[Federal Register Volume 85, Number 12 (Friday, January 17, 2020)]
[Notices]
[Pages 3045-3048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00746]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is adopting a proposal to extend for three years, without revision, the 
Recordkeeping and Disclosure Requirements Associated with Regulation RR 
(FR RR; OMB No. 7100-0372).\1\
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    \1\ The internal Agency Tracking Number previously assigned by 
the Board to this information collection was ``Reg RR.'' The Board 
is changing the internal Agency Tracking Number to ``FR RR'' for the 
purpose of consistency.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, (202) 
452-3829.
    Office of Management and Budget (OMB) Desk Officer--Shagufta 
Ahmed--Office of Information and Regulatory Affairs, Office of 
Management and Budget, New Executive Office Building, Room 10235, 725 
17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
    A copy of the Paperwork Reduction Act (PRA) OMB submission, 
including the reporting form and instructions, supporting statement, 
and other documentation will be placed into OMB's public docket files. 
These documents also are available on the

[[Page 3046]]

Federal Reserve Board's public website at https://www.federalreserve.gov/apps/reportforms/review.aspx or may be requested 
from the agency clearance officer, whose name appears above.

SUPPLEMENTARY INFORMATION: On June 15, 1984, OMB delegated to the Board 
authority under the PRA to approve and assign OMB control numbers to 
collections of information conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official 
OMB inventory of currently approved collections of information. Copies 
of the PRA Submission, supporting statements, and approved collection 
of information instrument(s) are placed into OMB's public docket files.

Final Approval Under OMB Delegated Authority of the Extension for Three 
Years, Without Revision, of the Following Information Collection

    Report title: Recordkeeping and Disclosure Requirements Associated 
with Regulation RR.
    Agency form number: FR RR.
    OMB control number: 7100-0372.
    Frequency: Event generated; annual.
    Respondents: Securitizers that are, or are a subsidiary of, a state 
member bank, bank holding company, savings and loan holding company, 
intermediate holding company, Edge or agreement corporation, foreign 
banking organization, or nonbank financial company supervised by the 
Board.
    Estimated number of respondents: 10.
    Estimated average hours per response:
    Sections 244.4 and 246.4--standard risk retention: Horizontal 
interests: Recordkeeping--0.5 hours, disclosures--5.5 hours; vertical 
interests: Recordkeeping--0.5 hours, disclosures--2.0 hours; combined 
horizontal and vertical interests: Recordkeeping--0.5 hours, 
disclosures--7.5 hours;
    Sections 244.5 and 246.5--revolving master trusts: Recordkeeping--
0.5 hours, disclosures--7.0 hours;
    Sections 244.6 and 246.6--eligible asset-backed commercial paper 
(ABCP) conduits: Recordkeeping--20.0 hours, disclosures--3.0 hours;
    Sections 244.7 and 246.7--commercial mortgage-backed securities: 
Recordkeeping--30.0 hours, disclosures--20.75 hours;
    Sections 244.8 and 246.8--FNMA and FHLMC asset-backed securities 
(ABS): Disclosures--1.5 hours;
    Sections 244.9 and 246.9--open market collateralized loan 
obligations (CLOs): Disclosures--20.25 hours;
    Sections 244.10 and 246.10--qualified tender option bonds: 
Disclosures--6.0 hours;
    Sections 244.11 and 246.11--allocation of risk retention to an 
originator: Recordkeeping--20.0 hours, disclosures--2.5 hours;
    Sections 244.13, 244.19(g), 246.13, and 246.19(g)--exemption for 
qualified residential mortgages and qualifying 3-to-4 unit residential 
mortgage loans: Recordkeeping--40.0 hours, disclosures--1.25 hours;
    Sections 244.15 and 246.15--exemption for qualifying commercial 
loans, commercial real estate loans, and automobile loans: 
Recordkeeping--0.5 hours, disclosures--20.0 hours;
    Sections 244.16 and 246.16--underwriting standards for qualifying 
commercial loans: Recordkeeping--40.5 hours, disclosures--1.25 hours;
    Sections 244.17 and 246.17--underwriting standards for qualifying 
commercial real estate (CRE) loans: Recordkeeping--40.5 hours, 
disclosures--1.25 hours; and
    Sections 244.18 and 246.18--underwriting standards for qualifying 
automobile loans: Recordkeeping--40.5 hours, disclosures--1.25 hours.
