On September 27, 2010, the Board of Directors of the Federal Deposit Insurance Corporation (“FDIC”) adopted new rules (the “Securitization Rules”) to apply to securitizations issued after the expiration on December 31, 2010 of the transitional safe harbor rule then in effect. Like the earlier safe harbor provisions, the Securitization Rules address the treatment of securitization transactions in the context of the receivership or conservatorship of an insured depository institution (“IDI”). These new rules were meant to clarify the criteria a securitization must satisfy in order for the FDIC to forebear exercising its statutory repudiation powers with respect to assets transferred into such securitization by an IDI. However, the broadly framed nature of certain of these criteria raised questions with respect to their practical application, especially with regard to RMBS structures. In August 2011, representa-tives of the American Securitization Forum (“ASF”) met with the FDIC to clarify several provisions of the Securitization Rules. On February 7, 2012, the FDIC responded to ASF’s interpretive requests with guidance on six aspects of the Securitization Rule: Disclosure, Servicer Best Practices, Reserve Fund for Repurchases, Underwriting of Obligations, Six-Credit Tranche Limitation, and Limitation on Advancing. The following is a discussion of these clarifications.

Disclosure

The Securitization Rule amended 12 C.F.R. Part 360 to include various disclosure requirements applicable to all securitization transactions, including the requirement that the sponsor, issuing entity and/or servicer, as applicable, provide disclosure regarding “the policies governing delinquencies, servicer advances, loss mitigation, and write-offs of financial assets….” The language, as amended, offered little guidance regarding what level of detail was needed to satisfy these disclosure requirements (e.g., would servicing manuals need to be reproduced as part of the disclosure materials). In its response to ASF, the FDIC indicated that this requirement would be satisfied by descrip-tions of the material aspects of the material provisions of such policies. For these purposes, “materiality” could be interpreted based on federal securities law standards of materiality.

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