(a) Definitions. For purposes of this section, the following definitions
shall apply:
Community-focused residential
mortgage means a residential mortgage exempt from the definition
of “covered transaction” under section 1026.43(a)(3)(iv) and (v) of
the CFPB’s Regulation Z (12 CFR 1026.43(a)).
First pay class means a class of
ABS interests for which all interests in the class are entitled to
the same priority of payment and that, at the time of closing of the
transaction, is entitled to repayments of principal and payments of
interest prior to or pro-rata with all other classes of securities
collateralized by the same pool of first-lien residential mortgages,
until such class has no principal or notional balance remaining.
Inverse floater means an ABS interest issued as part of a securitization transaction
for which interest or other income is payable to the holder based
on a rate or formula that varies inversely to a reference rate of
interest.
Qualifying
three-to-four unit residential mortgage loan means a mortgage
loan that is:
(i) Secured by a dwelling (as defined
in 12 CFR 1026.2(a)(19)) that is owner occupied and contains three-to-four
housing units;
(ii)
Is deemed to be for business purposes for purposes of Regulation Z
under 12 CFR part 1026, Supplement I, paragraph 3(a)(5)(i); and
(iii) Otherwise meets
all of the requirements to qualify as a qualified mortgage under section
1026.43(e) and (f) of Regulation Z (12 CFR 1026.43(e) and (f)) as
if the loan were a covered transaction under that section.
(b) This part shall not apply to:
(1) U.S. Government-backed
securitizations. Any securitization transaction that:
(i) Is collateralized
solely by residential, multifamily, or health care facility mortgage
loan assets that are insured or guaranteed (in whole or in part) as
to the payment of principal and interest by the United States or an
agency of the United States, and servicing assets; or
(ii) Involves the issuance
of asset-backed securities that:
(A) Are insured or guaranteed
as to the payment of principal and interest by the United States or
an agency of the United States; and
(B) Are collateralized solely by residential,
multifamily, or health care facility mortgage loan assets or interests
in such assets, and servicing assets.
(2) Certain agricultural loan securitizations. Any securitization transaction that is collateralized solely by
loans or other assets made, insured, guaranteed, or purchased by any
institution that is subject to the supervision of the Farm Credit Administration,
including the Federal Agricultural Mortgage Corporation, and servicing
assets;
(3) State and municipal securitizations. Any
asset-backed security that is a security issued or guaranteed by any
State, or by any political subdivision of a State, or by any public
instrumentality of a State that is exempt from the registration requirements
of the Securities Act of 1933 by reason of section 3(a)(2) of that
Act (15 U.S.C. 77c(a)(2)); and
(4) Qualified
scholarship funding bonds. Any asset-backed security that meets
the definition of a qualified scholarship funding bond, as set forth
in section 150(d)(2) of the Internal Revenue Code of 1986 (26 U.S.C.
150(d)(2)).
(5) Pass-through resecuritizations. Any securitization
transaction that:
(i) Is collateralized solely by servicing
assets, and by asset-backed securities:
(A) For which credit risk
was retained as required under subpart B of this part; or
(B) That were exempted from the
credit risk retention requirements of this part pursuant to subpart
D of this part;
(ii) Is structured so that it involves
the issuance of only a single class of ABS interests; and
(iii) Provides for the
pass-through of all principal and interest payments received on the
underlying asset-backed securities (net of expenses of the issuing
entity) to the holders of such class.
(6) First-pay-class
securitizations. Any securitization transaction that:
(i) Is collateralized
solely by servicing assets, and by first-pay classes of asset-backed
securities collateralized by first-lien residential mortgages on properties
located in any state:
(A) For which credit risk was retained as
required under subpart B of this part; or
(B) That were exempted from the credit risk
retention requirements of this part pursuant to subpart D of this
part;
(ii) Does not provide for any ABS interest issued in the securitization
transaction to share in realized principal losses other than pro
rata with all other ABS interests issued in the securitization
transaction based on the current unpaid principal balance of such
ABS interests at the time the loss is realized;
(iii) Is structured to reallocate prepayment
risk;
(iv) Does not
reallocate credit risk (other than as a consequence of reallocation
of prepayment risk); and
(v) Does not include any inverse floater
or similarly structured ABS interest.
(7) Seasoned
loans.
(i) Any securitization transaction that
is collateralized solely by servicing assets, and by seasoned loans
that meet the following requirements:
(A) The loans have not been
modified since origination; and
(B) None of the loans have been delinquent
for 30 days or more.
(ii) For purposes of this paragraph,
a seasoned loan means:
(A) With respect to asset-backed
securities collateralized by residential mortgages, a loan that has
been outstanding and performing for the longer of:
(1) A period of five years; or
(2) Until the outstanding
principal balance of the loan has been reduced to 25 percent of the
original principal balance.
(3) Notwithstanding paragraphs (b)(7)(ii)(A)(1) and
(2) of this section, any residential mortgage loan that has
been outstanding and performing for a period of at least seven years
shall be deemed a seasoned loan.
(B) With respect to all other classes of asset-backed
securities, a loan that has been outstanding and performing for the
longer of:
(1) A period of at
least two years; or
(2) Until the outstanding principal balance of the loan has been
reduced to 33 percent of the original principal balance.
(8) Certain public utility securitizations.
