in the
prospectus come to pass), ASF V, and SIFMA III-dealers and sponsors.
---------------------------------------------------------------------------

To address commenters' concerns with ``expected payments,'' we have
revised paragraph four so that the certification relates to ``expected
cash flows at times and in amounts to service scheduled payments of
interest and the ultimate repayment of principal on the securities (or
other scheduled or required distributions on the securities, however
denominated) in accordance with their terms as described in the
prospectus.'' We agree with commenters that certain ABS may not be
required to produce fixed payments, as is the case with pass-through
certificates, and that using the term ``expected payments'' may have
caused confusion.\1009\ We believe the revised language provides
greater clarity as to what the chief executive officer is certifying to
and more precisely captures the varying terminology used to describe
the amounts due to investors depending upon the type of ABS
transaction.
---------------------------------------------------------------------------

\1009\ See, e.g., letter from ABA II.
---------------------------------------------------------------------------

We also recognize that characterizing the cash flows as
``sufficient'' to service the payments or distributions may have
inadvertently implied that there will always be adequate cash flows to
service such payments or distributions regardless of whether the ABS is
of a lower tranche or structured as a pass-through security. We have
deleted the term ``sufficient'' to eliminate this possible
confusion.\1010\ We believe, however, that even if fixed payments are
not required to be made, a securitization is structured with the
expectation that cash flows from the assets will provide distributions
at certain times and amounts, and accordingly we believe that
certification should reflect that expectation. We have therefore moved
``expected'' to before ``cash flows'' to clarify the requirement. We
also believe that this change addresses some commenters' concerns about
lower tranches of shelf registered ABS in that the expectation is not
so much related to payment as to how the cash flow has been structured
to allocate distributions of interest and principal.
---------------------------------------------------------------------------

\1010\ We also removed the term ``sufficient'' in paragraph
three for the same reason where we changed the language from ``the
cash flows sufficient'' to ``cash flows available.''
---------------------------------------------------------------------------

One commenter suggested inserting language to indicate that the
certifying officer's statements are his or her ``current beliefs'' and
that there may be future developments that would cause his or her
opinion to change or result in the assets not generating sufficient
cash flows.\1011\ Also, commenters stressed the importance of including
cautionary statements in the certification that identify those risks
and uncertainties as factors that could cause the actual results to
differ materially from those set forth in the certification.\1012\
Several commenters supported the Commission's language outlined in
Request for Comment No. 4 in the 2011 ABS Re-Proposal.\1013\ As we note
above,

[[Page 57273]]

the certification will be a statement of what is known by the certifier
at the time of the offering. This is made clear by the introductory
language to paragraphs three and four (``based on my knowledge'') and
therefore we have not made this change.\1014\ We are also revising the
text to insert the phrase ``a reasonable basis to conclude,'' as
suggested by some commenters to further clarify that the certification
applies to what is known at the time of securitization.\1015\ Many
commenters argued that paragraph four represents an assessment and
forecast of the future performance of the securitized assets and the
ABS, which would make it a forward-looking statement, and thus the
issuers should be entitled to protections afforded by the safe harbor
for forward-looking statements.\1016\ We do not believe that paragraph
four is protected by the statutory safe harbor for a forward-looking
statement.\1017\ We have, however, included ``related risks'' of the
securitized assets and structure as described in the prospectus to
address comments that the certifier should be allowed to take risk
disclosure into account. We also note that because the language of the
certification cannot be altered, any issues in providing the required
certification must be addressed through disclosure in the prospectus.
For example, if the prospectus describes the risk of nonpayment or
other risk that such cash flows will not be produced, then the
certifier would take those disclosures into consideration in signing
the certification.
---------------------------------------------------------------------------

\1011\ See letter from J.P. Morgan II.
\1012\ See letters from ABA II, AFME, BoA II, CREFC II, J.P.
Morgan II, SIFMA III-dealers and sponsors, and Wells Fargo II.
\1013\ See letters from ABAASA II, AFME, ASF V, and SIFMA III-
dealers and sponsors. See also the 2011 ABS Re-Proposal Release at
47954, Request for Comment No. 4 (requesting comment on whether to
allow the certification to state, among other things, that it is
only an expression of the executive officer's current belief and is
not a guarantee that those assets will generate such cash flows).
\1014\ Also note that paragraph one requires that the certifier
review the prospectus and the necessary documents regarding the
assets, transactions and disclosures.
\1015\ See letters from ABAASA II, ASF V, J.P. Morgan II (noting
that this language is also consistent with the defenses that an
officer of a registrant would have under the federal securities
laws), and Wells Fargo II.
\1016\ See letters from ABAASA II, AFME, ASF V, BoA II, CREFC
II, J.P. Morgan II, MBA III, SIFMA III-dealers and sponsors, and
Wells Fargo II.
\1017\ The statutory safe harbor for forward-looking statements
is only available to an issuer that is subject to the reporting
requirements of Section 13(a) or Section 15(d) of the Exchange Act.
The depositor for the issuing entity of an asset-backed security is
a different ``issuer'' from that same person acting as a depositor
for any other issuing entity or for purposes of that person's own
securities. See Securities Act Rule 191 [17 CFR 230.191], and
Exchange Act Rule 3b-19 [17 CFR 240.3b-19]. Therefore, at the time
of an ABS takedown, other than in the case of master trusts, the
entity acting as issuer is not subject to the reporting requirements
of Section 13(a) or Section 15(d) of the Exchange Act. See
Securities Act Section 27A (15 U.S.C. 77z-2).
---------------------------------------------------------------------------

(v) Paragraph Five
As discussed above, some commenters expressed concern over
potential increased liability with the certification. We acknowledge
that the potential litigation risk to the chief executive officer may
be higher, and we recognize that participants in securities offerings
who make statements about those offerings can face liability for their
statements, but we believe that possible additional risk to the
certifier is justified where each takedown provides investors with
offering information about the underlying assets and structure of the
securities and recent market events persuade us that these were
insufficient incentives for proper oversight over the transaction. In
this regard, we also note that the certification is tied to the
disclosure in the prospectus. For example, if the prospectus includes
disclosure that the terms of the securities do not include any
expectation (or limited expectation) that the structure will produce
cash flows sufficient to make distributions, the certifier would
nonetheless be able to sign the certification because the certification
is based, in part, on the disclosure in the prospectus. In response to
commenters' concerns about certifier liability,\1018\ we note that the
CEO can take steps to mitigate the risks of signing. In addition, the
final certification includes a fifth paragraph to further clarify that
the certifier has any and all defenses available to him or her under
the federal securities laws. The chief executive officer must make the
following statement:
---------------------------------------------------------------------------

\1018\ See letter from ASF V (requesting that the Commission
make clear that the certifying officer have any and all defenses
available under the federal securities laws as a person signing the
registration statement and providing recommended language to include
in the certification). See also letters from ABA II & J.P. Morgan II
(supporting ASF's recommended language).

The foregoing certifications are given subject to any and all
defenses available to me under the federal securities laws,
including any and all defenses available to an executive officer
that signed the registration statement of which the prospectus
referred to in this certification is part.
(vi) Signature Requirement
In the 2010 ABS Proposing Release, we had proposed that the
depositor's chief executive officer sign the certification. We
explained that the chief executive officer of the depositor is already
responsible for the disclosure as a signer of the registration
statement.\1019\ We also asked, in the 2010 ABS Proposing Release,
whether an individual in a different position should be required to
provide the certification, such as the senior officer of the depositor
in charge of securitization, in order to be consistent with other
signature requirements for ABS. In response to comments, as part of the
2011 ABS Re-Proposal, we re-proposed to allow either the chief
executive officer of the depositor or the executive officer in charge
of securitization of the depositor sign the certification.
---------------------------------------------------------------------------

\1019\ See the 2010 ABS Proposing Release at 23346.
---------------------------------------------------------------------------

We received various comments on the appropriate party to sign the
certification. One commenter supported the re-proposal to allow ``the
executive officer in charge of securitization'' to sign the
certification but suggested modifying it to require the signature of
``an executive officer in charge of the securitization.'' \1020\ This
commenter explained that it may be the case that more than one person
may satisfy the role of executive officer in charge of securitization,
and it would be appropriate to permit the executive officer with
particular knowledge of the specific securitization to sign the
certification. In response to a request for comment in the 2011 ABS Re-
Proposal regarding whether we should conform signature requirements
across forms (e.g., Form 10-K and proposed Form SF-3),\1021\ one
commenter recommended that the ``senior officer in charge of
securitization'' sign the certification,\1022\ and another suggested we
broaden the list of signers to include the principal executive officer,
the principal financial officer and controller or the principal
accounting officer of the depositor.\1023\ One commenter recommended
requiring an executive officer with a title such as ``chief transaction
officer'' if the Commission is seeking a party to assume more
responsibility for disclosure.\1024\
---------------------------------------------------------------------------

\1020\ See letter from MBA III (stressing that in the context of
CMBS it is common for more than one person to satisfy the definition
of executive officer who has worked closely with the
securitization).
\1021\ See Request for Comment No. 3 in the 2011 ABS Re-
Proposing Release. The Form 10-K [17 CFR 249.310] report for ABS
issuers must be signed either on behalf of the depositor by the
senior officer in charge of securitization of the depositor, or on
behalf of the issuing entity by the senior officer in charge of the
servicing. In addition, the certifications for ABS issuers that are
required under Section 302 of the Sarbanes-Oxley Act must be signed
either on behalf of the depositor by the senior officer in charge of
securitization of the depositor if the depositor is signing the Form
10-K report, or on behalf of the issuing entity by the senior
officer in charge of the servicing function of the servicer if the
servicer is signing the Form 10-K report.
\1022\ See letter from Sallie Mae II.
\1023\ See letter from J.P. Morgan II.
\1024\ See letter from Kutak (proposing ``chief transaction
officer'' (without defining this position) because the proposed
certification would not provide any additional oversight than what
is presently required with regard to the signers of a registration
statement).
---------------------------------------------------------------------------

Commenters also provided comments as to why an executive officer
would be

[[Page 57274]]

unable to provide the certification. For example, some commenters
argued that executive officers lack the expertise to perform the credit
analysis necessary to provide the certification.\1025\ Another
commenter recommended that, with respect to paragraph four as to any
assurance about the structure and cash flows of the securitization, the
issuer, not a principal officer, should provide the certification
because the chief executive officer may be too removed from the process
and the team approach to securitization may not leave any one person in
a position to evaluate all of the material attributes of the
securitization.\1026\
---------------------------------------------------------------------------

\1025\ See letters from AFME and SIFMA III-dealers and sponsors
(noting that executives may not be trained to perform the type of
credit analysis that would be required to give a certification and
that credit rating agencies are the more appropriate parties to
perform the credit analysis).
\1026\ See letter from ABA II.
---------------------------------------------------------------------------

Similarly, some commenters explained why an executive officer might
be unwilling to provide the certification. One commenter noted that
depositors would be unable to effectively price for the possibility of
liability under such a broad certification.\1027\ The commenter
explained that to the extent that an executive officer is willing to
sign it, he or she will likely do so only in the most conservative
circumstances, which may result in shelf-offered ABS of only the
highest quality and thus preclude shelf offerings of securities with
different credit risk and profiles. Another expressed concern that
principal officers may be discouraged from taking such positions due to
exposure to personal litigation.\1028\
---------------------------------------------------------------------------

\1027\ See letter from SIFMA III-dealers and sponsors.
\1028\ See letter from SIFMA II-investors.
---------------------------------------------------------------------------

After considering the comments, the final rule requires that the
certification be signed by the chief executive officer. We are not
adopting the suggestion that the executive officer in charge of the
securitization for the depositor sign the certification, as re-
proposed, because we are not acting at this time on the proposal to
revise the signature requirements for the registration statement. We
believe that the certification should be signed by a signatory to the
registration statement. Furthermore, we believe that having the chief
executive officer as the sole signatory is appropriate for other policy
reasons. Although we understand that the chief executive officer may
not personally undertake credit analysis and that he or she will likely
rely on the work of others to assist him or her with structuring the
transaction and preparing the certification as noted by some
commenters, we believe that the depositor's chief executive officer, as
an officer of the depositor at the highest level, should be responsible
for providing proper oversight over the transaction and thus should be
held accountable for the structuring of the transaction and for the
disclosure provided in the prospectus supplement. In that regard, we
believe, as we did when we proposed the certification for Exchange Act
periodic reports, that a certification should cause the chief executive
officer to more carefully review the disclosure, and in this case, the
transaction, and to participate more extensively in the oversight of
each transaction.\1029\
---------------------------------------------------------------------------

\1029\ See the 2011 ABS Re-Proposing Release at 47951 and the
2010 ABS Proposing Release at 23345.
---------------------------------------------------------------------------

(vii) Date of the Certification
The date of the certification, as proposed, is required to be as of
the date of the final prospectus.\1030\ One commenter supported the
proposed date because the deal structure will be final at that time and
the final deal structure is what is being addressed in the
certification.\1031\
---------------------------------------------------------------------------

\1030\ See Item 601(b)(36) of Regulation S-K [17 CFR
229.601(b)(36)]. The certification should be filed as an exhibit to
the final 424(b)(2) or (5) prospectus. See also new Item 1100(f) of
Regulation AB [17 CFR 229.1100(f)] (specifying procedures for filing
required exhibits).
\1031\ See letter from Sallie Mae II.
---------------------------------------------------------------------------

(viii) Opinion by an Independent Evaluator Alternative
In the 2011 ABS Re-Proposing Release, we also requested comments on
whether, in lieu of the requirement that the chief executive officer or
executive officer in charge of the securitization of the depositor
provide a certification, the Commission should allow an opinion to be
provided by an ``independent evaluator.'' \1032\ Several commenters
supported allowing an opinion by an ``independent evaluator'' in lieu
of the proposed certification.\1033\ One commenter believed that
allowing an opinion by an independent evaluator meeting particular
requirements would provide a more detached and objective basis for
certification.\1034\ The other commenter stressed that an independent
evaluator is particularly important in evaluating the structure of a
transaction given that structures are often the product of investment
bankers or third parties who know what securities will sell in the
market.\1035\ Relatedly, several commenters noted that a credit rating
agency is the more appropriate party to perform the credit analysis
required.\1036\
---------------------------------------------------------------------------

\1032\ See Request for Comment No. 12 in the 2011 ABS Re-
Proposing Release.
\1033\ See letters from C. Barnard (recommending independence,
experience, and related disclosure requirements related to the
independent evaluator) and Kutak (suggesting limiting information
disclosed to identification of the independent evaluator,
compensation, and affiliations and that the person not be considered
an expert).
\1034\ See letter from C. Barnard (acknowledging that such
opinion could reduce the executive oversight of the transaction
structure but emphasized that the responsibility for the
certification would still reside with the executive).
\1035\ See letter from Kutak.
\1036\ See letters from AFME and SIFMA III-dealers and sponsors
(noting that any conflict of interest inherent in the rating
agency's credit analysis would be magnified exponentially were such
analysis to be effectively required to be undertaken by an affiliate
of an issuer). Additionally, SIFMA III-dealers and sponsors was
troubled that given the Commission's express intent to reduce the
reliance on credit analysis by NRSROs, that shelf eligibility would
instead be conditioned on a credit analysis by an officer of the
depositor.
---------------------------------------------------------------------------

In contrast, one commenter noted its opposition to allowing the use
of an independent evaluator, stating that the certification, as
proposed, may result in a more careful review of the disclosure and
transaction by the issuer and ultimately higher-quality ABS in shelf
offerings.\1037\ Another commenter recommended that we not mandate the
use of an independent evaluator, explaining that it is uncertain,
especially in the RMBS market, whether there are companies willing to
serve as an independent evaluator given the possibility of increased
liability and preclusion from performing other more desirable roles in
the transaction.\1038\
---------------------------------------------------------------------------

\1037\ See letter from CFA II.
\1038\ See letter from MBA III.
---------------------------------------------------------------------------

As reflected in the comments above, an independent evaluator
alternative may provide benefits to investors and issuers. For issuers
that conduct offerings on an infrequent basis, such an alternative may
be less costly than implementing an infrastructure in order for the
chief executive officer to conduct the review required by the
certification. However, as one commenter noted with respect to RMBS,
such issuers may encounter difficulty hiring a company that is willing
to provide such services and sign the certification.\1039\ A
certification by the chief executive officer is designed to increase
internal oversight within the issuer. For investors, the independent
evaluator may be able to provide a more detached and objective opinion;
however, investors should also benefit from the enhanced internal
oversight by the issuer obtained from the CEO certification. We are
therefore not adopting the independent evaluator as

[[Page 57275]]

an alternative to providing a certification.
---------------------------------------------------------------------------

\1039\ See letter from MBA III.
---------------------------------------------------------------------------

(2) Asset Review Provision
(a) Proposed Rule
Investors have expressed concerns about the effectiveness of the
contractual provisions related to the representations and warranties
about the pool assets and the lack of responsiveness by sponsors about
potential breaches.\1040\ A significant hurdle faced by investors
seeking to enforce repurchase obligations has been that transaction
agreements typically have not included specific mechanisms to identify
breaches of representations and warranties or to resolve a question as
to whether a breach of the representations and warranties has occurred.
Further, investors have had to rely upon the trustees to enforce
repurchase covenants because the transaction agreements do not
typically contain a provision for an investor to directly make a
repurchase demand. Investors have been frustrated with this structure
and process because trustees have not enforced repurchase rights, and
investors have been unable to locate other investors in order to force
trustees to do so.\1041\ Furthermore, these contractual agreements have
frequently been ineffective because, without access to documents
relating to each pool asset, it can be difficult for the trustee, which
typically notifies the sponsor of an alleged breach, to determine
whether a representation or warranty relating to a pool asset has been
breached.\1042\ The impact of these difficulties for investors is
particularly concerning given the pervasiveness of misrepresentation
among securitized residential real estate loans in the 2000's.\1043\
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\1040\ In the underlying agreements for an asset securitization,
sponsors or originators typically make representations and
warranties about the pool assets and their origination, including
representations about the quality of the pool assets. Upon discovery
that a pool asset does not comply with the representation or
warranty, an obligated party (typically the sponsor) must repurchase
the asset or replace it with an asset that complies with the
representations and warranties. See the 2011 ABS Re-Proposal at
47956-57. See also the Section 943 Adopting Release at 4489-90.
\1041\ Typically, investor rights require a minimum percentage
of investors acting together in order to enforce the representation
and warranty provisions contained in the underlying transaction
agreements. See Housing Finance Reform: Fundamentals of a
Functioning Private Label Mortgage Backed Securities Market Hearing
Before the S. Comm. on Banking, Housing & Urban Affairs, 113th Cong.
39 (2013) (statement of Adam J. Levitin, law professor at Georgetown
University Law Center) (noting that ``before PLS [private label
securities] investors are able to spur a trustee to take action to
protect their interests, they face the challenge of limited
information available on which to determine if an event of default
has occurred, the information problem of identifying other PLS
investors in their deal, and the collective action problem of
coordinating the required threshold of PLS investors (who do not
always have identical incentives and may trade in and out of their
positions), and the expense of indemnifying the trustee).
\1042\ See, e.g., Kathryn Brenzel, $615M MBS Suit Aims To
Rewrite Deal's Terms, Deutsche Says, Law360, May 6, 2013 (noting
that the defendant argued that the notification provided by the
trustee did not adequately show misrepresentations). Our requirement
addresses this problem because the review required will provide
evidence of misrepresentations that the trustees and investors can
then use in making a repurchase request.
\1043\ Between 10% and 30% of securitized residential real
estate loans exhibited some indication of potential
misrepresentation. See Tomasz Piskorski et al., Asset Quality
Misrepresentation by Financial Intermediaries: Evidence from RMBS
Market, (Nat'l Bureau of Econ. Research, Working Paper No. 18843,
2013) and John Griffin & Gonzalo Maturana, Who Facilitated
Misreporting in Securitized Loans?, (University of Texas at Austin,
Working Paper, 2013), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256060&download=yes.
---------------------------------------------------------------------------

To address this concern, we proposed in the 2011 ABS Re-Proposal as
one of the transaction requirements for shelf eligibility, that the
underlying transaction documents of an ABS include provisions requiring
a review of the underlying assets of the ABS for compliance with the
representations and warranties upon the occurrence of certain post-
securitization trigger events. Specifically, we proposed that the
transaction agreements require, at a minimum, a review of the
underlying assets (1) when the credit enhancement requirements, as
specified in the transaction documents, are not met, or (2) at the
direction of investors pursuant to processes provided in the
transaction agreement and disclosed in the prospectus.\1044\ We
proposed that the review would be conducted by a ``credit risk
manager'' who would have access to the underlying loan documents to
assist in determining whether the loan complied with the
representations and warranties provided to investors.\1045\ A report of
the findings and conclusions of the review would be provided to the
trustee to use in determining whether a repurchase request would be
appropriate, and would also be filed as an exhibit to the Form 10-D.
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\1044\ We also proposed that disclosure of the findings and
conclusions of the review be required on Form 10-D if an event
triggers a review.
\1045\ Under the proposal, the credit risk manager would be
appointed by the trustee and could not be affiliated with any
sponsor, depositor, or servicer in the transaction. Disclosure about
the experience of the credit risk manager in prospectuses would also
be required.
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Finally, we proposed to require certain provisions in the
underlying transaction agreements that would help to resolve repurchase
request disputes. We discuss the dispute resolution provision
requirement below in Section V.B.3.a)(3) Dispute Resolution Provision
because we are adopting it as a stand-alone shelf eligibility
condition.
As noted above, studies have highlighted the extent of
misrepresentations among securitized residential real estate loans in
the 2000's; however, we are unable to quantify the extent to which
enforcing representations and warranties was an issue during the
crisis. While recently adopted Exchange Act Rule 15Ga-1 implementing
Section 943 of the Dodd-Frank Act requires disclosure of fulfilled and
unfulfilled repurchase request activity, as a practical matter, it does
not address directly the enforceability of put-back provisions in the
underlying transaction agreements. Further, the historical data
provided by Rule 15Ga-1 is limited, as initially only those
securitizers that issued ABS between January 1, 2009 and December 31,
2011 were required to report on Form ABS-15G demand and repurchase
history that occurred during that same period.\1046\ As we discussed in
the Section 943 Adopting Release, we limited the rule to a three-year
look-back period because we recognized concerns regarding the
availability and comparability of historical information related to
repurchase demands.\1047\ While we recognize these limitations, we used
the information contained in recent Form ABS-15G filings in order to
provide some baseline information on current market practices. Based on
Form ABS-15G filings of the first quarter of 2013, we find that more
than 99% of repurchase requests are in dispute, and with respect to the
resolved requests: 16.5% were satisfied, 48.5% were withdrawn, and 35%
were rejected.\1048\ These numbers highlight the fact that enforcing
representations and warranties may be time-consuming and lead to
uncertain outcomes for investors. We believe that the asset review
shelf requirement will help to address this problem and enhance the

[[Page 57276]]

enforceability of the representations and warranties regarding the pool
assets.
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\1046\ See Exchange Act Rule 15Ga-1(c)(1). After December 31,
2011 all securitizers are required to report, on a quarterly basis,
demand and repurchase activity for any new or outstanding ABS. See
Exchange Act Rule 15Ga-1(c)(2).
\1047\ See the Section 943 Adopting Release at 4498-99. We noted
that the three-year look-back period for initial disclosures struck
the right balance between the disclosure benefits to investors,
availability of historical information and compliance costs to
securitizers. In doing so, we acknowledged that older data may be
very hard or impossible for securitizers to obtain if they have not
had systems in place to track the data required for the required
disclosures, which may lead to less comparable data.
\1048\ We found similar figures for Form ABS-15G filings in
other quarters.
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(b) Comments on Proposed Rule
Several commenters generally agreed that a review of assets for
compliance with representations and warranties should be a shelf
eligibility requirement.\1049\ Commenters made it clear that investors
desire more robust representation and warranty enforcement
mechanisms.\1050\ Many commenters noted that a review mechanism would
enhance investor protection and promote the integrity of asset-backed
securities.\1051\ Some commenters argued that the proposed requirement
should not be imposed upon transactions other than RMBS
transactions.\1052\ They were concerned that enforcement mechanisms
could increase costs on transactions where there have been only a
limited number of repurchase requests historically.\1053\ Some
commenters responded to the 2011 ABS Re-Proposal by suggesting that the
Commission adopt, as an alternative criterion for shelf eligibility for
asset classes other than RMBS, the original proposed shelf requirements
that there be a quarterly third-party review of the assets for
compliance with the representations and warranties, which we did not
re-propose in light of comments.\1054\ Below we discuss comments about
the various parts of the proposal.
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\1049\ See letters from C. Barnard, ICI II, MBA III, Metlife II,
Prudential II, SIFMA II-investors, and Sallie Mae II.
\1050\ See letters from Metlife II, Prudential II, and SIFMA II-
investors (stating that they do not believe the ABS market will
recover without a mechanism to enforce breaches of representations
and warranties).
\1051\ See letters from ASF III, C. Barnard, ICI II (noting that
``it would provide investors with a stronger basis to pursue
remedies under the transaction agreement for violations of
representations and warranties relating to pool assets, and create
better incentives for obligated parties to consider and monitor the
quality of the assets in the pool''), Prudential II, and SIFMA II-
investors.
\1052\ See letters from ABA II (stating that transactions with
assets that have no meaningful history of repurchase demands should
not be subject to the requirement), ABAASA II (noting that the
proposed requirement should be required only for RMBS transactions),
ASF III, J.P. Morgan II, and Wells Fargo II (stating that credit
card and auto transactions should not be subject to the
requirement), BoA II (recommending a tailored approach), Sallie Mae
II (noting student loans should not be subject to the proposal), and
VABSS III (noting that auto deals have not had a history of
significant repurchases and thus should not incur the costs
associated with the proposed requirement).
\1053\ See letters from ABA II, ABAASA II, ASF III, and Wells
Fargo II (all supporting a review system for residential mortgage-
backed securities transactions and opposing a requirement for other
asset-backed securities that do not typically have repurchase
demands).
\1054\ See letters from ASF III, BoA II, and VABSS III. In the
2010 ABS Proposing Release, the Commission proposed to require a
provision in the pooling and servicing agreement requiring the party
obligated to repurchase the assets for breach of representations and
warranties to periodically furnish an opinion of an independent
third party regarding whether the obligated party acted consistently
with the terms of the pooling and servicing agreement with respect
to any loans that the trustee put back to the obligated party for
violation of representations and warranties and which were not
repurchased. In the 2011 ABS Re-Proposal, we replaced the quarterly
third-party opinion proposal with a proposed review of the
underlying assets upon certain triggers being reached in response to
the comments received on the 2010 ABS Proposal.
---------------------------------------------------------------------------

Commenters provided varying comments on the appropriateness of the
proposed review triggers. Several commenters suggested that a trigger
for review should not be tied to credit enhancement, as proposed.\1055\
Commenters stated that, for most transactions, a credit enhancement
trigger would not be a feasible measurement across asset classes
because many deals provide for a buildup of credit enhancement over
time and, under the proposed rule, the first distribution could trigger
a review.\1056\ One commenter stated that certain transactions do not
have pool-level credit enhancements that would trigger a review.\1057\
Given these potential issues with a credit enhancement trigger, some
commenters suggested as an alternative that the trigger for review be
based on a more common measurement of asset performance such as
delinquencies.\1058\
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\1055\ See letters from ABA II, ABAASA II, ASF III, BoA II,
CREFC II, J.P. Morgan II, Kutak, MBA III, SIFMA III-dealers and
sponsors, VABSS III, and Wells Fargo II.
\1056\ See, e.g., letters from ASF III, SIFMA III-dealers and
sponsors, and Wells Fargo II (explaining that transactions involving
assets with interest rates in excess of the rates required to be
paid on the ABS may initially be structured with little or no
initial overcollateralization and that the required credit
enhancement is built up over time by applying excess interest to pay
principal on the ABS, resulting in overcollateralization), BoA II
(noting that in cases where credit enhancement is built over time,
credit enhancement levels do not meet required target levels during
most of the early life of the deal), VABSS III (noting that while
credit enhancement may increase over time, in other transactions,
credit enhancement can be reduced if certain performance results are
achieved).
\1057\ See letter from MBA III.
\1058\ See letters from ASF III (suggesting objective factors
such as cumulative losses, delinquencies, or average loss severity
be the trigger), Metlife II (noting the review should be based on
delinquencies as a percentage of the original subordination for the
senior-most class in a transaction), Prudential II (stating that a
review should be triggered if the 60+ day delinquencies percentage
is greater than the currently available credit support or if a loan
becomes 90 days delinquent within six months of the loan's
origination or four months from being included in the pool) and
Sallie Mae II (recommending ``linking the action of the CRM to an
element that can arise across all asset classes and all structures,
namely losses'').
---------------------------------------------------------------------------

As part of the 2011 ABS Re-Proposal, we requested comments on
certain aspects of the investor-directed trigger. For example, we
requested comment on whether we should require that at least 5% of
investors must first call for an investor vote on the question of
whether to initiate a review before a vote occurs.\1059\ Although
comments received were mixed, several commenters supported such a
provision.\1060\ Additionally, many commenters agreed that investors
should have the ability to direct a review of assets and suggested
procedures that would provide investors with an effective means to
request a review while minimizing baseless claims that could impose
costs.\1061\
---------------------------------------------------------------------------

\1059\ See Request for Comment No. 30 in the 2011 ABS Re-
Proposing Release at 47958.
\1060\ See letters from Metlife II (suggesting that we require
5% of investors to initiate a vote), Prudential II, and SIFMA II-
investors (suggesting that at least 5% of the total interest in the
pool may poll other investors to determine whether a review should
be performed). See also letter from Metlife I (explaining that the
vast majority of securitization transactions require a ``25%-in-
interest voting threshold'' before the trustee can be directed by
investors to undertake actions such as polling investors as to
whether to exercise rights or remedies under the transaction
agreements).
\1061\ See, e.g., letters from ASF III (stating that its
investor members generally favor the proposal while issuer members
generally oppose it), J.P. Morgan II (stating their belief that
investors representing a minimum of 25% of the pool be required to
trigger a review), MBA III (noting that a threshold of investors
should be required to agree to a review due to the potential costs),
Prudential II (stating that note holders should be permitted to
request a credit risk manager review if 25% of the note holders
believe a review is warranted), SIFMA II-investors (stating their
belief that a review be triggered if investors with at least 25% (by
principal balance) of the total interest in the pool of securitized
assets agree to a review), and Sallie Mae II (suggesting specific
requirements if the final rule permits investors to direct a review
independently of the credit enhancement trigger).
---------------------------------------------------------------------------

We also requested comment on whether, as an alternative to
specifying voting procedures, it would be appropriate to specify
certain maximum conditions, where the percentage of investors required
to direct review could be no more than a certain percentage, such as
5%, 10%, or 25%. Commenters provided differing views on imposing
maximum conditions. Several commenters suggested that 25% would be the
appropriate percentage of investors that should agree to a review
before one is required.\1062\ Another

[[Page 57277]]

commenter suggested that we consider a majority or plurality of those
casting a vote, and that we also specify a quorum requirement.\1063\
One commenter suggested that a super-majority would be
appropriate.\1064\
---------------------------------------------------------------------------

\1062\ See letters from J.P. Morgan II (stating that ``if there
is a requirement for review based on a certain percentage of
investors, we strongly recommend that the required percentage of
investors required to direct a review be no less than 25% of each
class of securities outstanding''), Prudential II (``Note holders
should be permitted to request a credit risk manager review if 25%
of the note holders believe a review is warranted. A 25% threshold
would serve to limit both the number of frivolous claims and any
unnecessary credit risk manager expenses.''), and Sallie Mae II
(stating that if an investor is allowed to direct a review, among
other requirements, the requesting investor must own at least 25% of
the outstanding principal balance of the related ABS).
\1063\ See letter from Metlife II.
\1064\ See letter from Wells Fargo II.
---------------------------------------------------------------------------

With respect to disclosing the report on the findings and
conclusions of the review, several commenters recommended that we
require a summary of the report instead of the proposed requirement
that the full report be filed as an exhibit to Form 10-D because of
privacy concerns or potential problems that the requirement would cause
with workouts or modifications with delinquent borrowers.\1065\
---------------------------------------------------------------------------

\1065\ See letters from ASF III (noting that the report may
include confidential or non-public personal information on
obligors), CREFC II (stating too much detailed information provided
to the public could provide a borrower with an inappropriate
advantage in negotiations), MBA III, and Wells Fargo II.
---------------------------------------------------------------------------

We also received comments on the selection and appointment of the
credit risk manager. Commenters, in general, opposed the proposal to
require that the trustee appoint the credit risk manager. Commenters
noted that the trustee would not be a suitable party to appoint the
credit risk manager and would not be likely to accept the
responsibility for appointing the credit risk manager.\1066\
Furthermore, commenters generally explained that the appointment by a
trustee would be unworkable since the trustee is not typically a party
to the transaction until it closes, therefore the trustee would
technically not have the authority to appoint the manager until after
the transaction closes.\1067\ One of these commenters stated that it is
important to have details about the manager disclosed in the prospectus
so that investors can fully understand their impact on the
transaction.\1068\
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\1066\ See, e.g., letters from ABA II (noting that appointing
any transaction party is outside the scope of a trustee's duties),
ASF III (stating that in conversation with trustees the trustees
have indicated their discomfort with appointing a manager), BoA II,
J.P. Morgan II, SIFMA III-dealers and sponsors (noting that trustees
would not likely accept the responsibility of appointing a manager),
and VABSS III (stating that the independent reviewer should be
appointed in the relevant agreement but not solely by the trustee).
\1067\ See letters from ABA II, ABAASA II, ASF III, BoA II,
SIFMA II-investors, and VABSS III.
\1068\ See letter from ABAASA II.
---------------------------------------------------------------------------

With respect to the proposed prohibited affiliations between the
credit risk manager and certain transaction parties, several commenters
supported the proposal, although some commenters suggested that we not
permit the credit risk manager to be affiliated with other additional
transaction parties, such as the trustee or any investor.\1069\ One
commenter stated that the credit risk manager should not be affiliated
with any party hired by the sponsor or underwriter to perform pre-
closing due diligence on the pool assets.\1070\ However, one commenter
suggested that the proposal to limit affiliations was overly
broad.\1071\
---------------------------------------------------------------------------

\1069\ See letters from Better Markets (stating that, to ensure
independence, the proposal must provide that the manager have no
conflicts of interest with any party including investors), J.P.
Morgan II (suggesting that the manager not be affiliated with other
transaction parties such as the trustee or any investor), Metlife II
(noting that independence from other parties in the securitization
is imperative), Prudential II (also stating the manager not be
affiliated with the trustee), and SIFMA II-investors.
\1070\ See letter from SIFMA II-investors.
\1071\ See letter from MBA III.
---------------------------------------------------------------------------

Additionally, commenters provided comments about other aspects of
the credit risk manager. For example, some commenters recommended that
we revise the title ``credit risk manager'' as it may not properly
describe its function.\1072\ Commenters also stated that it was
important for managers to have access to the underlying documents in
order to perform their duties.\1073\ Some commenters also offered their
views about the process and conditions for the removal and replacement
of a credit risk manager. One commenter stated that it would be
acceptable for the trustee to appoint a new credit risk manager if the
existing one needs to be removed or replaced for any reason.\1074\
Another commenter suggested that we require an affirmative vote of 25%
of the investors in order for investors to initiate replacement.\1075\
One commenter recommended that the transaction documents detail the
conditions and process for removal.\1076\
---------------------------------------------------------------------------

\1072\ See letters from ASF III and VABSS III (both noting that
prior credit risk managers had varied functions including loss
mitigation and reporting advice to the servicer), and Wells Fargo II
(noting that the title ``credit risk manager'' could be misleading
because the credit risk manager would not guarantee the credit of an
underlying borrower).
\1073\ See letters from Metlife II, Prudential II, and SIFMA
III-dealers and sponsors (generally expressing support for the
proposal to require the manager to have access to all underlying
documents including the underwriting guidelines and credit
underwriting files and any other documents necessary to investigate
compliance).
\1074\ See letter from MBA III (RMBS).
\1075\ See letter from Prudential II.
\1076\ See letter from MetLife II.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Asset Review Provision
We are adopting, as a second shelf eligibility requirement, that
the underlying transaction agreements include provisions requiring a
review of pool assets in certain situations for compliance with the
representations and warranties made with regard to those assets. Under
the final rule, the agreements must require a review, at a minimum,
upon the occurrence of a two-pronged trigger based first upon the
occurrence of a specified percentage of delinquencies in the pool and
if the delinquency trigger is met, then upon direction of investors by
vote. We have made modifications to the review triggers, discussed
below, that we believe help to address some of the cost concerns
expressed by commenters for asset classes that historically have seen a
limited number of repurchase requests. Because we are unable to predict
which asset classes may experience problems in the future, we believe
that it is prudent to impose this requirement for all asset
classes.\1077\
---------------------------------------------------------------------------

\1077\ We note, for example, that there was not a need to
enforce representations and warranties for RMBS and CMBS until the
crisis.
---------------------------------------------------------------------------

We have taken into consideration the array of comments received
related to the triggers and potential costs, while at the same time
balancing the need for stronger mechanisms to enforce underlying
contract terms. As we noted above, most transaction agreements lack a
specific mechanism for investors to not only identify potential assets
that fail to comply with the representations and warranties made but
also to resolve a question of whether noncompliance of the
representations and warranties constitutes a breach of the contractual
provisions. These problems have been compounded by the fact that
investors typically cannot make repurchase requests directly, thus they
have had to rely upon the trustees who have not enforced repurchase
requests in most circumstances. We believe that adopting this shelf
provision coupled with the new dispute resolution and investor
communication shelf requirements should provide investors with
effective tools to address the enforceability of repurchase obligations
and help overcome collective action problems. In that regard, we see
these shelf requirements working together to help investors enforce
repurchase obligations. Our investor communication provision, discussed
below, will help investors to communicate with each other in order to
determine whether they should vote to direct a review of the assets and
later

[[Page 57278]]

whether to initiate a repurchase request. The review of the assets
required once certain triggers are met will not only benefit investors
in determining whether the assets have breached the representations and
warranties but also whether to move forward with a repurchase request.
Additionally, should those parties with repurchase obligations fail to
address investors' repurchase requests in a timely manner, investors
will now have a means to demand resolution through arbitration or
mediation. We believe that these transactional safeguards will
collectively enhance the enforceability of representations and
warranties about the pool assets and provide incentives for obligated
parties to more carefully consider the characteristics and quality of
the assets that are included in the pool. Therefore, this shelf
transaction requirement should encourage ABS issuers to design and
prepare ABS offerings with greater oversight and care. We believe that
stronger enforcement mechanisms should incentivize issuers to provide
investors with accurate and complete information at the time of the
offering. It is these transactions that are appropriate for public
offerings off a shelf without prior staff review. The magnitude of
these benefits will depend on whether the reviewers are able to
correctly evaluate the contractual terms to identify non-compliance
with the representations and warranties about the pool assets. Such
evaluations may be challenging to the extent that the contractual
language for the representations and warranties are incomplete or
ambiguous. Nonetheless, we conclude that the asset review provision
will enhance investor protection for the reasons stated above. We also
note that the review requirement we are adopting is similar to post-
crisis industry efforts, such as the American Securitization Forum's
Project RESTART, which includes repurchase principles for
investigating, resolving, and enforcing remedies with respect to
representations and warranties in RMBS transactions.\1078\
Additionally, some recent CMBS deals have included a provision for a
third-party review of the underlying assets.
---------------------------------------------------------------------------

\1078\ See letter from ASF III.
---------------------------------------------------------------------------

While we believe that this review requirement will enhance the
enforceability of repurchase obligations, we acknowledge that it will
also increase costs, particularly on investors, who will incur the
expense of the reviews. A group of investors noted that despite the
additional costs, increased investor protection will produce net
economic benefits to investors.\1079\ We expect that the bulk of the
costs for this shelf requirement will be incurred with individual
reviews of pool assets directed by investors. There will also be some
expense arising from retaining a reviewer to conduct the reviews in the
form of an annual retainer fee.\1080\ Although the exact magnitude of
the expenses incurred in connection with the reviews is not possible to
predict, we expect that they will depend on the frequency with which a
review is triggered and on the extent of the review.\1081\ For
instance, securitizations of high-risk assets are more likely to meet
the delinquency threshold and therefore more likely to undergo a review
and incur the review expenses. Additionally, sponsor representations
about pool assets characterized by low or no documentation may require
more time for the reviewer to examine and therefore may result in
higher expenses. We have attempted to mitigate the potential costs by
not requiring a review of the assets until after the occurrence of a
two-pronged trigger as described below. We expect that investors will
weigh the benefits of a review of the assets against the costs and vote
for a review only if the benefits justify the costs. This revised
approach should address concerns about potentially frivolous review
requests being made at the cost of other investors.
---------------------------------------------------------------------------

\1079\ See letter from SIFMA II-investors (``The concept of
increasing costs to investors in order to increase investor
protections is not new. On balance, the strict enforcement of the
deal documents by an independent credit risk manager, we believe,
will in the ordinary course produce net economic benefits to the
investors.'').
\1080\ The staff is aware of only several recent unregistered
RMBS transactions that include a comparable provision for which we
have some cost information. According to Kroll's Pre-Sale Report for
J.P. Morgan Mortgage Trust 2013-1, the reviewer will be paid an
annual retainer fee of $20,000 for the first six years and $12,000
annually thereafter. The reviewer will also be paid $525 for each
mortgage loan subject to a review. See Kroll's Pre-Sale Report: J.P.
Morgan Mortgage Trust 2013-1 (Mar. 20, 2013). We believe that these
costs figures are generally comparable to the costs that RMBS
issuers and investors will likely incur in connection with our
review requirement. The costs for other asset classes may be more or
less than these costs figures depending upon the quality of the
assets, the extensiveness of the representations and warranties, and
the volume of documents required to review.
\1081\ In a typical ABS transaction, fees are paid before
distributions are made to investors. We remind issuers that
information related to the review fees should be disclosed in
accordance with Regulation AB requirements. See, e.g., Items
1109(b)(4) and 1113 of Regulation AB.
---------------------------------------------------------------------------

We also recognize that our approach to require that a reviewer be
engaged at the time of issuance, as opposed to when the above two
triggers are met, will be more costly. For asset classes that rarely
experience breaches of representations and warranties, the benefits of
this shelf provision may be smaller than for other asset classes and
thus there may be situations where the costs may be greater than the
benefits. We believe, however, that for asset classes where the
likelihood of investors using the review provision is low, the upfront
retainer fee should also be low. We note also that the requirement that
the reviewer be engaged at the time of issuance could potentially
create incentive alignment issues. Because of this requirement, a
reviewer could seek to be appointed to as many ABS transactions as
possible, thus potentially creating an incentive to submit reports
favorable to sponsors and win future business from them. This could
potentially impact the quality and usefulness of the reports if the
reviews are not--or are not perceived as being--objective.\1082\ The
significance of this problem should be reduced to the extent that the
reviewer's compensation is paid by investors, particularly if done so
after the objective triggers for the asset reviews are met. In
addition, transaction agreements may prescribe mechanisms to replace
reviewers in the event of failure to meet their obligations. Finally,
reputational concerns could potentially influence reviewers' decisions
to adhere to their limited role of determining whether the assets
comply with the representations and warranties made. As discussed
below, the investors through the trustee, not the reviewer, are
responsible for determining whether to initiate a repurchase
request.\1083\ Furthermore, we have chosen to require that the reviewer
be named in the offering documents because the identity and competency
of the reviewer is an important consideration for investors in making
an ABS investment decision.
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\1082\ We note that our rules do not mandate the particular
contents of the report. Should these reports ultimately include
subjective elements, the potential incentive misalignments could
increase.
\1083\ As we have indicated above, investors have encountered
difficulty with getting the trustees to initiate repurchase
obligations. We believe that the required report of the conclusions
and findings to the trustee, which should provide evidence of any
noncompliance, will make it difficult for trustees to ignore
possible breaches of the contractual provisions.
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(i) Triggers for Review
As noted above, the 2011 ABS Re-Proposal specified two separate
events, either of which would trigger a review of the underlying assets
under the new shelf eligibility requirement. One proposed trigger would
have required a review when the credit enhancement requirements of the
transaction are not met. The other proposed trigger would have
permitted investors to direct a review of the assets, pursuant to

[[Page 57279]]

procedures specified in the transaction agreements. After taking into
account the comments received related to the applicability of the
proposed triggers and potential costs, we are modifying the triggers
for review.
Under the new shelf eligibility requirement, the pooling and
servicing agreement, or other transaction agreement, must provide for a
review of assets, at a minimum, upon the occurrence of a two-pronged
trigger with the first prong being a percentage of delinquencies in the
pool and the second prong being the direction of an investor vote, in
each case as specified in the transaction agreements. Because these
thresholds are negotiated by sponsors and investors in advance of the
ABS issuance, and could vary by asset class, deal structure, or
takedown, this approach allows the market to optimize and determine the
most effective thresholds, subject to caps discussed below. In
developing this two-prong trigger approach, we have attempted to
balance some commenters' concerns about potentially unfounded claims by
requiring that an objective threshold based on delinquencies first be
met while protecting investors' ability to effectively direct a review
at a time when rising delinquencies may begin to cause concern that the
assets in the pool may not have met the representations and warranties
made in the transaction documents.
(a) Delinquency Prong
Rather than tying the trigger to credit enhancement levels, we are
adopting an objective trigger based on delinquencies.\1084\ As
summarized above, although commenters generally supported the
requirement of an objective trigger, many stated that the proposed
credit enhancement trigger did not easily apply across different asset
classes and deal structures.\1085\ We received some recommendations for
alternative objective triggers and, in particular, commenters noted
that a trigger based on delinquencies would work across all deal
types.\1086\ The amount of delinquencies in an asset pool is a metric
that is required to be reported at the time of offering and on an
ongoing basis.\1087\
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\1084\ Current Regulation AB does not establish a standard for
determining delinquencies, and we are not providing a definition of
delinquency for purposes of the asset review provision. Regulation
AB requires disclosure of the methodology for determining
delinquencies in the prospectus and accordingly, we expect that the
transaction agreements provide the method of determining
delinquencies. See Item 1101(d) of Regulation AB [17 CFR
229.1101(d)]. If the transaction agreements do not use delinquencies
to measure late or non-payment of an underlying obligor, then in
order to meet this shelf requirement, a comparable metric measuring
late or non-payment should be used and disclosed. As discussed
below, the final rule requires disclosure regarding how the
delinquency trigger was determined to be appropriate. See Item
1113(a)(7)(i) of Regulation AB [17 CFR 229.1113(a)(7)(i)]. Under the
new rule, in the case of a transaction using a metric other than
delinquencies, disclosure regarding why a different metric is
appropriate would need to be included.
\1085\ See letters from ASF III, BoA II, MBA III, SIFMA II-
investors, VABSS III, and Wells Fargo II (all noting that many
transactions do not provide for a specific level of credit
enhancement to be maintained or the credit enhancement levels build
up over time to a target. In these situations, the review would be
triggered before there would be any real indication that there have
been breaches of representations or warranties).
\1086\ See letters from ASF III (suggesting objective factors
such as cumulative losses, delinquencies or average loss severity be
the trigger), Metlife II (noting the review should be based on
delinquencies as a percentage of the original subordination for the
senior-most class in a transaction), and Prudential II (stating that
a review should be triggered if the 60+ day delinquencies percentage
is greater than the currently available credit support or if a loan
becomes 90 days delinquent within six month of the loan's
origination or four months from being included in the pool).
\1087\ See Items 1100(b), 1101(c), 1105, 1111(c) and 1121(a)(9)
of Regulation AB.
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We are not specifying the threshold amount of delinquencies that
must first be reached, given the variety of thresholds that may be
relevant and the differing approaches offered by commenters. For
instance, we note that some ABS transactions include delinquent loans
at the onset. Furthermore, the shelf eligibility requirements permit
registration of offerings of ABS that include up to 20% of delinquent
assets.\1088\ We also acknowledge that transaction participants should
have some flexibility across deal structures and asset classes so that
they may negotiate the terms appropriate for each particular offering,
including the appropriate delinquency threshold.\1089\ We recognize,
however, that providing the transaction parties with such flexibility
may impose costs to investors depending on the procedures established.
In particular, we recognize that by not prescribing a particular
delinquency threshold, transaction parties could theoretically set this
threshold high and thereby make it difficult for investors to exercise
their rights under this provision. To address this concern, we are
requiring disclosure in the prospectus that describes how the
delinquency trigger was determined to be appropriate.\1090\ The
disclosure must include a comparison of the delinquency trigger against
the delinquencies disclosed for prior securitized pools of the sponsor
for that asset type. Using this disclosure, investors will be able to
analyze the reasonableness of the delinquency trigger.
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\1088\ See General Instruction I.B.1(e) of Form SF-3.
\1089\ We also note that our proposed credit enhancement trigger
provided the transaction parties with the flexibility to set the
target levels of the credit enhancement requirements so that they
could tailor the procedures to each ABS transaction, taking into
account the specific features of the transaction and/or asset class.
\1090\ See Item 1113(a)(7)(i) of Regulation AB.
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The final rule provides some specificity as to how the delinquency
threshold must be calculated in order to provide clarity to issuers and
consistency to investors across various transactions and assets
classes, and to prevent possible mechanisms from reducing the
effectiveness of the trigger. The delinquency prong requires that the
delinquency threshold be calculated as a percentage of the aggregate
dollar amount of delinquent assets in a given pool to the aggregate
dollar amount of all the assets in that particular pool, measured as of
the end of the reporting period in accordance with the issuer's
reporting obligations. By requiring that the delinquency calculation be
measured as a percentage of the aggregate dollar amount of all assets
in the pool, the calculation will better reflect the magnitude of
delinquencies, as compared to a delinquency calculation measured by
counting only the number of delinquent assets without consideration of
the delinquent assets' relative dollar values.\1091\ Furthermore, to
prevent issuers from imposing a higher hurdle to trigger the
delinquency threshold for transactions with multiple sub-pools, we are
also requiring that the percentage be based on the percentage of
delinquencies in the sub-pool. For example, if a transaction has
divided the underlying assets into three sub-pools, there will be three
separate delinquency trigger calculations. If the delinquencies in one
sub-pool triggers an investor vote (and, as explained below, the
subsequent vote is attained to trigger a review), the final rule
requires that the transaction documents specify, at a minimum, that the
assets of the respective sub-pool would be subject to review.\1092\ We
believe that requiring the delinquency threshold to be calculated on a
sub-pool basis also recognizes the notion that investors would be
primarily concerned about the

[[Page 57280]]

assets that support their respective pool.\1093\
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\1091\ We also note that this requirement is similar to how
delinquencies are reported by servicers in their monthly reports (as
a percentage of the ending pool balance).
\1092\ Transaction participants may, however, provide for
reviews of additional assets in this instance.
\1093\ See letter from Metlife II (noting that the review should
be based on delinquencies as a percentage of the original
subordination for the senior-most class in a transaction).
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(b) Investor Vote Prong
The underlying transaction documentation must include a provision
that, after the delinquency threshold has been reached or exceeded,
investors have the ability to vote to direct a review. In formulating
the final rule, we considered whether an investor vote would be
necessary given that the final rule would require an objective trigger
first be satisfied. We appreciate the costs that will be incurred by
the investors in connection with these reviews.\1094\ Furthermore, we
acknowledge that there may be cases where some investors may not wish
to incur the cost of an asset review, for example, when the transaction
is performing as expected. For these reasons, the review is not
automatic but rather must be initiated by investors as specified in the
transaction documents. In order to balance the concern that the
transaction parties may impose stringent voting requirements in the
transaction documents in an effort to diminish investors' voting
rights, we have imposed certain restrictions on the voting requirements
in response to comments that we received.
---------------------------------------------------------------------------

\1094\ See letter from SIFMA II-investors (noting that although
the review requirement would result in additional costs, it would
also increase investor protections).
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Under the final rule, if the transaction agreement includes a
minimum investor demand percentage in order to trigger a vote on the
question of whether to direct a review, then the maximum percentage of
investors' interest in the pool required to initiate a vote may not be
greater than 5% of the total investors' interest in the pool (i.e.,
interests that are not held by affiliates of the sponsor or
servicer).\1095\ We are imposing this restriction because we believe
that a higher threshold will blunt its effectiveness.\1096\ Once the
requisite percentage of investors' interest seeks to initiate a vote,
as required by the transaction agreement, investors will proceed to
vote on whether to direct a review. Our interpretation of ``pool,'' as
discussed above in connection with the delinquency trigger, is also
applicable for the voting procedures. Thus, if there are multiple sub-
pools, then the calculation of whether there is the requisite
percentage of investors' interest to initiate a vote would be
determined based on that particular sub-pool.
---------------------------------------------------------------------------

\1095\ The final rule does not require that the transaction
agreement include a minimum investor demand percentage to trigger a
vote; rather the final rule requires that if such provision is part
of the transaction agreement, then it may require no more than 5% of
the total interest in the pool.
\1096\ See letter from Metlife I (noting that many
securitization transactions impose a 25%-in-interest voting
threshold before the trustee can be directed by investors to
undertake certain actions such as polling investors on questions as
to whether to exercise certain rights or remedies, thereby making it
difficult for investors to act).
---------------------------------------------------------------------------

Under the proposed rule, the transaction parties would have been
given significant flexibility in setting the voting requirements for
the investor vote trigger. We are concerned, however, that the
transaction parties could establish a high delinquency threshold and
high investor vote threshold as noted by one commenter, thus making it
difficult for investors to utilize this shelf provision.\1097\ We
requested comments in the 2011 ABS Re-Proposal on whether we should
establish maximum conditions for voting. Commenters offered a range of
thresholds from 25% to a supermajority.\1098\ Under the final rule, the
transaction parties will be able to specify the percentage of
investors' interest required to direct a review, provided that the
threshold of approval shall be no more than a simple majority of those
interests casting a vote. The final rule requires a simple majority of
those interests casting a vote as the maximum condition because we
believe that a simple majority threshold will help to reduce
potentially frivolous claims while also helping to ensure that
investors will be able to use the review provision. In addition to
imposing restrictions on the voting requirements, we note that issuers
are required to provide disclosure in the prospectus regarding the
voting procedures for the review under existing Regulation AB, which
will permit investors to analyze the reasonableness of the voting
procedures.\1099\
---------------------------------------------------------------------------

\1097\ See letter from Metlife II (explaining, for example, that
in a case where a transaction agreement requires 25% of all
investors to initiate a vote, and 75% of all investors to approve a
resolution, the likelihood of meeting a voting threshold would be
slim at best).
\1098\ See letters from J.P. Morgan II and Sallie Mae II
(recommending a 25% threshold), MetLife II (suggesting a majority or
plurality of those casting a vote), and Wells Fargo II (recommending
a supermajority).
\1099\ See Item 1113(a)(12) of Regulation AB (requiring
disclosure regarding allocation of voting rights among security
holders).
---------------------------------------------------------------------------

We also recognize that the rule may complicate the voting process
for investors in transactions that include assets consisting of
previously issued ABS. In particular, when trigger conditions for a
review are met in connection with the previously issued ABS, the
trustee acting on behalf of the investors in the second securitization
must vote since they are also investors in the first securitization via
the resecuritization. To address this potential issue, each
securitization will need to have clearly delineated voting rules and
eligibility criteria in the event that some of its investors are
through a resecuritization. It is hard for us to evaluate the extent to
which this problem may affect the ABS markets because, over the past
several years, there have been no registered resecuritizations of RMBS,
CMBS, or Auto ABS.
The requirements of this shelf eligibility criterion are meant to
be the minimum procedures that should be included in the transaction
documents to provide investors with a means to trigger a review of the
assets. We acknowledge that transaction parties have and may develop
more specific and robust procedures for monitoring and reviewing assets
that support the ABS.\1100\ The adoption of this rule will not preclude
the transaction parties from specifying additional, separate triggers
for a review in the transaction agreements, as appropriate for a
particular deal or asset class. To clarify, while we are permitting
additional triggers to be established by the transaction parties, the
final rule does not allow the transaction parties to add additional
restrictions or requirements on the two triggers that we are
establishing in order to make it more onerous for investors to utilize
the provision.
---------------------------------------------------------------------------

