impact on the reduction in the goodness-of-fit measure. Higher
reduction represents higher contribution of a factor to predictive
ability of the full model. The R\2\ that we find here is in line
with R\2\ found in academic studies that perform similar analyses.
See id.
    \668\ We believe this primarily is due to the fact that the year
of loan origination served as a proxy for unobservable factors like
the quality of underwriting standards during the years immediately
preceding the financial crisis when serious delinquency rate was
higher, and a large portion of the loans in the sample were
originated during that time. The importance of the origination year
is smaller for sub-samples that do not include loans originated in
2006-2007.
    \669\ Origination year contributed 5% to the goodness-of-fit
measure. LTV, 2-digit zip code, and the obligor's credit score
contributed about 1.5% each. All other 12 data points we considered
made a comparatively smaller contribution to the predictive ability
of the model (1.5% combined), but are still important in predicting
SDQ. These 12 data points include: Interest rate on the loan, DTI,
indicators whether a loan had full documentation, had prepayment
penalty provisions, was interest-only, had a balloon payment, had
negative amortization, was a first lien, was long term, had a teaser
rate, had private mortgage insurance, and whether the property was
owner-occupied.
    \670\ The analysis indicated that the goodness-of-fit of the
complete model (i.e., the model that includes all predictive
variables considered in this study) would increase from 15.5% to
15.7% if an MSA is used instead of a 2-digit zip code, and to 16.0%
if a 3-digit zip code is used instead of a 2-digit zip code.
---------------------------------------------------------------------------

    Another approach we considered, although not specifically suggested
by commenters, was an approach that rounds the loan amount, other loan
balance-related data points, and monthly performance data points to
further hinder potential obligor re-identification.\671\ The rounding
of loan amount would result in an imputed sales price that may be
sufficiently different from the true sales price so as to lessen the
possibility of a match to other publicly accessible real estate
datasets. Rounding the loan balance to the nearest $1,000 results in
the reduction of the likelihood of isolating a unique mortgage in the
MBSData dataset to 11%. It would, however, come at a loss of precision
in the cash flow variables that we believe is necessary for
investors.\672\ As noted above, such precision is key to investors'
ability to analyze and track the performance of various parties
involved in RMBS transactions.
---------------------------------------------------------------------------

    \671\ To be effective in reducing the probability of isolating a
loan that is unique with respect to location, imputed sales price,
and origination date, rounding loan amount (and other loan balance
related variables like most recent appraised value, sales price,
paid-in-full amount, etc.) to the nearest $1,000 ($10,000) must be
accompanied by rounding monthly payment performance related
variables approximately to the nearest $10 ($100).
    \672\ See letter from Prudential III (noting that loan-level
data (e.g., current asset balance, next interest rate, current
delinquency status, remaining term to maturity) will allow investors
to better estimate the timing of the principal and interest cash
flows of the collateral pool, which will in turn allow investors to
better estimate the cash flow of the securitization and be more
confident in their risk/reward consideration of the security).
---------------------------------------------------------------------------

    We considered several alternative approaches to disseminating
asset-level data as potential means to address privacy concerns,
including the Web site approach.\673\ Most commenters were generally
opposed to the Web site approach as the appropriate means to address
privacy concerns.\674\ For example, commenters raised concerns about
the difficulty in determining who would be a potential investor and
thus should have access to asset-level data; \675\ the liability for
failing to disclose all material information to investors in the event
a potential investor was denied access to asset-level data; \676\ the
need for guidance on what controls are necessary to address privacy;
\677\ and access to the data by other market participants.\678\ Given
these concerns and our belief that it is critically important that
investors receive access to asset-level information, we are not
adopting the Web site approach. We believe the final asset-level
requirements, which have been modified from the proposal to address
privacy concerns, provide investors with information they need to
perform due diligence and make informed investment decisions, and
therefore, we are requiring the asset-level information to be filed on
EDGAR where it will be readily available to and accessible by
investors. For similar reasons, we do not think it would be appropriate
to restrict access to such information on EDGAR.
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    \673\ See the 2014 Re-Opening Release and the 2014 Staff
Memorandum.
    \674\ See letters from ABA III, AFSA II, Capital One II,
Deutsche Bank, MBA IV (with respect to RMBS), SIFMA/FSR I-dealers
and sponsors, and Treasurer Group.
    \675\ See, e.g., letters from ABA III (noting concern that
without guidance as to who is a potential investor, issuers may
apply their own bias filters to public offerings, such as limiting
public offerings to only institutional investors), CCMR, MBA IV, and
SFIG II.
    \676\ For example, issuers have expressed concern about possible
claims for failure to disclose material information by a potential
investor who is denied access to the Web site or refuses to agree to
the terms of access but nonetheless purchases the security. See,
e.g., letters from ABA III, CCMR, ELFA II, SIFMA/FSR II-dealers and
sponsors, and SFIG II.
    \677\ Some commenters noted that in order to determine whether a
user should be granted access it would need to screen parties,
conduct reviews of these parties' data protection controls, and
obtain appropriate disclosure agreements, among other controls. See
letters from MBA IV (noting, for example, that issuers would be
faced with the burden of determining how to control the spread of
the information once a credentialed entity accesses the Web site),
SIFMA/FSR I-dealers and sponsors (noting that issuers would
generally not be equipped to verify any prospective user's identity
or credentials or be able to enforce compliance with the terms of
access), SFIG II (noting that investors do not want the liability
risk that may be imposed with the access restrictions), and Wells
Fargo III.
    \678\ See, e.g., letters from ABA III, Moody's II, and R&R.
---------------------------------------------------------------------------

    Commenters suggested a central repository or ``aggregated data
warehouse'' to house the asset-level data because such an approach
would simplify enforcement of access policies, ensure consistent data
formats and lower incentives to exclude certain users.\679\ Similarly,
another commenter suggested that issuers disclose all asset-level data
to a consumer reporting agency administered repository, along with a
unique identification number for each asset, which would allow
investors to access all the asset-level data for these assets.\680\
Another commenter also

suggested that credit bureaus, instead of issuers, should provide
credit-related information.\681\ While these suggestions have the
potential to address privacy concerns, as noted by one commenter, they
are not currently in use, would require further development, and would
depend upon the willing participation of certain third parties in order
to function as a viable means of disseminating asset-level data.\682\
---------------------------------------------------------------------------

    \679\ See letters from AFR (suggesting either a single data
warehouse managed by a federal agency (e.g., the Commission, the
Federal Reserve (similar to the Bank of England model), or the
Office of Financial Research) or a non-profit data warehouse owned
and managed by private sector entities under Commission oversight
(similar to the European Data Warehouse) and VABSS II (recommending,
as one option to address privacy concerns, to establish a central
``registration system'' managed by the Commission or a third party
that would permit access to sensitive asset-level data only to
persons who had established their identities as investors, rating
agencies, data providers, investment banks or other permitted
categories of users).
    \680\ See letter from SIFMA/FSR II-dealers and sponsors (noting
that this approach would apply to all ABS asset classes and also
noting certain developmental challenges, such as identifying a
consumer reporting agency willing to act as a repository, and
application of FCRA). See also SFIG II (stating that issuers should
have the option to use third party agents (which may be a consumer
reporting agency or a central Web site data aggregator) to make the
data available and control access, but also noting that such an
approach still raises privacy law concerns and concerns about who
pays for the third-party service).
    \681\ See letter from ABA III.
    \682\ See letter from SIFMA/FSR II-dealers and sponsors.
---------------------------------------------------------------------------

4. Requirements Under Section 7(c) of the Securities Act
    As we note elsewhere, subsequent to the 2010 ABS Proposing Release,
Congress adopted the Dodd-Frank Act. Section 942(b) of the Dodd-Frank
Act added Section 7(c) to the Securities Act which requires the
Commission to adopt regulations requiring an issuer of ABS to disclose,
for each tranche or class of security, information regarding the assets
backing that security. It specifies, in part, that in adopting
regulations, the Commission shall require issuers of asset-backed
securities, at a minimum, to disclose asset-level or loan-level data,
if such data are necessary for investors to independently perform due
diligence including--data having unique identifiers relating to loan
brokers or originators; the nature and extent of the compensation of
the broker or originator of the assets backing the security; and the
amount of risk retention by the originator and the securitizer of such
assets.\683\
---------------------------------------------------------------------------

    \683\ See Section 7(c)(2) of the Securities Act, as added by
Section 942(b) of the Dodd-Frank Act.
---------------------------------------------------------------------------

    In the 2011 ABS Re-Proposing Release, we requested comment as to
whether our 2010 ABS Proposals implemented Section 7(c) effectively and
whether any changes or additions to the proposals would better
implement Section 7(c). We discuss below the comments we received in
response to the requests for comment regarding the requirements of
Section 7(c).
(a) Section 7(c)(2)(B)--Data Necessary for Investor Due Diligence
    Section 7(c)(2)(B) states, in part, that we require issuers of
asset-backed securities, at a minimum, to disclose asset-level or loan-
level data, if such data are necessary to independently perform due
diligence. We requested comment in the 2011 ABS Re-Proposing Release
whether the 2010 ABS Proposal implements Section 7(c) effectively. In
response, two investors supported requiring asset-level disclosures for
all asset types, except for credit cards.\684\ The investor membership
of one trade association suggested that the disclosure of relevant
asset-level data is necessary for well-functioning markets \685\ and
another commenter suggested that the 2010 ABS proposals would
successfully implement Section 7(c) of the Securities Act.\686\ Two
other commenters, however, questioned whether borrower data proposed in
the 2010 ABS proposals was ``necessary'' for investors to perform their
own due-diligence.\687\ These commenters, however, did not specifically
identify the asset-level disclosures that are necessary for investors
to independently perform due diligence.
---------------------------------------------------------------------------

    \684\ See letters from MetLife II and Prudential II.
    \685\ See letter from SIFMA II-investors (stating that well-
functioning markets require the disclosure of as much relevant
asset-level data as is reasonably available).
    \686\ See letter from Chris Barnard dated Aug. 22, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``C.
Barnard'').
    \687\ See letters from ABA III and MBA IV.
---------------------------------------------------------------------------

    We are adopting asset-level requirements for RMBS, CMBS, Auto ABS,
debt security ABS, and resecuritizations. We prioritized these asset
classes for various reasons that we discuss above.\688\ Our decision to
adopt these requirements is based on our belief that investors should
have access to robust information concerning the pool assets that
provides them the ability to independently perform due diligence. We
continue to consider the appropriate disclosures for other asset
classes. We believe the data points we are adopting fulfill, for those
asset types, the Section 7(c) requirement that we adopt asset-level
disclosures that are necessary for investors to independently perform
due diligence. To the extent issuers believe additional data is needed,
we encourage them to provide such additional disclosures in an Asset
Related Document.\689\
---------------------------------------------------------------------------

    \688\ See Section III.A.1 Background and Economic Baseline for
the Asset-Level Disclosure Requirement.
    \689\ See Section III.B.4 Asset Related Documents for further
discussion on how to provide such additional disclosures.
---------------------------------------------------------------------------

(b) Section 7(c)(2)(B)(i)--Unique Identifiers Relating to Loan Brokers
and Originators
    Section 7(c)(2)(B)(i) requires the Commission to require disclosure
of asset-level or loan-level data, including, but not limited to, data
having unique identifiers relating to loan brokers or originators if
such data are necessary for investors to independently perform due
diligence. In the 2010 ABS Proposing Release, we proposed to require
issuers to provide the originator's name for all asset types and, if
the asset is a residential mortgage, the MERS number \690\ for the
originator, if available. We also proposed requiring RMBS issuers to
provide the National Mortgage License System registration number
required by the Secure and Fair Enforcement for Mortgage Licensing Act
of 2008, otherwise known as the NMLS number, for the loan originators
and company that originated the loan.\691\
---------------------------------------------------------------------------