    Estimated annual burden hours: 2,114.
    General description of report: The recordkeeping and disclosure 
requirements in the credit risk retention rule are set forth below. 
Compliance with the information collections is mandatory.
    Standard Risk Retention. Section 244.4 of Regulation RR and section 
246.4 of the Securities and Exchange Commission's (SEC's) credit risk 
retention rule set forth the conditions that must be met by sponsors of 
a securitization that elects to use the credit risk retention rule's 
standard risk retention option, which may consist of an eligible 
vertical interest or an eligible horizontal residual interest, as 
defined by the rule, or any combination thereof. Sections 244.4(c) of 
Regulation RR and section 246.4(c) of the SEC's credit risk retention 
rule set forth the disclosure requirements for a sponsor that uses the 
standard risk retention option.
    A reasonable period of time prior to the sale of an ABS issued in 
the same offering of ABS interests, a sponsor retaining any eligible 
horizontal residual interest (or funding a horizontal cash reserve 
account), is required to disclose to potential investors: The fair 
value (or a range of fair values and the method used to determine such 
range) of the eligible horizontal residual interest that the sponsor 
expects to retain at the closing of the securitization transaction; the 
material terms of the eligible horizontal residual interest; the 
methodology used to calculate the fair value (or range of fair values) 
of all classes of ABS interests; the key inputs and assumptions used in 
measuring the estimated total fair value (or range of fair values) of 
all classes of ABS interests, including, to the extent applicable, 
certain enumerated items; and a description of the reference data set 
or other historical information used to develop the key inputs and 
assumptions. A reasonable time after the closing of the securitization 
transaction, the sponsor must disclose: The fair value of the eligible 
horizontal residual interest retained by the sponsor; the fair value of 
the eligible horizontal residual interest required to be retained by 
the sponsor; and a description of any material differences between the 
methodology used in calculating the fair value disclosed prior to sale 
and the methodology used to calculate the fair value at the time of 
closing. If the sponsor retains risk through the funding of an eligible 
horizontal cash reserve account, the sponsor must also disclose the 
amount placed by the sponsor in the horizontal cash reserve account at 
closing, the fair value of the eligible horizontal residual interest 
that the sponsor is required to fund through such account, and a 
description of such account.
    For eligible vertical interests, a reasonable period of time prior 
to the sale of an ABS issued in the same offering of ABS interests, the 
sponsor is required to disclose to potential investors: The form of the 
eligible vertical interest; the percentage that the sponsor is required 
to retain; and a description of the material terms of the vertical 
interest and the amount the sponsor expects to retain at closing. A 
reasonable time after the closing of the securitization transaction, 
the sponsor must disclose the amount of vertical interest retained by 
the sponsor at closing, if that amount is materially different from the 
amount disclosed earlier.
    Section 244.4(d) of Regulation RR and section 246.4(d) of the SEC's 
credit risk retention rule require a sponsor to retain the 
certifications and disclosures by section 244.4 of Regulation RR and 
section 246.4 of the SEC's credit risk retention rule. The sponsor must 
retain these records until three years after all ABS interests are no 
longer outstanding.
    Revolving Pool Securitizations. Section 244.5 of Regulation RR and 
section 246.5 of the SEC's credit risk retention rule require sponsors 
relying on the revolving pool securitization risk retention option to 
disclose in writing to potential investors, a reasonable period of time 
prior to the sale of an ABS, the material terms of the seller's 
interest and the percentage of the seller's

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interest that the sponsor expects to retain at the closing of the 
transaction. A reasonable time after the closing of the transaction, 
the sponsor must disclose in writing: The amount of the seller's 
interest that the sponsor retained at closing, if materially different 
from the amount previously disclosed; the material terms of any 
horizontal risk retention offsetting the seller's interest under 
sections 244.5(g), 244.5(h), and 244.5(i) of Regulation RR or sections 
246.5(g), 246.5(h), or 246.5(i) of the SEC's credit risk retention 
rule, as applicable; and the fair value of any horizontal risk 
retention retained by the sponsor. Additionally, a sponsor must retain 
these disclosures in its records until three years after all are ABS 
interests are no longer outstanding.
