[Federal Register Volume 90, Number 188 (Wednesday, October 1, 2025)]
[Proposed Rules]
[Pages 47254-47266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-19152]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 229, 230, 239, 240, and 249
[Release Nos. 33-11391; 34-104102; File No. S7-2025-04]
RIN 3235-AN52
Concept Release on Residential Mortgage-Backed Securities
Disclosures and Enhancements to Asset-Backed Securities Registration
AGENCY: Securities and Exchange Commission.
ACTION: Concept release; request for comments.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
publishing this concept release to solicit comments on whether to amend
the asset-level disclosure requirements for residential mortgage-backed
securities in Item 1125 of Regulation AB and whether to revise
generally the definition of ``asset-backed security'' and/or other
definitions in Item 1101 of Regulation AB. The Commission is
considering these steps to expand issuer and investor access to the
registered asset-backed securities markets and facilitate enhanced
capital formation and liquidity while maintaining appropriate investor
protections.
DATES: Comments should be received on or before December 1, 2025.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/comments/s7-2025-04/s7-2025-04); or
Send an email to [email protected]. Please include
File Number S7-2025-04 on the subject line.
Paper Comments
Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-2025-04. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
comments on the Commission's website (https://www.sec.gov/comments/s7-2025-04/s7-2025-04). Do not include personally identifiable information
in submissions; you should submit only information that you wish to
make available publicly. The Commission may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection.
FOR FURTHER INFORMATION CONTACT: Arthur Sandel, Special Counsel, or
Kayla Roberts, Acting Chief, in the Office of Structured Finance,
Division of Corporation Finance, at (202) 551-3850, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
Table of Contents
I. Introduction
II. Asset-Level Disclosures for Residential Mortgage-Backed
Securities
A. Background
B. Recent Developments
C. Potential Changes to RMBS Asset-Level Disclosure Requirements
D. Request for Comment
III. Disclosure of Certain Sensitive RMBS Asset-Level Data
A. Background
B. Potential Regulatory Response
C. Request for Comment
IV. Definition of Asset-Backed Security Generally
A. Background
B. Potential Changes to Regulation AB Definitions
[[Page 47255]]
C. Request for Comment
V. General Request for Comment
VI. Regulatory Planning and Review
VII. Conclusion
I. Introduction
Securitization serves a vital role in the U.S. capital markets and
the U.S. economy. As a method of financing in which financial assets
are pooled and converted into instruments that may be offered and sold
in the capital markets, securitization helps provide entities, such as
banks, operating companies, and other non-depository financial
institutions, with access to lower-cost capital to make loans to
borrowers or otherwise finance operations.\1\ This process, in turn,
promotes necessary market liquidity and facilitates capital formation
in critical economic sectors, such as housing and consumer lending. For
investors, asset-backed securities (``ABS'') may offer attractive
yields and an opportunity to diversify fixed-income portfolios with a
range of credit quality. A more liquid registered ABS market should
further increase opportunities for capital formation while also
reducing borrowing costs for assets routinely financed by U.S.
households, corporations, and small businesses, such as automobiles and
residential and commercial real estate.
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\1\ See, e.g., Steven L. Schwarcz, Securitization Ten Years
after the Financial Crisis: An Overview, 37 Rev. of Banking and Fin.
L. 757, 759 (2018), available at https://www.bu.edu/rbfl/files/2018/12/Schwarcz-757.pdf (``Because financial assets can be easier to
understand and value, if not safer, than the business and risks
associated with operating a company, securitization offers companies
an efficient and usually lower-cost funding source.''). See also,
Aron M. Zuckerman, Securitization Reform: A Coasean Cost Analysis, 1
Harv. Bus. L. Rev. 303, 306 (2011), available at https://journals.law.harvard.edu/hblr//wp-content/uploads/sites/87/2014/09/Zuckerman-Securitization_Reform.pdf (``The chief benefit for banks
from securitization is lower funding costs for making residential
housing loans.'').
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From its origins in the earliest mortgage-backed securities
transactions of the 1970s, the modern ABS market gained traction in the
1980s and 1990s and, since then, the Commission has adopted a series of
disclosure rules and forms to establish comprehensive registration and
ongoing reporting requirements. In 2004, the Commission adopted
Regulation AB,\2\ establishing for the first time a comprehensive
registration, disclosure, and ongoing reporting regime for ABS under
the Securities Act of 1933 \3\ (the ``Securities Act'') and the
Securities Exchange Act of 1934 \4\ (the ``Exchange Act'').\5\ As we
discuss in more detail in section IV.A below, the availability of this
tailored regime was intentionally limited only to the types of
securitizations that meet the definition of ABS in Item 1101(c) of
Regulation AB.\6\
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\2\ 17 CFR 229.1100 et seq.
\3\ 15 U.S.C. 77a et seq.
\4\ 15 U.S.C. 78a et seq.
\5\ Asset-Backed Securities, Release No. 33-8518 (Dec. 22, 2004)
[70 FR 1506] (Jan. 7, 2005) (``2004 Regulation AB Adopting
Release'').
\6\ 17 CFR 229.1101(c). See section III.A.2 of the 2004
Regulation AB Adopting Release.
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Following the financial crisis of 2007-2009 (the ``Financial
Crisis''), Congress enacted the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the ``Dodd-Frank Act'').\7\ The Dodd-Frank Act
added a new statutory definition of ``asset-backed security'' \8\ and
included mandates for the Commission to adopt rules and regulations
intended to address concerns in the securitization market including, in
relevant part, a lack of transparency about the assets underlying
ABS.\9\ In 2014, the Commission adopted significant revisions to its
registration, disclosure, and reporting regime for ABS, including
amendments to Regulation AB (colloquially, ``Regulation AB II''), in
part to implement several of these Dodd-Frank Act mandates.\10\ As
discussed in sections II and III below, one such amendment adopted by
the Commission in Regulation AB II was the new requirement that ABS
issuers disclose asset-level data for all assets underlying registered
residential mortgage-backed securities (``RMBS'') and certain other
asset classes.\11\
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\7\ Public Law 111-203, 124 Stat. 1376 (2010).
\8\ Section 3(a)(79) of the Exchange Act [15 U.S.C. 78c(a)(79)].
See section IV.A below for a more detailed discussion about the
commonalities and distinctions between the definitions in Regulation
AB and the Exchange Act.
\9\ See, e.g., Public Law 111-203, 942(b), 124 Stat. 1376, 1897.
\10\ Asset-Backed Securities Disclosure and Registration,
Release No. 33-9638 (Sept. 4, 2014) [79 FR 57184] (Sept. 24, 2014)
(``2014 Regulation AB II Adopting Release'').
\11\ See section III.A of the 2014 Regulation AB II Adopting
Release and the Appendix to Schedule AL (Item 1125 of Regulation AB)
[17 CFR 229.1125]. The asset-level requirements adopted by the
Commission partially implemented the statutory mandate in Securities
Act section 7(c), as added by section 942(b) of the Dodd-Frank Act,
which requires, in relevant part, that the Commission adopt
regulations requiring an issuer of an ABS to disclose, for each
tranche or class of security, information about the underlying
assets, including asset-level data, if such data is necessary for
investors to independently perform due diligence.
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In developing these specialized registration and reporting
requirements, the Commission and its staff have regularly engaged with
securitization market participants to identify areas for regulatory
enhancements or modifications to address the changing needs of the
market while supporting capital formation and investor protection.
Market trends and developments since the adoption of Regulation AB II
(such as new and expanding asset classes) have prompted us to assess
whether the current framework for registration and reporting is serving
the needs of the current ABS market.\12\ Because, as discussed in more
detail in section II.A below, a robust registered ABS market offers
benefits such as increased transparency and protections, greater
liquidity, and potentially lower costs of capital, this assessment
includes consideration of whether there are any regulatory impediments
to issuer and investor access to the registered ABS market.
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\12\ See infra sections IV.A and IV.B.
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As part of this assessment, the Commission is considering and seeks
public input on whether certain modifications may be warranted with
respect to the current asset-level disclosure requirements for RMBS
under Item 1125 of Regulation AB, including whether and how to address
potential disclosure of certain sensitive RMBS asset-level data. In
sections II and III, we review the background of the existing asset-
level disclosure requirements and discuss certain challenges reported
by RMBS market participants, including some of their recent efforts to
identify potential solutions to these challenges. Related to these
considerations, we also discuss certain RMBS asset-level data points
that raise privacy and confidentiality concerns for consumers and
request feedback regarding whether we should reconsider our current
approach to address such concerns. We set forth our objectives to
reduce costs and regulatory obstacles to registration of RMBS offerings
with the goal of facilitating public offerings of RMBS and increasing
liquidity in the registered RMBS market. We seek input on potential
solutions that balance the interests of all RMBS market participants,
including investors.
The Commission is also considering whether to revise generally the
definition of ``asset-backed security'' in Item 1101(c) of Regulation
AB and/or certain other definitions in Regulation AB.\13\ In section
IV, we review the background of the asset-backed securities definition
and discuss certain challenges that may be impacting the registered ABS
market. We seek public input regarding potential changes that
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may facilitate expanded access to the registered ABS market.\14\
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\13\ 17 CFR 229.1101(c).
\14\ See infra section IV.
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While we ask a number of general and specific questions throughout
this release regarding each of these topics, we also welcome comments
on any other aspects of the ABS registration and reporting regime.
Interested persons are also invited to comment on whether certain
specific approaches, alternative approaches, or a combination of
approaches would address the items identified in this release.
II. Asset-Level Disclosures for Residential Mortgage-Backed Securities
A. Background
As discussed in section I above, in 2014, the Commission adopted
significant amendments to Regulation AB and other rules governing the
public offering, disclosure, and reporting regime for ABS.\15\ Among
the revisions, the Commission adopted Item 1125 of Regulation AB and
the Appendix to Item 1125 (``Schedule AL'') \16\ to implement the
mandate in Securities Act section 7(c).\17\ Schedule AL requires
standardized asset-level disclosures for registered ABS where the
underlying assets consist of residential mortgages, commercial
mortgages, auto loans, auto leases, debt securities, or
resecuritizations of ABS that include these asset types.\18\ The
Commission determined that the asset-level information required by
Schedule AL would provide investors with access to more robust and
standardized information necessary for investors to independently
perform due diligence.\19\ While the specific data requirements vary by
asset class, Schedule AL generally requires information about the
credit quality of obligors, the collateral related to each asset, and
the performance of those assets. The information must be provided in a
tagged data format using eXtensible Markup Language (``XML'') and must
be filed at the time of the offering of the ABS and in ongoing reports
filed with the Commission.\20\
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\15\ See supra section I and note 10.
