(1) Prior to origination of the automobile
loan, the originator:
(i) Verified and documented that within
30 days of the date of origination:
(A) The borrower was not currently
30 days or more past due, in whole or in part, on any debt obligation;
(B) Within the previous
24 months, the borrower has not been 60 days or more past due, in
whole or in part, on any debt obligation;
(C) Within the previous 36 months, the borrower
has not:
(1) Been a debtor
in a proceeding commenced under Chapter 7 (Liquidation), Chapter 11
(Reorganization), Chapter 12 (Family Farmer or Family Fisherman plan),
or Chapter 13 (Individual Debt Adjustment) of the U.S. Bankruptcy
Code; or
(2) Been
the subject of any federal or State judicial judgment for the collection
of any unpaid debt;
(D) Within the previous 36 months, no one-to-four
family property owned by the borrower has been the subject of any
foreclosure, deed in lieu of foreclosure, or short sale; or
(E) Within the previous 36 months,
the borrower has not had any personal property repossessed;
(ii) Determined and
documented that the borrower has at least 24 months of credit history;
and
(iii) Determined
and documented that, upon the origination of the loan, the borrower’s
DTI ratio is less than or equal to 36 percent.
(A) For the purpose
of making the determination under paragraph (a)(1)(iii) of this section,
the originator must:
(1) Verify and document all income of the borrower that the
originator includes in the borrower’s effective monthly income (using
payroll stubs, tax returns, profit and loss statements, or other similar
documentation); and
(2) On or after the date of the borrower’s written application
and prior to origination, obtain a credit report regarding the borrower
from a consumer reporting agency that compiles and maintain files
on consumers on a nationwide basis (within the meaning of 15 U.S.C.
1681a(p)) and verify that all outstanding debts reported in the borrower’s
credit report are incorporated into the calculation of the borrower’s
DTI ratio under paragraph (a)(1)(iii) of this section;
(2) An originator will be deemed to have met the requirements of
paragraph (a)(1)(i) of this section if:
(i) The originator, no
more than 30 days before the closing of the loan, obtains a credit
report regarding the borrower from a consumer reporting agency that
compiles and maintains files on consumers on a nationwide basis (within
the meaning of 15 U.S.C. 1681a(p));
(ii) Based on the information in such
credit report, the borrower meets all of the requirements of paragraph
(a)(1)(i) of this section, and no information in a credit report subsequently
obtained by the originator before the closing of the loan contains
contrary information; and
(iii) The originator obtains electronic
or hard copies of the credit report.
(3) At closing of the automobile loan,
the borrower makes a down payment from the borrower’s personal funds
and trade-in allowance, if any, that is at least equal to the sum
of:
(i) The full cost of the vehicle title,
tax, and registration fees;
(ii) Any dealer-imposed fees;
(iii) The full cost of any
additional warranties, insurance or other products purchased in connection
with the purchase of the vehicle; and
(iv) 10 percent of the vehicle purchase
price.
(4)
The originator records a first lien securing the loan on the purchased
vehicle in accordance with State law.
(5) The terms of the loan agreement provide
a maturity date for the loan that does not exceed the lesser of:
(i) Six years from the date of origination; or
(ii) 10 years minus the difference between
the current model year and the vehicle’s model year.
(6) The terms of the loan
agreement:
(i) Specify a fixed rate of interest
for the life of the loan;
(ii) Provide for a level monthly payment
amount that fully amortizes the amount financed over the loan term;
(iii) Do not permit
the borrower to defer repayment of principal or payment of interest;
and
(iv) Require
the borrower to make the first payment on the automobile loan within
45 days of the loan’s contract date.
(7) At the cut-off date or similar date
for establishing the composition of the securitized assets collateralizing
the asset-backed securities issued pursuant to the securitization
transaction, all payments due on the loan are contractually current;
and
(8) (i) The depositor of the asset-backed
security certifies that it has evaluated the effectiveness of its
internal supervisory controls with respect to the process for ensuring
that all qualifying automobile loans that collateralize the asset-backed
security and that reduce the sponsor’s risk retention requirement
under section 244.15 meet all of the requirements set forth in paragraphs
(a)(1) through (7) of this section and has concluded that its internal
supervisory controls are effective;
(ii) The evaluation of the effectiveness
of the depositor’s internal supervisory controls referenced in paragraph
(a)(8)(i) of this section shall be performed, for each issuance of
an asset-backed security, as of a date within 60 days of the cut-off
date or similar date for establishing the composition of the asset
pool collateralizing such asset-backed security; and
(iii) The sponsor provides, or causes
to be provided, a copy of the certification described in paragraph
(a)(8)(i) of this section to potential investors a reasonable period
of time prior to the sale of asset-backed securities in the issuing
entity, and, upon request, to its appropriate Federal banking agency,
if any.
(1) The failure of the loan to meet any
of the requirements set forth in paragraphs (a)(1) through (7) of
this section is not material; or
(2) No later than ninety (90) days after
the determination that the loan does not meet one or more of the requirements
of paragraphs (a)(1) through (7) of this section, the sponsor:
(i) Effectuates cure, establishing conformity of the loan to the
unmet requirements as of the date of cure; or
(ii) Repurchases the loan(s) from the
issuing entity at a price at least equal to the remaining principal
balance and accrued interest on the loan(s) as of the date of repurchase.
(3) If the
sponsor cures or repurchases pursuant to paragraph (b)(2) of this
section, the sponsor must promptly notify, or cause to be notified,
the holders of the asset-backed securities issued in the securitization
transaction of any loan(s) included in such securitization transaction
that is required to be cured or repurchased by the sponsor pursuant
to paragraph (b)(2) of this section, including the principal amount
of such loan(s) and the cause for such cure or repurchase.