    Eligible ABCP Conduits. Section 244.6 of Regulation RR and section 
246.6 of the SEC's credit risk retention rule address the requirements 
for sponsors utilizing the eligible ABCP conduit risk retention option. 
The sponsor must disclose to each purchaser of ABCP, before or at the 
time of the first sale of ABCP to such purchaser and at least monthly 
thereafter to each holder of commercial paper issued by the ABCP 
conduit: The name and form of organization of the regulated liquidity 
provider that provides liquidity coverage to the eligible ABCP conduit, 
including a description of the material terms of such liquidity 
coverage, and notice of any failure to fund; and with respect to each 
ABS interest held by the ABCP conduit, the asset class or brief 
description of the underlying securitized assets, the standard 
industrial category code for each originator-seller that retains an 
interest in the securitization transaction, and a description of the 
percentage amount and form of interest retained by each originator-
seller.
    A sponsor relying on the eligible ABCP conduit risk retention 
option shall maintain and adhere to policies and procedures to monitor 
compliance by each relevant originator-seller. If the ABCP conduit 
sponsor determines that an originator-seller is no longer in 
compliance, the sponsor must promptly notify the holders of the ABCP in 
writing of the name and form of organization of any originator-seller 
that fails to properly retain risk; the amount of ABS interests issued 
by an intermediate special purpose vehicle (SPV) of such originator-
seller and held by the ABCP conduit; the name and form of organization 
of any originator-seller that hedges, directly or indirectly through an 
intermediate SPV; the risk retention in violation of the rule; the 
amount of ABS interests issued by an intermediate SPV of such 
originator-seller and held by the ABCP conduit; and any remedial 
actions taken by the ABCP conduit sponsor or other party with respect 
to such ABS interests.
    Commercial Mortgage-Backed Securities. Section 244.7 of Regulation 
RR and section 246.7 of the SEC's credit risk retention rule set forth 
the requirements for sponsors relying on the commercial mortgage-backed 
securities risk retention option and requires a sponsor to make, a 
reasonable period of time prior to the sale of the ABS as part of the 
securitization transaction, the following disclosures to potential 
investors: The name and form of organization of each initial third-
party purchaser; each initial third-party purchaser's experience in 
investing in commercial mortgage-backed securities; other material 
information regarding each initial third-party purchaser or each 
initial third-party purchaser's retention of the interest; the fair 
value and purchase price of the eligible horizontal residual interest 
retained by each third-party purchaser; the fair value of the eligible 
horizontal residual interest that the sponsor would have retained if 
the sponsor had relied on retaining an eligible horizontal residual 
interest under the standard risk retention option; a description of the 
material terms of the eligible horizontal residual interest retained by 
each initial third-party purchaser, including the same information as 
is required to be disclosed by sponsors retaining horizontal interests 
pursuant to section 244.4; the material terms of the applicable 
transaction documents with respect to the Operating Advisor; and 
representations and warranties concerning the securitized assets, a 
schedule of any securitized assets that are determined not to comply 
with such representations and warranties, and the factors used to 
determine that such securitized assets should be included in the pool 
notwithstanding that they did not comply with the representations and 
warranties. A sponsor relying on the commercial mortgage-backed 
securities risk retention option is also required to include in the 
underlying securitization transaction documents certain provisions 
related to the appointment of an operating advisor, to maintain and 
adhere to policies and procedures to monitor compliance by third-party 
purchasers with regulatory requirements, and to notify the holders of 
the ABS interests in the event of noncompliance by a third-party 
purchaser with such regulatory requirements.
    Federal National Mortgage Association and Federal Home Loan 
Mortgage Corporation ABS. Section 244.8(c) of Regulation RR and section 
246.8(c) of the SEC's credit risk retention rule require that a sponsor 
relying on the Federal National Mortgage Association and Federal Home 
Loan Mortgage Corporation risk retention option disclose to investors a 
description of the manner in which it has met the credit risk retention 
requirements.
