(a) Definitions. For purposes of this section, the following definitions
apply:
Revolving pool securitization means
an issuing entity that is established to issue on multiple issuance
dates more than one series, class, subclass, or tranche of asset-backed
securities that are collateralized by a common pool of securitized
assets that will change in composition over time, and that does not
monetize excess interest and fees from its securitized assets.
Seller’s interest means an ABS interest or
ABS interests:
(1) Collateralized by the securitized assets
and servicing assets owned or held by the issuing entity, other than
the following that are not considered a component of seller’s interest:
(i) Servicing assets that have been allocated as collateral only
for a specific series in connection with administering the revolving
pool securitization, such as a principal accumulation or interest
reserve account; and
(ii) Assets that are not eligible under the terms of the securitization
transaction to be included when determining whether the revolving
pool securitization holds aggregate securitized assets in specified
proportions to aggregate outstanding investor ABS interests issued;
and
(2)
That is pari passu with each series of investor ABS interests
issued, or partially or fully subordinated to one or more series in
identical or varying amounts, with respect to the allocation of all
distributions and losses with respect to the securitized assets prior
to early amortization of the revolving securitization (as specified
in the securitization transaction documents); and
(3) That adjusts for fluctuations in the
outstanding principal balance of the securitized assets in the pool.
(b) General
requirement. A sponsor satisfies the risk retention requirements
of section 244.3 with respect to a securitization transaction for
which the issuing entity is a revolving pool securitization if the
sponsor maintains a seller’s interest of not less than 5 percent of
the aggregate unpaid principal balance of all outstanding investor
ABS interests in the issuing entity.
(c) Measuring the seller’s interest. In measuring
the seller’s interest for purposes of meeting the requirements of
paragraph (b) of this section:
(1) The unpaid principal balance of the
securitized assets for the numerator of the 5 percent ratio shall
not include assets of the types excluded from the definition of seller’s
interest in paragraph (a) of this section;
(2) The aggregate unpaid principal balance
of outstanding investor ABS interests in the denominator of the 5
percent ratio may be reduced by the amount of funds held in a segregated
principal accumulation account for the repayment of outstanding investor
ABS interests, if:
(i) The terms of the securitization
transaction documents prevent funds in the principal accumulation
account from being applied for any purpose other than the repayment
of the unpaid principal of outstanding investor ABS interests; and
(ii) Funds in that
account are invested only in the types of assets in which funds held
in an eligible horizontal cash reserve account pursuant to section
244.4 are permitted to be invested;
(3) If the terms of the securitization
transaction documents set minimum required seller’s interest as a
proportion of the unpaid principal balance of outstanding investor
ABS interests for one or more series issued, rather than as a proportion
of the aggregate outstanding investor ABS interests in all outstanding
series combined, the percentage of the seller’s interest for each
such series must, when combined with the percentage of any minimum
seller’s interest set by reference to the aggregate outstanding investor
ABS interests, equal at least 5 percent;
(4) The 5 percent test must be determined
and satisfied at the closing of each issuance of ABS interests to
investors by the issuing entity, and
(i) At least monthly
at a seller’s interest measurement date specified under the securitization
transaction documents, until no ABS interest in the issuing entity
is held by any person not a wholly-owned affiliate of the sponsor;
or
(ii) If the revolving
pool securitization fails to meet the 5 percent test as of any date
described in paragraph (c)(4)(i) of this section, and the securitization
transaction documents specify a cure period, the 5 percent test must
be determined and satisfied within the earlier of the cure period,
or one month after the date described in paragraph (c)(4)(i).
(d) Measuring
outstanding investor ABS interests. In measuring the amount of
outstanding investor ABS interests for purposes of this section, ABS
interests held for the life of such ABS interests by the sponsor or
its wholly-owned affiliates may be excluded.
(e) Holding and retention of the seller’s interest;
legacy trusts.
(1) Notwithstanding section 244.12(a),
the seller’s interest, and any offsetting horizontal retention interest
retained pursuant to paragraph (g) of this section, must be retained
by the sponsor or by one or more wholly-owned affiliates of the sponsor,
including one or more depositors of the revolving pool securitization.
(2) If one revolving
pool securitization issues collateral certificates representing a beneficial
interest in all or a portion of the securitized assets held by that
securitization to another revolving pool securitization, which in
turn issues ABS interests for which the collateral certificates are
all or a portion of the securitized assets, a sponsor may satisfy
the requirements of paragraphs (b) and (c) of this section by retaining
the seller’s interest for the assets represented by the collateral
certificates through either of the revolving pool securitizations,
so long as both revolving pool securitizations are retained at the
direction of the same sponsor or its wholly-owned affiliates.