\16\ 17 CFR 229.1125.
\17\ 15 U.S.C. 77g(c). Securities Act section 7(c) was added by
Dodd-Frank Act section 942(b) and requires, in relevant part, that
the Commission adopt regulations requiring an ABS issuer 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 and that the Commission set
standards for the format of such disclosures to facilitate the
comparison of such data across securities in similar types of asset
classes.
\18\ See 2014 Regulation AB II Adopting Release at 57196. Prior
to the adoption of Schedule AL, ABS issuers were required to provide
aggregated information about the composition and characteristics of
the underlying asset pool, tailored to the asset type and asset pool
involved for the particular offering, but there was no mandatory
regulatory requirement that asset-level data be provided.
\19\ See id. at 57196 (noting that such information provides a
more complete picture of the composition and characteristics of the
pool assets and their performance) and 57201 (reiterating the
Commission's belief that the asset-level information would provide
investors and other market participants with access to standardized
information to analyze the risk and return characteristics of ABS
offerings).
\20\ 17 CFR 229.1111(h) and 17 CFR 229.1125.
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With respect to RMBS, Item 1 of Schedule AL requires disclosure of
up to 270 data points for each underlying mortgage.\21\ Of these 270
RMBS data points, 165 are required to be provided only upon the
occurrence of specific events or when certain specified conditions
exist.\22\ For example, if an underlying mortgage is a fixed-rate
mortgage, the data points related to adjustable-rate mortgages need not
be included in the Schedule AL data file with respect to such fixed-
rate mortgage.\23\
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\21\ See 2014 Regulation AB II Adopting Release at 57210.
\22\ See id. at 57211.
\23\ See id. at 57211 n. 265.
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In determining which RMBS data points to adopt, the Commission
considered various industry and regulatory standards developed for
collection and/or presentation of asset-level data about residential
mortgages, as well as suggestions from commenters.\24\ Though there
were many efforts by market participants to identify responses to the
issues arising from the lack of transparency that was brought to light
by the Financial Crisis and re-establish confidence in the market, only
one issuer has publicly issued private-label RMBS (i.e., RMBS not
issued by the Agencies) since 2009,\25\ and there have been no
registered private-label RMBS offerings since June 2013 (pre-dating the
adoption of Regulation AB II by more than a year).\26\ Rather, RMBS
securitizations have been concentrated in the Agencies,\27\ which are
exempt from the Commission's registration and reporting requirements
under the Securities Act and the Exchange Act.\28\ All private-label
RMBS offerings since June 2013 have been unregistered, with nearly all
occurring in the Rule 144A market,\29\ despite investment criteria
restrictions that limit the amount of Rule 144A ABS that many
institutional investors can hold.\30\ By contrast, as shown in Table 1,
below, there has been an active registered market for ABS
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backed by other consumer lending assets, such as automobile loans and
leases and credit card receivables, over the same period of time.
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\24\ For example, the Commission considered standard definitions
of mortgage related terms and XML formats developed by the Mortgage
Industry Standards Maintenance Organization (``MISMO'') (The MISMO
standards have been mapped to the relevant data in Schedule AL,
available at http://www.mismo.org/standards-and-resources/additional-tools-and-resources/document-mappings/schedule-al-reg-ab-ii-mapping); information reported by sellers to the Federal National
Mortgage Association (``Fannie Mae'') and the Federal Home Loan
Mortgage Corporation (``Freddie Mac''); information published by
Fannie Mae, Freddie Mac, and the Government National Mortgage
Association (``Ginnie Mae'' and, together with Fannie Mae and
Freddie Mac, the ``Agencies''); data delivered to banking
regulators, as well as the ``RMBS Disclosure and Reporting
Package,'' published in 2009 by the American Securitization Forum
(``ASF''). ASF was a securitization trade association that
represented issuers, investors, financial intermediaries, and other
market participants. This reporting package was developed by its
membership following the Financial Crisis as part of its Project on
Residential Securitization Transparency and Reporting (``Project
RESTART'') to establish standardized definitions for RMBS asset-
level information and a format for presenting this data to
investors. See 2014 Regulation AB II Adopting Release at 57210-12.
See also Chairman Jay Clayton, Asset-Level Disclosure Requirements
for Residential Mortgage-Backed Securities (Oct. 30, 2019) (the
``2019 Chairman's Statement'') at n.6, available at https://www.sec.gov/newsroom/speeches-statements/clayton-rmbs-asset-disclosure.
\25\ By contrast, prior to the Financial Crisis, there were 52
issuers issuing registered private-label RMBS in 2004 at the time
Regulation AB was adopted. See Regulation AB II Adopting Release at
57192.
\26\ There was a precipitous decline in registered RMBS issuance
during the Financial Crisis. For example, in 2008, there was $12.2
billion in issuance, $0 in 2009, and only $200 million in 2010. From
2011-2013 there was a slight rebound, with $4 billion in registered
RMBS issuance in 2013, before ceasing entirely starting in the third
quarter of 2013. See AB Alert Debt Database.
\27\ See, e.g., Fannie Mae Financial Supplement Q4 and Full Year
2024 (Feb. 14, 2025) at 14, available at https://www.fanniemae.com/media/54816/display (showing that 92% of single-family mortgage-
related securities issuances in 2024 were conducted by the Agencies
while 8% were private-label securities issuances).
\28\ Securities issued or guaranteed by the Agencies are, like
government securities, exempt from the registration and reporting
requirements of the Securities Act and the Exchange Act. See 12
U.S.C. 1455(g) and 1723c. They are, however, subject to other
regulatory reporting requirements.
\29\ See Diana Knyazeva, Asset-Backed Securities Markets:
Issuance and Structure (Apr. 2025) at 5, available at https://www.sec.gov/files/dera-abs-mkt-2504.pdf and Table 1, below.
\30\ See, e.g., letter from American Bankers Association,
Housing Policy Council, Mortgage Bankers Association, and Securities
Industry and Financial Markets Association (May 19, 2020) (the
``Associations'') at 3, in response to the 2019 Chairman's
Statement, available at https://www.sec.gov/comments/rmbs/cll8-7214372-216890.pdf (``While Rule 144A offerings provide an excellent
option for some issuers and investors, 144A offerings limit the pool
of investors available to purchase exempt securities, which leaves
private capital that could be deployed to support residential
housing through RMBS purchases, such as that of some institutional
investors, on the sidelines.''); SFA Trains Sights on Regulation AB,
Asset-Backed Alert at 2 (Apr. 17, 2025), available at https://my.greenstreet.com/news/all/publications?reportId=17258 (stating
that issuers support the Structured Finance Association's efforts to
change asset-level disclosure requirements for RMBS because they
want to widen the pool of available investors to include those
limited to buying only registered RMBS).
[GRAPHIC] [TIFF OMITTED] TP01OC25.000
Market participants often cite the RMBS asset-level disclosure
requirements as a key barrier to the return of private-label RMBS
issuance to the registered market.\31\ Nevertheless, many market
participants, including investors,\32\ have expressed a desire to re-
enter the registered RMBS market due to the benefits it provides,
including increased liquidity and greater transparency of registered
offerings and publicly available disclosure.\33\ Others have emphasized
the benefits of increased financing to housing markets from the broader
investor base available to invest in registered RMBS offerings versus
Rule 144A RMBS offerings.\34\
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\31\ See, e.g., letter from the Associations. See also letter
from Mortgage Bankers Association (Feb. 4, 2020) (``MBA'') at 2, in
response to the 2019 Chairman's Statement, available at https://www.sec.gov/comments/rmbs/cll8-6746321-207968.pdf (``[E]fforts to
revise the SEC's RMBS disclosure requirements are a valuable--and
necessary--step toward reviving the non-agency mortgage
securitization market.''); letter from Pentalpha Surveillance LLC
(Dec. 23, 2019) at 1, in response to the 2019 Chairman's Statement,
available at https://www.sec.gov/comments/rmbs/cll8-6584947-201253.pdf (``Based on our experience, we agree that the additional
asset-level data points required by Regulation AB in an SEC-
registered offering have been a contributing factor to the lack of
SEC-registered RMBS issuances.''); Edward DeMarco, Three Ways to
Draw Private Capital Back Into Mortgages, Am. Banker (June 19,
2019), available at https://www.americanbanker.com/opinion/three-ways-to-draw-private-capital-back-into-mortgages (``[T]he SEC's
Regulation AB II includes elements that are difficult, if not
impossible, to fulfill because the data definitions in the rule are
unclear, certain required data is not relevant, and other data
elements are not readily available. As a result, Reg AB II has
become a barrier for issuers and investors, and we have seen no
publicly registered mortgage-backed securities deals since the
crisis.''); and SFA Trains Sights on Regulation AB (quoting Michael
Bright, chief executive officer of the Structured Finance
Association (``SFA''): ``There are too many data fields, and issuers
can't comply.''). The 2019 Chairman's Statement is discussed in more
detail in section II.B below.
\32\ See, e.g., Key Points Summary: Responding to the SEC's
Request for Input on Residential Mortgage Backed Securities
Disclosures, Structured Finance Association (2019), available at
https://structuredfinance.org/wp-content/uploads/2020/02/SFA-Responding-to-the-SECs-RFI-on-RMBS-Summary-Final.pdf (stating that,
in response to the 2019 Chairman's Statement, the Structured Finance
Association would convene member discussions including investors
(such as those in Agency credit risk transfer offerings, 144A
offerings, and investors currently not purchasing any MBS
offerings), following which investor and issuer members would seek
to ``establish a comprehensive industry agreed recommendation to the
SEC for how disclosures in public RMBS offerings may be modified to
provide investors the material information they need to analyze RMBS
investment opportunities and while also supporting public issuance
of private label RMBS.'').
