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Daily Rules, Proposed Rules, and Notices of the Federal Government

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 240, and 249

[Release Nos. 33-9148; 34-63029; File No. S7-24-10]

RIN 3235-AK75

Disclosure for Asset-Backed Securities Required by Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act

AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
SUMMARY: Pursuant to Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act1 we are proposing rules related to representations and warranties in asset-backed securities offerings. Our proposals would require securitizers of asset-backed securities to disclose fulfilled and unfulfilled repurchase requests across all transactions. Our proposals would also require nationally recognized statistical rating organizations to include information regarding the representations, warranties and enforcement mechanisms available to investors in an asset-backed securities offering in any report accompanying a credit rating issued in connection with such offerings, including a preliminary credit rating.

1Public Law 111-203 (July 21, 2010).

DATES: Comments should be received on or before November 15, 2010.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments

* Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml);

* Send an e-mail torule-comments@sec.gov.Please include File Number S7-24-10 on the subject line; or

* Use the Federal Rulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number S7-24-10. This file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments are also available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: Rolaine Bancroft, Attorney-Advisor, in the Office of Rulemaking, at (202) 551-3430, Division of Corporation Finance, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-3628 or, with respect to proposed Rule 17g-7, Joseph I. Levinson, Special Counsel, at (202) 551-5598; Division of Trading and Markets, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-3628.
SUPPLEMENTARY INFORMATION:

We are proposing amendments to Items 1104 and 11212 of Regulation AB3 (a subpartof Regulation S-K) under the Securities Act of 1933 (“Securities Act”).4 We also are proposing to add Rules 15Ga-15 and 17g-76 and Form ABS-15G7 under the Securities Exchange Act of 1934 (“Exchange Act”).8

217 CFR 229.1104 and 17 CFR 229.1121.

317 CFR 229.1100 through 17 CFR 229.1123.

415 U.S.C. 77aet seq.

517 CFR 240.15Ga-1.

617 CFR 240.17g-7.

717 CFR 249.1300.

815 U.S.C. 78aet seq.

Table of Contents I. Background II. Discussion of Proposals A. Proposed Disclosure Requirements for Securitizers 1. Definition of Exchange-Act ABS for Purposes of Rule 15Ga-1 2. Definition of Securitizer for Purposes of Rule 15Ga-1 3. Disclosures Required by Proposed Rule 15Ga-1 4. Proposed Form ABS-15G 5. Offshore Sales of Exchange Act-ABS B. Proposed Disclosure Requirements in Regulation AB Transactions C. Proposed Disclosure Requirements for NRSROs III. Transition Period IV. General Request for Comments V. Paperwork Reduction Act A. Background B. PRA Reporting and Cost Burden Estimates 1. Form ABS-15G 2. Rule 15Ga-1 3. Forms S-1 and S-3 4. Form 10-D 5. Regulation S-K 6. Rule 17g-7 7. Summary of Proposed Changes to Annual Burden Compliance in Collection of Information 8. Solicitation of Comments VI. Benefit-Cost Analysis A. Benefits B. Costs C. Request for Comment VII. Consideration of Burden on Competition and Promotion of Efficiency, Competition and Capital Formation VIII. Small Business Regulatory Enforcement Fairness Act IX. Regulatory Flexibility Act Certification X. Statutory Authority and Text of Proposed Rule and Form Amendments I. Background

This release is one of several that the Commission is required to issue to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) related to asset-backed securities (“ABS”). In this release, we propose rules to implement Section 943 of the Act, which requires the Commission to prescribe regulations on the use of representations and warranties in the market for asset-backed securities:

(1) To require any securitizer to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by securitizer, so that investors may identify asset originators with clear underwriting deficiencies; and

(2) To require each nationally recognized statistical rating organization (“NRSRO”) to include, in any report accompanying a credit rating for an asset-backed securities offering, a description of (A) the representations, warranties and enforcement mechanisms available to investors; and (B) how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities.9

9 SeeSection 943 of the Act.

The Act requires us to adopt these rules within 180 days of enactment of the Act.

In April of 2010, we proposed rules that would revise the disclosure, reporting and offering process for asset-backed securities (the “2010 ABS Proposing Release”).10 Among other things, the 2010 ABS Proposing Release proposed new disclosure requirements with respect to repurchase requests. Specifically, we proposed that issuers disclose in prospectuses the repurchase demand and repurchase and replacement activity for the last three years of sponsors of asset-backed transactions or originators of underlying pool assets if they are obligated to repurchase assets pursuant to the transaction agreements.11 These disclosure requirements would apply to offerings of ABS registered under the Securities Act or ABS offered and sold without registration in reliance upon Securities Act rules, which includes both offerings eligible for Rule 144A resales and other offerings conducted in reliance on exemptions from registration. We also proposed that issuers disclose the repurchase demand and repurchase and replacement activity concerning the asset pool on an ongoing basis in periodic reports.12 As described in Section II.B. below, we are re-proposing the disclosure requirements with respect to repurchase requests in Regulation AB in order to conform the disclosures to those required by Section 943 of the Act.

10 See Asset Backed Securities, SEC Release No. 33-9117 (April 7, 2010) [75 FR 23328] (the “2010 ABS Proposing Release”).

11Depending on the transaction, the originator of the assets or, most typically, the sponsor of the securities—who could also function as the originator—would be the obligated party.Seepreviously proposed Items 1104(f) and 1110(c) of Regulation AB in the 2010 ABS Proposing Release.