\1100\ For example, the shelf requirement would not preclude an
ABS issuer from including a review trigger for any asset delinquent
for 120 days or more, without requiring an investor vote, if such a
trigger is appropriate for that transaction. The transaction
documents for the shelf registration statement would, however, need
to include, at minimum, the asset review requirements that we are
adopting.
---------------------------------------------------------------------------

(ii) Scope of the Review
We are also modifying the proposal to add some specificity
regarding the scope of the review, since we have changed the objective
trigger from being based on credit enhancement to one based on
delinquencies and received varied comments regarding the appropriate
scope for a review based on delinquencies.\1101\ Under the final rule,
once both prongs have been met (the delinquencies have reached or
exceeded the threshold and investors have voted to conduct a review), a
review must be

[[Page 57281]]

conducted of all assets that are 60 or more days delinquent as reported
in the most recent periodic report, at a minimum, for compliance with
the related representations and warranties, as suggested by commenters.
We are also adopting, as proposed, that the transaction agreement must
provide the reviewer with access to copies of the underlying loan
documents in order to determine whether the loan complied with the
representations and warranties.\1102\ As discussed below, a summary of
the reviewer's report must be included in the Form 10-D.\1103\
---------------------------------------------------------------------------

\1101\ See letters from Metlife II (stating that a random sample
of all 60+ day delinquent loans should be reviewed once a review is
triggered) and Prudential II (stating that once a review is
triggered the reviewer should be required to ``review all 60+ day
delinquent loans and prior defaults'').
\1102\ See General Instruction I.B.1(b)(B) of Form SF-3.
\1103\ We would expect that the reviewer would conduct the
review and provide its report to the trustee in a reasonably prompt
manner once the review is triggered.
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(iii) Report of the Findings and Conclusions
As proposed, under the final rule, a report of the reviewer's
findings and conclusions for all assets reviewed will be required to be
provided to the trustee.\1104\ The trustee could then use the report to
determine whether a repurchase request would be appropriate under the
terms of the transaction agreements. We are also requiring, as
proposed, that disclosure be provided about any event triggering a
review of the assets in the Form 10-D filing for the period in which
the event occurred.\1105\
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\1104\ See General Instruction I.B.1(b)(E) of Form SF-3.
\1105\ If the transaction parties decide to include additional
triggers beyond the minimum two-prong trigger required by this shelf
eligibility rule, then disclosure is required about those trigger
events as well.
---------------------------------------------------------------------------

We proposed to require that any report of results provided to the
trustee also be filed on periodic report Form 10-D. Commenters
generally supported filing the reports on Form 10-D. Several commenters
indicated, however, that privacy concerns may arise related to the
information about the underlying loans if a full report is filed and
recommended that we instead require summaries of the reports.\1106\ We
are persuaded by commenters that only a summary of the report of the
findings and conclusions needs to be included on the Form 10-D. We
acknowledge, however, a potential cost of this approach is that
investors may not receive all of the information necessary to determine
whether the trustee, or another party with demand rights, has made an
appropriate decision regarding whether to initiate a repurchase
request.
---------------------------------------------------------------------------

\1106\ See letters from ABAASA II, ASF III, CREFC II, MBA III,
VABSS III, and Wells Fargo II.
---------------------------------------------------------------------------

(iv) Selection of the Reviewer
In response to comments received, we are not adopting the proposal
to require that the trustee appoint the reviewer. We are requiring,
instead, that the pooling and servicing agreement or other transaction
agreement provide for the selection and appointment of the reviewer
since we believe that the transaction parties should be able to agree
on who should serve as the reviewer.\1107\
---------------------------------------------------------------------------

\1107\ See General Instruction I.B.1(b) of Form SF-3.
---------------------------------------------------------------------------

We are requiring, as proposed, disclosure in the prospectus of the
name of the reviewer, its form of organization, the extent of its
experience serving as a reviewer for ABS transactions involving similar
pool assets, and the manner and amount in which the reviewer is
compensated.\1108\ ABS investors will benefit from this increased
disclosure as they will be able to assess the qualifications of the
reviewer. ABS issuers will incur some additional disclosure costs to
provide this information. In addition, as proposed, under the new rule
disclosure is required with respect to: The reviewer's duties and
responsibilities under the governing documents and under applicable
law; any limitations on the reviewer's liability under the transaction
agreements; any indemnification provisions; any contractual provisions
or understanding regarding the reviewer's removal, replacement, or
resignation, and how any related expenses would be paid.\1109\ In
addition, we are adopting, as proposed, a requirement that if, during
the reporting period, the reviewer has resigned, or has been removed,
replaced or substituted, or if a new reviewer has been appointed, then
disclosure regarding the event and circumstances surrounding the change
must be provided in the report for the period in which the event
occurred.\1110\
---------------------------------------------------------------------------

\1108\ See Item 1109(b) of Regulation AB [17 CFR 229.1109(b)].
\1109\ Id.
\1110\ See Item 1121(d)(2).
---------------------------------------------------------------------------

We are also adopting a requirement that prohibits the reviewer from
being affiliated with certain transaction parties and from performing
certain duties due to concerns over potential conflicts of interest.
Under the final rule, the reviewer, at a minimum, cannot be affiliated
with the sponsor, depositor, servicer, the trustee, or any of their
affiliates.\1111\ In addition, a conflict may arise if the reviewer is
also assigned the responsibility under the transaction documents to
determine whether non-compliance with representations and warranties
constitutes a breach of any contractual provision. Therefore, the
reviewer shall not be the party to determine whether the non-compliance
constitutes a breach. We believe that the role of the reviewer should
be limited to reviewing the assets' compliance with the representations
and warranties since we believe that the investors through the trustee
are the most appropriate parties for determining, after reviewing the
report of the conclusions and findings, whether to pursue a repurchase
claim. In response to comments, particularly in the context of CMBS,
the final rule will permit that the reviewer may be the same party
serving another role in the transaction, provided that it is not
affiliated with the sponsor, depositor, servicer, trustee, or any of
their affiliates. As recommended by one commenter, however, the final
rules prohibit the reviewer from being the same party or an affiliate
of the party hired by the sponsor or underwriter to perform pre-closing
due diligence on the pool assets due to the inherent conflict posed by
the same party performing the pre-closing review and the review
required by this shelf provision.\1112\ The reviewer is also prohibited
from being affiliated with the trustee in light of several commenters
recommending this prohibition given the economic relationships the
trustee or its affiliates may have with other transaction parties and
the conflicts of interest that such relationships may create.\1113\ We
have not, however, added investors as a prohibited affiliation, as some
commenters requested.\1114\ We understand that issuers might view
investor affiliation with the reviewer as a possible conflict; however,
since issuers will be responsible for selecting the reviewer, they will
be able to address any concern. We do not think such an affiliation
will likely cause harm or conflict to investors as a whole because, if
there is evidence of high or growing delinquencies in the asset pool,
it would be in the best interest of investors as a whole to have a
review conducted in order to determine whether investors should make a
repurchase demand.\1115\ Because the

[[Page 57282]]

rule establishes the minimum restrictions on affiliations, the
transaction parties could agree to exclude other parties based on their
relationships. As proposed, the final rule requires disclosure about
those relationships in the prospectus, which will help alert investors
to any potential conflicts.\1116\
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\1111\ See Item 1101(m) of Regulation AB (defining the
reviewer).
\1112\ See letter from SIFMA II-investors.
\1113\ See letters from Better Markets, J.P. Morgan II, and
Prudential II.
\1114\ See letters from Better Markets and J.P. Morgan II.
\1115\ However, any investor, or affiliate of an investor,
affiliated with a sponsor, depositor, or any servicer would not
qualify as a reviewer. For example, in the context of CMBS, an
investor that is affiliated with a special servicer would not
qualify as a reviewer.
\1116\ Item 1119 of Regulation AB requires disclosure of any
known, material relationships among the various parties to the
transaction and the character of those relationships.
---------------------------------------------------------------------------

As noted above, some commenters suggested, as an alternative, that
we revert back to an approach proposed in the 2010 ABS Proposing
Release. They recommended that we allow issuers of asset classes other
than residential mortgages the option to choose between the 2011 ABS
Re-Proposal to require review of the assets upon certain triggers being
met or the 2010 ABS Proposal to allow for a third-party review
opinion.\1117\ These commenters explained that the 2010 ABS Proposal
for a third-party review opinion would limit costs on the issuers where
repurchases have not presented the same difficulties as they have in
RMBS.\1118\ However, in response to the 2010 ABS Proposal, some
commenters stated that the third-party opinion provision would not
provide investors with the protection they would need in the event
issues arise with the enforcement of representations and warranties
provisions because, in general, transaction agreements have not
included mechanisms to identify potential breaches of representations
and warranties.\1119\ The rule we are adopting is designed to protect
against potential risks even where they have not surfaced in the past.
As noted above, a group of investors commented that despite the
additional costs, increased investor protections will produce net
economic benefits to investors.\1120\ In light of these considerations,
rather than permitting a third-party opinion as an alternative
requirement for shelf eligibility, we have revised the review process
to address the costs concerns.
---------------------------------------------------------------------------

\1117\ See letters from ASF III, BoA II, and VABSS III. See also
footnote 1054.
\1118\ See letters from ASF III, BoA II, and VABSS III.
\1119\ See letters from ABAASA I, ASF I, BoA I, J.P. Morgan I,
Metlife I, Prudential I, SIFMA I, VABSS I, Vanguard, and Wells Fargo
I.
\1120\ See letter from SIFMA II-investors.
---------------------------------------------------------------------------

(3) Dispute Resolution Provision
(a) Proposed Rule
In the 2011 ABS Re-Proposal, along with the credit risk manager
proposal, we proposed to require that underlying transaction documents
include repurchase request dispute resolution procedures. As we have
noted elsewhere, not only have investors lacked a mechanism to identify
potential breaches of the representations and warranties, they have
also lacked a mechanism to require sponsors to address their repurchase
requests in a timely manner.\1121\ Under the proposal, the transaction
agreements would be required to provide that if an asset subject to a
repurchase request pursuant to the terms of the transaction agreements
is not repurchased by the end of the 180-day period beginning when
notice is received, then the party submitting such repurchase request
will have the right to refer the matter, at its discretion, to either
mediation or third-party arbitration, and the party obligated to
repurchase must agree to the selected resolution method. As noted
above, the dispute resolution provision, along with the other new shelf
transaction requirements, should encourage ABS issuers to design and
prepare ABS offerings with greater oversight and care. We believe that
the dispute resolution provision will enhance the enforceability of the
transaction terms and should incentivize issuers to provide investors
with accurate and complete information at the time of the offering. We
believe that these requirements are appropriate for asset-backed
securities transactions to be offered to the public off a shelf
registration statement.
---------------------------------------------------------------------------

\1121\ See the 2011 ABS Re-Proposal at 47956-57. See also the
Section 943 Adopting Release at 4489-90.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Commenters generally supported a dispute resolution process.\1122\
Several commenters recommended that we require that binding arbitration
be the sole process.\1123\ We received a significant number of comments
stating that 180 days is an appropriate time period for the obligated
party to review repurchase requests.\1124\ One commenter stated that
180 days may not be long enough for RMBS.\1125\ Another commenter noted
that transactions backed by assets that have shorter maturity dates
should have a shorter timeframe.\1126\ Although the proposed rule did
not specifically address payment of the costs of the dispute resolution
process, several commenters made recommendations for which party should
pay.\1127\ We also received comments that we specify that a repurchase
is not the only way a repurchase request can be satisfied.\1128\
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\1122\ See letters from ASF III, BoA II, J.P. Morgan II, MBA
III, Metlife II, Prudential II, SIFMA III-dealers and sponsors, and
Wells Fargo II.
\1123\ See letters from BoA II, J.P. Morgan II, Prudential II,
SIFMA II-investors, SIFMA III-dealers and sponsors, and Wells Fargo
II (all noting that binding arbitration would be the best form of
dispute resolution).
\1124\ See letters from ASF III, J.P. Morgan II, Metlife II, and
Prudential II.
\1125\ See letter from MBA III (stating that due to rebuttals it
may take longer than 180 days to resolve a dispute).
\1126\ See letter from Metlife II (stating that 180 days may be
too long for shorter term transactions since some investors may hold
classes that pay off sooner).
\1127\ Nine commenters suggested that the party that loses the
dispute should pay for all legal fees incurred by the prevailing
party. See letters from ABASA II, BoA II, J.P. Morgan II, MBA III,
Metlife II, SIFMA II-investors, SIFMA III-dealers and sponsors, and
Sallie Mae II. One commenter recommended that the arbitrator should
be responsible for determining who pays. See letter from Prudential
II. Another suggested that the transaction documents specify who
pays for the resolution. See letter from Wells Fargo II.
\1128\ See letters from ASF III (stating that the requirement,
as written, may have the unintended effect of restricting the
resolution of a repurchase request to only repurchasing the asset),
MBA III (stating ``given the potential for non-repurchase resolution
of a breach, MBA recommends changing the focus of the Re-proposal
from `repurchases' not completed in 180 days to `resolutions' not
completed within 180 days''), and SIFMA II-investors and SIFMA III-
dealers and sponsors (noting that remedies for a breach would be
``cure of the breach, repurchase of the affected pool asset for the
purchase price specified in the transaction documents, or, if
applicable and if provided in the transaction documents,
substitution of a pool asset having substantially similar
characteristics as the defective pool asset'').
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Dispute Resolution Shelf
Requirement
As a third transaction requirement for shelf registration, we are
requiring, as proposed but with slight modification, that the
underlying transaction documents include dispute resolution procedures
for repurchase requests.\1129\ We note that our original proposal for
the dispute resolution requirement appeared in the same subsection of
Form SF-3 as our credit risk manager proposal, even though we intended
them to operate separately from each other. Thus, while we believed
that our asset review shelf requirement would help investors evaluate
whether a repurchase request should be made, we structured the dispute
resolution provision so that investors could utilize the dispute
resolution provision for any repurchase request, regardless of whether
investors direct a review of the assets. We believe that organizing the
dispute resolution requirement as a separate subsection in the shelf
eligibility requirements will help to

[[Page 57283]]

clarify the scope of the dispute resolution provision.
---------------------------------------------------------------------------

\1129\ Disclosure regarding the dispute resolution procedures is
required in the prospectus under Item 1111(e) of Regulation AB.
---------------------------------------------------------------------------

As we have discussed above, the shelf eligibility conditions that
we are adopting are intended to help ensure that ABS shelf offerings
have transactional safeguards and features that make securities
appropriate to be issued off a shelf. We believe that the dispute
resolution provision will provide a key procedural safeguard for
investors to resolve disputes over repurchase requests in an effective
and timely manner. We expect that the dispute resolution provision
should generate efficiencies in the repurchase request process. We
believe that, as a result of the asset review provision and the dispute
provision, sponsors may have an increased incentive to carefully
consider the characteristics of the assets underlying the
securitization and to accurately disclose these characteristics at the
time of the offering. We also believe that investors should benefit
from reduced losses associated with nonperforming assets since, as a
result of this new shelf requirement, sponsors will have less of an
incentive to include nonperforming assets in the pool.
Under the new rule, the transaction agreements must provide that if
an asset subject to a repurchase request pursuant to the terms of the
transaction agreements is not resolved by the end of the 180-day period
beginning when notice is received, then the party submitting such
repurchase request will have the right to refer the matter, at its
discretion, to either mediation or third-party arbitration, and the
party obligated to repurchase or replace must agree to the selected
resolution method.\1130\ In response to comments, the final rule
applies to those assets subject to a repurchase request that has not
been resolved. We agree with several commenters that indicated that the
term ``resolved'' is more appropriate than ``repurchased,'' which was
proposed, since ``repurchased'' could have the unintended effect of
restricting resolution of a repurchase request only to repurchasing the
asset.\1131\ We also believe that investors should be able to utilize
the dispute resolution provision not only in connection with those
requests in which the sponsor has failed to respond in a timely manner
but also for those requests in which investors believe that the
resolution offered by the sponsor does not make them whole.
---------------------------------------------------------------------------

\1130\ Several commenters asked us to clarify that a repurchase
is not the only way a repurchase request can be satisfied. See
letters from ASF III, MBA III, SIFMA II-investors, and SIFMA III-
dealers and sponsors.
\1131\ See letters from ASF III, MBA III, SIFMA II-investors,
and SIFMA III-dealers and sponsors. We made a similar change in an
asset-level data point capturing repurchase requests in order to use
consistent terminology and to help ensure accurate tracking of the
status of repurchase requests. See footnote 225.
---------------------------------------------------------------------------

We realize there are possible costs associated with setting the
waiting period at 180 days before the party submitting the request has
the right to refer the matter to mediation or arbitration. On the one
hand, we recognize that there is the possibility that 180 days may not
be long enough to come to a resolution due to numerous rebuttals in
some situations, as noted by one commenter.\1132\ This commenter
recommended that the 180 days serve as a timeframe for due diligence
and discussion and that the transaction parties be permitted to specify
in the transaction agreements how much additional time beyond the 180
days the responsible party should be provided before the requesting
party has the right to refer the dispute to mediation or arbitration.
We believe that such an approach, however, may result in investors
having to wait too long before being able to proceed to mediation or
arbitration. On the other hand, we also recognize that the 180-day
period may be too long for shorter term transactions since some
investors may hold classes of assets that pay off sooner than 180 days.
Although commenters generally supported the 180-day waiting period, one
commenter recommended, for shorter term transactions, that the
timeframe be reduced to 90 days before investors could proceed to
mediation or arbitration.\1133\ While we appreciate the timing issues
raised by shorter term transactions, it is not clear that 90 days
provides the responsible party with enough time to complete due
diligence and engage in discussions with the requesting party. For
these reasons, we believe 180 days, in general, fairly balances the
need of investors for quick resolution with the desire of issuers for
time to address the request.
---------------------------------------------------------------------------

\1132\ See letter from MBA III.
\1133\ See letter from MetLife II.
---------------------------------------------------------------------------

In addition, some commenters recommended that we require binding
arbitration as the single form of dispute resolution. Because we
believe that investors should have access to all options available to
resolve a dispute, we are not requiring a specific form or process to
resolve disputes. The final rule permits a demanding party to determine
what form of dispute resolution is appropriate.
Finally, after considering the comments received, we are requiring
that the transaction documents specify that if arbitration occurs, the
arbitrator will determine the party responsible for paying the dispute
resolution fees and in the case of mediation, the parties, with the
assistance of the mediator, will mutually agree on the allocation of
the expenses incurred. While some commenters recommended that the
losing party should pay the expenses, we believe that letting the
arbitrator or the parties in mediation determine who pays balances
competing concerns. On the one hand, some commenters expressed concern
about the possibility of investors using the dispute resolution process
for frivolous disputes and therefore recommended that we require the
transaction documents to specify that the losing party pays.\1134\ On
the other hand, there may be instances where the requesting party uses
the dispute resolution process for a legitimate claim and the
arbitrator rules against the claim but believes that the requesting
party should not be required to bear all the expenses associated with
the dispute resolution.\1135\ By giving the arbitrator the discretion
to make this determination based on the facts and circumstances of the
repurchase claim at issue, we believe investors will not be discouraged
from using the dispute resolution process for valid claims while also
curbing potentially frivolous claims, given the possibility of having
to pay the fees associated with the dispute resolution.
---------------------------------------------------------------------------

\1134\ See, e.g., letters from BoA II, J.P. Morgan II, and MBA
III.
\1135\ See letter from Prudential II.
---------------------------------------------------------------------------

We recognize that the dispute resolution provision could result in
increased costs for ABS issuers and investors. We believe that these
costs will likely be similar to other securities industry dispute
resolution costs, which typically include filing fees, hearing session
fees, and other miscellaneous arbitrator or mediator expenses.
According to FINRA, arbitration and mediation filing fees depend on the
size of the claim and can be up to $500 for an amount in controversy
over $100,000.\1136\ In addition, the dispute parties will incur the
costs of arbitrator/mediator compensation, which depends on the length
of the hearing and the complexity of the case. A typical arbitration
hearing of three days can cost from $2,700 to $6,750 for an amount in
controversy in the $100,000 to $500,000 range.\1137\ A typical

[[Page 57284]]

mediation hearing of one day can cost between $1,000 and $6,400.\1138\
The parties will also incur attorneys' fees with arbitration or
mediation hearings, which will depend upon the length of the hearing,
the number of attorneys involved, and the amount of preparation
required.
---------------------------------------------------------------------------

\1136\ For more information about securities-related arbitration
and mediation, including typical costs, see FINRA's Dispute
Resolution Web site, http://www.finra.org/ArbitrationAndMediation/FINRADisputeResolution/.
\1137\ See FINRA Manual, Section 12902, Hearing Session Fees,
and Other Costs and Expenses, available at http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4190. See
also Seth Lipner, Is Arbitration Really Cheaper?, Forbes, July 14,
2009, available at http://www.forbes.com/2009/07/14/lipner-arbitration-litigation-intelligent-investing-cost.html (stating that
the average arbitration requires three days of hearings).
\1138\ See FINRA's Mediation Web site, http://www.finra.org/ArbitrationAndMediation/Mediation/Process/MediationSessions/index.htm (stating that mediations usually take one day). We used
mediation hourly rates provided by the American Arbitration
Association for cost estimates for mediation since FINRA does not
provide information on mediator's hourly rates. For more information
about the costs of mediation, see the American Arbitration
Association's Web site, www.adr.org.
---------------------------------------------------------------------------

Because the dispute resolution provision is not limited strictly to
repurchase requests connected with a review pursuant to the asset
review provision, there is a possibility that frivolous repurchase
requests could be made and thus subject to the dispute resolution
process. As discussed above, under the final rule the requesting party
could be responsible for paying the dispute resolution expenses based
on a determination by the arbitrator (or if the parties mutually agree
that the requesting party should incur these expenses in the case of
mediation). This is intended to limit the number of potentially
frivolous claims.
(4) Investor Communication
(a) Proposed Rule
In the 2011 ABS Re-Proposing Release, we proposed, as a shelf
eligibility requirement, a method for facilitating investor
communication with other investors related to their rights under the
terms of the ABS. In particular, the proposed rule would require that
the transaction agreements contain a provision requiring the party
responsible for filing the Form 10-D to include in ongoing distribution
reports on Form 10-D any request received from an investor to
communicate with other investors related to investors exercising their
rights under the terms of the asset-backed security. The request to
communicate would be required to include: the name of the investor
making the request, the date the request was received, and a
description of the method by which other investors may contact the
requesting investor. As we discussed in the 2011 ABS Re-Proposing
Release, investors have raised concerns about the inability to locate
other investors in order to enforce rights contained in the transaction
documents, such as those relating to the repurchase of underlying
assets for breach of representations and warranties.\1139\ Frequently,
in order to act, the transaction agreements require a minimum
percentage of investors acting together. Additionally, as one investor
noted, since most ABS are held by custodians or brokers in ``street
name'' through the Depository Trust Company (DTC), investors face
further difficulties in trying to locate one another to communicate
about exercising their investor rights.\1140\
---------------------------------------------------------------------------

\1139\ See the 2011 ABS Re-Proposing Release at 47959. See also
Alex Ulam, Investors Try to Use Trustees as Wedge in Mortgage Put-
Back Fight, American Banker (June 24, 2011) (noting that many
attempted put-backs have ``flamed out after investor coalitions
failed to get the 25% bondholder votes that pooling and servicing
agreements require for a trustee to be forced to take action against
a mortgage servicer''); Tom Hals & Al Yoon, Mortgage Investors
Zeroing in on Subprime Lender, Thomson Reuters (May 9, 2011) (noting
that gathering the requisite number of investors needed to demand
accountability for faulty loans pooled into investments is a
laborious task).
\1140\ See letter from MetLife I. DTC is a securities depository
and a clearing agency registered with the Commission and provides
settlement services, including immobilizing securities and making
book-entry changes to ownership of securities deposited by its
participants, in order to facilitate the end-of-day net settlement
in multiple markets. For a more detailed description of DTC's
services see The Depository Trust Company Assessment of Compliance
with the CPSS/IOSCO Recommendations for Securities Settlement
Systems (Dec. 12, 2011), http://dtcc.com/en/legal/policy-and-compliance.aspx.
---------------------------------------------------------------------------

While we did not propose specific procedural requirements for
verifying that the person requesting to communicate is a beneficial
owner of the particular ABS, we proposed to include an instruction to
limit investor verification requirements, if the underlying transaction
agreements contain such procedures, to no more than the following: (1)
If the investor is a record holder of the securities at the time of a
request to communicate, then the investor would not have to provide
verification of ownership because the person obligated to make the
disclosure will have access to a list of record holders; and (2) if the
investor is not the record holder of the securities at the time of the
request to communicate, the person obligated to make the disclosure
must receive a written statement from the record holder verifying that,
at the time the request is submitted, the investor beneficially held
the securities.
(b) Comments on Proposed Rule
Many commenters were generally supportive of the concept to allow
for mechanisms for investors to contact and communicate with each
other.\1141\ Some commenters generally supported the proposal that
investors' requests to communicate be reported on Form 10-D.\1142\
Other commenters suggested that the Commission allow for alternative
methods of communication and recommended that the Commission permit the
use of investor registries and trustee Web site processes currently in
practice for many recent CMBS transactions.\1143\ Some of these
commenters noted that it would be quicker for investors to communicate
with each other on a Web site compared to requiring the issuer to
include the notice on Form 10-D and would be less costly.\1144\ One of
these commenters also recommended a Web site approach because it would
provide investors with more privacy, which investors may want in
certain situations.\1145\ The other commenter noted that a Web site
approach could provide investors with an open and instant dialogue with
other investors.\1146\
---------------------------------------------------------------------------

\1141\ See letters from ABA II, ABAASA II, ASF III, BoA II,
CREFC II, ICI II, MBA III, Metlife II, Prudential II, VABSS III, and
Wells Fargo II.
\1142\ See letters from ASF III, BoA II, ICI II, Metlife II, and
VABSS III.
\1143\ See letters from ABA II, ABAASA II, ASF III, BoA II,
CREFC II, Metlife II, MBA III, Prudential II, VABSS III, and Wells
Fargo II.
\1144\ See letters from CREFC II and Wells Fargo II.
\1145\ See letter from CREFC II.
\1146\ See letter from Wells Fargo II.
---------------------------------------------------------------------------

Commenters suggested other methods to simplify the verification
process. One commenter opposed the proposed instruction on how an
investor's ownership of the securities is verified because most
certificates are held through DTC, which may make it difficult and
costly to determine who the ultimate holders are.\1147\ Several
commenters suggested requiring investors to complete a certification
regarding their ownership.\1148\ Another commenter suggested a written
certification plus one or more items to verify interest.\1149\ One
commenter suggested that the right to communicate be limited to current
investors and that the nature of communication be limited to a
``factual statement that the investor wishes to communicate with other
investors with respect to exercising a right under the transaction
documents.'' \1150\ This commenter explained that limiting the nature
of the

[[Page 57285]]

communication would eliminate any need for the filing party to monitor
or edit the communication and also would address any liability concerns
associated with the inclusion of references to a specific party to the
transaction or as to what contractual standard may have been violated.
Responding to a request for comment in the 2011 ABS Re-Proposing
Release,\1151\ some commenters stated the disclosure should include a
reason for the communication that would be specified in a pre-set
list.\1152\ One commenter, however, opposed requiring the issuer to
disclose the type or category of matter that the investor wishes to
discuss with other investors.\1153\
---------------------------------------------------------------------------

\1147\ See letter from CREFC II.
\1148\ See letters from MBA III and Wells Fargo II.
\1149\ See letter from ABA II (stating ``in circumstances in
which rapid verification of investor status has been required,
trustees have accepted screen shots from DTC, letters from
registered broker-dealers affirming the identity of the beneficial
owner on whose behalf they hold a position, and copies of trade
confirmations'').
\1150\ See letter from MBA III.
\1151\ See Request for Comment No. 43 in the 2011 ABS Re-
Proposing Release (requesting comment as to whether a pre-set list
of reasons for communication should be required--the pre-set list
would include the following categories: Servicing, trustee,
representations and warranties, voting matters, pool assets, and
other).
\1152\ See letters from ABAASA II and BoA II.
\1153\ See letter from ABA II (noting its belief that ``such
information is more appropriately conveyed directly by the investor
itself and should not be given an imprimatur of the issuer (or
trustee) involved in facilitating the request'').
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Investor Communication
Shelf Requirement
We are adopting, as proposed, a shelf eligibility requirement that
an underlying transaction agreement include a provision to require the
party responsible for making periodic filings on Form 10-D to include
in the Form 10-D any request from an investor to communicate with other
investors related to an investor's rights under the terms of the ABS
that was received during the reporting period by the party responsible
for making the Form 10-D filings.\1154\ Without an effective means for
investors to communicate with each other, investors may be unable to
utilize the contractual rights provided in the underlying transaction
agreements.\1155\ Therefore, we are requiring that the investor
communication provision be included in an underlying transaction
agreement so that the party responsible for making Form 10-D filings
will be contractually obligated to disclose an investor's desire to
communicate.\1156\ We continue to believe that this is an appropriate
requirement for ABS shelf eligibility because facilitating
communications among investors enables them to more effectively
exercise the rights included in the underlying transaction agreements,
which we believe will enhance the enforceability of representations and
warranties regarding the pool assets. As noted above, the new shelf
transaction requirements should encourage ABS issuers to design and
prepare ABS offerings with greater oversight and care. We believe that
stronger enforcement mechanisms should incentivize issuers to provide
investors with accurate and complete information at the time of the
offering. This shelf eligibility requirement, for example, will assist
investors in exercising their rights related to the new asset review
provision required for shelf eligibility. Those rights would include
the right to direct a review of underlying assets to determine whether
the assets comply with the representations and warranties.
Consequently, we believe that these new shelf requirements aimed at
helping investors exercise their contractual rights will assist in
increasing investors' participation in the ABS markets and thereby
foster greater capital formation.
---------------------------------------------------------------------------

\1154\ Most ABS issuers report and distribute payments to
investors on a monthly basis. The Form 10-D is required to be filed
within fifteen days after a required distribution date, and a
distribution date is typically two weeks after the end of a
reporting period. For example, under our final rule, for the month
of June, a request from an investor would have to be received prior
to the close of the reporting period on June 30, a distribution
would be due to investors by July 15, and the Form 10-D filing due
date would be July 30.
\1155\ See Paul A. Burke & Michael C. Morcom, Improving Issuer-
Investor Communication in U.S. Securitization Transactions, J.
Structured Fin., Summer 2013, at 27-31 (discussing the problems
associated with the current communication process between issuers
and investors and arguing that ``[a] critical piece of an effective
bondholder communication system is [the] initial `push' of
information out to the investor'').
\1156\ See also new Item 1121(e) (requiring disclosure of
investors' request to communicate on Form 10-D).
---------------------------------------------------------------------------

In previous releases, we have recognized that in certain
circumstances the Internet can present a cost-effective alternative or
supplement to traditional disclosure methods. We considered whether a
Web site or investor registry would be a more effective approach to
facilitate investor communication, including consideration of the
comments received supporting a Web site approach. While we appreciate
some of the potential benefits that may be afforded by a Web site
approach, such as faster dissemination of the notices and more robust
communication capabilities as noted by some commenters,\1157\ we
believe that requiring that the investor communication notices be filed
with the Form 10-D is the best way to ensure that these requests reach
investors. This approach is consistent with our efforts to facilitate
the distribution of all investor information regarding the ABS in one
place at an expected time--that is, through distribution reports that
are attached as exhibits to the Form 10-D. We also believe that this
approach is a cost-effective means for issuers to provide investors
with communication notices since we are using an existing periodic
report. Additionally, by requiring issuers to file the notices with the
Commission, as opposed to posting the notices on a Web site, we will be
able to more effectively monitor compliance with this shelf requirement
and provide investors with reliable access to the notices through
EDGAR, even at times when the markets are in distress and issuers' Web
sites are not accessible. Finally, we note that while our shelf
requirement is intended to provide investors with at least one method
to contact other investors, the final rule does not preclude issuers
from utilizing Web sites to provide investors with more robust
communications capabilities and we encourage issuers to do so.
---------------------------------------------------------------------------

\1157\ See, e.g., letters from CREFC II and Wells Fargo II.
---------------------------------------------------------------------------

We acknowledged in the 2011 ABS Re-Proposing Release that
transaction parties might want to specify procedures in the underlying
transaction agreements for verifying the identity of a beneficial owner
in a particular ABS prior to including a notice in a Form 10-D. While
we did not propose specific procedural requirements to be added to the
agreements, we did propose to limit the extent of the verification
procedures that the transaction parties could impose to verify investor
ownership. As summarized above, several commenters consisting of
issuers, investors, trustees, and trade associations suggested that the
investor verification procedures should be easy and quick to perform
and provided various recommendations for the Commission to
consider.\1158\ Taking into account suggestions from commenters, we are
modifying part of the proposed instruction to specify that, if the
investor is not the record holder of the securities, an issuer may
require no more than a written certification from the investor that it
is a beneficial owner and another form of documentation such as a trade
confirmation, an account statement, a letter from the broker or dealer,
or other similar document verifying ownership.\1159\ We are making this

[[Page 57286]]

change since ownership of most ABS is held in book-entry form through
DTC.\1160\ We are also adopting, as proposed, the other part of the
instruction that states that if the investor is the record holder of
the securities, an investor will not have to provide verification of
ownership because the person obligated to make the disclosure will have
access to a list of record holders.
---------------------------------------------------------------------------

\1158\ See letters from ABA II, BoA II, CREFC II, and MBA III.
\1159\ We note that these ownership verification procedures are
less prescriptive than the ownership eligibility requirements to
submit a proposal under Exchange Act Rule 14a-8; however, we believe
that this flexibility is appropriate because the provision is more
limited in its scope to only providing notification to other
investors of their interest to communicate.
\1160\ See letter from CREFC II (explaining that although the
trustee can request a list of beneficial owners from DTC, the
process can be costly and can take days or weeks to complete).
---------------------------------------------------------------------------

Under the final rule, the disclosure in Form 10-D is required to
include no more than the name of the investor making the request, the
date the request was received, a statement to the effect that the party
responsible for filing the Form 10-D has received a request from such
investor, stating that such investor is interested in communicating
with other investors about the possible exercise of rights under the
transaction agreements, and a description of the method by which other
investors may contact the requesting investor.\1161\ While we requested
comment on whether we should prescribe a pre-set list of objective
categories from which an investor could choose for the purpose of
indicating why it is requesting communication with other investors, we
are not requiring that the investor specify the substance of the
communication due to concerns raised by commenters. As summarized
above, some commenters opposed imposing any obligation on the party
responsible for filing the Form 10-D to monitor or edit the
communications.\1162\ We also agree with one commenter that the
substance of the communication is more appropriately conveyed directly
by the investor and should not be given an imprimatur of the party
involved in facilitating the communication request.\1163\ Thus, the
purpose of this communication requirement is not to communicate
specific issues or concerns of an investor but rather is intended to be
a method for investors to notify other investors of their interest to
communicate.
---------------------------------------------------------------------------

\1161\ See Item 1121(e) and Item 1.B. of Form 10-D.
\1162\ See letters from ABA II and MBA III.
\1163\ See letter from ABA II.
---------------------------------------------------------------------------

As proposed, we are also including an instruction to Item 1121(e)
of Regulation AB to define the type of notices that are required to be
on Form 10-D. The party responsible for filing the Form 10-D will be
required to include disclosure of only those notices of an investor's
desire to communicate where the communication relates to the investor
exercising its rights under the terms of the ABS. Thus, the party
responsible for filing is not required to disclose an investor's desire
to communicate for other purposes, such as identifying potential
customers or marketing efforts.\1164\
---------------------------------------------------------------------------

\1164\ To the extent an investor wishes to communicate with
other investors about other matters, the investor must consider
independently the potential applicability of other regulatory
provisions under the federal securities laws. For example, an
investor proposing to commence a tender offer for securities in the
ABS class must evaluate whether such a communication is subject to
Exchange Act Sections 14(d) and 14(e) and Regulations 14D and 14E
thereunder.
---------------------------------------------------------------------------

While we acknowledge that issuers will incur some cost to implement
this provision, we believe, taken together with the new asset review
provision, that the disclosure will benefit investors by helping them
establish communication and overcome collective action problems. As a
result, this requirement should help investors exercise their rights
under the transaction agreements, including those that are required to
be included in the transaction documents to comply with shelf
eligibility requirements. We acknowledge that the rule will minimally
increase the costs for the party responsible for making the periodic
filings on Form 10-D since it will need to modify its existing
information systems to receive investors' requests to communicate.
However, this is a very low cost method to help distinguish shelf
appropriate ABS offerings. The Form 10-D is an existing periodic report
that provides investors with, among other things, distribution
information and pool performance information for the distribution
period. Given the nature and frequency of the Form 10-D, we believe
that adding the investor communication request requirement to the Form
10-D is appropriate and beneficial to investors because it will
facilitate the distribution of all investor information regarding the
ABS in one place, at an expected time. Using an existing form will also
limit the cost for issuers because a separate reporting mechanism will
not be necessary. While we have sought to limit costs by using Form 10-
D, we recognize for those issuers that currently offer investor
registries or Web sites and decide to continue to offer those methods
of communication that there will be additional costs.
(b) Shelf Eligibility--Registrant Requirements
In the 2010 ABS Proposing Release, we proposed new registrant
requirements related to compliance with the proposed transaction
requirements for shelf eligibility (i.e., risk retention, a third-party
opinion provision in transaction agreements, an officer certification,
and an undertaking to file ongoing Exchange Act reports).\1165\ We
proposed that prior to filing a registration statement on proposed Form
SF-3 to the extent the depositor, any issuing entity that was
previously established by the depositor, or an affiliate of the
depositor is or was at any time during the previous twelve months
required to comply with the proposed transaction requirements of Form
SF-3 with respect to a previous offering of asset-backed securities
involving the same asset class, such depositor, each such issuing
entity, and any affiliate of the depositor must have filed all material
required to be filed during the twelve months (or shorter period that
the entity was required to have filed such materials). Also, such
material, other than certain specified reports on Form 8-K, must have
been filed in a timely manner.\1166\ Finally, we proposed a separate
registrant requirement that there be disclosure in the registration
statement stating that the proposed registrant requirements have been
complied with.
---------------------------------------------------------------------------

\1165\ For a list of existing shelf eligibility conditions that
we are including in new Form SF-3, see footnote 874.
\1166\ See General Instruction I.A.2 to Form SF-3.
---------------------------------------------------------------------------

In light of the changes to proposed amendments to the transaction
requirements for shelf eligibility, we revised the proposed registrant
requirements to make conforming changes in the 2011 ABS Re-Proposal. We
re-proposed that to the extent the depositor, any issuing entity that
was previously established by the depositor, or any affiliate of the
depositor is or was at any time during the twelve month look-back
period required to comply with the proposed transaction requirements of
Form SF-3 with respect to a previous offering of asset-backed
securities involving the same asset class then the registrant must meet
certain registrant requirements at the time of filing the shelf
registration statement. The re-proposed registrant requirements would
require that such depositor, each such issuing entity, and any
affiliate of the depositor must have timely filed all required
certifications and all transaction agreements that contain the required
provisions relating to the credit

[[Page 57287]]

risk manager, repurchase request disputes, and investor communication.
In addition, we re-proposed to make the proposed separate
registrant requirement that would have required the registrant to
include disclosure in the registration statement stating the depositor
has complied with the registrant requirements an instruction rather
than a shelf eligibility registrant requirement.
Because we did not receive any comments on the revised registrant
requirements for shelf eligibility, we are adopting the revised
registrant requirements largely as re-proposed. Under the final rule,
we are retaining the registrant requirement that was previously in Form
S-3 relating to delinquent filings of the depositor or an affiliate of
the depositor for purposes of new Form SF-3. Since registrants are
already required to comply with this particular existing shelf
registrant requirement, registrants should not incur additional
compliance costs.
The final rule also requires that to the extent the depositor or
any issuing entity that was previously established by the depositor, or
any affiliate of the depositor is or was at any time during the twelve
month look-back period required to comply with the transaction
requirements of Form SF-3 with respect to a previous offering of asset-
backed securities involving the same asset class, then such depositor,
each such issuing entity, and any affiliate of the depositor, must have
timely filed all required certifications and all transaction agreements
that contain the required provisions relating to the asset review
provision, dispute resolution, and investor communication.
We believe that connecting the registrant requirements to the
transaction requirements of prior offerings by the depositor, or
affiliates of the depositor, will incentivize the depositor to timely
file all required transaction documents with the required provisions
and the required certifications.
In addition, as proposed, we are including an instruction stating
that the registrant must disclose in a prospectus that it has met the
registrant requirements. We believe disclosure of compliance with the
registrant requirements will provide a means for market participants
(as well as the Commission and its staff) to better gauge compliance
with the shelf eligibility conditions of Form SF-3.
(c) Annual Evaluation of Form SF-3 Eligibility in Lieu of Section
10(a)(3) Update
(1) Annual Compliance Check Related to Timely Exchange Act Reporting
(a) Proposed Rule
As we noted in the 2010 ABS Proposing Release, Form S-3 eligibility
is determined at the time of filing the registration statement and
again at the time of updating the registration statement under
Securities Act Section 10(a)(3) by filing audited financial
statements.\1167\ We explained that, because ABS registration
statements do not contain financial statements of the issuer, we
believe a different periodic determination of continued shelf
eligibility must be established. We believed that such an evaluation
would provide us and the staff with a better means to oversee
compliance of the new Form SF-3 eligibility conditions that would
replace the investment-grade ratings requirement. Therefore, in lieu of
the Section 10(a)(3) updating, we proposed to revise Securities Act
Rule 401 to require, as a condition to conducting an offering off an
effective shelf registration statement, an annual evaluation of whether
the Exchange Act reporting registrant requirements have been satisfied.
An ABS issuer wishing to conduct a takedown off an effective shelf
registration statement would be required to evaluate whether the
depositor, any issuing entity previously established by the depositor
or any affiliate of the depositor that was required to report under
Sections 13(a) and 15(d) of the Exchange Act during the previous twelve
months for asset-backed securities involving the same asset class, have
filed such reports on a timely basis, as of 90 days after the end of
the depositor's fiscal year end.\1168\ Under this proposal the related
registration statement could not be utilized for subsequent offerings
for at least one year from the date the depositor or the affiliated
issuing entity that had failed to file Exchange Act reports then became
current in its Exchange Act reports (and the other requirements had
been met).
---------------------------------------------------------------------------

\1167\ 15 U.S.C. 77j(a)(3).
\1168\ See the 2004 ABS Adopting Release at 1525 (noting our
belief that given past deficiencies in Exchange Act reporting
compliance in the ABS sector that issuers that fail to comply with
their responsibilities under the Exchange Act for prior transactions
should not continue to receive the benefits of shelf registration
and, further, that issuers should not be able to create a new
special purpose depositor to avoid the consequences of Exchange Act
reporting noncompliance).
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
We received only a few comments on our proposal. One commenter
expressed concern that it is not possible for ABS issuers to fully
verify compliance with the Exchange Act reporting registrant
requirements as of 90 days after the end of the depositor's fiscal year
end because there could be an unknown defect, latent or otherwise, in
one or another of the relevant issuing entities' reports or reporting
history.\1169\ Another commenter suggested that the loss of shelf
eligibility should not be automatic.\1170\ This commenter suggested
allowing for an explanation and any resulting penalty should be at the
staff's discretion.\1171\
---------------------------------------------------------------------------

\1169\ See letter from ASF III.
\1170\ See letter from SIFMA III-dealers and sponsors.
\1171\ Id.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
Under the new rule, an ABS issuer with an effective shelf
registration statement will be required to evaluate whether the
depositor, any issuing entity previously established by the depositor
or any affiliate of the depositor was required to report under Sections
13(a) or 15(d) of the Exchange Act during the previous twelve months
for asset-backed securities involving the same asset class, have filed
such reports on a timely basis. As noted above, one commenter expressed
concern that ABS issuers would be unable to fully verify compliance
with the Exchange Act reporting registrant requirements as of 90 days
after fiscal year end due to an unknown defect in one or another of the
relevant issuing entities' periodic reports or reporting history.\1172\
We note that this annual compliance check is the same evaluation
undertaken today by registrants at the time of filing the registration
statement and at the time of filing Form 10-K; therefore, we expect
that issuers would use the same procedures that are used to verify
compliance at the time of filing the registration statement. As a
result, this rule conforms the ABS process to the corporate issuers'
process. Additionally, we believe that the costs will be minimal and
limited to ABS issuers performing the same procedures they perform at
the time of filing a registration statement. We believe that

[[Page 57288]]

this annual shelf eligibility compliance check will benefit investors
because it will encourage issuers to file their Exchange Act reports in
connection with prior offerings at the required time and therefore
enhance informed investment decisions. We acknowledge, however, that
there will be costs to those issuers that determine, as a result of
their annual evaluation, that they did not timely file their Exchange
Act reports and lose shelf access since they will be required to use
Form SF-1. These costs are related to market timing given the
possibility of additional staff review that may occur with a Form SF-1
compared to Form SF-3. We believe that this new provision simply
ensures that the shelf process for ABS includes a mechanism to check
whether the shelf issuer is current and timely with its Exchange Act
reporting obligations as is currently required for corporate shelf
issuers.
---------------------------------------------------------------------------

\1172\ See letter from ASF III (also suggesting that we follow
Rule 401(g) and deem the registration statement to be filed on the
proper registration form unless and until the Commission notifies
the issuer of its objection). We note that Rule 401(g) applies to
automatically effective registration statements, and those are not
the type of registration statements in question here.
---------------------------------------------------------------------------

(2) Annual Compliance Check Related to the Fulfillment of the
Transaction Requirements in Previous ABS Offerings
(a) Proposed Rule
In the 2010 ABS Proposing Release, we also proposed to require
that, for continued shelf eligibility, an ABS issuer would be required
to conduct an evaluation at the end of the fiscal quarter prior to the
takedown of whether the ABS issuer was in compliance with the proposed
transaction requirements relating to risk retention, third-party
opinions, the officer certification, and the undertaking to file
ongoing reports. If the ABS issuer was not in compliance with the
transaction requirements, then it could not utilize the registration
statement or file a new registration statement on Form SF-3 until one
year after the required filings were filed.
In the 2011 ABS Re-Proposal, we re-proposed this registrant
requirement to require an annual evaluation of compliance with the
transaction requirements of shelf registration rather than an
evaluation on a quarterly basis as we had originally proposed.
Therefore, notwithstanding that the registration statement may have
been previously declared effective, in order for the registrant to
conduct a takedown off an effective registration statement, an ABS
issuer would be required to evaluate, as of 90 days after the end of
the depositor's fiscal year end, whether it meets the registrant
requirements. Under the 2011 ABS Re-Proposal, to the extent that the
depositor or any issuing entity previously established by the depositor
or any affiliate of the depositor, is or was at any time during the
previous twelve months, required to comply with the proposed new
transaction requirements related to the certification, credit risk
manager and repurchase dispute resolution provisions, and investor
communication provision, with respect to a previous offering of ABS
involving the same asset class, such depositor and each issuing entity
must have filed on a timely basis, at the required time for each
takedown, all transaction agreements containing the provisions that are
required by the proposed transaction requirements as well as all
certifications.
In response to commenters' concerns that the one-year penalty for
non-compliance with the transaction requirements was too extreme, we
revised and re-proposed to allow depositors and issuing entities to
cure any failure to file the required certification or transaction
agreements with the required shelf provisions. Under the proposed cure
mechanism, the depositor or any issuing entity would be deemed to have
met the registrant requirements, for purposes of Form SF-3, 90 days
after the date all required filings were made.
(b) Comments on Proposed Rule
Commenters recommended that we reduce the waiting period after
curing the deficiency. Some commenters requested that the waiting
period after curing the deficiency be reduced to 30 days.\1173\ Another
commenter recommended changing the period to 30 or 45 days.\1174\
---------------------------------------------------------------------------

\1173\ See letters from CREFC II and Kutak.
\1174\ See letter from MBA III.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
The final rule includes a registrant requirement that requires an
annual evaluation of compliance with the transaction requirements of
shelf registration, as re-proposed in the 2011 ABS Re-Proposing
Release. Under the final rule, notwithstanding that the registration
statement may have been previously declared effective, in order to
conduct a takedown off an effective shelf registration statement, an
ABS issuer would be required to evaluate, as of 90 days after the end
of the depositor's fiscal year end, whether it meets the registrant
requirements, which is the same look-back period for the ABS issuer as
the compliance evaluation for Exchange Act reporting described above.
Under the final rule, a depositor and issuing entity may cure the
deficiency if it subsequently files the information that was required.
After a waiting period, it will be permitted to continue to use its
shelf registration statement.\1175\ Under the cure mechanism, the
depositor and issuing entity will be deemed to have met the registrant
requirements, for purposes of Form SF-3, 90 days after the date all
required filings are filed.
---------------------------------------------------------------------------

\1175\ Curing the deficiency also allows the depositor, or its
affiliates, to file a new registration statement if it also meets
the other registrant requirements. See General Instruction I.A.1. of
Form SF-3. As we emphasized in the 2011 ABS Re-Proposing Release,
failure to file the information required (i.e., the required
certification and transaction agreements with required provisions)
will be a violation of our rules, and subject to liability
accordingly. Furthermore, failing to provide disclosure at the
required time periods may raise serious questions about whether all
required disclosure was provided to investors prior to investing in
the securities.
---------------------------------------------------------------------------

Because the issuer can cure the deficiency while it continues to
use the shelf and before the required annual evaluation, the issuer can
avoid being out of the market. For example, a depositor with a December
31 fiscal year end has an effective shelf registration statement and on
March 30 of Year 1, it evaluates compliance with all registrant
requirements under new Rule 401(g) (90 days after the last fiscal year
end) and determines that it is in compliance. The depositor then offers
ABS but does not timely file the required transaction agreements that
should have been filed on June 20 of Year 1. The depositor would be
able to continue to use its existing shelf until it is required to
perform the annual evaluation required by new Rule 401(g), on March 30
of Year 2. After March 30 of Year 2 and until June 20 of Year 2 (one
year after the agreements should have been filed), the depositor would
not be able to offer ABS off of the shelf registration statement, and
would not be permitted to file a new shelf registration statement.
However, if the depositor had cured the deficiency by filing the
agreements on July 1 of Year 1, under the final rule, a new
registration statement could be filed 90 days after July 1 of Year 1
(or September 29 of Year 1), instead of waiting until June 20 of Year 2
(when it otherwise would meet the twelve month timely filing
requirement). In that case, at the time of the next annual evaluation
for the registration statement on March 30 of Year 2, the depositor
would be deemed to have met the registrant requirements because it
would have cured the deficiency more than 90 days earlier on July 1 of
Year 1, and thus the depositor could continue to use its existing shelf
registration statement.\1176\
---------------------------------------------------------------------------

\1176\ Using the example above, if the failure occurs in the
first 90 days of the year before the March 30 annual compliance
evaluation, but the issuer corrects the deficiency by filing the
required information before providing the evaluation on March 30,
the issuer will still be deemed to satisfy the registrant
requirements for purposes of continued shelf eligibility and thus
not be required to wait until March 30 of the next year to use the
existing shelf registration statement or file a new one. The issuer,
however, must still wait 90 days after filing the required
information before using the existing effective shelf registration
statement or filing a new shelf registration statement. We have
revised the requirement to make this clear.

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

[[Page 57289]]

Our approach is designed to strike a balance between encouraging
issuers' compliance with the shelf transaction requirements and
commenters' concerns that the one-year time out period in the 2010 ABS
Proposals was too long. Also, as discussed above, we received comments
that 90 days was still too long and that a 30 or 45 day waiting period
would be more appropriate.\1177\ We continue to be concerned that 30 or
45 days would not adequately incentivize issuers to comply with the
transaction requirements. Based on staff observations of shelf
offerings since the crisis, registrants typically conduct between two
and three offerings during the course of a year. Under such conditions,
a short waiting period such as 30 or 45 days would provide minimal, if
any, incentive to comply with transaction requirements.
---------------------------------------------------------------------------

\1177\ See letters from MBA III and SIFMA III-dealers and
sponsors.
---------------------------------------------------------------------------

We are not adopting another commenter's suggestion that the loss of
shelf eligibility not be automatic and that issuers should instead be
allowed to explain and be penalized at the staff's discretion.\1178\
The eligibility requirement is an incentive for issuers to comply with
the shelf transaction requirements--providing the market with
information about the issuer and thus an appropriate eligibility
criterion to offer securities off the shelf. Furthermore, an ad hoc
review of justifications for delays or missing filings would be
inefficient use of the Commission's resources and would not incentivize
issuers to monitor compliance.
---------------------------------------------------------------------------

\1178\ See letter from SIFMA III-dealers and sponsors.
---------------------------------------------------------------------------

We believe that the annual shelf eligibility compliance check will
benefit investors because it will encourage issuers to file their
transaction documents in connection with prior offerings at the
required time and therefore enhance informed investment decisions. We
acknowledge that the annual evaluations of compliance with the
transaction requirements will impose additional costs on ABS issuers in
the form of systems needed to examine compliance with the filing
requirements. However, we believe that these costs should be minimal
because issuers should already have, in most instances, systems
designed to ensure that the transaction agreements are being filed
timely in accordance with rules under the Securities Act.
4. Continuous Offerings
(a) Proposed Rule
In the 2010 ABS Proposing Release, we had proposed to amend Rule
415 to limit the registration of continuous offerings for ABS offerings
to ``all or none'' offerings. In an ``all or none'' offering, the
transaction is completed only if all of the securities are sold. In
contrast, in a ``best-efforts'' or ``mini-max'' offering, a variable
amount of securities may be sold by the issuer. In those latter cases,
because the size of the offering would be unknown, investors would not
have the transaction-specific information and, in particular, would not
know the specific assets to be included in the transaction. Thus,
information about the asset pool required by Item 1111 of Regulation
AB, either in its existing form or as amended today, could not be
complied with.\1179\ As noted in the 2010 ABS Proposing Release, we
believe that our proposed restriction would help ensure that ABS
investors receive sufficient information relating to the pool assets,
if an issuer registered an ABS offering to be conducted as a continuous
offering.\1180\
---------------------------------------------------------------------------

\1179\ The staff has advised us that they believe that neither
``best efforts'' offerings nor any continuous offerings have been
utilized in the past for public offerings of asset-backed
securities.
\1180\ See the 2010 ABS Proposing Release at 23350.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Only one commenter commented on the proposal to limit the use of
continuous offerings on shelf to ``all or none'' offerings.\1181\ This
commenter agreed that ``in a continuous offering where the ultimate
size of the offering is unknown, investors would not necessarily know
the specific assets to be included in the transaction'' and the
proposal properly eliminates this issue. However, this commenter
suggested more guidance on what constitutes an ``all or none''
offering.\1182\
---------------------------------------------------------------------------

\1181\ See letter from ASF I.
\1182\ See letter from ASF I (suggesting that there are
offerings that should not be included in the ``mini-max''
definition).
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We are adopting the rule as proposed. The new rule will provide ABS
investors in continuous ABS offerings with information about all
relevant pool assets and would close a potential gap in our regulations
for ABS offerings. Under the final rule, the continuous offering must
be commenced promptly and must be made on the condition that all of the
consideration paid for such security will be promptly refunded to the
purchaser unless (A) all of the securities being offered are sold at a
specified price within a specified time, and (B) the total amount due
to the seller is received by the seller by a specified date.\1183\
---------------------------------------------------------------------------

\1183\ All or none offerings are described in Exchange Act Rules
10b-9 [17 CFR 240.10b-9] and 15c2-4 [17 CFR 240.15c2-4] in the same
manner.
---------------------------------------------------------------------------

As one commenter noted, in some ABS offerings, all or a portion of
one or more classes of ABS that are offered for sale to investors
through one or more underwriters may initially be retained by the
depositor or sold to one or more of its affiliates.\1184\ In these
cases, the offerings may be conducted as a firm commitment underwritten
offering or as a best efforts offering. The commenter believed that
such offering would not be a ``mini-max'' offering because the total
size of the offering is known and disclosed in the prospectus. We agree
with the commenter that these offerings would not be a ``mini-max''
offering if the prospectus includes all transaction-specific
information, including information about the specific assets included
in the pool.
---------------------------------------------------------------------------

\1184\ See letter from ASF I (noting that this typically arises
when the offered securities have a lower return or carry a lower
spread relative to market demand and confirming that any subsequent
sale of the securities by the depositor or its affiliates would be
undertaken in accordance with the registration provisions under the
Securities Act).
---------------------------------------------------------------------------

This rule will be beneficial to investors in continuous offerings
by ensuring that the information they receive is about all pool assets
underlying the asset-backed securities they purchase. While ABS
offerings are typically not conducted as a continuous offering, we
believe that it is important for us to close a potential gap in our
regulations for ABS offerings so that ABS investors receive this
material information when making an investment decision--irrespective
of the type of public offering. We acknowledge that restricting
continuous offerings to ``all or none'' limits issuers' choice and may
potentially impose costs on those issuers that would have preferred to
conduct the offering on a best efforts basis. However, we also note
that the staff is not aware of any prior public offering of ABS that
was conducted on a continuous offering--either as ``all or none'' or
best efforts--and therefore we expect these costs to be minimal. For
similar reasons, we do not believe that the amended rule will have an
impact

[[Page 57290]]

on competition, efficiency, or capital formation.
5. Mortgage Related Securities
(a) Proposed Rule
In the 2010 ABS Proposing Release, we proposed to require that
offerings of mortgage related securities be eligible for shelf
registration on a delayed basis only if, like other asset-backed
securities, they meet the registrant and transaction requirements for
shelf registration. Under the proposal, delayed shelf offerings of
mortgage related securities could be registered only on new Form SF-3,
and accordingly, must meet the eligibility requirements of Form SF-3.
We proposed eliminating the provision in Rule 415 that permits the
registration of ``mortgage related securities,'' as that term is
defined in Section 3(a)(41) of the Exchange Act, for shelf offerings
without regard to form eligibility requirements. This was a provision
that was added to Rule 415 contemporaneous with the enactment of
SMMEA.\1185\ Therefore, under the provision, an offering of mortgage
related securities did not have to meet the requirements of Form S-3
and could have been registered on a delayed basis on Form S-1.\1186\ As
we stated in the 2010 ABS Proposing Release, we proposed this
requirement based on our belief that mortgage related securities should
be required to meet all the requirements that we proposed for shelf
eligibility in order to be eligible for registration on a delayed basis
since these securities present the same complexities and concerns as
other ABS.\1187\
---------------------------------------------------------------------------

\1185\ See Section V.A. Background and Economic Discussion.
\1186\ See footnote 61 of the 2004 ABS Adopting Release.
\1187\ See the 2010 ABS Proposing Release at 23350.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
One commenter agreed that mortgage related securities should be
held to the same standards as other asset-backed securities.\1188\
Another commenter believed that both proposed Forms SF-1 and SF-3
should be available for delayed offerings of mortgage related
securities ``to accommodate issuers or transactions that may not have a
need for an SF-3 registration or assets that are unique and better
suited for an SF-1 filing,'' but the commenter did not provide specific
examples or further explanation.\1189\
---------------------------------------------------------------------------

\1188\ See letter from CFA I.
\1189\ See letter from MBA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We are revising Rule 415 as proposed. The change requires that
mortgage related securities meet all criteria for eligibility for shelf
registration on new Form SF-3. We believe that mortgage related
securities should meet all the requirements we are adopting in order to
be eligible for shelf registration on a delayed basis since these
securities present the same complexities and concerns as other asset-
backed securities. If we continue to allow issuers of mortgage related
securities to offer securities on a delayed basis off the shelf without
regard to the shelf eligibility requirements, we would effectively
allow mortgage related securities issuers to circumvent the
requirements we are adopting.
We believe that the amendment to Rule 415 adopted today will result
in consistent and fair treatment of all asset-backed securities,
regardless of the nature of the underlying pool assets. We believe that
the impact of this rule on competition and capital formation will be
minimal since most, if not all, issuers of mortgage related securities
have met the shelf eligibility requirements and conducted offerings off
shelf registration statements.