\33\ See, e.g., DeMarco (``Public registration and disclosure of
the details of asset-backed securitization is essential to market
transparency and liquidity.'').
\34\ See, e.g., letter from MBA (``Reintroducing a critical
source of private capital will add much-needed diversity to the
housing finance system and increase aggregate liquidity, benefiting
borrowers, lenders, issuers, and investors.'').
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B. Recent Developments
In September 2019, the Treasury Department published a housing
reform plan recommending that the Commission review its RMBS asset-
level requirements in Schedule AL.\35\ The report raised concerns that
the Commission's regulations prescribing asset-level disclosures for
registered RMBS might unduly restrict registered private-label RMBS
issuances and contribute to a ``heightened . . . competitive
advantage'' for the Agencies.\36\ The report concluded, in part, that
``[i]t is difficult to collect the required data for some of these
fields--with the expense and burden of collection potentially
outweighing the benefit to [private-label RMBS] investors, particularly
for seasoned mortgage loans and some of the [data points] are
ambiguous.'' \37\ The Treasury Department recommended that the
Commission review the RMBS asset-level disclosure requirements to
assess the number of required reporting fields and to clarify any
ambiguous fields for registered private-label RMBS issuances.\38\
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\35\ U.S. Department of the Treasury Housing Reform Plan
Pursuant to the Presidential Memorandum Issued March 27, 2019
(``2019 Housing Reform Plan'') (Sept. 2019), available at https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf.
\36\ Id. at 39 (stating that ``[t]he special treatment afforded
to the [Agencies] under the disclosure, risk retention, and other
regulations governing securitization transactions has also
heightened the [Agencies'] competitive advantage over private sector
securitizers.'').
\37\ Id. at 39.
\38\ See id. at 40 and A-5.
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In October 2019, then-Chairman Jay Clayton released a statement
seeking public input on the issues related to RMBS asset-level
requirements.\39\ As with the Treasury's housing reform
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plan, the Chairman's statement highlighted the absence of registered
RMBS offerings since the adoption of Regulation AB II and the dominance
of the Agencies in the overall RMBS market.\40\ The Chairman's
statement acknowledged that there were likely a number of factors
contributing to the absence of registered private-label RMBS offerings
and sought public input on these various factors, including whether the
RMBS asset-level disclosure requirements were a significant
contributing factor.\41\ Public input was limited, with only a handful
of commenters responding to the Chairman's statement.\42\
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\39\ See 2019 Chairman's Statement.
\40\ See id.
\41\ See id.
\42\ The public comment file for the 2019 Chairman's Statement
is available at https://www.sec.gov/comments/rmbs/rmbs.htm. The
Commission received nine letters in total, five of which were
substantively responsive.
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One comment letter submitted by a group of four industry
organizations recommended the removal of certain specific RMBS asset-
level data points from Schedule AL, and the addition of other data
points, to align with the asset-level disclosures used in the Rule 144A
RMBS market.\43\ For example, these industry organizations suggested
that, to bring the Schedule AL requirements more in line with
disclosures generally provided in the Rule 144A RMBS market, the
Commission should remove certain information related to servicer
advances (Item 1(g)(31) of Schedule AL), loans in foreclosure (Item
1(r) of Schedule AL), ``real estate owned'' properties (Item 1(s) of
Schedule AL), information related to losses (Item 1(t) of Schedule AL),
and mortgage insurance claims (Item 1(u) of Schedule AL), among several
others. The industry organizations suggested various reasons for
removal of specific data points, including that the information is not
typically obtained or is not obtainable, the information is not
verifiable, or that the information is not material. They also
recommended the addition of several data points that are used in Rule
144A RMBS issuances, including detailed information related to borrower
credit scores, borrower income and employment information, geographical
information related to the property, property valuation information,
and certain information related to the modification of the terms of a
mortgage. Schedule AL currently requires much of this information,\44\
but to varying degrees and levels of granularity, at least in part due
to privacy and confidentiality concerns, which we discuss in section
III below. Commission staff has continued to engage with industry
participants to identify potential barriers to registration of RMBS
offerings, as well as ways to reduce or remove those barriers, and
continue to hear concerns with certain RMBS asset-level data
points.\45\
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\43\ See, generally, letter from the Associations.
\44\ For example, Items 1(e)(2) through (e)(6) of Schedule AL
require information about an obligor's credit score, whereas the
industry groups recommended inclusion of more than 10 data points
related to credit score, requiring multiple credit score and credit
score types for the ``primary wage earner'' and the ``secondary wage
earner.''
\45\ Industry participants have also continued to share concerns
related to these potential barriers publicly. See e.g., Dodd-Frank
Turns 15: Lessons Learned and the Road Ahead: Hearing Before the H.
Comm. on Financial Services, 119th Cong. (July 15, 2025) (written
testimony of Kenneth E. Bentsen, Jr., President and CEO, Securities
Industry and Financial Markets Association (``SIFMA'')), available
at https://docs.house.gov/meetings/BA/BA00/20250715/118488/HHRG-119-BA00-Wstate-BentsenK-20250715.pdf (stating, in relevant part, his
belief that Regulation AB II has prevented registered RMBS issuances
due to the ``impossibility of production of the data'' and
suggesting that the Commission should ``review, reduce, and
rationalize the number of required data fields.'').
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C. Potential Changes to RMBS Asset-Level Disclosure Requirements
In an effort to enhance the Commission's registration, disclosure,
and reporting framework for RMBS, we are soliciting public comment on
whether and how any potential revisions to the RMBS asset-level
disclosure requirements in Item 1 of Schedule AL could facilitate
increased capital formation through registered RMBS issuances, while
providing investors with information necessary to their investment
decisions. In the case of RMBS, there are several factors that may be
contributing to the absence of registered offerings, including the
dominance of the Agencies, which may be attributed to deep market
liquidity, beliefs among some market participants regarding the
availability of U.S. Government guarantees, more favorable underwriting
standards compared to private-label RMBS, and attractive yields and
returns for investors.\46\ Nevertheless, it is important to consider
whether the Commission's rules may be contributing to this absence.
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\46\ See, e.g., letter from the Associations at 2 (``The GSE
exemption from the CFPB Ability to Repay/Qualified Mortgage Rule,
for example, was a regulatory privilege that had a tremendous market
impact. As a result of the `GSE Patch,' which granted Qualified
Mortgage status to all GSE-eligible mortgages, the majority of the
market was confined to the GSE underwriting parameters, an unfair
advantage that undermined important market innovation, including
critical advances in the mitigation, management, and distribution of
risk.'').
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Securitization market conditions have changed considerably since
both the Financial Crisis and the Commission's adoption of Schedule AL,
including improved investor confidence in securitization markets due to
increased transparency and other regulatory guardrails established in
response to the crisis.\47\ Despite these developments, the issuance of
registered RMBS has yet to return. In light of these observations--and
based on the staff's ongoing engagement with market participants to
understand the circumstances contributing to this lack of public
issuance--we are considering whether the required disclosure of certain
RMBS data points under Schedule AL contributes to the ongoing absence
of registered RMBS transactions.
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\47\ See, e.g., letter from SIFMA, the Asset Management Group of
SIFMA, and the Bank Policy Institute (Mar. 27, 2023) (``SIFMA et
al.'') at 3 and 9, in response to the Securities Act Rule 192 re-
proposing release, available at https://www.sec.gov/comments/s7-01-23/s70123-20161806-330705.pdf (noting that the current
securitization market is ``vastly different, and better, than it was
in the years leading up to the financial crisis'' and that the
securitization market has improved ``with the help of well-
considered rulemaking by the Commission'' such as Regulation AB II,
Securities Act Rule 193, and Exchange Act Rule 15Ga-1). See also,
letter from the American Investment Council (Mar. 27, 2023) at 4-5,
in response to the Securities Act Rule 192 re-proposing release,
available at https://www.sec.gov/comments/s7-01-23/s70123-20161727-330618.pdf (stating that ``[t]oday's ABS markets have been shaped in
no small part by other provisions of the Dodd-Frank Act that have
already been implemented'' and that the credit risk retention rule
and the Volcker rule, ``together with other developments in the ABS
markets, have materially aligned the incentives of investors and
securitization participants, and have increased the transparency of
transaction structures.''). See also, letter from Jay Knight, Chair
of the Committee on Federal Regulation of Securities, Business Law
Section of the American Bar Association (Apr. 5, 2023) at 4-5, in
response to the Securities Act Rule 192 re-proposing release,
available at https://www.sec.gov/comments/s7-01-23/s70123-20163663-333899.pdf (noting that, since the adoption of the Dodd-Frank Act,
there has been a fundamental transformation of the regulatory
landscape for the financial industry, including the credit risk
retention rule, the Volcker rule, regulation of swaps and security-
based swaps by the Commission and the Commodity Futures Trading
Commission, the Commission's changes to the regulation of nationally
recognized statistical rating organizations, and Securities Act Rule
192).
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The RMBS market plays a substantial role in enhancing liquidity in
the residential mortgage market and reduces the cost associated with
access to capital, benefitting the U.S. housing sector.\48\ As some
RMBS market
[[Page 47259]]
participants have noted, a diverse array of securitization options
(i.e., Agency RMBS, Rule 144A private-label RMBS, and registered
private-label RMBS) is important for a healthy mortgage market because
it provides access to a wider range of issuers and investors, reducing
reliance on any one source of liquidity and contributing to lower
consumer costs.\49\ For these reasons, we seek to identify and address
potential barriers that issuers may face when they seek to engage in
registered RMBS offerings and to explore any accommodations that could
facilitate public offerings of RMBS in a manner that is consistent with
the Commission's statutory mandate and maintains investor protection.
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\48\ See e.g., Andreas Fuster, David Lucca, and James Vickery,
Mortgage-backed Securities, Federal Reserve Bank of New York Staff
Report, n.1001 (Feb. 2022), at 1 and 19, available at https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1001.pdf?sc_lang=en (noting the ``US MBS market is one of the
largest and most liquid global fixed-income markets'' and ``a key
benefit of securitization is that it makes mortgages more liquid,
thereby significantly de-coupling loan originators' ability to
produce loans from their own financial condition (e.g. funding, risk
exposure)''); and letter from SIFMA et al. at 3 (``Indeed, our well-
functioning securitization market has helped to mitigate the effects
of rising interest rates by acting as a source of cost-efficient
financing for auto loans, mortgage loans, unsecured consumer loans,
business loans and many other forms of commercial and consumer
credit.''). See also 2019 Chairman's Statement.