    \690\ MERS has developed a unique numbering system and reporting
packages to capture and report data at different times during the
life of the underlying residential or commercial loan.
    \691\ The NMLS numbers for the originator and the company refer
to the individual and company taking the loan application, which
would include loan brokers and the company that the broker works
for. We noted in the 2011 ABS Re-Proposing Release that we were
unaware of any other unique identifying systems used for the purpose
of identifying brokers or originators of other asset types, across
all asset types or within an asset type.
---------------------------------------------------------------------------

    In the 2011 ABS Re-proposing Release, we stated our belief that the
proposal to require NMLS numbers would implement the requirements of
Section 7(c) with respect to mortgages by requiring a numerical
identifier for a loan broker.\692\ We requested comment on whether
unique identifiers for loan brokers and/or originators were necessary
to permit investors to independently perform due diligence for asset
classes other than RMBS or CMBS and, if so, whether there is a unique
system of identifiers for brokers and originators for other asset
classes.\693\ We did not receive any comments suggesting this
requirement would not satisfy the requirements of Section 7(c),
although one commenter opposed requiring an NMLS identifier (for RMBS)
because disclosure should focus on the collateral and its performance
and an NMLS identifier does not provide investors with information they
can use to value the assets.\694\
---------------------------------------------------------------------------

    \692\ See the 2011 ABS Re-Proposing Release at 47965-66.
    \693\ See the 2011 ABS Re-Proposing Release at 47966.
    \694\ See letter from MBA III.
---------------------------------------------------------------------------

    For RMBS, we are adopting the requirement that issuers provide for
ABS backed by residential mortgages the NMLS number of the loan
originator company. As noted above, we are not adopting the requirement
that issuers provide a unique broker identifier, (i.e., the NMLS number
of the specific loan originator) because we are concerned this
disclosure may increase re-identification risk.\695\ Even though we

are not requiring disclosure of the NMLS loan originator number, we
believe disclosure of the NMLS number of the loan originator company
satisfies Section 7(c)(2)(B)(i) regarding the asset-level disclosure of
unique identifiers for loan brokers or originators. We believe this
disclosure should, over time, allow investors to compare loans
originated by particular loan originator companies and determine
whether there is any correlation to the performance of the loan. This
should facilitate independent investor due diligence with respect to
the loan pools underlying RMBS.
---------------------------------------------------------------------------

    \695\ See Section III.A.3 Asset-Level Data and Individual
Privacy Concerns.
---------------------------------------------------------------------------

    We are unaware of unique identifiers for loan originators and, if
applicable, brokers within the commercial mortgage, auto loan and
lease, and debt security markets. We note the ongoing development of
certain identifiers, but we are uncertain, at this time, especially due
to the lack of response to our request for comment, whether a unique
identifier for loan originators for these asset classes is necessary
for investor due diligence. Therefore, at this time, we are not
adopting unique identifiers for loan originators or brokers within the
CMBS, Auto ABS or debt security markets.
(c) Section 7(c)(2)(B)(ii)--Broker Compensations and Section
7(c)(2)(B)(iii)--Risk Retention by Originator and the Securitizer of
the Assets
    In the 2010 ABS Proposing Release, we did not propose requiring
asset-level disclosures of broker compensation or risk retention held
by loan originators or securitizers. Section 942(b) of the Dodd-Frank
Act, however, amended Section 7(c) of the Securities Act to require
disclosure on an asset-level or loan-level basis with respect to the
nature and extent of the compensation of the broker or originator of
the assets backing the security and the amount of risk retention by the
originator and the sponsor of such assets if these disclosures are
necessary for investor due diligence. In the 2011 ABS Re-Proposing
Release, we requested comment on whether these disclosures were
necessary for investor due diligence.
    We received few comments on these portions of Section 7(c) in
response to our requests for comments. One commenter stated that
disclosure of broker compensation was appropriate to require because it
``is necessary for evaluating how the compensation structure associated
with an asset--including possible conflicts of interest--might affect
its quality.'' \696\ The same commenter believed that asset-level or
loan-level disclosure of risk retention held by an originator or
sponsor ``would undoubtedly be of value to investors as they perform
due diligence and assess the quality of the offering.'' \697\ This
commenter stated that we must require asset-level risk retention
disclosure because of the ``many forms of risk retention that have been
proposed in accordance with Section 941(b) of the Dodd-Frank Act,
including vertical, horizontal, and other configurations'' and because
``[e]ach of those forms of risk retention presents a different risk
profile, depending on the specific underlying assets that are subject
to the risk retention.'' \698\
---------------------------------------------------------------------------

    \696\ See letter from Better Markets.
    \697\ Id.
    \698\ Id.
---------------------------------------------------------------------------

    A CMBS issuer and a trade association did not believe that broker
compensation disclosure in the prospectus would be useful to investors
in performing due diligence on the assets in the pool.\699\ The CMBS
issuer stated that the general due diligence focus for CMBS was whether
the income-producing potential of the underlying commercial property
was sufficient to service the debt that it secures and broker
compensation does not assist that analysis.\700\ Another trade
association stated that it did not support disclosure of asset-level
risk retention disclosures because its ``members do not believe this
would add any value in the CMBS industry.'' \701\
---------------------------------------------------------------------------

    \699\ See letters from MBA III and Wells Fargo & Co. dated Oct.
4, 2011 submitted in response to the 2011 ABS Re-Proposing Release
(``Wells Fargo II'').
    \700\ See letter from Wells Fargo II.
    \701\ See letter from CRE Finance Council dated Oct. 4, 2011
submitted in response to the 2011 ABS Re-Proposing Release (``CREFC
II'').
---------------------------------------------------------------------------

    We did not receive any comments from investors suggesting that
disclosure of broker compensation is necessary for their due diligence.
While the disclosure of broker compensation on an asset-level basis may
provide some value to investors in assessing possible conflicts of
interest, we are not persuaded at this time that such information is
necessary for investors to independently conduct due diligence.
    With respect to asset-level risk retention, we are not persuaded at
this time that additional requirements relating to risk retention, on
an asset-level basis, are needed for investors to independently conduct
due diligence. A sponsor, however, will be required to provide
information, on an aggregate basis, about its retained interest in a
securitization transaction. As explained below, we are adopting
amendments to Items 1104, 1108, and 1110 of Regulation AB that will
require disclosure regarding the sponsor's, a servicer's, or a 20%
originator's interest retained in the transaction, including the amount
and nature of that interest.\702\ The disclosure would be required for
both shelf and other offerings. We note the recent re-proposal of the
credit risk retention rules, issued jointly by the Commission and other
agencies, implementing Section 941 of the Dodd-Frank Act.\703\ When
adopted, we will review the final credit risk retention rules to
determine whether additional asset-level or other disclosure
requirements, if any, are appropriate. The asset-level requirements we
are adopting should provide investors with transparency about the
quality of the assets in a securitization.
---------------------------------------------------------------------------

    \702\ See Items 1104, 1108 and 1110 of Regulation AB [17 CFR
229.1104, 17 CFR 229.1108 and 17 CFR 229.1110].
    \703\ See the 2013 Risk Retention Re-Proposing Release.
---------------------------------------------------------------------------

B. Asset-Level Filing Requirements

1. The Timing of the Asset-Level Disclosure Requirements
    This section, Section III.B.1, is divided into two parts covering
when asset-level information must be provided. Section III.B.1.a
discusses when asset-level disclosures are required at the time of the
offering. Section III.B.1.b discusses the frequency with which the
asset-level disclosures are required on an ongoing basis. Section
III.B.2 discusses the scope of asset-level data required at the time of
the offering and on an ongoing basis.
(a) Timing of Offering Disclosures
(1) Proposed Rule
    In the 2010 ABS Proposing Release, we proposed to require asset-
level information of asset pool characteristics at the following times
during the offering process:
     At the time the preliminary prospectus is filed.
     At the time the final prospectus is filed.
     With an Item 6.05 Form 8-K if the requirements of Item
6.05 were triggered.\704\
---------------------------------------------------------------------------

    \704\ Under the existing Item 6.05 requirement, if any material
pool characteristic of the actual asset pool at the time of issuance
of the securities differs by five percent or more (other than as a
result of the pool assets converting to cash in accordance with
their terms) from the description of the asset pool in the
prospectus filed for the offering pursuant to Securities Act Rule
424, the issuer must provide certain disclosures regarding the
actual asset pool, such as that required by Items 1111 and 1112 of
Regulation AB. Under a proposed revision to Item 6.05 of Form 8-K,
we proposed that a new Schedule L be filed if assets are added to
the pool during the reporting period, either through prefunding
periods, revolving periods or substitution, and the triggers of Item
6.05 are met. See footnote 235 of the 2010 ABS Proposing Release.

---------------------------------------------------------------------------

(2) Comments on Proposed Rule
    Only one commenter responded to our proposal that the asset-level
disclosures be required at the time of the offering. This commenter
stated the proposal seemed to cover the period of offering
sufficiently.\705\
---------------------------------------------------------------------------

    \705\ See letter from MBA I (stating that if the Commission
requires a Schedule L for CMBS, then they do not recommend the
inclusion of Schedule L data at other times as the proposal seems to
cover the period of offering sufficiently).
---------------------------------------------------------------------------

(3) Final Rule and Economic Analysis of the Final Rule
    Under the final rule, as proposed, those issuers that are required
to provide asset-level data must provide all of the required asset-
level disclosures in a preliminary prospectus and the final prospectus.
Requiring that asset-level disclosures be filed by the same time a
preliminary prospectus is filed will provide investors more time to
analyze the asset-level data in advance of an investment decision. We
acknowledge that every time asset-level disclosures are filed issuers
likely will incur filings costs and costs to verify the data. We
believe the costs incurred to provide this information are justified in
order to provide investors access to relevant data about the assets
underlying the particular ABS offering in advance of their investment
decision. In addition, we believe providing investors time to analyze
the asset-level data may result in better pricing and therefore may
improve allocative efficiency and facilitate capital formation.
Compliance costs are minimized, to some extent, because if there has
been no change to the asset-level information provided with the
preliminary prospectus, then under current requirements, this
information can be incorporated by reference into the final prospectus.
This eliminates the costs associated with re-filing the information.
    Under the proposal, an issuer would have been required to provide
updated asset-level disclosures about the pool composition, including
characteristics of new assets added to the pool, if an Item 6.05 Form
8-K was triggered.\706\ Under the final rules, asset-level information
about the actual pool composition is required with each Form 10-D.
Therefore, we do not believe that issuers should also incur the cost to
provide asset-level information if an Item 6.05 is triggered.
---------------------------------------------------------------------------

    \706\ See footnote 235 of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

(b) Timing of Periodic Disclosures
(1) Proposed Rule
    We also proposed in the 2010 ABS Proposing Release to require
ongoing asset-level disclosures. Under the proposal, asset-level
disclosures would be required at the time of each Form 10-D, which
under current requirements is within 15 days after each required
distribution date on the ABS.
(2) Comments on Proposed Rule
    With respect to when and how frequently the ongoing asset-level
disclosures should be provided, comments varied. One commenter
recommended that the required disclosures be provided on the
distribution date rather than 15 days thereafter.\707\ Some commenters
noted that industry standards for CMBS make ongoing disclosures
available earlier than when the proposal would require them.\708\
---------------------------------------------------------------------------

    \707\ See letter from MetLife I.
    \708\ See letters from BoA I, MBA I, MBA IV, and Wells Fargo I
(referring to the CREFC IRP making disclosures available 15 days
earlier than what the proposal would require).
---------------------------------------------------------------------------

    With respect to how frequently the ongoing asset-level disclosures
should be provided, comments varied. For instance, a few commenters
suggested we require disclosure on the day of an ``observable event,''
or promptly thereafter.\709\ Alternatively, one commenter suggested
requiring less asset-level data each month or allowing issuers to
provide the data annually or quarterly.\710\ Other commenters stated
that the asset-level disclosures should not be required on a daily
basis or on a timeframe that occurs less than monthly.\711\ Relatedly,
one commenter stated that the final rule should include an instruction
clarifying that the ongoing asset-level information reported for any
particular reporting period may be reporting information from a prior
reporting period due to delays that can occur between the time when
asset-level information is received and such information is ready to be
reported.\712\
---------------------------------------------------------------------------