C. Exchange Act Rule 15c2-8(b)

1. Proposed Rule
Except for securities issued under master trust structures, shelf-
eligible ABS issuers generally are not reporting issuers at the time of
issuance. Under Exchange Act Rule 15c2-8(b),\1190\ with respect to an
issue of securities where the issuer has not been previously required
to file reports pursuant to Sections 13(a) or 15(d) of the Exchange
Act, unless the issuer has been exempted from the requirement to file
reports thereunder pursuant to Section 12(h) of the Exchange Act, a
broker or dealer is required to deliver a copy of the preliminary
prospectus to any person who is expected to receive a confirmation of
sale at least 48 hours prior to the sending of such confirmation (``48-
hour preliminary prospectus delivery requirement''). The rule contains
an exception to the 48-hour preliminary prospectus delivery requirement
for offerings of asset-backed securities eligible for registration on
Form S-3. An exception to the 48-hour preliminary prospectus delivery
requirement was first provided in 1995 by staff no-action
position.\1191\ This staff position was later codified in 2004.\1192\
---------------------------------------------------------------------------

\1190\ 17 CFR 240.15c2-8(b).
\1191\ See footnote 163 of the 2004 ABS Adopting Release and
accompanying text (discussing staff no-action letters providing
relief to ABS issuers from Rule 15c2-8(b)).
\1192\ In the 2004 ABS Adopting Release, we noted some concerns
that investors did not have sufficient time to consider ABS offering
information. However, as we were considering other proposals at that
time that sought to address information disparity in the offering
process, we decided to codify the staff position.
---------------------------------------------------------------------------

In light of recent economic events and to make this rule consistent
with our other proposed revisions, in the 2010 ABS Proposing Release,
we proposed to eliminate this exception so that a broker or dealer
would be required to deliver a preliminary prospectus at least 48 hours
before sending a confirmation of sale for all offerings of asset-backed
securities, including those involving master trusts. Because each pool
of assets in an ABS offering is unique, we believe that an ABS offering
is akin to an IPO, and therefore we believe the 48-hour preliminary
prospectus delivery requirement in Rule 15c2-8(b) should apply. Even
with subsequent offerings of a master trust, the offerings are more
similar to an IPO given that the mix of assets changes and is different
for each offering. Additionally, requiring that a broker or dealer
provide an investor with a preliminary prospectus at least 48 hours
before sending a confirmation of sale should be feasible and made
easier to implement as a result of our proposal that a form of
preliminary prospectus be filed with the Commission at least three
business days in advance of the first sale in a shelf offering.
2. Comments on Proposed Rule
Commenters generally supported the proposal.\1193\ Several trade
associations agreed that investors should have sufficient time to
review an offering.\1194\ One trade association supported the proposal,
but suggested an ``access equals delivery'' model akin to final
prospectuses to satisfy the requirements.\1195\ One individual
commenter supported the proposal but suggested that ABS structured as
master trusts be treated differently so as not to require information
delivered previously to be delivered again.\1196\
---------------------------------------------------------------------------

\1193\ See letters from ASF I, A. Zonca, BoA I, MBA I, Sallie
Mae I, and SIFMA I.
\1194\ See letters from ASF I, MBA I, and SIFMA I.
\1195\ See letter from ASF. See also letters from MBA I and
SIFMA I (focusing their comments in this area on the waiting period
that would be required by proposed Rules 424(h) and 430D).
\1196\ See letter from A. Zonca (also suggesting that ABS master
trusts not be required to deliver the information if any changes to
previously delivered information relates to new account additions
with balances representing less than five percent of the master
trust).

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

[[Page 57291]]

3. Final Rule and Economic Analysis of the Final Rule
We are eliminating the exception in Rule 15c2-8(b) for shelf-
eligible asset-backed securities from the 48-hour preliminary
prospectus delivery requirement as proposed.\1197\ Under the final
rule, a broker or dealer is required to comply with the 48-hour
preliminary prospectus delivery requirement with respect to the sale of
securities by each ABS issuer, regardless of whether the issuer has
previously been required to file reports pursuant to Sections 13(a) or
15(d) of the Exchange Act.\1198\ In addition, the 48-hour preliminary
prospectus delivery requirement also applies to ABS issuers utilizing
master trust structures that are exempt from the reporting requirements
pursuant to Section 12(h) of the Exchange Act. This requirement is
necessary because assets in a master trust routinely change, whether or
not they are exempt from or subject to Section 13(a) or 15(d) reporting
requirements. In a master trust securitization, assets may be added to
the pool in connection with future issuances of the securities backed
by the pool.\1199\ Although ABS issuers utilizing master trust
structures may be reporting under the Exchange Act at the time of a
``follow-on'' or subsequent offering of securities, additional assets
are added to the entire pool backing the trust in connection with a
subsequent offering of securities.
---------------------------------------------------------------------------

\1197\ Because of the other changes we are adopting, we are also
repealing Securities Act Rule 190(b)(7). Rule 190(b)(7) provides
that if securities in the underlying asset pool of asset-backed
securities are being registered, and the offering of the asset-
backed securities and the underlying securities is not made on a
firm commitment basis, the issuing entity must distribute a
preliminary prospectus for both the underlying securities and the
expected amount of the issuer's securities that is to be included in
the asset pool to any person who is expected to receive a
confirmation of sale of the asset-backed securities at least 48
hours prior to sending such confirmation. Rule 190(b)(7) effectively
overrules the exclusion in Rule 15c2-8 for ABS issuers from the 48-
hour preliminary prospectus delivery requirement for particular
types of ABS offerings. Because we are repealing the Rule 15c2-8
exclusion for ABS issuers, and because our disclosure requirements
regarding the underlying securities for resecuritizations requires
significantly more information than what is required in Rule
190(b)(7) to be provided in the preliminary prospectus, we are
deleting Rule 190(b)(7).
\1198\ See definition of issuer in relation to asset-backed
securities in Exchange Act Rule 3b-19.
\1199\ The typical master trust securitization is backed by
assets arising out of revolving accounts such as credit card
receivables or dealer floorplan financings.
---------------------------------------------------------------------------

The adoption of today's amendment will benefit investors by
allowing them more time to consider the characteristics of the
offering. We recognize that this benefit may be lower for investors in
ABS structured as master trusts, because such offerings are issued from
an existing issuing entity, which would have previously disclosed much
of the information to be provided in the 48-hour preliminary
prospectus. Nonetheless, such investors should benefit from having
additional time to consider information about the new assets that is
not provided in Exchange Act reports. The cost of today's amendment
will be borne by issuers, who will have to prepare and provide to
investors the preliminary prospectus. These costs will likely be small
as a result of our other new rule requiring that a preliminary
prospectus be filed with the Commission at least five days in advance
of the first sale.\1200\
---------------------------------------------------------------------------

\1200\ See Section V.B.1 New Shelf Registration Procedures.
---------------------------------------------------------------------------

We considered one commenter's suggestion to provide for an ``access
equals delivery'' model akin to final prospectuses.\1201\ Access equals
delivery is only permitted for a final prospectus and not a preliminary
prospectus. The rule is the same for prospectuses of both corporate
securities as well as ABS. The commenter did not address why ABS should
be different from corporate securities in the context of delivery of a
preliminary prospectus under Rule 15c2-8(b).\1202\
---------------------------------------------------------------------------

\1201\ See letter from ASF I. See also the Securities Offering
Reform Release at 44783.
\1202\ However, as is the case today, delivery of a preliminary
prospectus may be made electronically as permitted under our current
rules. See Use of Electronic Media for Delivery Purposes, Release
No. 33-7233 (Oct. 6, 1995) [60 FR 53458] (the 1995 Release).
---------------------------------------------------------------------------

We are also adopting, as proposed, a correcting amendment to Rule
15c2-8(j). Paragraph (j) states that the terms ``preliminary
prospectus'' and ``final prospectus'' include terms that are defined in
Rule 434.\1203\ In 1995, at the same time we adopted Rule 434, we added
paragraph (j) to expand the use of the terms ``preliminary prospectus''
and ``final prospectus'' to reflect the terminology used in Rule
434.\1204\ Rule 434, however, was later repealed in 2005.\1205\
Accordingly, we are deleting paragraph (j), which is no longer
applicable.
---------------------------------------------------------------------------

\1203\ 17 CFR 230.434. Securities Act Rule 434 allowed issuers
and other offering participants to meet their prospectus delivery
requirement by delivering a preliminary prospectus and a term sheet
or abbreviated term sheet before or at the time of sale. The
information contained in the preliminary prospectus, confirmation
and term sheet or abbreviated term sheet must, in the aggregate,
meet the informational requirements of Securities Act Section 10(a).
\1204\ See Section II.B.4.a of Prospectus Delivery; Securities
Transactions Settlement, Release No. 33-7168 (May 11, 1995) [60 FR
26604].
\1205\ Rule 434 was repealed in the Securities Offering Reform
Release.
---------------------------------------------------------------------------

D. Including Information in the Form of Prospectus in the Registration
Statement

1. Presentation of Disclosure in Prospectuses
(a) Proposed Rule
We proposed to eliminate the current practice in shelf ABS
offerings of providing a base prospectus and prospectus supplement by
requiring the filing of a form of prospectus at the time of
effectiveness of the Form SF-3 and a single prospectus for each
takedown. As we noted in the 2010 ABS Proposing Release, we are
concerned that the base and supplement format has resulted in unwieldy
documents with excessive and inapplicable disclosure that is not useful
to investors.\1206\ To address this concern, we proposed to add a
provision in proposed Rule 430D and an instruction to proposed Form SF-
3 that would require ABS issuers to file a form of prospectus at the
time of effectiveness of the proposed Form SF-3 and to file a single
prospectus for each takedown, which would include all of the
information required by Regulation AB. We also proposed to require each
depositor to file a separate registration statement for each form of
prospectus. Under this proposal, each registration statement would
cover offerings by depositors securitizing only one asset class.
---------------------------------------------------------------------------

\1206\ See the 2010 ABS Proposing Release at 23352.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Several commenters supported \1207\ our proposal requiring the
filing of one integrated prospectus rather than a base prospectus and
prospectus supplement for each takedown, and one commenter
opposed.\1208\ One commenter, in support of the proposed rules,
believed that our proposal will provide investors with clearer
information relating to the assets that are the subject of the takedown
by not being encumbered with information that may not relate to that
particular transaction.\1209\ Another commenter, opposing the proposal,
argued that our concern that the base and supplement format has
resulted in unwieldy documents with excessive and inapplicable
disclosure that is not useful to investors is unwarranted.\1210\
---------------------------------------------------------------------------

\1207\ See letters from BoA I, CFA I, and MBA I.
\1208\ See letter from ASF I.
\1209\ See letter from CFA I.
\1210\ See letter from ASF I (expressed views of issuers only).
ASF investor members offered mixed views on the proposal.
---------------------------------------------------------------------------

With respect to our proposal to limit each shelf registration
statement to one

[[Page 57292]]

asset class, one commenter asserted its belief that this proposal had
no bearing on the nature and quality of disclosure for any particular
shelf offering.\1211\ This commenter also noted that our proposed
limitation would not permit securitization platforms where more than
one depositor transfers or sells pool assets into the same issuing
entity to conduct shelf offerings. The commenter, although opposing the
proposal, recommended that the Commission clarify the scope of any
limitation so that multiple depositors who transfer or sell pool assets
into the same issuing entity would be permitted under the final rule.
---------------------------------------------------------------------------

\1211\ See letter from ASF I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments provided, we are adopting the rule
regarding presentation of disclosure in prospectuses as proposed so
that issuers must file a form of prospectus at the time of
effectiveness of Form SF-3 and file a single prospectus for each
takedown.\1212\ We continue to believe that the current format has the
unintended effect of encouraging ABS issuers to draft disclosure
documents that build in maximum flexibility for as many differing
transactions as possible with the investor bearing the burden of
determining which disclosures are relevant to a particular transaction.
Given that the registration statement is primarily for the benefit of
investors, we believe that we should facilitate investor understanding
and access to prospectuses for ABS and eliminate unnecessary
disclosures given to investors.\1213\ A single form of prospectus at
the time of effectiveness and a single prospectus for each takedown
should provide investors with clearer and more focused information
relating to the assets that are the subject of the takedown by not
encumbering investors with information that may not relate to that
particular transaction. Additionally, because we believe that this rule
will enhance investor understanding of the offering materials and the
transaction, the rule will, in turn, promote more efficient capital
formation. While we note one commenter's view that the existing
practice did not result in unwieldy documents,\1214\ we remain
concerned about the usefulness of the prospectus supplement format for
investors, especially in light of other commenters' support for our
proposal and the staff's experience in reviewing prospectuses in
registration statements and in takedowns.\1215\
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\1212\ See General Instruction IV of Form SF-3.
\1213\ See the 2010 ABS Proposing Release at 23352.
\1214\ See letter from ASF I.
\1215\ See letters from BoA I, CFA I, and MBA I.
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We are also adopting our proposed limitation of one asset class per
registration statement with one clarification in response to
comments.\1216\ We continue to note the practice of some issuers to
include multiple depositors, multiple base prospectuses and multiple
prospectus supplements all in one registration statement.\1217\ We
believe that this practice has made the disclosure difficult for
investors to understand and difficult for market participants to locate
and obtain offering documents. Although one commenter stated that
limiting each shelf registration statement to one asset class has no
bearing on the quality or nature of the disclosure for any particular
shelf offering, we disagree.\1218\ The cumulative effect of including
multiple depositors, multiple base prospectuses and multiple prospectus
supplements in one registration statement is an unwieldy registration
statement for investors to navigate in determining what information
they should review before making their investment decision and
difficult for market participants to follow which registration
statement relates to which takedown. By limiting a registration
statement to one asset class, the quality and nature of the disclosure
should be enhanced as the disclosure would be presented in a more
accessible and useful format for investors. While the revisions to both
presentation of disclosure as well as the limitation of one asset class
per registration statement could place additional costs on issuers that
need to file additional registration statements, we believe that these
additional costs are reasonable in light of the expected improved
transparency benefits for investors.\1219\ Furthermore, we believe that
our pay-as-you-go amendment that we are also adopting should offset
some of the costs that issuers could incur with additional registration
statements.
---------------------------------------------------------------------------

\1216\ See General Instruction IV of Form SF-3. We note existing
market practice in the case of some master trust structures, such as
credit card ABS involving a single platform, in which multiple
affiliated depositors transfer credit card receivables into the
issuing entity. We would view, in these limited instances, such
master trust structure with a single securitization platform as one
transaction (that is, one program), with multiple registrants.
\1217\ See the 2010 ABS Proposing Release at 23352.
\1218\ See letter from ASF I.
\1219\ See Section X Paperwork Reduction Act (estimating this
requirement will result in approximately four new registration
statements to be filed annually by shelf ABS issuers).
---------------------------------------------------------------------------

2. Adding New Structural Features or Credit Enhancements
(a) Proposed Rule
We proposed to restrict the ability of ABS issuers to add
information about new structural features or credit enhancements by
filing a prospectus under Rule 424(b).\1220\ It has been our
longstanding position, as articulated in the 2004 ABS Adopting Release,
that structural features or credit enhancements must be fully described
in the registration statement at the time of effectiveness.\1221\ As
part of this position, we have stated that a takedown off a shelf that
involves new structural features or credit enhancements that were not
described as contemplated in the base prospectus will usually require a
post-effective amendment rather than describing them in the final
prospectus filed with the Commission pursuant to Securities Act Rule
424.\1222\ In that regard, we proposed to codify our position that when
an issuer desires to add information that relates to new structural
features or credit enhancements, the issuer must file that information
by a post-effective amendment to the registration statement. By
requiring the issuer to file a post-effective amendment, the
Commission's staff would have an opportunity to review the disclosure
regarding these new structural features and credit enhancements that
would be contemplated for future takedowns from the shelf registration
statement.
---------------------------------------------------------------------------

\1220\ See the 2010 ABS Proposing Release at 23353.
\1221\ See the 2004 ABS Adopting Release at 1524.
\1222\ See id. See also the 2010 ABS Proposing Release at 23353
(noting that although Rule 430B provides all issuers on Form S-3
with the ability to include information previously omitted in a
prospectus filed pursuant to Securities Act Rule 424(b), the staff
has continued to apply our position articulated in the 2004 ABS
Adopting Release).
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(b) Comments on Proposed Rule
Commenters were generally supportive of our proposal to codify the
requirement of a post-effective amendment for new structural features
or credit enhancements.\1223\ One commenter believed that all market
participants would benefit from the enhanced understanding of a
transaction that would result from the proposed rule.\1224\ One
commenter noted that the proposed rule would provide the staff with
time to focus on new structural features or credit

[[Page 57293]]

enhancements.\1225\ Another commenter noted that the proposed rule
would allow the Commission to control the purpose of shelf filing and
allow for more targeted review.\1226\ One commenter noted that the term
``structural features'' is too vague and suggested that the Commission
provide more specificity.\1227\
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\1223\ See letters from BoA I, CFA I, MBA I, Prudential I, and
Wells Fargo I.
\1224\ See letter from Prudential I.
\1225\ See letter from CFA I.
\1226\ See letter from Wells Fargo I.
\1227\ See letter from BoA I.
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(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments, we are adopting, as proposed, new
Securities Act Rule 430D(d)(2), which codifies a longstanding position
of the Commission that an ABS issuer must file a post-effective
amendment to the registration statement when it wants to add
information about new structural features or credit enhancements that
were not described as contemplated in the base prospectus of an
effective registration statement. As noted above, one commenter stated
that the term ``structural features'' was too vague to use as a trigger
for a post-effective amendment and was concerned that the term could be
interpreted to trigger a post-effective amendment for minor structural
adjustments that would not have required a post-effective amendment
under the existing standard.\1228\ Because our new rule merely codifies
the Commission's longstanding position, the final rule does not change
when such requirement is triggered.\1229\
---------------------------------------------------------------------------

\1228\ See letter from BoA I.
\1229\ See the 2004 ABS Adopting Release at 1524 (``A takedown
off of a shelf that involves assets, structural features, credit
enhancement or other features that were not described as
contemplated in the base prospectus will usually require either a
new registration statement (e.g., to include additional assets) or a
post-effective amendment (e.g., to include new structural features
or credit enhancement) rather than simply describing them in the
final prospectus filed with the Commission pursuant to Securities
Act Rule 424.'').
---------------------------------------------------------------------------

We believe that codification of our existing position will provide
issuers with clarity about how the rules work. It will also help to
ensure that the staff has the opportunity to review these new
structural features or credit enhancements that would be contemplated
for future offerings. Because this rule is simply a codification of our
existing position, we believe that the new rule will result in no
material increase in costs and will be neutral in terms of its impact
on competition, efficiency, and capital formation.

E. Pay-as-You-Go Registration Fees

1. Proposed Rule
To alleviate some of the burden of managing multiple registration
statements among ABS issuers, we proposed to allow, but not require,
ABS issuers eligible to use Form SF-3 to pay filing fees as securities
are offered off a shelf registration statement, commonly known as
``pay-as-you-go.'' \1230\ Under the proposal, the triggering event for
a fee payment would be the filing of a preliminary prospectus.
---------------------------------------------------------------------------

\1230\ In 2005, we first adopted pay-as-you-go rules to allow
well-known seasoned issuers using automatic shelf registration
statements to pay filing fees at the time of a securities offering.
See Section V.B.2.b.(D) of the Securities Offering Reform Release.
Under the current pay-as-you-go procedure for WKSIs, an issuer can
pay any filing fee, in whole or in part, in advance of takedown or
at the time of takedown, providing flexibility in the timing of the
fee payment. Issuers using pay-as-you-go can still deposit monies in
an account for payment of filing fees when due. The fee rules
applicable to the use of such account, also referred to as the
``lockbox account,'' apply. The amount of the fee is calculated
based on the fee schedule in effect when the money is withdrawn from
the lockbox account. This flexibility had been provided so issuers
may determine the fee payment approach most appropriate for them.
See footnote 529 of the Securities Offering Reform Release. See
Securities Act Rules 456(b) [17 CFR 230.456(b)] and 457(r) [17 CFR
230.457(r)].
---------------------------------------------------------------------------

2. Comments on Proposed Rule
Several trade associations agreed that the proposal would be a
helpful change.\1231\ Some commenters noted that they would like the
Commission to clarify that, under existing Rule 457(p), if an ABS
offering is not completed, or the size of the offering is reduced,
after the fee is paid, the unused portion of the fee can be applied to
future takedowns off the same or a replacement registration statement
by the depositor or an affiliate of such depositor.\1232\ One issuer
requested that the timing of the fee payment be changed from the filing
of the preliminary prospectus to the filing of the final prospectus in
order to alleviate any risk that the issuer did not pay sufficient
registration fees to cover any upsizing of the offering as well as to
alleviate the possibility of overpayment of the registration fees if
the offering is downsized.\1233\
---------------------------------------------------------------------------

\1231\ See letters from ABA I, ASF I, MBA I, and SIFMA I.
\1232\ See letters from ASF I, BoA I, MBA I, and Sallie Mae I.
\1233\ See letter from Sallie Mae I.
---------------------------------------------------------------------------

3. Final Rule and Economic Analysis of the Final Rule
We are adopting, as proposed, revisions to our rules to permit ABS
issuers to pay registration fees as securities are offered off a
registration statement as opposed to paying all registration fees
upfront at the time of filing a registration statement on Form SF-3. As
proposed, under the new rule, a dollar amount or a specific number of
securities is not required to be included in the calculation of the
registration fee table in the registration statement, unless a fee
based on an amount of securities is paid at the time of filing.\1234\
As proposed, the fee table on the cover of the registration statement
must list the securities or class of securities registered and must
indicate if the filing fee will be paid on a pay-as-you-go basis.\1235\
---------------------------------------------------------------------------

\1234\ See new Securities Act Rule 457(s).
\1235\ In the case of ABS, the fee table on the registration
statement typically lists the offering of certificates and notes as
separate classes of securities. Each class (or tranche) of those
certificates and notes offered would not need to be separately
listed on the fee table. However, if the ABS is a resecuritization,
where registration of the underlying securities would be required
under Rule 190 and the underlying security was not listed on the fee
table of the Form SF-3 registration statement, the underlying
securities would need to be registered on a different new
registration statement. Likewise, if a servicer or trustee invests
cash collections in other instruments which may be securities under
the Securities Act, such as guarantees or debt instruments of an
affiliate, under Rule 190 those underlying securities also may need
to be registered concurrently with the asset-backed offering. If
those underlying securities were not listed on the fee table of the
registration statement, a new registration statement would be
required.
---------------------------------------------------------------------------

Under the final rule, as proposed, the triggering event for a fee
payment will be the filing of an initial preliminary prospectus.\1236\
At the time of filing an initial preliminary prospectus,\1237\ the ABS
issuer is required to include a calculation of registration fee table
on the cover page of the prospectus and to pay the appropriate fee
calculated in accordance with Securities Act Rule 457. In light of one
commenter's concern about the possibility of overpaying the
registration fee by requiring it to be paid in connection with the
preliminary prospectus, we note ABS issuers opting to pay the required
registration fees with each takedown could rely upon Rule 457(p) to
apply a portion of the fee associated

[[Page 57294]]

with the unsold securities under a previously-filed registration
statement as an offset against the filing fee due at the time of the
preliminary prospectus filing by the same depositor or affiliates of
the depositor across asset classes. Similarly, such registrants could
apply unused fees paid in connection with a preliminary prospectus
filing toward a future takedown off the same registration statement. We
believe that this amendment will alleviate some of the burden ABS
issuers incur with managing multiple registration statements.
Additionally, it should offset some of the additional costs that
issuers will incur with our new rule, discussed earlier, requiring a
separate registration statement for each form of prospectus. We also
believe that our pay-as-you-go rule should produce some efficiencies in
the shelf offering process by providing shelf issuers with greater
payment flexibility.
---------------------------------------------------------------------------

\1236\ See new Securities Act Rule 456(c). Unlike the pay-as-
you-go rules for WKSIs, we do not believe that a cure period is
necessary for ABS issuers because we are requiring ABS issuers to
pay the required fee at the time the preliminary prospectus is
filed. The timing of the fee payment for ABS would not give rise to
the same effective date and registration concerns that arise with
WKSIs. See Section V.B.2.b.(D) of the Securities Offering Reform
Release.
\1237\ If, after the initial preliminary prospectus, an issuer
files a subsequent preliminary prospectus or prospectus supplement
solely to update the fee table and pay additional fees, the
subsequent preliminary prospectus will not trigger a new waiting
period. See discussion in Section V.B.1 New Shelf Registration
Procedures related to preliminary prospectuses and related waiting
periods.
---------------------------------------------------------------------------

F. Codification of Staff Interpretations Relating to Securities Act
Registration
We proposed to codify several staff positions relating to the
registration of asset-backed securities.\1238\ In proposing these
codifications, we sought to simplify our rules by making our staff's
positions more transparent and readily available to the public.
---------------------------------------------------------------------------

\1238\ See Section VII.A. of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

1. Fee Requirements for Collateral Certificates or Special Units of
Beneficial Interest
We proposed to amend Rule 190 \1239\ of the Securities Act to
clarify the existing requirement that if the pool assets for the asset-
backed securities are collateral certificates or special units of
beneficial interest (SUBIs),\1240\ then the offer and sale of those
collateral certificates or SUBIs must be registered concurrently with
the registration of the asset-backed securities. While the offer and
sale of the certificates or SUBIs must be concurrently registered, we
proposed to codify the staff position that no separate registration fee
for the collateral certificates or SUBIs is required to be paid,
provided that the certificates or SUBIs meet the requirements of Rule
190(c).\1241\ Additionally, we proposed to amend Rule 457 \1242\ of the
Securities Act, governing the computation of registration fees, to
reflect the staff's position that where the securities to be offered
are collateral certificates or SUBIs underlying asset-backed securities
which are being concurrently registered, no separate fee for the
certificates or SUBIs will be payable.
---------------------------------------------------------------------------

\1239\ 17 CFR 230.190. Rule 190 governs the registration
requirements for the underlying securities of an asset
securitization.
\1240\ In some ABS transactions backed by auto leases, the
leases and car titles are originated in the name of a separate trust
to avoid the administrative expenses of re-titling the physical
property underlying the leases. The separate trust, commonly
referred to as the ``origination trust'' or ``titling trust,'' will
issue a collateral certificate, often called a ``special unit of
beneficial interest,'' to the issuing entity for the asset-backed
security. The issuing entity will then issue the asset-backed
securities backed by the collateral certificate or SUBI.
\1241\ Rule 190(c) provides for the conditions in which an
asset-backed issuer is not required to register a pool asset
representing an interest in or the right to the payments or cash
flows of another asset.
\1242\ 17 CFR 230.457.
---------------------------------------------------------------------------

Several commenters supported the proposal to codify the staff's
position in Rule 190 and Rule 457 under the Securities Act.\1243\ One
commenter noted generally that codifying the staff's interpretations is
a benefit for all market participants,\1244\ and another commenter
indicated that it concurred with the Commission's rationale.\1245\ No
commenter opposed the proposal. After considering the comments, we are
adopting the amendments to Rule 190 and Rule 457 of the Securities Act
as proposed.\1246\
---------------------------------------------------------------------------

\1243\ See letters from BoA I, Prudential I, and SIFMA I.
\1244\ See letter from Prudential I.
\1245\ See letter from BoA I.
\1246\ See 17 CFR 230.190(d) and 457(t).
---------------------------------------------------------------------------

2. Incorporating by Reference Subsequently Filed Exchange Act Reports
(a) Proposed Rule
Item 12(b) of Form S-3 requires that the registrant incorporate by
reference all subsequently filed Exchange Act reports prior to the
termination of the offering. In the 2004 ABS Adopting Release, we
explained that Item 12(b) of Form S-3 is required for asset-backed
issuers only ``if applicable.'' \1247\ The staff has provided
interpretive guidance to issuers as to which periodic reports and other
Exchange Act reports the issuer may be required to incorporate by
reference into the registration statement.\1248\ The staff has noted
that information filed with a current report on Form 8-K prior to the
termination of the offering would often be required to be incorporated
into the registration statement.\1249\ In contrast, the staff has
explained that Form 10-D or Form 10-K reports may not necessarily
contain information that is required to be, or that the issuer desires
to be, incorporated by reference into the registration statement.\1250\
---------------------------------------------------------------------------

\1247\ See Section III.A.3 of the 2004 ABS Adopting Release.
\1248\ See Interpretation 15.02 of the Division's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules.
\1249\ Examples of circumstances when an asset-backed issuer may
be required to incorporate by reference its current reports on Form
8-K into the registration statement include filing required
exhibits, such as legal and tax opinions, or to provide disclosure
under Item 6.05 of Form 8-K regarding changes in the composition of
the pool assets.
\1250\ We explained in the 2010 ABS Proposing Release that
because the Form 10-Ds and Form 10-Ks that are filed prior to the
termination of the offering are generally for a different ABS issuer
than the ABS issuer that has filed the prospectus, the Form 10-D and
Form 10-K reports may not be relevant to the asset-backed offering
that is the subject of the prospectus. See Section VII.B of the 2010
ABS Proposing Release.
---------------------------------------------------------------------------

To simplify our rules, we proposed to codify the staff's position
that an issuer of asset-backed securities may modify the incorporation
by reference language included in the registration statement to provide
that only the current reports on Form 8-K subsequently filed by the
registrant prior to the termination of the offering shall be deemed to
be incorporated by reference into the registration statement.\1251\
---------------------------------------------------------------------------

\1251\ See Section VII.B of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
Several commenters supported the proposal, and no commenters
opposed it.\1252\ One commenter believed that the proposed rule struck
the right balance by permitting issuers to incorporate by reference
only Form 8-K filings rather than requiring issuers to incorporate all
subsequently filed Exchange Act reports.\1253\ Some commenters
indicated that the proposed rule is consistent with current practice of
issuers.\1254\
---------------------------------------------------------------------------

\1252\ See letters from BoA I, MBA I, Prudential I, and SIFMA I.
\1253\ See letter from BoA I.
\1254\ See letters from BoA I and MBA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After consideration of the comments, we are adopting the proposed
codification of the staff's position regarding incorporation by
reference of subsequently filed periodic reports in Form SF-3. Thus,
under Item 10(d) of Form SF-3, the prospectus shall provide a statement
regarding the incorporation by reference of Exchange Act reports prior
to the termination of the offering pursuant to one of the following two
ways. The registrant may state that all reports subsequently filed by
the registrant pursuant to Sections 13(a), 13(c), or 15(d) of the
Exchange Act prior to the termination of the offering shall be deemed
to be incorporated by reference into the prospectus. In the
alternative, the registrant may state that all current reports on Form
8-K subsequently filed by the registrant

[[Page 57295]]

pursuant to Sections 13(a), 13(c), or 15(d) of the Exchange Act prior
to the termination of the offering shall be deemed to be incorporated
by reference into the prospectus.
We believe that the codification of these staff positions will
simplify our rules by making our staff's positions more transparent and
readily available to the public. Because these codifications are
consistent with current practice of issuers, we do not believe that
they will pose a cost to either issuers or investors.

VI. Filing Requirements for Transaction Documents

A. Proposed Rule

Item 1100(f) of Regulation AB allows ABS issuers to file agreements
or other documents as exhibits on Form 8-K and, in the case of
offerings off a shelf registration statement, incorporate the exhibits
by reference instead of filing a post-effective amendment. In the 2010
ABS Proposing Release, we noted our belief that the information in the
transaction agreements and other documents provide important
information on the terms of the transactions, representations and
warranties about the assets, servicing terms, and many other rights
that would be material to an investor. In the staff's experience with
the filing of these documents, some ABS issuers have delayed filing
such material agreements with the Commission until several days or even
weeks after the offering of securities off a shelf registration
statement. We also noted that investors have expressed concerns
regarding the timeliness of information in ABS offerings, including the
timeliness of the filing of these documents.\1255\ In light of these
concerns, we proposed to revise Item 1100(f) of Regulation AB to state
explicitly that the exhibits filed with respect to an ABS offering
registered on Form SF-3 must be on file and made part of the
registration statement at the latest by the date the final prospectus
is required to be filed.\1256\ In response to the 2010 ABS Proposing
Release, some commenters recommended that the exhibits should be
available for investor review prior to making an investment
decision.\1257\ Therefore, in the 2011 ABS Re-Proposing Release, we re-
proposed the amendments to Item 1100(f) of Regulation AB to also
require that the underlying transaction documents, in substantially
final form, be filed and made part of the registration statement by the
date the preliminary prospectus is required to be filed rather than by
the date that the final prospectus is required to be filed.
---------------------------------------------------------------------------

\1255\ See the 2010 ABS Proposing Release at 23388.
\1256\ We permit the filing of these agreements with the Form 8-
K and incorporated by reference into the registration statement in
lieu of filing a post-effective amendment to the registration
statement. As such, the filing requirements for these agreements,
including the timing of the filing, is governed by our registration
requirements, not the provisions of Form 8-K.
\1257\ See letters from Tricadia Capital, Pacific Life Insurance
Company, PPM America, Inc., Allstate Investments LLC, New York Life
Investments, Guardian Life Insurance Company, AllianceBernstein
L.P., Prudential Fixed Income Management, Principal Real Estate
Investors, Capital Research Company, T. Rowe Price Associates, Inc.,
BlackRock, AEGON USA Investment Management, and State Street
Corporation (collectively, ``CMBS Investors'') dated Feb. 25, 2011
submitted in response to the 2010 ABS Proposing Release (suggesting
that the rules require that key disclosures, including the pooling
and servicing agreement, be made available to investors during the
marketing period so that investors have adequate time to review
prior to making an investment decision), Prudential I (noting its
concern with possible ``last minute financial engineering'' that
contributes to poor understanding of the transaction), and SIFMA I
(requesting for purposes of shelf eligibility that we clarify that
if exhibits are timely filed in substantially final form, the fact
that any such document is subsequently amended or otherwise
corrected will not be viewed by the Commission as a failure to
timely file the corrected document).
---------------------------------------------------------------------------

B. Comments Received on Proposed Rule

Comments on the re-proposed amendments to Item 1100(f) of
Regulation AB were mixed with mostly investors supporting the
amendments \1258\ and issuers opposing them.\1259\ The commenters that
opposed the proposal generally believed that the preliminary prospectus
provides all material information related to a particular transaction
and, therefore, there is no material benefit to providing the
transaction documents in substantially final form.\1260\ The commenters
also were concerned that the requirement would likely result in
additional costs to issuers or consumers; \1261\ that it would pose a
restriction on the parties' ability to tailor the transaction to meet
investor requests; \1262\ revising the prospectus and the transaction
documents at the same time could lead to more inconsistencies or
errors; \1263\ and may require the filing of the same documents three
times.\1264\ Some commenters also believed that for certain
transactions the documents cannot be given in the proposed time
frame.\1265\ Similarly, another commenter contended that the
requirement compels issuers to ``finalize transaction agreements'' by
the time of the preliminary prospectus filing, which will inevitably
delay issuers' access to the market and thereby potentially expose both
issuers and investors to market movements that may be adverse to one or
the other.\1266\
---------------------------------------------------------------------------

\1258\ See letters from ASF V (expressed views of investors
only), Better Markets, ICI II, MetLife II (stating that the
prospectus and transaction documents in substantially final form
should be provided at least five business days before the first sale
in an offering), Prudential II (stating that a draft set of
operative documents should be released at least five business days
prior to the first sale in the offering and the executed set of
operative documents should be released with the final prospectus
filing at least three business days prior to closing), and SIFMA II-
investors.
\1259\ See letters from ABA II, AFME, ASF V (expressed views of
dealers and sponsors only), Kutak, SIFMA III-dealers and sponsors,
Sallie Mae II, VABSS III, and Wells Fargo II.
\1260\ See, e.g., letters from ABA II, Sallie Mae II (suggesting
the transaction documents should be filed no earlier than the time
the final prospectus is filed), SIFMA III-dealers and sponsors,
VABSS III, and Wells Fargo II. See also letter from AFME (supporting
SIFMA's (dealer and sponsor members) position and stating that any
filing requirements adopted by the Commission should be consistent
with the requirements already in place in the European Union and its
member states, such as posting the relevant closing documents on an
issuer Web site).
\1261\ See letters from Sallie Mae II (focusing on increased
costs to the issuer without any explanation or quantification),
VABSS III (focusing on costs to the issuer without any explanation
or quantification), and Wells Fargo II.
\1262\ See letters from AFME and SIFMA III-dealers and sponsors.
\1263\ See letter from ABA II (stating that the proposed
amendments to Item 1100(f) will impose unnecessary costs and timing
constraints on the issuer and introduce ``inefficiencies into the
offering process,'' but if the Commission requires ``current
documentation'' before pricing, the ABA believes that to the extent
that deal-specific terms create significant changes to or
clarifications of the forms filed with the registration statement,
then the updated documents should be made available to investors one
business day before they are asked to make an investment decision).
\1264\ See letter from ASF V (stating that a filing may be
necessary, at the time the preliminary prospectus is filed, again at
the time the final prospectus is filed, in the event a change (other
than a ``minor'' change) to the agreement occurs, and at or after
the time those transaction agreements are executed because
``regulations appear to provide that an exhibit to a registration
statement filed without signatures would be considered an incomplete
exhibit and, therefore, could not be incorporated by reference in
any subsequent filing under any Act administered by the
Commission'').
\1265\ See letters from ABA II (stating swap agreements are
generally negotiated after the transaction has been priced to
reflect pricing terms and market conditions on the date of entry and
that some of the technical real estate mortgage investment conduit
(``REMIC'') provisions that must be added into RMBS and CMBS
documentation cannot be provided within the proposed time frame (but
also have little relevance for investors, so long as they are
properly drafted) and Kutak (suggesting the documents are constantly
being revised, although in most cases, not materially, until the
final prospectus is filed).
\1266\ See letter from ASF V (without clarification as to why
this requirement may delay pricing and the formation of contracts).
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On the other hand, some investors believed that the transaction
documents

[[Page 57296]]

should be provided in substantially final form at least five business
days before the first sale in an offering,\1267\ and one of these
investors believed that an executed set of operative documents should
be released with the filing of the final prospectus (at least three
business days prior to closing).\1268\ One investor stated that access
to these documents was necessary in order to conduct appropriate due
diligence on transactions,\1269\ and a group of investors also stated
that the underlying transaction documents are material to their
investment decision and should be available in substantially final form
at the time the preliminary prospectus is filed.\1270\ Another group of
investors supported the proposal and stated that ``[t]he complexity of
those transactions does not lend itself to abbreviated disclosure.''
\1271\ Another commenter noted that ``access to the underlying
transaction documents is also essential for the benefit of investors.''
\1272\
---------------------------------------------------------------------------

\1267\ See letters from ASF V (expressed views of investors
only), MetLife II, Prudential II, and SIFMA II-investors.
\1268\ See letter from Prudential II.
\1269\ See letter from MetLife II (stating that in order to
conduct due diligence, investors need access to the following
documents: The pooling and servicing agreement and a blackline
against the original pooling and servicing agreement contained in
the shelf; the representations, warranties, and exceptions and a
blackline against industry model representations and warranties
(e.g., CMBS or other sectors that adopt these); or a blackline
against original representations and warranties contained in the
shelf; and the indenture (along with any blacklines thereto)).
\1270\ See letter from ASF V (expressed views of investors
only).
\1271\ See letter from SIFMA II-investors.
\1272\ See letter from Better Markets.
---------------------------------------------------------------------------

In the 2011 ABS Re-Proposing Release, we also requested comment on
whether we should require issuers to file as an exhibit a copy of the
representations, warranties, remedies, and exceptions marked to show
how it compares to industry-developed model provisions. The comments
that we received on our request for comment as to filing exhibits
marked to industry-developed models were mixed with investors
supporting the proposal \1273\ and mostly issuers opposing it.\1274\
---------------------------------------------------------------------------

\1273\ See letters from ASF V (expressed views of investors
only), MetLife II (recommending that a copy of the current pooling
and servicing agreement be marked against the original pooling and
servicing agreement in the registration statement), and Prudential
II (recommending that we should require certain marked copies of
current filings against prior filings to assist investors in
identifying structural changes and suggesting that the release of
operative documents and blacklined documents should begin within 30
days after adoption of the new rules because this information is
critical to an investor's understanding of a securitization).
\1274\ See letters from Better Markets, CREFC II (noting that
the representations and warranties will be in the ``substantially
final mortgage loan purchase agreement'' filed with the Rule 424(h)
filing), MBA II (with respect to CMBS), and SIFMA III-dealers and
sponsors (noting its support of industry efforts to develop model
provisions but emphasizing that such models do not currently exist
for most asset classes and that identifying trade associations to be
tasked with generating model provisions and doing so in a fair and
open manner would be an enormous challenge while resulting in
minimal additional investor protection).
---------------------------------------------------------------------------

C. Final Rule and Economic Analysis of the Final Rule

After considering the comments received, we are adopting the
requirement, as proposed in the 2010 ABS Proposing Release, to clarify
existing exhibit filing requirements by making explicit that the
exhibits filed with respect to an ABS offering, registered on new Form
SF-3, must be on file and made part of the registration statement at
the latest by the date the final prospectus is filed. We believe that
this revision should address the problem that we noted above about some
issuers delaying their filing of the transaction agreements with the
Commission until several days and, in some cases, even weeks after a
shelf offering of the securities. We also note that ABS shelf offerings
were designed to mirror non-shelf offerings in terms of filing the
exhibits and final prospectuses. Because all exhibits to Form SF-1 must
be filed by the time of effectiveness, we believe that all transaction
agreements for shelf offerings filed as exhibits should be filed and
made part of the shelf registration statement by the time of the final
prospectus.
We are not adopting at this time, however, the part of the proposal
to require the transaction documents be filed, in substantially final
form, and made part of the registration statement by the date the
preliminary prospectus is required to be filed. We continue to consider
the balance between investors' interest in having access to the
transaction documents earlier and the costs and difficulties with
requiring issuers to provide the transaction documents in substantially
final form by the time of the preliminary prospectus. Also, in light of
the new disclosure requirements that must be provided at the time of
the preliminary prospectus, as well as the certification by the issuer
that the prospectus must fairly present information about the
transaction, including the structure of the transaction, we believe
further consideration is warranted. Therefore, the proposal to require
the transaction documents be filed, in substantially final form, and
made part of the registration statement by the date of the preliminary
prospectus is required to be filed remains outstanding and unchanged.
In light of the comments received, we are also not adopting any
requirements that investors be provided with blacklines of how the
issuer's representations and warranties compare against the industry-
developed model provisions or blacklines of how the transaction
documents compare to the transaction documents from prior transactions
or from prior versions of the transaction documents filed for the
current transaction. While we believe that these types of marked
documents could be an important tool for the identification of discrete
or material changes between original and revised documents, we
acknowledge commenters' concerns that there is no consistent industry
standard at this time nor a clear identity of what other agreements to
use as a comparison. We also believe, at this time, that most investors
should have the capacity to produce documents marked to show
differences from prior documents.

VII. Definition of Asset-Backed Security

A. Proposed Rule

As part of our effort to provide more timely and detailed
disclosure regarding the pool assets to investors, we proposed
revisions to the Regulation AB definition of an asset-backed
security.\1275\ A security must meet the definition of an ``asset-
backed security'' under Regulation AB in order to utilize the
disclosure requirements of Regulation AB and be eligible for shelf
registration as an asset-backed security.\1276\ As noted in previous
releases, a core principle of the Regulation AB definition of an asset-
backed security is that the security is backed by a discrete pool of
assets that by their terms convert into cash, with a general absence of
active pool management. However, in response to commenters and previous
staff interpretation, in 2004, we adopted certain exceptions to the
``discrete pool'' requirement in the definition of asset-backed
security to accommodate master trusts, prefunding periods, and
revolving periods.\1277\
---------------------------------------------------------------------------

\1275\ See Item 1101(c) of Regulation AB.
\1276\ See Item 1100 of Regulation AB.
\1277\ See Item 1101(c)(3) of Regulation AB.
---------------------------------------------------------------------------

In the 2010 ABS Proposing Release, we proposed to amend the
``discrete pool of assets'' exceptions to the current definition of
``asset-backed security'' by amending:
(i) The master trust exception to exclude securities that are
backed by

[[Page 57297]]

assets that arise in non-revolving accounts;
(ii) the revolving period exception to reduce the permissible
duration of the revolving period for securities backed by non-revolving
assets from three years to one year; and
(iii) the prefunding exception to decrease the prefunding limit
from 50% to 10% of the offering proceeds or, in the case of master
trusts, from 50% to 10% of the principal balance of the total asset
pool.\1278\
---------------------------------------------------------------------------

\1278\ See the 2010 ABS Proposing Release at 23389.
---------------------------------------------------------------------------

We were concerned that pools that are not sufficiently developed at
the time of an offering to fit within the ABS disclosure regime may,
nonetheless, qualify for ABS treatment, which may result in investors
not receiving appropriate information about the securities being
offered.\1279\ Consequently, we proposed amendments to these exceptions
in order to restrict deviations from the ``discrete pool of assets''
requirement.
---------------------------------------------------------------------------

\1279\ Id.
---------------------------------------------------------------------------

B. Comments on Proposed Rule

While some commenters provided specific comments, several
commenters provided general comments on the proposal to change the
definition of asset-backed security. One commenter noted that the
changes to the definition would not prohibit public issuances of ABS
with larger prefunding accounts and revolving periods, and noted that
such offerings would be governed by the more extensive disclosure
requirements of Form S-1.\1280\ Another commenter requested that the
definition of asset-backed security be sufficiently narrow to restrict
access to only those securities where sufficient and robust disclosure,
including collateral pool disclosure, can be provided during the
initial offering process and at the same time, the definition should be
calibrated to permit a reasonable degree of flexibility to accommodate
innovation and new product development.\1281\
---------------------------------------------------------------------------

\1280\ See letter from ELFA I.
\1281\ See letter from FSR.
---------------------------------------------------------------------------

1. The Master Trust Exception
One commenter supported the proposal to exclude securities that are
backed by assets that arise in non-revolving accounts.\1282\ This
commenter noted that master trust structures are appropriate for
sponsors with recurring variable collateral funding needs (e.g., credit
cards, fleet leases, floor plans, and rental cars) and that any asset
type that follows a traditional amortization schedule or without the
ability to redraw on the loan generally should not be included in a
publicly issued master trust structure.\1283\
---------------------------------------------------------------------------

\1282\ See letter from Prudential I.
\1283\ See letter from Prudential I.
---------------------------------------------------------------------------

However, other commenters opposed the proposal to limit the
exception to master trusts backed by revolving accounts.\1284\ Several
commenters believed that distinguishing securities backed by revolving
versus non-revolving assets is unwarranted. One commenter noted that it
did not believe there is any credit, disclosure, or other investor
protection reason to support the change.\1285\ The issuer and investor
members of another commenter agreed that, in applying the master trust
exception, efforts to distinguish securities backed by revolving versus
non-revolving assets will impose artificial limits on which asset
classes may use the master trust structure, thereby eliminating an
investment option that both issuers and investors desire.\1286\
---------------------------------------------------------------------------

\1284\ See letters from AFME/ESF, ASF I, BoA I, and IPFS I.
\1285\ See letter from IPFS I.
\1286\ See letter from ASF I.
---------------------------------------------------------------------------

Some commenters noted that the master trust structure is commonly
used to securitize mortgages in the United Kingdom and that the
proposed rule would result in those mortgage master trusts no longer
being eligible for shelf registration.\1287\ One commenter noted that
European market participants expressed concern that since the proposed
change would reduce the ability of mortgage master trust issuers to
place their bonds in the U.S. market, it would effectively reduce the
efficiency of issuances for existing master trusts, which would
adversely impact the overall efficiency of the asset-backed
market.\1288\
---------------------------------------------------------------------------

\1287\ See letters from AFME/ESF (noting that it would still be
possible for such transactions to be registered in the U.S. using a
new registration statement for each offering) and BoA I (noting that
while the domestic RMBS market does not currently utilize a master
trust structure, given the current mortgage finance market, we
should allow for the possibility that a master trust structure could
develop).
\1288\ See letter from AFME/ESF.
---------------------------------------------------------------------------

2. The Revolving Period Exception
Although an investor commenter supported the proposal relating to
reducing the revolving period for non-revolving assets (e.g., auto
loans and equipment loans), the commenter acknowledged that concerns
about lack of information about new collateral additions to the pool
would be mitigated if the issuer would be required to file loan-level
information at issuance and each month that new assets are added to the
collateral pool.\1289\ This commenter also noted that this transparency
will allow investors to evaluate the changing nature of the risk
layering introduced by the new assets.
---------------------------------------------------------------------------

\1289\ See letter from Prudential I.
---------------------------------------------------------------------------

Several commenters opposed the proposal.\1290\ One commenter noted
that investors have a significant interest in purchasing ABS supported
by non-revolving assets with longer maturities than are possible
without the use of revolving periods and reducing the revolving period
to one year would effectively eliminate the ability of issuers to
satisfy such investor demand.\1291\ One commenter stated that the
primary effect of not being able to register these offerings on Form
SF-3 would be to increase the timing and cost burdens placed on
issuers.\1292\ Another commenter stated that the proposed one-year
period for revolving periods should not apply to certain loans that are
homogenous in nature.\1293\ It explained, for example, that since all
loans issued under a federal student loan program such as the Federal
Family Education Loan Program (``FFELP'') \1294\ have the same credit
risk, investors need not be concerned that the addition of future FFELP
loans would adversely impact the credit quality of the asset
pool.\1295\
---------------------------------------------------------------------------

\1290\ See letters from ASF I, Sallie Mae I, and VABSS I.
\1291\ See letter from ASF I (also noting that the current
three-year limitation on the use of revolving periods for non-
revolving assets already limits the ability to issue publicly-
registered ABS matching investor preferences).
\1292\ See letter from VABSS I.
\1293\ See letter from Sallie Mae I (also proposing, in the
alternative, a three-year revolving period limitation for homogenous
assets, such as FFELP loans, and a one-year revolving period
limitation for other assets).
\1294\ See letter from Sallie Mae I (noting that FFELP loans are
generally based on need, instead of credit quality of the underlying
obligor).
\1295\ See letter from Sallie Mae I (also noting that revolving
periods allow issuers to efficiently manage their funding needs
without having to issue additional bonds).
---------------------------------------------------------------------------

3. The Prefunding Exception
Certain investor members of one commenter were supportive of the
proposal to decrease the prefunding limitation.\1296\ Several
commenters did not support the proposal to decrease the prefunding
limitation and believed that the prefunding amount should remain at 50%
of the offering proceeds.\1297\ One commenter noted that by utilizing
securitizations rather than more expensive warehouse credit facilities
or other financing alternatives, it is able to pass along cost savings
to consumers via

[[Page 57298]]

low interest rates and that reducing the limit to 10% would reduce
flexibility and cost efficiencies when executing a
securitization.\1298\
---------------------------------------------------------------------------

\1296\ See letter from ASF I.
\1297\ See letters from AmeriCredit, IPFS I, and VABSS I.
\1298\ See letter from AmeriCredit (also suggesting that
disclosures involving prefunding structures be required to include
certain representations and warranties that there has been no
material variation in the overall composition of the characteristics
(such as underwriting, origination, or pool selection criteria) of
the initial loans and the pool of loans as whole after giving effect
to the transfer of the subsequent loans).
---------------------------------------------------------------------------

Issuer members of one commenter noted that the greater the limits
on prefunding, the more expensive the carrying costs for originators
and, potentially, the higher the borrowing rates for consumers and
small businesses.\1299\ This commenter suggested that the prefunding
limit instead be based on the duration of the prefunding period,\1300\
or the prefunding limit should decrease from 50% to 25% (but retain a
prefunding period of up to one year), which would make the standard
consistent with the prefunding standards under the Employee Retirement
Income Security Act of 1974 (``ERISA'').\1301\ Several other commenters
also suggested that a 25% prefunding ceiling would be more appropriate
for the same reason.\1302\ Another commenter suggested reducing the
limit to 20%, while imposing a 10% limit in the case of shelf offerings
on Form SF-3 because it would be more consistent with market practice
and more restrictive than the limitation on prefunding that is
applicable to ABS that are eligible for sale under ERISA.\1303\
---------------------------------------------------------------------------

\1299\ See letter from ASF I.
\1300\ See letter from ASF I (suggesting, for example,
permitting prefunding not in excess of 10% where a prefunding period
may last up to one year, prefunding not in excess of 25% where a
prefunding period may last up to nine months, and prefunding not in
excess of 50% where a prefunding period may last up to six months).
\1301\ Pub. L. No. 93-406, 88 Stat. 829 (1974). ERISA is a
federal law that sets uniform minimum standards to ensure that
employee benefit plans are established and maintained in a fair and
financially sound manner. In addition, employers have an obligation
to provide promised benefits and satisfy ERISA's requirements for
managing and administering private retirement and welfare plans.
\1302\ See letters from BoA I and Sallie Mae I.
\1303\ See letter from SIFMA I (also noting that the Commission
staff would have the opportunity to review and comment on the
disclosure for an offering on Form SF-1 where the 20% limit would be
applicable and reiterating that a 10% limit on prefunding is
appropriate in a shelf offering).
---------------------------------------------------------------------------