\49\ See, e.g., letter from the Associations at 2 (``We believe
that the long-term health and resilience of the mortgage market
depends, in part, on maintaining a diverse set of securitization
options that foster engagement from a broader array of issuers and
investors. This, in turn, reduces lender reliance on any single
source of liquidity and ensures that borrowers are receiving the
lowest interest rates available.'').
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As such, we are requesting input as to whether a reconsideration of
the RMBS asset-level disclosure requirements is warranted to assess
whether certain data points continue to be necessary for independent
investor due diligence under current market conditions. We are also
soliciting public comment about ways to enhance and revise the asset-
level disclosure requirements of Schedule AL to reduce or remove any
potential barriers to registration of RMBS offerings. In considering
potential revisions to our rules, it would be helpful to understand
which data points are possible to obtain, even if not typically or
easily obtained, versus which data points are impossible to obtain, and
the separate reasons for each.\50\ As we consider potential approaches,
it will be helpful to have a better understanding regarding the level
of difficulty for disclosure of various data points and the related
reasons and impacts. Likewise, it will be helpful to understand what
asset-level data is necessary for the investor to independently perform
due diligence on RMBS, consistent with the mandate in Securities Act
section 7(c). In each case, a clear and demonstrable rationale for a
suggested approach would allow us to evaluate more effective and
tailored solutions. We welcome and encourage market participants and
other interested persons to submit their views on potential regulatory
changes discussed above or on any alternative that they deem
appropriate.
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\50\ We note that, as the Commission stated in the 2014
Regulation AB II Adopting Release, the rules requiring asset-level
disclosures do not affect the availability of Securities Act Rule
409 [17 CFR 230.409] or Exchange Act Rule 12b-21 [17 CFR 240.12b-
21], which permit issuers to omit required information that is
unknown and not reasonably available. See 2014 Regulation AB II
Adopting Release at 57210. The distinction, therefore, is
particularly salient for us to assess recommendations for revisions
to Schedule AL.
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D. Request for Comment
1. To what extent, if at all, are the Commission's asset-level
disclosure requirements adopted in 2014 contributing to the lack of
registered RMBS issuances? What are the costs and other related burdens
associated with providing asset-level disclosures for registered RMBS
offerings?
2. To what extent have other factors contributed to the absence of
registered RMBS offerings? Which are the most salient factors? To what
extent, if at all, has the Rule 144A market also contributed to the
lack of registered RMBS issuances and if so, why?
3. Are there differences in transaction costs for registered RMBS
relative to Rule 144A RMBS offerings? For example, are there
differences in costs associated with reporting frequency, making
filings on EDGAR, or costs related to the administration of the deals,
such as those related to transaction parties? Is there quantitative
data available underlying such cost comparisons? Are there any
parallels to other quantitative data sets?
4. Are there any RMBS data points in Schedule AL for which the
Commission's rationale articulated in the 2014 Regulation AB II
Adopting Release is no longer relevant in today's market?
5. Should the RMBS asset-level disclosure requirements in Schedule
AL be conformed to the practices of private-label RMBS issuers offering
securities in the Rule 144A market?
6. Should any RMBS data points in Schedule AL be revised? Should
any data points be removed? If so, which specific data points should be
revised or removed and why? Should any RMBS data points not in Schedule
AL be added? If so, which specific data points should be added and why?
7. Are there any RMBS data points in Schedule AL that are not
necessary or are overly burdensome to obtain? If so, could any such
data points be revised or should they be removed from Schedule AL? Are
such data points overly burdensome to obtain for newly issued
mortgages, or only for legacy mortgages, and if the latter, of what
vintage? Which data points are possible to obtain, even if not
typically or easily obtained, versus which data points are impossible
to obtain and why? Please specify the data points and provide a
detailed explanation of the reasons why they should be revised or
removed.
8. Are there any definitions in Schedule AL regarding specific RMBS
data points that are ambiguous or confusing? Why or why not? If so, how
can such definitions be revised to provide clarity? Is there
interpretive guidance that the Commission could provide to help clarify
any data points?
9. Should we consider alternative reporting frequencies for ongoing
disclosures and/or allowing summary reporting for certain credit events
required to be disclosed by Schedule AL? Why or why not?
10. Should the Schedule AL data points be rearranged or modified in
such a way that would more clearly delineate when and under what
circumstances each data point is required to be provided (i.e., at
offering and/or at the time of filing each Form 10-D)? If so, what
clarifying changes to the structure of Schedule AL or the definitions
of specific data points would be helpful in this regard?
11. Should the response codes for specific RMBS data points in
Schedule AL be revised? If so, which ones and why? Should we consider
providing greater use of response codes such as ``not applicable,''
``not available,'' ``not obtainable,'' or ``unknown''? Should we
require additional explanatory information regarding such responses
and, if so, where?
12. Should we consider a ``provide-or-explain'' regime? \51\ Under
a provide-or-explain regime, an issuer may omit any asset-level data
point, provided the issuer identifies the omitted field and explains
why the data was not disclosed.
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\51\ We note that the Commission previously declined to adopt a
``provide-or-explain'' regime because it could result in differing
levels of disclosure. See 2014 Regulation AB II Adopting Release at
57205.
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If so, what limits should we place on a provide-or-explain
regime? What impact could a provide-or-explain regime have on investor
protection, market transparency, and investors' ability to analyze data
using models or other technologies?
13. What impacts would there be on standardization of RMBS asset-
level data if we were to allow a provide-or-explain regime? How could a
provide-or-explain disclosure regime be structured so as to be
consistent with
[[Page 47260]]
Securities Act section 7(c)? Please explain.
14. What asset-level data is necessary for investors to
independently perform due diligence on RMBS offerings, consistent with
the mandate in Securities Act section 7(c)? Are there data points in
current Schedule AL upon which investors do not rely? Would the
elimination of any of the RMBS data points in Schedule AL be reasonably
expected to adversely affect investors' ability to analyze the quality
and performance of the underlying assets? If so, which specific data
points should not be eliminated and why?
15. Are there any RMBS data points in Schedule AL that are
duplicative? If so, identify the data points and explain why. Would it
be beneficial to issuers and investors to remove duplicative data
points?
16. Some RMBS data points request the results of calculations, such
as debt-to-income ratios. Can these ratios otherwise be calculated from
data provided in other asset-level data points? Are these calculations
overly burdensome to perform? Should we permit these data points to be
excluded from the asset-level data file?
III. Disclosure of Certain Sensitive RMBS Asset-Level Data
A. Background
Throughout the Regulation AB II proposal process, the Commission
was sensitive to the possibility that certain asset-level disclosures
may raise concerns about an underlying obligor's personal privacy.\52\
In particular, the Commission noted that asset-level data points
requiring disclosures about the geographic location of the
collateralized property and obligors' credit scores, income, and debt
may raise privacy concerns.\53\ The Commission also recognized,
however, that information about obligors' 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.\54\ In an effort to balance individual privacy concerns with the
needs of investors to have access to detailed financial information
about the obligors, the Commission proposed a series of data points
that required information presented in ranges and coded responses
rather than specific values. One such example of this effort is the
approach taken with respect to the data point requiring disclosure of
the geographic location of the property.\55\
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\52\ See Re-Proposal of Shelf Eligibility Conditions for Asset-
Backed Securities, Release No. 33-9244 (July 26, 2011) [76 FR 47948,
47967] (Aug. 5, 2011) (the ``2011 Regulation AB II Re-Proposing
Release'').
\53\ See 2010 Regulation AB II Proposing Release at 23357 and
the 2011 Regulation AB II Re-Proposing Release at 47967. See also,
the Memorandum from the Commission's Division of Corporation Finance
(Feb. 25, 2014), available at https://www.sec.gov/comments/s7-08-10/s70810-258.pdf (the ``2014 Staff Memorandum'').
\54\ See 2011 Regulation AB II Re-Proposing Release at 47967.
\55\ While this discussion focuses on the data point requiring
disclosure of the geographic location of an individual property (as
adopted, Item 1(d)(1) of Schedule AL), the Commission also proposed
coded responses to represent ranges for other sensitive consumer
information as well, such as credit scores and monthly income and
debt ranges. See the 2010 Regulation AB II Proposing Release at
23357.
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The Commission originally proposed that a property's location be
provided by Metropolitan Statistical Area, Micropolitan Statistical
Area, or Metropolitan Division (collectively, ``MSA'') \56\ in lieu of
the narrower geographic delineation of zip codes.\57\ Commenters'
responses to this proposal were mixed, with some noting that such an
approach would greatly reduce transparency \58\ and one stating its
belief that limiting geographic information to MSA could result in
lower pricing for new RMBS offerings, potentially resulting in higher
costs for consumers of residential mortgage loans.\59\ According to
these commenters, zip codes were preferable as they could provide
further information for a property, including, for instance, whether a
property is in a flood plain or earthquake zone.\60\ Other commenters
highlighted the potential privacy risks posed by zip codes, including
that they can be used with other public databases to match a property
with a specific borrower.\61\
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\56\ Metropolitan and Micropolitan Statistical Areas are
geographic areas designated by a five-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 Micropolitan 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. See the
2010 Regulation AB II Proposing Release at 23357.
\57\ See the 2010 Regulation AB II Proposing Release at 23357.
\58\ See letter from American Securitization Forum (Aug. 2,
2010) at 50, in response to the 2010 Regulation AB II Proposing
Release, available at https://www.sec.gov/comments/s7-08-10/s70810-70.pdf (expressing views of investors only), letter from The Beached
Consultancy (July 8, 2010) at 2, in response to the 2010 Regulation
AB II Proposing Release, available at https://www.sec.gov/comments/s7-08-10/s70810-41.pdf (suggesting that the metropolitan area is too
broad to be useful, and, therefore, a ``3-digit zip code'' should be
permitted), and letter from Wells Fargo & Co. (Aug. 2, 2010)
(``Wells Fargo'') at 13, in response to the 2010 Regulation AB II
Proposing Release, available at https://www.sec.gov/comments/s7-08-10/s70810-76.pdf.