    \709\ See letters from TYI and CoStar (both defining
``observable events'' as any of the following: (1) Payment (and the
amount thereof) by the obligor on such loan or receivable; (2)
failure by the obligor to make payment in full on such loan or
receivable on the due date for such payment; (3) amendment or other
modification with respect to such loan or receivable; or (4) the
billing and collecting party becomes aware that such obligor has
become subject to a bankruptcy or insolvency proceeding).
    \710\ See letter from AFSA I (suggesting that monthly reports
are cumbersome and the data does not change that often).
    \711\ See letters from ABA I (suggesting that it would be
burdensome or impossible to provide intra-month updates because of
system limitations that would prevent more frequent data collection
and that data is only comparable if consistently collected at the
same point in time) and Wells Fargo I (suggesting that, for RMBS and
CMBS, requiring ongoing disclosures on a daily basis or less than
monthly is inappropriate because the marginal benefit to investors
would not justify the costs).
    \712\ See letter from Wells Fargo I (stating that CMBS
transactions often involve multiple loans with different financial
reporting dates, and the information has to be reviewed by the
appropriate parties, including the servicer, and normalized before
it is provided to the filer, which can result in substantial delays
between the time information is received and is reported on Form 10-
D).
---------------------------------------------------------------------------

(3) Final Rule and Economic Analysis of the Final Rule
    The final rule requires, as proposed, that issuers provide the
asset-level disclosures at the time of each Form 10-D. As discussed,
however, in Section III.B.2 the scope of information required with each
Form 10-D has changed to also include the same set of data points that
were required in the prospectus. We are not persuaded by commenters'
suggestions that the ongoing asset-level disclosures be provided
quarterly, annually or monthly, because reporting at these times may be
outside the time when such disclosures are normally collected. The
requirement to file a Form 10-D is tied to the distribution date on the
ABS, as specified in the governing documents for the securities. In
effect, tying the asset-level disclosures to each Form 10-D filing
aligns the frequency of the disclosures to the payment cycle (when data
about the collections and distributions is captured) which should
minimize the burdens and costs to issuers of collecting such
information. For investors, receiving asset-level data tied to the
payment cycle should allow them to conduct their own valuation and risk
analysis of each asset in the pool at periods close in time to when the
data is captured and other distribution information is already being
reported. This should allow investors to understand, on an ongoing
basis for the life of the investment, how the performance of any
particular asset is affecting pool performance.
    We also believe that only requiring asset-level disclosures on a
quarterly or monthly basis may not provide investors with timely access
to data about the performance of pool assets because it ties the
reporting of asset-level disclosures to a timeframe that may be outside
the payment cycle when the data is normally captured, which may
increase costs or inhibit investors' ability to make timely and
informed ongoing investment decisions. For instance, if asset-level
reporting was required monthly, but the payment cycle occurred every
six months, then requiring a filing on a monthly basis

may unnecessarily increase costs without a corresponding benefit. If
reporting was required on a quarterly basis, but the payment cycle was
monthly, then in instances where the performance of pool assets
deteriorates or the pool assets change, investors would not receive
timely updates about such events. This may impact their ability to spot
developing trends, thus limiting their ability to make informed ongoing
investment decisions with respect to the ABS.
    We are also not persuaded that we should require reporting any time
an ``observable event'' occurs with respect to a single asset because
we do not believe that the benefits to investors of such a requirement
would justify the costs to issuers of capturing and reporting data in a
timeframe that falls outside when data is typically captured and
reported. Reporting on an observable event basis could result in the
issuer constantly updating the data. As noted above, we believe
providing investors access to timely and relevant asset-level
disclosures and minimizing costs to issuers is best achieved by
requiring asset-level disclosures be provided with each Form 10-D,
which means the disclosures will be provided in a timeframe that is in
line with the payment cycle and when the data is typically captured.
    The final rule also requires that the asset-level disclosures be
provided for each asset that is in the pool at any point in time during
the reporting period. Therefore, if a substitution occurred during the
reporting period, then asset-level disclosures are required for both
the loan added and the loan removed during the reporting period in
which the change occurred. Providing investors with disclosure about
assets that are added and removed will allow investors to understand
the actual composition of the asset pool over the life of a security.
This will benefit investors by allowing them to assess on an ongoing
basis the current risk of the collateral pool and to compare the
characteristics of the assets involved in a substitution. We recognize
that this benefit to investors will result in increased reporting costs
to sponsors and ABS issuers.
    A commenter suggested the final rule include an instruction
clarifying that the information reported for any particular reporting
period may be information from a prior reporting period due to delays
that can occur between the time when asset-level information is
received and such information is ready to be reported.\713\ We are not
persuaded that this is a significant problem for issuers; therefore the
final rule does not include such an instruction. The transaction
agreements specify a distribution date to investors that is generally
sometime after the end of a reporting period so that the amounts of a
distribution may be calculated so that reports may be prepared.
Consistent with current requirements, the Form 10-D is required to be
filed 15 days after each required distribution date on the ABS and
accordingly, because the asset-level disclosures are included in the
Form 10-D disclosure requirements, they are due at the same time. Based
on current market practice, the amount of time between the end of a
reporting period and filing of a Form 10-D may be four weeks or more.
Therefore, we believe aligning the timing of filing the asset-level
disclosure with current Form 10-D reporting requirements will not be
costly and will provide a sufficient period of time for the appropriate
parties to review the information before filing.
---------------------------------------------------------------------------

    \713\ See letter from Wells Fargo I.
---------------------------------------------------------------------------

2. The Scope of New Schedule AL
    Section III.B.1 discussed when asset-level disclosures are required
at the time of offering and on an ongoing basis. This section discusses
the scope of those required asset-level disclosures required at the
time of the offering and on an ongoing basis.
(a) Proposed Rule
(1) Offering Disclosures
    As noted above, in the 2010 ABS Proposing Release, we proposed to
add the prospectus disclosure requirements in new Item 1111(h) and new
Schedule L to Regulation AB. We also proposed data points related to
each asset. Proposed Schedule L focused, in general, on providing
investors asset-level data about the credit quality of the obligor, the
collateral related to each asset and the cash flows related to a
particular asset, such as the terms, expected payment amounts, indices
and whether and how payment terms change over time. Schedule L
contained some data points capturing some loan performance data.\714\
As noted above, proposed Schedule L would have been provided at the
time of the preliminary prospectus. We also proposed that an updated
Schedule L be provided with the final prospectus.\715\ Finally, we
proposed that, if issuers are required to report changes to the pool
under Item 6.05 of Form 8-K, then an updated Schedule L would be
required.\716\ We also requested comment on whether Schedule L data
should be required at any other time.\717\
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    \714\ See, e.g., proposed Items 1(b)(5) and 1(b)(6) of Schedule
L.
    \715\ See proposed Item 1125 of Regulation AB and the 2010 ABS
Proposing Release at 23356.
    \716\ In footnote 235 of the 2010 ABS Proposing Release we
stated that if a new asset is added to the pool during the reporting
period, an issuer would be required to provide the asset-level
information for each additional asset pursuant to proposed revisions
to both Item 1111 of Regulation AB and Item 6.05 of Form 8-K. See
the 2010 ABS Proposing Release at 23356.
    \717\ See the 2010 ABS Proposing Release at 23356.
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    Under our proposed revisions to Item 6.05 of Form 8-K, we proposed
that a new Schedule L be filed if any material pool characteristic of
the actual asset pool at the time of issuance of the asset-backed
securities differs by 1% or more from the description of the asset pool
in the prospectus.\718\ Based on comments received, it seemed that it
may not be clear that an Item 6.05 Form 8-K would be required when
prefunding or revolving assets increased or changed the pool by 1% or
more, although that was the intent of the proposal. Therefore, in the
2011 ABS Re-Proposing Release, we requested additional comment about
whether we should clarify that a new Schedule L would be required with
an Item 6.05 Form 8-K when assets are added to the pool after the
issuance of the securities either through prefunding periods, revolving
periods or substitution and the triggers in Item 6.05 are met.\719\ The
Schedule L provided with an Item 6.05 Form 8-K would provide investors
with the current pool composition including data related to the cash
flows related to a particular asset, data that allows for better
prepayment analysis or credit analysis and data about the property. We
also requested comment on whether the updated Schedule L should include
all assets in the pool and whether the Schedule L should be an exhibit
to a Form 8-K or to a Form 10-D.\720\
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    \718\ See the 2010 ABS Proposing Release at 23392. As proposed,
if any material pool characteristic of the actual asset pool at the
time of issuance of the asset-backed securities differs by 1% or
more than the description of the asset pool in the prospectus filed
for the offering pursuant to Securities Act Rule 424, an issuer
would be required to file an Item 6.05 Form 8-K and provide the
disclosures required under Item 1111 and Item 1112 of Regulation AB.
Under proposed Item 1111(h) of Regulation AB issuers would be
required to provide a Schedule L. In addition, the item, as proposed
to be revised, also would require a description of the changes that
were made to the asset pool, including the number of assets
substituted or added to the asset pool.
    \719\ See the 2011 ABS Re-Proposing Release at 47970.
    \720\ Id.
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(2) Periodic Disclosures
    In the 2010 ABS Proposing Release, we also proposed ongoing
disclosure requirements in Item 1121(d) and Schedule L-D. Proposed
Schedule L-D

would require, in general, disclosures corresponding to payments
received during the payment cycle, as well as amounts past due and the
servicer's efforts during the payment cycle to collect past due
amounts. Proposed Item 1121(d) and Schedule L-D disclosure would be
provided at the time of each Form 10-D. We also requested comment in
the 2010 ABS Proposing Release about whether Schedule L-D data should
be provided at other times.\721\
---------------------------------------------------------------------------

    \721\ See the 2010 ABS Proposing Release at 23368.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    We received limited response to the request for comment on whether
Schedule L and Schedule L-D data should be provided at any other time.
Commenters generally indicated that the disclosures enumerated in
Schedule L and Schedule L-D may be appropriate at other times than
proposed. For instance, one investor stated that the same disclosures
for all ABS sectors (other than CMBS) should be required for offering
documents and ongoing reports.\722\ The investor recognized that
certain data will be static, while other data will change from month to
month. Another investor stated that for transactions involving a
prefunding period or revolving period, a new Schedule L should be filed
monthly when new collateral is added.\723\
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    \722\ See letter from MetLife I (suggesting that the same
disclosure be required for offering documents and ongoing reports,
but that for CMBS the loan originator and the loan servicer are not
affiliated and therefore, the same requirement may be impractical
for CMBS).
    \723\ See letter from Prudential I (opposing additions to the
collateral pool after the filing of the final prospectus except for
substitutions for defaulted assets after closing).
---------------------------------------------------------------------------

    In response to the questions asked in the 2011 ABS Re-Proposing
Release about clarifying that a new Schedule L would be required with
an Item 6.05 Form 8-K, an investor reiterated its earlier position that
issuers should file a Schedule L at issuance and each month new assets
are added to the collateral pool.\724\ The investor added that this
would allow investors to evaluate the changing nature of the risk
layering introduced by the new assets and it would allow investors to
confirm that the quality of the newly added collateral meets the
expected origination practices of the issuer.\725\
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    \724\ See letter from Prudential II.
    \725\ See letter from Prudential II (also suggesting that the
newly originated collateral should also appear on Schedule L-D, ``so
investors can efficiently assess how the new assets influence the
risk profile of the overall collateral pool'').
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    One commenter noted that current rules require that updated
information about the characteristics of the collateral in the pool be
provided with the Form 10-D, rather than in a Form 8-K.\726\ The
commenter, however, also believed requiring an updated Schedule L for
assets added after the measurement date for revolving asset master
trusts is inappropriate because the asset composition of these trusts
changes on a daily basis during its revolving period and, therefore, an
issuer would be filing both a Schedule L and Schedule L-D each
month.\727\ Another commenter suggested that a new Schedule L should
not be required when assets are added to the pool after issuance,
either through prefunding periods, revolving periods or substitution
unless the triggers under Item 6.05 of Form 8-K are met. If the 5%
threshold under Item 6.05 was met, then the commenter asserted filing
the Schedule L with the Form 10-D would be more efficient.\728\
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    \726\ See letter from VABSS II (noting that existing Item
1121(b) of Regulation AB requires disclosure for changes in pool
composition during revolving periods and prefunding periods, and
Item 1121(b) states that the information is to be provided in
distribution reports on Form 10-D, rather than in a Form 8-K).
    \727\ See letter from VABSS III.
    \728\ See letter from Sallie Mae II.
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(c) Final Rule and Economic Analysis of the Final Rule
    After considering the comments received, we are adopting a rule,
based on a commenter's suggestion that the same asset-level disclosures
be provided, if applicable, at the time of the offering and on an
ongoing basis. Therefore, we have condensed information previously
proposed to be provided in either Schedule L or Schedule L-D into a
single schedule, titled Schedule AL. Schedule AL in new Item 1125 of
Regulation AB enumerates all of the asset-level disclosures to be
provided, if applicable, about the assets in the pool at securitization
and on an ongoing basis. The asset-level disclosures apply to each
asset in the pool during the reporting period covered by Schedule
AL.\729\
---------------------------------------------------------------------------