Lastly, one student loan issuer believed that the proposed 10%
limitation on prefunding should not apply to FFELP loans (or other
asset types) that are homogenous in nature.\1304\
---------------------------------------------------------------------------

\1304\ See letter from Sallie Mae I.
---------------------------------------------------------------------------

C. Final Rule and Economic Analysis of the Final Rule

We are adopting the prefunding limitation in the definition of
asset-backed security, as proposed, with some modification. The new
rule decreases the prefunding limit from 50% to 25% (instead of 10%, as
proposed) of offering proceeds or, in the case of master trusts, the
principal balance of the total asset pool. The new rule is based on
suggestions from several commenters that 25% would be an appropriate
restriction, in part, because it is consistent with prefunding
standards under ERISA.
We believe that this reduction will result in the asset pool being
more developed at the time of the offering, which will provide
investors with more appropriate information about the securities being
offered. We recognize, however, that the rule could impose higher
carrying costs on originators and, in turn, potentially higher
borrowing rates for consumers and small businesses. We believe that our
final rule balances the need to provide investors with more appropriate
information and these cost concerns by raising the prefunding period
limit from the proposed 10% to 25% of the offering proceeds (or
principal balance of the total assets for master trusts).
We are not adopting the revision to the master trust exception to
exclude securities that are backed by assets that arise in non-
revolving accounts because we are persuaded by commenters' concerns
that it would eliminate the use of shelf for certain master trusts. The
cost of not adopting this revision today is the possibility that more
ABS issuers of non-revolving assets will utilize master trust
structures, which will result in investors lacking access to
information about all pool assets before making an investment decision.
This concern is mitigated, to some extent, by the adoption of initial
and ongoing asset-level disclosure requirements for some asset classes.
We are also not adopting the proposal to revise the revolving
period exception that would reduce the permissible duration of the
revolving period for securities backed by non-revolving assets from
three years to one year due to comments received. An investor commenter
noted, for example, that receiving updated asset-level information
about the pool's assets on an ongoing basis would mitigate concerns
regarding the duration of the revolving period.\1305\ We also
recognize, as noted by another commenter, that shortening the revolving
period for securities backed by non-revolving assets could preclude
certain issuers, such as auto and equipment issuers, from issuing
securities with longer maturities than the underlying loans.\1306\
---------------------------------------------------------------------------

\1305\ See letter from Prudential I.
\1306\ See letter from ASF I.
---------------------------------------------------------------------------

VIII. Exchange Act Reporting

A. Distribution Reports on Form 10-D

1. Delinquency Presentation
(a) Proposed Rule
In the 2004 ABS Adopting Release, we stated that delinquency
disclosures required in the Form 10-D under Item 1121(a)(9) were based
on materiality \1307\ and not on Item 1100(b) of Regulation AB, which
requires presentation of delinquency data to be provided in 30- or 31-
day increments, as applicable, beginning at least with assets that are
30 or 31 days delinquent, as applicable, through the point that assets
are written off or charged off as uncollectable. However, in
registration statements, delinquency disclosures are to be presented
pursuant to Item 1100(b). Consistent with our efforts to standardize
the disclosure across all ABS, we proposed to add a new instruction to
Item 1121(a)(9) to require that pool-level delinquency disclosure in
periodic reports be provided in accordance with Item 1100(b) of
Regulation AB.
---------------------------------------------------------------------------

\1307\ See footnote 477 of the 2004 ABS Adopting Release.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
We received several comment letters that provided differing views
on the proposal. One commenter stated that it would not object to the
proposal because it would ``provide clarity and consistency in
reporting.'' \1308\ This commenter also indicated that disclosure
provided in the CREFC's IRP contains delinquency information in this
format.\1309\ On the other hand, several commenters expressed concern
about applying the requirements of Item 1100(b) to ongoing reporting in
that it applies a ``one-size-fits-all approach across different asset
classes.'' \1310\ They believed that for various asset classes the
presentation of delinquency information would be provided for
``considerably longer periods of time, or in more granular increments,
than would be required under general principles of materiality'' and in
ways that differ from the current disclosure

[[Page 57299]]

practices across different asset classes.\1311\ The commenter believed
that issuers and servicers should not be required to incur the
additional time and cost to track and present delinquency information
in additional prescribed increments as required under Item
1100(b).\1312\
---------------------------------------------------------------------------

\1308\ See letter from MBA I.
\1309\ See letter from MBA I. For more information about the
CREFC IRP, see footnote 104.
\1310\ See letters from ASF I and VABSS I.
\1311\ See letter from ASF I (noting that standard practice in
the mortgage industry has been to present delinquency information in
Form 10-D reports and in static pool information in 30- or 31-day
increments through the point that loans are 179 or 180 days
delinquent, followed by an additional 180-day increment and a final
increment of 359 or 360 days or more, and for ABS supported,
directly or indirectly, by motor vehicles, equipment and other
similar physical assets that have finite lives over which their
value depreciates, delinquency information is presented in 30- or
31-day increments through the point that loans are 119 or 120 days
delinquent, followed by a final increment of 119 or 120 days or
more).
\1312\ Even though we did not propose any changes to Item
1100(b)(1), ASF I requested we make revisions to Item 1100(b)(1)
that they believed would provide for consistent presentation of
delinquency information across issuers within the same asset class,
while recognizing that ``some variation across asset classes is
meaningful and appropriate.'' See letter from ASF I (Exhibit L).
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We are adopting a revised requirement in light of comments
received. The final instruction to Item 1121(a)(9) requires delinquency
disclosures included in the Form 10-D to be presented in accordance
with Item 1100(b) with respect to presenting delinquencies in 30- or
31-day increments. In response to commenters' concerns that requiring
such granular presentation through charge-off is too long a time
period, we have modified the proposed instruction to require such
presentation through no less than 120 days. We believe that this
revised time period helps to address commenters' concerns about the
cost and burden of having to track and report this information in a
more granular manner for a longer period of time while still providing
investors with a more comprehensive picture of delinquencies and losses
in a uniform manner across asset classes. We also note that the revised
time period is consistent with the new asset-level data requirement for
presentation of delinquencies and losses in RMBS.\1313\ While investors
will not receive as granular a presentation as proposed (through
charge-off), investors investing in asset classes required to provide
asset-level disclosures will be receiving more detailed information
about the payment status of each individual asset, such as the paid
through date.\1314\ We recognize that to the extent that issuers will
now be required to present delinquencies and losses for a longer period
of time than previously provided in the distribution reports, such
issuers will incur some costs. We believe, however, the benefits gained
from standardized and comparable delinquency and loss disclosure
justify the costs issuers may incur to provide the information.
---------------------------------------------------------------------------

\1313\ See new Item 1(g)(33) of Schedule AL.
\1314\ See new Item 1(g)(28) of Schedule AL. See Section
III.A.2.b Asset Specific Disclosure Requirements and Economic
Analysis of These Requirements. Due to the transition period for
implementing the loan-level requirements, there will be a period of
time during which investors will not have access to this more
granular data about assets in prior securitized pools. See Section
IX.B Transition Period for Asset-Level Disclosure Requirements.
---------------------------------------------------------------------------

2. Identifying Information and Cross-References to Previously Reported
Information
In the 2010 ABS Proposing Release, we proposed several revisions to
Exchange Act Form 10-D or to the requirements governing the disclosures
to be provided with the Form 10-D.\1315\ We proposed to revise General
Instruction C.3. of Form 10-D to provide that if information required
by an item has been previously reported,\1316\ the Form 10-D does not
need to repeat the information. Because information that is previously
reported may relate to a different issuer from the issuer to which the
report relates, such information may be difficult to locate. As a
result, we also proposed to amend Form 10-D to require disclosure of a
reference to the CIK number, file number, and date of the previously
reported information. Additionally, we proposed to revise the cover
page of the Form 10-D to include the name and phone number of the
person to contact in connection with the filing because we believed
this would assist the staff in its review of asset-backed
filings.\1317\ We did not receive any comments regarding these proposed
revisions to Form 10-D. We believe the costs of these requirements to
be very limited and offset by the benefit to investors and staff in
easily and quickly locating the previously reported information.
Because of that and since we did not receive any comments opposing
these proposed revisions to Form 10-D, we are adopting them as
proposed.
---------------------------------------------------------------------------

\1315\ See the 2010 ABS Proposing Release at 23390.
\1316\ The term ``previously reported'' is defined in Exchange
Act Rule 12b-2 [17 CFR 240.12b-2].
\1317\ Issuers are also encouraged to provide the name and phone
number of the outside attorney or other contact in accompanying
correspondence to their reports on Form 10-D.
---------------------------------------------------------------------------

3. Changes in Sponsor's Interest in the Securities
(a) Proposed Rule
To assist investors in monitoring the sponsor's interest in the
securities, we proposed to add a new item to Form 8-K to require the
filing of a Form 8-K for any material change in the sponsor's interest
in the securities. Under the proposal, the report on Form 8-K would be
required to include disclosure of the amount of change in interest and
a description of the sponsor's resulting interest in the transaction.
(b) Comments on Proposed Rule
We received a mixed response to the proposal with some commenters
supporting the proposal \1318\ and other commenters opposing the
disclosure and suggesting that the disclosures were not material.\1319\
In support of the proposal, the investor members of a trade association
believed that if the sponsor retains exposure to the risks of the
assets, the sponsor will likely have greater incentives to include
higher quality assets and ongoing monitoring of this exposure helps to
align the interests of the sponsor and investors.\1320\ They also
believed that the sponsor is akin to an ``insider'' and its decision to
hold or sell its retained interest may be triggered based upon a
negative or positive view of the securitization. Another investor
stated that the sponsor and its affiliates should regularly report
their current risk retention related holdings by each tranche of a
securitization, because any change in risk retention holdings is
material.\1321\ Another commenter, an issuer of student loan ABS,
generally supported the proposal, but requested an instruction be added
to clarify that transfers by the sponsor to its affiliates or
subsidiaries would not trigger a filing obligation under Item 6.09
because transfers within a corporate family are not material changes
that should require a Form 8-K filing.\1322\
---------------------------------------------------------------------------

\1318\ See letters from ASF I (expressed views of investors
only), Prudential I, and Sallie Mae I.
\1319\ See letters from ASF I (expressed views of dealer and
sponsors only) (stating that the information has not been shown to
be material), BoA I, MBA I (questioning the materiality of the
disclosure and suggesting that all the disclosure would provide was
that the sponsor was at some level above the minimum required
level), and SIFMA I.
\1320\ See letter from ASF I (expressed views of investors only)
(suggesting that because our shelf eligibility requirements proposed
in 2010 to require disclosure that the sponsor or an affiliate of
the sponsor retained a net economic interest in each securitization
that this requirement should be extended to affiliates of the
sponsor).
\1321\ See letter from Prudential I.
\1322\ See letter from Sallie Mae I.

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

[[Page 57300]]

Some commenters who opposed the proposal suggested it was too broad
and should be limited to the monitoring of a sponsor's retention of
risk that is required as a condition of shelf eligibility, law, or
regulation.\1323\ Another commenter also opposed the proposal because
it did not see a benefit to the disclosure, the compliance costs would
be substantial, and the issuer would need information from parties that
it does not control.\1324\ In addition, the issuer members of a trade
association also disagreed with the investor members who suggested, as
discussed above, that a sponsor's decision to hold or sell any portion
of its interest in the securities may serve as an indicator of the
future prospects for the securitization \1325\ and that the requirement
should extend to changes in the interest of affiliates of the
sponsors.\1326\ The issuer members also stated that privacy concerns
could arise with disclosing this type of information, although no
further detail was provided.\1327\
---------------------------------------------------------------------------

\1323\ See letters from BoA I and SIFMA I.
\1324\ See letter from MBA I.
\1325\ See letter from ASF I (expressed views of dealers and
sponsors only) (stating in many deals, the sponsor is not an
affiliate of the servicer and may not even be an affiliate of the
depositor and, in any event, a sponsor's affiliation with an issuer
or servicer does not involve the same level of relationship as the
relationship of an officer, director, or other control person to a
corporation).
\1326\ See letter from ASF I (expressed views of dealers and
sponsors only) (suggesting that this new requirement would entail an
extraordinarily difficult monitoring process and that the sponsor
may never be able to administer with reliable results).
\1327\ See letter from ASF I (expressed views of dealers and
sponsors only).
---------------------------------------------------------------------------

We also received several comments seeking revisions to the
proposal. For instance, some commenters suggested that, if we adopt the
rule, it should not include the reporting of changes that arise as a
result of organic changes in the sponsor's interest in securities, such
as pool assets converting into cash in accordance with their terms or,
in the case of revolving pool assets, fluctuating account balances
based on credit line usage or those arising as a result of payments
made on other securities issued by the issuing entity.\1328\ One of
these commenters also suggested that we make clear that no reporting
requirement arises as a result of the ``sponsor's pledge of the
securities in the ordinary course of business for on balance sheet
funding purposes.'' \1329\ Finally, some commenters suggested that the
disclosure be provided in the Form 10-D rather than in the Form 8-
K.\1330\ One of these commenters believed that this approach would
permit issuers to avoid constant monitoring of changes in retained
interest and repeated filing of Forms 8-K, while keeping investors
informed of the sponsor's retained interest amount.\1331\
---------------------------------------------------------------------------

\1328\ See letters from ABA I, ASF I (expressed views of dealers
and sponsors only), and Discover.
\1329\ See letter from ASF I (expressed views of dealers and
sponsors only).
\1330\ See letters from ASF I (expressed views of dealers and
sponsors only) (requesting that, in cases where the sponsor is not
an affiliate of the ABS issuer, the Commission except Item 6.09 Form
8-K reports from the Exchange Act filing requirements for Form SF-3
eligibility purposes. The dealer and sponsor members stated that
unlike other cases where the content or completeness of an Exchange
Act report is dependent on the timely receipt of reports or other
information from unaffiliated third parties, an ABS issuer would
have no way of even knowing whether and when a change in a sponsor's
interest in the securities had occurred and, therefore, it would be
inappropriate and unfair for a registrant to lose its eligibility to
use Form SF-3) and Discover.
\1331\ See letter from Discover.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
We are adopting the proposed requirement that disclosure be
provided regarding material changes in a sponsor's interest in the ABS
transaction with some modification. Instead of providing a description
in a Form 8-K as proposed, we are requiring that if there has been a
material change in the sponsor's interest during the period covered by
the Form 10-D, then a description of the material change must be
provided in the Form 10-D for that reporting period. We agree with the
commenters that suggested this approach because it would permit issuers
to avoid monitoring of changes in retained interest to meet the current
reporting requirements of Form 8-K, thus minimizing costs.\1332\ At the
same time, investors will continue to benefit from being kept informed
of the sponsor's retained interest amount. Further, we are also
clarifying that disclosure of any material change in the sponsor's
retained interest includes any interest held by an affiliate of the
sponsor in order to be consistent with the disclosure required in the
prospectus and to allow investors to monitor changes in the interest
held. The rule requires disclosure of a material change in the
sponsor's retained interest in the ABS transaction due to the purchase,
sale or other acquisition or disposition of the securities by the
sponsor or an affiliate.\1333\ While we note that the credit risk
retention rules under Section 15G of the Exchange Act have not yet been
adopted,\1334\ under the rules we are adopting, if there is a material
change (such as a transfer) in any interest or assets that are required
to be retained in compliance with law, disclosure of such change would
be required. In order to clarify the interplay of the disclosure
requirement with risk retention requirements, we have included an
instruction specifying that the disclosure about the resulting amount
and nature of any interest or asset retained in compliance with law
must be separately stated. Finally, we understand that the sponsor may
not be a party that is controlled by the issuer. We believe, however,
that contracts that relate to the transfer of the assets to the trust
can include an ongoing duty for the sponsor to provide the information
required for this disclosure. Furthermore, we believe that by requiring
changes in the sponsor's interest to be disclosed periodically on the
Form 10-D, instead of on a Form 8-K, lessens the burden of obtaining
this information from parties that the issuer may not control.
---------------------------------------------------------------------------

\1332\ See letters from ASF I (expressed views of dealers and
sponsors only) and Discover. The obligation to file a report on Form
8-K is triggered by the occurrence of a reportable event described
in Form 8-K, which typically must be filed within four business days
of the event.
\1333\ Activities like pledging would not be required. See
letter from ASF I (expressed views of issuers only).
\1334\ See the 2013 Risk Retention Re-Proposing Release.
---------------------------------------------------------------------------

B. Annual Report on Form 10-K

1. Servicer's Assessment of Compliance With Servicing Criteria
(a) Proposed Rule
The Form 10-K report of an asset-backed issuer is required to
contain, among other things, an assessment of compliance with servicing
criteria that is set forth in Item 1122 of Regulation AB by each party
participating in the servicing function.\1335\ The body of the Form 10-
K report must also contain disclosure regarding material instances of
noncompliance with servicing criteria. Our rules require an asset-
backed issuer to provide an assessment of compliance with respect to
all asset-backed securities transactions involving the asserting party
that are backed by assets of the type backing the asset-

[[Page 57301]]

backed securities.\1336\ In order to provide enhanced information
regarding instances of noncompliance with servicing criteria with
respect to the offering to which the annual report relates, including
information on steps taken to address noncompliance, we proposed to
expand the disclosure requirements to require in the body of the annual
report disclosure as to whether the instance of noncompliance
identified under Item 1122 involved the servicing of the assets backing
the asset-backed securities covered in the particular Form 10-K
report.\1337\ As part of its assessment of compliance, the asserting
party typically conducts a sampling of the transactions for which it is
responsible for the Item 1122 criteria in order to determine whether
there is a material instance of noncompliance in their servicing. The
proposed rule would require that if the examination of the sample found
a material instance of noncompliance and that material instance of
noncompliance involved the servicing of assets of a particular ABS,
then the annual report covering that particular ABS would include
disclosure indicating that the material instance of noncompliance
involved the servicing of the assets underlying the ABS. We also
proposed to require that the body of the annual report discuss any
steps taken to remedy a material instance of noncompliance previously
identified by an asserting party for its activities made on a platform
level.\1338\
---------------------------------------------------------------------------

\1335\ Exchange Act Rules 13a-18(b) and 15d-18(b) [17 CFR
240.13a-18(b) and 17 CFR 240.15d-18(b)] and Item 1122 of Regulation
AB. Item 1122 of Regulation AB defines ``a party participating in
the servicing function'' as any entity (e.g., master servicer,
primary servicers, trustees) that is performing activities that
address the criteria set forth in paragraph (d) of Item 1122, unless
such entity's activities relate only to 5% or less of the pool
assets. See Instruction 2 to Item 1122. For purposes of this
discussion, we refer to the party that is required to provide a
servicer's assessment as the ``servicer.''
\1336\ Issuers should provide descriptions of each servicing
party's role in the transaction, particularly if multiple servicing
parties have overlapping responsibilities, by describing in the Form
10-K the responsibilities assigned to each party and the servicing
criteria applicable to such party under Item 1122(d) of Regulation
AB.
\1337\ See the 2010 ABS Proposing Release at 23391. While some
information about instances of noncompliance may also be required by
Item 1123 of Regulation AB, because of the differences in the
definition of servicer between Item 1122 and Item 1123, we believed
that Item 1123 does not cover the same information that our proposed
revision to Item 1122 would cover.
\1338\ This proposed disclosure would be required whether or not
the instance of noncompliance involved the servicing of assets
backing the securities covered in the particular Form 10-K.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
One commenter supported the proposed requirement that the body of
the annual report indicate whether an instance of noncompliance
identified under Item 1122 involved the servicing of the assets backing
the asset-backed securities covered in the particular Form 10-K
report,\1339\ while several commenters opposed the proposal.\1340\
---------------------------------------------------------------------------

\1339\ See letter from ABA I.
\1340\ See letters from ASF I, CREFC I, and KPMG (stating the
proposed requirement would require an issuer to identify each
transaction that involved the instance of noncompliance identified
in the Item 1122 assessment and attestation and then report in the
annual report of each transaction that had that instance of
noncompliance, which may offset the efficiencies gained by allowing
management to provide a platform-level assessment).
---------------------------------------------------------------------------

The commenter, who supported the proposed requirement, noted that
such information is, in fact, already being reported in annual reports
on Form 10-K.\1341\ However, the commenter requested that we clarify
that the ``lack of such disclosure could not be interpreted as
confirmation that the transaction had not been affected.'' On the other
hand, a commenter who opposed the requirement stated that it is not
possible ``for the servicer (much less an ABS issuer) to identify each
transaction impacted by the instance of noncompliance'' and ``it would
be `inappropriate and arbitrary' to require an ABS issuer to identify
only those transactions within the test sample that were impacted by
the instance of noncompliance.'' \1342\ This commenter believed that if
an ABS issuer were required to disclose whether a reported instance of
noncompliance involved assets backing the ABS covered in a particular
10-K report, then investors may draw the incorrect conclusion that in
the absence of such disclosure, the reported instance of noncompliance
did not involve the servicing of assets backing its ABS.\1343\
---------------------------------------------------------------------------

\1341\ See letter from ABA I.
\1342\ See letter from ASF I.
\1343\ See letters from ASF I (noting ``because the platform
level report is based on only a sampling of transactions, a reported
instance of noncompliance does not purport to, nor by its nature
could it, identify all transactions where noncompliance may have
occurred''), CREFC I, and KPMG.
---------------------------------------------------------------------------

One commenter supported requiring the disclosure of any steps taken
to remedy a material instance of noncompliance previously identified by
an asserting party for the activities made on a platform level.\1344\
This commenter recommended, however, that instead of requiring the
disclosure in the body of the annual report that the disclosure be
included as part of the servicer's management assessment of compliance.
The commenter explained that in certain circumstances the management
responsible for the noncompliance (e.g., servicer management) is not
the same as management responsible for filing the Form 10-K (e.g.,
issuer). The commenter also requested that we clarify that the
remediation activity described in the servicer's management assessment
is not covered by the auditor's servicing compliance report because the
remediation activities are undertaken subsequent to the date of the
auditor's report. Another commenter generally requested that we not
adopt any of the proposed revisions to Item 1122.\1345\
---------------------------------------------------------------------------

\1344\ See letter from KPMG.
\1345\ See letter from CREFC I (without explaining why this
particular proposed revision to Item 1122 should not be adopted).
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
After considering the comments received, we are adopting a
requirement that disclosure be provided in the body of the annual
report as to whether the identified material instance of noncompliance
pursuant to Item 1122 was determined to have involved the servicing of
the assets backing the asset-backed securities covered in the
particular Form 10-K report.\1346\ If the material instance of
noncompliance is identified as relating to a particular transaction,
investors with investments in that particular transaction will benefit
from receiving this information.\1347\ We continue to believe that
testing every transaction in the platform is cost prohibitive and that
a platform-level assessment for purposes of assessing servicing
compliance provides an appropriate level of information to investors
while balancing the substantial increase in cost that issuers would
incur to assess the compliance with servicing criteria for every
transaction in the platform.\1348\ The amendments that we adopt today
do not require any change in that approach.
---------------------------------------------------------------------------

\1346\ For example, if the servicer selected 10 transactions as
part of their sample for purposes of assessing Item 1122 servicing
criteria and it was determined that five of those transactions
involved instances of noncompliance that are material to the
platform, then, under this requirement, each Form 10-K report for
those five transactions must disclose in the body of the 10-K report
that: (1) This transaction was part of the sample and (2) it was
determined that this particular transaction involved a material
instance of noncompliance.
\1347\ We observe, however, that the absence of disclosure of
instances of noncompliance involving the servicing of assets backing
a particular transaction in an annual report is not necessarily an
indication that the transaction had not been affected. We also note
that, to the extent appropriate, issuers can provide explanatory
disclosure in the annual reports of the transactions that were not
part of the Item 1122 sample and explain that it is not clear
whether their transaction has been affected by the material instance
of noncompliance identified in the Item 1122 assessment and
attestation.
\1348\ See Section III.D.7.b.iii of the 2004 ABS Adopting
Release.
---------------------------------------------------------------------------

We understand that some commenters are concerned that requiring
issuers to disclose a reported instance of noncompliance involving
assets backing the ABS covered by the 10-K report may impose an
indirect cost to investors if investors draw the incorrect conclusion
that in the absence of such disclosure, the reported instance of

[[Page 57302]]

noncompliance did not involve the servicing of assets backing its
ABS.\1349\ We believe disclosure can be provided in the Form 10-K or in
the servicer's Item 1122 report regarding the scope and structure of
the assessment that can adequately addresses this concern.
---------------------------------------------------------------------------

\1349\ See letters from ASF I, CREFC I, and KPMG.
---------------------------------------------------------------------------

We are also adopting, as proposed, the requirement to disclose any
steps taken to remedy a material instance of noncompliance for
activities made on a platform level in the body of the annual report.
While we note one commenter's recommendation that such disclosure be
provided as part of the servicer's management assessment of compliance
rather than in the body of the Form 10-K, we continue to believe that
the issuer is ultimately responsible for the disclosure provided in the
Form 10-K and therefore should be assessing the information provided by
the servicers in their reports, including considering whether the
information provided by the servicers in their reports at the platform
level applies to the transaction for which the 10-K is filed.\1350\ The
final rule does not, however, prohibit the servicer from also providing
such disclosure in the servicer's assessment of compliance. We are
adopting the disclosure requirement in order to provide investors with
insight into the potential impact of the instance of noncompliance on
their transaction and whether they should reassess their continuing
investment decision. Further, we do not believe adding this disclosure
is burdensome to the issuers since the information should be readily
available to them and is a logical extension of the disclosure of
material instances of noncompliance.
---------------------------------------------------------------------------

\1350\ See letter from KPMG.
---------------------------------------------------------------------------

Finally, in the 2010 ABS Proposing Release, we noted the staff's
belief that the application of Item 1108(b)(2), which requires a
detailed discussion in the prospectus of the servicer's experience in,
and procedures for, the servicing function it will perform in the
current transaction for assets of the type included in the current
transaction, has not been consistent among issuers.\1351\ While we are
not adopting any changes to Item 1108(b)(2) at this time, we continue
to believe that Item 1108(b)(2) requires disclosure in the prospectus
of any material instances of noncompliance noted in the assessment or
attestation reports required by Item 1122 or the servicer compliance
statement that is required by Item 1123. In addition, the prospectus
should provide disclosure of any steps taken to remedy the
noncompliance disclosed and the current status of those steps. With
respect to requiring disclosure in the prospectus of a material
instance of noncompliance noted in Item 1123 servicer compliance
statements, we believe such disclosure is appropriate because investors
should have access to information related to the performance of
servicers.
---------------------------------------------------------------------------

\1351\ See the 2010 ABS Proposing Release at 23383. Item 1108
also requires a general discussion of the servicer's experience in
servicing the assets of any type.
---------------------------------------------------------------------------

2. Codification of Prior Staff Interpretations Relating to the
Servicer's Assessment of Compliance With Servicing Criteria
We also proposed to codify certain staff positions issued by the
Division of Corporation Finance relating to the servicer's assessment
requirement, with some modification. The first staff interpretation
that we proposed to codify related to aggregation and conveyance of
information between a servicer and another party (who may also be a
servicer for purposes of the servicer's assessment requirement).\1352\
This new criterion, as proposed, would, if information obtained in the
course of performing the servicer's duties is required by any party or
parties in the transaction in order to complete their duties under the
transaction agreements, require an assessment that the aggregation of
such information, as applicable, is mathematically accurate and the
information conveyed accurately reflects the information.\1353\
---------------------------------------------------------------------------

\1352\ The staff had taken the position that, while the
conveyance of information to another party is not explicitly
contained in any of the criterion in Item 1122(d), the accurate
conveyance of the information was part of the same servicing
criterion under which the activity that generated the information
was assessed. See the Division of Corporation Finance's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules, Interpretation 11.03. We proposed to codify this position,
but instead of requiring it be included with an existing criterion,
the proposed rule would make it a new servicing criterion in Item
1122. See proposed Item 1122(d)(1)(v).
\1353\ For example, if Servicer A is responsible for
administering the assets of the pool and passing along the
aggregated information about the assets in the pool to Servicer B,
and Servicer B is responsible for calculating the waterfall or
preparing and filing the Exchange Act reports with that information,
Servicer A's activity with respect to administering the assets would
be required to be assessed under Item 1122(d)(4). In addition to
assessing Servicer A's pool asset administration, Servicer A would
be required under proposed Item 1122(d)(1)(v) to separately assess
whether its aggregation of the information is mathematically
accurate and the information conveyed to Servicer B accurately
reflects the information. If instead of aggregating the individual
asset information, Servicer A conveys it un-aggregated, then
Servicer B would be required to include its own aggregation of the
individual asset data in Servicer B's assessment of calculating the
waterfall or preparing and filing Exchange Act reports. Servicer A
would still need to assess under proposed Item 1122(d)(1)(v) that
the un-aggregated information conveyed to Servicer B accurately
reflects the information.
---------------------------------------------------------------------------

We also proposed to codify in an instruction to Item 1122 staff
interpretations relating to the scope of the Item 1122 servicer's
assessment. In a publicly available telephone interpretation the staff
explained, among other things, that the platform for reporting purposes
should not be artificially designed, but rather, it should mirror the
actual servicer practices of the servicer.\1354\ The servicer may,
however, take into account in determining the platform for reporting
purposes divisions in its servicing function by geographic locations or
among separate computer systems. Although, if the servicer includes in
its platform less than all of the transactions backed by the same asset
type that it services, the proposed instruction would provide that a
description of the scope of the platform should be included in the
servicer's assessment.
---------------------------------------------------------------------------

\1354\ See the Division of Corporation Finance's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules, Interpretation 17.03.
---------------------------------------------------------------------------

We received general support for the proposed codifications from
several commenters \1355\ and one commenter generally requested that we
not adopt any of the proposed changes to Item 1122.\1356\ We are
adopting these codifications, as proposed, because we continue to
believe that adopting these positions makes them more transparent and
readily available to the public. We do not anticipate that these
codifications will cause a hardship for servicers as they are
consistent with current servicer practices to the extent they were
executed under existing staff interpretations.
---------------------------------------------------------------------------

\1355\ See letters from E&Y, KPMG, and Prudential I.
\1356\ See letter from CREFC I (opposing without providing an
explanation why this particular proposed revision to Item 1122
should not be adopted).
---------------------------------------------------------------------------

C. Central Index Key Numbers for Depositor, Sponsor and Issuing Entity

In the 2010 ABS Proposing Release, we noted that ABS offerings with
a particular file number may be associated with a registration
statement with a different file number and that Forms 8-K for ABS
offerings may be filed under the depositor file number, making it
difficult to track material for the related offering with only the
information provided in the Form 8-K. To make it easier for interested
parties to locate the depositor's registration statement and periodic
reports associated with a particular offering and information related
to the sponsor of the offering, we

[[Page 57303]]

proposed amendments to require that the cover pages of registration
statements on Form SF-1 and Form SF-3 include the CIK number \1357\ of
the depositor, and if applicable, the CIK number of the sponsor. We
also proposed to require that the cover pages of the Form 10-D, Form
10-K, and Form 8-K for ABS issuers include the CIK number of the
depositor, the issuing entity, and, if applicable, the sponsor.
---------------------------------------------------------------------------

\1357\ The CIK is a number that we assign to each entity
(company or individual) that submits filings to the Commission. Use
of the CIK allows the Commission to differentiate between filing
entities with similar names. A CIK is used to identify all filers,
both EDGAR and non-EDGAR.
---------------------------------------------------------------------------

Several commenters expressed general support for these proposals;
no commenters opposed.\1358\ These commenters agreed that adding the
CIK numbers of the depositor and the issuing entity to the cover pages
of filings will enhance the accessibility of information to
investors.\1359\
---------------------------------------------------------------------------

\1358\ See letters from BoA I and MBA I.
\1359\ See letter from MBA I (noting that sponsors' CIK numbers
should be required only if the sponsor has a CIK number). See also
letter from BoA I (stating our proposal to require CIK numbers for
the depositor and the sponsor (if applicable) on the cover pages of
the proposed Forms SF-l and SF-3 will also help investors locate
materials related to an ABS offering or ABS issuer).
---------------------------------------------------------------------------

We are adopting these amendments, as proposed, given the benefits
that they will provide as recognized by commenters. Furthermore, we do
not believe that requiring this information on certain cover pages for
ABS filings will be burdensome to issuers, nor did we receive any
comments stating any cost concern.

IX. Transition Period

In the 2010 ABS Proposing Release, we noted our belief that
compliance dates should not extend past a year after adoption of the
new rules, but we sought comment about feasible dates for
implementation of the proposed amendments. We also acknowledged that
the asset-level disclosure requirements may initially impose
significant burdens on sponsors and originators as they adjust to the
new requirements, including changes to how information relating to the
pool assets is collected and disseminated to various parties along the
chain of the securitization.\1360\ We also requested comment on whether
we should provide a transition period for compliance with the asset-
level disclosure requirements that would allow the filing of test
submissions.\1361\ We describe below the comments received and the
overall transition period for revisions to Regulation AB and the
additional transition period for asset-level disclosure requirements.
---------------------------------------------------------------------------

\1360\ See Section VIII of the 2010 ABS Proposing Release.
\1361\ EDGAR currently provides the ability to file a test
submission which allows the filer to test the ability to create a
filing in an EDGAR-acceptable format. For a test submission, fees
will not be deducted, the filing will not be disseminated, and the
filing will not count towards any filing requirements.
---------------------------------------------------------------------------

A. General Transition Period

With respect to implementation of the overall proposals to revise
Regulation AB, a majority of commenters expressed a need for a longer
transition period. The commenters were generally concerned that the
proposed rules would impose new substantial obligations on various
industry parties, such as originators, sponsors, and other transaction
parties that will require changes to operational procedures and
infrastructures in order to meet the new disclosure requirements.\1362\
These commenters suggested that we consider various factors when
determining the implementation timeframe, including: The existence of
other rulemaking processes and regulatory developments,\1363\ how the
final regulations relate to and work with other new and revised
regulations,\1364\ and the ability of issuers to implement the various
rules' changes simultaneously.\1365\
---------------------------------------------------------------------------

\1362\ See letters from ASF I, ABA I, BoA I, CREFC I, and MBA I
(requesting an 18-month implementation period because the new
obligations will require the implementation of new operational
procedures and infrastructures, and originators and servicers will
need sufficient time to evaluate and update their origination and
servicing platforms).
\1363\ See, e.g., letters from ABA I, CREFC I, and MBA I.
\1364\ See letters from CREFC I (stating we should take into
consideration how the final rules' new and revised regulations
relate to and work with other new or proposed regulations, such as
those described in Section 941(b) of the Dodd-Frank Act, which
provides for a two-year transition period for securitizers and
originators of all classes of asset-backed securities other than
RMBS to comply with risk retention requirements) and MBA.
\1365\ See letter from MBA I.
---------------------------------------------------------------------------

As noted above, several commenters suggested compliance timeframes
that would extend past the proposed one-year transition period. One
trade association suggested an implementation period of at least
eighteen months \1366\ and another suggested two years.\1367\ Another
commenter suggested that implementation of the proposed rules should be
staggered in one and two year increments with those changes that can be
implemented in the near-term implemented in a one-year timeframe and
the ``more elaborate implementation measures'' implemented within two
years.\1368\ Another trade association did not specifically suggest a
longer compliance period, but suggested that for the disclosure aspects
of the proposal that the effective date should be no earlier than one
year following the date of publication of the related final rules in
the Federal Register.\1369\
---------------------------------------------------------------------------

\1366\ See letter from MBA I (with respect to RMBS).
\1367\ See letter from CREFC I. See also letter from BoA I
(suggesting, in general, a longer transition period should be
provided).
\1368\ See letter from MBA III (with respect to CMBS)
(reiterating its suggested implementation timeframes in its Oct. 4,
2011 letter submitted in response to the 2011 ABS Re-Proposing
Release).
\1369\ See letter from ASF I (suggesting that if a prospectus is
included in a new registration statement filed on or after the
effective date that the new disclosure rules should apply to that
prospectus and that we should also allow for a period to convert to
the proposed new Form SF-3 so that a prospectus included in the
registration statement may be made compliant). The ASF reiterated
this position in its Oct. 4, 2011 letter submitted in response to
the 2011 ABS Re-Proposing Release. See letter from ASF III.
---------------------------------------------------------------------------

We understand that some of the requirements that we are adopting,
including the asset-level disclosure requirements, will take time and
resources in order to satisfy the new requirements. We also understand
that issuers and market participants are working to implement many
different regulations that have recently been adopted or may be adopted
in the near future. We are therefore adopting a tiered approach. All
new rules, except for asset-level disclosures require compliance within
one year from the effective date of the rules. We believe that this
time period provides a sufficient transition period for compliance. We
believe that 12 months will allow the transaction parties to better
manage the changes necessary to their systems and processes. Therefore,
any registered offering of asset-backed securities commencing with an
initial bona fide offer one year after the effective date of the rules
and the asset-backed securities that are the subject of that offering
must comply with the new rules and forms, except for asset-level
disclosures. Consequently, after the one year transition period, ABS
issuers seeking to conduct a shelf ABS offering must conduct such
offering off of an effective Form SF-3 registration statement.
In addition, any Form 10-D or Form 10-K that is filed after one
year after the effective date of the rules must include the information
required by the new rules, except for asset-level disclosures.

B. Transition Period for Asset-Level Disclosure Requirements

We received substantial feedback with respect to the appropriate
compliance dates for our requirements related to the asset-level
disclosure requirements.

[[Page 57304]]

Issuers, market participants, and trade associations representing
issuers generally believed that a significant number of the proposed
data points required data that is currently not captured by originators
or servicers.\1370\ They also argued that there will be substantial
costs in time and resources to develop systems that will capture the
data in the required format and, therefore, believed an extended
implementation timeframe is appropriate.
---------------------------------------------------------------------------

\1370\ See, e.g., letters from ABA I, ASF I, BoA I, CREFC I,
J.P. Morgan I, PricewaterhouseCoopers dated July 30, 2010 submitted
in response to the 2010 ABS Proposing Release (``PwC''), MBA I,
SIFMA I (expressed views of dealers and sponsors only), and Wells
Fargo I. None of these commenters provided a specific cost estimate
for compliance.
---------------------------------------------------------------------------

Commenters suggested varying timeframes for implementation. For
instance, investor members of one group suggested that the transition
period should not exceed one year from the date the final rules are
published.\1371\ In contrast, other commenters suggested longer
timeframes, including: A transition period of no earlier than 12 months
from the publication of the final rules in the Federal Register,\1372\
18 months,\1373\ and 24 months.\1374\ We also received a number of
comments suggesting that the asset-level disclosures may not be
available for assets originated before the effective date of the asset-
level disclosure requirements or for assets underlying asset-backed
securities originated before the effective date of the
requirements.\1375\ These commenters suggested a range of possible
solutions, including a full exemption,\1376\ a multi-year phase-
in,\1377\ and an exemption to the extent that information called for
under those rules with respect to legacy loans is unknown and not
available to the issuer without unreasonable effort or expense.\1378\
However, investor members of one trade association suggested that any
grandfathering period for assets originated prior to the compliance
date should be limited to an additional one year after the compliance
date.\1379\
---------------------------------------------------------------------------

\1371\ See letter from SIFMA I (expressed views of investors
only). The dealer and sponsor members of this commenter suggested
that a one-year transition period would be the minimum needed and
recommending 18 months for asset-level disclosure because many
securitizers are unprepared for these requirements and this
timeframe would also allow smaller originators and servicers to
examine the feasibility of converting their platforms to comply with
the disclosure requirements.
\1372\ See letter from ASF I.
\1373\ See letters from J.P. Morgan I (suggesting an 18-month
implementation period following the effective date of the rule
without specifying whether the recommended timeframe should apply to
all of the rules or just the new asset-level requirements), MBA I
(with respect to RMBS) (suggesting 18 months will ensure more
compliance and smoother transition), SIFMA I, and Wells Fargo I
(suggesting a 12-month implementation period followed by a six-month
test period).
\1374\ See letters from CREFC I, MBA I (with respect to CMBS),
and PwC.
\1375\ See, e.g., letters from ABA I, ASF I, BoA I, J.P. Morgan
I, MBA I, and SIFMA I. See also letters from J.P. Morgan II and
SIFMA III-dealers and sponsors.
\1376\ See letters from ABA I and Citi (also suggesting we
create an explicit safe harbor for earlier-originated assets that
may not be able to satisfy all of the disclosure requirements based
on a Rule 409 type standard).
\1377\ See letter from ABA I (without describing the multi-year
phase-in approach).
\1378\ See letters from ASF I (suggesting that resecuritizations
supported by legacy underlying securities be grandfathered and not
be subject to the new and amended rules, at least to the extent that
information called for under those rules with respect to legacy
assets is unknown and not available to the issuer without
unreasonable effort or expense), Citi, and J.P. Morgan I (suggesting
that we provide a bright-line test for compliance based on the
origination date of the related asset, or allow as an acceptable
response to the data points an indication that certain data fields
for such asset are unavailable, accompanied by an explanation of why
the data is not available and whether it will be available in the
future). See also letters from ASF II and J.P. Morgan II.
\1379\ See letter from SIFMA I (expressed views of investors
only).
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Some commenters also recommended allowing exemptions or
``deferrals'' from the reporting requirements for data that they were
unable to start collecting within the implementation timeframe.\1380\
One commenter also stated that it was important that the Commission
provide the public with the ``the detailed file layout that is
necessary with XML'' when the final rule is adopted so that market
participants can begin programming their systems and that any delay in
receiving this information will greatly affect the industry's ability
to comply in a timely manner.\1381\
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\1380\ See letters from ASF I (suggesting that some cases will
exist where compliance cannot be accomplished within the
implementation timeframe and in those cases, issuers should be able
to apply for a hardship exemption and be granted additional time to
comply as needed on a case-by-case basis, or on a ``class of
transactions'' basis, where the class might be defined by any number
of common characteristics (e.g., common depositor, sponsor or other
transaction party, asset type or transaction structure)) and BoA I
(suggesting we allow issuers to report exceptions or deferrals in
cases where responses to non-crucial data points cannot be provided
in the exact manner contemplated by the proposed rule to ease
transition concerns and indicating that this is consistent with
Regulation AB, which permits concessions when data requests require
significant cost or effort).
\1381\ See letter from MBA I.
---------------------------------------------------------------------------

As we noted earlier, we believe that, in order for investors to
have access to robust information concerning the pool assets, asset-
level disclosure needs to be provided. We understand that some of the
disclosures that we are requiring are not currently captured by
originators or servicers and that it will take time and resources to
reprogram systems and processes to capture the data and then report it
in XML. We also understand that issuers and market participants are
working to implement many different regulations that have recently been
adopted. Therefore, we have decided to delay the compliance date for
the asset-level disclosure requirements so that market participants
will have ample time to prepare and satisfy the new requirements. In
this regard, issuers will be required to provide asset-level
information no later than two years after the effective date of the
rules, which we believe is a reasonable implementation timeframe. We
believe the extended timeframe will ultimately benefit investors
because it will give issuers and market participants the time to plan
for and implement appropriate reporting processes and more meaningful
and relevant disclosure documents. In addition, as discussed in Section
III.A.2.b.5 Resecuritizations, we are adopting an exemption for
resecuritizations of ABS issued prior to two years after the effective
date of the rules, the compliance date for the asset-level disclosure
requirements.
We also understand that certain changes to issuers' and market
participants' systems may not be able to occur until the final
technical requirements are published in the EDGAR Filer Manual and
EDGAR Technical Specification documents. In order to provide issuers
and other filers time to make adjustments to their systems, we
anticipate making a draft of the EDGAR Technical Specification
documents\1382\ available soon.
---------------------------------------------------------------------------

\1382\ The draft EDGAR Technical Specification documents will
include preliminary tagging requirements for asset-level data
points.
---------------------------------------------------------------------------

We also note that at least one commenter requested a test period.
We believe that submissions may assist both the Commission and issuers
with addressing unknown and unforeseeable issues that may arise with
the submission of the asset-level disclosures.\1383\ We will permit
issuers to file test submissions during the transition period.
---------------------------------------------------------------------------

\1383\ See letter from Wells Fargo I (suggesting a six-month
test period).
---------------------------------------------------------------------------

We are not adopting a commenter's suggestion that we adopt a
hardship exemption from the reporting requirements for those issuers
that may be unable to start collecting by the implementation timeframe.
We believe that our timeframe provides ample time for the necessary
reprogramming of systems and processes to capture the information,
including for smaller originators.

[[Page 57305]]

C. Compliance Dates

As discussed above, we are adopting different compliance periods
for the new rules. Registrants must comply with new rules, forms, and
disclosures other than the asset-level disclosure requirements no later
than November 23, 2015. Offerings of asset-backed securities backed by
RMBS, CMBS, Auto ABS, and debt securities (including resecuritizations)
must comply with the asset-level disclosure requirements no later than
November 23, 2016. Any Form 10-D or Form 10-K filed after November 23,
2015, must comply with the new rules and disclosures, except asset-
level disclosures. If any provision of these rules, or the application
thereof to any person or circumstance, is held to be invalid, such
invalidity shall not affect other provisions or application of such
provisions to other persons or circumstances that can be given effect
without the invalid provision or application.

X. Paperwork Reduction Act

A. Background

Certain provisions of the new rules and rule amendments contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (``PRA'').\1384\ We published a notice
requesting comment on the collection of information requirements in the
2010 ABS Proposing Release and the 2011 ABS Re-Proposing Release, and
we submitted these requirements to the Office of Management and Budget
(``OMB'') for review in accordance with the PRA.\1385\
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\1384\ 44 U.S.C. 3501 et seq.
\1385\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

An agency may not conduct or sponsor, and a person is not required
to comply with, a collection of information unless it displays a
currently valid control number. The titles for the collections of
information are:
(1) ``Form S-1'' (OMB Control No. 3235-0065);
(2) ``Form S-3'' (OMB Control No. 3235-0073);
(3) ``Form 10-K'' (OMB Control No. 3235-0063);
(4) ``Form 10-D'' (OMB Control No. 3235-0604);
(5) ``Form 8-K'' (OMB Control No. 3235-0060);
(6) ``Regulation S-K'' (OMB Control No. 3235-0071);
(7) ``Regulation S-T'' (OMB Control No. 3235-0424);
(8) ``Form SF-1'' (OMB Control No. 3235-0707);
(9) ``Form SF-3'' (OMB Control No. 3235-0690); and
(10) ``Form ABS-EE'' (OMB Control No. 3235-0706).
The forms listed in Nos. 1 through 7 were adopted under the
Securities Act and the Exchange Act and set forth the disclosure
requirements for registration statements and periodic and current
reports filed with respect to asset-backed securities and other types
of securities to inform investors. Regulation S-K, which includes the
item requirements in Regulation AB, contains the requirements for
disclosure that an issuer must provide in filings under both the
Securities Act and the Exchange Act. Regulation S-T specifies the
requirements that govern the submission of electronic documents.
The regulations and forms listed in Nos. 8 through 10 are new
collections of information under the Securities Act and the Exchange
Act. Form SF-1 and Form SF-3 represent the new registration forms for
offerings of asset-backed securities, as defined in Item 1101(c) of
Regulation AB. Form SF-3 represents the registration form for asset-
backed offerings that meet certain shelf eligibility conditions and can
be offered off a shelf under Rule 415. Form SF-1 represents the
registration form for other asset-backed offerings. Form ABS-EE \1386\
is a new form for the filing of certain asset-level information
required in connection with registration statements and periodic
reports for asset-backed issuers. Under the requirements, an asset-
backed issuer is required to submit to the Commission specified, tagged
information on assets in the pool underlying the securities.
---------------------------------------------------------------------------

\1386\ We proposed this new collection of information in the
2010 ABS Proposing Release under the title ``Asset Level Data.'' We
have revised the title of this collection of information to reflect
the location of the asset-level data requirements under the final
rule.
---------------------------------------------------------------------------

The hours and costs associated with preparing disclosure, filing
forms, and retaining records constitute reporting and cost burdens
imposed by the collections of information. Compliance with the rule
amendments is mandatory. Responses to the information collection will
not be kept confidential, and there is no mandatory retention period
for the information disclosed.

B. Summary of Comment Letters on the PRA Analysis

In the 2010 ABS Proposing Release and the 2011 ABS Re-Proposing
Release, we requested comment on the PRA analysis. While many
commenters provided qualitative comments on the possible costs of the
proposed rules and amendments, we received limited quantitative
comments on our PRA analysis. The only quantitative comment we received
on asset-level disclosure came from a commenter representing a group of
Auto ABS sponsors. This commenter estimated that, if we adopted each of
the Auto ABS data points originally proposed, the average costs and
employee hours per sponsor necessary to comply with the asset-level
requirements would be approximately $2 million and 12,000 hours,
respectively.\1387\ This commenter also noted that if we adopted the
reduced number of data points proposed in their comment letter, the
burden would decrease to $750,000 and 3,500 hours.
---------------------------------------------------------------------------

\1387\ See letter from VABSS IV. As the commenter noted, the
sponsors ``estimated the costs and employee hours necessary to
reprogram systems and business procedures to capture, track and
report all of the items for auto loans currently set forth in the
[2010 ABS Proposing Release].'' We assume that these costs and
burden hours include the costs and burden hours associated with
providing information at the time the ABS is issued as well as on an
ongoing basis, as was contemplated in the 2010 ABS Proposing
Release.
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We received only one comment letter with quantitative comments on
the additional burden to complete Form SF-3.\1388\ This commenter
believed that our 100 burden hour estimate for asset-backed issuers to
complete the disclosure requirements for Form SF-3, prepare the
information, and file it with the Commission is ``inadequate'' and
``not realistic.'' This commenter stated that at least 100 burden hours
should be separately allocated to certain of the shelf transaction
requirements, including the certification provision, the asset review
provision, and the dispute resolution provision. The commenter noted
that there would be an increased burden of at least 100 hours for the
certification requirement because the certifying officer would likely
need to rely on an independent evaluator or hire an additional
executive officer with the expertise necessary in order to provide the
certification. The commenter also noted that there will be additional
burden in retaining a reviewer and its counsel to comply with the asset
review provision. Finally, the commenter stated that the dispute
resolution provision alone could exceed our 100 burden hour estimate
without providing any quantitative analysis.
---------------------------------------------------------------------------

\1388\ See letter from Kutak.
---------------------------------------------------------------------------

Qualitative comments that we received generally noted that the new
data collection requirements will impose additional burdens on issuers
and sponsors. For example, we received several qualitative comments
noting that the proposal would likely impose burdens on sponsors by
requiring them

[[Page 57306]]

to collect, capture, maintain, evaluate and report data in new or
different ways.\1389\
---------------------------------------------------------------------------

\1389\ See, e.g., letters from ABA I, J.P. Morgan II, MBA II,
and Wells Fargo I.
---------------------------------------------------------------------------

C. Revisions to Proposals

We considered all of the comments we received, as we considered how
to quantify and possibly mitigate the burdens that could potentially be
imposed by the new requirements. In order to address commenters'
concerns about the asset-level requirements for Auto ABS, we have
significantly reduced the scope of the asset-level data required from
the proposal.
For the new shelf eligibility criteria, we have made several
changes to address cost concerns--for example, we revised the
certification to indicate that the certification is not a guarantee
about the future performance of the assets and have clarified that the
certifying officer has any and all defenses available under the
securities laws. We also note, in response to one commenter's concern
discussed above,\1390\ that we do not believe that an additional
executive officer or independent evaluator will need to be hired as a
result of the new rules to actually structure the transaction because
the certifying officer may rely on senior officers under his or her
supervision that may be more familiar with the structuring of the
transaction. We do expect, however, that the certifying officer will
provide appropriate oversight over the transaction, including
supervision of the structuring, so that he or she is able to make the
certification. Finally, we believe that providing the certification
should not impose any additional significant burden in terms of
preparing additional disclosure, as such burden is already accounted
for in the preparation of prospectus disclosure that is part of the
Form SF-3 registration statement.
---------------------------------------------------------------------------

\1390\ See letter from Kutak.
---------------------------------------------------------------------------

We acknowledge that the asset review provision will impose an
upfront cost on the transaction since we are requiring that the
reviewer be named in the prospectus. We believe, however, that most of
the costs will be incurred in connection with reviews, which will occur
during the life of the securitization only if the triggering events
have been met. Consequently, if the reviewer does not perform any
reviews, then the costs will be limited to the retainer fee.
Recognizing that the bulk of the cost will be incurred with the actual
reviews, we have attempted to reduce the burden of ongoing compliance
with this shelf transaction requirement by requiring that a delinquency
threshold must first be reached or exceeded before investors will be
able to vote for a review. Disclosure is required in a Form 10-D only
if a review is triggered.
We do not agree with a commenter that the dispute resolution
provision could exceed the 100 burden hour estimate to collect the
information. Under the final rules, a dispute resolution provision is
required in the pooling and servicing agreement and disclosure of that
provision is required in the prospectus. We acknowledge that additional
costs may be incurred as a result of the number of hours that will be
expended by certain personnel, including counsel, to come to a
resolution if a dispute occurs. Because we are not requiring additional
disclosures about the dispute resolution provision, we are not
increasing our burden estimates. Accordingly, while we recognize that
the new shelf conditions will impose additional costs on issuers, these
costs are not primarily disclosure or record keeping burdens. Thus, we
do not believe that we need to increase the 100 burden hour estimate to
complete and file Form SF-3.
We have also made a number of changes in response to more general
qualitative comments in an effort to avoid potential unintended
consequences and reduce potential additional costs or burdens
identified by commenters. For example, for the asset-level
requirements, we have attempted to reduce burden and cost concerns by
aligning the requirements with industry standards where feasible. We
have also revised how we are calculating the burden hours and costs for
data collection to more accurately reflect how data will be captured
and organized in the industry, as described by commenters. Further, we
are providing for an extended implementation timeframe, which we also
believe will reduce the burden of implementing the requirements.