    Open Market CLOs. Section 244.9 of Regulation RR and section 246.9 
of the SEC's credit risk retention rule set forth the requirements for 
sponsors relying on the open market CLO risk retention option. A 
reasonable period of time prior to the sale of ABS in the 
securitization transaction, a sponsor must disclose to potential 
investors a complete list of, and certain information related to, every 
asset held by an open market CLO and the full legal name and form of 
organization of the CLO manager.
    Qualified Tender Option Bonds. Section 244.10 of Regulation RR and 
section 246.10 of the SEC's credit risk retention rule set forth the 
requirements for sponsors relying on the qualified tender option bond 
risk retention option and requires, a reasonable period of time prior 
to the sale of the ABS as part of the securitization transaction, the 
following disclosures to potential investors: The name and form of 
organization of the qualified tender option bond entity; a description 
of the form and subordination features of the retained interest in 
accordance with the disclosure obligations associated with the standard 
risk retention option; the fair value of any portion of the retained 
interest that is claimed by the sponsor as an eligible horizontal 
residual interest; and the percentage of ABS interests issued that is 
represented by any portion of the retained interest that is claimed by 
the sponsor as an eligible vertical interest. In addition, to the 
extent any portion of the retained interest claimed by the sponsor is a 
municipal security held outside of the qualified tender option bond 
entity, the sponsor must disclose the name and form of organization of 
the qualified tender option bond entity; the identity of the issuer of 
the municipal securities; the face value of the municipal securities 
deposited into the qualified tender option bond entity; and the face 
value of the municipal securities retained outside of the qualified 
tender option bond entity by the sponsor or its majority-owned 
affiliates.
    Allocation of Risk Retention to an Originator. Section 244.11 of 
Regulation RR and section 246.11 of the SEC's credit risk retention 
rule set forth the

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conditions that apply when the sponsor of a securitization allocates to 
originators of securitized assets a portion of the credit risk the 
sponsor is required to retain. The sponsor must provide the same 
disclosures required by section 244.4(c) of Regulation RR or section 
246.6(c) of the SEC's credit risk retention rule, as applicable, and 
must also, a reasonable period of time prior to the sale of the ABS as 
part of the securitization transaction, disclose the following to 
potential investors: The name and form of organization of any 
originator that acquired and retained (or will acquire and retain) an 
interest in the transaction; a description of the form, amount, and 
nature of such interest; and the method of payment for such interest. A 
sponsor relying on this section is also required to maintain and adhere 
to policies and procedures that are reasonably designed to monitor 
originator compliance with the retention amount, as well as hedging, 
transferring, and pledging requirements, and to promptly notify the 
holders of the ABS interests issued in the transaction in the event of 
originator non-compliance with such requirements.
    Exemption for Qualified Residential Mortgages and Exemptions for 
Securitizations of Certain Three-to-Four Unit Mortgage Loans. Sections 
244.13 and 244.19(g) of Regulation RR and sections 246.13 and 246.19(g) 
of the SEC's credit risk retention rule provide exemptions from the 
risk retention requirements for qualified residential mortgages and 
qualifying three-to-four unit residential mortgage loans that meet 
certain criteria, including that the depositor with respect to the 
securitization transaction certify that it has evaluated the 
effectiveness of its internal supervisory controls and concluded that 
the controls are effective, and that the sponsor provide a copy of the 
certification to potential investors prior to sale of asset-backed 
securities in the issuing entity. In addition, sections 244.13(c)(3) 
and 244.19(g)(3) of Regulation RR and sections 246.13(c)(3) and 
246.19(g)(3) of the SEC's credit risk retention rule provide that a 
sponsor that has relied upon the exemptions will not lose the 
exemptions if, after closing of the transaction, it is determined that 
one or more of the residential mortgage loans does not meet all of the 
criteria, provided that the depositor complies with certain specified 
requirements, including prompt notice to the holders of the asset-
backed securities of any loan that is required to be repurchased by the 
sponsor, the amount of such repurchased loan, and the cause for such 
repurchase.