\59\ See letter from Wells Fargo.
\60\ See, e.g., letter from The Epicurus Institute (Aug. 1,
2010) at 17, in response to the 2010 Regulation AB II Proposing
Release, available at https://www.sec.gov/comments/s7-08-10/s70810-64.pdf.
\61\ See, e.g., generally, letter from World Privacy Forum et
al. (Aug. 2, 2010), in response to the 2010 Regulation AB II
Proposing Release, available at https://www.sec.gov/comments/s7-08-10/s70810-91.pdf (noting as examples that property addresses, sales
prices, and closing dates may be disclosed by certain local
governments and could link asset-level data to individuals).
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In February 2014, the Division of Corporation Finance issued a
staff memorandum detailing how disclosure of certain asset-level data
requirements combined with other publicly available sources of consumer
information would allow the identity of the obligors in ABS pools to be
uncovered or re-identified and the potential implications of such an
outcome.\62\ The 2014 Staff Memorandum also presented a potential
approach of making certain asset-level data available to investors and
potential investors through an issuer-sponsored website, rather than on
EDGAR.\63\ The 2014 Staff Memorandum suggested that such a website
would allow issuers the flexibility to determine the procedures and
controls best suited to protecting asset-level data while allowing
investor access to the data necessary for any investment decisions.
Also in February 2014, the Commission re-opened the comment period for
the 2010 Regulation AB II Proposing Release and the 2011 Regulation AB
II Re-Proposing Release to solicit public comment on the privacy
considerations and website approach detailed in the 2014 Staff
Memorandum.\64\
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\62\ See 2014 Staff Memorandum at 3. For example, if an obligor
were identified in this process, the obligor's personal finances
could be determined and information such as the obligor's credit
score, monthly income, and debt would be available through EDGAR
filings, which could further conflict with or undermine consumer
privacy protections provided by Federal and foreign laws which
restrict the dissemination of individual information such as the
Fair Credit Reporting Act [15 U.S.C. 1681 et seq.] (``FCRA'') and
the Gramm-Leach-Bliley Act [Pub. L. 106-102]. Moreover, the
availability of such personal information could increase the
potential for identity theft and fraud.
\63\ See id. at 8.
\64\ Re-Opening of Comment Period for Asset-Backed Securities
Release, Release No. 33-9552 (Feb. 2, 2014) [79 FR 11361] (Feb. 28,
2014).
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As detailed in the 2014 Regulation AB II Adopting Release, only a
few commenters supported the use of such a website, citing concerns
that it could increase the legal and reputational risks to issuers and
may cause issuers to take on liability under any applicable privacy
laws.\65\ Other commenters noted
[[Page 47261]]
concerns that websites pose technological risks and that any issues
could have negative market impacts.\66\ The Commission went on to
detail a series of options considered before finally adopting Item
1(d)(1) of Schedule AL, which requires disclosure of a two-digit zip
code for the geographic location of individual properties underlying an
RMBS offering to mitigate privacy and re-identification risk.\67\ To
provide guidance with respect to the FCRA implications of the proposed
asset-level disclosure requirements, the Consumer Financial Protection
Bureau (``CFPB'') issued a letter to the Commission explaining its view
that, if the Commission made certain determinations related to the
disclosure of the asset-level information at issue, which excluded
direct identifiers, the Commission would not become a consumer
reporting agency by requiring, obtaining, and disseminating such
information and an issuer would not become a consumer reporting agency
by disclosing such information to investors or filing it with the
Commission pursuant to the Commission's regulatory requirement.\68\
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\65\ See 2014 Regulation AB II Adopting Release at 57233.
\66\ See id. at 57234 n.587 and the accompanying text.
\67\ See section III.A.3 of the 2014 Regulation AB II Adopting
Release. For example, the Commission conducted an analysis of the
disclosure practices of other market participants such as the
Agencies and the effect of requiring less precise information, in
particular, on the likelihood of isolating a unique mortgage in a
sample pool of mortgage loans, depending on disclosure inputs. This
analysis indicated that alternatives, such as disclosing three-digit
zip codes, as the Agencies sometimes do, would not significantly
reduce re-identification risk versus the MSA. The two-digit zip code
did not eliminate the possibility of obligor re-identification but
struck a balance between privacy and transparency.
\68\ As the CFPB explained, this view relied on the Commission
determining that disclosure of the information was ``necessary for
investors to independently perform due diligence'' under section
942(b) of the Dodd-Frank Act and that the information should be
filed with the Commission and disclosed via EDGAR to best fulfill
the congressional mandate in section 942(b) of the Dodd-Frank Act.
The letter also advised that the CFPB believed that the Commission
and issuers would not violate section 604(f) of the FCRA by
obtaining or disseminating certain asset-level information at issue
if the Commission made these determinations. See letter from the
CFPB (Aug. 26, 2014), available at https://www.sec.gov/comments/s7-08-10/s70810-306.pdf. See also 2014 Regulation AB II Adopting
Release at 57237.
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In his 2019 statement regarding RMBS asset-level disclosure
requirements, then-Chairman Clayton specifically requested feedback on
issues related to five-digit zip code and other privacy concerns.\69\
Chairman Clayton noted the Commission staff's understanding that
issuers of unregistered RMBS provide five-digit zip codes to investors
rather than the two-digit zip code required under Schedule AL and that
issuers address privacy concerns by limiting the use and dissemination
of zip codes, including via the use of end-user agreements. Chairman
Clayton requested feedback regarding the impact of the zip codes on
registered RMBS offerings, the role and value of zip codes in risk and
return analysis related to RMBS offerings, and whether there were
alternatives to zip codes that would accommodate privacy concerns while
still meeting the needs of investors.\70\
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\69\ See 2019 Chairman's Statement.
\70\ See id.
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In response to this request, one commenter noted that there should
be alignment between the asset-level data disclosure provided in
registered and unregistered RMBS offerings, but that, in the meantime,
issuers of registered RMBS offerings should provide the five-digit zip
code to investors of record, with the EDGAR filing displaying only
three-digit zip codes.\71\ Another commenter stated that filing data on
EDGAR should be limited to three-digit zip codes, with processes in
place to allow public disclosure of a zip code to be further
limited.\72\ This commenter proposed an approach already used for Rule
144A RMBS issuances: a ``click-through'' agreement through which
investors can access asset-level data (e.g., through a permissioned
website) after providing representations regarding the use and
redistribution of such data.
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\71\ See letter from Veros Real Estate Solutions (July 20, 2020)
at 2-3, in response to the 2019 Chairman's Statement, available at
https://www.sec.gov/comments/rmbs/cll8-7449542-220989.pdf. We note
that, in 2014, the Commission considered the option of requiring
three-digit zip codes in Schedule AL but determined that three-digit
zip codes presented a greater reidentification risk than two-digit
codes, as ultimately adopted. See the 2014 Regulation AB II Adopting
Release at 57236 (noting that, at the time, there were fewer than 99
distinct two-digit zip codes and approximately 900 distinct three-
digit zip codes).
\72\ See letter from the Associations at 5.
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The Securities Industry and Financial Markets Association
(``SIFMA'') has made available a model click-through agreement.\73\ The
agreement places several limitations on users, including on the use of
the data, disclosure of the data, and communications with any obligors.
The agreement also requires users to represent that, where they do
disclose the data, those with access to the data are informed that it
is confidential and that they are subject to confidentiality and
security obligations. Users must further represent that they will treat
the information as personally identifiable under all applicable laws
and that, commensurate with the type of user and relative to the nature
and scope of their activities, they have reasonable safeguards to
protect the confidentiality of the asset-level data.\74\
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\73\ See SIFMA Model Asset-Level Disclosure Click-Though
Agreement Language, available at https://www.sifma.org/wp-content/uploads/2017/08/SIFMA_Click-Through_Confidentiality_Agreement.pdf.
\74\ Id. (see representation 4).
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B. Potential Regulatory Response
As discussed in section II above, we are considering possible
approaches to facilitate issuer participation in registered RMBS
offerings, including a reconsideration of the issuer-sponsored websites
discussed above. We understand there is a difference between the
information investors receive in unregistered transactions, such as
those conducted pursuant to Rule 144A, and disclosures required in a
public offering through registered transactions. From staff discussions
with RMBS market participants, we are aware that there are certain data
point categories provided in Rule 144A RMBS transactions that, if
included in registered RMBS transactions, would pose privacy concerns,
including property address and other geographical property information,
borrower credit scores, property valuation, and underwriting details.
We also acknowledge that asset-level information is important to an
investor's analysis in making investment decisions about the RMBS
transaction. As such, providing that information to investors and
promoting capital formation may involve considering potential
alternative approaches, such as the use of a website separate from
EDGAR, managed or sponsored by the issuer, consistent with current
practices for unregistered private-label RMBS issuances.
At the time Regulation AB II was proposed, commenters generally
opposed the use of a website for storing asset-level data, leading to
its exclusion from the final rule.\75\ However, commenters responding
to the 2019 Chairman's Statement indicated that the use of a website
would be more consistent with the approach currently utilized for
unregistered RMBS issuances.\76\
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\75\ See 2014 Regulation AB II Adopting Release at 57233.
\76\ See letter from the Associations at 6.
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Given the passage of time and evolution of industry practice, we
are interested in market participants' views on whether an issuer-
sponsored website as summarized in the Regulation AB II Adopting
Release and the 2014 Staff Memorandum may be an alternative worth
considering. Such a website could allow issuers to manage access to,
[[Page 47262]]
and protection of, asset-level data for investors. This could be done
by leveraging existing technology and procedures that are currently
used for unregistered RMBS issuances, which would also help provide
consistency with current industry practices and legal requirements. We
recognize that the concerns raised during the proposal of Regulation AB
II may persist but, given that such websites are currently in use for
unregistered RMBS issuances, this approach may provide a potential
solution to balance the market concerns with respect to both individual
privacy and consistency in investor access to certain information
between registered and unregistered markets, and therefore we seek
public comment on its regulatory viability. We also seek public input
on any other potential approaches that could address privacy and
confidentiality concerns related to the disclosure of certain sensitive
asset-level information.