    \729\ See Item 1111(h)(7) of Regulation AB [17 CFR 229.1111].
---------------------------------------------------------------------------

    We believe aggregating Schedule L and Schedule L-D into one unified
schedule simplifies the new rules to the benefit of both issuers and
investors. For investors, we believe a unified schedule will make it
easier to understand the actual pool composition and the performance of
the asset pool both at issuance and on an ongoing basis. We recognize
that, in certain circumstances, the pool composition may continue to
change even after the final prospectus is filed. As a result, the
asset-level information provided with the final prospectus may not
reflect the pool composition at closing.\730\ On an ongoing basis, the
composition of the asset pool may change due to prefunding or revolving
periods, or substitution. Under the proposal, if the assets in the pool
changed after the filing of the final prospectus, then investors would
have only received updated disclosures about the characteristics of the
current asset pool, if an Item 6.05 of Form 8-K was triggered. Some
assets could be added or removed from the pool without investors
receiving updated disclosures about the changes to the composition and
characteristics of the asset pool. As a result, the assets identified
in the most recent Schedule L-D would not exactly match the assets
identified in the last Schedule L that was filed.
---------------------------------------------------------------------------

    \730\ The requirement to file Schedule AL data with the final
prospectus does not impact the analysis regarding the timing and
adequacy of information conveyed to the investor at the time the
investment decision is made. Under Securities Act Rule 159,
information conveyed after the time of the contract of sale (e.g., a
final prospectus) is not taken into account in evaluating the
adequacy of information conveyed to the investor at the time the
investment decision was made. Therefore, registrants should be
mindful of their obligations under Securities Act Rule 159.
---------------------------------------------------------------------------

    Requiring that the asset-level information provided with the Form
10-D include information about the characteristics of each asset will
make it easier to understand the actual pool composition at any point
in time and, in particular, when the asset composition has changed
through additions, substitutions or removal of assets.\731\ This
requirement will also make it easier to compare the characteristics of
the current asset pool with the pool characteristics for a prior period
or date. As a result, we believe investors will be able to better
assess any potential risk layering introduced by changes to the
composition of the asset pool and confirm that the quality of the newly
added collateral meets expected origination practices.
---------------------------------------------------------------------------

    \731\ For instance, if a loan was added to an RMBS pool during a
reporting period, the next Schedule AL that is filed will include
all relevant disclosures about the asset, including all disclosures
that would have been included if the loan was part of the pool at
the time of securitization and all required ongoing asset-level
disclosures about the asset. The final rules include a data point
that captures whether an asset was added to the pool during the
reporting period.
---------------------------------------------------------------------------

    Another benefit is that investors at the time of the offering will
receive a more complete picture of any seasoned assets in the ABS pool,
including the current performance of these assets. As we noted in the
2010 ABS Proposing Release, proposed Schedule L-D focused on whether an
obligor is making payments as scheduled, the efforts by the servicer to
collect amounts past due,

and the losses that may pass on to investors.\732\ We believe these
disclosures, if made at the time of the offering, will also assist an
investor in its investment analysis, especially with respect to asset
pools involving seasoned assets.
---------------------------------------------------------------------------

    \732\ See the 2010 ABS Proposing Release at 23367.
---------------------------------------------------------------------------

    We recognize that the one schedule format may benefit issuers, but
it may also result in some increased compliance costs. We believe that
it may be easier to revise, amend and file one schedule than two
separate schedules. Also, as discussed above, because we are not
adopting the proposed requirement that an updated Schedule L be
provided if an Item 6.05 is triggered, issuers will not need to bear
the burden or cost of assessing whether an updated Schedule L is
required if the requirements of Item 6.05 were triggered.\733\
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    \733\ The current disclosures required under existing Item 6.05
of Form 8-K are still required if the triggers of Item 6.05 are met.
Item 6.05 is not limited to the reporting of differences in material
pool characteristics that result only from changes in the pool
composition and, in fact, it excludes only changes that occur as a
result of the pool assets converting into cash in accordance with
their terms. For example, absent a change in pool composition, if
payment activity after the cut-off date would result in a change to
the delinquency or payment statistics that were presented in the
prospectus by more than 5% after the cut-off date, but prior to
closing, then disclosure would be required under Item 6.05.
---------------------------------------------------------------------------

    We also recognize that aggregating the data points proposed in
Schedules L and L-D into one schedule may increase the number of data
points that an issuer will need to respond to at the time of the
offering and on an ongoing basis. We do not believe that this change
increases the data issuers must collect about the assets beyond what
was proposed as the unified schedule primarily consists of information
proposed to be provided under Schedule L and Schedule L-D. Under the
rule we are adopting, the issuer will be required, at the time of the
offering, to provide all the information relating to the underwriting
of the asset (e.g., terms of the asset, obligor characteristics
determined at origination) and any applicable performance related
information for the most recent reporting period. On an ongoing basis,
the issuer will be required to provide the relevant ongoing performance
information for the most recent reporting period and the underwriting
information previously provided about the asset. Issuers may incur some
increased filing costs compared to what they would have incurred under
the proposal because they will be verifying and filing more data at
each filing. Although we cannot quantify the increase in filing costs
that issuers may incur, our qualitative assessment is that the increase
will not be significant over what was proposed.\734\
---------------------------------------------------------------------------

    \734\ By aggregating the schedules we are able to omit any
duplicate data points found on both schedules. For instance, the
following data points were in proposed Schedule L-D and were omitted
from Schedule AL since they were similar or identical to other data
points: Items 1(a) Asset number type; 1(b) Asset number; 1(c) Asset
group number; 1(f)(7) Current asset balance; 1(f)(12) Current
delinquency status; 1(f)(13) Number of days payment is past due;
1(f)(14) Current payment status; 1(f)(15) Pay history; 1(f)(18)
Remaining term to maturity; 1(g)(6) Servicing advance methodology;
2(b)(2) Next interest rate change date; 2(b)(5) Option ARM
indicator; 2(e)(1) Modification effective payment date; 2(e)(3)
Total capitalized amount; 2(e)(29) Forgiven principal amount
(cumulative); and 2(e)(30) Forgiven interest amount (cumulative).
The following data points were in proposed Schedule L and were
omitted from Schedule AL since they were similar or identical to
other data points: Items 1(a)(15) Primary servicer; 2(a)(21)(iv)
Updated DTI (front-end) and 2(a)(21)(iv) Updated DTI (back-end).
---------------------------------------------------------------------------

    We considered, as an alternative, requiring information to be
provided only about assets added to the pool during a reporting period.
We believe asset-level information is most useful when it reflects all
the assets actually in the pool. Therefore, we believe that current
investors and potential secondary market investors should have access
through the current Form 10-D to the asset-level information reflecting
the assets in the pool at that time. Otherwise those parties may have
to piece together various tables of information to construct the
current pool. Piecing together various tables may lead to confusion and
errors and, as a result, market participants may base their analysis on
data that does not provide an accurate picture of the asset pool.
Further, investors rather than issuers would bear the cost of piecing
together the disclosures and having each investor doing so would create
duplicative costs.
    One investor commenter who supported the same asset-level
disclosure in offering documents and in ongoing reports for most asset
classes did not support this format for CMBS.\735\ For CMBS, this
commenter stated the loan originator and the loan servicer are not
affiliated and, therefore, unifying items in Schedule L and Schedule L-
D may be impractical for the CMBS sector. We considered this concern,
but we believe the information is available to issuers, albeit perhaps
at some cost. Thus, Schedule AL enumerates for issuances of CMBS all of
the asset-level disclosures to be provided, if applicable, about the
assets in the pool at securitization and on an ongoing basis.
---------------------------------------------------------------------------

    \735\ See letter from MetLife I.
---------------------------------------------------------------------------

    In the end, we believe this approach is reasonable despite the
increased compliance costs, because this approach provides investors
with access, both at the time of the offering and on an ongoing basis,
to more data about the characteristics and performance of the pool
assets. As a result, investors can evaluate the characteristics of the
pool with the benefit of a more complete picture of the pool assets'
characteristics and performance.
3. XML and the Asset Data File
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we proposed requiring that
asset-level information be provided in XML. We believed that requiring
the asset-level data file in XML, a machine-readable language, would
allow users to download the data directly into spreadsheets and
databases, analyze it using commercial off-the-shelf software, or use
it within their own models in other software formats.
(b) Comments on Proposed Rule
    In response to the 2010 ABS Proposing Release, several commenters
supported the use of XML to report loan-level data \736\ and some
commenters noted that the residential mortgage industry already uses
XML to transmit data about loans.\737\ For CMBS, some commenters
suggested not requiring XML at this time.\738\ A few commenters
suggested that we not adopt the XML requirement for RMBS, but instead
require the information in comma separated values (``CSV'').\739\

Other commenters also suggested the use of another standard, such as
XBRL.\740\
---------------------------------------------------------------------------

    \736\ See, e.g., letters from ActiveState Software Inc. dated
July 29, 2010 submitted in response to the 2010 ABS Proposing
Release, Beached Consultancy, CMBS.Com I, CREFC I (recognizing the
importance of XML format, but requesting we not adopt the
requirement for CMBS until such time that CREFC IRP adopts a version
of the CREFC IRP in XML), Interactive, MetLife I, Risk Management
Association dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``RMA''), and Alberto Zonca dated July 26, 2010
submitted in response to the 2010 ABS Proposing Release (``A.
Zonca'').
    \737\ See letters from eSign, MBA I, MERS, and MISMO (each
supporting the use of XML, but suggesting the use of MISMO XML
standards).
    \738\ See letters from CREFC I (indicating that requiring XML
would be a significant burden on those institutions who largely work
under an alternative platform to convert to XML and the conversion
could create data quality issues), MBA I, and Wells Fargo I (each
suggesting that the Commission wait until the CMBS industry develops
the XML format).
    \739\ See letters from ASF I (suggesting requiring RMBS files be
in text format with each value in the file separated by a comma
because market participants should focus staff and information
technology resources on efforts to standardize the data) and Wells
Fargo I (suggesting the format of the data be in CSV format).
    \740\ See letters from RMA (supporting the use of XML schemas
specified either with the XSD language or the more specialized
XBRL), UBMatrix, Inc. dated July 31, 2010 submitted in response to
the 2010 ABS Proposing Release (recommending requiring XBRL), and
XBRL.US dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (suggesting the use of XBRL because it is
consistent with their recommended waterfall output format).
---------------------------------------------------------------------------