D. PRA Reporting and Cost Burden Estimates

Our PRA burden estimate for each of the existing collections of
information, except for Form 10-D, are based on an average of the time
and cost incurred by all types of public companies, not just asset-
backed issuers, to prepare a particular collection of information. Form
10-D is a form that is prepared and filed only by asset-backed issuers.
In 2004, we codified requirements for asset-backed issuers in these
regulations and forms, recognizing that the information relevant to
asset-backed securities differs substantially from that relevant to
other securities.
Our PRA burden estimates for the new rules and rule amendments are
based on information that we receive on entities assigned to Standard
Industrial Classification Code 6189, the code used for asset-backed
securities, as well as information from outside data sources.\1391\
When possible, we base our estimates on an average of the data that we
have available for years 2004 through 2013.\1392\ In some cases, our
estimates for the number of asset-backed issuers that file Form 10-D
with the Commission are based on an average of the number of ABS
offerings from 2006 through 2013.\1393\
---------------------------------------------------------------------------

\1391\ In the 2010 ABS Proposing Release, we relied on the AB
Alert database for the initial terms of offerings and supplemented
that data with information from the Securities Data Corporation
(SDC). In this release, outside databases referenced in this section
include the AB Alert and CM Alert databases for the initial terms of
offerings.
\1392\ We selected this time period in order to account for the
market disruption caused by the financial crisis by using data that
captures both pre-crisis and post-crisis filings.
\1393\ Form 10-D was not implemented until 2006. Before
implementation of Form 10-D, asset-backed issuers often filed their
distribution reports under cover of Form 8-K.
---------------------------------------------------------------------------

1. Form ABS-EE
The asset-level reporting requirement that we are adopting for
issuances of certain ABS is a new collection of information.\1394\ As
proposed, under the new rules the asset-level information will be
provided at the time the ABS is issued and on an ongoing basis. The
rules also require the information be filed as an exhibit to new Form
ABS-EE.
---------------------------------------------------------------------------

\1394\ We proposed this new collection of information in the
2010 ABS Proposing Release under the title ``Asset Level Data.'' We
are revising the title to reflect that the asset-level information
will be filed as an exhibit to new Form ABS-EE. Also, the proposed
requirements would have required asset-level data across all asset
types, except for credit card receivables ABS and stranded costs
ABS. We proposed that credit card ABS issuers would be required to
provide grouped account data, both at the time of securitization and
on an ongoing basis. The rules we are adopting at this time,
however, only require asset-level data for ABS where the underlying
assets consist of residential mortgages, commercial mortgages, auto
loans or auto leases, resecuritizations of ABS, or of debt
securities. Also, we are not adopting at this time the proposed
requirement that credit card ABS issuers provide grouped account
data. Because of the number of data points involved, our estimates
for the asset-level requirements in the proposal were based on data
for RMBS, CMBS and credit card ABS issuers. In line with the
requirements we are adopting, we have revised our burden hour
estimate to base the estimate on the hours that sponsors of RMBS,
CMBS, Auto ABS, debt security ABS or resecuritizations may incur to
provide the required data.
---------------------------------------------------------------------------

Our estimates in the 2010 ABS Proposing Release were based on the
costs to provide the required data at the time of securitization and on
an ongoing basis. We estimated that each unique

[[Page 57307]]

sponsor \1395\ would incur a one-time setup cost for the initial filing
of asset-level data.\1396\ Software costs and costs associated with
adjusting existing systems in order to provide the data are included in
the one-time setup costs. The burden estimate also included costs
associated with tagging the data and filing it with the Commission.
After the first filing of asset-level information, we estimated that
sponsors would incur costs to provide the required data with subsequent
offerings of ABS and with each Form 10-D.
---------------------------------------------------------------------------

\1395\ In the proposal, we estimated that the number of unique
ABS sponsors from 2004 to 2009 was 343, for an average of 57 unique
sponsors per year. We have updated our estimate of the total number
of unique sponsors among the relevant assets classes. Based on our
updated estimate, we estimate 60 as the average number of unique
sponsors of registered ABS subject to the rules we are adopting per
year (23 RMBS sponsors, 25 CMBS sponsors, 20 Auto ABS sponsors, two
debt security ABS sponsors, and one resecuritization sponsor (the
total of these numbers for all asset classes is greater than the 60
unique sponsors estimate due to the fact that a single sponsor often
sponsors ABS from different asset classes). For purposes of our
updated estimate, the average annual number of unique sponsors for
RMBS, CMBS and Auto ABS is based on data from outside databases for
the period of 2004 through 2013. See footnote 1391. We believe the
time period selected provides a conservative estimate of the average
annual number of unique sponsors for these asset classes as the 2004
through 2013 timeframe captures both the time period prior to the
financial crisis when there was a larger number of unique ABS
sponsors per year and the more recent time period when the number of
unique sponsors per year has been substantially lower. For debt
security ABS and resecuritizations, we were unable to obtain from
outside databases the average annual number of unique debt security
ABS or resecuritization sponsors. Based on data available through
EDGAR for the period of 2010 to 2013, we estimate that for each year
there will be two unique debt security ABS sponsors. There have been
no registered resecuritization offerings over the past several
years. We assume for this estimate, however, that for each year
there will be at least one unique resecuritization sponsor.
\1396\ Under the proposal, the asset-level information outlined
in proposed Schedule L would be required at the time of issuance. On
an ongoing basis, the asset-level information outlined in proposed
Schedule L-D would be required. Under the final rules, we are
condensing these schedules into one schedule titled Schedule AL. See
Section III.B.2 The Scope of New Schedule AL. The burden estimate in
the proposal provided an estimate for the one-time burden cost for
issuers to provide the asset-level disclosures required at issuance
and a separate estimate for the one-time burden cost for issuers to
provide the ongoing disclosures. For purposes of our updated
estimate and in line with the condensed schedule format we are
adopting, we combined the estimates for one-time setup costs into
one calculation. This change resulted in a substantially lower
estimate of average annual burden hours for filing asset-level data
on an ongoing basis, but a higher amount of professional costs
associated with the first filing of asset-level data at issuance.
---------------------------------------------------------------------------

Some comments on the asset-level proposal suggested that sponsors
would incur substantial costs to capture the required data and to
provide it in the format requested.\1397\ We continue to assume that
asset-backed issuers currently required by Regulation AB to file pool-
level information on the assets in the underlying pool have access to a
substantial portion of the required asset-level information, although
we acknowledge that sponsors may incur additional costs to provide the
data currently collected in the format required by the rules we are
adopting. We recognize that some of the required data is not currently
collected by sponsors and that sponsors will incur costs to capture and
provide some of the required data in the format requested.
---------------------------------------------------------------------------

\1397\ See, e.g., letters from ABA I, ABAASA I, SIFMA I
(expressed views of dealer and sponsors only), and VABSS I.
---------------------------------------------------------------------------

To address concerns about the costs to provide the data, we revised
our calculation of the estimated number of burden hours a sponsor may
incur to acknowledge that a sponsor may need to revise its existing
systems or procedures for each required data point. The burden estimate
in the proposal assumed that approximately two percent of the proposed
asset-level data points would require a sponsor to adjust its existing
systems and procedures for capturing and reporting data. For each data
point that required the sponsor to adjust its existing systems and
procedures, a sponsor would expend at least 18 minutes per adjustment
for each asset in the pool. We have revised our estimate to assume that
before the first filing of asset-level information a sponsor will need
to adjust its existing systems and procedures in some way for each
required data point in order to provide the response to the data point
based on our definitions and that each adjustment will require ten
hours.\1398\
---------------------------------------------------------------------------

\1398\ For instance, the requirements for RMBS include 270 data
points, and we estimate that for each of these 270 data points a
sponsor will need to adjust its systems and procedures in some way
and that each adjustment will require ten hours. In the proposal,
our calculation considered the number of assets in each pool. Since
we continue to assume that a sponsor will need to make a one-time
change to its existing systems and procedures before the first
filing of asset-level information, the number of assets in the pool
is less relevant because the revisions to a sponsor's existing
systems and procedures will be completed before it provides asset-
level data for any ABS. The revised estimate focuses on the changes
each required data point will cause to a sponsor's existing systems
and procedures before it must provide asset-level information.
---------------------------------------------------------------------------

The burden estimate in the proposal for the initial filing of
asset-level data included ten hours to tag and file the data with the
Commission.\1399\ We continue to believe that a sponsor will incur
approximately ten hours to tag, review and file the required data the
first time the sponsor files the asset-level data to comply with our
rules. Based on comments received raising concerns about the burden to
provide the asset-level data in XML, we are also estimating that each
sponsor will also expend approximately 10 hours per data point in order
to adjust its systems to be able to provide the data in XML with the
first filing of asset-level data.\1400\ Based on the asset-level
requirements applicable to each asset class and our estimates for the
XML conversion costs and filing costs, we estimate that each RMBS
sponsor will incur 5,410 hours, each CMBS sponsor will incur 3,050
hours, each Auto ABS sponsor will incur 2,770 hours and each debt
security ABS sponsor or resecuritization sponsor will incur 1,210 hours
\1401\ in one-time setup costs and to provide the asset-level data for
the first time.\1402\ Based on the average number of unique sponsors in
each asset class, we estimate that the total burden estimate for the
initial filing of asset-level data, including the one-time setup cost
to be 259,711 hours.\1403\ We allocate 25% of

[[Page 57308]]

those hours (64,928) to internal burden hours and 75% of the hours
(194,783) to out-of-pocket expenses for software consulting and filing
agent costs at a rate of $250 per hour for a total cost of $48,695,625.
---------------------------------------------------------------------------

\1399\ See the 2010 ABS Proposing Release at 23404.
\1400\ The estimated per hour cost to convert the required data
into an XML format is based on the estimate of the cost to provide
the required asset-level data in XML provided in Section III.B.3.
See footnote 748. For purposes of that estimate, we assumed that a
sponsor would work with all asset types and would need to convert
the data for all asset classes into an XML format and that
conversion would require 6,283 hours. With a combined 680 unique
data points (RMBS = 270, CMBS = 152, Auto ABS = 138, debt security
ABS = 60 and resecuritizations = 60), we estimate that responding to
each data point in XML for the first time will require approximately
10 hours per data point.
\1401\ For each resecuritization, the asset pool is comprised of
one or more ABS. The final rules require disclosures about the ABS
in the pool, and if the ABS in the asset pool is an RMBS, CMBS or
Auto ABS, issuers are also required to provide asset-level
disclosures about the assets underlying the ABS. For purposes of
this estimate, the one-time setup costs for resecuritizations is
based on the number of data points each resecuritization sponsor
must respond to for each ABS in the pool. Our estimate for the one-
time setup cost for providing asset-level data for resecuritizations
does not include the cost to provide asset-level data if the ABS in
the pool is an RMBS, CMBS or Auto ABS since these one-time setup
costs are already included in the one-time setup estimates for RMBS,
CMBS and Auto ABS and sponsors of resecuritizations may be able to
reference asset-level information about the assets underlying the
securities in the pool.
\1402\ In the 2010 ABS Proposal, we estimated that an RMBS
sponsor would incur a total of 7,005 hours (3,194 hours for the data
required at securitization and 3,811 hours for the data required on
an ongoing basis), and a CMBS sponsor would incur a total of 178
hours (86 hours for the data required at securitization and 92 hours
for the data required on an ongoing basis). See the 2010 ABS
Proposing Release at 23404.
\1403\ The burden estimate in the proposal estimated the total
annual burden hours for preparing, tagging and filing asset-level
disclosure at the time of securitization for all ABS issuers to be
151,368 with 25% of those hours allocated to internal burden costs
and 75% of those hours allocated to external burden hours. For a
description of the factors that contributed to differences between
the proposed and final estimates see footnotes 1396 and 1407.
---------------------------------------------------------------------------

After a sponsor has made an initial filing of asset-level data, we
estimate that each subsequent filing of asset-level data will take
approximately 10 hours to prepare, review, tag and file the
information. Based on the number of offerings after the first filing of
asset-level data \1404\ and the number of Form 10-D filings per
year,\1405\ we estimate the average annual hours to prepare and file
asset-level disclosure after the first filing of asset-level data will
be 140,215 hours.\1406\ We allocate 75% of those hours (105,161) to
internal burden hours and 25% of the hours (35,054) to out-of-pocket
expenses for software consulting and filing agent costs at a rate of
$250 per hour totaling $8,763,438. Thus, we estimate the total annual
burden hours for the asset-level disclosure requirements at 170,089
hours \1407\ and the total amount of out-of-pocket expenses for
software and filing agent costs at $57,459,063.\1408\
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\1404\ The burden estimate in the proposal estimated the average
number of offerings for all asset classes to be 958 per year. For
purposes of comparison, we have adjusted the average number of
offerings from 958 to 629 to account for the fact that we are
adopting asset-level requirements for fewer asset classes than we
had proposed. For purposes of this burden estimate because we are
adopting requirements only for certain asset classes, we estimate
there will be an average of 431 registered ABS offerings per year
(RMBS = 343, CMBS = 33, Auto ABS = 51, debt security ABS and
resecuritizations = 4). For purposes of this estimate, the average
annual number of registered RMBS, CMBS and Auto ABS offerings is
based on data from outside databases for the period of 2004 through
2013. We believe the time period selected provides a conservative
estimate of the average annual number of registered offerings for
these asset classes as the 2004-2013 timeframe captures both the
time prior to the financial crisis when there was a larger number of
registered ABS offerings per year and the more recent time period
when the number of registered ABS offerings per year has been
substantially lower. For debt security ABS and resecuritizations, we
are unable to obtain from outside databases the average annual
number of registered offerings of debt security ABS or
resecuritizations between 2004 and 2013. Based on data available
through EDGAR for the period of 2010 to 2013, we estimate there will
be three registered debt security ABS offerings per year. There have
been no registered resecuritization offerings over the past several
years. We assume for this estimate, however, that each year there
will be at least one registered resecuritization offering.
\1405\ For purposes of estimating the number of expected Form
10-D filings, we are using the actual average annual number of Form
10-D filings, which was 13,014. We apportioned the burden of Form
10-D filings across each asset class based on the average number of
offerings per year for each asset class. We believe this results in
a conservative estimate because the rules we are adopting do not
require that all asset classes provide asset-level disclosure and
therefore not every Form 10-D filed will include asset-level data.
\1406\ We estimated in the 2010 ABS Proposing Release that the
average annual burden hours to provide the asset-level data with
Form 10-D on an ongoing basis would be 207,009 hours for all ABS
issuers with 75% of those hours allocated to internal burden hours
and 25% allocated to external burden hours. The final estimate
reflects the cost of ongoing maintenance for XML, which we estimated
to be 5% of the initial XML conversion costs. For a description of
the factors that contributed to differences between the proposed and
final estimate and the proposed estimate see footnotes 1396 and
1407.
\1407\ 170,089 = 64,928 + 105,161. The proposal estimated that
the total average annual burden hours to provide the asset-level
data or grouped asset data would be 193,099 hours and the total
amount of out-of-pocket expenses for software and filing agent costs
would be $41,319,571. The drop in total average annual burden hours
can be attributed to changes in the average annual number of unique
RMBS sponsors and the expected annual number of registered ABS
offerings. Also, other changes to our calculation to address
comments received (e.g., XML conversion cost, system changes) and
differences between the proposed requirements and the final
requirements (e.g., combining the initial and ongoing disclosure
schedules into one schedule) also impacted our estimate.
\1408\ $57,459,063 = $48,695,625 + 8,763,438.
---------------------------------------------------------------------------

2. Form S-3 and Form SF-3
Our current PRA burden estimate for Form S-3 is 136,392 annual
burden hours. This estimate is based on the assumption that most
disclosures required of the issuer are incorporated by reference from
separately filed Exchange Act reports. However, because an Exchange Act
reporting history is not a condition for Form S-3 eligibility for ABS,
asset-backed issuers using Form S-3 often must present all of the
relevant disclosure in the registration statement rather than
incorporate relevant disclosure by reference. Thus, our current burden
estimate for asset-backed issuers using Form S-3 under existing
requirements is similar to our current burden estimate for asset-backed
issuers using Form S-1. During 2004 through 2013, we received an
average of 71 Form S-3 filings annually related to asset-backed
securities.
Under the rules that we are adopting, we are moving the
requirements for asset-backed issuers into new forms that will be used
solely to register offerings of asset-backed securities. New Form SF-3
is the ABS equivalent of existing Form S-3. For purposes of our
calculations, we estimate that the provisions relating to shelf
eligibility will cause a 5% movement in the number of filers (i.e., a
decrease of four registration statements) out of the shelf system due
to the new requirements, which include the certification, the asset
review provision, the dispute resolution provision, the investor
communications provision, and the annual evaluations of compliance with
timely Exchange Act reporting and timely filing of the transaction
agreements and the related certifications.\1409\ On the other hand, we
estimate the number of shelf registration statements for asset-backed
issuers will increase by four as a result of the amendments eliminating
the practice of providing a base prospectus and a prospectus supplement
for ABS offerings.\1410\ Thus, we estimate that the annual number of
shelf registration statements concerning ABS offerings will remain the
same. Accordingly, since the rule amendments will shift all shelf-
eligible ABS filings from Form S-3 to Form SF-3, we estimate that the
amendments will cause a decrease of 71 ABS filings on Form S-3 and a
corresponding increase of 71 ABS filings on Form SF-3 filed
annually.\1411\
---------------------------------------------------------------------------

\1409\ We calculated the decrease of four Form SF-3s by
multiplying the average number of Form S-3s filed (71) by 5%.
\1410\ Based on staff reviews, we believe that it is unusual to
see ABS registration statements with multiple unrelated collateral
types such as auto loans and student loans. There are occasionally
multiple related collateral types such as HELOCs, subprime mortgages
and Alt-A mortgages in ABS registration statements.
\1411\ This is based on the number of registration statements
for asset-backed issuers currently filed on Form S-3 and the new
shelf eligibility requirements.
---------------------------------------------------------------------------

In 2004, we estimated that an asset-backed issuer, under the 2004
amendments to Form S-3, would take an average of 1,250 hours to prepare
a Form S-3 to register ABS.\1412\ Additionally, in the January 2011 ABS
Issuer Review Release, we estimated that the requirements described in
that release would increase the annual incremental burden to asset-
backed issuers by 30 hours per form.\1413\ For registration statements,
we estimate that 25% of the burden of preparation is carried by the
company internally and that 75% of the burden is carried by outside
professionals retained by the registrant at an average cost of $400 per
hour.
---------------------------------------------------------------------------

\1412\ See the 2004 ABS Adopting Release.
\1413\ See the 2011 ABS Issuer Review Adopting Release.
---------------------------------------------------------------------------

We are also adopting additional disclosure requirements that will
impose some additional costs to asset-backed issuers with respect to
registration statements, which we have included as part of our burden
estimate for Form SF-3. We do not believe, however, that the shelf
eligibility requirements that we are adopting will substantially
increase the burden hours

[[Page 57309]]

of filing a Form SF-3 since they generally do not impose significant
new disclosure or record-keeping obligations.\1414\ We note that we
have added a disclosure component to the asset review provision to
require information about the reasonableness of the delinquency trigger
selected by the transaction parties. We did not increase the total
burden hours for this additional disclosure because the additional
burden to provide this information should be minimal since issuers
already have the required information.
---------------------------------------------------------------------------

\1414\ In connection with the new shelf eligibility
requirements, we are adopting a number of ongoing disclosure
requirements that will be triggered at the time a particular
provision (e.g., the asset review or investor communications
provision) is invoked. As discussed below, the burden of these
additional disclosure requirements is reflected in the revised
burden estimate for Form 10-D.
---------------------------------------------------------------------------

We estimate that the incremental burden for asset-backed issuers to
complete the additional disclosure requirements for Form SF-3, prepare
the information, and file it with the Commission will be 100 burden
hours per response on Form SF-3. As a result, we estimate that each
Form SF-3 will take approximately 1,380 hours to complete and
file.\1415\ We estimate the total internal burden for Form SF-3 to be
24,495 hours and the total related professional costs to be
$29,394,000.\1416\ This would result in a corresponding decrease in
Form S-3 burden hours of 22,720 and $27,264,000 in professional
costs.\1417\
---------------------------------------------------------------------------

\1415\ The total burden hours to file Form SF-3 are calculated
by adding the existing burden hours of 1,280 that we estimate for
Form S-3 and the incremental burden of 100 hours imposed by our new
requirements for a total of 1,380 total burden hours.
\1416\ To calculate these values, we first multiply the total
burden hours per Form SF-3 (1,380) by the number of Forms SF-3
expected under the new requirements (71), resulting in 97,980 total
burden hours. Then, we allocate 25% of those hours to internal
burden, resulting in 24,495 hours. We allocate the remaining 75% of
the total burden hours to related professional costs and use a rate
of $400 per hour to calculate the external professional costs of
$29,394,000.
\1417\ To calculate these values, we first multiply the total
burden hours per Form S-3 (1,280) by the average number of Forms S-3
over the period 2004-2013 (71), resulting in 90,880 total burden
hours. Then, we allocate 25% of these hours to internal burden,
resulting in 22,720 hours. We allocate the remaining 75% of the
total burden hours to related professional costs and use a rate of
$400 per hour to calculate the external professional costs of
$27,264,000.
---------------------------------------------------------------------------

3. Form S-1 and Form SF-1
New Form SF-1 is the ABS equivalent of existing Form S-1. As noted
above, for purposes of our calculation, we estimate that the new
requirements for shelf eligibility and new shelf procedures will cause
some movement in the number of filers from the shelf system to the non-
shelf system. For purposes of the PRA, we estimate four asset-backed
issuers will move from the shelf system to the non-shelf system of Form
SF-1.\1418\ From 2004 through 2013, an average of two Forms S-1 were
filed annually by asset-backed issuers. Correspondingly, we estimate
that the number of filings on Form SF-1 will be six, which is the sum
of the two average filings per year and the estimated incremental four
filings from shelf to Form SF-1.
---------------------------------------------------------------------------

\1418\ We estimate in the section above that the requirements
relating to shelf eligibility and new shelf procedures will cause a
5% movement in the number of ABS filers out of the shelf system. We
assume, for the purposes of our PRA estimates, that the other filers
that do not move to Form SF-1 will utilize unregistered offerings or
offshore offerings for offerings of ABS.
---------------------------------------------------------------------------

For ABS filings on Form S-1, we have used the same estimate of
burden per response that we used for Form S-3, because the disclosures
in both filings are similar.\1419\ Even under the new requirements, the
disclosures will continue to be similar for shelf registration
statements and non-shelf registration statements. The burden for the
new requirements for the Asset Data File to be filed as an exhibit to
Forms SF-1 and SF-3 is included in the new Form ABS-EE collection of
information discussed above. Thus, we estimate that an ABS Form SF-1
filing will impose an incremental burden of 100 hours per response,
which is equal to the incremental burden to file Form SF-3. We estimate
the total number of hours to prepare and file each Form SF-1 to be
1,380, the total annual burden to be 2,070 hours and added costs for
professional expenses to be $2,484,000.\1420\ This will result in a
corresponding decrease in Form S-1 burden hours of 640 and $768,000 in
professional costs.\1421\
---------------------------------------------------------------------------

\1419\ See Section IV.B.2 of the 2004 ABS Proposing Release.
\1420\ The total burden hours to file Form SF-1 are calculated
by adding the existing burden hours of 1,280 and the incremental
burden of 100 hours imposed by the new requirements for total of
1,380 hours. To calculate the annual internal and external costs, we
first multiply the total burden hours per Form SF-1 (1,380) by the
number of Forms SF-1 expected under the new requirements (six),
resulting in 8,280 total burden hours. Then, we allocate 25% of
these hours to internal burden, resulting in 2,070 hours. We
allocate the remaining 75% of the total burden hours to related
professional costs and use a rate of $400 per hour to calculate the
external professional costs of $2,484,000.
\1421\ To calculate these values, we first multiply the total
burden hours per Form S-1 (1,280) by the average number of Form S-1s
filed during 2004-2013 (two), resulting in 2,560 total burden hours.
Then, we allocate 25% of these hours to internal burden, resulting
in 640 hours. We allocate the remaining 75% of the total burden
hours to related professional costs and use a rate of $400 per hour
to calculate the external professional costs of $768,000.
---------------------------------------------------------------------------

4. Form 10-K
The ongoing periodic and current reporting requirements applicable
to operating companies differ substantially from the reporting that is
most relevant to investors in asset-backed securities. For asset-backed
issuers, in addition to a specified set of Form 10-K disclosure items,
the issuer must file a servicer compliance statement, a servicer's
assessment of compliance with servicing criteria, and an attestation of
an independent public accountant as exhibits to the Form 10-K. In 2004,
we estimated that 120 hours would be needed to complete and file a Form
10-K for an asset-backed issuer. We believe that our revisions related
to the disclosure requirements for material instances of noncompliance
will cause an increase in the number of hours incurred to prepare,
review, and file Form 10-K by five hours. We estimate that, for
Exchange Act reports, 75% of the burden of preparation is carried by
the company internally and that 25% of the burden is carried by outside
professionals retained by the registrant at an average rate of $400 per
hour. We also estimate that 1,046 Form 10-K filings for asset-backed
issuers are filed per year, based on the average number of Forms 10-K
filed over the period 2004-2013. Therefore, we estimate for PRA
purposes that the increase in total annual number of hours to prepare,
review, and file Form 10-K for asset-backed issuers will be 5,230
hours.\1422\ We allocate 75% of those hours (3,923) to internal burden
and the remaining 25% to external costs totaling $523,000 using a rate
of $400 per hour.
---------------------------------------------------------------------------

\1422\ To calculate the annual internal and external costs, we
first multiply the incremental burden of five hours imposed by the
new requirements by the number of Forms 10-K (1,046), resulting in
an increase of 5,230 burden hours.
---------------------------------------------------------------------------

5. Form 10-D
In 2004, we adopted Form 10-D as a new form for only asset-backed
issuers. This form is filed within 15 days of each required
distribution date on the asset-backed securities, as specified in the
governing documents for such securities. The form contains periodic
distribution and pool performance information.
In 2004, we estimated that it would take 30 hours to complete and
file Form 10-D.\1423\ We also estimate that 13,014 Form 10-D filings
are filed per year based on current annual responses.\1424\

[[Page 57310]]

As discussed above, we are adopting asset-level disclosure requirements
that relate to ongoing performance of the assets to be filed at the
same time as Form 10-D; the burden of this requirement is included in
our estimate of the asset-level disclosure collection of information
requirements. We estimate that the new Regulation AB disclosure
requirements that will be included in Form 10-D related to the asset
review (Item 1121(d)), investor communications (Item 1121(e)), and
material changes to the sponsor's interest in the transaction (Item
1124) will result in an additional burden of five hours for Items
1121(d) & (e), plus two hours for Item 1124 per filing to prepare.
Therefore, we estimate that the new requirements will increase the
number of hours to prepare, review, and file a Form 10-D to 37 hours,
thereby increasing the total burden hours for all Form 10-Ds filed
annually to 481,518 hours. We allocate 75% of those hours (361,139) to
internal burden and the remaining 25% to external costs totaling
$48,151,800 using a rating of $400 per hour.
---------------------------------------------------------------------------

\1423\ See the 2004 ABS Adopting Release.
\1424\ To calculate current annual responses, we used the
average number of respondents that filed Form 10-Ds between 2011 and
2013, which was 2,169. We then multiplied the average number of
respondents (2,169) by the average number of times that a respondent
would file a Form 10-D per year (6) for a total of 13,014 Form 10-Ds
per year. Different types of asset-backed securities have different
distribution periods, and the Form 10-D is filed for each
distribution period. We derived the multiplier of six by comparing
the number of Forms 10-D that have been filed since 2006 with the
number of Forms 10-K (which are only required to be filed once a
year) that have been filed.
---------------------------------------------------------------------------

6. Form 8-K
Our current PRA estimate for Form 8-K is based on the use of the
report to disclose the occurrence of certain defined reportable events,
some of which are applicable to asset-backed securities. In the 2010
ABS Proposing Release, we noted three portions of the proposal which
would cause an increase in the number of reports on Form 8-K for ABS
issuers; however, we are not adopting any of those proposed
requirements.\1425\ We are amending Form 8-K to include a specific item
number under which static pool information that is filed on Form 8-K
must be reported. This amendment will assist investors in locating
static pool information that is incorporated by reference into the
prospectus. Because the static pool requirement is included in the
existing burden estimate for Form S-3, which we are transferring to the
new Form SF-3, we are not assigning any additional burden hours to the
Form 8-K for this new requirement.
---------------------------------------------------------------------------

\1425\ See Section X.B.5. of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

7. Regulation S-K and Regulation S-T
Regulation S-K, which includes the item requirements in Regulation
AB, contains the requirements for disclosure that an issuer must
provide in filings under both the Securities Act and the Exchange Act.
As noted above, Regulation S-T contains the requirements that govern
the electronic submission of documents.
The new rules and rule amendments that we are adopting will result
in revisions to Regulation S-K and Regulation S-T. The collection of
information requirements, however, are reflected in the burden hours
estimated for the various Securities Act and Exchange Act forms related
to asset-backed issuers. The rules in Regulation S-K and Regulation S-T
do not impose any separate burden. Consistent with historical practice,
we have retained an estimate of one burden hour each to Regulation S-T
and Regulation S-K for administrative convenience.

E. Summary of Changes to Annual Burden of Compliance in Collection of
Information

The table below illustrates the changes in annual compliance burden
in the collection of information in hours and costs for existing
reports and registration statements and for the new registration
statements and forms for asset-backed issuers. Bracketed numbers
indicate a decrease in the estimate.
---------------------------------------------------------------------------

\1426\ The current annual responses reflects the average number
of filings that the Commission has received from 2011 to 2013.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Decrease or Decrease or
annual Final Current increase in Final Current increase in Final
Form responses annual burden burden burden professional professional professional
\1426\ responses hours hours hours costs costs costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
S-3................................ 1,153 1,082 136,192 [22,720] 113,472 163,435,444 [27,264,000] 136,171,444
S-1................................ 903 901 219,501 [640] 218,861 263,401,488 [768,000] 262,633,488
SF-3............................... ........... 71 ........... 24,495 24,495 ................ 29,394,000 29,394,000
SF-1............................... ........... 6 ........... 2,070 2,070 ................ 2,484,000 2,484,000
10-K............................... 8,137 8,137 12,198,094 3,923 12,202,017 1,626,412,494 523,000 1,626,935,494
10-D............................... 13,014 13,014 292,815 68,324 361,139 39,042,000 9,109,800 48,151,800
Form ABS-EE........................ ........... 13,374 ........... 170,089 170,089 ................ 57,459,063 57,459,063
--------------------------------------------------------------------------------------------------------------------------------------------------------

XI. Regulatory Flexibility Act Certification

In Part XIV of the 2010 ABS Proposing Release and Part IX of the
2011 ABS Re-Proposing Release, we certified pursuant to 5 U.S.C. 605(b)
that the new rules contained in this release would not have a
significant economic impact on a substantial number of small entities.
One commenter provided comments in response to the Commission's request
for written comments regarding this certification.\1427\ This commenter
faulted the Commission for reaching its conclusion by ``focusing
exclusively on the size of the sponsors that would be required to
comply.'' \1428\ The commenter suggested that the analysis should
extend beyond the impact on small entities as sponsors of
securitization transactions.\1429\ This commenter did not suggest that
there would be a significant impact on entities directly subject to any
of the rules we had proposed.\1430\ Further, the commenter did not
describe the nature of any impact on small entities or provide
empirical data to support the extent of the impact. The Regulatory
Flexibility Act analysis only applies to those entities ``which will be
subject to the requirement[s]'' of the rule.\1431\

[[Page 57311]]

Accordingly, based on the analysis set forth in the 2010 ABS Proposing
Release and the 2011 ABS Re-Proposing Release, we continue to believe
that the rules being adopted would not have a significant economic
impact on a substantial number of small entities.
---------------------------------------------------------------------------

\1427\ See letter from ABA II.
\1428\ Id.
\1429\ In justifying a thorough regulatory analysis, the ABA
contended, ``[g]iven securitization's pervasive role in our economy
and the importance of securitization to the availability of credit
to small businesses, it is difficult to fathom how the 2010 ABS
Proposals, as revised by the Re-Proposing Release, if adopted, would
not have a significant impact on a substantial number of small
entities.''
\1430\ See letter from ABA II.
\1431\ See 5 U.S.C. 604(a)(5). See also Mid-Tex Elec. Co-op,
Inc. v. FERC, 773 F.2d 327, 343 (D.C. Cir. 1985) (reasoning that
because ``Congress did not intend to require that every agency
consider every indirect effect that any regulation might have on
small businesses in any stratum of the national economy''), Cement
Kiln Recycling Coalition v. EPA, 255 F.3d 855, 869 (D.C. Cir. 2001)
(reasoning that ``to require an agency to assess the impact on all
of the nation's small businesses possibly affected by a rule would
be to convert every rulemaking process into a massive exercise in
economic modeling, an approach we have already rejected'').
---------------------------------------------------------------------------

XII. Statutory Authority and Text of Rule and Form Amendments

We are adopting the new rules, forms and amendments contained in
this document under the authority set forth in Sections 5, 6, 7, 8, 10,
19(a) and 28 of the Securities Act, Sections 12, 13, 15, 23(a), 35A and
36 of the Exchange Act, and Section 319 of the Trust Indenture Act.

List of Subjects

17 CFR Part 230

Advertising, Reporting and recordkeeping requirements, Securities.

17 CFR Parts 229, 232, 239, 240, 243 and 249

Reporting and recordkeeping requirements, Securities.

For the reasons set out above, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read as follows:

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 777iii,
77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j-3,78l, 78m, 78n, 78n-1, 78o,
78u-5, 78w, 78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18
U.S.C. 1350, unless otherwise noted.

0
2. Amend Sec. 229.512 by:
0
a. In paragraph (a)(1)(iii)(B) adding the phrase ``, Form SF-3 (Sec.
239.45 of this chapter)'' immediately after the phrase, ``Form S-3
(Sec. 239.13 of this chapter)'';
0
b. In paragraph (a)(1)(iii)(C) removing the phrase ``on Form S-1 (Sec.
239.11 of this chapter) or Form S-3 (Sec. 239.13 of this chapter)''
and adding in its place ``on Form SF-1 (Sec. 239.44 of this chapter)
or Form SF-3 (Sec. 239.45 of this chapter)'';
0
c. Adding paragraphs (a)(5)(iii) and (a)(7); and
0
d. Removing paragraph (l).
The additions read as follows:

Sec. 229.512 (Item 512) Undertakings.

* * * * *
(a) * * *
(5) * * *
(iii) If the registrant is relying on Sec. 230.430D of this
chapter:
(A) Each prospectus filed by the registrant pursuant to Sec.
230.424(b)(3) and (h) of this chapter shall be deemed to be part of the
registration statement as of the date the filed prospectus was deemed
part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Sec.
230.424(b)(2), (b)(5), or (b)(7) of this chapter as part of a
registration statement in reliance on Sec. 230.430D of this chapter
relating to an offering made pursuant to Sec. 230.415(a)(1)(vii) or
(a)(1)(xii) of this chapter for the purpose of providing the
information required by section 10(a) of the Securities Act of 1933 (15
U.S.C. 77j(a)) shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Sec. 230.430D of this chapter, for
liability purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of
the registration statement relating to the securities in the
registration statement to which that prospectus relates, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective date; or
* * * * *
(7) If the registrant is relying on Sec. 230.430D of this chapter,
with respect to any offering of securities registered on Form SF-3
(Sec. 239.45 of this chapter), to file the information previously
omitted from the prospectus filed as part of an effective registration
statement in accordance with Sec. 230.424(h) and Sec. 230.430D of
this chapter.
* * * * *

0
3. Amend Sec. 229.601 by:
0
a. Revising the exhibit table in paragraph (a); and
0
b. Adding paragraphs (b)(36) and (b)(102) through (b)(106).
The additions read as follows:

Sec. 229.601 (Item 601) Exhibits.

(a) * * *
EXHIBIT TABLE
* * * * *

Exhibit Table
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Securities act forms Exchange act forms
-------------------------------------------------------------------------------------------------------------------------------
S-4 F-4 8-K
S-1 S-3 SF-1 SF-3 \1\ S-8 S-11 F-1 F-3 \1\ 10 \2\ 10-D 10-Q 10-K ABS-EE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Underwriting agreement...................................... X X X X X ...... X X X X ...... X ...... ...... ...... ......
(2) Plan of acquisition, reorganization, arrangement, X X X X X ...... X X X X X X ...... X X ......
liquidation or succession......................................
(3) (i) Articles of incorporation............................... X ...... X X X ...... X X ...... X X X X X X ......
(ii) Bylaws..................................................... X ...... X X X ...... X X ...... X X X X X X ......
(4) Instruments defining the rights of security holders, X X X X X X X X X X X X X X X ......
including indentures...........................................
(5) Opinion re legality......................................... X X X X X X X X X X ...... ...... ...... ...... ...... ......
(6) [Reserved].................................................. N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

[[Page 57312]]

(7) Correspondence from an independent accountant regarding non- ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ...... ...... ...... ......
reliance on a previously issued audit report or completed
interim review.................................................
(8) Opinion re tax matters...................................... X X X X X ...... X X X X ...... ...... ...... ...... ...... ......
(9) Voting trust agreement...................................... X ...... ...... ...... X ...... X X ...... X X ...... ...... ...... X ......
(10) Material contracts......................................... X ...... X X X ...... X X ...... X X ...... X X X ......
(11) Statement re computation of per share earnings............. X ...... ...... ...... X ...... X X ...... X X ...... ...... X X ......
(12) Statements re computation of ratios........................ X X ...... ...... X ...... X X ...... X X ...... ...... ...... X ......
(13) Annual report to security holders, Form 10-Q or quarterly ...... ...... ...... ...... X ...... ...... ...... ...... ...... ...... ...... ...... ...... X ......
report to security holders \3\.................................
(14) Code of Ethics............................................. ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ...... ...... X ......
(15) Letter re unaudited interim financial information.......... X X ...... ...... X X X X X X ...... ...... ...... X ...... ......
(16) Letter re change in certifying accountant \4\.............. X ...... ...... ...... X ...... X ...... ...... ...... X X ...... ...... X ......
(17) Correspondence on departure of director.................... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ...... ...... ...... ......
(18) Letter re change in accounting principles.................. ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X X ......
(19) Report furnished to security holders....................... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ...... ......
(20) Other documents or statements to security holders.......... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ...... ...... ...... ......
(21) Subsidiaries of the registrant............................. X ...... X X X ...... X X ...... X X ...... ...... ...... X ......
(22) Published report regarding matters submitted to vote of ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X X X ......
security holders...............................................
(23) Consents of experts and counsel............................ X X X X X X X X X X ...... \5\ X \5\ X \5\ X \5\ X ......
(24) Power of attorney.......................................... X X X X X X X X X X X X ...... X X ......
(25) Statement of eligibility of trustee........................ X X X X X ...... ...... X X X ...... ...... ...... ...... ...... ......
(26) Invitation for competitive bids............................ X X X X X ...... ...... X X X ...... ...... ...... ...... ...... ......
(27) through (30) [Reserved].................................... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ......
(31) (i) Rule 13a-14(a)/15d-14(a) Certifications................ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ......
(ii) Rule 13a-14/15d-14 Certifications ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ......
(32) Section 1350 Certifications \6\............................ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X X ......
(33) Report on assessment of compliance with servicing criteria ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ......
for asset-backed issuers.......................................
(34) Attestation report on assessment of compliance with ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ......
servicing criteria for asset-backed securities.................
(35) Servicer compliance statement.............................. ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X ......
(36) Depositor Certification for shelf offerings of asset-backed ...... ...... ...... X ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ......
securities.....................................................
(37) through (94) [Reserved].................................... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
(95) Mine Safety Disclosure Exhibit............................. ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X X ......
(96) through (98) [Reserved].................................... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ......
(99) Additional exhibits........................................ X X X X X X X X X X X X X X X ......
(100) XBRL-Related Documents.................................... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... X X ...... X X ......
(101) Interactive Data File..................................... X X ...... ...... X ...... X X X X ...... X ...... X X ......
(102) Asset Data File........................................... ...... ...... X X ...... ...... ...... ...... ...... ...... ...... ...... X ...... ...... X
(103) Asset Related Documents................................... ...... ...... X X ...... ...... ...... ...... ...... ...... ...... ...... X ...... ...... X
(104) [Reserved]................................................ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ......
(105) [Reserved]................................................ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ......
(106) Static Pool PDF........................................... ...... ...... X X ...... ...... ...... ...... ...... ...... ...... X ...... ...... ...... ......
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ An exhibit need not be provided about a company if: (1) With respect to such company an election has been made under Form S-4 or F-4 to provide information about such company at a level
prescribed by Form S-3 or F-3; and (2) the form, the level of which has been elected under Form S-4 or F-4, would not require such company to provide such exhibit if it were registering a
primary offering.
\2\ A Form 8-K exhibit is required only if relevant to the subject matter reported on the Form 8-K report. For example, if the Form 8-K pertains to the departure of a director, only the
exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by reference from a previous filing.
\3\ Where incorporated by reference into the text of the prospectus and delivered to security holders along with the prospectus as permitted by the registration statement; or, in the case of
the Form 10-K, where the annual report to security holders is incorporated by reference into the text of the Form 10-K.
\4\ If required pursuant to Item 304 of Regulation S-K.
\5\ Where the opinion of the expert or counsel has been incorporated by reference into a previously filed Securities Act registration statement.
\6\ Pursuant to Sec. Sec. 240.13a-13(b)(3) and 240.15d-13(b)(3) of this chapter, asset-backed issuers are not required to file reports on Form 10-Q.

* * * * *
(b) * * *
(36) Certification for shelf offerings of asset-backed securities.
Provide the certification required by General Instruction I.B.1.(a) of
Form SF-3 (Sec. 239.45 of this chapter) exactly as set forth below:
Certification
I [identify the certifying individual] certify as of [the date of
the final prospectus under Sec. 230.424 of this chapter] that:
1. I have reviewed the prospectus relating to [title of all
securities, the offer and sale of which are registered] (the
``securities'') and am familiar with, in all material respects, the
following: The characteristics of the securitized assets underlying the
offering (the ``securitized assets''), the structure of the
securitization, and all material underlying transaction agreements as
described in the prospectus;
2. Based on my knowledge, the prospectus does not contain any
untrue statement of a material fact or omit to

[[Page 57313]]

state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading;
3. Based on my knowledge, the prospectus and other information
included in the registration statement of which it is a part fairly
present, in all material respects, the characteristics of the
securitized assets, the structure of the securitization and the risks
of ownership of the securities, including the risks relating to the
securitized assets that would affect the cash flows available to
service payments or distributions on the securities in accordance with
their terms; and
4. Based on my knowledge, taking into account all material aspects
of the characteristics of the securitized assets, the structure of the
securitization, and the related risks as described in the prospectus,
there is a reasonable basis to conclude that the securitization is
structured to produce, but is not guaranteed by this certification to
produce, expected cash flows at times and in amounts to service
scheduled payments of interest and the ultimate repayment of principal
on the securities (or other scheduled or required distributions on the
securities, however denominated) in accordance with their terms as
described in the prospectus.
5. The foregoing certifications are given subject to any and all
defenses available to me under the federal securities laws, including
any and all defenses available to an executive officer that signed the
registration statement of which the prospectus referred to in this
certification is part.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
-----------------------------------------------------------------------
[Title]

The certification must be signed by the chief executive officer of
the depositor, as required by General Instruction I.B.1.(a) of Form SF-
3.
* * * * *
(102) Asset Data File. An Asset Data File (as defined in Sec.
232.11 of this chapter) filed pursuant to Item 1111(h)(3) of Regulation
AB (Sec. 229.1111(h)(3)).
(103) Asset Related Document. Additional asset-level information or
explanatory language pursuant to Item 1111(h)(4) and (5) of Regulation
AB (Sec. 229.1111(h)(4) and (h)(5)).
(104) [Reserved].
(105) [Reserved]
(106) Static pool. If not included in the prospectus filed in
accordance with Sec. 230.424(b)(2) or (5) and (h) of this chapter,
static pool disclosure as required by Sec. 229.1105.
* * * * *

0
4. Amend Sec. 229.1100 by:
0
a. Revising the heading and introductory text of paragraph (c); and
0
b. Revising paragraph (f).
The revisions read as follows:

Sec. 229.1100 (Item 1100) General.

* * * * *
(c) Presentation of certain third party information. If information
of a third party is required in a filing by Item 1112(b) of this
Regulation AB (Information regarding significant obligors) (Sec.
229.1112(b)), Items 1114(b)(2) or 1115(b) of this Regulation AB
(Information regarding significant provider of enhancement or other
support) (Sec. 229.1114(b)(2) or (Sec. 229.1115(b)), or Item 1125 of
this Regulation AB (Asset-level information) (Sec. 229.1125) such
information, in lieu of including such information, may be provided as
follows:
* * * * *
(f) Filing of required exhibits. Where agreements or other
documents in this Regulation AB (Sec. Sec. 229.1100 through 229.1124)
are specified to be filed as exhibits to a Securities Act registration
statement, such agreements or other documents, if applicable, may be
incorporated by reference as an exhibit to the registration statement,
such as by filing a Form 8-K (Sec. 249.308 of this chapter) in the
case of offerings registered on Form SF-3 (Sec. 239.45 of this
chapter). Final agreements must be filed and made part of the
registration statement no later than the date the final prospectus is
required to be filed under Sec. 230.424 of this chapter.

0
5. Amend Sec. 229.1101 by:
0
a. In paragraphs (c)(3)(ii)(A) and (B) removing the references to
``50%'' and adding in their place ``25%''; and
0
b. Adding paragraph (m).
The addition reads as follows:

Sec. 229.1101 (Item 1101) Definitions.

* * * * *
(m) Asset representations reviewer means any person appointed to
review the underlying assets for compliance with the representations
and warranties on the underlying pool assets and is not affiliated with
any sponsor, depositor, servicer, or trustee of the transaction, or any
of their affiliates. The asset representations reviewer shall not be
the party to determine whether noncompliance with representations or
warranties constitutes a breach of any contractual provision. The asset
representations reviewer also shall not be the same party or an
affiliate of any party hired by the sponsor or underwriter to perform
pre-closing due diligence work on the pool assets.

0
6. Amend Sec. 229.1102 by adding a second sentence to paragraph (a) to
read as follows:

Sec. 229.1102 (Item 1102) Forepart of registration statement and
outside cover page of the prospectus.

* * * * *
(a) * * * Such identifying information should include a Central
Index Key number for the depositor and the issuing entity, and if
applicable, the sponsor.
* * * * *

0
7. Amend Sec. 229.1103 by adding an instruction after paragraph (a)(2)
to read as follows:

Sec. 229.1103 (Item 1103) Transaction summary and risk factors.

(a) * * *
(2) * * *
Instruction to Item 1103(a)(2). What is required is summary
disclosure tailored to the particular asset pool backing the asset-
backed securities. While the material characteristics will vary
depending on the nature of the pool assets, summary disclosure may
include, among other things, statistical information of: The types of
underwriting or origination programs, exceptions to underwriting or
origination criteria and, if applicable, modifications made to the pool
assets after origination. Include a cross-reference in the prospectus
summary to the more detailed statistical information found in the
prospectus.
* * * * *
0
8. Amend Sec. 229.1104 by:
0
a. In paragraph (e)(1) removing the phrase ``Section 3(a)(77) of the
Securities Exchange Act of 1934)'' and adding in its place ``Section
3(a)(79) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(79))''; and
0
b. Adding paragraphs (f) and (g).
The additions read as follows:

Sec. 229.1104 (Item 1104) Sponsors.

* * * * *
(f) If the sponsor is required to repurchase or replace any asset
for breach of a representation and warranty pursuant to the transaction
agreements, provide information regarding the sponsor's financial
condition to the extent that there is a material risk that the effect
on its ability to comply with the provisions in the transaction
agreements relating to the repurchase obligations for those assets
resulting from such financial condition could have a material impact on
pool

[[Page 57314]]

performance or performance of the asset-backed securities.
(g) Describe any interest that the sponsor, or any affiliate of the
sponsor, has retained in the transaction, including the amount and
nature of that interest. Disclose any hedge (security specific or
portfolio) materially related to the credit risk of the securities that
was entered into by the sponsor or, if known, by an affiliate of the
sponsor to offset the risk position held.
Instruction to Item 1104(g). The disclosure required under this
item shall separately state the amount and nature of any interest or
asset retained in compliance with law, including any amounts that are
retained by parties other than the sponsor in order to satisfy such
requirements.

0
9. Amend Sec. 229.1105 by:
0
a. Adding introductory text;
0
b. Revising paragraph (a)(3)(ii);
0
c. Adding an instruction to paragraph (a)(3)(ii);
0
d. Adding paragraph (a)(3)(iv); and
0
e. Revising paragraph (c).
The additions and revisions read as follows:

Sec. 229.1105 (Item 1105) Static pool information.

Describe the static pool information presented. Provide appropriate
introductory and explanatory information to introduce the
characteristics, the methodology used in determining or calculating the
characteristics and any terms or abbreviations used. Include a
description of how the static pool differs from the pool underlying the
securities being offered, such as the extent to which the pool
underlying the securities being offered was originated with the same or
differing underwriting criteria, loan terms, and risk tolerances than
the static pools presented. In addition to a narrative description, the
static pool information should be presented graphically if doing so
would aid in understanding.
(a) * * *
(3) * * *
(ii) Present delinquency, cumulative loss and prepayment data for
each prior securitized pool or vintage origination year, as applicable,
over the life of the prior securitized pool or vintage origination
year. The most recent periodic increment for the data must be as of a
date no later than 135 days after the date of first use of the
prospectus.
Instruction to Item 1105(a)(3)(ii). Present historical delinquency
and loss information in accordance with Item 1100(b) of this Regulation
AB (Sec. 229.1100(b)) through no less than 120 days.
* * * * *
(iv) Provide graphical illustration of delinquencies, prepayments
and losses for each prior securitized pool or by vintage origination
year regarding originations or purchases by the sponsor, as applicable
for that asset type.
* * * * *
(c) If the information that would otherwise be required by
paragraph (a)(1), (a)(2) or (b) of this section is not material, but
alternative static pool information would provide material disclosure,
provide such alternative information instead. Similarly, information
contemplated by paragraph (a)(1), (a)(2) or (b) of this section
regarding a party or parties other than the sponsor may be provided in
addition to or in lieu of such information regarding the sponsor if
appropriate to provide material disclosure. In addition, provide other
explanatory disclosure, including why alternative disclosure is being
provided and explain the absence of any static pool information
contemplated by paragraph (a)(1), (a)(2) or (b) of this section, as
applicable.
* * * * *

0
10. Amend Sec. 229.1108 by:
0
a. In paragraph (a)(3) removing the phrase ``(c) and (d)'' and adding
in its place ``(c), (d), and (e)'';
0
b. Removing paragraph (c)(6);
0
c. Redesignating paragraphs (c)(7) and (c)(8) as paragraphs (c)(6) and
(c)(7); and
0
d. Adding paragraph (e).
The addition reads as follows:

Sec. 229.1108 (Item 1108) Servicers.

* * * * *
(e) Describe any interest that the servicer, or any affiliate of
the servicer, has retained in the transaction, including the amount and
nature of that interest. Disclose any hedge (security specific or
portfolio) materially related to the credit risk of the securities that
was entered into by the servicer or, if known, by an affiliate of the
servicer to offset the risk position held.
Instruction to Item 1108(e). The disclosure required under this
item shall separately state the amount and nature of any interest or
asset retained in compliance with law, including any amounts that are
retained by parties other than the servicer in order to satisfy such
requirements.

0
11. Amend Sec. 229.1109 by:
0
a. Revising the section heading;
0
b. Redesignating paragraphs (a), (b), (c), (d), (e) and (f) as
paragraphs (a)(1), (2), (3), (4), (5), and (6), respectively;
0
c. Redesignating the introductory text as paragraph (a) introductory
text and adding the paragraph heading ``Trustees.'' to newly
redesignated paragraph (a) introductory text; and
0
d. Adding new paragraph (b).
The revision and addition read as follows:

Sec. 229.1109 (Item 1109) Trustees and other transaction parties.

(a) Trustees. * * *
* * * * *
(b) Asset representations reviewer. Provide the following for each
asset representations reviewer:
(1) State the asset representations reviewer's name and describe
its form of organization.
(2) Describe to what extent the asset representations reviewer has
had prior experience serving as an asset representations reviewer for
asset-backed securities transactions involving similar pool assets.
(3) Describe the asset representations reviewer's duties and
responsibilities regarding the asset-backed securities under the
governing documents and under applicable law. In addition, describe any
actions required of the asset representations reviewer, including
whether notices are required to investors, rating agencies or other
third parties, and any required percentage of a class or classes of
asset-backed securities that is needed to require the asset
representations reviewer to take action.
(4) Disclose the manner and amount in which the asset
representations reviewer is compensated.
(5) Describe any limitations on the asset representations
reviewer's liability under the transaction agreements regarding the
asset-backed securities transaction.
(6) Describe any indemnification provisions that entitle the asset
representations reviewer to be indemnified from the cash flow that
otherwise would be used to pay holders of the asset-backed securities.
(7) Describe any contractual provisions or understandings regarding
the asset representations reviewer's removal, replacement or
resignation, as well as how the expenses associated with changing from
one asset representations reviewer to another asset representations
reviewer will be paid.

0
12. Amend Sec. 229.1110 by:
0
a. Adding a second sentence to paragraph (a); and
0
b. Adding paragraphs (b)(3) and (c).
The additions read as follows:

[[Page 57315]]

Sec. 229.1110 (Item 1110) Originators.

(a) * * * Also identify any originator(s) originating less than 10%
of the pool assets if the cumulative amount originated by parties other
than the sponsor or its affiliates is more than 10% of the pool assets.
(b) * * *
(3) Describe any interest that the originator, or any affiliate of
the originator, has retained in the transaction, including the amount
and nature of that interest. Disclose any hedge (security specific or
portfolio) materially related to the credit risk of the securities that
was entered into by the originator or, if known, by an affiliate of the
originator to offset the risk position held.
Instruction to Item 1110(b)(3). The disclosure required under this
item shall separately state the amount and nature of any interest or
asset retained in compliance with law, including any amounts that are
retained by parties other than the originator in order to satisfy such
requirements.
(c) For any originator identified under paragraph (b) of this
section, if such originator is required to repurchase or replace a pool
asset for breach of a representation and warranty pursuant to the
transaction agreements, provide information regarding the originator's
financial condition to the extent that there is a material risk that
the effect on its ability to comply with the provisions in the
transaction agreements relating to the repurchase obligations for those
assets resulting from such financial condition could have a material
impact on pool performance or performance of the asset-backed
securities.

0
13. Amend Sec. 229.1111 by:
0
a. Revising paragraph (e); and
0
b. Adding paragraph (h).
The revision and addition read as follows:

Sec. 229.1111 (Item 1111) Pool assets.

* * * * *
(e) Representations and warranties and modification provisions
relating to the pool assets. Provide the following information:
(1) Representations and warranties. Summarize any representations
and warranties made concerning the pool assets by the sponsor,
transferor, originator or other party to the transaction, and describe
briefly the remedies available if those representations and warranties
are breached, such as repurchase obligations.
(2) Modification provisions. Describe any provisions in the
transaction agreements governing the modification of the terms of any
asset, including how such modification may affect the cash flows from
the assets or to the securities.
* * * * *
(h) Asset-level information. (1) If the asset pool includes
residential mortgages, commercial mortgages, automobile loans,
automobile leases, debt securities or resecuritizations of asset-backed
securities, provide asset-level information for each asset or security
in the pool in the manner specified in Schedule AL (Sec. 229.1125).
(2) File the disclosures as an Asset Data File (as defined in Sec.
232.11 of this chapter) in the format required by the EDGAR Filer
Manual. See Sec. 232.301 of this chapter.
(3) File the Asset Data File as an exhibit to Form ABS-EE (Sec.
249.1401 of this chapter) in accordance with Item 601(b)(102) of
Regulation S-K (Sec. 229.601(b)(102)).
(4) A registrant may provide additional explanatory disclosure
related to an Asset Data File by filing an asset related document as an
exhibit to Form ABS-EE (Sec. 249.1401 of this chapter) in accordance
with Item 601(b)(103) of Regulation S-K (Sec. 229.601(b)(103)).
(5) A registrant may provide other asset-level information in
addition to the information required by Schedule AL (Sec. 229.1125) by
filing an asset related document as an exhibit to Form ABS-EE (Sec.
249.1401 of this chapter) in accordance with Item 601(b)(103) of
Regulation S-K (Sec. 229.601(b)(103)). The asset related document(s)
must contain the definitions and formulas for each additional data
point and the related tagged data and may contain explanatory
disclosure about each additional data point.
Instruction to Item 1111(h). All of the information required by
this Item must be provided at the time of every filing for each asset
that was in the asset pool during the reporting period, including
assets removed prior to the end of the reporting period.

Sec. 229.1112 [Amended]

0
14. Amend Sec. 229.1112 by:
0
a. Removing Instruction 2 to Item 1112(b); and
0
b. Redesignating Instructions 1, 3 and 4 to Item 1112(b) as
Instructions 1, 2, and 3, respectively.

0
15. Amend Sec. 229.1113 by:
0
a. Adding paragraph (a)(7)(i); and
0
b. Adding and reserving paragraph (a)(7)(ii).
The addition reads as follows:

Sec. 229.1113 (Item 1113) Structure of the transaction.

(a) * * *
(7) * * *
(i) Describe how the delinquency threshold that triggers a review
by the asset representations reviewer was determined to be appropriate.
In describing the appropriateness of such delinquency threshold,
compare such delinquency threshold against the delinquencies disclosed
for prior securitized pools of the sponsor for that asset type in
accordance with Item 1105 of Regulation AB (Sec. 229.1105).
(ii) [Reserved]
* * * * *

Sec. 229.1114 [Amended]

0
16. Amend Sec. 229.1114 by:
0
a. Removing the heading ``Instructions to Item 1114:'' ;
0
b. Removing Instruction 3 to Item 1114(b); and
0
c. Redesignating Instructions 1, 2, 4 and 5 to Item 1114 as
``Instruction 1 to Item 1114(b)'', ``Instruction 2 to Item 1114(b)'',
``Instruction 3 to Item 1114(b)'' and ``Instruction 4 to Item
1114(b)'', respectively.

0
17. Amend Sec. 229.1119 by adding paragraph (a)(7) to read as follows:

Sec. 229.1119 (Item 1119) Affiliations and certain relationships and
related transactions.