12 Seepreviously proposed Item 1121(c) of Regulation AB in the 2010 ABS Proposing Release.

In the underlying transaction agreements for an asset securitization, sponsors or originators typically make representations and warranties relating to the pool assets and their origination, including about the quality of the pool assets. For instance, in the case of residential mortgage-backed securities, one typical representation and warranty is that each of the loans has complied with applicable federal, state and local laws, including truth-in-lending, consumer credit protection, predatory and abusive laws and disclosure laws. Another representation that may be included is that no fraud has taken place in connection with the origination of the assets on the part of the originator or any party involved in the origination of the assets. Upon discovery that a pool asset does not comply with the representation or warranty, under transaction covenants, an obligated party, typically the sponsor, must repurchase the asset or substitute a different asset that complies with the representations and warranties for the non-compliant asset. The effectiveness of the contractual provisions related to representations and warranties has been questioned and lack of responsiveness by sponsors to potential breaches of the representations and warranties relating to the pool assets has been the subject of investor complaint.13

13As we noted in the 2010 ABS Proposing Release, transaction agreements typically have not included specific mechanisms to identify breaches of representations and warranties or to resolve a question as to whether a breach of the representations and warranties has occurred. Thus, these contractual agreements have frequently been ineffective because, without access to documents relating to each pool asset, it can be difficult for the trustee, which typically notifies the sponsor of an alleged breach, to determine whether or not a representation or warranty relating to a pool asset has been breached. In the 2010 ABS Proposing Release, the Commission proposed a condition to shelf eligibility that would require a provision in the pooling and servicing agreement that would require the party obligated to repurchase the assets for breach of representations and warranties to periodically furnish an opinion of an independent third party regarding whether the obligated party acted consistently with the terms of the pooling and servicing agreement with respect to any loans that the trustee put back to the obligated party for violation of representations and warranties and which were not repurchased.SeeSection II.A.3.b. of the 2010 ABS Proposing Release.See alsothe Committee on Capital Markets Regulation,The Global Financial Crisis: A Plan for Regulatory Reform, May 2009, at 135 (noting that contractual provisions have proven to be of little practical value to investors during the crisis);see also Investors Proceeding with Countrywide Lawsuit, Mortgage Servicing News, Feb. 1, 2009 (describing class action investor suit against Countrywide in which investors claim that language in the pooling and servicing agreements requires the seller/servicer to repurchase loans that were originated with “predatory” or abusive lending practices) and American Securitization Forum,ASF Releases Model Representations and Warranties to Bolster Risk Retention and Transparency in Mortgage Securitizations, (Dec. 15, 2009), available at http://www.americansecuritization.com.It has been reported that only large ABS investors, such as Fannie Mae and Freddie Mac, have been able to effectively exercise repurchase demands.SeeAparajita Saha-Bubna, “Repurchased Loans Putting Banks in Hole,”Wall Street Journal(Mar. 8, 2010) (noting that most mortgages put back to lenders are coming from Fannie Mae and Freddie Mac).

II. Discussion of Proposals A. Proposed Disclosure Requirements for Securitizers

We are proposing to add new Rule 15Ga-1 to implement Section 943(2) of the Act. This proposed rule would require any securitizer of asset-backed securities to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by securitizer, so that investors may identify asset originators with clear underwriting deficiencies. Under our proposals, a securitizer would provide the disclosure by filing new proposed Form ABS-15G.

1. Definition of Exchange Act-ABS for Purposes of Rule 15Ga-1

The Act amended the Exchange Act to include a definition of an “asset-backed security” and Section 943 of the Act references that definition.14 The statutory definition of an asset-backed security (“Exchange Act-ABS”) is much broader than the definition of an asset-backed security in Regulation AB (“Reg AB-ABS”).15 The definition of an Exchange Act-ABS includes securities that are typically sold in transactions that are exempt from registration under the Securities Act, such as collateralized debt obligations (“CDOs”), as well as securities issued or guaranteed by a government sponsored entity, such as Fannie Mae and Freddie Mac.16 Similarly, if a municipal entity issues securities collateralized by a self-liquidating pool of loans that allow holders of the securities to receive payments that depend primarily on cash flow from those loans, that security would fall within the definition of an Exchange Act-ABS.17 Since Section 943 uses the broader Exchange Act-ABS definition, our proposed Rule 15Ga-1 would require a securitizer to provide disclosures relating to all asset-backed securities that fall within the statutory definition, whether or not sold in Securities Act registered transactions. However, as we discuss further below, even if a security meets the definition of an Exchange Act-ABS, the new disclosure requirement would not be triggered if the underlying transaction agreements do not contain a covenant to repurchase or replace an asset.

14Section 3(a)(77) of the Exchange Act provides that the term “asset backed security” means 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, including a collateralized mortgage obligation; a collateralized debt obligation; a collateralized bond obligation; a collateralized debt obligation of asset-backed securities; a collateralized debt obligation of collateralized debt obligations; and a security that the Commission, by rule, determines to be an asset-backed security for purposes of this section; and does not include a security issued by a finance subsidiary held by the parent company or a company controlled by the parent company, if none of the securities issued by the finance subsidiary are held by an entity that is not controlled by the parent company. Section 3(a)(77) of the Exchange Act, as amended by the Act.