    As we note above, subsequent to the 2010 ABS Proposing Release,
Congress adopted the Dodd-Frank Act. Section 942(b) of the Dodd-Frank
Act added Section 7(c) to the Securities Act, which requires the
Commission to set standards for the format of the data provided by
issuers of an asset-backed security, which shall, to the extent
feasible, facilitate the comparison of such data across securities in
similar types of asset classes. We requested comment in the 2011 ABS
Re-Proposing Release as to whether the proposed XML format was an
adequate standard for the format of data that facilitated the
comparison. We did not receive any comments suggesting that requiring
that asset-level data be provided in XML did not, as it relates to data
standardization, implement Section 7(c) effectively.
    Instead, comments on the 2011 Re-Proposing Release reiterated
concerns raised in prior comment letters. For instance, some commenters
reiterated their belief that XML should not be required for CMBS at
this time \741\ and one of these commenters said requiring XML should
be tied to investor demand.\742\ These commenters were concerned with
the cost to implement the standard,\743\ the cost of providing the data
in duplicate formats,\744\ data quality risks,\745\ and the time needed
to implement the standard.\746\ On the other hand, one commenter
believed that the current format of CMBS reports (CSV, Excel and even
PDF) ``greatly limits the transparency of CMBS.'' \747\
---------------------------------------------------------------------------

    \741\ See letters from CREFC II, MBA III, and Wells Fargo II.
    \742\ See letter from MBA III.
    \743\ See letter from CREFC II. This commenter did not provide a
specific cost to implement XML.
    \744\ See letter from MBA III (stating that CMBS investors
generally do not currently utilize XML formatting for reporting and
even if XML is required, issuers will likely continue to provide
investors the disclosures in the format they currently provide them
and use XML format ``solely for filings with the Commission.'').
    \745\ See letters from CREFC II and Wells Fargo I.
    \746\ See letter from Wells Fargo I.
    \747\ See letter from CMBS.com and Commercial Mortgage Industry
Standards Maintenance Organization dated Oct. 4, 2011 submitted in
response to the 2011 ABS Re-Proposing Release.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    After considering the comments received, we are adopting the
proposed XML requirement. We believe requiring asset-level information
in a standardized machine-readable format should lower the cost for
investors of collecting data about ABS offerings and should allow data
to be analyzed by investors and other end-users more quickly than if
the data was provided in a non-machine readable format. For instance,
if the asset-level data is made available to investors in a format that
is not machine-readable, it would require the manual key-entry of the
data into a format that allows statistical analysis and aggregation.
Thus, investors seeking to gain a broad understanding of ABS offerings
would either need to spend considerable time manually collecting the
data and manually entering the data into a format that allows for
analysis, thus increasing the time needed to analyze the data, or incur
the cost of subscribing to a financial service provider that
specializes in this data aggregation and comparison process. Further,
manual entering of data can lead to errors, thereby reducing data
accuracy and usefulness. Requiring companies to report asset-level data
in a standardized machine-readable format, such as XML, should lower
both the time and expense for each investor to access this data. Since
asset-level disclosures will be tagged and can be immediately
downloaded into a larger, more comprehensive database that may include
data about other ABS offerings, investors will not need to manually
enter the data or subscribe to a third-party data aggregator. With more
information readily available in a usable format, investors may be able
to better distinguish the merits of various investment choices, thereby
allowing investors to better match their risk and return preferences
with ABS issuances having the same risk and return profile. Thus, we
expect that this reduction in the costs of accessing, collecting and
analyzing information about the value of ABS will lead to better
allocation of capital. We believe that the requirements we are adopting
to require standardized asset-level disclosures in XML fulfill, for the
asset types subject to these requirements, the requirement under the
Dodd-Frank Act that we set a standard for the format of data that
facilitates comparison across securities in similar types of assets.
    We understand that some commenters expressed concerns regarding the
burden and cost to implement the standard. We recognize that requiring
asset-level disclosures in XML will result in substantial initial set-
up costs to filers.\748\ In a further attempt to mitigate costs to
issuers, as we discuss below in Section IX.B, we are requiring that
issuers comply with the asset-level disclosures no later than November
23, 2016, which we believe reduces the burden of implementation by
providing time for market participants to reprogram their systems. With
respect to the costs of implementation, we believe that the costs are
justified because we believe investors need the asset-level disclosures
in a standardized machine-readable format that makes the data
transparent and comparable. We continue to believe that having the
asset-level data in a standardized machine-readable format will enable
investors to use commercial off-the-shelf software for analysis of
underlying asset-level data, which will allow them to aggregate,
compare and analyze the information.
---------------------------------------------------------------------------

    \748\ We estimate the direct costs of converting data from
internal formats to rule-compliant XML format the following way: We
assume that a sponsor would work with all asset types and would need
to convert the total of 680 distinct data columns, with 80% of them
having direct mapping from internal data types (i.e., no additional
conversion or modification would be necessary) and 20% being coded
(i.e., column value be a combination or modification of existing
data values) and requiring 3 times the effort for direct columns.
One simple column would require 6 hours of work, with a total of
5,712 hours. The deployment (documentation, internal ``roll out''
with the first filing, etc.) would add another 10% to the costs,
leading to the total 6,283 hours, or 3.5 full-time equivalents
(Senior Database Administrator, Senior Business Analyst and one and
a half Junior Business Analysts). Using salary data from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified by Commission staff to account for a 1,800-hour work-year
and multiplied by 5.35 to account for bonuses, firm size, employee
benefits and overhead, we estimate the initial costs would be about
$1,445,000 per sponsor. The hardware cost increment would be de
minimis and the maintenance in subsequent periods would be only 5%
of build cost. For some sponsors that specialize on a limited number
of asset types the costs could be significantly lower because they
would need to transform fewer data points from their internal format
to the rule-compliant XML format. After necessary adjustments have
been made, we expect that the ongoing costs for providing the data
in XML will be minimal.
---------------------------------------------------------------------------

    We also considered, as several commenters suggested, alternative
formats to XML, such as PDF, CSV and XBRL. We do not believe PDF format
is a suitable alternative because it is not a convenient medium for
tabular structured data and it is not designed to convey machine-
readable data. As explained above, the ability of investors to easily
utilize the asset-level data required of issuers is crucial to its
usefulness. We believe that the CSV format is not suitable either,
since any given dataset reported will require more than a single set of
uniformly structured

rows and CSV format will not support the disclosure of such datasets
easily. Finally, while XBRL allows issuers to capture the rich
complexity of financial information presented in accordance with U.S.
Generally Accepted Accounting Principles, we do not believe that it is
appropriate for the asset-level disclosure requirements we are
adopting.\749\ The Asset Data File will present relatively simpler
characteristics of the underlying loan, obligor, underwriting criteria,
and collateral, among other items, that is better suited for XML.
Further, the data extensions available in XBRL are not appropriate for
this dataset where comparability of data is critical and the nature of
the repetitive data lends itself to an XML format. In addition, the XML
schema can be easily updated. \750\
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    \749\ XBRL was derived from the XML standard. See Interactive
Data to Improve Financial Reporting Adopting, Release No. 34-59324
(Jan. 30, 2009) [74 FR 6776].
    \750\ A schema is a set of custom tags and attributes that
defines the tagging structure for an XML document. Extension data is
not permitted in the asset-level data file because we believe it
would defeat the purpose of standardizing data elements. Extension
data allows issuers to add their own data elements to our defined
data elements.
---------------------------------------------------------------------------

4. Asset Related Documents
(a) Proposed Rule
    We understand that a situation may arise where an issuer would need
to disclose other asset-level data not already defined in Schedule AL.
To address this situation, we proposed to include a limited number of
``blank'' data tags in our XML schema to provide issuers with the
ability to present additional asset-level data not required under the
proposal.\751\ We also proposed an ``Asset Related Document'' that
would allow registrants to disclose the definitions or formulas of any
additional asset-level data or provide further explanatory disclosure
regarding the Asset Data File.\752\
---------------------------------------------------------------------------

    \751\ See the 2010 ABS Proposing Release at 23375.
    \752\ Id.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    We received some comments, which were mixed, on the blank tag
proposal, but we did not receive any comments regarding the use of an
Asset Related Document. With regard to the blank tag proposal, one
commenter suggested that as long as the information in the blank data
tag is clearly described, neither the number of blank data tags nor the
information would add complexity to the requirements.\753\ One
commenter, however, did not see the benefit of the proposed blank tags
because new data points can be added as business and reporting needs
evolve.\754\ Another commenter did not believe a blank tag was
appropriate or consistent with ``good XML syntax.'' \755\
---------------------------------------------------------------------------

    \753\ See letter from Prudential I.
    \754\ See letter from MISMO.
    \755\ See letter from MBA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    We continue to believe, given the possible variety of assets and
structures for securitization and that business and reporting needs may
evolve faster than changes can be made to the asset-level requirements,
issuers should have the flexibility to provide asset-level data in
addition to what is required by Schedule AL. For instance, we note that
some commenters suggested we adopt data points that we had not
proposed.\756\ While we are adopting some of the data points commenters
suggested, we are not adopting all the additional data points
recommended for various reasons that we describe above. We encourage
issuers to provide any additional asset-level data that may be
appropriate. We believe the flexibility to provide additional data in a
machine-readable format will provide benefits to investors and issuers
at no significant cost.
---------------------------------------------------------------------------

    \756\ See, e.g., letters from ASF I (suggesting additional RMBS
data points), CU, and Wells Fargo I (suggesting additional RMBS data
points as well as additional RMBS data points regarding government-
sponsored assets).
---------------------------------------------------------------------------

    Under the final requirements, issuers can provide additional asset-
level disclosures in an Asset Related Document and such Asset Related
Document(s) must then disclose the tags, definitions, and formulas for
each additional asset-level disclosure.\757\ As we stated in the 2004
ABS Adopting Release and 2010 ABS Proposing Release, issuers and
underwriters should be mindful of any privacy, consumer protection or
other regulatory requirements when providing additional loan-level
information, especially given that the information would be publicly
filed on EDGAR.\758\ Finally, issuers may also provide other
explanatory disclosure regarding the asset-level data in an Asset
Related Document.\759\ As with any information that is part of the
prospectus or ongoing reports, all Asset Related Documents must be
filed concurrently with the Schedule AL it supplements. We are not
adopting the blank tag proposal as we are persuaded by comments that
the blank tags are not appropriate, may provide limited benefits and
may not be consistent with ``good XML syntax.''
---------------------------------------------------------------------------

    \757\ See Item 1111(h)(5) of Regulation AB.
    \758\ See Section III.C.1.c. of the 2004 ABS Adopting Release
and Section III.A.(b)(i) of the 2010 ABS Proposing Release.
    \759\ See Item 1111(h)(4) of Regulation AB.
---------------------------------------------------------------------------

5. New Form ABS-EE
(a) Proposed Rule
    We proposed that the new Asset Data File be filed as an exhibit to
certain filings. Therefore, we proposed changes to Item 601 of
Regulation S-K, Rule 11 and 101 of Regulation S-T, and Form 8-K to
accommodate the filing of Asset Data Files. We proposed to define the
XML file required by Schedules L and L-D as an Asset Data File in Rule
11 to Regulation S-T and proposed corresponding changes to Rule 101 of
Regulation S-T mandating electronic submission. For asset-level
disclosures required at the time of the offering, we proposed,
regardless of whether the issuer was registering the offering on Form
SF-1 or SF-3, that the Asset Data File be filed as an exhibit to the
appropriate Form 8-K (in the case of an offering) under proposed Item
6.06 of Form 8-K. Proposed Item 6.06 would have required that issuers
file the Asset Data File as an exhibit to a Form 8-K on the same date a
preliminary or final prospectus is filed or an Item 6.05 of Form 8-K is
filed. The proposed requirement would have also required that any Asset
Related Document be filed at the same time the Asset Data File is filed
on EDGAR.
    For ongoing reporting of asset-level disclosure, we proposed to
require the Asset Data File and any Asset Related Document be filed
with the appropriate Form 10-D. As noted above, we also proposed an
additional exhibit, an Asset Related Document, for registrants to
disclose the definitions or formulas of any additional asset-level data
or to provide further explanatory disclosure regarding the Asset Data
File.
(b) Comments on Proposed Rule
    We did not receive any comments with respect to the requirement of
filing the Asset Data Files or Asset Related Documents with the Form 8-
K (in the case of an offering) or with the Form 10-D (in the case of a
periodic distribution report).
(c) Final Rule and Economic Analysis of the Final Rule
    We are adopting new Form ABS-EE to facilitate the filing of the new
Asset Data Files \760\ and Asset Related Documents.\761\ The Asset Data
Files and the Asset Related Documents are

required to be filed as exhibits to new Form ABS-EE.\762\
---------------------------------------------------------------------------