(a) * * *
(7) Asset representations reviewer.
* * * * *

0
18. Amend Sec. 229.1121 by:
0
a. Revising the second sentence of paragraph (a)(9); and
0
b. Adding paragraphs (d) and (e).
The revision and additions read as follows:

Sec. 229.1121 (Item 1121) Distribution and pool performance
information.

(a) * * *
(9) * * * Present historical delinquency and loss information in
accordance with Item 1100(b) of this Regulation AB (Sec. 229.1100(b))
through no less than 120 days.
* * * * *
(d) Asset review. (1) If during the distribution period a review of
the underlying assets for compliance with the representations and
warranties on the underlying assets is required, provide the following
information, as applicable:
(i) A description of the event(s) that triggered the review during
the distribution period; and
(ii) If the asset representations reviewer provided to the trustee
during the distribution period a report of the findings and conclusions
of the review, a summary of the report.
(2) Change in asset representations reviewer. If during the
distribution

[[Page 57316]]

period an asset representations reviewer has resigned or has been
removed, replaced or substituted, or if a new asset representations
reviewer has been appointed, state the date the event occurred and the
circumstances surrounding the change. If a new asset representations
reviewer has been appointed, provide the disclosure required by Item
1109(b) (Sec. 229.1109(b)), as applicable, regarding such asset
representations reviewer.
(e) Investor communication. Disclose any request received from an
investor to communicate with other investors during the reporting
period received by the party responsible for making the Form 10-D
filings on or before the end date of a distribution period. The
disclosure regarding the request to communicate is required to include
the name of the investor making the request, the date the request was
received, a statement to the effect that the party responsible for
filing the Form 10-D (Sec. 249.312 of this chapter) has received a
request from such investor, stating that such investor is interested in
communicating with other investors with regard to the possible exercise
of rights under the transaction agreements, and a description of the
method by which other investors may contact the requesting investor.
Instruction to Item 1121(e). The party responsible for filing the
Form 10-D (Sec. 249.312 of this chapter) is required to disclose an
investor's interest to communicate only where the communication relates
to an investor exercising its rights under the terms of the transaction
agreement.

0
19. Amend Sec. 229.1122 by:
0
a. Revising paragraph (c)(1);
0
b. Redesignating paragraph (c)(2) as paragraph (c)(3);
0
c. Adding new paragraph (c)(2);
0
d. Adding paragraph (d)(1)(v);
0
e. Removing the heading ``Instructions to Item 1122:'';
0
f. Redesignating Instructions 1, 2 and 3 to Item 1122 as, ``Instruction
2 to Item 1122.'', ``Instruction 3 to Item 1122.'', and ``Instruction 4
to Item 1122.'', respectively; and
0
g. Adding a new instruction 1 to Item 1122.
The revision and additions read as follows:

Sec. 229.1122 (Item 1122) Compliance with applicable servicing
criteria.

* * * * *
(c) * * * (1) If any party's report on assessment of compliance
with servicing criteria required by paragraph (a) of this section, or
related registered public accounting firm attestation report required
by paragraph (b) of this section, identifies any material instance of
noncompliance with the servicing criteria, identify the material
instance of noncompliance in the report on Form 10-K (Sec. 249.310 of
this chapter). Also disclose whether the identified instance was
determined to have involved the servicing of the assets backing the
asset-backed securities covered in this Form 10-K report.
(2) Discuss any steps taken to remedy a material instance of
noncompliance previously identified by an asserting party for its
activities with respect to asset-backed securities transactions taken
as a whole involving such party and that are backed by the same asset
type backing the asset-backed securities.
* * * * *
(d) * * *
(1) * * *
(v) Aggregation of information, as applicable, is mathematically
accurate and the information conveyed accurately reflects the
information.
* * * * *
Instruction 1 to Item 1122: The assessment should cover all asset-
backed securities transactions involving such party and that are backed
by the same asset type backing the class of asset-backed securities
which are the subject of the Commission filing. The asserting party may
take into account divisions among transactions that are consistent with
actual practices. However, if the asserting party includes in its
platform less than all of the transactions backed by the same asset
type that it services, a description of the scope of the platform
should be included in the assessment.
* * * * *

0
20. Add Sec. 229.1124 to read as follows:

Sec. 229.1124 (Item 1124) Sponsor interest in the securities.

Provide information about any material change in the sponsor's, or
an affiliate's, interest in the securities resulting from the purchase,
sale or other acquisition or disposition of the securities by the
sponsor, or an affiliate, during the period covered by the report.
Describe the change, including the amount of change and the sponsor's,
or the affiliate's, resulting interest in the transaction after the
change.
Instruction to Item 1124. The disclosure required under this item
shall separately state the resulting amount and nature of any interest
or asset retained in compliance with law, including any amounts that
are retained by parties other than the sponsor in order to satisfy such
requirement.

0
21A. Add Sec. 229.1125 to read as follows:

Sec. 229.1125 (Item 1125) Schedule AL--Asset-level information.

(a) The following definitions apply to the terms used in this
schedule unless otherwise specified:
Debt service reduction. A modification of the terms of a loan
resulting from a bankruptcy proceeding, such as a reduction of the
amount of the monthly payment on the related mortgage loan.
Deficient valuation. A bankruptcy proceeding whereby the bankruptcy
court may establish the value of the mortgaged property at an amount
less than the then-outstanding principal balance of the mortgage loan
secured by the mortgaged property or may reduce the outstanding
principal balance of a mortgage loan.
Underwritten. The amount of revenues or expenses adjusted based on
a number of assumptions made by the mortgage originator or seller.
(b) As required by Item 1111(h) (Sec. 229.1111(h)), provide asset-
level information for each asset or security in the pool in the manner
specified in Appendix to Sec. 229.1125.
0
21B. Add an appendix to Sec. 229.1125 to read as follows:

Appendix to Sec. 229.1125--Schedule AL

Item 1. Residential mortgages. If the asset pool includes
residential mortgages, provide the following data and the data under
Item 1 for each loan in the asset pool:
(a) Asset numbers. (1) Asset number type. Identify the source of
the asset number used to specifically identify each asset in the
pool.
(2) Asset number. Provide the unique ID number of the asset.
Instruction to paragraph (a)(2): The asset number must reference
a single asset within the pool and should be the same number that
will be used to identify the asset for all reports that would be
required of an issuer under Sections 13 or 15(d) of the Exchange Act
(15 U.S.C. 78m or 78o(d)). If an asset is removed and replaced with
another asset, the asset added to the pool should be assigned a
unique asset number applicable to only that asset.
(3) Asset group number. For structures with multiple collateral
groups, indicate the collateral group number in which the asset
falls.
(b) Reporting period. (1) Reporting period begin date. Specify
the beginning date of the reporting period.
(2) Reporting period end date. Specify the ending date of the
reporting period.
(c) General information about the residential mortgage. (1)
Original loan purpose. Specify the code which describes the purpose
of the loan at the time the loan was originated.
(2) Originator. Identify the name of the entity that originated
the loan.
(3) Original loan amount. Indicate the amount of the loan at the
time the loan was originated.

[[Page 57317]]

(4) Original loan maturity date. Indicate the month and year in
which the final payment on the loan is scheduled to be made at the
time the loan was originated.
(5) Original amortization term. Indicate the number of months
that would have been required to retire the mortgage loan through
regular payments, as determined at the origination date of the loan.
In the case of an interest-only loan, the original amortization term
is the original term to maturity (other than in the case of a
balloon loan). In the case of a balloon loan, the original
amortization term is the number of months used to calculate the
principal and interest payment due each month (other than the
balloon payment).
(6) Original interest rate. Provide the rate of interest at the
time the loan was originated.
(7) Accrual type. Provide the code that describes the method
used to calculate interest on the loan.
(8) Original interest rate type. Indicate whether the interest
rate on the loan is fixed, adjustable, step or other.
(9) Original interest only term. Indicate the number of months
in which the obligor is permitted to pay only interest on the loan
beginning from when the loan was originated.
(10) Underwriting indicator. Indicate whether the loan or asset
met the criteria for the first level of solicitation, credit-
granting or underwriting criteria used to originate the pool asset.
(11) Original lien position. Indicate the code that describes
the priority of the lien against the subject property at the time
the loan was originated.
(12) Information related to junior liens. If the loan is a first
mortgage with subordinate liens, provide the following additional
information for each non-first mortgage if obtained or available:
(i) Most recent junior loan balance. Provide the most recent
combined balance of any subordinate liens.
(ii) Date of most recent junior loan balance. Provide the date
of the most recent junior loan balance.
(13) Information related to non-first mortgages. For non-first
mortgages, provide the following information if obtained or
available:
(i) Most recent senior loan amount. Provide the total amount of
the balances of all associated senior loans.
(ii) Date of most recent senior loan amount. Provide the date(s)
of the most recent senior loan amount.
(iii) Loan type of most senior lien. Indicate the code that
describes the loan type of the first mortgage.
(iv) Hybrid period of most senior lien. For non-first mortgages
where the associated first mortgage is a hybrid ARM, provide the
number of months remaining in the initial fixed interest rate period
for the first mortgage.
(v) Negative amortization limit of most senior lien. For non-
first mortgages where the associated first mortgage features
negative amortization, indicate the negative amortization limit of
the mortgage as a percentage of the original unpaid principal
balance.
(vi) Origination date of most senior lien. Provide the
origination date of the associated first mortgage.
(14) Prepayment penalty indicator. Indicate yes or no as to
whether the loan includes a penalty charged to the obligor in the
event of a prepayment.
(15) Negative amortization indicator. Indicate yes or no as to
whether the loan allows negative amortization.
(16) Modification indicator. Indicate yes or no as to whether
the loan has been modified from its original terms.
(17) Number of modifications. Provide the number of times that
the loan has been modified.
(18) Mortgage insurance requirement indicator. Indicate yes or
no as to whether mortgage insurance is or was required as a
condition for originating the loan.
(19) Balloon indicator. Indicate yes or no as to whether the
loan documents require a lump-sum to fully pay off the loan.
(20) Covered/High cost loan indicator. Indicate yes, no or
unknown as to whether as of the end of the reporting period the loan
is categorized as ``high cost,'' ``higher priced'' or ``covered''
according to applicable federal, state or local statutes, ordinances
or regulations.
(21) Servicer-placed hazard insurance. Indicate yes, no or
unknown as to whether as of the end of the reporting period the
hazard insurance on the property is servicer-placed.
(22) Refinance cash-out amount. For any refinance loan that is a
cash-out refinance provide the amount the obligor received after all
other loans to be paid by the mortgage proceeds have been satisfied.
For any refinance loan that is a no-cash-out refinance provide the
result of the following calculation: [NEW LOAN AMOUNT]-[PAID OFF
FIRST MORTGAGE LOAN AMOUNT]-[PAID OFF SECOND MORTGAGE LOAN AMOUNT]-
[CLOSING COSTS].
(23) Total origination and discount points. Provide the amount
paid to the lender to increase the lender's effective yield and, in
the case of discount points, to reduce the interest rate paid by the
obligor.
(24) Broker. Indicate yes or no as to whether a broker
originated or was involved in the origination of the loan.
(25) Channel. Specify the code that describes the source from
which the issuer obtained the loan.
(26) NMLS company number. Specify the National Mortgage License
System (NMLS) registration number of the company that originated the
loan.
(27) Buy down period. Indicate the total number of months during
which any buy down is in effect, representing the accumulation of
all buy down periods.
(28) Loan delinquency advance days count. Indicate the number of
days after which a servicer can stop advancing funds on a delinquent
loan.
(29) Information related to ARMs. If the loan is an ARM, provide
the following additional information:
(i) Original ARM Index. Specify the code that describes the type
and source of index to be used to determine the interest rate at
each adjustment.
(ii) ARM Margin. Indicate the number of percentage points that
is added to the index value to establish the new interest rate at
each interest rate adjustment date.
(iii) Fully indexed interest rate. Indicate the fully indexed
interest rate to which the obligor was underwritten.
(iv) Initial fixed rate period for hybrid ARM. If the interest
rate is initially fixed for a period of time, indicate the number of
months between the first payment date of the loan and the first
interest rate adjustment date.
(v) Initial interest rate decrease. Indicate the maximum
percentage by which the interest rate may decrease at the first
interest rate adjustment date.
(vi) Initial interest rate increase. Indicate the maximum
percentage by which the interest rate may increase at the first
interest rate adjustment date.
(vii) Index look-back. Provide the number of days prior to an
interest rate effective date used to determine the appropriate index
rate.
(viii) Subsequent interest rate reset period. Indicate the
number of months between subsequent rate adjustments.
(ix) Lifetime rate ceiling. Indicate the percentage of the
maximum interest rate that can be in effect during the life of the
loan.
(x) Lifetime rate floor. Indicate the percentage of the minimum
interest rate that can be in effect during the life of the loan.
(xi) Subsequent interest rate decrease. Provide the maximum
number of percentage points by which the interest rate may decrease
at each rate adjustment date after the initial adjustment.
(xii) Subsequent interest rate increase. Provide the maximum
number of percentage points by which the interest rate may increase
at each rate adjustment date after the initial adjustment.
(xiii) Subsequent payment reset period. Indicate the number of
months between payment adjustments after the first interest rate
adjustment date.
(xiv) ARM round indicator. Indicate the code that describes
whether an adjusted interest rate is rounded to the next higher
adjustable rate mortgage round factor, to the next lower round
factor, or to the nearest round factor.
(xv) ARM round percentage. Indicate the percentage to which an
adjusted interest rate is to be rounded.
(xvi) Option ARM indicator. Indicate yes or no as to whether the
loan is an option ARM.
(xvii) Payment method after recast. Specify the code that
describes the means of computing the lowest monthly payment
available to the obligor after recast.
(xviii) Initial minimum payment. Provide the amount of the
initial minimum payment the obligor is permitted to make.
(xix) Convertible indicator. Indicate yes or no as to whether
the obligor of the loan has an option to convert an adjustable
interest rate to a fixed interest rate during a specified conversion
window.
(xx) HELOC indicator. Indicate yes or no as to whether the loan
is a home equity line of credit (HELOC).
(xxi) HELOC draw period. Indicate the original maximum number of
months from the month the loan was originated during

[[Page 57318]]

which the obligor may draw funds against the HELOC account.
(30) Information related to prepayment penalties. If the obligor
is subject to prepayment penalties, provide the following additional
information:
(i) Prepayment penalty calculation. Specify the code that
describes the method for calculating the prepayment penalty for the
loan.
(ii) Prepayment penalty type. Specify the code that describes
the type of prepayment penalty.
(iii) Prepayment penalty total term. Provide the total number of
months after the origination of the loan that the prepayment penalty
may be in effect.
(iv) Prepayment penalty hard term. For hybrid prepayment
penalties, provide the number of months after the origination of the
loan during which a ``hard'' prepayment penalty applies.
(31) Information related to negative amortization. If the loan
allows for negative amortization, provide the following additional
information:
(i) Negative amortization limit. Specify the maximum amount of
negative amortization that is allowed before recalculating a fully
amortizing payment based on the new loan balance.
(ii) Initial negative amortization recast period. Indicate the
number of months after the origination of the loan that negative
amortization is allowed.
(iii) Subsequent negative amortization recast period. Indicate
the number of months after which the payment is required to recast
after the first amortization recast period.
(iv) Negative amortization balance amount. Provide the amount of
the negative amortization balance accumulated as of the end of the
reporting period.
(v) Initial fixed payment period. Indicate the number of months
after the origination of the loan during which the payment is fixed.
(vi) Initial periodic payment cap. Indicate the maximum
percentage by which a payment can increase in the first amortization
recast period.
(vii) Subsequent periodic payment cap. Indicate the maximum
percentage by which a payment can increase in one amortization
recast period after the initial cap.
(viii) Initial minimum payment reset period. Provide the maximum
number of months after the origination of the loan that an obligor
can initially pay the minimum payment before a new minimum payment
is determined.
(ix) Subsequent minimum payment reset period. Provide the
maximum number of months after the initial period an obligor can pay
the minimum payment before a new minimum payment is determined.
(x) Minimum payment. Provide the amount of the minimum payment
due during the reporting period.
(d) Information related to the property. (1) Geographic
location. Specify the location of the property by providing the two-
digit zip code.
(2) Occupancy status. Specify the code that describes the
property occupancy status at the time the loan was originated.
(3) Most recent occupancy status. If a property inspection has
been performed after the loan is originated, provide the code that
describes the manner in which the property is occupied.
(4) Property type. Specify the code that describes the type of
property that secures the loan.
(5) Most recent property value. If an additional property
valuation was obtained by any transaction party or its affiliates
after the original appraised property value, provide the most recent
property value obtained.
(6) Most recent property valuation type. Specify the code that
describes the method by which the most recent property value was
reported.
(7) Most recent property valuation date. Specify the date on
which the most recent property value was reported.
(8) Most recent AVM model name. Provide the code indicating the
name of the AVM model if an AVM was used to determine the most
recent property value.
(9) Most recent AVM confidence score. If an additional AVM was
obtained by any transaction party or its affiliates after the
original valuation, provide the confidence score presented on the
most recent AVM report.
(10) Original combined loan-to-value. Provide the ratio obtained
by dividing the amount of all known outstanding mortgage liens on a
property at origination by the lesser of the original appraised
property value or the sales price.
(11) Original loan-to-value. Provide the ratio obtained by
dividing the amount of the original mortgage loan at origination by
the lesser of the original appraised property value or the sales
price.
(e) Information related to the obligor. (1) Original number of
obligors. Indicate the number of obligors who are obligated to repay
the mortgage note at the time the loan was originated.
(2) Original obligor credit score. Provide the standardized
credit score of the obligor used to evaluate the obligor during the
loan origination process.
(3) Original obligor credit score type. Specify the type of the
standardized credit score used to evaluate the obligor during the
loan origination process.
(4) Most recent obligor credit score. If an additional credit
score was obtained by any transaction party or its affiliates after
the original credit score, provide the most recently obtained
standardized credit score of the obligor.
(5) Most recent obligor credit score type. Specify the type of
the most recently obtained standardized credit score of the obligor.
(6) Date of most recent obligor credit score. Provide the date
of the most recently obtained standardized credit score of the
obligor.
(7) Obligor income verification level. Indicate the code
describing the extent to which the obligor's income was verified
during the loan origination process.
(8) 4506--T Indicator. Indicate yes or no whether a Transcript
of Tax Return (received pursuant to the filing of IRS Form 4506-T)
was obtained and considered.
(9) Originator front-end debt-to-income (DTI). Provide the
front-end DTI ratio used by the originator to qualify the loan.
(10) Originator back-end DTI. Provide the back-end DTI ratio
used by the originator to qualify the loan.
(11) Obligor employment verification. Indicate the code
describing the extent to which the obligor's employment was verified
during the loan origination process.
(12) Length of employment--obligor. Indicate whether the obligor
was employed by its current employer for greater than 24 months at
the time the loan was originated.
(13) Obligor asset verification. Indicate the code describing
the extent to which the obligor's assets used to qualify the loan
was verified during the loan origination process.
(14) Original pledged assets. If the obligor(s) pledged
financial assets to the lender instead of making a down payment,
provide the total value of assets pledged as collateral for the loan
at the time of origination.
(15) Qualification method. Specify the code that describes the
type of mortgage payment used to qualify the obligor for the loan.
(f) Information related to mortgage insurance. If mortgage
insurance is required on the mortgage, provide the following
additional information:
(1) Mortgage insurance company name. Provide the name of the
entity providing mortgage insurance for the loan.
(2) Mortgage insurance coverage. Indicate the total percentage
of the original loan balance that is covered by mortgage insurance.
(3) Pool insurance company. Provide the name of the pool
insurance provider.
(4) Pool insurance stop loss percent. Provide the aggregate
amount that the pool insurance company will pay, calculated as a
percentage of the pool balance.
(5) Mortgage insurance coverage plan type. Specify the code that
describes the coverage category of the mortgage insurance applicable
to the loan.
(g) Information related to activity on the loan. (1) Asset added
indicator. Indicate yes or no whether the asset was added to the
pool during the reporting period.
Instruction to paragraph (g)(1): A response to this data point
is required only when assets are added to the asset pool after the
final prospectus under Sec. 230.424 of this chapter is filed.
(2) Remaining term to maturity. Indicate the number of months
from the end of the reporting period to the loan maturity date.
(3) Modification indicator--reporting period. Indicate yes or no
whether the asset was modified during the reporting period.
(4) Next payment due date. For loans that have not been paid
off, indicate the next payment due date.
(5) Advancing method. Specify the code that indicates a
servicer's responsibility for advancing principal or interest on
delinquent loans.
(6) Servicing advance methodology. Indicate the code that
describes the manner in which principal and/or interest are advanced
by the servicer.
(7) Stop principal and interest advance date. Provide the first
payment due date for

[[Page 57319]]

which the servicer ceased advancing principal or interest.
(8) Reporting period beginning loan balance. Indicate the
outstanding principal balance of the loan as of the beginning of the
reporting period.
(9) Reporting period beginning scheduled loan balance. Indicate
the scheduled principal balance of the loan as of the beginning of
the reporting period.
(10) Next reporting period payment amount due. Indicate the
total payment due to be collected in the next reporting period.
(11) Reporting period interest rate. Indicate the interest rate
in effect during the reporting period.
(12) Next interest rate. For loans that have not been paid off,
indicate the interest rate that is in effect for the next reporting
period.
(13) Servicing fee--percentage. If the servicing fee is based on
a percentage, provide the percentage used to calculate the aggregate
servicing fee.
(14) Servicing fee--flat-fee. If the servicing fee is based on a
flat-fee amount, indicate the monthly servicing fee paid to all
servicers.
(15) Other assessed but uncollected servicer fees. Provide the
cumulative amount of late charges and other fees that have been
assessed by the servicer, but not paid by the obligor.
(16) Other loan-level servicing fee(s) retained by the servicer.
Provide the amount of all other fees earned by loan administrators
during the reporting period that reduced the amount of funds
remitted to the issuing entity (including subservicing, master
servicing, trustee fees, etc.).
(17) Scheduled interest amount. Indicate the interest payment
amount that was scheduled to be collected during the reporting
period.
(18) Other interest adjustments. Indicate any unscheduled
interest adjustments during the reporting period.
(19) Scheduled principal amount. Indicate the principal payment
amount that was scheduled to be collected during the reporting
period.
(20) Other principal adjustments. Indicate any other amounts
that caused the principal balance of the loan to be decreased or
increased during the reporting period.
(21) Reporting period ending actual balance. Indicate the actual
balance of the loan as of the end of the reporting period.
(22) Reporting period ending scheduled balance. Indicate the
scheduled principal balance of the loan as of the end of the
reporting period.
(23) Reporting period scheduled payment amount. Indicate the
total payment amount that was scheduled to be collected during the
reporting period (including all fees and escrows).
(24) Total actual amount paid. Indicate the total payment
(including all escrows) paid to the servicer during the reporting
period.
(25) Actual interest collected. Indicate the gross amount of
interest collected during the reporting period, whether or not from
the obligor.
(26) Actual principal collected. Indicate the amount of
principal collected during the reporting period, whether or not from
the obligor.
(27) Actual other amounts collected. Indicate the total of any
amounts, other than principal and interest, collected during the
reporting period, whether or not from the obligor.
(28) Paid through date. Provide the date the loan's scheduled
principal and interest is paid through as of the end of the
reporting period.
(29) Interest paid through date. Provide the date through which
interest is paid with the payment received during the reporting
period, which is the effective date from which interest will be
calculated for the application of the next payment.
(30) Paid-in-full amount. Provide the scheduled loan ``paid-in-
full'' amount (principal) (do not include the current month's
scheduled principal). Applies to all liquidations and loan payoffs.
(31) Information related to servicer advances.
(i) Servicer advanced amount--principal. Provide the total
amount the servicer advanced for the reporting period for due but
unpaid principal on the loan.
(ii) Servicer advanced amounts repaid--principal. Provide the
total amount of any payments made by the obligor during the
reporting period that was applied to outstanding advances of due but
unpaid principal on the loan.
(iii) Servicer advances cumulative--principal. Provide the
outstanding cumulative amount of principal advances made by the
servicer as of the end of the reporting period, including amounts
advanced for the reporting period.
(iv) Servicer advanced amount--interest. Provide the total
amount the servicer advanced for the reporting period for due but
unpaid interest on the loan.
(v) Servicer advanced amounts repaid--interest. Provide the
total amount of any payments made by the obligor during the
reporting period that was applied to outstanding advances of due but
unpaid interest on the loan.
(vi) Servicer advances cumulative--interest. Provide the
outstanding cumulative amount of interest advances made by the
servicer as of the end of the reporting period, including amounts
advanced for the reporting period.
(vii) Servicer advanced amount--taxes and insurance. Provide the
total amount the servicer advanced for the reporting period for due
but unpaid property tax and insurance payments (escrow amounts).
(viii) Servicer advanced amount repaid--taxes and insurance.
Provide the total amount of any payment made by the obligor during
the reporting period that was applied to outstanding advances of due
but unpaid escrow amounts.
(ix) Servicer advances cumulative--taxes and insurance. Provide
the outstanding cumulative amount of escrow advances made by the
servicer as of the end of the reporting period, including amounts
advanced for the reporting period.
(x) Servicer advanced amount--corporate. Provide the total
amount the servicer advanced for property inspection and
preservation expenses for the reporting period.
(xi) Servicer advanced amount repaid--corporate. Provide the
total amount of any payments made by the obligor during the
reporting period that was applied to outstanding corporate advances.
(xii) Servicer advances cumulative--corporate. Provide the
outstanding cumulative amount of corporate advances made by the
servicer as of the end of the reporting period, including amounts
advanced for the reporting period.
Instruction to paragraph (g)(31): For loans modified or
liquidated during a reporting period the data provided in response
to this paragraph (g)(31) is to be information as of the liquidation
date or modification date, as applicable.
(32) Zero balance loans. If the loan balance was reduced to zero
during the reporting period, provide the following additional
information about the loan.
(i) Zero balance effective date. Provide the date on which the
loan balance was reduced to zero.
(ii) Zero balance code. Provide the code that indicates the
reason the loan's balance was reduced to zero.
(33) Most recent 12-month pay history. Provide the string that
indicates the payment status per month listed from oldest to most
recent.
(34) Number of payments past due. Indicate the number of
payments the obligor is past due as of the end of the reporting
period.
(35) Information related to activity on ARM loans. If the loan
is an ARM, provide the following additional information.
(i) Rate at next reset. Provide the interest rate that will be
used to determine the next scheduled interest payment, if known.
(ii) Next payment change date. Provide the next date that the
amount of scheduled principal and/or interest is scheduled to
change.
(iii) Next interest rate change date. Provide the next scheduled
date on which the interest rate is scheduled to change.
(iv) Payment at next reset. Provide the principal and interest
payment due after the next scheduled interest rate change, if known.
(v) Exercised ARM conversion option indicator. Indicate yes or
no whether the obligor exercised an option to convert an ARM loan to
a fixed interest rate loan during the reporting period.
(h) Information related to servicers. (1) Primary servicer.
Indicate the name of the entity that serviced the loan during the
reporting period.
(2) Most recent servicing transfer received date. If a loan's
servicing has been transferred, provide the effective date of the
most recent servicing transfer.
(3) Master servicer. Provide the name of the entity that served
as master servicer during the reporting period, if applicable.
(4) Special servicer. Provide the name of the entity that served
as special servicer during the reporting period, if applicable.
(5) Subservicer. Provide the name of the entity that served as a
subservicer during the reporting period, if applicable.
(i) Asset subject to demand. Indicate yes or no whether during
the reporting period the

[[Page 57320]]

loan was the subject of a demand to repurchase or replace for breach
of representations and warranties, including investor demands upon a
trustee. If the loan is the subject of a demand to repurchase or
replace for breach of representations and warranties, including
investor demands upon a trustee, provide the following additional
information:
(1) Status of asset subject to demand. Indicate the code that
describes the status of the repurchase or replacement demand as of
the end of the reporting period.
(2) Repurchase amount. Provide the amount paid to repurchase the
loan from the pool.
(3) Demand resolution date. Indicate the date the loan
repurchase or replacement demand was resolved.
(4) Repurchaser. Specify the name of the repurchaser.
(5) Repurchase or replacement reason. Indicate the code that
describes the reason for the repurchase or replacement.
(j) Information related to loans that have been charged off. If
the loan has been charged off, provide the following additional
information:
(1) Charged-off principal amount. Specify the total amount of
uncollected principal charged off.
(2) Charged-off interest amount. Specify the total amount of
uncollected interest charged off.
(k) [Reserved]
(l) Loss mitigation type indicator. Indicate the code that
describes the type of loss mitigation the servicer is pursuing with
the obligor, loan, or property as of the end of the reporting
period.
(m) Information related to loan modifications. If the loan has
been modified from its original terms, provide the following
additional information about the most recent loan modification:
(1) Most recent loan modification event type. Specify the code
that describes the most recent action that has resulted in a change
or changes to the loan note terms.
(2) Effective date of the most recent loan modification. Provide
the date on which the most recent modification of the loan has gone
into effect.
(3) Post-modification maturity date. Provide the loan's maturity
date as of the modification effective payment date.
(4) Post-modification interest rate type. Indicate whether the
interest rate type on the loan after the modification is fixed,
adjustable, step, or other.
(5) Post-modification amortization type. Indicate the
amortization type after modification.
(6) Post-modification interest rate. Provide the interest rate
in effect as of the modification effective payment date.
(7) Post-modification first payment date. Indicate the date of
the first payment due after the loan modification.
(8) Post-modification loan balance. Provide the loan balance as
of the modification effective payment date as reported on the
modification documents.
(9) Post-modification principal and interest payment. Provide
total principal and interest payment amount as of the modification
effective payment date.
(10) Total capitalized amount. Provide the amount added to the
principal balance of the loan due to the modification.
(11) Income verification indicator (at modification). Indicate
yes or no whether a Transcript of Tax Return (received pursuant to
the filing of IRS Form 4506-T) was obtained and considered during
the loan modification process.
(12) Modification front-end DTI. Provide the front-end DTI ratio
used to qualify the modification.
(13) Modification back-end DTI. Provide the back-end DTI ratio
used to qualify the modification.
(14) Total deferred amount. Provide the deferred amount that is
non-interest bearing.
(15) Forgiven principal amount (cumulative). Provide the total
amount of all principal balance reductions as a result of loan
modifications over the life of the loan.
(16) Forgiven principal amount (reporting period). Provide the
total principal balance reduction as a result of a loan modification
during the reporting period.
(17) Forgiven interest amount (cumulative). Provide the total
amount of all interest forgiven as a result of loan modifications
over the life of the loan.
(18) Forgiven interest amount (reporting period). Provide the
total gross interest forgiven as a result of a loan modification
during the reporting period.
(19) Actual ending balance--total debt owed. For a loan with
principal forbearance, provide the sum of the actual ending balance
field plus the principal deferred amount. For all other loans,
provide the actual ending balance.
(20) Scheduled ending balance--total debt owed. For a loan with
principal forbearance, provide the sum of the scheduled ending
balance field plus the deferred amount. For all other loans, provide
the scheduled ending balance.
(21) Information related to ARM loan modifications. If the loan
was an ARM before and after the most recent modification, provide
the following additional information:
(i) Post-modification ARM indicator. Indicate whether the loan's
existing ARM parameters have changed per the modification agreement.
(ii) Post-modification ARM index. Specify the code that
describes the index on which an adjustable interest rate is based as
of the modification effective payment date.
(iii) Post-modification margin. Provide the margin as of the
modification effective payment date. The margin is the number of
percentage points added to the index to establish the new rate.
(iv) Post-modification interest reset period (if changed).
Provide the number of months of the interest reset period of the
loan as of the modification effective payment date.
(v) Post-modification next reset date. Provide the next interest
reset date as of the modification effective payment date.
(vi) Post-modification index lookback. Provide the number of
days prior to an interest rate effective date used to determine the
appropriate index rate as of the modification effective payment
date.
(vii) Post-modification ARM round indicator. Indicate the code
that describes whether an adjusted interest rate is rounded to the
next higher adjustable rate mortgage round factor, to the next lower
round factor, or to the nearest round factor as of the modification
effective payment date.
(viii) Post-modification ARM round percentage. Indicate the
percentage to which an adjusted interest rate is to be rounded as of
the modification effective payment date.
(ix) Post-modification initial minimum payment. Provide the
amount of the initial minimum payment the obligor is permitted to
make as of the modification effective payment date.
(x) Post-modification next payment adjustment date. Provide the
due date on which the next payment adjustment is scheduled to occur
for an ARM loan per the modification agreement.
(xi) Post-modification ARM payment recast frequency. Provide the
payment recast frequency of the loan (in months) per the
modification agreement.
(xii) Post-modification lifetime rate floor. Provide the minimum
rate of interest that may be applied to an adjustable rate loan over
the course of the loan's life as of the modification effective
payment date.
(xiii) Post-modification lifetime rate ceiling. Provide the
maximum rate of interest that may be applied to an adjustable rate
loan over the course of the loan's life as of the modification
effective payment date.
(xiv) Post-modification initial interest rate increase. Indicate
the maximum percentage by which the interest rate may increase at
the first interest rate adjustment date after the loan modification.
(xv) Post-modification initial interest rate decrease. Provide
the maximum percentage by which the interest rate may adjust
downward on the first interest rate adjustment date after the loan
modification.
(xvi) Post-modification subsequent interest rate increase.
Provide the maximum number of percentage points by which the rate
may increase at each rate adjustment date after the initial rate
adjustment as of the modification effective payment date.
(xvii) Post-modification subsequent interest rate decrease.
Provide the maximum number of percentage points by which the
interest rate may decrease at each rate adjustment date after the
initial adjustment as of the modification effective payment date.
(xviii) Post-modification payment cap. Provide the percentage
value by which a payment may increase or decrease in one period as
of the modification effective payment date.
(xix) Post-modification payment method after recast. Specify the
code that describes the means of computing the lowest monthly
payment available to the obligor after recast as of the modification
effective payment date.
(xx) Post-modification ARM interest rate teaser period. Provide
the duration in months that the teaser interest rate is in effect as
of the modification effective payment date.
(xxi) Post-modification payment teaser period. Provide the
duration in months that the teaser payment is in effect as of the
modification effective payment date.
(xxii) Post-modification ARM negative amortization indicator.
Indicate yes or no whether a negative amortization feature is

[[Page 57321]]

part of the loan as of the modification effective payment date.
(xxiii) Post-modification ARM negative amortization cap. Provide
the maximum percentage of negative amortization allowed on the loan
as of the modification effective payment date.
(22) Information related to loan modifications involving
interest-only periods. If the loan terms for the most recent loan
modification include an interest only period, provide the following
additional information:
(i) Post-modification interest-only term. Provide the number of
months of the interest-only period from the modification effective
payment date.
(ii) Post-modification interest-only last payment date. Provide
the date of the last interest-only payment as of the modification
effective payment date.
(23) Post-modification balloon payment amount. Provide the new
balloon payment amount due at maturity as a result of the loan
modification, not including deferred amounts.
(24) Information related to step loans. If the loans terms for
the most recent loan modification agreement call for the interest
rate to step up over time, provide the following additional
information:
(i) Post-modification interest rate step indicator. Indicate
whether the terms of the modification agreement call for the
interest rate to step up over time.
(ii) Post-modification step interest rate. Provide the rate(s)
that will apply at each change date as stated in the loan
modification agreement. All rates must be provided, not just the
first change rate, unless there is only a single change date.
(iii) Post-modification step date. Provide the date(s) at which
the next rate and/or payment change will occur per the loan
modification agreement. All dates must be provided, not just the
first change, unless there is only a single change date.
(iv) Post-modification--step principal and interest. Provide the
principal and interest payment(s) that will apply at each change
date as stated in the loan modification agreement. All payments must
be provided, not just the first change payment, unless there is only
a single change date.
(v) Post-modification--number of steps. Provide the total number
of step rate adjustments under the step agreement.
(vi) Post-modification maximum future rate under step agreement.
Provide the maximum interest rate to which the loan will step up.
(vii) Post-modification date of maximum rate under step
agreement. Provide the date on which the maximum interest rate will
be reached.
(25) Non-interest bearing principal deferred amount
(cumulative). Provide the total amount of principal deferred (or
forborne) by the modification that is not subject to interest
accrual.
(26) Non-interest bearing principal deferred amount (reporting
period). Provide the total amount of principal deferred by the
modification that is not subject to interest accrual.
(27) Recovery of deferred principal (reporting period). Provide
the amount of deferred principal collected from the obligor during
the reporting period.
(28) Non-interest bearing deferred paid-in-full amount. If the
loan had a principal forbearance and was paid in full or liquidated,
provide the amount paid towards the amount of the principal
forbearance.
(29) Non-interest bearing deferred interest and fees amount
(reporting period). Provide the total amount of interest and
expenses deferred by the modification that is not subject to
interest accrual during the reporting period.
(30) Non-interest bearing deferred interest and fees amount
(cumulative). Provide the total amount of interest and expenses
deferred by the modification that is not subject to interest
accrual.
(31) Recovery of deferred interest and fees (reporting period).
Provide the amount of deferred interest and fees collected during
the reporting period.
(n) Information related to forbearance or trial modification. If
the type of loss mitigation is forbearance or a trial modification,
provide the following additional information. A forbearance plan
refers to a period during which either no payment or a payment
amount less than the contractual obligation is required from the
obligor. A trial modification refers to a temporary loan
modification during which an obligor's application for a permanent
loan modification is under evaluation.
(1) Most recent forbearance plan or trial modification start
date. Provide the date on which a payment change pursuant to the
most recent forbearance plan or trial modification started.
(2) Most recent forbearance plan or trial modification scheduled
end date. Provide the date on which a payment change pursuant to the
most recent forbearance plan or trial modification is scheduled to
end.
(3) Most recent trial modification violated date. Provide the
date on which the obligor ceased complying with the terms of the
most recent trial modification.
(o) Information related to repayment plan. If the type of loss
mitigation is a repayment plan, provide the following additional
information. A repayment plan refers to a period during which an
obligor has agreed to make monthly mortgage payments greater than
the contractual installment in an effort to bring a delinquent loan
current.
(1) Most recent repayment plan start date. Provide the date on
which the most recent repayment plan started.
(2) Most recent repayment plan scheduled end date. Provide the
date on which the most recent repayment plan is scheduled to end.
(3) Most recent repayment plan violated date. Provide the date
on which the obligor ceased complying with the terms of the most
recent repayment plan.
(p) Information related to short sales. Short sale refers to the
process in which a servicer workers with a delinquent obligor to
sell the property prior to the foreclosure sale. If the type of loss
mitigation is short sale, provide the following information:
(1) Short sale accepted offer amount. Provide the amount
accepted for a pending short sale.
(2) [Reserved]
(q) Information related to loss mitigation exit. If the loan has
exited loss mitigation efforts during the reporting period, provide
the following additional information:
(1) Most recent loss mitigation exit date. Provide the date on
which the servicer deemed the most recent loss mitigation effort to
have ended.
(2) Most recent loss mitigation exit code. Indicate the code
that describes the reason the most recent loss mitigation effort
ended.
(r) Information related to loans in the foreclosure process. If
the loan is in foreclosure, provide the following additional
information:
(1) Attorney referral date. Provide the date on which the loan
was referred to a foreclosure attorney.
(2) Foreclosure delay reason. Indicate the code that describes
the reason for delay within the foreclosure process.
(3) Foreclosure exit date. If the loan exited foreclosure during
the reporting period, provide the date on which the loan exited
foreclosure.
(4) Foreclosure exit reason. If the loan exited foreclosure
during the reporting period, indicate the code that describes the
reason the foreclosure proceeding ended.
(5) NOI Date. If a notice of intent (NOI) has been sent, provide
the date on which the servicer sent the NOI correspondence to the
obligor informing the obligor of the acceleration of the loan and
pending initiation of foreclosure action.
(s) Information related to REO. REO (Real Estate Owned) refers
to property owned by a lender after an unsuccessful sale at a
foreclosure auction. If the loan is REO, provide the following
additional information:
(1) Most recent accepted REO offer amount. If an REO offer has
been accepted, provide the amount accepted for the REO sale.
(2) Most recent accepted REO offer date. If an REO offer has
been accepted, provide the date on which the REO sale amount was
accepted.
(3) Gross liquidation proceeds. If the REO sale has closed,
provide the gross amount due to the issuing entity as reported on
Line 420 of the HUD-1 settlement statement.
(4) Net sales proceeds. If the REO sale has closed, provide the
net proceeds received from the escrow closing (before servicer
reimbursement).
(5) Reporting period loss amount passed to issuing entity.
Provide the cumulative loss amount passed through to the issuing
entity during the reporting period, including subsequent loss
adjustments and any forgiven principal as a result of a modification
that was passed through to the issuing entity.
(6) Cumulative total loss amount passed to issuing entity.
Provide the loss amount passed through to the issuing entity to
date, including any forgiven principal as a result of a modification
that was passed through to the issuing entity.
(7) Subsequent recovery amount. Provide the reporting period
amount recovered subsequent to the initial gain/loss recognized at
the time of liquidation.
(8) Eviction indicator. Indicate whether an eviction process has
begun.

[[Page 57322]]

(9) REO exit date. If the loan exited REO during the reporting
period, provide the date on which the loan exited REO status.
(10) REO exit reason. If the loan exited REO during the
reporting period, indicate the code that describes the reason the
loan exited REO status.
(t) Information related to losses.
(1) Information related to loss claims.
(i) UPB at liquidation. Provide the actual unpaid principal
balance (UPB) at the time of liquidation.
(ii) Servicing fees claimed. Provide the amount of accrued
servicing fees claimed at time of servicer reimbursement after
liquidation.
(iii) Servicer advanced amounts reimbursed--principal. Provide
the total amount of unpaid principal advances made by the servicer
that were reimbursed to the servicer.
(iv) Servicer advanced amounts reimbursed--interest. Provide the
total amount of unpaid interest advances made by the servicer that
were reimbursed to the servicer.
(v) Servicer advanced amount reimbursed--taxes and insurance.
Provide the total amount of any unpaid escrow amounts advanced by
the servicer that were reimbursed to the servicer.
(vi) Servicer advanced amount reimbursed--corporate. Provide the
total amount of any outstanding advances of property inspection and
preservation expenses made by the servicer that were reimbursed to
the servicer.
(vii) REO management fees. If the loan is in REO, provide the
total amount of REO management fees (including auction fees) paid
over the life of the loan.
(viii) Cash for keys/cash for deed. Provide the total amount
paid to the obligor or tenants in exchange for vacating the
property, or the payment to the obligor to accelerate a deed-in-lieu
process or complete a redemption period.
(ix) Performance incentive fees. Provide the total amount paid
to the servicer in exchange for carrying out a deed-in-lieu or short
sale or similar activities.
(2) [Reserved]
(u) Information related to mortgage insurance claims. If a
mortgage insurance claim (MI claim) has been submitted to the
primary mortgage insurance company for reimbursement, provide the
following additional information:
(1) MI claim filed date. Provide the date on which the servicer
filed an MI claim.
(2) MI claim amount. Provide the amount of the MI claim filed by
the servicer.
(3) MI claim paid date. If the MI claim has been paid, provide
the date on which the MI company paid the MI claim.
(4) MI claim paid amount. If the MI claim has been decided,
provide the amount of the claim paid by the MI company.
(5) MI claim denied/rescinded date. If the MI claim has been
denied or rescinded, provide the final MI denial date after all
servicer appeals.
(6) Marketable title transferred date. If the deed for the
property has been conveyed to the MI company, provide the date of
actual title conveyance to the MI company.
(v) Information related to delinquent loans. (1) Non-pay status.
Indicate the code that describes the delinquency status of the loan.
(2) Reporting action code. Further indicate the code that
defines the default/delinquent status of the loan.
Item 2. Commercial mortgages. If the asset pool includes
commercial mortgages, provide the following data for each loan in
the asset pool:
(a) Asset numbers. (1) Asset number type. Identify the source of
the asset number used to specifically identify each asset in the
pool.
(2) Asset number. Provide the unique ID number of the asset.
Instruction to paragraph (a)(2): The asset number must reference
a single asset within the pool and should be the same number that
will be used to identify the asset for all reports that would be
required of an issuer under Sections 13 or 15(d) of the Exchange Act
(15 U.S.C. 78m or 78o(d)). If an asset is removed and replaced with
another asset, the asset added to the pool should be assigned a
unique asset number applicable to only that asset.
(3) Group ID. Indicate the alpha-numeric code assigned to each
loan group within a securitization.
(b) Reporting period. (1) Reporting period begin date. Specify
the beginning date of the reporting period.
(2) Reporting period end date. Specify the ending date of the
reporting period.
(c) General information about the commercial mortgage. (1)
Originator. Identify the name or MERS organization number of the
originator entity.
(2) Origination date. Provide the date the loan was originated.
(3) Original loan amount. Indicate the amount of the loan at the
time the loan was originated.
(4) Original loan term. Indicate the term of the loan in months
at the time the loan was originated.
(5) Maturity date. Indicate the date the final scheduled payment
is due per the loan documents.
(6) Original amortization term. Indicate the number of months
that would have been required to retire the loan through regular
payments, as determined at the origination date of the loan.
(7) Original interest rate. Provide the rate of interest at the
time the loan was originated.
(8) Interest rate at securitization. Indicate the annual gross
interest rate used to calculate interest for the loan as of
securitization.
(9) Interest accrual method. Provide the code that indicates the
``number of days'' convention used to calculate interest.
(10) Original interest rate type. Indicate whether the interest
rate on the loan is fixed, adjustable, step or other.
(11) Original interest-only term. Indicate the number of months
in which the obligor is permitted to pay only interest on the loan.
(12) First loan payment due date. Provide the date on which the
borrower must pay the first full interest and/or principal payment
due on the mortgage in accordance with the loan documents.
(13) Underwriting indicator. Indicate whether the loan or asset
met the criteria for the first level of solicitation, credit-
granting or underwriting criteria used to originate the pool asset.
(14) Lien position at securitization. Indicate the code that
describes the lien position for the loan as of securitization.
(15) Loan structure. Indicate the code that describes the type
of loan structure including the seniority of participated mortgage
loan components. The code relates to the loan within the
securitization.
(16) Payment type. Indicate the code that describes the type or
method of payment for a loan.
(17) Periodic principal and interest payment at securitization.
Provide the total amount of principal and interest due on the loan
in effect as of securitization.
(18) Scheduled principal balance at securitization. Indicate the
outstanding scheduled principal balance of the loan as of
securitization.
(19) Payment frequency. Indicate the code that describes the
frequency mortgage loan payments are required to be made.
(20) Number of properties at securitization. Provide the number
of properties which serve as mortgage collateral for the loan as of
securitization.
(21) Number of properties. Provide the number of properties
which serve as mortgage collateral for the loan as of the end of the
reporting period.
(22) Grace days allowed. Provide the number of days after a
mortgage payment is due in which the lender will not require a late
payment charge in accordance with the loan documents. Does not
include penalties associated with default interest.
(23) Interest only indicator. Indicate yes or no whether this is
a loan for which scheduled interest only is payable, whether for a
temporary basis or until the full loan balance is due.
(24) Balloon indicator. Indicate yes or no whether the loan
documents require a lump-sum payment of principal at maturity.
(25) Prepayment premium indicator. Indicate yes or no whether
the obligor is subject to prepayment penalties.
(26) Negative amortization indicator. Indicate yes or no whether
negative amortization (interest shortage) amounts are permitted to
be added back to the unpaid principal balance of the loan if monthly
payments should fall below the true amortized amount.
(27) Modification indicator. Indicate yes or no whether the loan
has been modified from its original terms.
(28) Information related to ARMs. If the loan is an ARM, provide
the following additional information for each loan:
(i) ARM index. Specify the code that describes the index on
which an adjustable interest rate is based.
(ii) First rate adjustment date. Provide the date on which the
first interest rate adjustment becomes effective (subsequent to loan
securitization).
(iii) First payment adjustment date. Provide the date on which
the first adjustment to the regular payment amount becomes effective
(after securitization).
(iv) ARM margin. Indicate the spread added to the index of an
ARM loan to determine the interest rate at securitization.

[[Page 57323]]

(v) Lifetime rate cap. Indicate the maximum interest rate that
can be in effect during the life of the loan.
(vi) Lifetime rate floor. Indicate the minimum interest rate
that can be in effect during the life of the loan.
(vii) Periodic rate increase limit. Provide the maximum amount
the interest rate can increase from any period to the next.
(viii) Periodic rate decrease limit. Provide the maximum amount
the interest rate can decrease from any period to the next.
(ix) Periodic pay adjustment maximum amount. Provide the maximum
amount the principal and interest constant can increase or decrease
on any adjustment date.
(x) Periodic pay adjustment maximum percentage. Provide the
maximum percentage amount the payment can increase or decrease from
any period to the next.
(xi) Rate reset frequency. Indicate the code describing the
frequency which the periodic mortgage rate is reset due to an
adjustment in the ARM index.
(xii) Pay reset frequency. Indicate the code describing the
frequency which the periodic mortgage payment will be adjusted.
(xiii) Index look back in days. Provide the number of days prior
to an interest rate adjustment effective date used to determine the
appropriate index rate.
(29) Information related to prepayment penalties. If the obligor
is subject to prepayment penalties, provide the following additional
information for each loan:
(i) Prepayment lock-out end date. Provide the effective date
after which the lender allows prepayment of a loan.
(ii) Yield maintenance end date. Provide the date after which
yield maintenance prepayment penalties are no longer effective.
(iii) Prepayment premium end date. Provide the effective date
after which prepayment premiums are no longer effective.
(30) Information related to negative amortization. If the loan
allows for negative amortization, provide the following additional
information for each loan:
(i) Maximum negative amortization allowed (% of original
balance). Provide the maximum percentage of the original loan
balance that can be added to the original loan balance as the result
of negative amortization.
(ii) Maximum negative amortization allowed. Provide the maximum
amount of the original loan balance that can be added to the
original loan balance as the result of negative amortization.
(iii) Negative amortization/deferred interest capitalized
amount. Indicate the amount for the reporting period that was
capitalized (added to) the principal balance.
(iv) Deferred interest--cumulative. Indicate the cumulative
deferred interest for the reporting period and prior reporting
cycles net of any deferred interest collected.
(v) Deferred interest collected. Indicate the amount of deferred
interest collected during the reporting period.
(d) Information related to the property. Provide the following
information for each of the properties that collateralizes a loan
identified above:
(1) Property name. Provide the name of the property which serves
as mortgage collateral. If the property has been defeased, then
populate with ``defeased.''
(2) Property address. Specify the address of the property which
serves as mortgage collateral. If multiple properties, then print
``various.'' If the property has been defeased then leave field
empty. For substituted properties, populate with the new property
information.
(3) Property city. Specify the city name where the property
which serves as mortgage collateral is located. If the property has
been defeased, then leave field empty.
(4) Property state. Indicate the two character abbreviated code
representing the state in which the property which serves as
mortgage collateral is located.
(5) Property zip code. Indicate the zip (or postal) code for the
property which serves as mortgage collateral.
(6) Property county. Indicate the county in which the property
which serves as mortgage collateral is located.
(7) Property type. Indicate the code that describes how the
property is being used.
(8) Net rentable square feet. Provide the net rentable square
feet area of the property.
(9) Net rentable square feet at securitization. Provide the net
rentable square feet area of the property as determined at the time
the property is contributed to the pool as collateral.
(10) Number of units/beds/rooms. If the property type is
multifamily, self-storage, healthcare, lodging or mobile home park,
provide the number of units/beds/rooms of the property.
(11) Number of units/beds/rooms at securitization. If the
property type is multifamily, self-storage, healthcare, lodging or
mobile home park, provide the number of units/beds/rooms of the
property at securitization.
(12) Year built. Provide the year that the property was built.
(13) Year last renovated. Provide the year that the last major
renovation/new construction was completed on the property.
(14) Valuation amount at securitization. Provide the valuation
amount of the property as of the valuation date at securitization.
(15) Valuation source at securitization. Specify the code that
identifies the source of the property valuation.
(16) Valuation date at securitization. Provide the date the
valuation amount at securitization was determined.
(17) Most recent value. If an additional property valuation was
obtained by any transaction party or its affiliates after the
valuation obtained at securitization, provide the most recent
valuation amount.
(18) Most recent valuation date. Provide the date of the most
recent valuation.
(19) Most recent valuation source. Specify the code that
identifies the source of the most recent property valuation.
(20) Physical occupancy at securitization. Provide the
percentage of rentable space occupied by tenants.
(21) Most recent physical occupancy. Provide the most recent
available percentage of rentable space occupied by tenants.
(22) Property status. Provide the code that describes the status
of the property.
(23) Defeasance option start date. Provide the date when the
defeasance option becomes available.
(24) Defeasance status. Provide the code that indicates if a
loan has or is able to be defeased.
(25) Largest tenant.
(i) Largest tenant. Identify the tenant that leases the largest
square feet of the property based on the most recent annual lease
rollover review.
Instruction to paragraph (d)(25)(i): If the tenant is not
occupying the space but is still paying rent, print ``Dark'' after
tenant name. If tenant has sub-leased the space, print ``Sub-leased/
name'' after tenant name.
(ii) Square feet of largest tenant. Provide total number of
square feet leased by the largest tenant based on the most recent
annual lease rollover review.
(iii) Date of lease expiration of largest tenant. Provide the
date of lease expiration for the largest tenant.
(26) Second largest tenant.
(i) Second largest tenant. Identify the tenant that leases the
second largest square feet of the property based on the most recent
annual lease rollover review.
Instruction to paragraph (d)(26)(i): If the tenant is not
occupying the space but is still paying rent, print ``Dark'' after
tenant name. If tenant has sub-leased the space, print ``Sub-leased/
name'' after tenant name.
(ii) Square feet of second largest tenant. Provide the total
number of square feet leased by the second largest tenant based on
the most recent annual lease rollover review.
(iii) Date of lease expiration of second largest tenant. Provide
the date of lease expiration for the second largest tenant.
(27) Third largest tenant.
(i) Third largest tenant. Identify the tenant that leases the
third largest square feet of the property based on the most recent
annual lease rollover review.
Instruction to paragraph (d)(27)(i): If the tenant is not
occupying the space but is still paying rent, print ``Dark'' after
tenant name. If tenant has sub-leased the space, print ``Sub-leased/
name'' after tenant name.
(ii) Square feet of third largest tenant. Provide the total
number square feet leased by the third largest tenant based on the
most recent annual lease rollover review.
(iii) Date of lease expiration of third largest tenant. Provide
the date of lease expiration for the third largest tenant.
(28) Financial information related to the property. Provide the
following information as of the most recent date available:
(i) Date of financials as of securitization. Provide the date of
the operating statement for the property used to underwrite the
loan.
(ii) Most recent financial as of start date. Specify the first
date of the period for the most recent, hard copy operating
statement (e.g., year-to-date or trailing 12 months).
(iii) Most recent financial as of end date. Specify the last day
of the period for the most recent, hard copy operating statement
(e.g., year-to-date or trailing 12 months).
(iv) Revenue at securitization. Provide the total underwritten
revenue amount from all sources for a property as of securitization.
(v) Most recent revenue. Provide the total revenues for the most
recent operating statement reported.