15In 2004, we adopted the definition of “asset-backed security” in Regulation AB. The definition and our interpretations of it are intended to establish parameters for the types of securities that are appropriate for the alternate disclosure and regulatory regime provided in Regulation AB and the related rules for Form S-3 registration of ABS. The definition does not mean that public offerings of securities outside of these parameters, such as synthetic securitizations, may not be registered with the Commission, but only that the alternate regulatory regime is not designed for those securities. The definition does mean that such securities must rely on non-ABS form eligibility for registration, including shelf registration.SeeSection III.A.2 ofAsset-Backed Securities, SEC Release 33-8518 (January 7, 2005) [70 FR 1506] (the “2004 ABS Adopting Release”) and Item 1101(c) of Regulation AB [17 CFR 1101(c)].

16Government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac purchase mortgage loans and issue or guarantee mortgage-backed securities (MBS). MBS issued or guaranteed by these GSEs have been and continue to be exempt from registration under the Securities Act and reporting under the Exchange Act. For more information regarding GSEs,seeTask Force on Mortgage-Backed Securities Disclosure, “Staff Report: Enhancing Disclosure in the Mortgage-Backed Securities Markets” (Jan. 2003) available athttp://www.sec.gov/news/studies/mortgagebacked.htm.

17For a discussion of municipal ABS,see generallyRobert A. Fippinger, The Securities Law of Public Finance vol. 1, § 1:6.2[B], 1-70—1-72 (2d ed., Practicing Law Institute 2009).

Request for Comment:

1. Is it clear what types of securities a securitizer would have to provide representation and warranty repurchase disclosure about under proposed Rule 15Ga-1? If not, please identify which securities are not clearly covered and the reasons why those securities are not clearly included or excluded by the proposal.

2. Should we provide further guidance regarding the application of proposed Rule 15Ga-1 to securities issued by municipal entities that would fall within the definition of Exchange Act-ABS? Is it clear what types of municipal securities a municipal securitizer would have to provide representation and warranty repurchase disclosure about under proposed Rule 15Ga-1? If not, please identify those types of municipal securities that are not clearly covered and explain why they are not clearly included or excluded by the proposal.

2. Definition of Securitizer for Purposes of Rule 15Ga-1

Section 943 and proposed Rule 15Ga-1 impose the disclosure obligation on a “securitizer” as defined in the Exchange Act. The Act amended the Exchange Act to include the definition of a “securitizer.” Under the Exchange Act, a securitizer is either:

(A) An issuer of an asset-backed security; or

(B) A person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuer.18

18 SeeSection 15G(a)(3) of the Exchange Act, as amended by the Act.

The definition of securitizer is not specifically limited to entities that undertake transactions that are registered under the Securities Act or conducted in reliance upon any particular exemption. Consequently, we believe it is intended to apply to any entity or person that issues or organizes an Exchange Act-ABS as specified in Section 15G(a)(3) of the Exchange Act. As a result, proposed Rule 15Ga-1 would require any entity coming within the Section 15G(a)(3) definition of securitizer, including government sponsored entities such as Fannie Mae, Freddie Mac, or a municipal entity, to provide the proposed disclosures. Further, as noted above, Section 943 and Section 15G(a)(3) do not distinguish between securitizers of Exchange Act-ABS in registered or unregistered transactions, and our proposed Rule 15Ga-1 would apply equally to registered and unregistered transactions.

With respect to registered transactions and the definitions of transaction parties in Regulation AB, sponsors and depositors19 both fall within the statutory definition of securitizer. A sponsor typically initiates a securitization transaction by selling or pledging to a specially created issuing entity a group of financial assets that the sponsor either has originated itself or has purchased in the secondary market.20 In some instances, the transferof assets is a two-step process: the financial assets are transferred by the sponsor first to an intermediate entity, often a limited purpose entity created by the sponsor for a securitization program and commonly called a depositor, and then the depositor will transfer the assets to the issuing entity for the particular asset-backed transaction.21 Because both sponsors and depositors fit within the statutory definition of securitizers, both entities would have the disclosure responsibilities under proposed Rule 15Ga-1. However, if a sponsor filed all disclosures proposed to be required under Rule 15Ga-1, which would include disclosures of the activity of affiliated depositors, Rule 15Ga-1 would provide that those affiliated depositors would not have to separately provide and file the same disclosures. Such disclosure would be duplicative and would not provide any additional useful information, since as noted above, the depositor usually serves as an intermediate entity of a transaction initiated by a sponsor.22

19Securities Act Rule 191 [17 CFR 230.191] generally defines an issuer as the depositor.

20A sponsor, as defined in Regulation AB, is the person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuing entity.SeeItem 1101(l) of Regulation AB [17 CFR 229.1101(l)]. Sponsors of asset-backed securities often include banks, mortgage companies, finance companies, investment banks and other entities that originate or acquire and package financial assets for resale asABS.SeeSection II. of the 2004 ABS Adopting Release.

21A depositor receives or purchases and transfers or sells the pool assets to the issuing entity.SeeItem 1101(e) of Regulation AB [17 CFR 229.1101(e)]. For asset-backed securities transactions where there is not an intermediate transfer of assets from the sponsor to the issuing entity, the term depositor refers to the sponsor. For asset-backed securities transactions where the person transferring or selling the pool assets is itself a trust, the depositor of the issuing entity is the depositor of that trust.