    \760\ See new Item 601(b)(102) of Regulation S-K [17 CFR
229.601(b)(102)].
    \761\ See new Item 601(b)(103) of Regulation S-K [17 CFR
229.601(b)(103)].
    \762\ See Item 1111(h)(3) of Regulation AB [17 CFR
229.1111(h)(3)].
---------------------------------------------------------------------------

    We had proposed that the Asset Data Files and Asset Related
Documents be filed with the Form 8-K because, in the case of a shelf
offering, a Form 8-K is typically used to file other documents related
to a registration statement. We had proposed filing the documents with
Form 10-D to keep periodic disclosures on the same form. We believe,
however, that requiring the information on a single Form ABS-EE will
facilitate the filing of the Asset Data Files and Asset Related
Documents because EDGAR programming for XML files can be specifically
tailored for these types of documents, therefore simplifying filing
obligations for issuers. Form ABS-EE will benefit investors by making
it easier for users to run queries on EDGAR to locate these documents
for download.
    The fact that the disclosures are filed as exhibits does not impact
the fact that the data contained in the Asset Data Files and the Asset
Related Documents are disclosures that are part of a prospectus or a
periodic report, as applicable.\763\ As noted earlier, they are
required to be incorporated by reference into the prospectus or the
Form 10-D, as applicable. Accordingly, there is no change to the timing
and frequency requirements for filing information to meet our offering
and periodic disclosure rules and the corresponding Form ABS-EE, with
the proper attachments, must be on file and be incorporated by
reference into those filings by the time those filings are made or are
required to be made.
---------------------------------------------------------------------------

    \763\ Forms SF-1, SF-3, and 10-D each include an instruction
requiring that any disclosures provided pursuant to Item 1111(h) of
Regulation AB [17 CFR 229.1111(h)] filed as exhibits to Form ABS-EE
in accordance with Items 601(b)(102) or 601(b)(103) [17 CFR
229.601(b)(102) and (b)(103)].
---------------------------------------------------------------------------

6. Temporary Hardship Exemption
(a) Proposed Rule
    We proposed to revise Rule 201 of Regulation S-T to include a self-
executing temporary hardship exemption for filing the Asset Data
File.\764\ We also proposed to exclude Asset Data Files from the
continuing hardship exemption under Rule 202 of Regulation S-T. Rule
202 generally allows an issuer to apply for a continuing hardship if it
cannot file all or part of a filing without undue burden or expense.
Under the proposed temporary hardship exemption, if the registrant
experiences unanticipated technical difficulties preventing the timely
preparation and submission of an Asset Data File, a registrant would
still be considered timely if: The Asset Data File(s) containing the
asset-level data is posted on a Web site on the same day it was due to
be filed on EDGAR; an Asset Data File is filed on EDGAR that contains
the Web site address, a legend is provided in the Asset Data File filed
on EDGAR claiming the hardship exemption; and the Asset Data File(s)
are filed on EDGAR within six business days.
---------------------------------------------------------------------------

    \764\ [17 CFR 232.201]. Rule 201 of Regulation S-T generally
provides for a temporary hardship exemption from the electronic
submission of information, without staff or Commission action, when
a filer experiences unanticipated technical difficulties that
prevent timely preparation and submission of an electronic filing.
The temporary hardship exemption permits the filer to initially
submit the information in paper format but requires the filer to
submit a confirming electronic copy of the information within six
business days of filing the information in paper format.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    We did not receive any comments regarding our proposed self-
executing temporary hardship exemption. We also did not receive any
comments on the proposal to exclude Asset Data Files from the
continuing hardship exemption under Rule 202 of Regulation S-T.
(c) Final Rule and Economic Analysis of the Final Rule
    We are adopting, as proposed, a temporary hardship exemption. Under
the requirement, if an issuer experiences unanticipated technical
difficulties preventing the timely preparation and submission of an
Asset Data File required to be filed on EDGAR, it may still be
considered timely. For the Asset Data File, an issuer will still be
considered timely if: The Asset Data File is posted on a Web site
accessible to the public on the same day it was due to be filed on
EDGAR; a Form ABS-EE is filed that identifies the Web site address
where the file can be located; a legend is provided claiming the
hardship exemption; and the Asset Data File is filed on EDGAR within
six business days.\765\ We believe that the hardship exemption will
benefit both issuers and investors, because it will allow issuers to
maintain compliance with our rules while providing investors with
access to the information required to be disclosed without further
delay.
---------------------------------------------------------------------------

    \765\ See Rule 201(d) and (e) of Regulation S-T [17 CFR
232.201].
---------------------------------------------------------------------------

    We are also excluding the Asset Data File, as proposed, from the
continuing hardship exemption under Rule 202 of Regulation S-T. We
continue to believe that a continuing hardship exemption is not
appropriate with respect to the Asset Data File because the Asset Data
File is an integral part of the prospectus and periodic reports. We
also believe that for ABS issuers the information in machine-readable
format is generally already collected and stored on a servicer's
systems. Therefore, we do not believe it would be appropriate for
issuers to receive a continuing hardship exemption for the Asset Data
File. We believe all investors will benefit from receiving the
disclosures specified in Schedule AL in a format that will allow them
to effectively utilize the information.

C. Foreign ABS

    We requested comment on whether there are other privacy issues that
arise for issuers of ABS backed by foreign assets.\766\ The responses
we received indicated concerns regarding foreign privacy laws,\767\ as
well as concerns related to variations in the characteristics of
consumer receivables originated in different jurisdictions,\768\ the
inconsistencies between our proposal and other countries' disclosure
and reporting standards,\769\ and certain terms or structures used in
the proposed rule that lack a direct European equivalent.\770\ As an
alternative to our proposal, some commenters requested that the
disclosure standards for transactions involving assets located outside
the United States be based on local requirements.\771\ In response to
the

2014 Re-Opening Release, a few commenters raised cost and burden
concerns about foreign ABS issuers' compliance with overlapping
regulatory regimes.\772\ A few commenters suggested flexible
requirements for foreign ABS issuers to account for differences in the
applicability and availability of information or a substitute
compliance regime to account for differences between jurisdictions,
including differences between the privacy laws of foreign
jurisdictions.\773\
---------------------------------------------------------------------------

    \766\ See Section III.A(b)(i) of the 2010 ABS Proposing Release.
We asked: (1) Are there other privacy issues that arise for issuers
of ABS backed by foreign assets? (2) How do the privacy laws of
foreign jurisdictions differ from U.S. privacy laws? (3) If the
privacy laws of foreign jurisdictions are more restrictive regarding
the disclosure of information how should we accommodate issuers of
ABS backed by foreign assets? (4) Is there substitute information
that could be provided to investors?
    \767\ See letters from ABA I, Association for Financial Markets
in Europe/European Securitisation Forum dated Aug. 2, 2010 submitted
in response to the 2010 ABS Proposing Release (``AFME/ESF''), and
Association for Financial Markets in Europe dated Oct. 4, 2011
submitted in response to the 2011 ABS Re-Proposing Release
(``AFME'').
    \768\ See letter from Australian Securitisation Forum dated Aug.
2, 2010 submitted in response to the 2010 ABS Proposing Release
(``AusSF'').
    \769\ See letter from AFME/ESF.
    \770\ Id.
    \771\ See letters from AusSF (requesting that Australian issuers
need only satisfy the Australian Securities and Investments
Commission requirements and that differences between U.S. and
Australian standards be disclosed in the offering documents), AFME/
ESF (suggesting that the Commission permit the satisfaction of
certain requirements by European issuers if they provide relevant
information in compliance with any local or other relevant
requirements and allow the adjustment of the requirements to reflect
the information available outside of a U.S. context) and AFME
(suggesting a similar regime, but stating that if compliance with
local requirements was not appropriate, then a ``provide-or-
explain'' regime would be a helpful alternative).
    \772\ See letters from ABA III, GFMA/AusSF, SFIG II, SIFMA/FSR
I-dealers and sponsors, and Treasurer Group.
    \773\ See, e.g., letters from ABA III, GFMA/AusSF, and Treasurer
Group (stating that substitute compliance is allowing the issuer to
provide the disclosure required under a foreign jurisdiction).
---------------------------------------------------------------------------

    We have reviewed the requirements we are adopting against the
requirements adopted by the European Central Bank \774\ and the Bank of
England.\775\ We note several similarities and differences between our
requirements and theirs, and we believe that perfect agreement between
the Commission's requirements and the requirements of all foreign
jurisdictions may not be achievable. We believe U.S. investors may
expect data in a certain format and/or a certain level of disclosure
that is not required under the requirements of other jurisdictions,
some of which require the information for supervisory purposes and not
specifically for the benefit of investors.\776\ In addition, the
underlying assets, the form of issuance, parties to the structures,
terms and definitions and the structures themselves vary across
jurisdictions. We also note that the privacy laws vary across
jurisdictions, resulting in disclosure requirements of one jurisdiction
that may conflict with the privacy laws in another jurisdiction.
---------------------------------------------------------------------------

    \774\ See Data Templates, European Central Bank (2013), http://www.ecb.eu/mopo/assets/loanlevel/transmission/html/index.en.html.
    \775\ See Bank of England Loan Level Data: Reporting Template
for Residential Mortgage Pools, Bank of England (Nov. 2010), http://www.bankofengland.co.uk/markets/Documents/money/documentation/RMloanleveldata-template.pdf.
    \776\ See, e.g., details about the European Central Bank's loan-
level requirements for ABS accepted as collateral in Eurosystem
credit operations available at http://www.ecb.europa.eu/paym/coll/loanlevel/html/index.en.html. See also the market notices from the
Bank of England discussing their eligibility requirements for RMBS
and covered bonds backed by residential mortgages; CMBS, small-
medium enterprise loan backed securities and ABS backed by
commercial paper; and ABS backed by consumer loans, auto loans, and
leases that are delivered as collateral against transactions in the
Bank's operations at http://www.bankofengland.co.uk/markets/Documents/marketnotice121002abs.pdf, http://www.bankofengland.co.uk/markets/Documents/marketnotice111220.pdf, http://www.bankofengland.co.uk/markets/Documents/marketnotice121217.pdf.
---------------------------------------------------------------------------

    We are not persuaded, however, that the Commission should implement
a regime that would recognize the asset-level data requirements
developed by foreign authorities, for example the European Central Bank
and the Bank of England, that are tailored to assets originated outside
of the U.S. or a ``provide-or-explain'' type regime that would permit
selective disclosure based upon foreign laws. We continue to believe,
as for U.S. originated assets, the usefulness of asset-level data is
generally limited unless the data is standardized. We believe adopting
another disclosure regime for foreign asset ABS would reduce
standardization and, thereby, the comparability of ABS backed by assets
originated outside of the U.S. and ABS backed by assets originated
within the U.S. Further, a provide-or-explain regime lowers the
comparability of ABS pools comprised of assets originated outside the
U.S. against each other as the scope of disclosures provided by each
issuer for each ABS may differ depending on the privacy laws of the
home jurisdiction of the issuer. We acknowledge that compliance
challenges and increased costs for foreign market participants may
arise; however, we believe U.S. investors should receive the same data
about ABS backed by assets originated outside the U.S. as ABS backed by
assets originated within the U.S. This approach is consistent with our
approach for corporate issuers, under which foreign private issuers
generally provide comparable information to U.S. issuers.