(3) If the sponsor retains
the seller’s interest associated with the collateral certificates
at the level of the revolving pool securitization that issues those
collateral certificates, the proportion of the seller’s interest required
by paragraph (b) of this section retained at that level must equal
the proportion that the principal balance of the securitized assets
represented by the collateral certificates bears to the principal
balance of the securitized assets in the revolving pool securitization
that issues the ABS interests, as of each measurement date required
by paragraph (c) of this section.
(f) Offset for pool-level excess funding account. The 5 percent seller’s interest required on each measurement date
by paragraph (c) of this section may be reduced on a dollar-for-dollar
basis by the balance, as of such date, of an excess funding account
in the form of a segregated account that:
(1) Is funded in the event of a failure
to meet the minimum seller’s interest requirements or other requirement
to maintain a minimum balance of securitized assets under the securitization
transaction documents by distributions otherwise payable to the holder
of the seller’s interest;
(2) Is invested only in the types of assets in which funds held in
a horizontal cash reserve account pursuant to section 244.4 are permitted
to be invested; and
(3) In the event of an early amortization, makes payments of amounts
held in the account to holders of investor ABS interests in the same
manner as payments to holders of investor ABS interests of amounts
received on securitized assets.
(g) Combined seller’s interests and horizontal interest
retention. The 5 percent seller’s interest required on each measurement
date by paragraph (c) of this section may be reduced to a percentage
lower than 5 percent to the extent that, for all series of investor
ABS interests issued after the applicable effective date of this section
244.5, the sponsor, or notwithstanding section 244.12(a) a wholly-owned
affiliate of the sponsor, retains, at a minimum, a corresponding percentage
of the fair value of ABS interests issued in each series, in the form
of one or more of the horizontal residual interests meeting the requirements
of paragraphs (h) or (i).
(h) Residual ABS interests in excess interest and
fees. The sponsor may take the offset described in paragraph
(g) of this section for a residual ABS interest in excess interest
and fees, whether certificated or uncertificated, in a single or multiple
classes, subclasses, or tranches, that meets, individually or in the
aggregate, the requirements of this paragraph (h);
(1) Each series of the revolving pool securitization
distinguishes between the series’ share of the interest and fee cash
flows and the series’ share of the principal repayment cash flows
from the securitized assets collateralizing the revolving pool securitization,
which may according to the terms of the securitization transaction
documents, include not only the series’ ratable share of such cash
flows but also excess cash flows available from other series;
(2) The residual ABS interest’s
claim to any part of the series’ share of the interest and fee cash
flows for any interest payment period is subordinated to all accrued
and payable interest due on the payment date to more senior ABS interests
in the series for that period, and further reduced by the series’
share of losses, including defaults on principal of the securitized
assets collateralizing the revolving pool securitization (whether
incurred in that period or carried over from prior periods) to the
extent that such payments would have been included in amounts payable
to more senior interests in the series;
(3) The revolving pool securitization continues
to revolve, with one or more series, classes, subclasses, or tranches
of asset-backed securities that are collateralized by a common pool
of assets that change in composition over time; and
(4) For purposes of taking the offset described
in paragraph (g) of this section, the sponsor determines the fair
value of the residual ABS interest in excess interest and fees, and
the fair value of the series of outstanding investor ABS interests
to which it is subordinated and supports using the fair value measurement
framework under GAAP, as of:
(i) The closing of the securitization
transaction issuing the supported ABS interests; and
(ii) The seller’s interest measurement
dates described in paragraph (c)(4) of this section, except that for
these periodic determinations the sponsor must update the fair value
of the residual ABS interest in excess interest and fees for the numerator
of the percentage ratio, but may at the sponsor’s option continue
to use the fair values determined in (h)(4)(i) for the outstanding
investor ABS interests in the denominator.
(i) Offsetting eligible
horizontal residual interest. The sponsor may take the offset
described in paragraph (g) of this section for ABS interests that
would meet the definition of eligible horizontal residual interests
in section 244.2 but for the sponsor’s simultaneous holding of subordinated
seller’s interests, residual ABS interests in excess interests and
fees, or a combination of the two, if:
(1) The sponsor complies with all requirements
of paragraphs (b) through (e) of this section for its holdings of
subordinated seller’s interest, and paragraph (h) for its holdings
of residual ABS interests in excess interests and fees, as applicable;
(2) For purposes of taking
the offset described in paragraph (g) of this section, the sponsor
determines the fair value of the eligible horizontal residual interest
as a percentage of the fair value of the outstanding investor ABS
interests in the series supported by the eligible horizontal residual
interest, determined using the fair value measurement framework under
GAAP:
(i) As of the closing of the securitization
transaction issuing the supported ABS interests; and
(ii) Without including in the numerator
of the percentage ratio any fair value based on:
(A) The subordinated
seller’s interest or residual ABS interest in excess interest and
fees;
(B) the interest
payable to the sponsor on the eligible horizontal residual interest,
if the sponsor is including the value of residual ABS interest in
excess interest and fees pursuant to paragraph (h) of this section
in taking the offset in paragraph (g) of this section; and,
(C) the principal payable to
the sponsor on the eligible horizontal residual interest, if the sponsor
is including the value of the seller’s interest pursuant to paragraphs
(b) through (f) of this section and distributions on that seller’s
interest are available to reduce charge-offs that would otherwise
be allocated to reduce principal payable to the offset eligible horizontal
residual interest.