(i) Any securitization transaction where
the asset-back securities issued in the transaction are secured by
the intangible property right to collect charges for the recovery
of specified costs and such other assets, if any, of an issuing entity
that is wholly owned, directly or indirectly, by an investor owned
utility company that is subject to the regulatory authority of a State
public utility commission or other appropriate State agency.
(ii) For purposes of this
paragraph:
(A) Specified cost means any cost identified
by a State legislature as appropriate for recovery through securitization
pursuant to specified cost recovery legislation; and
(B) Specified cost recovery legislation means legislation enacted by a State that:
(1) Authorizes the investor owned
utility company to apply for, and authorizes the public utility commission
or other appropriate State agency to issue, a financing order determining
the amount of specified costs the utility will be allowed to recover;
(2) Provides that
pursuant to a financing order, the utility acquires an intangible
property right to charge, collect, and receive amounts necessary to
provide for the full recovery of the specified costs determined to
be recoverable, and assures that the charges are non-bypassable and
will be paid by customers within the utility’s historic service territory
who receive utility goods or services through the utility’s transmission
and distribution system, even if those customers elect to purchase
these goods or services from a third party; and
(3) Guarantees that neither the State
nor any of its agencies has the authority to rescind or amend the
financing order, to revise the amount of specified costs, or in any
way to reduce or impair the value of the intangible property right,
except as may be contemplated by periodic adjustments authorized by
the specified cost recovery legislation.
(c) Exemption for securitizations of assets issued, insured or guaranteed
by the United States. This part shall not apply to any securitization
transaction if the asset-backed securities issued in the transaction
are:
(1) Collateralized solely
by obligations issued by the United States or an agency of the United
States and servicing assets;
(2) Collateralized solely by assets that
are fully insured or guaranteed as to the payment of principal and
interest by the United States or an agency of the United States (other
than those referred to in paragraph (b)(1)(i) of this section) and
servicing assets; or
(3) Fully guaranteed as to the timely payment of principal and interest
by the United States or any agency of the United States.
(d) Federal Deposit Insurance
Corporation securitizations. This part shall not apply to any
securitization transaction that is sponsored by the Federal Deposit
Insurance Corporation acting as conservator or receiver under any
provision of the Federal Deposit Insurance Act or of Title II of the
Dodd-Frank Wall Street Reform and Consumer Protection Act.
(e) Reduced requirement for
certain student loan securitizations. The 5 percent risk retention
requirement set forth in section 244.4 shall be modified as follows:
(1) With respect to a securitization transaction
that is collateralized solely by student loans made under the Federal
Family Education Loan Program (“FFELP loans”) that are guaranteed
as to 100 percent of defaulted principal and accrued interest, and
servicing assets, the risk retention requirement shall be 0 percent;
(2) With respect to a
securitization transaction that is collateralized solely by FFELP
loans that are guaranteed as to at least 98 percent but less than 100 percent
of defaulted principal and accrued interest, and servicing assets,
the risk retention requirement shall be 2 percent; and
(3) With respect to any other
securitization transaction that is collateralized solely by FFELP
loans, and servicing assets, the risk retention requirement shall
be 3 percent.
(f) Community-focused lending securitizations.
(1) This part shall not apply to any securitization
transaction if the asset-backed securities issued in the transaction
are collateralized solely by community-focused residential mortgages
and servicing assets.
(2) For any securitization transaction that includes both community-focused
residential mortgages and residential mortgages that are not exempt
from risk retention under this part, the percent of risk retention
required under section 244.4(a) is reduced by the ratio of the unpaid
principal balance of the community-focused residential mortgages to
the total unpaid principal balance of residential mortgages that are
included in the pool of assets collateralizing the asset-backed securities
issued pursuant to the securitization transaction (the community-focused
residential mortgage asset ratio); provided that:
(i) The
community-focused residential mortgage asset ratio is measured as
of the cut-off date or similar date for establishing the composition
of the pool assets collateralizing the asset-backed securities issued
pursuant to the securitization transaction; and
(ii) If the community-focused residential
mortgage asset ratio would exceed 50 percent, the community-focused
residential mortgage asset ratio shall be deemed to be 50 percent.
(g) Exemptions for securitizations of certain three-to-four unit mortgage
loans. A sponsor shall be exempt from the risk retention requirements
in subpart B of this part with respect to any securitization transaction
if:
(1) (i)
The asset-backed securities issued in the transaction are collateralized
solely by qualifying three-to-four unit residential mortgage loans
and servicing assets; or
(ii) The asset-backed securities issued in the transaction are collateralized
solely by qualifying three-to-four unit residential mortgage loans,
qualified residential mortgages as defined in section 244.13, and
servicing assets.
(2) The depositor with respect to the securitization
provides the certifications set forth in section 244.13(b)(4) with
respect to the process for ensuring that all assets that collateralize
the asset-backed securities issued in the transaction are qualifying
three-to-four unit residential mortgage loans, qualified residential
mortgages, or servicing assets; and
(3) The sponsor of the securitization complies
with the repurchase requirements in section 244.13(c) with respect
to a loan if, after closing, it is determined that the loan does not
meet all of the criteria to be either a qualified residential mortgage
or a qualifying three-to-four unit residential mortgage loan, as appropriate.
(h) Rule of construction. Securitization transactions involving the issuance of asset-backed
securities that are either issued, insured, or guaranteed by, or are
collateralized by obligations issued by, or loans that are issued,
insured, or guaranteed by, the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or a Federal home loan
bank shall not on that basis qualify for exemption under this part.