IV. Other Prospectus Disclosure

A. Transaction Parties

1. Identification of the Originator
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we noted that Item 1110(a) of
Regulation AB, prior to the adoption of today's amendments, required
identification of originators apart from the sponsor or its affiliates
only if the originator has originated, or expects to originate, 10% or
more of the pool assets. We noted that in situations where many of the
pool assets have been purchased from originators other than the sponsor
and each of these originators originated less than 10% of the pool
assets that the requirement requires very little, if any, information
about the originators. Therefore, we proposed to amend the item to
require that an originator originating less than 10% of the pool assets
would be required to be identified if the cumulative amount of
originated assets by parties other than the sponsor or its affiliates
comprises more than 10% of the total pool assets.
(b) Comments on Proposed Rule
    Comments on the proposal were focused on the scope of the
requirement. Commenters argued that the rule should require disclosure
identifying the originator of each asset without exception.\777\
Another commenter recommended that the requirement be modified to
include a low threshold (e.g., 2% of the original pool assets) under
which identification of the non-affiliated originators would not be
required.\778\ In contrast, one commenter believed that the proposal
was excessive with the costs outweighing the benefits and recommended
keeping the current requirement and supplementing it with disclosure of
``additional originators to the extent necessary so that information
about the originators of at least 85% of the pool assets has been
included in the prospectus.'' \779\ Another commenter stated that
disclosure of only third parties who originated more than 10% of the
pool and all originators who provided 5% or more of the pool by dollar
value would be more valuable to investors.\780\
---------------------------------------------------------------------------

    \777\ See, e.g., letters from Prudential I (suggesting that
Schedule L should specify the originator of each asset, which will
allow investors to identify and differentiate originators that are
providing riskier collateral to structured product transactions) and
Realpoint (recommending that for CMBS transactions every originator
be identified).
    \778\ See letter from BoA I.
    \779\ See letter from VABSS I (without providing a cost
estimate).
    \780\ See letter from CFA I (without describing why this
disclosure would be more valuable to investors).
---------------------------------------------------------------------------

(c) Final Rule
    After considering the comments received, we are adopting the
amendment to Item 1110(a) of Regulation AB, as proposed, with a slight
modification to clarify the change that we are making to the existing
requirement. Under the final rule that we are adopting, if the
cumulative amount of originated assets by parties, other than the
sponsor or its affiliates, comprises more than 10% of the total pool
assets, then those originator(s) originating less than 10% of the pool
assets will also be required to be identified in the prospectus. We
continue to believe that where the sponsor securitizes assets of a
group of originators that are not affiliated with the sponsor, more
disclosure regarding the originators of the assets is needed. We
believe investors will benefit from these disclosures because they will
be

better able to assess pools comprising assets from these originators.
We acknowledge that the revised rule will likely result in more
originators having to be identified in the prospectus than is currently
required; however, we do not think that it will result in significant
costs to issuers since the information is readily available and the
disclosure is limited only to identification of the originator. In
addition, while we note that some commenters requested that we impose
an additional minimum threshold before issuers would be required to
identify unaffiliated originators,\781\ we do not believe that such a
distinction would be appropriate for the same reasons.
---------------------------------------------------------------------------

    \781\ See letters from BoA I, CFA I, and VABSS I.
---------------------------------------------------------------------------

2. Financial Information Regarding a Party Obligated To Repurchase
Assets
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we noted that in the events
arising out of the financial crisis, the financial condition of the
party obligated to repurchase assets pursuant to the transaction
agreement governing an asset securitization became increasingly
important as to whether repayments on asset-backed securities would be
made.\782\ We proposed to require disclosure of the financial condition
of certain parties required to repurchase assets when there is a
breach, pursuant to the transaction agreements, of a representation and
warranty related to pool assets. Under the proposal, information
regarding the financial condition of a 20% originator would be required
if there is a material risk that the financial condition could have a
material impact on the origination of the originator's assets in the
pool or on its ability to comply with provisions relating to the
repurchase obligations for those assets. Information about the
sponsor's financial condition similarly would be required to the extent
that there is a material risk that the financial condition could have a
material impact on its ability to comply with the provisions relating
to the repurchase obligations for those assets or otherwise materially
impact the pool.
---------------------------------------------------------------------------

    \782\ See the 2010 ABS Proposing Release at 23382. In the 2010
ABS Proposing Release, we also proposed to amend Item 1104 and Item
1110 of Regulation AB to require disclosure of the amount, if
material, of publicly securitized assets originated or sold by the
sponsor or an identified originator that were the subject of a
demand to repurchase or replace any of the assets for breach of the
representations and warranties concerning the pool assets in the
last three years pursuant to the transaction agreements. This
proposal and the comments on this proposal were considered in
connection with the rules implementing Section 943 of the Dodd-Frank
Act. See the Section 943 Adopting Release. Therefore, the proposal
and related comments are not addressed in this release.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    The response to the proposal was mixed with some commenters
supporting the proposal,\783\ some commenters opposing the
proposal,\784\ and other commenters who did not express whether they
supported or opposed the proposal, but suggested certain
revisions.\785\ One concern, raised by some commenters who opposed the
proposal, was that investors may perceive the disclosure and the
existence of representations and warranties as suggesting that the
obligated parties are providing credit or liquidity support to the
transaction.\786\ Some commenters stated that the disclosure
requirement may act as a barrier to entry for participation in the
securitization markets, may potentially be misleading because it would
likely be provided long before repurchase demands would be made, and in
most instances disclosure would be required because an obligated
party's financial condition would likely always impact a party's
ability to perform its repurchase-related obligations.\787\
---------------------------------------------------------------------------

    \783\ See letters from ASF I (supporting the proposal, but
suggesting that we revise the standard for when such disclosure is
required to mirror the requirement regarding financial information
of certain servicers included in Item 1108(b)(4) of Regulation AB,
with a focus on whether the sponsor's or originator's financial
condition would have an effect on origination of the pool assets or
on its ability to comply with any repurchase obligations in a manner
that could have a material impact on pool performance or performance
of the asset-backed securities) and CFA I (stating that benefits to
investors in the form of better knowledge about the source of pool
assets outweighs the costs of compliance).
    \784\ See letters from BoA I, CMBP (disagreeing with the
proposed disclosure requirement as it relates to a 20% originator)
CREFC I, IPFS Corporation dated Aug. 2, 2010 submitted in response
to the 2010 ABS Proposing Release (``IPFS I'') (responding with
respect to private offerings of insurance premium finance loans),
and MBA I.
    \785\ See letters from AusSF (stating that if we require
financial statements that we should allow the submission of IFRS-
compliant financial statements to satisfy the requirement) and KPMG
LLP dated Aug. 2, 2010 submitted in response to the 2010 ABS
Proposing Release (``KPMG'') (noting that the impact of the proposal
will vary depending, in part, on whether the financial information
must be audited and urging the Commission to weigh the cost of
requiring audited financials against such benefit). See also letters
from Center for Audit Quality dated Aug. 2, 2010 submitted in
response to the 2010 ABS Proposing Release and Ernst & Young dated
Aug. 2, 2010 submitted in response to the 2010 ABS Proposing Release
(``E&Y'') (requesting other revisions). These commenters contended
that the proposed amendments to Item 1104 and Item 1110(b) would
require a subjective evaluation of the materiality of the risk and
recommended, instead, to expand the scope of the definition of
significant obligor in Item 1112 (i.e., to incorporate the obligated
party that is required to repurchase assets for breach of a warranty
or representation) or to expand the scope of Item 1114, the
requirement relating to disclosure of significant credit
enhancements, to include repurchase and replacement obligations--
thereby providing an objective standard for determining when and how
the requisite financial disclosure should be provided. Under this
standard, the required financial information would be (1) the
selected financial data specified by Item 301 of Regulation S-K when
the obligation exceeds 10% of the asset pool, and (2) audited
financial statements that comply with Regulation S-X when the
obligation exceeds 20% of the asset pool.
    \786\ See letters from BoA I, CREFC I, and MBA I.
    \787\ See letters from CREFC I and MBA I. See also letter from
CMBP (recommending instead to require sponsors to certify that: all
the originators that have sold assets to the pool backing the ABS
meet the sponsor's standards of creditworthiness, the sponsor's
standards are customary and commercially reasonable, and based on
the sponsor's assessment that each originator has the financial
means to discharge their obligations under the representations and
warranties regarding the pool assets).
---------------------------------------------------------------------------

(c) Final Rule
    After considering the comments received, we are adopting the
amendments to Item 1104 and Item 1110, with some modification. We have
revised the amendments so that the standard for when disclosure of
financial information is required mirrors the existing standard for
disclosures required about certain servicers.\788\ Under the revised
rules, the standard focuses on whether the sponsor or 20% originator's
financial condition would have an effect on its ability to comply with
any repurchase obligations in a manner that could have a material
impact on pool performance or performance of the asset-backed
securities.
---------------------------------------------------------------------------

    \788\ See Item 1108(b)(4) of Regulation AB (requiring
information regarding the servicer's financial condition to the
extent that there is a material risk that the effect on one or more
aspects of servicing resulting from such financial condition could
have a material impact on pool performance or performance of the
asset-backed securities).
---------------------------------------------------------------------------

    We are adopting these amendments because we believe an investor's
ABS investment decision includes consideration of obligations from
certain parties to repurchase assets if there is a breach of the
representations and warranties relating to those assets and the
capacity of those parties to repurchase those assets. As evident from
the crisis, the mere existence of a repurchase provision provides
investors with little comfort as to the ability of the party obligated
to repurchase assets for a breach of a representation or warranty.\789\
The expanded disclosure

that we are requiring will provide investors insight into the capacity
of the obligated parties to repurchase assets. We acknowledge that the
financial condition of these parties may change between the time of the
transaction, when the disclosure is provided, and when a repurchase is
required. We believe that investors will nonetheless benefit from the
required information because it will allow investors to assess, at the
time of their investment decision, whether the representations and
warranties provided regarding the pool assets are made by entities
financially capable of fulfilling their obligations.
---------------------------------------------------------------------------

    \789\ See Transparency in Accounting: Proposed Changes to
Accounting for Off-Balance Sheet Entities Before the Subcomm. on
Sec., Ins., & Inv. of the S. Comm. on Banking, Housing & Urban
Affairs, 110th Cong. 3 (2008) (statement of Joseph Mason, Professor
at Louisiana State University) (stating that `` `representations and
warranties' have become a mechanism for subsidizing pool
performance, so that no asset- or mortgage-backed security investor
experiences losses--until the seller, itself, fails and is no longer
able to support the pool'').
---------------------------------------------------------------------------