C. Request for Comment
17. Are issuers forgoing registered RMBS offerings because they
cannot provide investors with sensitive asset-level information, such
as five-digit zip code, due to privacy and re-identification concerns?
If so, please identify the asset-level requirements that contain such
sensitive information and that are causing or contributing factors in
issuers' decisions to forgo registered RMBS offerings.
18. What methods of disclosing zip codes, obligor credit scores,
and other sensitive asset-level data would best balance providing
investors with sufficiently granular geographical and obligor financial
information while also addressing privacy concerns?
19. Should we consider adding data points used in Rule 144A
private-label RMBS transactions that may include sensitive information
to Schedule AL? If so, which data points should be added and what steps
should be taken to address privacy or confidentiality concerns?
If any of the sensitive information is not currently
considered by market participants to be necessary for investors to
independently perform due diligence, please elaborate as to why such
information is provided to investors in connection with a Rule 144A
private-label RMBS issuance.
20. Are the legal and reputational concerns under privacy laws that
were identified in connection with the adoption of Regulation AB II
still relevant? How have Rule 144A private-label RMBS issuers mitigated
those concerns? Have there been breaches in data and privacy
protections resulting in harm to obligors? To what extent and how
frequently do issuers update their data and privacy protections in
response to emerging cybersecurity threats and breaches?
21. Are there other legal or reputational concerns, such as with
respect to Regulation FD or other Federal or State securities laws,
that RMBS issuers would have if we permit disclosures of certain
information via an issuer-sponsored website (or other alternative
method) rather than being publicly disseminated via filings on EDGAR?
Would Commission rules or guidance establishing what information may or
must be disclosed in this manner mitigate any of those concerns?
22. Please describe the websites currently used to provide RMBS
asset-level data to investors and potential investors. How is access
managed? Is access limited only to potential investors, investors, and
the issuer? How is access managed to reflect secondary market
transactions? For instance, how is it updated to reflect when investors
may no longer hold an applicable investment? What are the challenges
issuers have faced in maintaining these websites?
23. Do the websites continue to use click-through agreements
consistent with the model click-through agreement provided by SIFMA?
Have there been important changes to usage rights, representations, or
limitations?
24. Do RMBS issuers maintain websites specific to their own
issuances, or are there any third-party websites, whether affiliated or
unaffiliated with the RMBS issuers, currently in use that allow
investors to access data across issuances? If such websites have been
utilized or considered, what challenges do they pose? How have those
challenges been addressed? To what extent do liability concerns impact
issuers' use of issuer-maintained websites or third-party websites,
respectively?
Do RMBS issuers delegate the responsibility and
obligations to establish, maintain, and manage access to such websites
to other transaction parties such as the sponsor, servicer, trustee, or
custodian (whether affiliated or unaffiliated with the RMBS issuers)?
Why or why not? To what extent do liability concerns impact issuers'
decisions to delegate these obligations? Is there a standard market
practice with respect to the security provided when issuers delegate
their obligations to other transaction parties? If so, what are the
standard liability provisions under these arrangements in the event of
a data breach?
25. Should we permit RMBS issuers to use issuer-sponsored websites
in connection with registered RMBS offerings? If so, should we permit
RMBS issuers to delegate the responsibility and obligations to
establish, maintain, and manage access to such websites to other
transaction parties such as the sponsor, servicer, trustee, or
custodian (whether affiliated or unaffiliated with the RMBS issuers)?
Why or why not?
26. Have investors in unregistered RMBS offerings expressed
concerns with the amount of asset-level data typically provided on the
website? Have investors expressed concerns with the approach taken in
providing the data, or on the attendant access restrictions?
27. Should we require the RMBS issuer to undertake in the offering
materials and transaction documents that it will identify and make
available the sensitive asset-level information provided on the
website? Should we consider requiring that RMBS issuers make certain
representations in their filings on EDGAR related to the disclosure of
sensitive information?
28. If we require undertakings, representations, and/or
certifications by the RMBS issuer as to the sensitive asset-level data
provided on its website, what should those obligations include? Should
the Commission provide standard language for such undertakings,
representations, and/or certifications?
For example, should we require undertakings,
representations, and/or certifications that a website will be/has been
established, that a website will continue to be maintained for the life
of the deal, and that access to such website has been granted to all
prospective/purchasing/current investors (and will continue to be
granted) subject to certain specified conditions? Why or why not? Are
there other representations and/or certifications that we should
consider? If so, please specify.
Should RMBS issuers be required to represent that such
information will be provided to any investor or prospective investor
upon request, similar to the standard used in Rule 144A? Would it be
appropriate to require that the sensitive RMBS asset-level information
that is disclosed outside of EDGAR be incorporated by reference into
the issuer's disclosures that are publicly filed on EDGAR?
When and how frequently should any such undertakings,
representations, and/or certifications be required? For example, should
they be required with the offering materials (either at the time that
the preliminary prospectus is required to be filed pursuant to
[[Page 47263]]
Securities Act Rule 424(h) \77\ or at the time that the final
prospectus is required to be filed pursuant to Securities Act Rule
424(b) \78\), with each distribution report filed on Form 10-D,\79\
and/or with the annual report filed on Form 10-K? Please specify why
your recommendation as to timing and frequency would be appropriate.
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\77\ 17 CFR 249.424(h).
\78\ 17 CFR 230.424(b).
\79\ 17 CFR 249.312.
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29. Have there been recent technological or other advances in the
production and analysis of property data that have lessened reliance on
the RMBS asset-level data that has previously raised privacy concerns,
including zip codes?
30. When investors in, or assets of, a given unregistered RMBS
issuance are located outside the United States, what is the general
approach for addressing any cross-border privacy considerations? For
instance, when a property and/or obligor may be situated outside the
United States and foreign privacy laws constrain the dissemination of
asset-level information beyond what is contemplated by U.S. privacy
laws, what sorts of restrictions are put in place?
31. Are there alternative approaches to providing RMBS investors
with access to sensitive asset-level information that would minimize
the re-identification risks discussed above? Please describe the
alternative(s) and explain why it would be preferable to the issuer-
sponsored website approach discussed in this release.
IV. Definition of Asset-Backed Security Generally
A. Background
When the Commission adopted Regulation AB in 2004, it defined
``asset-backed security'' to demarcate the securities and offerings to
which the rules would apply for purposes of registration, disclosure,
and reporting under the Securities Act and the Exchange Act.\80\
Specifically, Item 1101(c) of Regulation AB (the ``Regulation AB ABS
Definition'') defines ``asset-backed security'' as a ``security that is
primarily serviced by the cash flows of a discrete pool of receivables
or other financial assets, either fixed or revolving, that by their
terms convert into cash within a finite time period, plus any rights or
other assets designed to assure the servicing or timely distributions
of proceeds to the security holders. . .'' with certain conditions and
limitations added with respect to lease assets, transaction parties,
non-performance, delinquencies, master trusts, and revolving asset
pools.\81\
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\80\ See section III.A.2 of the 2004 Regulation AB Adopting
Release.
\81\ 17 CFR 229.1101(c)(2) through (3).
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The origins of the Regulation AB ABS Definition can be traced back
to 1992, when the Commission amended Form S-3 \82\ to permit shelf
registration of offers and sales of ABS.\83\ At that time, the
Commission envisioned a broad definition, stating that ``[a] broad
standard has been adopted in order to provide sufficient flexibility
and to accommodate future developments in the asset-backed
marketplace.'' \84\ The definition, however, was used only for purposes
of Form S-3 eligibility. When the Commission later adopted the
Regulation AB ABS Definition, it noted that moving the definition from
the registration form to Regulation AB meant that any security meeting
the general definition would be eligible for the new disclosure and
reporting regime, regardless of the form used for registration.\85\ The
Commission made clear, however, that the substance of the definition
itself would remain largely unchanged,\86\ stating that it
``continue[d] to believe the ABS regulatory regime [being adopted]
should be appropriately limited to a definable group of asset-backed
securities.'' \87\ For example, the Commission's emphasis on discrete
pools meant excluding managed pool structures, such as collateralized
loan obligations (``CLOs'').\88\ Similarly, the emphasis on the
activities of the issuing entity being limited to owning and holding
one asset pool and issuing securities backed by that pool meant
excluding series trust structures, where a single issuing entity issues
separate series of ABS backed by separate asset pools.\89\ The
Commission's concerns about payments not being based primarily on the
performance of assets in an underlying pool in synthetic
securitizations meant excluding these securitizations.\90\ Recognizing
that other structures and securities may develop in the future, the
Commission explained that the Regulation AB ABS Definition was not
designed to limit the public offering of securities that fell outside
its parameters; \91\ rather, ABS that fall outside the parameters of
Regulation AB, such as ABS structured as a series trust, do not qualify
to rely on the registration and reporting regime created by Regulation
AB.\92\
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\82\ ABS offerings are now registered on Forms SF-1 and SF-3,
which are tailored to ABS offerings and disclosures, and are no
longer eligible for registration on Form S-3. See 17 CFR 239.44 and
17 CFR 239.45, respectively. See also section V.B.2. of the 2014
Regulation AB II Adopting Release.
\83\ See Simplification of Registration Procedures for Primary
Securities Offerings, Release No. 33-6964 (Oct. 22, 1992) [57 FR
48970].
\84\ See id.
\85\ See 2004 Regulation AB Adopting Release at 1513.
\86\ The limited changes made to the definition had the effect
of expanding the definition to permit more flexibility. See, e.g.,
2004 Regulation AB Adopting Release at 1585-6 (noting that the new
definition allows ``structures such as master trusts and revolving
periods, currently allowed by the staff for only certain asset
classes, to be used by all asset-backed issuers'' and stating its
belief that ``these expansions will result in increased flexibility
in structuring transactions that meet market demands'').
\87\ See 2004 Regulation AB Adopting Release at 1586. The
Commission explained that the approach was based on the history and
development of the traditional ABS market such that a definable set
of criteria and requirements could be established and that it was
``pragmatic and feasible to establish Regulation AB for an
appropriately definable group of asset-backed securities.'' See 2004
Regulation AB Adopting Release at 1514-15.
