[Federal Register Volume 80, Number 227 (Wednesday, November 25, 2015)]
[Proposed Rules]
[Pages 73680-73681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29821]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AE38


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

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

ACTION: Notice of proposed rulemaking.

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

DATES: Comments on the Proposed Rule must be received by January 25, 
2016.
    You may submit comments, identified by RIN number, by any of the 
following methods:
     Agency Web site: http://www.FDIC.gov/regulations/laws/federal. Follow instructions for submitting comments on the agency Web 
site.
     Email: [email protected]. Include RIN 3064-AE38 in the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7:00 a.m. and 5:00 p.m.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Instructions: All comments will be posted without change to http://www.fdic.gov/regulations/laws/federal/, including any personal 
information provided.

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

SUPPLEMENTARY INFORMATION

I. Background

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

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

[[Page 73681]]

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

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

IV. Request for Comment

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

V. Administrative Law Matters

A. Paperwork Reduction Act

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

B. Regulatory Flexibility Act

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

C. Plain Language

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

List of Subjects in 12 CFR Part 360

    Banks, Banking, Bank deposit insurance, Holding companies, National 
banks, Participations, Reporting and recordkeeping requirements, 
Savings associations, Securitizations.

    For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation proposes to amend 12 CFR part 360 as 
follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

0
1. The authority citation for Part 360 continues to read as follows:

    Authority:  12 U.S.C. 1821(d)(1), 1821(d)(10)(C), 1821(d)(11), 
1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. 401(h), 
Pub. L. 101-73, 103 Stat. 357.

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


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

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

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

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2015-29821 Filed 11-24-15; 8:45 am]
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