22There may be other situations where multiple affiliated securitizers would have individual reporting obligations under proposed Rule 15Ga-1 with respect to a particular transaction. Therefore, we propose that if one securitizer has filed all the disclosures required in order to meet the obligations under Rule 15Ga-1, which would include disclosures of the activity of affiliated securitizers, those affiliated securitizers would not be required to separately provide and file the same disclosures.

Request for Comment:

3. Is it clear which entities or persons would have disclosure responsibilities under proposed Rule 15Ga-1? If not, please identify those possible entities or persons, describe their role in the transaction, and explain why they are not clearly included or excluded by the definition of a securitizer.

4. Should we provide further guidance regarding the application of proposed Rule 15Ga-1 to municipal issuers that are within the definition of securitizers? Is it clear which municipal entities would have disclosure responsibilities under proposed Rule 15Ga-1? If not, please identify those municipal entities that are not clearly covered and explain why they are not clearly included or excluded by the proposal.

3. Disclosures Required by Proposed Rule 15Ga-1

In accordance with Section 943 of the Act, we are proposing new Rule 15Ga-123 to require any securitizer of an Exchange Act-ABS to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by securitizer, so that investors may identify asset originators with clear underwriting deficiencies. We are proposing that, if the underlying transaction agreements provide a covenant to repurchase or replace an underlying asset for breach of a representation or warranty, then a securitizer would be required to provide the information described below for all assets originated or sold by the securitizer that were the subject of a demand for repurchase or replacement with respect to all outstanding Exchange Act-ABS held by non-affiliates of the securitizer. If the underlying agreements of an Exchange Act-ABS do not contain a covenant to repurchase or replace an underlying asset, then no transaction party would be entitled to demand repurchase or replacement. Requiring securitizers to report the activity of those Exchange Act-ABS with no demands might give an incorrect impression of sound underwriting. As discussed further below, initially, we are proposing that a securitizer provide the repurchase history for the last five years by filing Form ABS-15G at the time a securitizer first offers an Exchange Act-ABS or organizes and initiates an offering of Exchange Act-ABS, registered or unregistered, after the effective date of the proposed rules, as adopted. Going forward, a securitizer would be required to provide the disclosures for all outstanding Exchange Act-ABS on a monthly basis by filing Form ABS-15G. Information would not be required for the time period prior to the five-year look back period of the initial filing.

23We propose to adopt this rule as an Exchange Act rule because of the relationship with other requirements under the Exchange Act and other statutory requirements we are implementing.

Section 943(2) requires disclosure of fulfilled and unfulfilled repurchase requests. It does not limit the required disclosure to those relating only to demands successfully made by the trustee. Therefore our proposal would require tabular disclosure of assets subject to any and all demands for repurchase or replacement of the underlying pool assets as long as the transaction agreements provide a covenant to repurchase or replace an underlying asset. For instance, we note that demands for repurchase may not ultimately result in a repurchase or replacement pursuant to the terms of the transaction agreement, either because of withdrawn demands or incomplete demands that did not meet the requirements of a valid demand pursuant to the transaction agreements.24 Furthermore, it may be the case that a repurchase or replacement may occur whether or not it is determined that the obligated party was required to repurchase the asset pursuant to the terms of the transaction agreement.25 Securitizers would be permitted to footnote the table to provide additional explanatory disclosures to describe the data disclosed. We also note that investors have demanded that trustees enforce repurchase covenants because transaction agreements do not typically contain a provision for an investor to directly make a repurchase demand.26 As we stated earlier, Section 943(2) does not limit the required disclosures to those demands successfully made by the trustee; therefore our proposals wouldrequire investor demands upon a trustee be included in the table, irrespective of the trustee's determination to make a repurchase demand on a securitizer based on the investor request. We are concerned, however, that initially a securitizer may not be able to obtain complete information from a trustee because it may not have tracked investor demands. Because securitizers may not have access to historical information about investor demands made upon the trustee prior to the effective date of the proposed rules, we are proposing an instruction that a securitizer may disclose in a footnote, if true, that a securitizer requested and was able to obtain only partial information or unable to obtain any information with respect to investor demands to a trustee that occurred prior to the effective date of the proposed rules and state that the disclosures do not contain all demands made prior to the effective date.27

24 See e.g., comment letters of ASF, Bank of America, Community Mortgage Banking Project, CRE Finance Council and Mortgage Bankers Association on the 2010 ABS Proposing Release. The public comments are available athttp://www.sec.gov/comments/s7-08-10/s70810.shtml.

25See Section XI.C.2. of the 2010 ABS Proposing Release where we note that disclosures about an originator's or sponsor's refusal to repurchase or replace assets put back to them for breach of representations and warranties might create incentives for originators to agree to repurchase or replace such assets even in cases where these assets were not in breach. We explained that if investors regard such disclosures as indicative of a willingness to comply with representations and warranties in the future, then originators and sponsors might try to preserve their reputation by taking back assets even when they do not have to do so. This might create an incentive for sponsors and possibly trustees to ask for repurchase or replacement of poorly performing assets that represent no breach of representations and warranties. However, a commentator on the 2010 ABS Proposing Release stated that in certain situations, it may have the opposite effect, where the threat of a disclosure requirement may make a sponsor worry that a large number of successful repurchase claims could indicate that its initial due diligence, or the originator's loan quality was poor.Seeletter from Commonwealth of Massachusetts Attorney General.