\88\ The ``discrete pool'' requirement also excluded master
trust structures, where the ABS transaction contemplates future
issuances of ABS backed by the same, but expanded, asset pool.
Previously issued securities would also, therefore, be backed by the
same expanded asset pool. When it adopted the definition, however,
the Commission included an exception to this discrete pool
requirement in Item 1101(c)(3)(i) of Regulation AB to permit these
master trust structures. See section III.A.2.f of the 2004
Regulation AB Adopting Release and Item 1101(c) of Regulation AB.
\89\ See 2004 Regulation AB Adopting Release at 1516 and Asset-
Backed Securities, Release No. 33-8419 (May 3, 2004) [69 FR 26650,
26657 and n.63] (``2004 Regulation AB Proposing Release'').
\90\ See 2004 Regulation AB Adopting Release at 1514 and 2004
Regulation AB Proposing Release at 26656 and n.62.
\91\ See 2004 Regulation AB Adopting Release at 1515.
\92\ For example, as discussed in section IV.B below, certain
public utility securitizations that are structured as stand-alone
trusts meet the Regulation AB ABS Definition, but others, such as
public utility securitizations structured as series trusts, are
ineligible under the current rules for the Regulation AB
registration and reporting regime but do satisfy the Exchange Act
ABS Definition.
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In 2010, section 941(a) of the Dodd-Frank Act \93\ added a separate
statutory definition of ``asset-backed security'' as section 3(a)(79)
of the Exchange Act (the ``Exchange Act ABS Definition'').\94\ The
Exchange Act ABS Definition defines ``asset-backed security'' as ``a
fixed-income or other security collateralized by any type of self-
liquidating financial asset (including a loan, a lease, a mortgage, or
a secured or unsecured receivable) that allows the holder of the
security to receive payments that depend primarily on cash flow from
the asset. . .'' and explicitly includes managed pool structures, such
as CLOs. While the two definitions share similarities (i.e., that the
securityholder receives payments that primarily depend on cash flows
from self-
[[Page 47264]]
liquidating financial assets underlying the ABS), there are key
differences--specifically, the inclusion of managed pool and series and
master trust structures in the Exchange Act ABS Definition. Therefore,
the Exchange Act ABS Definition is broader (i.e., encompasses more
types of ABS) than the Regulation AB ABS Definition, and any ABS that
satisfy the Regulation AB ABS definition also meet the Exchange Act ABS
Definition.
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\93\ Public Law 111-203, 941(a), 124 Stat. 1376, 1890-91.
\94\ 15 U.S.C. 78c(a)(79).
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B. Potential Changes to Regulation AB Definitions
The Regulation AB ABS Definition was adopted prior to the enactment
of the Dodd-Frank Act and, as noted above, was intended to identify ABS
that satisfied certain core principles that the Commission determined
should be met in order to be eligible for the specialized registration
and reporting regime under Regulation AB.\95\ The Exchange Act ABS
Definition is used primarily in various Commission rules arising from
the Dodd-Frank Act, such as the credit risk retention rule under
Exchange Act section 15G,\96\ which requires the securitizer of ABS to
retain a portion of the credit risk associated with the underlying
assets, and Securities Act Rule 192,\97\ which was adopted by the
Commission pursuant to Securities Act section 27B \98\ and prohibits
certain material conflicts of interest. As a result, the overall
regulatory regime for ABS is governed by two different regulatory
standards which serve distinct purposes. This dynamic has resulted in
market participants needing to analyze the nuances of each definition
to determine whether various ABS structures satisfy only the Exchange
Act ABS Definition, both definitions, or neither definition, and what
the ramifications might be.
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\95\ See section III.A.2 of the 2004 Regulation AB Adopting
Release (identifying these ``core principles'' as, e.g., that the
securities are primarily backed by a pool of assets, that there is a
discrete pool with a general absence of active pool management, and
an emphasis on the self-liquidating nature of pool assets).
\96\ 17 CFR 246.1 et seq.
\97\ 17 CFR 230.192.
\98\ 15 U.S.C. 77z-2a.
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As the ABS market continues to evolve in response to macroeconomic
changes and market trends and innovations, ABS transactions have become
more diverse and complex, both structurally and in the types of assets
that are securitized. For example, since the Exchange Act ABS
Definition was enacted in 2010 (and since the Regulation AB ABS
Definition was adopted in 2004), we have observed the introduction of
new asset classes, such as cell phone payment plan securitizations, as
well as the proliferation of others, such as public utility
securitizations.\99\
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\99\ These securitizations have been variously referred to as
``utility recovery bonds,'' ``utility revenue bonds,'' ``stranded
cost bonds,'' ``rate reduction bonds,'' and ``utility cost recovery
bonds.'' For purposes of this release, we use the term ``public
utility securitizations.''
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Public utility securitizations are a helpful example of both the
impact of the differing definitions on the market and how the evolution
of the ABS market over time indicates that a reconsideration of the
current regulatory framework may be warranted.\100\ These transactions
are generally structured in one of two ways: using a stand-alone trust
for each issuance of ABS; or using a single series trust that issues
multiple series of ABS, each of which is backed by a separate pool of
assets, from the same trust. In 2004, the Commission intentionally
chose to exclude series trust ABS from the specialized regulatory
regime in Regulation AB.\101\ Today, this exclusion means that public
utility securitizations could be subject to different registration,
disclosure, and reporting obligations depending on their structure. As
a result, investors in public utility securitizations structured as
series trusts could receive different sets of disclosures, reporting
frequency, and other regulatory requirements from those available in
stand-alone trust issuances, despite the securities themselves having
nearly identical features and risk profiles.
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\100\ Public utility securitizations are offerings of securities
that are backed by ``securitization property'' which consists of an
intangible property right to assess and collect an irrevocable, non-
bypassable charge paid by a public utility's customers. The proceeds
of the securitization transaction are then used by the public
utility to fund specified projects, such as rebuilding
infrastructure following a natural disaster, decommissioning
outdated facilities, and other such recovery costs. These types of
ABS offerings were introduced to the market in the late 1990s. Until
recently, offerings were infrequent and offering amounts were
relatively modest, with some years seeing no registered public
utility securitization offerings. In recent years, however, we have
observed a sizeable increase in both the number of registered deals
and in the issuance amounts. Based on EDGAR issuance data, there
were eight registered public utility securitization offerings in
2022, totaling $10.3 billion; six in 2023, totaling $2.8 billion;
and seven in 2024, totaling $4.3 billion (compared to approximately
one registered issuance per year in the early 2000s, each totaling
between $330 million and $1.8 billion).
\101\ See supra section IV.A.
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However, the concerns informing this decision (e.g., that an
investor may need to analyze potential risks from a wholly separate and
unrelated transaction created after its original investment) \102\ may
no longer be so salient that the structure should continue to be
disqualifying.\103\ Aside from the difference in the structure of the
issuance trust, the key features of these offerings are the same and
satisfy the ``core principles'' of the ABS definition as set out by the
Commission in 2004 as well as the elements of the Exchange Act ABS
Definition.\104\ For example, in
[[Page 47265]]
public utility securitizations, the asset that collateralizes the ABS
is the property right to assess and collect charges paid by utility
customers, up to a specified total amount, within a specified time
period that is not to exceed the final maturity date of the bonds
issued to investors. This property right, therefore, is a ``self-
liquidating financial asset'' because it establishes: (1) the total
amount to be raised by the charges, thereby converting the property
right into that dollar amount in cash; and (2) the finite time period
by which that property right must convert to cash.
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\102\ See 2004 Regulation AB Adopting Release at 1516. The
Commission discussed the basis for its concern at the time, when the
ABS market was still relatively new, noting that ``[w]ith a series
trust structure, instead of only analyzing the particular pool, an
investor also may need to analyze any effect on its security,
including bankruptcy remoteness issues, if problems were to arise in
another wholly separate and unrelated transaction in the same
issuing entity. These concerns are exacerbated if new unrelated
transactions are created after the original transaction involving
the investor.'' By contrast, for ABS transactions structured as
stand-alone trusts where the issuance trust only issues ABS in a
single transaction, an investor would not need to consider the
impacts of other ABS issuances by the trust. As discussed, public
utility securitizations utilize both structures.
\103\ In 2004, the Commission also indicated that series trust
structures were not ``commonly used for issuing asset-backed
securities.'' See id. This is no longer the case. As discussed in
note 100 above, the increased transaction frequency and volume of
public utility securitizations, approximately half of which are
issued from a series trust, demonstrates that this structure may not
be as uncommon as it was when the Commission first considered this
question. Given the maturity and sophistication of the current ABS
market and the increased use of series trust structures, market
participants' familiarity with such structures has also increased.
Recognizing these developments, and--as the registration of public
utility securitizations using series trusts has become more common
over time--Commission staff has advised such series trust issuers to
use the ABS registration and disclosure regime, similar to public
utility securitizations that use stand-alone trusts. See Division of
Corporation Finance Asset-Backed Securities Compliance and
Disclosure Interpretations (``ABS C&DI''), Questions 112.01 and
112.02, available at https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/asset-backed-securities. The statements in the staff's compliance and disclosure
interpretations and any other staff statements referenced in this
release (``CF Statements'') represent the views of the Division of
Corporation Finance. CF Statements are not a rule, regulation or
statement of the Commission. Further, the Commission has neither
approved nor disapproved their content. CF Statements, like all
staff statements, have no legal force or effect; they do not alter
or amend applicable law, and they create no new or additional
obligations for any person.
\104\ The Commission has previously indicated its position that
public utility securitizations are ABS as defined in Regulation AB
and the Exchange Act. For example, the Commission described public
utility securitizations in detail when it initially proposed to
exempt these securitizations from the Regulation AB II asset-level
disclosure requirements. See Asset-Backed Securities, Release No.