[[Page 57324]]

(vi) Operating expenses at securitization. Provide the total
underwritten operating expenses as of securitization. Include real
estate taxes, insurance, management fees, utilities, and repairs and
maintenance. Exclude capital expenditures, tenant improvements, and
leasing commissions.
(vii) Operating expenses. Provide the total operating expenses
for the most recent operating statement. Include real estate taxes,
insurance, management fees, utilities, and repairs and maintenance.
Exclude capital expenditures, tenant improvements, and leasing
commissions.
(viii) Net operating income at securitization. Provide the total
underwritten revenues less total underwritten operating expenses
prior to application of mortgage payments and capital items for all
properties as of securitization.
(ix) Most recent net operating income. Provide the total
revenues less total operating expenses before capital items and debt
service per the most recent operating statement.
(x) Net cash flow at securitization. Provide the total
underwritten revenue less total underwritten operating expenses and
capital costs as of securitization.
(xi) Most recent net cash flow. Provide the total revenue less
the total operating expenses and capital costs but before debt
service per the most recent operating statement.
(xii) Net operating income or net cash flow indicator at
securitization. Indicate the code that describes the method used to
calculate at securitization net operating income or net cash flow.
(xiii) Net operating income or net cash flow indicator. Indicate
the code that describes the method used to calculate net operating
income or net cash flow.
(xiv) Most recent debt service amount. Provide the amount of
total scheduled or actual payments that cover the same number of
months as the most recent financial operating statement.
(xv) Debt service coverage ratio (net operating income) at
securitization. Provide the ratio of underwritten net operating
income to debt service as of securitization.
(xvi) Most recent debt service coverage ratio (net operating
income). Provide the ratio of net operating income to debt service
during the most recent operating statement reported.
(xvii) Debt service coverage ratio (net cash flow) at
securitization. Provide the ratio of underwritten net cash flow to
debt service as of securitization.
(xviii) Most recent debt service coverage ratio (net cash flow).
Provide the ratio of net cash flow to debt service for the most
recent financial operating statement.
(xix) Debt service coverage ratio indicator at securitization.
If there are multiple properties underlying the loan, indicate the
code that describes how the debt service coverage ratio was
calculated.
(xx) Most recent debt service coverage ratio indicator. Indicate
the code that describes how the debt service coverage ratio was
calculated for the most recent financial operating statement.
(xxi) Date of the most recent annual lease rollover review.
Provide the date of the most recent annual lease rollover review.
(e) Information related to activity on the loan. (1) Asset added
indicator. Indicate yes or no whether the asset was added during the
reporting period.
Instruction to paragraph (e)(1): A response to this data point
is required only when assets are added to the asset pool after the
final prospectus under Sec. 230.424 of this chapter is filed.
(2) Modification indicator--reporting period. Indicate yes or no
whether the loan was modified during the reporting period.
(3) Reporting period beginning scheduled loan balance. Indicate
the scheduled balance as of the beginning of the reporting period.
(4) Total scheduled principal and interest due. Provide the
total amount of principal and interest due on the loan in the month
corresponding to the current distribution date.
(5) Reporting period interest rate. Indicate the annualized
gross interest rate used to calculate the scheduled interest amount
due for the reporting period.
(6) Servicer and trustee fee rate. Indicate the sum of annual
fee rates payable to the servicers and trustee.
(7) Scheduled interest amount. Provide the amount of gross
interest payment that was scheduled to be collected during the
reporting period.
(8) Other interest adjustment. Indicate any unscheduled interest
adjustments during the reporting period.
(9) Scheduled principal amount. Indicate the principal payment
amount that was scheduled to be collected during the reporting
period.
(10) Unscheduled principal collections. Provide the principal
prepayments and other unscheduled payments of principal received on
the loan during the reporting period.
(11) Other principal adjustments. Indicate any other amounts
that caused the principal balance of the loan to be decreased or
increased during the reporting period, which are not considered
unscheduled principal collections and are not scheduled principal
amounts.
(12) Reporting period ending actual balance. Indicate the
outstanding actual balance of the loan as of the end of the
reporting period.
(13) Reporting period ending scheduled balance. Indicate the
scheduled or stated principal balance for the loan (as defined in
the servicing agreement) as of the end of the reporting period.
(14) Paid through date. Provide the date the loan's scheduled
principal and interest is paid through as of the end of the
reporting period.
(15) Hyper-amortizing date. Provide the date after which
principal and interest may amortize at an accelerated rate, and/or
interest expense to the mortgagor increases substantially.
(16) Information related to servicer advances.
(i) Servicing advance methodology. Indicate the code that
describes the manner in which principal and/or interest are advanced
by the servicer.
(ii) Non-recoverability determined. Indicate yes or no whether
the master servicer/special servicer has ceased advancing principal
and interest and/or servicing the loan.
(iii) Total principal and interest advance outstanding. Provide
the total outstanding principal and interest advances made (or
scheduled to be made by the distribution date) by the servicer(s).
(iv) Total taxes and insurance advances outstanding. Provide the
total outstanding tax and insurance advances made by the servicer(s)
as of the end of the reporting period.
(v) Other expenses advance outstanding. Provide the total
outstanding other or miscellaneous advances made by the servicer(s)
as of the end of the reporting period.
(17) Payment status of loan. Provide the code that indicates the
payment status of the loan.
(18) Information related to activity on ARM loans. If the loan
is an ARM, provide the following additional information:
(i) ARM index rate. Provide the index rate used to determine the
gross interest for the reporting period.
(ii) Next interest rate. Provide the annualized gross interest
rate that will be used to determine the next scheduled interest
payment.
(iii) Next interest rate change adjustment date. Provide the
next date that the interest rate is scheduled to change.
(iv) Next payment adjustment date. Provide the date that the
amount of scheduled principal and/or interest is next scheduled to
change.
(f) Information related to servicers. (1) Primary servicer.
Identify the name of the entity that services or will have the right
to service the asset.
(2) Most recent special servicer transfer date. Provide the date
the transfer letter, email, etc. provided by the master servicer is
accepted by the special servicer.
(3) Most recent master servicer return date. Provide the date of
the return letter, email, etc. provided by the special servicer
which is accepted by the master servicer.
(g) Asset subject to demand. Indicate yes or no whether during
the reporting period the loan was the subject of a demand to
repurchase or replace for breach of representations and warranties,
including investor demands upon a trustee. If the loan is the
subject of a demand to repurchase or replace for breach of
representations and warranties, including investor demands upon a
trustee, provide the following additional information:
(1) Status of asset subject to demand. If the loan is the
subject of a demand to repurchase or replace for breach of
representations and warranties, including investor demands upon a
trustee, indicate the code that describes the status of the
repurchase demand as of the end of the reporting period.
(2) Repurchase amount. Provide the amount paid to repurchase the
loan from the pool.
(3) Demand resolution date. Indicate the date the loan
repurchase or replacement demand was resolved.

[[Page 57325]]

(4) Repurchaser. Specify the name of the repurchaser.
(5) Repurchase or replacement reason. Indicate the code that
describes the reason for the repurchase.
(h) Realized loss to trust. Indicate the difference between net
proceeds (after liquidation expenses) and the scheduled or stated
principal of the loan as of the beginning of the reporting period.
(i) Information related to prepayments. If a prepayment was
received, provide the following additional information for each
loan:
(1) Liquidation/Prepayment code. Indicate the code assigned to
any unscheduled principal payments or liquidation proceeds received
during the reporting period.
(2) Liquidation/Prepayment date. Provide the effective date on
which an unscheduled principal payment or liquidation proceeds were
received.
(3) Prepayment premium/yield maintenance received. Indicate the
amount received from a borrower during the reporting period in
exchange for allowing a borrower to pay off a loan prior to the
maturity or anticipated repayment date.
(j) Workout strategy. Indicate the code that best describes the
steps being taken to resolve the loan.
(k) Information related to modifications. If the loan has been
modified from its original terms, provide the following additional
information about the most recent loan modification:
(1) Date of last modification. Indicate the date of the most
recent modification. A modification includes any material change to
the loan document, excluding assumptions.
(2) Modification code. Indicate the code that describes the type
of loan modification.
(3) Post-modification interest rate. Indicate the new initial
interest rate to which the loan was modified.
(4) Post-modification payment amount. Indicate the new initial
principal and interest payment amount to which the loan was
modified.
(5) Post-modification maturity date. Indicate the new maturity
date of the loan after the modification.
(6) Post-modification amortization period. Indicate the new
amortization period in months after the modification.
Item 3. Automobile loans. If the asset pool includes automobile
loans, provide the following data for each loan in the asset pool:
(a) Asset numbers. (1) Asset number type. Identify the source of
the asset number used to specifically identify each asset in the
pool.
(2) Asset number. Provide the unique ID number of the asset.
Instruction to paragraph (a)(2): The asset number must reference
a single asset within the pool and should be the same number that
will be used to identify the asset for all reports that would be
required of an issuer under Sections 13 or 15(d) of the Exchange Act
(15 U.S.C. 78m or 78o(d)). If an asset is removed and replaced with
another asset, the asset added to the pool should be assigned a
unique asset number applicable to only that asset.
(b) Reporting period. (1) Reporting period begin date. Specify
the beginning date of the reporting period.
(2) Reporting period end date. Specify the ending date of the
reporting period.
(c) General information about the automobile loan. (1)
Originator. Identify the name of the entity that originated the
loan.
(2) Origination date. Provide the date the loan was originated.
(3) Original loan amount. Indicate the amount of the loan at the
time the loan was originated.
(4) Original loan term. Indicate the term of the loan in months
at the time the loan was originated.
(5) Loan maturity date. Indicate the month and year in which the
final payment on the loan is scheduled to be made.
(6) Original interest rate. Provide the rate of interest at the
time the loan was originated.
(7) Interest calculation type. Indicate whether the interest
rate calculation method is simple or other.
(8) Original interest rate type. Indicate whether the interest
rate on the loan is fixed, adjustable or other.
(9) Original interest-only term. Indicate the number of months
from origination in which the obligor is permitted to pay only
interest on the loan beginning from when the loan was originated.
(10) Original first payment date. Provide the date of the first
scheduled payment that was due after the loan was originated.
(11) Underwriting indicator. Indicate whether the loan or asset
met the criteria for the first level of solicitation, credit-
granting or underwriting criteria used to originate the pool asset.
(12) Grace period. Indicate the number of months during which
interest accrues but no payments are due from the obligor.
(13) Payment type. Specify the code indicating how often
payments are required or if a balloon payment is due.
(14) Subvented. Indicate yes or no to whether a form of subsidy
is received on the loan, such as cash incentives or favorable
financing for the buyer.
(d) Information related to the vehicle. (1) Vehicle
manufacturer. Provide the name of the manufacturer of the vehicle.
(2) Vehicle model. Provide the name of the model of the vehicle.
(3) New or used. Indicate whether the vehicle financed is new or
used at the time of origination.
(4) Model year. Indicate the model year of the vehicle.
(5) Vehicle type. Indicate the code describing the vehicle type.
(6) Vehicle value. Indicate the value of the vehicle at the time
of origination.
(7) Source of vehicle value. Specify the code that describes the
source of the vehicle value.
(e) Information related to the obligor. (1) Obligor credit score
type. Specify the type of the standardized credit score used to
evaluate the obligor during the loan origination process.
(2) Obligor credit score. Provide the standardized credit score
of the obligor used to evaluate the obligor during the loan
origination process.
(3) Obligor income verification level. Indicate the code
describing the extent to which the obligor's income was verified
during the loan origination process.
(4) Obligor employment verification. Indicate the code
describing the extent to which the obligor's employment was verified
during the loan origination process.
(5) Co-obligor present indicator. Indicate whether the loan has
a co-obligor.
(6) Payment-to-income ratio. Provide the scheduled monthly
payment amount as a percentage of the total monthly income of the
obligor and any other obligor at the origination date. Provide the
methodology for determining monthly income in the prospectus.
(7) Geographic location of obligor. Specify the location of the
obligor by providing the current U.S. state or territory.
(f) Information related to activity on the loan. (1) Asset added
indicator. Indicate yes or no whether the asset was added during the
reporting period.
Instruction to paragraph (f)(1): A response to this data point
is required only when assets are added to the asset pool after the
final prospectus under Sec. 230.424 of this chapter is filed.
(2) Remaining term to maturity. Indicate the number of months
from the end of the reporting period to the loan maturity date.
(3) Modification indicator--reporting period. Indicates yes or
no whether the asset was modified from its original terms during the
reporting period.
(4) Servicing advance method. Specify the code that indicates a
servicer's responsibility for advancing principal or interest on
delinquent loans.
(5) Reporting period beginning loan balance. Indicate the
outstanding principal balance of the loan as of the beginning of the
reporting period.
(6) Next reporting period payment amount due. Indicate the total
payment due to be collected in the next reporting period.
(7) Reporting period interest rate. Indicate the current
interest rate for the loan in effect during the reporting period.
(8) Next interest rate. For loans that have not been paid off,
indicate the interest rate that is in effect for the next reporting
period.
(9) Servicing fee--percentage. If the servicing fee is based on
a percentage, provide the percentage used to calculate the aggregate
servicing fee.
(10) Servicing fee--flat-fee. If the servicing fee is based on a
flat-fee amount, indicate the monthly servicing fee paid to all
servicers.
(11) Other loan-level servicing fee(s) retained by servicer.
Provide the amount of all other fees earned by loan administrators
that reduce the amount of funds remitted to the issuing entity
(including subservicing, master servicing, trustee fees, etc.).
(12) Other assessed but uncollected servicer fees. Provide the
cumulative amount of late charges and other fees that have been
assessed by the servicer, but not paid by the obligor.
(13) Scheduled interest amount. Indicate the interest payment
amount that was scheduled to be collected during the reporting
period.
(14) Scheduled principal amount. Indicate the principal payment
amount that was scheduled to be collected during the reporting
period.

[[Page 57326]]

(15) Other principal adjustments. Indicate any other amounts
that caused the principal balance of the loan to be decreased or
increased during the reporting period.
(16) Reporting period ending actual balance. Indicate the actual
balance of the loan as of the end of the reporting period.
(17) Reporting period scheduled payment amount. Indicate the
total payment amount that was scheduled to be collected during the
reporting period (including all fees).
(18) Total actual amount paid. Indicate the total payment paid
to the servicer during the reporting period.
(19) Actual interest collected. Indicate the gross amount of
interest collected during the reporting period, whether or not from
the obligor.
(20) Actual principal collected. Indicate the amount of
principal collected during the reporting period, whether or not from
the obligor.
(21) Actual other amounts collected. Indicate the total of any
amounts, other than principal and interest, collected during the
reporting period, whether or not from the obligor.
(22) Servicer advanced amount. If amounts were advanced by the
servicer during the reporting period, specify the amount.
(23) Interest paid through date. Provide the date through which
interest is paid with the payment received during the reporting
period, which is the effective date from which interest will be
calculated for the application of the next payment.
(24) Zero balance loans. If the loan balance was reduced to zero
during the reporting period, provide the following additional
information about the loan:
(i) Zero balance effective date. Provide the date on which the
loan balance was reduced to zero.
(ii) Zero balance code. Provide the code that indicates the
reason the loan's balance was reduced to zero.
(25) Current delinquency status. Indicate the number of days the
obligor is delinquent past the obligor's payment due date, as
determined by the governing transaction agreement.
(g) Information related to servicers. (1) Primary loan servicer.
Provide the name of the entity that services or will have the right
to service the loan.
(2) Most recent servicing transfer received date. If a loan's
servicing has been transferred, provide the effective date of the
most recent servicing transfer.
(h) Asset subject to demand. Indicate yes or no whether during
the reporting period the loan was the subject of a demand to
repurchase or replace for breach of representations and warranties,
including investor demands upon a trustee. If the loan is the
subject of a demand to repurchase or replace for breach of
representations and warranties, including investor demands upon a
trustee, provide the following additional information:
(1) Status of asset subject to demand. Indicate the code that
describes the status of the repurchase or replacement demand as of
the end of the reporting period.
(2) Repurchase amount. Provide the amount paid to repurchase the
loan.
(3) Demand resolution date. Indicate the date the loan
repurchase or replacement demand was resolved.
(4) Repurchaser. Specify the name of the repurchaser.
(5) Repurchase or replacement reason. Indicate the code that
describes the reason for the repurchase or replacement.
(i) Information related to loans that have been charged off. If
the loan has been charged off, provide the following additional
information:
(1) Charged-off principal amount. Specify the amount of
uncollected principal charged off.
(2) Amounts recovered. If the loan was previously charged off,
specify any amounts received after charge-off.
(j) Information related to loan modifications. If the loan has
been modified from its original terms, provide the following
additional information about the most recent loan modification:
(1) Modification type. Indicate the code that describes the
reason the asset was modified during the reporting period.
(2) Payment extension. Provide the number of months the loan was
extended during the reporting period.
(k) Repossessed. Indicate yes or no whether the vehicle has been
repossessed. If the vehicle has been repossessed, provide the
following additional information:
(1) Repossession proceeds. Provide the total amount of proceeds
received on disposition (net of repossession fees and expenses).
(2) [Reserved]
Item 4. Automobile leases. If the asset pool includes automobile
leases, provide the following data for each lease in the asset pool:
(a) Asset numbers. (1) Asset number type. Identify the source of
the asset number used to specifically identify each asset in the
pool.
(2) Asset number. Provide the unique ID number of the asset.
Instruction to paragraph (a)(2): The asset number must reference
a single asset within the pool and should be the same number that
will be used to identify the asset for all reports that would be
required of an issuer under Sections 13 or 15(d) of the Exchange Act
(15 U.S.C. 78m or 78o(d)). If an asset is removed and replaced with
another asset, the asset added to the pool should be assigned a
unique asset number applicable to only that asset.
(b) Reporting period. (1) Reporting period begin date. Specify
the beginning date of the reporting period.
(2) Reporting period end date. Specify the ending date of the
reporting period.
(c) General information about the automobile lease. (1)
Originator. Identify the name of the entity that originated the
lease.
(2) Origination date. Provide the date the lease was originated.
(3) Acquisition cost. Provide the original acquisition cost of
the lease.
(4) Original lease term. Indicate the term of the lease in
months at the time the lease was originated.
(5) Scheduled termination date. Indicate the month and year in
which the final lease payment is scheduled to be made.
(6) Original first payment date. Provide the date of the first
scheduled payment after origination.
(7) Underwriting indicator. Indicate whether the lease met the
criteria for the first level of solicitation, credit-granting or
underwriting criteria used to originate the pool asset.
(8) Grace period. Indicate the number of months during the term
of the lease when no payments are due from the lessee.
(9) Payment type. Specify the code indicating the payment
frequency of the lease.
(10) Subvented. Indicate yes or no whether a form of subsidy is
received on the lease, such as cash incentives or favorable
financing for the lessee.
(d) Information related to the vehicle. (1) Vehicle
manufacturer. Provide the name of the manufacturer of the leased
vehicle.
(2) Vehicle model. Provide the name of the model of the leased
vehicle.
(3) New or used. Indicate whether the leased vehicle is new or
used.
(4) Model year. Indicate the model year of the leased vehicle.
(5) Vehicle type. Indicate the code describing the vehicle type.
(6) Vehicle value. Indicate the value of the vehicle at the time
of origination.
(7) Source of vehicle value. Specify the code that describes the
source of the vehicle value.
(8) Base residual value. Provide the securitized residual value
of the leased vehicle.
(9) Source of base residual value. Specify the code that
describes the source of the base residual value.
(10) Contractual residual value. Provide the residual value, as
stated on the contract, that the lessee would need to pay to
purchase the vehicle at the end of the lease term.
(e) Information related to the lessee. (1) Lessee credit score
type. Specify the type of the standardized credit score used to
evaluate the lessee during the lease origination process.
(2) Lessee credit score. Provide the standardized credit score
of the lessee used to evaluate the lessee during the lease
origination process.
(3) Lessee income verification level. Indicate the code
describing the extent to which the lessee's income was verified
during the lease origination process.
(4) Lessee employment verification. Indicate the code describing
the extent to which the lessee's employment was verified during the
lease origination process.
(5) Co-lessee present indicator. Indicate whether the lease has
a co-lessee.
(6) Payment-to-income ratio. Provide the scheduled monthly
payment amount as a percentage of the total monthly income of the
lessee and any other co-lessee at the origination date. Provide the
methodology for determining monthly income in the prospectus.
(7) Geographic location of lessee. Specify the location of the
lessee by providing the current U.S. state or territory.
(f) Information related to activity on the lease. (1) Asset
added indicator. Indicate yes or no whether the asset was added
during the reporting period.

[[Page 57327]]

Instruction to paragraph (f)(1): A response to this data point
is required only when assets are added to the asset pool after the
final prospectus under Sec. 230.424 of this chapter is filed.
(2) Remaining term to maturity. Indicate the number of months
from the end of the reporting period to the lease maturity date.
(3) Modification indicator--reporting period. Indicates yes or
no whether the asset was modified from its original terms during the
reporting period.
(4) Servicing advance method. Specify the code that indicates a
servicer's responsibility for advancing principal or interest on
delinquent leases.
(5) Reporting period securitization value. Provide the sum of
the present values, as of the beginning of the reporting period, of
the remaining scheduled monthly payment amounts and the base
residual value of the leased vehicle, computed using the
securitization value discount rate.
(6) Securitization value discount rate. Provide the discount
rate of the lease for the securitization transaction.
(7) Next reporting period payment amount due. Indicate the total
payment due to be collected in the next reporting period.
(8) Servicing fee--percentage. If the servicing fee is based on
a percentage, provide the percentage used to calculate the aggregate
servicing fee.
(9) Servicing fee--flat-fee. If the servicing fee is based on a
flat-fee amount, indicate the monthly servicing fee paid to all
servicers.
(10) Other lease-level servicing fee(s) retained by servicer.
Provide the amount of all other fees earned by lease administrators
that reduce the amount of funds remitted to the issuing entity
(including subservicing, master servicing, trustee fees, etc.).
(11) Other assessed but uncollected servicer fees. Provide the
cumulative amount of late charges and other fees that have been
assessed by the servicer, but not paid by the lessee.
(12) Reporting period ending actual balance. Indicate the actual
balance of the lease as of the end of the reporting period.
(13) Reporting period scheduled payment amount. Indicate the
total payment amount that was scheduled to be collected during the
reporting period (including all fees).
(14) Total actual amount paid. Indicate the total lease payment
received during the reporting period.
(15) Actual other amounts collected. Indicate the total of any
amounts, other than the scheduled lease payment, collected during
the reporting period, whether or not from the lessee.
(16) Reporting period ending actual securitization value.
Provide the sum of the present values, as of the end of the
reporting period, of the remaining scheduled monthly payment amounts
and the base residual value of the leased vehicle, computed using
the securitization value discount rate.
(17) Servicer advanced amount. If amounts were advanced by the
servicer during the reporting period, specify the amount.
(18) Paid through date. Provide the date through which scheduled
payments have been made with the payment received during the
reporting period, which is the effective date from which amounts due
will be calculated for the application of the next payment.
(19) Zero balance leases. If the lease balance was reduced to
zero during the reporting period, provide the following additional
information about the lease:
(i) Zero balance effective date. Provide the date on which the
lease balance was reduced to zero.
(ii) Zero balance code. Provide the code that indicates the
reason the lease's balance was reduced to zero.
(20) Current delinquency status. Indicate the number of days the
lessee is delinquent past the lessee's payment due date, as
determined by the governing transaction agreement.
(g) Information related to servicers. (1) Primary lease
servicer. Provide the name of the entity that services or will have
the right to service the lease.
(2) Most recent servicing transfer received date. If a lease's
servicing has been transferred, provide the effective date of the
most recent servicing transfer.
(h) Asset subject to demand. Indicate yes or no whether during
the reporting period the lease was the subject of a demand to
repurchase or replace for breach of representations and warranties,
including investor demands upon a trustee. If the lease is the
subject of a demand to repurchase or replace for breach of
representations and warranties, including investor demands upon a
trustee, provide the following additional information:
(1) Status of asset subject to demand. Indicate the code that
describes the status of the repurchase or replacement demand as of
the end of the reporting period.
(2) Repurchase amount. Provide the amount paid to repurchase the
lease from the pool.
(3) Demand resolution date. Indicate the date the lease
repurchase or replacement demand was resolved.
(4) Repurchaser. Specify the name of the repurchaser.
(5) Repurchase or replacement reason. Indicate the code that
describes the reason for the repurchase or replacement.
(i) Information related to loans that have been charged off. If
the loan has been charged off, provide the following additional
information:
(1) Charge-off amounts. Provide the amount charged off on the
lease.
(2) [Reserved]
(j) Information related to loan modifications. If the loan has
been modified from its original terms, provide the following
additional information about the most recent loan modification:
(1) Modification type. Indicate the code that describes the
reason the lease was modified during the reporting period.
(2) Lease extension. Provide the number of months the lease was
extended during the reporting period.
(k) Information related to lease terminations. If the lease was
terminated, provide the following additional information:
(1) Termination indicator. Specify the code that describes the
reason why the lease was terminated.
(2) Excess fees. Specify the amount of excess fees received upon
return of the vehicle, such as excess wear and tear or excess
mileage.
(3) Liquidation proceeds. Provide the liquidation proceeds net
of repossession fees, auction fees and other expenses in accordance
with standard industry practice.
Item 5. Debt securities. If the asset pool includes debt
securities, provide the following data for each security in the
asset pool:
(a) Asset numbers. (1) Asset number type. Identify the source of
the asset number used to specifically identify each asset in the
pool.
(2) Asset number. Provide the standard industry identifier
assigned to the asset. If a standard industry identifier is not
assigned to the asset, provide a unique ID number for the asset.
Instruction to paragraph (a)(2): The asset number must reference
a single asset within the pool and should be the same number that
will be used to identify the asset for all reports that would be
required of an issuer under Sections 13 or 15(d) of the Exchange Act
(15 U.S.C. 78m or 78o(d)). If an asset is removed and replaced with
another asset, the asset added to the pool should be assigned a
unique asset number applicable to only that asset.
(3) Asset group number. For structures with multiple collateral
groups, indicate the collateral group number in which the asset
falls.
(b) Reporting period. (1) Reporting period begin date. Specify
the beginning date of the reporting period.
(2) Reporting period end date. Specify the ending date of the
reporting period.
(c) General information about the underlying security. (1)
Issuer. Provide the name of the issuer.
(2) Original issuance date. Provide the date the underlying
security was issued. For revolving asset master trusts, provide the
issuance date of the receivable that will be added to the asset
pool.
(3) Original security amount. Indicate the amount of the
underlying security at the time the underlying security was issued.
(4) Original security term. Indicate the initial number of
months between the month the underlying security was issued and the
security's maturity date.
(5) Security maturity date. Indicate the month and year in which
the final payment on the underlying security is scheduled to be
made.
(6) Original amortization term. Indicate the number of months in
which the underlying security would be retired if the amortizing
principal and interest payment were to be paid each month.
(7) Original interest rate. Provide the rate of interest at the
time the underlying security was issued.
(8) Accrual type. Provide the code that describes the method
used to calculate interest on the underlying security.
(9) Interest rate type. Indicate the code that indicates whether
the interest rate on the underlying security is fixed, adjustable,
step or other.
(10) Original interest-only term. Indicate the number of months
from the date the

[[Page 57328]]

underlying security was issued in which the obligor is permitted to
pay only interest on the underlying security.
(11) First payment date from issuance. Provide the date of the
first scheduled payment.
(12) Underwriting indicator. Indicate whether the loan or asset
met the criteria for the first level of solicitation, credit-
granting or underwriting criteria used to originate the pool asset.
(13) Title of underlying security. Specify the title of the
underlying security.
(14) Denomination. Give the minimum denomination of the
underlying security.
(15) Currency. Specify the currency of the underlying security.
(16) Trustee. Specify the name of the trustee.
(17) Underlying SEC file number. Specify the registration
statement file number of the registration of the offer and sale of
the underlying security.
(18) Underlying CIK number. Specify the CIK number of the issuer
of the underlying security.
(19) Callable. Indicate whether the security is callable.
(20) Payment frequency. Indicate the code describing the
frequency of payments that will be made on the underlying security.
(21) Zero coupon indicator. Indicate yes or no whether an
underlying security or agreement is interest bearing.
(d) Information related to activity on the underlying security.
(1) Asset added indicator. Indicate yes or no whether the underlying
security was added to the asset pool during the reporting period.
Instruction to paragraph (d)(1): A response to this data point
is required only when assets are added to the asset pool after the
final prospectus under Sec. 230.424 of this chapter is filed.
(2) Modification indicator. Indicates yes or no whether the
underlying security was modified from its original terms.
(3) Reporting period beginning asset balance. Indicate the
outstanding principal balance of the underlying security as of the
beginning of the reporting period.
(4) Reporting period beginning scheduled asset balance. Indicate
the scheduled principal balance of the underlying security as of the
beginning of the reporting period.
(5) Reporting period scheduled payment amount. Indicate the
total payment amount that was scheduled to be collected during the
reporting period.
(6) Reporting period interest rate. Indicate the interest rate
in effect on the underlying security.
(7) Total actual amount paid. Indicate the total payment paid to
the servicer during the reporting period.
(8) Actual interest collected. Indicate the gross amount of
interest collected during the reporting period.
(9) Actual principal collected. Indicate the amount of principal
collected during the reporting period.
(10) Actual other amounts collected. Indicate the total of any
amounts, other than principal and interest, collected during the
reporting period.
(11) Other principal adjustments. Indicate any other amounts
that caused the principal balance of the underlying security to be
decreased or increased during the reporting period.
(12) Other interest adjustments. Indicate any unscheduled
interest adjustments during the reporting period.
(13) Scheduled interest amount. Indicate the interest payment
amount that was scheduled to be collected during the reporting
period.
(14) Scheduled principal amount. Indicate the principal payment
amount that was scheduled to be collected during the reporting
period.
(15) Reporting period ending actual balance. Indicate the actual
balance of the underlying security as of the end of the reporting
period.
(16) Reporting period ending scheduled balance. Indicate the
scheduled principal balance of the underlying security as of the end
of the reporting period.
(17) Servicing fee--percentage. If the servicing fee is based on
a percentage, provide the percentage used to calculate the aggregate
servicing fee.
(18) Servicing fee--flat-fee. If the servicing fee is based on a
flat-fee amount, indicate the monthly servicing fee paid to all
servicers as an amount.
(19) Zero balance loans. If the loan balance was reduced to zero
during the reporting period, provide the following additional
information about the loan:
(i) Zero balance code. Provide the code that indicates the
reason the underlying security's balance was reduced to zero.
(ii) Zero balance effective date. Provide the date on which the
underlying security's balance was reduced to zero.
(20) Remaining term to maturity. Indicate the number of months
from the end of the reporting period to the maturity date of the
underlying security.
(21) Current delinquency status. Indicate the number of days the
obligor is delinquent as determined by the governing transaction
agreement.
(22) Number of days payment is past due. If the obligor has not
made the full scheduled payment, indicate the number of days since
the scheduled payment date.
(23) Number of payments past due. Indicate the number of
payments the obligor is past due as of the end of the reporting
period.
(24) Next reporting period payment amount due. Indicate the
total payment due to be collected in the next reporting period.
(25) Next due date. For assets that have not been paid off,
indicate the next payment due date on the underlying security.
(e) Information related to servicers. (1) Primary servicer.
Indicate the name or MERS organization number of the entity that
serviced the underlying security during the reporting period.
(2) Most recent servicing transfer received date. If the
servicing of the underlying security has been transferred, provide
the effective date of the most recent servicing transfer.
(f) Asset subject to demand. Indicate yes or no whether during
the reporting period the asset was the subject of a demand to
repurchase or replace for breach of representations and warranties,
including investor demands upon a trustee. If the asset is the
subject of a demand to repurchase or replace for breach of
representations and warranties, including investor demands upon a
trustee, provide the following additional information:
(1) Status of asset subject to demand. Indicate the code that
describes the status of the repurchase or replacement demand as of
the end of the reporting period.
(2) Repurchase amount. Provide the amount paid to repurchase the
underlying security from the pool.
(3) Demand resolution date. Indicate the date the underlying
security repurchase or replacement demand was resolved.
(4) Repurchaser. Specify the name of the repurchaser.
(5) Repurchase or replacement reason. Indicate the code that
describes the reason for the repurchase or replacement.
Item 6. Resecuritizations.
(a) If the asset pool includes asset-backed securities, provide
the asset-level information specified in Item 5. Debt Securities in
this Schedule AL for each security in the asset pool.
(b) If the asset pool includes asset-backed securities issued
November 23, 2016, provide the asset-level information specified in
Sec. 229.1111(h) for the assets backing each security in the asset
pool.

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
22. The authority citation for Part 230 continues to read, in part, as
follows:

Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77d note, 77f,
77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n,
78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28,
80a-29, 80a-30, and 80a-37, and Pub. L. No. 112-106, sec. 201(a),
126 Stat. 313 (2012), unless otherwise noted.
* * * * *

Sec. 230.139a [Amended]

0
23. Amend Sec. 230.139a by:
0
a. In the introductory text removing the phrase ``General Instruction
I.B.5 of Form S-3 (Sec. 239.13 of this chapter) (``S-3 ABS'')'' and
adding in its place ``Form SF-3 (Sec. 239.45 of this chapter) (``SF-3
ABS'')''; and
0
b. Removing the phrase ``S-3 ABS'' and adding in its place the phrase
``SF-3 ABS'' wherever it appears.

Sec. 230.167 [Amended]

0
24. Amend Sec. 230.167, paragraph (a), by removing the phrase
``meeting the requirements of General Instruction I.B.5 of Form S-3
(Sec. 239.13 of this chapter) and registered under the Act on Form S-3
pursuant to Sec. 230.415'' and adding in its place ``registered on
Form SF-3 (Sec. 239.45 of this chapter)''.
0
25. Amend Sec. 230.190 by:
0
a. Revising paragraph (b)(1);

[[Page 57329]]

0
b. In paragraph (b)(6) removing ``; and'' and adding a period in its
place;
0
c. Removing paragraph (b)(7); and
0
d. Adding paragraph (d).
The revision and addition read as follows:

Sec. 230.190 Registration of underlying securities in asset-backed
securities transactions.

* * * * *
(b) * * *
(1) If the offering of asset-backed securities is registered on
Form SF-3 (Sec. 239.45 of this chapter), the offering of the
underlying securities itself must be eligible to be registered under
Form SF-3, Form S-3 (Sec. 239.13 of this chapter), or F-3 (Sec.
239.33 of this chapter) as a primary offering of such securities;
* * * * *
(d) Notwithstanding paragraph (c) of this section (that is,
although the pool asset described in paragraph (c) of this section is
an not an ``underlying security'' for purposes of this section), if the
pool assets for the asset-backed securities are collateral certificates
or special units of beneficial interest, those collateral certificates
or special units of beneficial interest must be registered concurrently
with the registration of the asset-backed securities. However, pursuant
to Sec. 230.457(t) no separate registration fee for the certificates
or special units of beneficial interest is required to be paid.

Sec. 230.193 [Amended]

0
26. Amend Sec. 230.193 by removing the phrase ``Section 3(a)(77) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(77)),'' and
adding in its place ``Section 3(a)(79) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(79)),''.

0
27. Amend Sec. 230.401 by:
0
a. In paragraph (g)(1) removing the phrase ``and (g)(3)'' and adding in
its place ``, (g)(3), and (g)(4)''; and
0
b. Adding paragraph (g)(4).
The addition reads as follows:

Sec. 230.401 Requirements as to proper form.

* * * * *
(g) * * *
(4) Notwithstanding that the registration statement may have become
effective previously, requirements as to proper form under this section
will have been violated for any offering of securities where the
requirements of General Instruction I.A. of Form SF-3 (Sec. 239.45 of
this chapter) have not been met as of ninety days after the end of the
depositor's fiscal year end prior to such offering.

Sec. 230.405 [Amended]

0
28. Amend Sec. 230.405 by, in paragraph (1) of the definition of a
Free writing prospectus, adding the phrase ``Rule 430D (Sec.
230.430D),'' before ``or Rule 431''.
0
29. Amend Sec. 230.415 by:
0
a. Revising paragraphs (a)(1)(vii) and (a)(1)(ix); and
0
b. Adding paragraph (a)(1)(xii).
The revisions and addition read as follows:

Sec. 230.415 Delayed or continuous offering and sale of securities.

(a) * * *
(1) * * *
(vii) Asset-backed securities (as defined in 17 CFR 229.1101(c))
registered (or qualified to be registered) on Form SF-3 (Sec. 239.45
of this chapter) which are to be offered and sold on an immediate or
delayed basis by or on behalf of the registrant;
Instruction to paragraph (a)(1)(vii): The requirements of General
Instruction I.B.1 of Form SF-3 (Sec. 239.45 of this chapter) must be
met for any offerings of an asset-backed security (as defined in 17 CFR
229.1101(c)) registered in reliance on this paragraph (a)(1)(vii).
* * * * *
(ix) Securities, other than asset-backed securities (as defined in
17 CFR 229.1101(c)), the offering of which will be commenced promptly,
will be made on a continuous basis and may continue for a period in
excess of 30 days from the date of initial effectiveness;
* * * * *
(xii) Asset-backed securities (as defined in 17 CFR 229.1101(c))
that are to be offered and sold on a continuous basis if the offering
is commenced promptly and being conducted on the condition that the
consideration paid for such securities will be promptly refunded to the
purchaser unless:
(A) All of the securities being offered are sold at a specified
price within a specified time; and
(B) The total amount due to the seller is received by him by a
specified date.
* * * * *

0
30. Amend Sec. 230.424 by:
0
a. Adding in paragraph (b)(2) the phrase ``or, in the case of asset-
backed securities, Rule 430D (Sec. 230.430D)'' after the phrase ``in
reliance on Rule 430B (Sec. 230.430B),'';
0
b. Redesignating the Instruction following the note to paragraph (b)(8)
as ``Instruction to paragraph (b):'' and in that newly redesignated
instruction removing the phrase ``mortgage-related securities on a
delayed basis under Sec. 230.415(a)(1)(vii) or asset-backed securities
on a delayed basis under Sec. 230.415(a)(1)(x)'' and adding in its
place ``asset-backed securities under Sec. 230.415(a)(1)(vii) or
230.415(a)(1)(xii)''; and
0
c. Adding paragraph (h).
The addition reads as follows:

Sec. 230.424 Filing of prospectuses, number of copies.

* * * * *
(h)(1) Three copies of a form of prospectus relating to an offering
of asset-backed securities pursuant to Sec. 230.415(a)(1)(vii) or
Sec. 230.415(a)(1)(xii) disclosing information previously omitted from
the prospectus filed as part of an effective registration statement in
reliance on Sec. 230.430D shall be filed with the Commission at least
three business days before the date of the first sale in the offering,
or if used earlier, the earlier of:
(i) The applicable number of business days before the date of the
first sale; or
(ii) The second business day after first use.
(2) Three copies of a prospectus supplement relating to an offering
of asset-backed securities pursuant to Sec. 230.415(a)(1)(vii) or
Sec. 230.415(a)(1)(xii) that reflects any material change from the
information contained in a prospectus filed in accordance with Sec.
230.424(h)(1) shall be filed with the Commission at least forty-eight
hours before the date and time of the first sale in the offering. The
prospectus supplement must clearly delineate what material information
has changed and how the information has changed from the prospectus
filed in accordance with paragraph (h)(1) of this section.
Instruction to paragraph (h): The filing requirements of this
paragraph (h) do not apply if a filing is made solely to add fees
pursuant to Sec. 230.457 and for no other purpose.

Sec. 230.430B [Amended]

0
31. Amend Sec. 230.430B, paragraph (a), first sentence by removing the
phrase ``Rule 415(a)(1)(vii) or (a)(1)(x) (Sec. 230.415(a)(1)(vii) or
(a)(1)(x))'' and adding in its place ``Rule 415(a)(1)(x) (Sec.
230.415(a)(1)(x))''; and in the second sentence removing the phrase
``(vii) or ''.

Sec. 230.430C [Amended]

0
32. Amend Sec. 230.430C, paragraph (a), by adding the phrase ``or Rule
430D (Sec. 230.430D)'' after the phrase ``in reliance on Rule 430B
(Sec. 230.430B)''.

0
33. Add Sec. 230.430D to read as follows:

[[Page 57330]]

Sec. 230.430D Prospectus in a registration statement after effective
date for asset-backed securities offerings.

(a) A form of prospectus filed as part of a registration statement
for primary offerings of asset-backed securities pursuant to Sec.
230.415(a)(1)(vii) or Sec. 230.415(a)(1)(xii) may omit from the
information required by the form to be in the prospectus information
that is unknown or not reasonably available to the issuer pursuant to
Sec. 230.409.
(b) Information omitted from a form of prospectus that is part of
an effective registration statement in reliance on paragraph (a) of
this section (other than information with respect to offering price,
underwriting syndicate (including any material relationships between
the registrant and underwriters not named therein), underwriting
discounts or commissions, discounts or commissions to dealers, amount
of proceeds or other matters dependent upon the offering price to the
extent such information is unknown or not reasonably available to the
issuer pursuant to Sec. 230.409) shall be disclosed in a form of
prospectus required to be filed with the Commission pursuant to Sec.
230.424(h). Each such form of prospectus shall be deemed to have been
filed as part of the registration statement for the purpose of section
7 of the Act (15 U.S.C. 77g).
(c) A form of prospectus filed as part of a registration statement
that omits information in reliance upon paragraph (a) of this section
meets the requirements of section 10 of the Act (15 U.S.C. 77j) for the
purpose of section 5(b)(1) of the Act (15 U.S.C. 77e(b)(1)). This
provision shall not limit the information required to be contained in a
form of prospectus in order to meet the requirements of section 10(a)
of the Act for the purposes of section 5(b)(2) (15 U.S.C. 77e(b)(2)) or
exception (a) of section 2(a)(10) of the Act (15 U.S.C. 77b(a)(10)(a)).
(d)(1) Except as provided in paragraph (b) or (d)(2) of this
section, information omitted from a form of prospectus that is part of
an effective registration statement in reliance on paragraph (a) of
this section may be included subsequently in the prospectus that is
part of a registration statement by:
(i) A post-effective amendment to the registration statement;
(ii) A prospectus filed pursuant to Sec. 230.424(b); or
(iii) If the applicable form permits, including the information in
the issuer's periodic or current reports filed pursuant to section 13
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)) that are incorporated or deemed incorporated by reference into
the prospectus that is part of the registration statement in accordance
with the applicable requirements, subject to the provisions of
paragraph (h) of this section.
(2) Information omitted from a form of prospectus that is part of
an effective registration statement in reliance on paragraph (a) of
this section that adds a new structural feature or credit enhancement
must be included subsequently in the prospectus that is part of a
registration statement by a post-effective amendment to the
registration statement.
(e)(1) Information omitted from a form of prospectus that is part
of an effective registration statement in reliance on paragraph (a) of
this section and contained in a form of prospectus required to be filed
with the Commission pursuant to Sec. 230.424(b), other than as
provided in paragraph (f) of this section, shall be deemed part of and
included in the registration statement as of the date such form of
filed prospectus is first used after effectiveness.
(2) Information omitted from a form of prospectus that is part of
an effective registration statement in reliance on paragraph (a) of
this section and contained in a form of prospectus required to be filed
with the Commission pursuant to Sec. 230.424(h) shall be deemed part
of and included in the registration statement the earlier of the date
such form of filed prospectus is filed with the Commission pursuant to
Sec. 230.424(h) or, if used earlier than the date of filing, the date
it is first used after effectiveness.
(f)(1) Information omitted from a form of prospectus that is part
of an effective registration statement in reliance on paragraph (a) of
this section, and is contained in a form of prospectus required to be
filed with the Commission pursuant to Sec. 230.424(b)(2) or (b)(5),
shall be deemed to be part of and included in the registration
statement on the earlier of the date such subsequent form of prospectus
is first used or the date and time of the first contract of sale of
securities in the offering to which such subsequent form of prospectus
relates.
(2) The date on which a form of prospectus is deemed to be part of
and included in the registration statement pursuant to paragraph (f)(1)
of this section shall be deemed, for purposes of liability under
section 11 of the Act (15 U.S.C. 77k) of the issuer and any underwriter
at the time only, to be a new effective date of the part of such
registration statement relating to the securities to which such form of
prospectus relates, such part of the registration statement consisting
of all information included in the registration statement and any
prospectus relating to the offering of such securities (including
information relating to the offering in a prospectus already included
in the registration statement) as of such date and all information
relating to the offering included in reports and materials incorporated
by reference into such registration statement and prospectus as of such
date, and in each case not modified or superseded pursuant to Sec.
230.412. The offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) If a registration statement is amended to include or is deemed
to include, through incorporation by reference or otherwise, except as
otherwise provided in Sec. 230.436, a report or opinion of any person
made on such person's authority as an expert whose consent would be
required under section 7 of the Act (15 U.S.C. 77g) because of being
named as having prepared or certified part of the registration
statement, then for purposes of this section and for liability purposes
under section 11 of the Act (15 U.S.C. 77k), the part of the
registration statement for which liability against such person is
asserted shall be considered as having become effective with respect to
such person as of the time the report or opinion is deemed to be part
of the registration statement and a consent required pursuant to
section 7 of the Act has been provided as contemplated by section 11 of
the Act.
(4) Except for an effective date resulting from the filing of a
form of prospectus filed for purposes of including information required
by section 10(a)(3) of the Act (15 U.S.C. 77j(a)(3)) or pursuant to
Item 512(a)(1)(ii) of Regulation S-K (Sec. 229.512(a)(1)(ii) of this
chapter), the date a form of prospectus is deemed part of and included
in the registration statement pursuant to this paragraph shall not be
an effective date established pursuant to paragraph (f)(2) of this
section as to:
(i) Any director (or person acting in such capacity) of the issuer;
(ii) Any person signing any report or document incorporated by
reference into the registration statement, except for such a report or
document incorporated by reference for purposes of including
information required by section 10(a)(3) of the Act (15 U.S.C.
77j(a)(3)) or pursuant to Item 512(a)(1)(ii) of Regulation S-K (Sec.
229.512(a)(1)(ii) of this chapter) (such person except for such reports
being deemed not to be a person who signed the registration statement
within the

[[Page 57331]]

meaning of section 11(a) of the Act (15 U.S.C. 77k(a)).
(5) The date a form of prospectus is deemed part of and included in
the registration statement pursuant to paragraph (f)(2) of this section
shall not be an effective date established pursuant to paragraph (f)(2)
of this section as to:
(i) Any accountant with respect to financial statements or other
financial information contained in the registration statement as of a
prior effective date and for which the accountant previously provided a
consent to be named as required by section 7 of the Act (15 U.S.C.
77g), unless the form of prospectus contains new audited financial
statements or other financial information as to which the accountant is
an expert and for which a new consent is required pursuant to section 7
of the Act or Sec. 230.436; and
(ii) Any other person whose report or opinion as an expert or
counsel has, with their consent, previously been included in the
registration statement as of a prior effective date, unless the form of
prospectus contains a new report or opinion for which a new consent is
required pursuant to section 7 of the Act (15 U.S.C. 77g) or Sec.
230.436.
(g) Notwithstanding paragraph (e) or (f) of this section or Sec.
230.412(a), no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement
after the effective date of such registration statement or portion
thereof in respect of an offering determined pursuant to this section
will, as to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such
effective date.
(h) Where a form of prospectus filed pursuant to Sec. 230.424(b)
relating to an offering does not include disclosure of omitted
information regarding the terms of the offering, the securities or the
plan of distribution for the securities that are the subject of the
form of prospectus, because such omitted information has been included
in periodic or current reports filed pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d))
incorporated or deemed incorporated by reference into the prospectus,
the issuer shall file a form of prospectus identifying the periodic or
current reports that are incorporated or deemed incorporated by
reference into the prospectus that is part of the registration
statement that contain such omitted information. Such form of
prospectus shall be required to be filed, depending on the nature of
the incorporated information, pursuant to Sec. 230.424(b)(2) or
(b)(5).
(i) Issuers relying on this section shall furnish the undertakings
required by Item 512(a) of Regulation S-K (Sec. 229.512(a) of this
chapter).

Sec. 230.433 [Amended]

0
34. Amend Sec. 230.433 by:
0
a. In paragraph (b)(1)(i) removing the phrase ``I.B.5, I.C., or I.D.
thereof'' and adding in its place ``I.C., or I.D. thereof or on Form
SF-3 (Sec. 239.45 of this chapter)'';
0
b. In paragraph (c)(1)(i) removing the phrase ``Rule 430B or Rule 430C
(Sec. 230.430B or Sec. 230.430C)'' and adding in its place ``Rule
430B (Sec. 230.430B), Rule 430C (Sec. 230.430C) or Rule 430D (Sec.
230.430D)''; and
0
c. Removing paragraph (d)(6)(iii).

0
35. Amend Sec. 230.456 by adding paragraph (c) to read as follows:

Sec. 230.456 Date of filing; timing of fee payment.

* * * * *
(c)(1) Notwithstanding paragraph (a) of this section, an asset-
backed issuer that registers asset-backed securities offerings on Form
SF-3 (Sec. 239.45 of this chapter), may, but is not required to, defer
payment of all or any part of the registration fee to the Commission
required by section 6(b)(1) of the Act (15 U.S.C. 77f(b)(1)) on the
following conditions:
(i) If the issuer elects to defer payment of the registration fee,
it shall pay the registration fees (pay-as-you-go registration fees)
calculated in accordance with Sec. 230.457(s) in advance of or in
connection with an offering of securities from the registration
statement at the time of filing the prospectus pursuant to Sec.
230.424(h) for the offering; and
(ii) The issuer reflects the amount of the pay-as-you-go
registration fee paid or to be paid in accordance with paragraph
(c)(1)(i) of this section by updating the ``Calculation of Registration
Fee'' table to indicate the class and aggregate offering price of
securities offered and the amount of registration fee paid or to be
paid in connection with the offering or offerings on the cover page of
a prospectus filed pursuant to Sec. 230.424(h).
(2) A registration statement filed relying on the pay-as-you-go
registration fee payment provisions of paragraph (c)(1) of this section
will be considered filed as to the securities or classes of securities
identified in the registration statement for purposes of this section
and section 5 of the Act (15 U.S.C. 77e) when it is received by the
Commission, if it complies with all other requirements of the Act and
the rules with respect to it.
(3) The securities sold pursuant to a registration statement will
be considered registered, for purpose of section 6(a) of the Act (15
U.S.C. 77f(a)), if the pay-as-you-go registration fee has been paid and
the post-effective amendment or prospectus including the amended
``Calculation of Registration Fee'' table is filed pursuant to
paragraph (c)(1) of this section.

0
36. Amend Sec. 230.457 by adding paragraphs (s) and (t) to read as
follows:

Sec. 230.457 Computation of fee.

* * * * *
(s) Where securities are asset-backed securities being offered
pursuant to a registration statement on Form SF-3 (Sec. 239.45 of this
chapter), the registration fee is to be calculated in accordance with
this section. When the issuer elects to defer payment of the fees
pursuant to Sec. 230.456(c), the ``Calculation of Registration Fee''
table in the registration statement must indicate that the issuer is
relying on Sec. 230.456(c) but does not need to include the number of
units of securities or the maximum aggregate offering price of any
securities until the issuer updates the ``Calculation of Registration
Fee'' table to reflect payment of the registration fee, including a
pay-as-you-go registration fee in accordance with Sec. 230.456(c). The
registration fee shall be calculated based on the fee payment rate in
effect on the date of the fee payment.
(t) Where the security to be offered is a collateral certificate or
is a special unit of beneficial interest, underlying asset-backed
securities (as defined in Sec. 229.1101(c) of this chapter) which are
being registered concurrently, no separate fee for the certificate or
the special unit of beneficial interest shall be payable.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS

0
37. The authority citation for Part 232 continues to read, in part, as
follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *

[[Page 57332]]

0
38. Amend Sec. 232.11 by adding a definition for ``Asset Data File''
in alphabetical order to read as follows:

Sec. 232.11 Definition of terms used in part 232.

* * * * *
Asset Data File. The term Asset Data File means the machine-
readable computer code that presents information in eXtensible Markup
Language (XML) electronic format pursuant to Sec. 229.1111(h) of this
chapter.
* * * * *

0
39. Amend Sec. 232.101 by:
0
a. In paragraph (a)(1)(xii) removing ``and'' after the semicolon;
0
b. Adding paragraph (a)(1)(xiv); and
0
c. Redesignating the note following paragraph (a)(3) as ``Note to
paragraph (a)(3)'' and in the newly redesignated Note to paragraph
(a)(3) removing the phrase ``F-2 and F-3 (see Sec. Sec. 239.12,
239.13, 239.16b, 239.32 and 239.33'' and adding in its place ``SF-3, F-
2 and F-3 (see Sec. Sec. 239.12, 239.13, 239.16b, 239.32, 239.33 and
239.45''.
The addition reads as follows:

Sec. 232.101 Mandated electronic submissions and exceptions.

(a) * * *
(1) * * *
(xiv) Form ABS-EE (Sec. 249.1401 of this chapter); and
* * * * *

0
40. Amend Sec. 232.201 by:
0
a. Revising paragraph (a) introductory text;
0
b. In Note 1 to paragraph (b) removing the phrase ``and F-3 (see
Sec. Sec. 239.12, 239.13, 239.16b, 239.32 and 239.33 of this section''
and adding in its place ``, F-3 and SF-3 (see Sec. Sec. 239.12,
239.13, 239.16b, 239.32, 239.33 and 239.45 of this chapter''; and
0
c. Adding paragraph (d).
The revision and addition read as follows:

Sec. 232.201 Temporary hardship exemption.

(a) If an electronic filer experiences unanticipated technical
difficulties preventing the timely preparation and submission of an
electronic filing, other than a Form 3 (Sec. 249.103 of this chapter),
a Form 4 (Sec. 249.104 of this chapter), a Form 5 (Sec. 249.105 of
this chapter), a Form ID (Sec. Sec. 239.63, 249.446, 269.7 and 274.402
of this chapter), a Form TA-1 (Sec. 249.100 of this chapter), a Form
TA-2 (Sec. 249.102 of this chapter), a Form TA-W (Sec. 249.101 of
this chapter), a Form D (Sec. 239.500 of this chapter), an Interactive
Data File (Sec. 232.11), or an Asset Data File (as defined in Sec.
232.11), the electronic filer may file the subject filing, under cover
of Form TH (Sec. Sec. 239.65, 249.447, 269.10 and 274.404 of this
chapter), in paper format no later than one business day after the date
on which the filing was to be made.
* * * * *
(d) If an electronic filer experiences unanticipated technical
difficulties preventing the timely preparation and submission of an
Asset Data File (as defined in Sec. 232.11) and any asset related
document pursuant to Items 601(b)(102) and 601(b)(103) (Sec. Sec.
229.601(b)(102) and 229.601(b)(103) of this chapter) the electronic
filer still can timely satisfy the requirement to submit the Asset Data
File or any asset related document in the following manner by:
(1) Posting on a Web site the Asset Data File and any asset related
documents unrestricted as to access and free of charge;
(2) Substituting for the Asset Data File and any asset related
documents in the required Form ABS-EE (Sec. 249.1401 of this chapter),
a statement specifying the Web site address and that sets forth the
following legend; and

IN ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY
RULE 201 OF REGULATION S-T, THE DATE BY WHICH THE ASSET DATA FILE IS
REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS DAYS.

(3) Submitting the required Asset Data File and asset related
documents no later than six business days after the Asset Data File
originally was required to be submitted.

Sec. 232.202 [Amended]

0
41. Amend Sec. 232.202, paragraph (a) introductory text, by removing
the phrase ``or a Form D (Sec. 239.500 of this chapter)'' and adding
in its place ``, a Form D (Sec. 239.500 of this chapter), or an Asset
Data File (Sec. 232.11)''.

0
42. Amend Sec. 232.305 by revising paragraph (b) to read as follows:

Sec. 232.305 Number of characters per line; tabular and columnar
information.

* * * * *
(b) Paragraph (a) of this section does not apply to HTML documents,
Interactive Data Files (as defined in Sec. 232.11) or XBRL-Related
Documents (as defined in Sec. 232.11).

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
43. The authority citation for part 239 continues to read, in part, as
follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l, 78m, 78n, 78 o(d), 78o-7, 78o-7 note, 78u-5,
78w(a), 78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13,
80a-24, 80a-26, 80a-29, 80a-30, and 80a-37, and Pub. L. No. 111-203,
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *

0
44. Revise Sec. 239.11 to read as follows:

Sec. 239.11 Form S-1, registration statement under the Securities Act
of 1933.

This Form shall be used for the registration under the Securities
Act of 1933 of securities of all registrants for which no other form is
authorized or prescribed, except that this Form shall not be used for
securities of foreign governments or political subdivisions thereof or
asset-backed securities, as defined in 17 CFR 229.1101(c).

0
45. Amend Form S-1 (referenced in Sec. 239.11) by revising General
Instruction I. to read as follows:

Note: The text of Form S-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
* * * * *
GENERAL INSTRUCTIONS
I. Eligibility Requirements for Use of Form S-1
This Form shall be used for the registration under the Securities
Act of 1933 (``Securities Act'') of securities of all registrants for
which no other form is authorized or prescribed, except that this Form
shall not be used for securities of foreign governments or political
subdivisions thereof or asset-backed securities, as defined in 17 CFR
229.1101(c).
* * * * *

0
46. Amend Sec. 239.13 by:
0
a. Removing paragraph (a)(4);
0
b. Redesignating paragraphs (a)(5), (a)(6), (a)(7) and (a)(8) as
paragraphs (a)(4), (a)(5), (a)(6), and (a)(7), respectively;
0
c. Revising paragraph (b)(5); and
0
d. In paragraph (e) introductory text removing the phrase ``(a)(2),
(a)(3) and (a)(4)'' and adding in its place ``(a)(2) and (a)(3)''.
The revision reads as follows:

Sec. 239.13 Form S-3, for registration under the Securities Act of
1933 of securities of certain issuers offered pursuant to certain types
of transactions.