26 SeeJody Shenn, “BNY Won't Investigate Countrywide Mortgage Securities,”Bloomberg Business Week(Sep. 13, 2010) available athttp://www.businessweek.com/news/2010-09-13/bny-won-t-investigate-countrywide-mortgage-securities.html(noting the difficulties that investors are facing to enforce contracts with respect to repurchase demands) and Al Yoon, “NY Fed joins other investors on loan repurchase bid,” Reuters (Aug. 4, 2010) available athttp://www.reuters.com/article/idUSTRE6736DZ20100804(noting that investors have been frustrated with trustees and servicers and are banding together to force trustees to act on repurchase requests). See also Kevin J. Buckley, “Securitization Trustee Issues,” The Journal of Structured Finance (Summer 2010) (discussing investors demands upon trustees to enforce sellers' repurchase obligations).

27This situation, as well as others, may arise where the disclosures required by proposed Rule 15Ga-1 alone may necessitate the disclosure of additional information in order to render the information not misleading. Securitizers would need to consider the antifraud provisions under the federal securities laws to determine what other information, if any, may need to be provided in offering materials given to an investor.

We are proposing that securitizers provide the information in the following tabular format in order to aid understanding:

Name of issuing entity Check if registered Name of originator Assets that were subject of demand (#) ($) (% of pool) Assets that were repurchased or replaced (#) ($) (% of pool) Assets that were not repurchased or replaced (#) ($) (% of pool) Assets pending repurchase or replacement (#) ($) (% of pool) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) Asset Class X Issuing Entity A
  • CIK #
  • X Originator 1
    Originator 2 Issuing Entity B Originator 3 Total # $ # $ # $ # $ Asset Class Y Issuing Entity C Originator 2 Originator 3 Issuing Entity D CIK# X Originator 1 Total # $ # $ # $ # $

    A single securitizer may have several securitization programs to securitize different types of asset classes. Therefore, in order to organize the information in a manner that would be useful for investors, we are proposing that the securitizer disclose the asset class and group the information in the table by asset class (column (a)). We are also proposing that securitizers list the names of all the issuing entities28 of Exchange Act-ABS, listed in order of the date of formation of the issuing entity in column (a) so that investors may identify the securities that contain the assets subject to the demands for repurchase and when the issuing entity was formed.29 Because the Act requires disclosure with respect to all Exchange Act-ABS, Rule 15Ga-1 would require securitizers to provide disclosure for all Exchange Act-ABS where the underlying agreements include a repurchase covenant, regardless of whether the transaction was registered with the Commission. Additionally, if any of the Exchange Act-ABS of the issuing entity were registered under the Securities Act, the Central Index Key (“CIK”) number of the issuing entity would be required so that investors may locate additional publicly available disclosure, if applicable.

    28Issuing entity is defined in Item 1101(f) of Regulation AB [17 CFR 229.1101(f)] as the trust or other entity created at the direction of the sponsor or depositor that owns or holds the pool assets and in whose name the asset-backed securities supported or serviced by the pool assets are issued.

    29In a stand-alone trust structure, usually backed by a pool of amortizing loans, a separate issuing entity is created for each issuance of ABS backed by a specific pool of assets. The date of formation of the issuing entity would most likely be at the same time of the issuance of the ABS. In a securitization using a master trust structure, the ABS transaction contemplates future issuances of ABS by the same issuing entity, backed by the same, but expanded, asset pool. Master trusts would organize the data using the date the issuing entity was formed, which would most likely be earlier than the date of the most recent issuance of securities.

    So that investors may distinguish between transactions that were registered, and those that were not, we are also proposing that securitizers check the box in column (b) to indicate whether any Exchange Act-ABS of the issuing entity were registered under the Securities Act. We believe this indicator would provide important information so an investor may locate additional publicly available disclosure for registered transactions, if applicable.

    The Act also provides that the disclosure is required “so that investors may identify asset originators with clear underwriting deficiencies.”30 Therefore, we are proposing that securitizers further break out the information by originator of the underlying assets in column (c).

    30 SeeSection 943(2) of the Act.

    Because the Act requires disclosure of all “fulfilled and unfulfilled” repurchase requests, we are proposing in Rule 15Ga-1 that securitizers disclose the assets that were subject of the demand, the assets that were repurchased or replaced and the assets that were not repurchased or replaced. In order to provide investors with useful information about the repurchase requests in relation to the overall pool of assets, we are proposing that securitizers present the number, outstanding principal balance and percentage by principal balance of the assets that were subject of demand to repurchase or replace for breach of representations and warranties (columns (d) through (f)); the number, outstanding principal balance and percentage by principal balance of assets that were repurchased or replaced for breach of representations and warranties (columns (g) through (i)); and the number, outstanding principal balance and percentage by principal balance of assets that were not repurchased or replaced for breach of representations and warranties (columns (j) through (l)).31

    31If the ABS were offered in a registered transaction, an investor may be able to locate additional detailed information. In the 2010 ABSProposing Release, the Commission also proposed that issuers be required to provide loan-level disclosure of repurchase requests on an ongoing basis. Under the proposal, an issuer, with each periodic report on a Form 10-D, would have to indicate whether a particular asset has been repurchased from the pool. If the asset has been repurchased, then the registrant would have to indicate whether a notice of repurchase has been received, the date the asset was repurchased, the name of the repurchaser and the reason for the repurchase.Seepreviously proposed Item 1(i) of Schedule L-D [Item 1121A of Regulation AB] in the 2010 ABS Proposing Release.