33-9117 (Apr. 7, 2010) [75 FR 23328, 23360] (the ``2010 Regulation
AB II Proposing Release'') (referring to public utility
securitizations as ``ABS backed by stranded costs''). In 2014, the
Commission adopted this exemption as proposed. See section III of
the 2014 Regulation AB II Adopting Release. Similarly, the
Commission, jointly with five other Federal agencies, exempted
public utility securitizations from the requirements of the credit
risk retention rule at the request of commenters as the rule
requirements would have otherwise applied to public utility
securitizations as ABS under the Exchange Act ABS Definition. See
Credit Risk Retention, Release No. 34-73407 (Oct. 22, 2014) [79 FR
77602, 77672] and 17 CFR 246.19(b)(8).
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Another core principle of both ABS definitions--that payments to
the securityholders depend primarily on cash flows from the underlying
self-liquidating financial asset--is also present, regardless of
structure. Whether an offering employs a stand-alone trust or a series
trust, the financing order establishing the property right requires
that the property right be transferred to a bankruptcy-remote special
purpose vehicle (i.e., the trust) as a true sale. The securityholders
rely only on the cash flow from this property right for payment, not on
the performance of the utility company itself and, in the event of
bankruptcy of the utility company, payments on the public utility
securitizations would continue independent of the utility's continued
participation or existence.\105\
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\105\ Because the financing order issued by the State public
utility commission is irrevocable, the property right may not be
impaired by subsequent government action (i.e., the financing order
probits any legislature, agency, or governmental authority from
rescinding, amending, or altering the property right) and it
continues to exist even if the utility company ceases to exist or if
the utility is provided by a third party).
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Because the key features of these offerings are otherwise the same,
whether the offering is both Exchange Act ABS and Regulation AB ABS
(and therefore eligible for the specialized registration, reporting,
and disclosure regime in Regulation AB) or solely Exchange Act ABS (and
therefore not eligible for the Regulation AB regime) is entirely
dependent on the structure of the transaction. This has the practical
effect of preventing an issuer of an offering structured as a series
trust from accessing the registered ABS market. Recognizing this fact,
and in response to a request from issuers in this asset class,\106\
Commission staff has advised issuers of public utility securitizations
structured using a series trust to follow the regulatory regime in
Regulation AB since 2007.\107\
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\106\ See MP Environmental Funding LLC, PE Environmental Funding
LLC, SEC No-Action Letter (Sept. 19, 2007) available at https://www.sec.gov/divisions/corpfin/cf-noaction/2007/mpef091907-1101.htm,
and incoming letter (Sept. 7, 2007), available at https://www.sec.gov/divisions/corpfin/cf-noaction/2007/mpef090707-1101-incoming.pdf. The requesting issuers stated that the forms available
under the Regulation AB disclosure and reporting regime would allow
them to convey information to investors that would not be provided
for under the non-ABS issuer reporting regime, such as the
distribution and servicer related information required by Regulation
AB.
\107\ See, e.g., ABS C&DI, Questions 112.01 and 112.02.
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We have also observed that there appears to be some continued
market confusion with respect to the differences, overlap, and purpose
of the Regulation AB ABS Definition and the Exchange Act ABS
Definition.\108\ Given the evolution of the ABS market in general since
the Regulation AB ABS Definition was adopted, the similarities between
the two definitions, and the resulting potential ambiguity in the
market, we are seeking public comment about whether we should amend the
definition of ABS in Regulation AB to better align with the Exchange
Act ABS Definition, as well as consider potential updates to other
related definitions. Such revisions may bring clarity and uniformity to
the current ABS regulatory regime and remove potentially unnecessary
definitional and/or structural impediments to accessing the registered
market for ABS issuers and investors, while providing sufficient
flexibility and accommodating future developments in the ABS market.
---------------------------------------------------------------------------
\108\ See, e.g., section II.A.3 of Prohibition Against Conflicts
of Interest in Certain Securitizations, Release No. 33-11254 (Nov.
27, 2023) [88 FR 85396] (``Rule 192 Adopting Release'') (clarifying
the ``discrete pool'' element in the Regulation AB ABS Definition
and the elements and purpose of each definition).
---------------------------------------------------------------------------
C. Request for Comment
32. Are there any challenges to market participants associated with
having more than one definition of ``asset-backed security'' in the
Federal securities laws? If so, what are the challenges? Are there any
potential benefits to retaining the current Regulation AB ABS
Definition as is that could be lost if we make changes? What are those
benefits?
33. Should we amend the Regulation AB ABS Definition to cross-
reference, or otherwise incorporate, the Exchange Act ABS Definition?
What are the advantages or disadvantages of consolidating the two
definitions?
If we amend the Regulation AB ABS Definition in this way,
should we revise either Item 1101(c)(2) or Item 1101(c)(3) to be
consistent with the additional features and structures (such as active
pool management and the use of series trusts) included in the Exchange
Act ABS Definition? Are there any conditions or limitations in Item
1101(c)(2) and/or Item 1101(c)(3) that we should retain as still
applicable and/or because they would still be appropriate for
registered offerings? If so, please specify what should be retained,
deleted, and/or revised and why.
34. As an alternative to the approach described in question 33,
should we replace the entirety of the Regulation AB ABS Definition with
the Exchange Act ABS Definition? Would replacing the entirety of the
Regulation AB ABS Definition with the Exchange Act ABS Definition
create a definition of ``asset-backed security'' that is too broad for
purposes of Regulation AB? If so, what conditions and limitations would
be necessary or beneficial?
35. Should we consider expanding the Regulation AB ABS Definition
to conform with the recently adopted definition of ``asset-backed
security'' in Securities Act Rule 192, which references the Exchange
Act ABS Definition but also includes synthetic and hybrid cash/
synthetic securitizations? Why or why not?
36. Are there any potential regulatory impacts to market
participants that would result from revising the Regulation AB ABS
Definition?
For example, would revising the Regulation AB ABS
Definition cause any consequences for issuers who have historically
offered, or would offer, securities in reliance on Regulation A,\109\
which excludes ``asset-backed securities as such term is defined in
Item 1101(c) of Regulation AB'' from eligibility? \110\
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\109\ 17 CFR 230.250 et seq.
\110\ 17 CFR 230.261(c).
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What impacts, if any, would incorporating the Exchange Act
ABS Definition into Regulation AB have on market participants who are
subject to regulation under the Investment Company Act of 1940? Should
managed pool structures such as CLOs be permitted (but not required) to
register ABS offerings pursuant to Regulation AB? What impacts, if any,
would such a registered ABS offering have on a pool's ability to rely
on the exclusions set forth in sections 3(c)(1) or 3(c)(7) of the
Investment Company Act?
Should we also consider revising the definition of
``asset-backed securities'' in Rule 902(a)(2) of Regulation S \111\ to
further harmonize the definitions across the Federal securities laws?
What impacts, if any,
[[Page 47266]]
would such a change have for issuers and/or offerings of ABS offered
and sold pursuant to Regulation S?
---------------------------------------------------------------------------
\111\ 17 CFR 230.902(a)(2).
---------------------------------------------------------------------------
While any potential changes to the Regulation AB ABS
Definition would not change the statutory definition of ``asset-backed
security'' referenced in Exchange Act section 3(a)(62)(A)(iv), would
revising the Regulation AB ABS Definition have any impact for a credit
rating agency registered, or seeking to be registered, as a nationally
recognized statistical rating agency (``NRSRO'') in the issuers of
asset-backed securities category of credit ratings pursuant to Exchange
Act Rule 17g-1? \112\ Could revising such definition have any impact
for NRSROs not registered in the issuers of asset-backed securities
category or for users of credit ratings?
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\112\ Exchange Act section 3(a)(62) provides in relevant part
that a ``nationally recognized statistical rating organization''
means a credit rating agency that issues credit ratings and is
registered under Exchange Act section 15E in one or more categories
of credit ratings, including ``issuers of asset-backed securities
(as defined in [Item] 1101(c) of [Regulation AB] as in effect on
September 29, 2006).'' See 15 U.S.C. 78(c)(a)(62).
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37. Are there other definitions under Item 1101 of Regulation AB
that we should consider amending to expand issuer and investor access
to the registered ABS markets and facilitate enhanced capital formation
and liquidity while maintaining appropriate investor protections?
For example, do the definitions for the various ABS
transaction participants--such as asset-backed issuer, depositor,
issuing entity, sponsor, and originator--still accurately describe
these parties' roles and responsibilities in contemporary
securitization transactions? If not, what changes would be beneficial?
Would any new definitions be necessary or beneficial?
Is there interpretive guidance that could help clarify any
definitions?
38. What additional or alternative disclosures should we consider
in light of any revisions to the Regulation AB ABS Definition or other
definitional changes discussed above? What specialized disclosures may
be necessary or appropriate regarding asset classes or structures that
may be new to shelf registration or registration in general?
39. Are there any additional features of, or developments in, the
ABS market that we should take into account in considering potential
regulatory changes?
V. General Request for Comment
We request and encourage any interested person to submit comments
on any aspect of this concept release, other matters that might have an
impact on the topics discussed in this concept release, and any
suggestions for additional changes. We are also soliciting comment on
any other aspect of asset-backed securities regulations that commenters
believe may be improved, including additional amendments to Regulation
AB that should be considered. Please be as specific as possible in your
discussion and analysis of any additional issues. We particularly
welcome comments on any costs, burdens, or benefits that may result
from possible regulatory responses related to the items identified in
this release or otherwise proposed by commenters.
VI. Regulatory Planning and Review
This concept release and request for comments is a significant
regulatory action under Executive Order 12866, as amended, and has been
reviewed by the Office of Management and Budget.
VII. Conclusion
We are interested in the public's views regarding the matters
discussed in this concept release. We recognize the public interest is
served by opportunities to invest in a variety of securities, including
asset-backed securities and, in this regard, we seek the public's input
on ways to reduce the barriers to entering the registered ABS market,
expand registration, and increase liquidity in the ABS market in
general. For RMBS market participants, in particular, reducing barriers
may result in a wider investor base, which could potentially increase
financing available for housing markets, while also renewing
opportunities for investors to benefit from the publicly available
disclosure and greater transparency that registered offerings provide.
We encourage all interested parties to submit comments on the topics
being considered in this concept release. If possible, please reference
the specific question numbers or sections of the release when
submitting comments.
By the Commission.
Dated: September 26, 2025.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-19152 Filed 9-30-25; 8:45 am]
BILLING CODE 8011-01-P