(j) Specified dates. A
sponsor using data about the revolving pool securitization’s collateral,
or ABS interests previously issued, to determine the closing-date
percentage of a seller’s interest, residual ABS interest in excess
interest and fees, or eligible horizontal residual interest pursuant
to this section 244.5 may use such data prepared as of specified dates
if:
(1) The sponsor describes the
specified dates in the disclosures required by paragraph (k) of this
section; and
(2) The
dates are no more than 60 days prior to the date of first use with
investors of disclosures required for the interest by paragraph (k)
of this section, or for revolving pool securitizations that make distributions
to investors on a quarterly or less frequent basis, no more than 135
days prior to the date of first use with investors of such disclosures.
(k) Disclosure and
record maintenance.
(1) Disclosure. A sponsor relying on this section shall provide, or cause to be
provided, to potential investors, under the caption “Credit Risk Retention”
the following disclosure in written form and within the time frames
set forth in this paragraph (k):
(i) A reasonable period
of time prior to the sale of an asset-backed security, a description
of the material terms of the seller’s interest, and the percentage
of the seller’s interest that the sponsor expects to retain at the
closing of the securitization transaction, measured in accordance
with the requirements of this section 244.5, as a percentage of the
aggregate unpaid principal balance of all outstanding investor ABS
interests issued, or as a percentage of the aggregate unpaid principal
balance of outstanding investor ABS interests for one or more series
issued, as required by the terms of the securitization transaction;
(ii) A reasonable
time after the closing of the securitization transaction, the amount
of seller’s interest the sponsor retained at closing, if that amount
is materially different from the amount disclosed under paragraph
(k)(1)(i) of this section; and
(iii) A description of the material
terms of any horizontal residual interests offsetting the seller’s
interest in accordance with paragraphs (g), (h), and (i) of this section;
and
(iv) Disclosure
of the fair value of those horizontal residual interests retained
by the sponsor for the series being offered to investors and described
in the disclosures, as a percentage of the fair value of the outstanding
investor ABS interests issued, described in the same manner and within
the same timeframes required for disclosure of the fair values of
eligible horizontal residual interests specified in section 244.4(c).
(2) Adjusted data. Disclosures required by
this paragraph (k) to be made a reasonable period of time prior to
the sale of an asset-backed security of the amount of seller’s interest,
residual ABS interest in excess interest and fees, or eligible horizontal
residual interest may include adjustments to the amount of securitized
assets for additions or removals the sponsor expects to make before
the closing date and adjustments to the amount of outstanding investor
ABS interests for expected increases and decreases of those interests
under the control of the sponsor.
(3) Record maintenance. A sponsor must retain the disclosures required in paragraph (k)(1)
of this section in its records and must provide the disclosure upon
request to the Commission and its appropriate Federal banking agency,
if any, until three years after all ABS interests are no longer outstanding.
(l) Early
amortization of all outstanding series. A sponsor that organizes
a revolving pool securitization that relies on this section 244.5
to satisfy the risk retention requirements of section 244.3, does
not violate the requirements of this part if its seller’s interest
falls below the level required by section 244.5 after the revolving
pool securitization commences early amortization, pursuant to the
terms of the securitization transaction documents, of all series of
outstanding investor ABS interests, if:
(1) The sponsor was in full compliance
with the requirements of this section on all measurement dates specified
in paragraph (c) of this section prior to the commencement of early
amortization;
(2) The
terms of the seller’s interest continue to make it pari passu with or subordinate in identical or varying amounts to each series
of outstanding investor ABS interests issued with respect to the allocation
of all distributions and losses with respect to the securitized assets;
(3) The terms of any
horizontal interest relied upon by the sponsor pursuant to paragraph
(g) to offset the minimum seller’s interest amount continue to require
the interests to absorb losses in accordance with the terms of paragraph
(h) or (i) of this section, as applicable; and
(4) The revolving pool securitization issues
no additional ABS interests after early amortization is initiated to any
person not a wholly-owned affiliate of the sponsor, either at the
time of issuance or during the amortization period.