    Additionally, we are proposing to require disclosure of the number, outstanding principal balance and percentage by principal balance of the assets that are pending repurchase or replacement and proposing an instruction to include a footnote to the table that provides narrative disclosure of the reasons why repurchase or replacement is pending (columns (m) through (o)). For example, the securitizer would indicate by footnote if pursuant to the terms of a transaction agreement, assets have not been repurchased or replaced pending the expiration of a cure period. Without these additional columns, the disclosures about fulfilled and unfulfilled repurchase requests of a securitizer alone may not provide clear and complete disclosure about the repurchase request history. For instance, some transaction agreements specify a cure period that typically lasts 60-90 days.32 Including those repurchase requests that are within a cure period as assets that were not repurchased or replaced (columns (j) through (l)) would provide inaccurate disclosure about the current pending status of those repurchase requests.

    32In response to our ABS 2010 Proposing Release, some commentators expressed concern about the timing of providing repurchase disclosures, noting that the person preparing repurchase disclosures may not be in a position to know what percentage of demands made in a period did not result in repurchase due to cure periods provided in the transaction agreements that typically last 60-90 days. See letters from the American Securitization Forum (“ASF”) and Wells Fargo & Company on the 2010 ABS Proposing Release.

    Lastly, we are proposing that the table include totals by asset class for columns that require numbers of assets and principal amounts (columns (d), (e), (g), (h), (j), (k), (m) and (n)).33

    33 Seeletter from Association of Mortgage Investors on the 2010 ABS Proposing Release (requesting that disclosure of information regarding claims made and satisfied under representation and warranties provisions of the transaction documents be broken down by securitization and then aggregated).

    The Act does not specify when the disclosure should first be provided, or the frequency with which it should be updated. We are proposing to require that securitizers first be required to file Form ABS-15G at the time a securitizer first offers an Exchange Act-ABS or organizes and initiates an offering of Exchange Act-ABS, registered or unregistered, after the effective date of the proposed rules, as adopted.34 The initial filing would include the repurchase demand and repurchase and replacement history of all outstanding Exchange Act-ABS of the securitizer with respect to which the underlying transaction agreements provide a covenant to repurchase or replace an underlying asset for breach of a representation or warranty for the last five years. The initial filing would be required to include all of the information in proposed Rule 15Ga-1, even if there had been no demands to repurchase or replace assets to report with respect to any issuing entity of an Exchange-Act ABS securitized by a securitizer. We believe that the ability to compare all issuing entities and the originators of the underlying pools would provide useful information for investors by making the disclosures comparable across securitizers, so that consistent with the purposes of Section 943, an investor may identify originators with clear underwriting deficiencies.

    34Filing proposed Form ABS-15G would not foreclose the reliance of an issuer on the private offering exemption in the Securities Act of 1933 and the safe harbor for offshore transactions from the registration provisions in Section 5 [15 U.S.C. 77e]. However, the inclusion of information beyond that required in proposed Rule 15Ga-1 may jeopardize such reliance by constituting a public offering or conditioning the market for the ABS being offered under an exemption.

    While Section 943 does not limit the time period for disclosure, we have proposed in Rule 15Ga-1 to limit the disclosure to Exchange Act-ABS that remain outstanding and are held by non-affiliates because we believe securitizers would more likely have ready access to this information, and it is more likely to be relevant to investors than information about securities that are no longer outstanding and held by non-affiliates. While we believe that Congress intended to provide investors with historical information about repurchase activity so that investors may identify asset originators with clear underwriting deficiencies,35 we also recognize that securitizers may not have historically collected the information required under our proposal.36 We are proposing that the initial disclosures be limited to the last five years of activity in order to balance the requirements of Section 943 and the burden on securitizers to provide the historical disclosures. Therefore, any demand, repurchase or replacement that had occurred within the five years immediately preceding the initial filing, as of the end of the preceding month, would need to be disclosed in the table.37

    35 Seeletter from Securities Industry Financial Markets Association (“SIFMA”) on the 2010 ABS Proposing Release (noting that their investor members believe that issuers should be required to make disclosures about repurchase requests regardless of the date of the securitization).

    36 See e.g.,comment letters from ASF, Bank of America, Financial Services Roundtable and the Mortgage Bankers Association on the 2010 ABS Proposing Release.

    37For the initial filing, we recognize that demands may have been made prior to the initial five-year look back date and that resolution may have occurred after that date. In this case, a securitizer would need to disclose that a demand was made, even though it occurred prior to the five-year look back date.

    We are also proposing that securitizers file proposed Form ABS-15G, periodically on a monthly basis with updated information so that, consistent with the purpose of Section 943 of the Act, an investor may monitor the demand, repurchase and replacement activity across all Exchange Act-ABS issued by a securitizer.38 For registered transactions, most ABS distribute payments monthly and file Forms 10-D on a monthly basis. Similarly, given the established frequency of reporting, we believe proposed Rule 15Ga-1 disclosure should be provided to investors on a monthly basis and filed on Form ABS-15G on EDGAR within 15 calendar days after the end of each calendar month.39

    38 Seeletter from Prudential Fixed Income Management on the 2010 ABS Proposing Release (noting that claims made against a sponsor should be included in offering materials and regularly reported, together with detail that clarifies the number of such claims that were accepted by the sponsor and the number of claims that were and were not approved).