    We also note the concerns that some of these parties are private
companies who may choose to exit the securitization market rather than
provide financial disclosures. While we acknowledge this possibility,
we believe that this information is material for investors in order to
make an informed investment decision. Furthermore, we believe this
concern is minimized, to some extent, because the requirement does not
necessarily require financial statements, but only information about
their financial condition similar to the type of disclosure required
under current rules regarding financial information of certain
servicers, some of which may be private companies. Where disclosure is
required, the type and extent of information regarding certain
originators' and sponsors' financial condition would depend upon the
particular facts. We note that sponsors will typically conduct due
diligence regarding the pool assets when purchasing assets to include
in the ABS pool, including assessing the financial condition of
originators that are obligated to repurchase or replace any asset for
breach of a representation and warranty pursuant to the transaction
agreements. We believe that when the trigger for disclosure of the
financial information of sponsors and 20% originators is met, as
outlined in the rule, investors should have the same information. We
are mindful, however, of the costs that originators and sponsors would
incur if we required audited financial information, especially for
those originators and sponsors that have not previously been subject to
an audit; therefore, we are not requiring that financial information
included be audited.
3. Economic Interest in the Transaction
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we noted that existing Item
1103(a)(3)(i) of Regulation AB required disclosure of the classes of
securities offered by the prospectus and any class of securities issued
in the same transaction or residual or equity interests in the
transaction that are not being offered by the prospectus.\790\ We also
noted our belief that information regarding the sponsor's, a
servicer's, or a 20% originator's continuing interest in the pool
assets is important to an ABS investor and, therefore, we proposed to
revise Items 1104, 1108, and 1110 to require disclosure regarding the
sponsor's, a servicer's, or a 20% originator's interest retained in the
transaction, including the amount and nature of that interest.\791\ The
disclosure would be required for both shelf and other offerings.\792\
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    \790\ 17 CFR 229.1103(a)(3)(i).
    \791\ For example, if the originator has retained a portion of
each tranche of the securitization, then disclosure regarding each
amount retained for each tranche would be required.
    \792\ We also proposed that if the offering was being registered
on Form SF-1, the issuer would be required to provide clear
disclosure that the sponsor is not required by law to retain any
interest in the securities and may sell any interest initially
retained at any time.
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(b) Comments on Proposed Rule
    Several commenters supported the proposed rule but recommended
certain revisions.\793\ Some of these commenters suggested that the
required disclosures include the effect of hedging.\794\ For instance,
one commenter stated that the rule should state that the disclosure
should be net of hedging,\795\ and the other commenter recommended
requiring the sponsor to disclose ``any hedge (security specific or
portfolio) that was entered into by the sponsor or, to the extent it
has actual knowledge of such a hedge, an affiliate in an effort to
offset any risk retention position held by the sponsor or an
affiliate.'' \796\
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    \793\ See letters from ABA I (supporting this requirement in
lieu of the proposed risk retention shelf eligibility requirement
because this disclosure will ensure that investors are fully aware
of the alignment of interests in each offering), ASF I (expressed
views of investors only) (believing that if the sponsor of the
securitization retains exposure to the risks of the assets, the
sponsor will likely have greater incentives to include higher
quality assets), Mass. Atty. Gen., and Prudential I.
    \794\ See letters from Mass. Atty. Gen. and Prudential I.
    \795\ See letter from Mass. Atty. Gen.
    \796\ See letter from Prudential I.
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    Another commenter requested that we limit the retention disclosure
requirements ``to those required in any risk retention construct that
may be included in the final rules.'' \797\ The commenter acknowledged
that it ``is difficult for investors to ascertain how many securities
cleared the market and how many were taken down by the issuer or
sponsor,'' but that disclosure of any retention held above a required
amount would be impractical and misleading because accurate information
about retention interests may not be known until closing, which is
after investors make their investment decision, and the retention
interests often change during the period between the time of sale and
closing.
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    \797\ See letter from CREFC I.
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(c) Final Rule
    After considering the comments received, we are adopting the
proposed revisions to Items 1104, 1108, and 1110 with some
modifications.\798\ As noted below, the requirements that we are
adopting for shelf eligibility do not contain a requirement for risk
retention in light of the risk retention proposals currently being
considered by regulators under the Dodd-Frank Act.\799\ Because
commenters noted that disclosure about a sponsor's, a servicer's, or a
20% originator's continuing interest in the pool assets is an important
factor that investors consider when analyzing the alignment of
interests among various parties in the securitization chain, we are
adopting this rule.\800\ We are also persuaded by commenters that this
disclosure should describe the effect of hedging because a hedge could
effectively reduce the actual exposure that the party may face from its
continuing interest in the pool assets.\801\ We do not believe that
providing disclosure of the interests retained by the sponsor,
servicer, or 20% originator net of hedging alone, as suggested by one
commenter, provides investors with

sufficient insight into the hedging activities used by these entities
to minimize exposure to their interests. Therefore, we are adopting the
rule that each of these parties disclose their continuing interest in
the pool assets, including the amount and nature of that interest, and
disclose any hedge (security specific or portfolio) materially related
to the credit risk of the securities that was entered into by these
parties or, if known, by any affiliate of these parties to offset any
risk position held.\802\ We believe this approach provides investors
with appropriate information about these entities' continuing interest
in the pool assets and how these parties may be managing those
exposures.
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    \798\ For purposes of describing any interest that the sponsor,
servicer, or 20% originator, retained in the transaction, such
disclosure must also include any interest held by an affiliate of
such entity, except as described below for certain hedges entered
into by affiliates, disclosure is required to the extent known. We
have made conforming changes to the final rule to clarify the
treatment of affiliates. As discussed later in Section VIII.A.3
Changes in Sponsor's Interest in the Securities, we are also
adopting a requirement that any material change in the sponsor's
interest in the securities must be disclosed on Form 10-D.
    \799\ See the 2011 Risk Retention Proposing Release and the 2013
Risk Retention Re-Proposing Release.
    \800\ See also footnote 1320 (describing one commenter's views
on the importance of requiring disclosure of any material change in
the sponsor's interest in the transaction).
    \801\ We also note that Section 15G of the Exchange Act, as
added by Section 941 of the Dodd-Frank Act, requires that the risk
retention rules, to be finalized by regulators, must prohibit a
securitizer from directly or indirectly hedging the credit risk
required to be retained under the rules.
    \802\ Because we believe that a security-specific hedge is more
likely to be material to investors, we anticipate that issuers will
need to provide more detailed disclosure about such hedge in order
for investors to understand the impact such hedge may have on the
ABS.
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    We also acknowledge the concerns that the exact amount retained by
these parties may not be known until closing and that these retention
interests may and do often change during the period between the time of
sale and closing.\803\ To address these concerns, the parties will only
need to describe in the preliminary prospectus the amount and nature of
the interest that they intend to retain. The parties must, however,
also disclose in the preliminary prospectus the amount and nature of
risk retention that they have retained in order to comply with law (for
example, to comply with the final risk retention rules once they are
adopted).\804\ In order to clarify the requirement, we have included an
instruction specifying that the amount and nature of the interest or
asset retained in compliance with law must be separately stated in the
preliminary prospectus.\805\ For purposes of the final prospectus, the
parties must also disclose the actual amount and nature of the interest
to be retained.
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    \803\ See letter from CREFC I.
    \804\ See the 2013 Risk Retention Re-Proposing Release.
    \805\ See letter from CREFC I (noting that the nature and amount
of retained interests held to fulfill risk retention requirements
could be disclosed in the prospectus).
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4. Economic Analysis Related to the Rules Regarding Transaction Parties
    The rules discussed in this section seek to provide ABS investors
with greater information about the transaction parties to a
securitization, thereby allowing them to make more informed investment
decisions. First, investors will now be able to identify a potentially
larger number of the originators of pool assets, which will improve
their ability to compare the loan performance across originators and
assess the relative stringency of these originators' underwriting
standards as well as their historical performance. Second, at the time
of an ABS offering, investors will now be able to better assess the
ability of parties obligated to repurchase assets to actually fulfill
those obligations. This will allow investors to more accurately assess
the representations and warranties in the transaction agreements, since
the enforceability of these depends on the ability of the obligated
party to repurchase breached assets. Third, investors will now have
information about the sponsor's, servicer's, or a 20% originator's
interest retained in the transaction net of hedging. Investors have
indicated that this information will be beneficial to them because the
information will allow them to consider the incentives of the various
parties involved in the securitization chain.
    The costs of the revised rule will be borne primarily by issuers,
who will be required to provide additional disclosure about the
transaction parties to a securitization. The magnitude of the costs
will depend on the extent to which issuers already gather the required
information. For instance, on the one hand, issuers likely already
obtain the identities of originators; therefore, providing that
information should not impose significant additional costs. On the
other hand, issuers may need to gather some additional information from
third parties regarding the financial condition of an originator who
originated 20% or more of the pool assets and is obligated to
repurchase assets under the transaction agreements. As a result,
issuers may incur costs to gather the financial data and then prepare
and provide the required disclosure. However, we believe that the
revised rule strikes the appropriate balance between the benefit of
providing investors with useful information about the originators and
the burden of requiring the identification of all originators,
regardless of the amount they contributed to the pool.
    Some commenters were concerned that disclosing the financial
condition of a party obligated to repurchase assets may impose an
indirect cost on investors, if investors misinterpret this disclosure
and the existence of representations and warranties as the obligated
parties providing credit or liquidity support to the transaction. In
light of our other rules on disclosure of credit and liquidity support,
we believe investors will see a clear distinction between the
representations and warranties and any credit or liquidity support
provided. Similarly, some commenters were concerned that the disclosure
may be misleading to investors because the financial condition of the
party may have changed between the time of the transaction when the
disclosure was provided and the repurchase demand. We believe that
investors will still benefit from the required information since it
will allow investors to assess at the time of making their investment
decision whether the entities that provided representations and
warranties regarding the pool assets are, at least as an initial
matter, financially capable of fulfilling their obligations.

B. Prospectus Summary

1. Proposed Rule
    In the 2010 ABS Proposing Release, we noted that a prospectus
summary should briefly highlight the material terms of the transaction,
including an overview of the material characteristics of the asset
pool. We also noted our belief that the prospectus summaries provided
in ABS prospectuses may not adequately highlight the material
characteristics, including material risks, particular to the ABS being
offered. Instead, these prospectus summaries often summarize types of
information that are common to all securitizations of a particular
asset class.\806\ Accordingly, we proposed a new instruction to clarify
the prospectus summary disclosure requirements.\807\ Specifically, the
proposed instruction noted that the prospectus summary disclosure may
include, among other things, statistical information of: The types of
underwriting or origination programs, exceptions to underwriting or
origination criteria, and, if applicable, modifications made to the
pool assets after origination.
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    \806\ See the 2010 ABS Proposing Release at 23383.
    \807\ 17 CFR 229.1103(a)(2).
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2. Comments on Proposed Rule
    Comments on the proposal were mixed.\808\ One commenter, who was
supportive of the proposal, stated that the instruction would help
``highlight potential risks relating to the underwriting of the
underlying pool assets.'' \809\ Another commenter, who opposed the
proposed instruction, requested an exception for CMBS transactions
stating that each commercial mortgage is unique and, as

a result, the proposed disclosures would not enhance an investor's
understanding of the risks and characteristics of a particular CMBS
loan pool.\810\ One commenter stated that the instruction runs counter
to the Commission's plain English rules because it requires the
repeating of disclosure in different sections of the document without
enhancing the quality of the information.\811\ This commenter also
contended that the proposed instruction seems to encourage reliance on
a summary of information that should be considered in the fuller
context of the narrative in the body of the prospectus. The commenter
suggested that we reconsider the proposal or, in the alternative,
require only a cross-reference in the summary to the location of this
information in the body of the prospectus.\812\
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    \808\ See letters from BoA I, CFA I, Prudential I, and Realpoint
(all supporting the proposal). But see letters from ASF I (expressed
views of dealers and sponsors only) and CREFC I (opposing the
proposed rule).
    \809\ See letter from CFA I.
    \810\ See letter from CREFC I.
    \811\ See letter from ASF I (expressed views of dealers and
sponsors only) (``find[ing] it unusual that the Commission is
proposing such a specific disclosure requirement as an instruction
to an Item requirement that is otherwise by design very general'').
    \812\ See letter from ASF I (expressed views of dealers and
sponsors only).
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3. Final Rule and Economic Analysis of the Final Rule
    After considering comments received, we are adopting the proposed
instruction with revisions. From our experience, the prospectus
summaries often summarize types of information that are common to all
securitizations of a particular asset class rather than the material
characteristics of the particular ABS, such as statistics regarding
whether the loans in the asset pool were originated under various
underwriting or origination programs, whether loans were underwritten
as exceptions to the underwriting or originations programs, or whether
the loans in the pool have been modified.\813\ We believe that
investors would benefit from a prospectus summary that summarizes the
disclosures in the prospectus regarding this type of information
because presenting this information in a summarized format may aid
investors' understanding of material characteristics. In that regard,
we also believe that the final instruction is less prescriptive than
one commenter suggested since it does not require specific disclosure
but rather indicates the types of information that may be summarized.
We acknowledge that the prospectus summary should be brief and should
not contain, and is not required to contain, all of the detailed
information in the prospectus and, therefore, issuers should not simply
repeat the disclosure found elsewhere in the prospectus in the
prospectus summary. We also acknowledge that more fulsome narrative
disclosures discussing these summary statistics may provide greater
context about these disclosures; therefore, we added as part of the
final instruction a requirement to include a cross-reference in the
prospectus summary to the location of corresponding disclosure in the
body of the prospectus.
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    \813\ For example, the prospectus summary should include
summarized information about the disclosure required as part of the
issuer review performed under Securities Act Rule 193. In
particular, Item 1111 of Regulation AB requires an ABS issuer to
disclose the nature of its review of the assets and the findings and
conclusions of the issuer's review of the assets, which includes its
conclusion that the review was designed and effected to provide
reasonable assurance that the disclosure in the prospectus regarding
the assets is accurate in all material respects.