[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41422-41423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15019]


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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: Final rule.

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SUMMARY: The FDIC is revising 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: Effective July 27, 2016.

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 FDIC, in its regulation 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, it 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. The Proposed Rule

    While the Securitization Safe Harbor Rule does not define what 
constitutes action to mitigate losses, the preamble to the notice of 
proposed rulemaking that accompanied an earlier amendment to the 
Securitization Safe Harbor Rule stated, ``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.'' \2\ 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 recently 
issued a notice of proposed rulemaking (the ``NPR'') to amend the 
Securitization Safe Harbor Rule to clarify that the documents governing 
a securitization transaction need not require an action prohibited by 
Regulation X in order to satisfy the loss mitigation conditions for 
safe harbor. The NPR was published in the Federal Register on November 
25, 2015 with a 60-day comment period.\3\

[[Page 41423]]

No comments were received by the FDIC in response to the NPR.
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    \2\ 75 FR 27471, 27479 (May 17, 2010).
    \3\ 80 FR 73680 (November 25, 2015).
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III. The Final Rule

    Having received no comments on the NPR, the FDIC is adopting the 
amendment set forth in the NPR as a final rule (the ``Final Rule''). 
Specifically, Sec.  360.6(b)(3)(ii)(A) is being revised to include 
language stating that the loss mitigation action requirement thereunder 
``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 . . .''

IV. Policy Objective

    One of the FDIC's general policy objectives 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 this rulemaking is to harmonize the 
residential loan servicing condition of the Securitization Safe Harbor 
Rule with the CFPB's loan servicing requirements. Adopting the Final 
Rule accomplishes that objective.

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 amendment set forth in the Final Rule would not 
revise the Securitization Safe Harbor Rule information collection (OMB 
No. 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 with respect to the PRA.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601, et seq.) (``RFA'') 
requires each federal agency to prepare a final regulatory flexibility 
analysis in connection with the promulgation of a final rule, or 
certify that the final rule will not have a significant economic impact 
on a substantial number of small entities.\4\ Pursuant to section 
605(b) of the RFA, the FDIC certifies that the Final Rule will not have 
a significant economic impact on a substantial number of small 
entities.
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    \4\ See 5 U.S.C. 603, 604 and 605.
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C. Small Business Regulatory Enforcement Act

    The Office of Management and Budget has determined that this final 
rule is not a ``major rule'' within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801, et seq.) 
(``SBREFA''). As required by the SBREFA, the FDIC will file the 
appropriate reports with Congress and the Government Accountability 
Office so that the Final Rule may be reviewed.

D. 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 Final 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 amends 12 CFR part 360 as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

0
1. The authority citation for part 360 is revised 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 be amended or 
modified from time to time.
* * * * *

    Dated at Washington, DC, this 21st day of June, 2016.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2016-15019 Filed 6-24-16; 8:45 am]
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