    39Form 10-Ds are required to be filed within 15 days of each required distribution date on the asset-backed securities.SeeGeneral Instruction A.2. of Form 10-D [17 CFR 249.312]. Because securitizers may sponsor various asset classes, we believe it would be difficult to tie the timing requirements of Rule 15Ga-1 disclosure to the timing of payments on the securities.

    Under the proposal, securitizers would be required to continue periodic reporting through and until the last payment on the last Exchange Act-ABS outstanding held by a non-affiliate that was issued by the securitizer or an affiliate. We are also proposing that securitizers be required to file Form ABS-15G to provide a notice to terminate the reporting obligation and disclose the date the last payment was made.

    Request for Comment:

    5. Is the proposed requirement to require that any securitizer of an Exchange Act-ABS transaction disclose fulfilled and unfulfilled repurchase requests in a table appropriate? Wouldanother format be more appropriate or useful to investors?

    6. Should we require, as proposed, that securitizers list all previous issuing entities with currently outstanding ABS where the underlying transaction agreements include a repurchase covenant, even if there were no demands to repurchase or replace assets in that particular pool? Should we require, as proposed, that securitizers with currently outstanding Exchange Act-ABS held by non-affiliates list all originators related to every issuing entity even if there were no demands to repurchase or replace assets related to that originator for that particular pool? Put another way, would it be useful for investors to compare all the issuing entities and originators, related to one securitizer, listed in the table, so that investors may identify asset originators with clear underwriting deficiencies, as provided in the Act?

    7. Would it be appropriate for securitizers to omit the table if a securitizer had no prior demands for repurchases or replacements? If so, how would an investor be able to know why the securitizer omitted the disclosure? In lieu of a table that displayed no demands for repurchases or replacements, would it be appropriate for a securitizer to provide narrative or check box disclosure stating that no demands were made for any asset securitized by the securitizer?

    8. Is it appropriate to limit disclosure to Exchange Act-ABS that remain outstanding and held by non-affiliates, as proposed? Would such a limitation be consistent with the Act? Alternatively, should disclosure be required with respect to Exchange Act-ABS that are no longer outstanding? Would such disclosure reveal potentially important information? Would it be appropriate to require disclosure regarding Exchange Act-ABS that were outstanding during a recent period, such as one, three, or five years?

    9. Should the disclosure requirement only be applied prospectively,i.e.,disclosure would be required only with respect to repurchase demands and repurchases and replacements beginning with Exchange Act-ABS issued after the effective date of the rule? Should disclosure only be required with respect to repurchase activity after the effective date? If so, please explain why limiting disclosure to activity regarding Exchange Act-ABS issued after the effective date would be consistent with the Act, as it specifies that the disclosure be provided by any securitizer across all trusts.

    10. In implementing the requirements of Section 943, should the disclosure requirement initially be limited to the last five years, as proposed? Would a different time frame be more appropriate,e.g.,the last three, seven or ten years of activity? Underwriting standards of originators may change over time. While information regarding repurchases within a recent time period may assist investors in identifying originators with current underwriting deficiencies, is older information, such as information about repurchases within a time period of ten years, less useful in identifying current underwriting deficiencies?40 Would information that covers the last three, five, seven or ten years of repurchase activity provide investors with the information they need so that they “may identify asset originators with clear underwriting deficiencies”? To what extent would disclosure older than such a period add significant burdens and costs and produce information that would be of marginal utility to investors?

    40In a response to our 2010 ABS Proposing Release, the ASF noted in its comment letter that “the requirement to report three years worth of repurchase activity would potentially result in a flood of unhelpful disclosure about transactions involving unrelated asset classes, particularly with respect to sponsors or originators that are large, diversified financial institutions engaging in securitization and sales of multiple asset classes through affiliated but often separately managed business units.”

    11. Is our proposed instruction to permit securitizers to omit disclosure of investor demands made upon the trustee prior to the effective date of the proposed rules if the information is unavailable and provide footnote disclosure, if true, that the table omits such demands and that the securitizer requested and was unable to obtain the information appropriate? If not, how would securitizers obtain the information about investor demands upon a trustee prior to the effective date of the proposed rules, as adopted?

    12. Should the requirement only cover the last three, five, seven or ten years of repurchase requests on an ongoing basis? Would this format on an ongoing basis provide information in a more easily understandable manner? Would it still allow an investor to “identify asset originators with clear underwriting deficiencies”?

    13. Are there any other agreements, outside of the related transaction agreements for an asset-backed security that provide for repurchase demands and repurchases and replacements? If so, please tell us what those agreements are and why securitizers should be required to report the information, including why that information would be material to an investor in a particular asset-backed security.41

    41 Seecomment letter from Massachusetts Office of Attorney General on the 2010 ABS Proposing Release (noting that side letter agreements between a sponsor and an originator may contain early payment default warranties and that the existence of such warranties often have an effect upon the performance of a securitization).

    14. Is the information proposed to be required in the table appropriate? Is there any other information that should be presented in the table that would be useful to investors? Is the proposed disclosure regarding pending repurchase requests appropriate? Should we specify that securitizers provide more detail about the reasons why the assets were not repurchased or why the assets are pending repurchase or replacement? For example, should we require more detail such as the date of claim, the date of repurchase, whether claims have been referred to arbitration, whether the claims are in a cure period, and the costs associated and expenses born by each issuing entity?42 Should we require securitizers to provide narrative disclosure of the reasons why repurchase or replacement is pending, as proposed? If so, should we specify the level of detail to be provided regarding pending asset repurchase or replacement requests? For instance, should we specify categories for the reasons why the request is pending,e.g.,cure period, arbitration, etc.