* * * * *
(b) * * *
(5) This Form shall not be used to register offerings of asset-
backed

[[Page 57333]]

securities, as defined in 17 CFR 229.1101(c).
* * * * *
0
47. Amend Form S-3 (referenced in Sec. 239.13) by:
0
a. Removing General Instruction I.A.4;
0
b. Redesignating General Instructions I.A.5, I.A.6, I.A.7, and I.A.8 as
General Instructions I.A.4, I.A.5, I.A.6, and I.A.7, respectively;
0
c. Revising General Instruction I.B.5;
0
d. Removing ``I.B.5,'' in General Instruction II.F; and
0
e. Removing General Instruction V.
The revision reads as follows:

Note: The text of Form S-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
* * * * *
GENERAL INSTRUCTIONS
I. * * *
B. * * *
5. This Form shall not be used to register offerings of asset-
backed securities, as defined in 17 CFR 229.1101(c).
* * * * *

0
48. Add Sec. 239.44 to read as follows:

Sec. 239.44 Form SF-1, registration statement under the Securities
Act of 1933 for offerings of asset-backed securities.

This Form shall be used for registration under the Securities Act
of 1933 of all offerings of asset-backed securities, as defined in 17
CFR 229.1101(c).

0
49. Add Form SF-1 (referenced in Sec. 239.44) to read as follows:

Note: The text of Form SF-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

[[Page 57334]]

[GRAPHIC] [TIFF OMITTED] TR24SE14.001

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities

[[Page 57335]]

Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]

Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price per aggregate offering registration fee
registered unit price
----------------------------------------------------------------------------------------------------------------

Note: Specific details relating to the fee calculation shall be
furnished in notes to the table, including references to provisions of
Rule 457 (Sec. 230.457 of this chapter) relied upon, if the basis of
the calculation is not otherwise evident from the information presented
in the table. If the filing fee is calculated pursuant to Rule 457(o)
under the Securities Act, only the title of the class of securities to
be registered, the proposed maximum aggregate offering price for that
class of securities and the amount of registration fee need to appear
in the Calculation of Registration Fee table. Any difference between
the dollar amount of securities registered for such offerings and the
dollar amount of securities sold may be carried forward on a future
registration statement pursuant to Rule 429 under the Securities Act.
GENERAL INSTRUCTIONS
I. Eligibility Requirements for Use of Form SF-1
This Form shall be used for the registration under the Securities
Act of 1933 (``Securities Act'') of asset-backed securities of all
registrants for which no other form is authorized or prescribed, except
that this Form shall not be used for securities of foreign governments
or political subdivisions thereof.
II. Application of General Rules and Regulations
A. Attention is directed to the General Rules and Regulations under
the Securities Act, particularly those comprising Regulation C (17 CFR
230.400 to 230.499) thereunder. That Regulation contains general
requirements regarding the preparation and filing of the registration
statement.
B. Attention is directed to Regulation S-K and Regulation AB (17
CFR part 229) for the requirements applicable to the content of
registration statements under the Securities Act.
C. Terms used in this Form have the same meaning as in Item 1101 of
Regulation AB.
III. Registration of Additional Securities
With respect to the registration of additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, the
registrant may file a registration statement consisting only of the
following: The facing page; a statement that the contents of the
earlier registration statement, identified by file number and CIK
number of the issuer, are incorporated by reference; required opinions
and consents; the signature page; and any price-related information
omitted from the earlier registration statement in reliance on Rule
430A that the registrant chooses to include in the new registration
statement. The information contained in such a Rule 462(b) registration
statement shall be deemed to be a part of the earlier registration
statement as of the date of effectiveness of the Rule 462(b)
registration statement. Any opinion or consent required in the Rule
462(b) registration statement may be incorporated by reference from the
earlier registration statement with respect to the offering, if: (i)
Such opinion or consent expressly provides for such incorporation; and
(ii) such opinion relates to the securities registered pursuant to Rule
462(b). See Rule 411(c) and Rule 439(b) under the Securities Act.
IV. Incorporation of Certain Information by Reference
A. With respect to all registrants required to provide asset-level
information pursuant to Item 1111(h) of Regulation AB (17 CFR
229.1111(h)):
1. The disclosures filed as exhibits to Form ABS-EE in accordance
with Items 601(b)(102) and 601(b)(103) of Regulation S-K (17 CFR
229.601(b)(102) and 601(b)(103)) must be incorporated by reference into
the prospectus that is part of the registration statement.
2. If the pool assets include asset-backed securities of a third-
party, registrants may reference the third-party's filings of asset-
level data pursuant to Item 1100(c)(2) of Regulation AB (17 CFR
229.1100(c)(2)), except that the third-party is not required to meet
the definition of significant obligor in Item 1101(k) of Regulation AB
(17 CFR 229.1101(k)).
3. Incorporation by reference must comply with Item 10 of this
Form.
B. Registrants may elect to file the information required by Item
1105 of Regulation AB (17 CFR 229.1105), Static Pool, pursuant to Item
6.06 of Form 8-K (17 CFR 249.308), provided that the information is
incorporated by reference into the prospectus that is part of the
registration statement. Incorporation by reference must comply with
Item 10 of this Form.
PART I INFORMATION REQUIRED IN PROSPECTUS
Item 1. Forepart of the Registration Statement and Outside Front Cover
Pages of Prospectus.
Set forth in the forepart of the registration statement and on the
outside front cover page of the prospectus the information required by
Item 501 of Regulation S-K (17 CFR 229.501) and Item 1102 of Regulation
AB (17 CFR 229.1102).
Item 2. Inside Front and Outside Back Cover Pages of Prospectus.
Set forth on the inside front cover page of the prospectus or,
where permitted, on the outside back cover page, the information
required by Item 502 of Regulation S-K (17 CFR 229.502).
Item 3. Transaction Summary and Risk Factors
Furnish the information required by Item 503 of Regulation S-K (17
CFR 229.503) and Item 1103 of Regulation AB (17 CFR 229.1103).
Item 4. Use of Proceeds.
Furnish the information required by Item 504 of Regulation S-K (17
CFR 229.504).
Item 5. Plan of Distribution.
Furnish the information required by Item 508 of Regulation S-K (17
CFR 229.508).
Item 6. Information With Respect to the Transaction Parties.
Furnish the following information:
(a) Information required by Item 1104 of Regulation AB (17 CFR
229.1104), Sponsors;
(b) Information required by Item 1106 of Regulation AB (17 CFR
229.1106), Depositors;

[[Page 57336]]

(c) Information required by Item 1107 of Regulation AB (17 CFR
229.1107), Issuing entities;
(d) Information required by Item 1108 of Regulation AB (17 CFR
229.1108), Servicers;
(e) Information required by Item 1109 of Regulation AB (17 CFR
229.1109), Trustees;
(f) Information required by Item 1110 of Regulation AB (17 CFR
229.1110), Originators;
(g) Information required by Item 1112 of Regulation AB (17 CFR
229.1112), Significant obligors of pool assets;
(h) Information required by Item 1117 of Regulation AB (17 CFR
229.1117), Legal Proceedings; and
(i) Information required by Item 1119 of Regulation AB (17 CFR
229.1119), Affiliations and certain relationships and related
transactions.
Item 7. Information with Respect to the Transaction.
Furnish the following information:
(a) Information required by Item 1111 of Regulation AB (17 CFR
229.1111), Pool Assets and Item 1125 of Regulation AB (17 CFR
229.1125), Schedule AL--Asset-level information;
(b) Information required by Item 202 of Regulation S-K (17 CFR
229.202), Description of Securities Registered and Item 1113 of
Regulation AB (17 CFR 229.1113), Structure of the Transaction;
(c) Information required by Item 1114 of Regulation AB (17 CFR
229.1114), Credit Enhancement and Other Support;
(d) Information required by Item 1115 of Regulation AB (17 CFR
229.1115), Certain Derivatives Instruments;
(e) Information required by Item 1116 of Regulation AB (17 CFR
229.1116), Tax Matters;
(f) Information required by Item 1118 of Regulation AB (17 CFR
229.1118), Reports and additional information; and
(g) Information required by Item 1120 of Regulation AB (17 CFR
229.1120), Ratings.
Item 8. Static Pool.
Furnish the information required by Item 1105 of Regulation AB (17
CFR 229.1105).
Item 9. Interests of Named Experts and Counsel.
Furnish the information required by Item 509 of Regulation S-K (17
CFR 229.509).
Item 10. Incorporation of Certain Information by Reference.
(a) The prospectus shall provide a statement that the following
documents filed at or prior to the time of effectiveness shall be
deemed incorporated by reference into the prospectus:
(1) Any disclosures pursuant to Item 1111(h) (17 CFR 229.1111(h))
and filed as exhibits to Form ABS-EE in accordance with Items
601(b)(102) or 601(b)(103) of Regulation S-K (17 CFR 229.601(b)(102) or
601(b)(103)); and
(2) all current reports filed pursuant to Item 6.06 of Form 8-K (17
CFR 249.308) pursuant to Sections 13(a), 13(c), or 15(d) of the
Exchange Act.
Instruction. Attention is directed to Rule 439 (17 CFR 230.439)
regarding consent to use of material incorporated by reference.
(b)(1) You must state:
(i) That you will provide to each person, including any beneficial
owner, to whom a prospectus is delivered, a copy of any or all of the
information that has been incorporated by reference in the prospectus
but not delivered with the prospectus;
(ii) that you will provide this information upon written or oral
request;
(iii) that you will provide this information at no cost to the
requester;
(iv) the name, address, and telephone number to which the request
for this information must be made; and
(v) the registrant's Web site address, including the uniform
resource locator (URL) where the incorporated information and other
documents may be accessed.
Note to Item 10(b)(1). If you send any of the information that is
incorporated by reference in the prospectus to security holders, you
also must send any exhibits that are specifically incorporated by
reference in that information.
(b)(2) You must:
(i) Identify the reports and other information that you file with
the SEC.
(ii) State that any materials you file with the SEC will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10:00 a.m. and 3:00 p.m. State that
the public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. If you are an
electronic filer, state that the SEC maintains an Internet site that
contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC and
state the address of that site (http://www.sec.gov). You are encouraged
to give your Internet address, if available.
Item 11. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.
Furnish the information required by Item 510 of Regulation S-K (17
CFR 229.510).
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 12. Other Expenses of Issuance and Distribution.
Furnish the information required by Item 511 of Regulation S-K (17
CFR 229.511).
Item 13. Indemnification of Directors and Officers.
Furnish the information required by Item 702 of Regulation S-K (17
CFR 229.702).
Item 14. Exhibits.
Subject to the rules regarding incorporation by reference, file the
exhibits required by Item 601 of Regulation S-K (17 CFR 229.601).
Item 15. Undertakings.
Furnish the undertakings required by Item 512 of Regulation S-K (17
CFR 229.512).
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SF-1 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of

, State of

, on

, 20 .
-----------------------------------------------------------------------
(Registrant)
By

-----------------------------------------------------------------------
(Signature and Title)

(Title)
-----------------------------------------------------------------------

(Date)
Instructions.
1. The registration statement shall be signed by the depositor, the
depositor's principal executive officer or officers, its principal
financial officer, and

[[Page 57337]]

controller or principal accounting officer and by at least a majority
of its board of directors or persons performing similar functions. If
the registrant is a foreign person, the registration statement shall
also be signed by its authorized representative in the United States.
Where the registrant is a limited partnership, the registration
statement shall be signed by a majority of the board of directors of
any corporate general partner signing the registration statement.
2. The name of each person who signs the registration statement
shall be typed or printed beneath his signature. Any person who
occupies more than one of the specified positions shall indicate each
capacity in which he signs the registration statement. Attention is
directed to Rule 402 concerning manual signatures and to Item 601 of
Regulation S-K concerning signatures pursuant to powers of attorney.

0
50. Add Sec. 239.45 to read as follows:

Sec. 239.45 Form SF-3, for registration under the Securities Act of
1933 for offerings of asset-backed issuers offered pursuant to certain
types of transactions.

This Form may be used for registration under the Securities Act of
1933 (``Securities Act'') of offerings of asset-backed securities, as
defined in 17 CFR 229.1101(c). Any registrant which meets the
requirements of paragraph (a) of this section may use this Form for the
registration of asset-backed securities (as defined in 17 CFR
229.1101(c)) under the Securities Act which are offered in any
transaction specified in paragraph (b) of this section provided that
the requirements applicable to the specified transaction are met. Terms
used have the same meaning as in Item 1101 of Regulation AB (17 CFR
229.1101).
(a) Registrant requirements. Registrants must meet the following
conditions in order to use this Form for registration under the
Securities Act of asset-backed securities offered in the transactions
specified in paragraph (b) of this section:
(1) To the extent the depositor or any issuing entity previously
established, directly or indirectly, by the depositor or any affiliate
of the depositor (as defined in Item 1101 of Regulation AB (17 CFR
229.1101)) is or was at any time during the twelve calendar months and
any portion of a month immediately preceding the filing of the
registration statement on this Form required to comply with the
transaction requirements in paragraphs (b)(1)(i) through (iv) of this
section with respect to a previous offering of asset-backed securities
involving the same asset class, the following requirements shall apply:
(i) Such depositor and each such issuing entity must have filed on
a timely basis all certifications required by paragraph (b)(1)(i) of
this section; and
(ii) Such depositor and each such issuing entity must have filed on
a timely basis all transaction agreements containing the provisions
that are required by paragraphs (b)(1)(ii) through (iv) of this
section.
(iii) If such depositor or issuing entity fails to meet the
requirements of paragraphs(a)(1)(i) and (ii) of this section, such
depositor or issuing entity will be deemed to satisfy such requirements
for purposes of this Form 90 days after the date it files the
information required by paragraphs (a)(1)(i) and (ii) of this section;
provided however that if the information is filed within 90 days of
evaluating compliance with this paragraph (a) such depositor and
issuing entity will be deemed to have been in compliance with such
requirements for purposes of this Form 90 days after the date it files
the information required by paragraphs (a)(1)(i) and (ii) of this
section.
Instruction to paragraph (a)(1). The registrant must provide
disclosure in a prospectus that is part of the registration statement
that it has met the registrant requirements of paragraph (a)(1) of this
section.
(2) To the extent the depositor or any issuing entity previously
established, directly or indirectly, by the depositor or any affiliate
of the depositor (as defined in Item 1101 of Regulation AB (17 CFR
229.1101)) is or was at any time during the twelve calendar months and
any portion of a month immediately preceding the filing of the
registration statement on this Form subject to the requirements of
section 12 or 15(d) of the Exchange Act (15 U.S.C. 78l or 78o(d)) with
respect to a class of asset-backed securities involving the same asset
class, such depositor and each such issuing entity must have filed all
material required to be filed regarding such asset-backed securities
pursuant to section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or
78o(d)) for such period (or such shorter period that each such entity
was required to file such materials). In addition, such material must
have been filed in a timely manner, other than a report that is
required solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06,
4.02(a), 6.01, or 6.03 of Form 8-K (17 CFR 249.308). If Sec. 240.12b-
25(b) of this chapter was used during such period with respect to a
report or a portion of a report, that report or portion thereof has
actually been filed within the time period prescribed by Sec. 240.12b-
25(b) of this chapter. Regarding an affiliated depositor that became an
affiliate as a result of a business combination transaction during such
period, the filing of any material prior to the business combination
transaction relating to asset-backed securities of an issuing entity
previously established, directly or indirectly, by such affiliated
depositor is excluded from this section, provided such business
combination transaction was not part of a plan or scheme to evade the
requirements of the Securities Act or the Exchange Act. See the
definition of ``affiliate'' in Sec. 230.405 of this chapter.
(b) Transaction Requirements. If the registrant meets the
registrant requirements specified in paragraph (a) of this section, an
offering meeting the following conditions may be registered on this
Form SF-3:
(1) Asset-backed securities (as defined in Sec. 229.1101(c) of
this chapter) to be offered for cash where the following have been
satisfied:
(i) Certification. The registrant files a certification in
accordance with Item 601(b)(36) of Regulation S-K (Sec. 229.601(b)(36)
of this chapter) signed by the chief executive officer of the depositor
with respect to each offering of securities that is registered on this
Form.
(ii) Asset review provision. With respect to each offering of
securities that is registered on this Form, the pooling and servicing
agreement or other transaction agreement, which shall be filed, must
provide for the following:
(A) The selection and appointment of an asset representations
reviewer that is not:
(1) Affiliated with any sponsor, depositor, servicer, or trustee of
the transaction, or any of their affiliates; or
(2) The same party or an affiliate of any party hired by the
sponsor or the underwriter to perform pre-closing due diligence work on
the pool assets;
(B) The asset representations reviewer shall have authority to
access copies of any underlying documents related to performing a
review of the pool assets;
(C) The asset representations reviewer shall be responsible for
reviewing the underlying assets for compliance with the representations
and warranties on the pool assets, and shall not otherwise be the party
to determine whether noncompliance with representations or warranties
constitutes a breach of any contractual provision. Reviews shall be
required under the transaction documents, at a minimum, when the
following conditions are met:
(1) A threshold of delinquent assets, as specified in the
transaction

[[Page 57338]]

agreements, has been reached or exceeded; and
(2) An investor vote to direct a review, pursuant to the processes
specified in the transaction agreements, provided that the agreement
not require more than:
(i) 5% of the total interest in the pool in order to initiate a
vote and
(ii) A simple majority of those interests casting a vote to direct
a review by the asset representations reviewer;
(D) The asset representations reviewer shall perform, at a minimum,
reviews of all assets 60 days or more delinquent when the conditions
specified in paragraph (b)(1)(ii)(C) of this section are met; and
(E) The asset representations reviewer shall provide a report to
the trustee of the findings and conclusions of the review of the
assets.
Instruction to paragraph (b)(1)(ii). The threshold of delinquent
assets shall be calculated as a percentage of the aggregate dollar
amount of delinquent assets in a given pool to the aggregate dollar
amount of all the assets in that particular pool, measured as of the
end of the reporting period. If the transaction has multiple sub-pools,
the transaction agreements must provide that:
1. The delinquency threshold shall be calculated with respect to
each sub-pool; and
2. The investor vote calculation shall be measured as a percentage
of investors' interest in each sub-pool.
(iii) Dispute resolution provision. With respect to each offering
of securities that is registered on this Form, the pooling and
servicing agreement or other transaction agreement, which shall be
filed, must provide for the following:
(A) If an asset subject to a repurchase request, pursuant to the
terms of the transaction agreements, is not resolved by the end of a
180-day period beginning when notice of the request is received, then
the party submitting such repurchase request shall have the right to
refer the matter, at its discretion, to either mediation or third-party
arbitration, and the party obligated to repurchase must agree to the
selected resolution method.
(B) If the party submitting the request elects third-party
arbitration, the arbitrator shall determine the allocation of any
expenses. If the party submitting the request elects mediation, the
parties shall mutually determine the allocation of any expenses.
(iv) Investor communication provision. With respect to each
offering of securities that is registered on this Form, the pooling and
servicing agreement or other transaction agreement, which shall be
filed, must contain a provision requiring that the party responsible
for making periodic filings on Form 10-D (Sec. 249.312 of this
chapter) include in the Form 10-D any request received during the
reporting period from an investor to communicate with other investors
related to investors exercising their rights under the terms of the
transaction agreements. The disclosure regarding the request to
communicate is required to include no more than the name of the
investor making the request, the date the request was received, a
statement to the effect that the party responsible for filing the Form
10-D has received a request from such investor, stating that such
investor is interested in communicating with other investors with
regard to the possible exercise of rights under the transaction
agreements, and a description of the method other investors may use to
contact the requesting investor.
Instruction to paragraph (b)(1)(iv). If an underlying transaction
agreement contains procedures in order to verify that an investor is,
in fact, a beneficial owner for purposes of invoking the investor
communication provision, the verification procedures may require no
more than the following:
1. If the investor is a record holder of the securities at the time
of a request to communicate, then the investor will not have to provide
verification of ownership, and
2. If the investor is not the record holder of the securities, then
the person obligated to make the disclosure may require no more than a
written certification from the investor that it is a beneficial owner
and one other form of documentation such as a trade confirmation, an
account statement, a letter from the broker or dealer, or other similar
document.
(v) Delinquent assets. Delinquent assets do not constitute 20% or
more, as measured by dollar volume, of the asset pool as of the
measurement date.
(vi) Residual value for certain securities. With respect to
securities that are backed by leases other than motor vehicle leases,
the portion of the securitized pool balance attributable to the
residual value of the physical property underlying the leases, as
determined in accordance with the transaction agreements for the
securities, does not constitute 20% or more, as measured by dollar
volume, of the securitized pool balance as of the measurement date.
(2) Securities relating to an offering of asset-backed securities
registered in accordance with paragraph (b)(1) of this section where
those securities represent an interest in or the right to the payments
of cash flows of another asset pool and meet the requirements of Sec.
230.190(c)(1) through (4) of this chapter.

0
51. Add Form SF-3 (referenced in Sec. 239.45) to read as follows:

Note: The text of Form SF-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

[[Page 57339]]

[GRAPHIC] [TIFF OMITTED] TR24SE14.002

If any of the securities being registered on this Form SF-3 are to
be offered pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [ ]

[[Page 57340]]

If this Form SF-3 is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: [ ]
If this Form SF-3 is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]

Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered. registered. offering price aggregate registration fee.
per unit. offering price.
----------------------------------------------------------------------------------------------------------------

Notes to the ``Calculation of Registration Fee'' Table (``Fee Table''):

1. Specific details relating to the fee calculation shall be
furnished in notes to the Fee Table, including references to provisions
of Rule 457 (Sec. 230.457 of this chapter) relied upon, if the basis
of the calculation is not otherwise evident from the information
presented in the Fee Table.
2. If the filing fee is calculated pursuant to Rule 457(s) under
the Securities Act, the Fee Table must state that it registers an
unspecified amount of securities of each identified class of securities
and must provide that the issuer is relying on Rule 456(c) and Rule
457(s). If the Fee Table is amended in a post-effective amendment to
the registration statement or in a prospectus filed in accordance with
Rule 456(c)(1)(ii) (Sec. 230.456(c)(1)(ii) of this chapter), the Fee
Table must specify the aggregate offering price for all classes of
securities in the referenced offering or offerings and the applicable
registration fee.
3. Any difference between the dollar amount of securities
registered for such offerings and the dollar amount of securities sold
may be carried forward on a future registration statement pursuant to
Rule 457 under the Securities Act.
GENERAL INSTRUCTIONS
I. Eligibility Requirements for Use of Form SF-3.
This instruction sets forth registrant requirements and transaction
requirements for the use of Form SF-3. Any registrant which meets the
requirements of I.A. below (``Registrant Requirements'') may use this
Form for the registration of asset-backed securities (as defined in 17
CFR 229.1101(c)) under the Securities Act of 1933 (``Securities Act'')
which are offered in any transaction specified in I.B. below
(``Transaction Requirements'') provided that the requirements
applicable to the specified transaction are met. Terms used in this
Form have the same meaning as in Item 1101 of Regulation AB.
A. Registrant Requirements. Registrants must meet the following
conditions in order to use this Form SF-3 for registration under the
Securities Act of asset-backed securities offered in the transactions
specified in I.B. below:
1. To the extent the depositor or any issuing entity previously
established, directly or indirectly, by the depositor or any affiliate
of the depositor (as defined in Item 1101 of Regulation AB (17 CFR
229.1101)) is or was at any time during the twelve calendar months and
any portion of a month immediately preceding the filing of the
registration statement on this Form required to comply with the
transaction requirements in General Instructions I.B.1(a), I.B.1(b),
I.B.1(c), and I.B.1(d) of this Form with respect to a previous offering
of asset-backed securities involving the same asset class, the
following requirements shall apply:
(a) Such depositor and each such issuing entity must have filed on
a timely basis all certifications required by I.B.1(a);
(b) Such depositor and each such issuing entity must have filed on
a timely basis all transaction agreements containing the provisions
that are required by I.B.1(b), I.B.1(c), and I.B.1(d); and
(c) If such depositor or issuing entity fails to meet the
requirements of I.A.1(a) and I.A.1(b), such depositor or issuing entity
will be deemed to satisfy such requirements for purposes of this Form
SF-3 90 days after the date it files the information required by
I.A.1(a) and I.A.1(b).
Instruction to General Instruction I.A.1: The registrant must
provide disclosure in a prospectus that is part of the registration
statement that it has met the registrant requirements of I.A.1.
2. To the extent the depositor or any issuing entity previously
established, directly or indirectly, by the depositor or any affiliate
of the depositor (as defined in Item 1101 of Regulation AB (17 CFR
229.1101)) is or was at any time during the twelve calendar months and
any portion of a month immediately preceding the filing of the
registration statement on this Form SF-3 subject to the requirements of
section 12 or 15(d) of the Exchange Act (15 U.S.C. 78l or 78o(d)) with
respect to a class of asset-backed securities involving the same asset
class, such depositor and each such issuing entity must have filed all
material required to be filed regarding such asset-backed securities
pursuant to section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or
78o(d)) for such period (or such shorter period that each such entity
was required to file such materials). In addition, such material must
have been filed in a timely manner, other than a report that is
required solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06,
4.02(a), 6.01, or 6.03 of Form 8-K (17 CFR 249.308). If Rule 12b-25(b)
(17 CFR 240.12b-25(b)) under the Exchange Act was used during such
period with respect to a report or a portion of a report, that report
or portion thereof has actually been filed within the time period
prescribed by that rule. Regarding an affiliated depositor that became
an affiliate as a result of a business combination transaction during
such period, the filing of any material prior to the business
combination transaction relating to asset-backed securities of an
issuing entity previously established, directly or indirectly, by such
affiliated depositor is excluded from this section, provided such
business combination transaction was not part of a plan or scheme to
evade the requirements of the Securities Act or the Exchange Act. See
the definition of ``affiliate'' in Securities Act Rule 405 (17 CFR
230.405).
B. Transaction Requirements. If the registrant meets the Registrant
Requirements specified in I.A. above, an offering meeting the following
conditions may be registered on Form SF-3:
1. Asset-backed securities (as defined in 17 CFR 229.1101(c)) to be
offered for cash where the following have been satisfied:
(a) Certification. The registrant files a certification in
accordance with Item 601(b)(36) of Regulation S-K (Sec.
229.601(b)(36)) signed by the chief executive officer of the depositor
with

[[Page 57341]]

respect to each offering of securities that is registered on this Form.
(b) Asset Review Provision. With respect to each offering of
securities that is registered on this Form, the pooling and servicing
agreement or other transaction agreement, which shall be filed, must
provide for the following:
(A) The selection and appointment of an asset representations
reviewer that is not (i) affiliated with any sponsor, depositor,
servicer, or trustee of the transaction, or any of their affiliates, or
(ii) the same party or an affiliate of any party hired by the sponsor
or the underwriter to perform pre-closing due diligence work on the
pool assets;
(B) The asset representations reviewer shall have authority to
access copies of any underlying documents related to performing a
review of the pool assets;
(C) The asset representations reviewer shall be responsible for
reviewing the underlying assets for compliance with the representations
and warranties on the pool assets, and shall not otherwise be the party
to determine whether noncompliance with representations or warranties
constitutes a breach of any contractual provision. Reviews shall be
required under the transaction documents, at a minimum, when the
following conditions are met:
(1) A threshold of delinquent assets, as specified in the
transaction agreements, has been reached or exceeded; and
(2) an investor vote to direct a review, pursuant to the processes
specified in the transaction agreements, provided that the agreement
not require more than: (a) 5% of the total interest in the pool in
order to initiate a vote and (b) a simple majority of those interests
casting a vote to direct a review by the asset representations
reviewer;
(D) The asset representations reviewer shall perform, at a minimum,
reviews of all assets 60 days or more delinquent when the conditions
specified in paragraph C are met; and
(E) The asset representations reviewer shall provide a report to
the trustee of the findings and conclusions of the review of the
assets.
Instruction to I.B.1(b). The threshold of delinquent assets shall
be calculated as a percentage of the aggregate dollar amount of
delinquent assets in a given pool to the aggregate dollar amount of all
the assets in that particular pool, measured as of the end of the
reporting period. If the transaction has multiple sub-pools, the
transaction agreements must provide that (i) the delinquency threshold
shall be calculated with respect to each sub-pool and (ii) the investor
vote calculation shall be measured as a percentage of investors'
interest in each sub-pool.
(c) Dispute Resolution Provision. With respect to each offering of
securities that is registered on this Form, the pooling and servicing
agreement or other transaction agreement, which shall be filed, must
provide for the following:
(A) If an asset subject to a repurchase request, pursuant to the
terms of the transaction agreements, is not resolved by the end of a
180-day period beginning when notice of the request is received, then
the party submitting such repurchase request shall have the right to
refer the matter, at its discretion, to either mediation or third-party
arbitration, and the party obligated to repurchase must agree to the
selected resolution method.
(B) If the party submitting the request elects third-party
arbitration, the arbitrator shall determine the allocation of any
expenses. If the party submitting the request elects mediation, the
parties shall mutually determine the allocation of any expenses.
(d) Investor Communication Provision. With respect to each offering
of securities that is registered on this Form, the pooling and
servicing agreement or other transaction agreement, which shall be
filed, must contain a provision requiring that the party responsible
for making periodic filings on Form 10-D (Sec. 249.312) include in the
Form 10-D any request received during the reporting period from an
investor to communicate with other investors related to investors
exercising their rights under the terms of the transaction agreements.
The disclosure regarding the request to communicate is required to
include no more than the name of the investor making the request, the
date the request was received, a statement to the effect that the party
responsible for filing the Form 10-D has received a request from such
investor, stating that such investor is interested in communicating
with other investors with regard to the possible exercise of rights
under the transaction agreements, and a description of the method other
investors may use to contact the requesting investor.
Instruction to I.B.1(d). If an underlying transaction agreement
contains procedures in order to verify that an investor is, in fact, a
beneficial owner for purposes of invoking the investor communication
provision, the verification procedures may require no more than the
following: (1) If the investor is a record holder of the securities at
the time of a request to communicate, then the investor will not have
to provide verification of ownership, and (2) if the investor is not
the record holder of the securities, then the person obligated to make
the disclosure may require no more than a written certification from
the investor that it is a beneficial owner and one other form of
documentation such as a trade confirmation, an account statement, a
letter from the broker or dealer, or other similar document.
(e) Delinquent assets. Delinquent assets do not constitute 20% or
more, as measured by dollar volume, of the asset pool as of the
measurement date.
(f) Residual value for certain securities. With respect to
securities that are backed by leases other than motor vehicle leases,
the portion of the securitized pool balance attributable to the
residual value of the physical property underlying the leases, as
determined in accordance with the transaction agreements for the
securities, does not constitute 20% or more, as measured by dollar
volume, of the securitized pool balance as of the measurement date.
2. Securities relating to an offering of asset-backed securities
registered in accordance with General Instruction I.B.1. where those
securities represent an interest in or the right to the payments of
cash flows of another asset pool and meet the requirements of
Securities Act Rule 190(c)(1) through (4) (17 CFR 230.190(c)(1) through
(4)).
II. Application of General Rules and Regulations.
A. Attention is directed to the General Rules and Regulations under
the Securities Act, particularly Regulation C thereunder (l7 CFR
230.400 to 230.499). That Regulation contains general requirements
regarding the preparation and filing of registration statements.
B. Attention is directed to Regulation S-K (17 CFR Part 229) for
the requirements applicable to the content of the non-financial
statement portions of registration statements under the Securities Act.
Where this Form SF-3 directs the registrant to furnish information
required by Regulation S-K and the item of Regulation S-K so provides,
information need only be furnished to the extent appropriate.
Notwithstanding Items 501 and 502 of Regulation S-K, no table of
contents is required to be included in the prospectus or registration
statement prepared on this Form SF-3. In addition to the information
expressly required to be included in a registration statement on this
Form SF-3, registrants also may provide such other information as they
deem appropriate.

[[Page 57342]]

C. Where securities are being registered on this Form SF-3, Rule
456(c) permits, but does not require, the registrant to pay the
registration fee on a pay-as-you-go basis and Rule 457(s) permits, but
does not require, the registration fee to be calculated on the basis of
the aggregate offering price of the securities to be offered in an
offering or offerings off the registration statement. If a registrant
elects to pay all or a portion of the registration fee on a deferred
basis, the Fee Table in the initial filing must identify the classes of
securities being registered and provide that the registrant elects to
rely on Rule 456(c) and Rule 457(s), but the Fee Table does not need to
specify any other information. When the registrant amends the Fee Table
in accordance with Rule 456(c)(1)(ii), the amended Fee Table must
include either the dollar amount of securities being registered if paid
in advance of or in connection with an offering or offerings or the
aggregate offering price for all classes of securities referenced in
the offerings and the applicable registration fee.
D. Information is only required to be furnished as of the date of
initial effectiveness of the registration statement to the extent
required by Rule 430D. Required information about a specific
transaction must be included in the prospectus in the registration
statement by means of a prospectus that is deemed to be part of and
included in the registration statement pursuant to Rule 430D, a post-
effective amendment to the registration statement, or a periodic or
current report under the Exchange Act incorporated by reference into
the registration statement and the prospectus and identified in a
prospectus filed, as required by Rule 430D, pursuant to Rule 424(h) or
Rule 424(b) (Sec. 230.424(h) or Sec. 230.424(b) of this chapter).
III. Registration of Additional Securities Pursuant to Rule 462(b).
With respect to the registration of additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, the
registrant may file a registration statement consisting only of the
following: The facing page; a statement that the contents of the
earlier registration statement, identified by file number, are
incorporated by reference; required opinions and consents; the
signature page; and any price-related information omitted from the
earlier registration statement in reliance on Rule 430A that the
registrant chooses to include in the new registration statement. The
information contained in such a Rule 462(b) registration statement
shall be deemed to be a part of the earlier registration statement as
of the date of effectiveness of the Rule 462(b) registration statement.
Any opinion or consent required in the Rule 462(b) registration
statement may be incorporated by reference from the earlier
registration statement with respect to the offering, if: (i) Such
opinion or consent expressly provides for such incorporation; and (ii)
such opinion relates to the securities registered pursuant to Rule
462(b). See Rule 411(c) and Rule 439(b) under the Securities Act.
IV. Registration Statement Requirements.
Include only one form of prospectus for the asset class that may be
securitized in a takedown of asset-backed securities under the
registration statement. A separate form of prospectus and registration
statement must be presented for each country of origin or country of
property securing pool assets that may be securitized in a discrete
pool in a takedown of asset-backed securities. For both separate asset
classes and jurisdictions of origin or property, a separate form of
prospectus is not required for transactions that principally consist of
a particular asset class or jurisdiction which also describe one or
more potential additional asset classes or jurisdictions, so long as
the pool assets for the additional classes or jurisdictions in the
aggregate are below 10% of the pool, as measured by dollar volume, for
any particular takedown.
PART I INFORMATION REQUIRED IN PROSPECTUS
Item 1. Forepart of the Registration Statement and Outside Front Cover
Pages of Prospectus.
Set forth in the forepart of the registration statement and on the
outside front cover page of the prospectus the information required by
Item 501 of Regulation S-K (17 CFR 229.501) and Item 1102 of Regulation
AB (17 CFR 229.1102).
Item 2. Inside Front and Outside Back Cover Pages of Prospectus.
Set forth on the inside front cover page of the prospectus or,
where permitted, on the outside back cover page, the information
required by Item 502 of Regulation S-K (17 CFR 229.502).
Item 3. Transaction Summary and Risk Factors.
Furnish the information required by Item 503 of Regulation S-K (17
CFR 229.503) and Item 1103 of Regulation AB (17 CFR 229.1103).
Item 4. Use of Proceeds.
Furnish the information required by Item 504 of Regulation S-K (17
CFR 229.504).
Item 5. Plan of Distribution.
Furnish the information required by Item 508 of Regulation S-K (17
CFR 229.508).
Item 6. Information with Respect to the Transaction Parties.
Furnish the following information:
(a) Information required by Item 1104 of Regulation AB (17 CFR
229.1104), Sponsors;
(b) Information required by Item 1106 of Regulation AB (17 CFR
229.1106), Depositors;
(c) Information required by Item 1107 of Regulation AB (17 CFR
229.1107), Issuing entities;
(d) Information required by Item 1108 of Regulation AB (17 CFR
229.1108), Servicers;
(e) Information required by Item 1109 of Regulation AB (17 CFR
229.1109), Trustees and other transaction parties;
(f) Information required by Item 1110 of Regulation AB (17 CFR
229.1110), Originators;
(g) Information required by Item 1112 of Regulation AB (17 CFR
229.1112), Significant obligors of pool assets;
(h) Information required by Item 1117 of Regulation AB (17 CFR
229.1117), Legal Proceedings; and
(i) Information required by Item 1119 of Regulation AB (17 CFR
229.1119), Affiliations and certain relationships and related
transactions.
Item 7. Information With Respect to the Transaction.
Furnish the following information:
(a) Information required by Item 1111 of Regulation AB (17 CFR
229.1111), Pool Assets and Item 1125 of Regulation AB (17 CFR
229.1125), Schedule AL--Asset-level information;
(b) Information required by Item 202 of Regulation S-K (17 CFR
229.202), Description of Securities Registered and Item 1113 of
Regulation AB (17 CFR 229.1113), Structure of the Transaction;
(c) Information required by Item 1114 of Regulation AB (17 CFR
229.1114), Credit Enhancement and Other Support;
(d) Information required by Item 1115 of Regulation AB (17 CFR
229.1115), Certain Derivatives Instruments;
(e) Information required by Item 1116 of Regulation AB (17 CFR
229.1116), Tax Matters;
(f) Information required by Item 1118 of Regulation AB (17 CFR
229.1118), Reports and additional information; and
(g) Information required by Item 1120 of Regulation AB (17 CFR
229.1120), Ratings.

[[Page 57343]]

Item 8. Static Pool.
Furnish the information required by Item 1105 of Regulation AB (17
CFR 229.1105).
Instruction: Registrants may elect to file the information required
by this item pursuant to Item 6.06 of Form 8-K (17 CFR 249.308).
Incorporation by reference must comply with Item 10 of this Form.
Item 9. Interests of Named Experts and Counsel.
Furnish the information required by Item 509 of Regulation S-K (17
CFR 229.509).
Item 10. Incorporation of Certain Information by Reference.
(a) The prospectus shall provide a statement that the following
documents filed by the date of the filing of a preliminary prospectus
filed in accordance with Rule 424(h) (17 CFR 230.424(b)) or a final
prospectus meeting the requirements of section 10(a) of the Securities
Act (15 U.S.C. 77j(a)) filed in accordance with Rule 424(b) (17 CFR
230.424(b)) are incorporated by reference into the prospectus that is
part of the registration statement:
(1) The disclosures filed as exhibits to Form ABS-EE in accordance
with Items 601(b)(102) and Item 601(b)(103) of Regulation S-K (17 CFR
601(b)(102) and 601(b)(103)); and
(2) except that if the pool assets include asset-backed securities
of a third-party, then registrants may reference the third-party's
filings of asset-level data pursuant to Item 1100(c)(2) of Regulation
AB (17 CFR 229.1100(c)(2)). The third-party is not required to meet the
definition of significant obligor in Item 1101(k) of Regulation AB (17
CFR 229.1101(k)).
Instruction. Attention is directed to Rule 439 (17 CFR 230.439)
regarding consent to use of material incorporated by reference.
(b) Registrants may elect to file the information required by Item
1105 of Regulation AB (17 CFR 229.1105), Static Pool, pursuant to Item
6.06 of Form 8-K (17 CFR 249.308), provided that the information is
incorporated by reference into the prospectus that is part of the
registration statement.
(c) If the registrant is structured as a revolving asset master
trust, the documents listed in (1) and (2) below shall be specifically
incorporated by reference into the prospectus by means of a statement
to that effect in the prospectus listing all such documents:
(1) The registrant's latest annual report on Form 10-K (17 CFR
249.310) filed pursuant to Section 13(a) or 15(d) of the Exchange Act
that contains financial statements for the registrant's latest fiscal
year for which a Form 10-K was required to be filed;
(2) all other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by the annual
report referred to in (1) above.
(d) The prospectus shall also provide a statement regarding the
incorporation of reference of Exchange Act reports prior to the
termination of the offering pursuant to one of the following two ways:
(1) A statement that all reports subsequently filed by the
registrant pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange
Act, prior to the termination of the offering shall be deemed to be
incorporated by reference into the prospectus; or
(2) a statement that all current reports on Form 8-K filed by the
registrant pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange
Act, prior to the termination of the offering shall be deemed to be
incorporated by reference into the prospectus.
Instruction. Attention is directed to Rule 439 (17 CFR 230.439)
regarding consent to use of material incorporated by reference.
(e)(1) You must state:
(i) That you will provide to each person, including any beneficial
owner, to whom a prospectus is delivered, a copy of any or all of the
information that has been incorporated by reference in the prospectus
but not delivered with the prospectus;
(ii) that you will provide this information upon written or oral
request;
(iii) that you will provide this information at no cost to the
requester;
(iv) the name, address, and telephone number to which the request
for this information must be made; and
(v) the registrant's Web site address, including the uniform
resource locator (URL) where the incorporated information and other
documents may be accessed.
Note to Item 10(d)(1). If you send any of the information that is
incorporated by reference in the prospectus to security holders, you
also must send any exhibits that are specifically incorporated by
reference in that information.
(2) You must:
(i) Identify the reports and other information that you file with
the SEC.
(ii) State that any materials you file with the SEC will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10:00 a.m. and 3:00 p.m. State that
the public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. If you are an
electronic filer, state that the SEC maintains an Internet site that
contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC and
state the address of that site (http://www.sec.gov). You are encouraged
to give your Internet address, if available.
Item 11. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.
Furnish the information required by Item 510 of Regulation S-K (17
CFR 229.510).
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 12. Other Expenses of Issuance and Distribution.
Furnish the information required by Item 511 of Regulation S-K (17
CFR 229.511).
Item 13. Indemnification of Directors and Officers.
Furnish the information required by Item 702 of Regulation S-K (17
CFR 229.702).
Item 14. Exhibits.
Subject to the rules regarding incorporation by reference, file the
exhibits required by Item 601 of Regulation S-K (17 CFR 229.601).
Item 15. Undertakings.
Furnish the undertakings required by Item 512 of Regulation S-K (17
CFR 229.512).
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SF-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of

, State of

, on

, 20.
-----------------------------------------------------------------------
(Registrant)

By
-----------------------------------------------------------------------
(Signature and Title)

[[Page 57344]]

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
-----------------------------------------------------------------------
(Signature)
-----------------------------------------------------------------------
(Title)
-----------------------------------------------------------------------
(Date)
Instructions.
1. The registration statement shall be signed by the depositor, the
depositor's principal executive officer or officers, its principal
financial officer, and controller or principal accounting officer and
by at least a majority of its board of directors or persons performing
similar functions. If the registrant is a foreign person, the
registration statement shall also be signed by its authorized
representative in the United States. Where the registrant is a limited
partnership, the registration statement shall be signed by a majority
of the board of directors of any corporate general partner signing the
registration statement.
2. The name of each person who signs the registration statement
shall be typed or printed beneath his signature. Any person who
occupies more than one of the specified positions shall indicate each
capacity in which he signs the registration statement. Attention is
directed to Rule 402 concerning manual signatures and to Item 601 of
Regulation S-K concerning signatures pursuant to powers of attorney.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
52. The general authority citation for Part 240 is revised to read as
follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.; and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and
Pub. L. 111-203, 939A, 124 Stat. 1376, (2010), unless otherwise
noted.
* * * * *

Sec. 240.3a68-1a [Amended]

0
53. Amend Sec. 240.3a68-1a, paragraphs (a)(1)(iv)(D), (a)(1)(iv)(G),
(a)(1)(iv)(H)(1) through (3), (c)(1), (c)(3)(ii), (c)(4), and (c)(5) by
removing references to ``3(a)(77) of the Act (15 U.S.C. 78c(a)(77))''
and adding in their place ``3(a)(79) of the Act (15 U.S.C.
78c(a)(79))''.

Sec. 240.3a68-1b [Amended]

0
54. Amend Sec. 240.3a68-1b, paragraphs (a)(1)(iv)(D), (a)(1)(iv)(G),
(a)(1)(iv)(H)(1) through (3), (c)(1), (c)(3)(ii), (c)(4), and (c)(5) by
removing references to ``3(a)(77) of the Act (15 U.S.C. 78c(a)(77))''
and adding in their place ``3(a)(79) of the Act (15 U.S.C.
78c(a)(79))''.

0
55. Amend Sec. 240.15c2-8 by:
0
a. In paragraph (b) revising the last sentence; and
0
b. Removing paragraph (j).
The revisions read as follows:

Sec. 240.15c2-8 Delivery of prospectus.

* * * * *
(b) * * * Provided, however, this paragraph (b) shall apply to all
issuances of asset-backed securities (as defined in Sec. 229.1101(c)
of this chapter) regardless of whether the issuer has previously been
required to file reports pursuant to sections 13(a) or 15(d) of the
Securities Exchange Act of 1934, or exempted from the requirement to
file reports thereunder pursuant to section 12(h) of the Act (15 U.S.C.
78l).
* * * * *

Sec. 240.15d-22 [Amended]

0
56. Amend Sec. 240.15d-22, amend paragraphs (a) introductory text and
(b)(1) by removing the reference ``230.415(a)(1)(x)'' and adding in its
place ``230.415(a)(1)(xii)''.
* * * * *

Sec. 240.15Ga-1 [Amended]

0
57. Amend Sec. 240.15Ga-1, paragraph (a) by removing the reference to
``Section 3(a)(77) of the Securities Exchange Act of 1934)'' and adding
in its place ``Section 3(a)(79) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(79))''.

Sec. 240.17g-7 [Amended]

0
58. Amend Sec. 240.17g-7, introductory text by removing the reference
to ``Section 3(a)(77) of the Securities Exchange Act of 1934'' and
adding in its place ``Section 3(a)(79) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(79))''.

PART 243--REGULATION FD

0
59. The authority citation for Part 243 continues to read as follows:

Authority: 15 U.S.C. 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and
80a-29, unless otherwise noted.

Sec. 243.103 [Amended]

0
60. Amend Sec. 243.103, paragraph (a) by removing the phrase ``and S-8
(17 CFR 239.16b)'' and adding in its place ``, S-8 (17 CFR 239.16b) and
SF-3 (17 CFR 239.45)''.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
61. The authority citation for Part 249 continues to read, in part, as
follows:

Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *

0
62. Amend Form 8-K (referenced in Sec. 249.308) by:
0
a. Adding a checkbox to the end of the cover page;
0
b. Revising General Instruction G.2.; and
0
c. Adding Item 6.06.
The revision and addition read as follows:

Note: The text of Form 8-K does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
* * * * *
GENERAL INSTRUCTIONS
* * * * *
G. Use of This Form by Asset-Backed Issuers. * * *
2. Additional Disclosure for the Form 8-K Cover Page. Immediately
after the name of the issuing entity on the cover page of the Form 8-K,
as separate line items, identify the exact name of the depositor as
specified in its charter and the exact name of the sponsor as specified
in its charter. Include a Central Index Key number for the depositor
and the issuing entity, and if available, the sponsor.
* * * * *
INFORMATION TO BE INCLUDED IN THE REPORT
* * * * *
Item 6.06 Static Pool
Regarding an offering of asset-backed securities registered on Form
SF-1 (17 CFR 239.44) or Form SF-3 (17 CFR 239.45), in lieu of providing
the static pool information as required by Item 1105 of Regulation AB
(17 CFR 229.1105) in a form of prospectus or prospectus, an issuer may
file the required information in this report or as an exhibit to this
report. The static pool disclosure must be filed by the time of
effectiveness of a registration statement on Form SF-1, by the same
date of the

[[Page 57345]]

filing of a form of prospectus, as required by Rule 424(h) (17 CFR
230.424(h)), and by the same date of the filing of a final prospectus
meeting the requirements of section 10(a) of the Securities Act (15
U.S.C. 77j(a)) filed in accordance with Rule 424(b) (17 CFR
230.424(b)).
Instructions.
1. Refer to Item 601(b)(106) of Regulation S-K (17 CFR
229.601(b)(106)) regarding the filing of exhibits to this Item 6.06.
2. Refer to Item 10 of Form SF-1 (17 CFR 239.44) or Item 10 of Form
SF-3 (17 CFR 239.45) regarding incorporation by reference.
* * * * *

0
63. Amend Form 10-K (referenced in Sec. 249.310) by:
0
a. Adding a checkbox on the cover page before the paragraph that starts
``Indicate by check mark whether the registrant (1) has filed all
reports . . .''; and
0
b. Revising General Instruction J(2)(a).
The revision reads as follows:

Note: The text of Form 10-K does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
* * * * *
GENERAL INSTRUCTIONS
* * * * *
J. Use of this Form by Asset-Backed Issuers.
(2) * * *
(a) Immediately after the name of the issuing entity on the cover
page of the Form 10-K, as separate line items, the exact name of the
depositor as specified in its charter and the exact name of the sponsor
as specified in its charter. Include a Central Index Key number for the
depositor and the issuing entity, and if available, the sponsor.
* * * * *
FORM 10-K
* * * * *

0
64. Amend Form 10-D (referenced in Sec. 249.312) by:
0
a. Revising General Instruction C(3);
0
b. Revising the beginning of the cover page above the line that reads
``(State or other jurisdiction of incorporation or organization of the
issuing entity)'';
0
c. Adding a checkbox to the cover page before the paragraph that starts
``Indicate by check mark whether the registrant (1) has filed . . .'';
0
d. Revising General Instruction D;
0
e. Revising Item 1 in Part I;
0
f. Adding Item 1A in Part I;
0
g. Adding Item 1B in Part I;
0
h. Redesignating Items 7, 8, and 9 as Items 8, 9, and 10 in Part II;
and
0
i. Adding new Item 7 in Part II.
The revisions and additions read as follows:

Note: The text of Form 10-D does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-D
* * * * *
GENERAL INSTRUCTIONS
* * * * *
C. Preparation of Report. * * *
(3) Any item which is inapplicable or to which the answer is
negative may be omitted and no reference need be made in the report. If
substantially the same information has been previously reported by the
asset-backed issuer, an additional report of the information on this
Form need not be made. Identify the form or report on which the
previously reported information was filed. Identifying information
should include a Central Index Key number, file number and date of the
previously reported information. The term ``previously reported'' is
defined in Rule 12b-2 (17 CFR 240.12b-2).
D. Incorporation by Reference. * * *
(3) With respect to all registrants required to provide asset-level
information pursuant to Item 1111(h) of Regulation AB (17 CFR
229.1111(h)):
(a) The disclosures filed as exhibits to Form ABS-EE in accordance
with Item 601(b)(102) and Item 601(b)(103) of Regulation S-K (17 CFR
229.601(b)(102) and 601(b)(103)) must be incorporated by reference into
the Form 10-D.
(b) If the pool assets include asset-backed securities of a third-
party, registrants may reference the third-party's filings of asset-
level data pursuant to Item 1100(c)(2) of Regulation AB (17 CFR
232.1100(c)(2)), except that the third-party is not required to meet
the definition of significant obligor in Item 1101(k) of Regulation AB
(17 CFR 232.1101(k)).
* * * * *
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-D
ASSET-BACKED ISSUER DISTRIBUTION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the [identify distribution frequency (e.g., monthly/quarterly)]
distribution period from

, 20 to

, 20
Commission File Number of issuing entity:------------------------------
Central Index Key Number of issuing entity:----------------------------
-----------------------------------------------------------------------
(Exact name of issuing entity as specified in its charter)

Commission File Number of depositor:-----------------------------------
-----------------------------------------------------------------------
Central Index Key Number of depositor:---------------------------------
-----------------------------------------------------------------------
(Exact name of depositor as specified in its charter)

Central Index Key Number of sponsor (if applicable):-------------------
-----------------------------------------------------------------------
(Exact name of sponsor as specified in its charter)

-----------------------------------------------------------------------
(Name and telephone number, including area code, of the person to
contact in connection with this filing)
* * * * *
PART I--DISTRIBUTION INFORMATION
Item 1. Distribution and Pool Performance Information.
Provide the information required by Item 1121(a) and (b) of
Regulation AB (17 CFR 229.1121(a) and (b)), and attach as an exhibit to
this report the distribution report delivered to the trustee or
security holders, as the case may be, pursuant to the transaction
agreements for the distribution period covered by this report. Any
information required by Item 1121(a) and (b) of Regulation AB that is
provided in the attached distribution report need not be repeated in
this report. However, taken together, the attached distribution report
and the information provided under this Item must contain the
information required by Item 1121(a) and (b) of Regulation AB.
Item 1A. Asset-Level Information.
Provide the information required by Item 1111 of Regulation AB (17
CFR 229.1111), Pool Assets and Item 1125 of

[[Page 57346]]

Regulation AB (17 CFR 229.1125), Schedule AL--Asset-level information.
Item 1B. Asset Representations Reviewer and Investor Communication.
For any transaction that included the provisions required by
General Instructions I.B.1(b) and I.B.1(d) on Form SF-3 (referenced in
Sec. 239.45), provide the information required by Item 1121(d) and (e)
of Regulation AB (17 CFR 229.1121(d) and (e)), as applicable.
* * * * *
PART II--OTHER INFORMATION
* * * * *
Item 7. Change in Sponsor Interest in the Securities.
Provide the information required by Item 1124 of Regulation AB (17
CFR 229.1124) with respect to the reporting period covered by this
report.
* * * * *

0
65. Revise the heading of Subpart O of Part 249 to read as follows:
Subpart O--Forms for Asset-Backed Securities

0
66. Add Sec. 249.1401 to Subpart O to read as follows.

Sec. 249.1401 Form ABS-EE, for submission of the asset-data file
exhibits and related documents.

This Form shall be used by an electronic filer for the submission
of information required by Item 1111(h) (Sec. 229.1111(h) of this
chapter).

0
67. Add Form ABS-EE (referenced in Sec. 249.1401) to read as follows:

Note: The text of Form ABS-EE does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM FOR SUBMISSION OF ELECTRONIC EXHIBITS FOR ASSET-BACKED SECURITIES
Commission File Number of the issuing entity:
-----------------------------------------------------------------------
Central Index Key Number of the issuing entity:
-----------------------------------------------------------------------
(Exact name of issuing entity as specified in its charter)
Commission File Number of the depositor:
-----------------------------------------------------------------------
Central Index Key Number of the depositor:-----------------------------
-----------------------------------------------------------------------

(Exact name of depositor as specified in its charter)

Central Index Key Number of sponsor (if applicable):-------------------
(Exact name of sponsor as specified in its charter)--------------------

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

(Name and telephone number, including area code, of the person to
contact in connection with this filing)
INFORMATION TO BE INCLUDED WITH THIS FORM
Item 1. File an Asset Data File in accordance with Exhibit
601(b)(102) (17 CFR 229.601(b)(102)).
Item 2. File an Asset Related Document in accordance with Exhibit
601(b)(103) (17 CFR 229.601(b)(103)).
SIGNATURES
The depositor has duly caused this Form to be signed on its behalf
by the undersigned hereunto duly authorized.

-----------------------------------------------------------------------
(Depositor)

-----------------------------------------------------------------------
(Signature)*

Date:------------------------------------------------------------------
[OR]
-----------------------------------------------------------------------
(Issuing Entity)

By:--------------------------------------------------------------------
(Servicer)*

-----------------------------------------------------------------------
(Signature)*

Date:------------------------------------------------------------------

*Print name and title of the signing officer under his signature.
Instruction. The report on this Form must be signed by the
depositor. In the alternative, if the form is being filed to satisfy
the disclosure requirements of Form 10-D (17 CFR 249.312) this Form may
be signed on behalf of the issuing entity by a duly authorized
representative of the servicer.
If multiple servicers are involved in servicing the pool assets, a
duly authorized representative of the master servicer (or entity
performing the equivalent function) must sign if a representative of
the servicer is to sign the report on behalf of the issuing entity.

By the Commission.

Dated: September 4, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21375 Filed 9-23-14; 8:45 am]
BILLING CODE 8011-01-P