    Qualifying Commercial Loans, CRE Loans, and Automobile Loans. 
Section 244.15 of Regulation RR and section 246.15 of the SEC's credit 
risk retention rule provide exemptions from the risk retention 
requirements for qualifying commercial loans that meet the criteria 
specified in section 244.16 of Regulation RR or section 246.16 of the 
SEC's credit risk retention rule, qualifying CRE loans that meet the 
criteria specified in section 244.17 of Regulation RR or section 246.17 
of the SEC's credit risk retention rule, and qualifying automobile 
loans that meet the criteria specified in section 244.18 of Regulation 
RR or section 246.18 of the SEC's credit risk retention rule. A sponsor 
must disclose to potential investors, a reasonable period of time prior 
to the sale of asset-backed securities of the issuing entity: A 
description of the manner in which the sponsor determined the aggregate 
risk retention requirement for the securitization transaction after 
including qualifying commercial loans, qualifying CRE loans, or 
qualifying automobile loans with 0 percent risk retention. In addition, 
the sponsor is required to disclose descriptions of the qualifying 
commercial loans, qualifying CRE loans, and qualifying automobile loans 
(qualifying assets), and descriptions of the assets that are not 
qualifying assets, and the material differences between the group of 
qualifying assets and the group of assets that are not qualifying 
assets with respect to the composition of each group's loan balances, 
loan terms, interest rates, borrower credit information, and 
characteristics of any loan collateral. Additionally, a sponsor must 
retain the above disclosures in its records until three years after all 
ABS interests are no longer outstanding.
    Underwriting Standards for Qualifying Commercial Loans, 
Underwriting Standards for Qualifying CRE Loans, and Underwriting 
Standards for Qualifying Automobile Loans. Sections 244.16, 244.17, and 
244.18 of Regulation RR and sections 246.16, 246.17, and 246.18 of the 
SEC's credit risk retention rule each require that the depositor of an 
asset-backed security certify that it has evaluated the effectiveness 
of its internal supervisory controls and concluded that its internal 
supervisory controls are effective. The sponsor is required to provide 
a copy of the certification to potential investors prior to the sale of 
asset-backed securities in the issuing entity, and the sponsor must 
promptly notify the holders of the asset-backed securities of any loan 
included in the transaction that is required to be cured or repurchased 
by the sponsor, including the principal amount of such loan and the 
cause for such cure or repurchase. Additionally, a sponsor must retain 
the disclosures required in sections 244.16(a)(8), 244.17(a)(10), and 
244.18(a)(8) of Regulation RR or sections 246.16(a)(8), 246.17(a)(10), 
and 246.18(a)(8) of the SEC's credit risk retention rule, as 
applicable, in its records until three years after all ABS interests 
are no longer outstanding.
    Legal authorization and confidentiality: The FR RR is authorized 
pursuant to section 15G of the Securities Exchange Act, which 
authorizes the Board, jointly with the Office of the Comptroller of the 
Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and SEC, 
to prescribe risk retention regulations (15 U.S.C. 78o-11). The FR RR 
is mandatory.
    The FR RR contains recordkeeping and disclosure requirements that 
are not submitted to the Board, so the issue of confidentiality will 
not normally arise. If the Board's examiners retain a copy of the 
records as part of an examination, the records may be exempt from 
disclosure under exemption 8 of the Freedom of Information Act, which 
exempts from disclosure matters that are ``contained in or related to 
examination, operating, or condition reports prepared by, on behalf of, 
or for the use of an agency responsible for the regulation or 
supervision of financial institutions'' (5 U.S.C. 552(b)(8)).
    Current actions: On September 30, 2019, the Board published a 
notice in the Federal Register (84 FR 51569) requesting public comment 
for 60 days on the extension, without revision, of the FR RR. The 
comment period for this notice expired on November 29, 2019. The Board 
did not receive any comments.

    Board of Governors of the Federal Reserve System, January 14, 
2020.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2020-00746 Filed 1-16-20; 8:45 am]
BILLING CODE 6210-01-P