    42 See e.g.,comment letters of Metropolitan Life Insurance Company and the SIFMA on the 2010 ABS Proposing Release.

    15. Section 943 of the Act requires that “all fulfilled and unfulfilled repurchase requests across all trusts” be disclosed. Should we require, as proposed, that all demands for repurchase be disclosed in the table? Some commentators on the 2010 ABS Proposing Release expressed concerns about disclosing demands for repurchase that ultimately did not result in a repurchase or replacement pursuant to the terms of the transaction agreement, either because of withdrawn demands or incomplete demands that did not meet the requirements of the transaction agreements.43 In order to address commentator's concerns, should we also require, by footnote to the table, disclosure of whether the repurchase or replacement was required by the transaction agreements or whether it occurred for some other reason? Should the disclosure indicate the type of representation or warranty that led to the repurchase or replacement?

    43 See e.g.,comment letters of ASF, Bank of America, Community Mortgage Banking Project, CRE Finance Council and Mortgage Bankers Association on the 2010 ABS Proposing Release.

    16. Is our proposal to require a securitizer to file its initial Form ABS-15G at the time it first offers Exchange-Act ABS or organizes and initiates an offering of Exchange Act-ABS after the implementation date of the proposed rules appropriate? What are other possible alternatives to trigger the initial filing obligation?

    17. Is our proposal to require the disclosure on a monthly basis appropriate? If not, what would be the appropriate interval for the disclosures,e.g.,quarterly or annually?

    18. Is our proposal to require that Form ABS-15G be filed within 15 calendar days after the end of each calendar month appropriate? If not, would a shorter or longer timeframe be more appropriate,e.g.,four days or twenty days? Please tell us why.

    19. We note that the transaction agreements for certain types of ABS, such as CDOs, may not typically contain a covenant to repurchase or replace an underlying asset. Is it appropriate to exclude, as proposed, those Exchange Act-ABS with transaction agreements that do not contain a covenant to repurchase or replace the underlying assets?

    20. Should the data in the table be tagged? If so, should the tagging be in XML or is a different tagging schema appropriate? If tagging is appropriate, would a phase-in period in which the disclosure would be provided without tagging pending completion of necessary technical specifications be appropriate? In order to tag the data, we would need to develop definitions that would result in consistent and comparable data across all issuing entities of all securitizers. For instance, how should we specify that securitizers tag the identity of an originator to provide consistency across disclosures provided by all securitizers? Should we assign codes that would specifically identify each originator? Or would text entry of the name of the originator be sufficient? Similarly, should we specify a unique code for all the issuing entities? For example, registered transactions would have a CIK number assigned for the issuing entity; however, unregistered transactions may not have a unique method of identification. What other definitions or responses would we need to specify in order to make the disclosure comparable across originators and securitizers?

    4. Proposed Form ABS-15G

    The disclosures required by proposed Rule 15Ga-1 do not fit neatly within the framework of existing Securities Act and Exchange Act Forms because those forms relate to registered ABS transactions and unregistered ABS transactions are not required to file those forms.44 Therefore, we are proposing new Form ABS-15G to be filed on EDGAR so that parties obligated to make disclosures related to Exchange Act-ABS under Rule 15Ga-1 could file the disclosures on EDGAR. As discussed above, proposed Rule 15Ga-1 would require securitizers to disclose repurchase demand and repurchase and replacement history with respect to registered and unregistered Exchange Act-ABS transactions for as long as the securitizer has ABS outstanding and held by non-affiliates. Consistent with current filing practices for other ABS forms,45 we are proposing, for purposes of making the disclosures required by Rule 15Ga-1, that Form ABS-15G be signed by the senior officer of the securitizer in charge of the securitization.

    44However, a portion of the information required by proposed Rule 15Ga-1 would be required in a registration statement and in periodic reports. We discuss those proposals below.

    45The Form 10-K report for ABS issuers must be signed either on behalf of the depositor by the senior officer in charge of securitization of the depositor, or on behalf of the issuing entity by the senior officer in charge of the servicing.SeeGeneral Instruction J.3. of Form 10-K [17 CFR 249.310] In addition, the certifications for ABS issuers that are required under Section 302 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241] must be signed either on behalf of the depositor by the senior officer in charge of securitization of the depositor if the depositor is signing the Form 10-K report, or on behalf of the issuing entity by the senior officer in charge of the servicing function of the servicer if the servicer is signing the Form 10-K report. In our 2010 ABS Proposing Release, we also proposed to require that the senior officer in charge of securitization of the depositor sign the registration statement (either on Form SF-1 or Form SF-3) for ABS issuers.SeeSection II.F. of the 2010 ABS Proposing Release.

    Request for Comment:

    21. Is our proposal to require proposed Rule 15Ga-1 disclosures on new Form ABS-15G appropriate?

    22. Securitizers would be required, as proposed, to file Form ABS-15G on EDGAR. If a securitizer has already been issued a CIK number, we would expect Form ABS-15G to be filed under that number. However, a securitizer may already be a registrant that has other reporting requirements under the Securities Act or the Exchange Act. Should we assign a different file number to Form ABS-15G filings in order to differentiate Form ABS-15G filings made by a registrant in its capacity as a securitizer, from other filings made pursuant to its own reporting requirements under the Securiti