[Federal Register Volume 76, Number 17 (Wednesday, January 26, 2011)]
[Rules and Regulations]
[Pages 4489-4515]
[FR Doc No: 2011-1504]

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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 76, No. 17 / Wednesday, January 26, 2011 /
Rules and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 232, 240 and 249

[Release Nos. 33-9175; 34-63741; File No. S7-24-10]
RIN 3235-AK75

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

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: Pursuant to Section 943 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act,\1\ we are adopting new rules related to
representations and warranties in asset-backed securities offerings.
The final rules require securitizers of asset-backed securities to
disclose fulfilled and unfulfilled repurchase requests. Our rules also
require nationally recognized statistical rating organizations to
include information regarding the representations, warranties and
enforcement mechanisms available to investors in an asset-backed
securities offering in any report accompanying a credit rating issued
in connection with such offering, including a preliminary credit
rating.
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    \1\ Pub. L. 111-203 (July 21, 2010).

DATES: Effective Date: March 28, 2011.
    Compliance Dates:
    Rule 15Ga-1: The initial filing required by Rule 15Ga-1(c)(1) for
the three years ended December 31, 2011 is required to be filed on
February 14, 2012, except that a securitizer that is any State or
Territory of the United States, the District of Columbia, any political
subdivision of any State, Territory or the District of Columbia, or any
public instrumentality of one or more States, Territories or the
District of Columbia, shall provide the initial filing required by Rule
15Ga-1(c)(1) for the three years ended December 31, 2014 and file on
February 14, 2015.
    Regulation AB: Any registered offering of asset-backed securities
commencing with an initial bona fide offer on or after February 14,
2012 must comply with the information requirements of new Item 1104(e)
of Regulation AB. For any such offering that relies on Securities Act
Rule 415(a)(1)(x), a Securities Act registration statement filed after
December 31, 2011 relating to such offering must be pre-effectively or
post-effectively amended, as applicable, to make the prospectus
included in Part I of the registration statement compliant. The
information required by Item of 1121 of Regulation AB is required for
all Form 10-Ds required to be filed after December 31, 2011.
    Rule 17g-7: NRSROs will be required to provide the information
required by the rule to be included in a report accompanying a credit
rating for an offering of asset-backed securities for any such report
issued on or after September 26, 2011.

FOR FURTHER INFORMATION CONTACT: Rolaine Bancroft, Attorney-Advisor, in
the Office of Rulemaking, at<PHONE_NUMBER>, Division of Corporation
Finance, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-3628 or, with respect to Rule 17g-7, Joseph I.
Levinson, Special Counsel, at<PHONE_NUMBER>, Division of Trading and
Markets, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Items 1104 and
1121 \2\ of Regulation AB \3\ (a subpart of Regulation S-K) under the
Securities Act of 1933 (``Securities Act'') \4\ and Rules 101 and 314
\5\ of Regulation S-T.\6\ We also are adding Rules 15Ga-1 \7\ and 17g-7
\8\ and Form ABS-15G \9\ under the Securities Exchange Act of 1934
(``Exchange Act'') \10\ and the Act.
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    \2\ 17 CFR 229.1104 and 17 CFR 229.1121.
    \3\ 17 CFR 229.1100 through 17 CFR 229.1123.
    \4\ 15 U.S.C. 77a et seq.
    \5\ 17 CFR 232.101 and 17 CFR 232.314.
    \6\ 17 CFR 232.10 et seq.
    \7\ 17 CFR 240.15Ga-1.
    \8\ 17 CFR 240.17g-7.
    \9\ 17 CFR 249.1400.
    \10\ 15 U.S.C. 78a et seq.
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Table of Contents

I. Background
II. Discussion of Amendments
    A. Disclosure Requirements for Securitizers
    1. Definition of Exchange Act-ABS for Purposes of Rule 15Ga-1
    2. Definition of Securitizer for Purposes of Rule 15Ga-1
    3. Application to Municipal Securitizers
    4. Disclosures Required by Rule 15Ga-1
    (a) Proposed New Rule 15Ga-1
    (b) Comments on the Proposed Rule
    (c) Final Rule
    5. Form ABS-15G
    (a) Proposed Form ABS-15G
    (b) Comments on the Proposed Rule
    (c) Final Form ABS-15G
    B. Disclosure Requirements in Regulation AB Transactions
    1. Proposed Amendments to Regulation AB
    2. Comments on the Proposed Amendments
    3. Final Rule
    C. Disclosure Requirements for NRSROs
    1. Proposed New Rule 17g-7
    2. Comments on the Proposed Rule
    3. Final Rule
III. Transition Period
IV. Paperwork Reduction Act
    A. Background
    B. Summary of the Final Rules
    C. Summary of Comment Letters on the PRA Analysis and Revisions
to Proposals
    D. PRA Reporting and Cost Burden Estimates
    1. Form ABS-15G
    2. Forms S-1, S-3 and 10-D
    3. Regulation S-K
    4. Rule 17g-7
    5. Summary of Changes to Annual Burden Compliance in Collection
of Information
V. Benefit-Cost Analysis
    A. Benefits
    B. Costs
VI. Consideration of Burden on Competition and Promotion of
Efficiency, Competition and Capital Formation
VII. Regulatory Flexibility Act Certification
VIII. Statutory Authority and Text of Rule and Form Amendments

I. Background

    On October 4, 2010, we proposed rules to implement Section 943 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
``Act'') related to asset-backed securities (``ABS'').\11\ Section 943
of the Act requires the Commission to prescribe regulations on the use
of representations

and warranties in the market for asset-backed securities:
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    \11\ See Release No. 33-9148 (Oct. 4, 2010) [75 FR 6278] (the
``Proposing Release'').
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    (1) To require any securitizer to disclose fulfilled and
unfulfilled repurchase requests across all trusts aggregated by
securitizer, so that investors may identify asset originators with
clear underwriting deficiencies; and
    (2) to require each nationally recognized statistical rating
organization (``NRSRO'') to include, in any report accompanying a
credit rating for an asset-backed securities offering, a description of
(A) the representations, warranties and enforcement mechanisms
available to investors; and (B) how they differ from the
representations, warranties and enforcement mechanisms in issuances of
similar securities.\12\
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    \12\ See Section 943 of the Act.
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    In addition to the rules required by the Act, we also re-proposed
disclosure requirements in Regulation AB in order to conform
disclosures about repurchase request activity to those required by
Section 943 of the Act.\13\
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    \13\ In April of 2010, we proposed rules that would revise the
disclosure, reporting and offering process for asset-backed
securities. See Asset Backed Securities, SEC Release No. 33-9117
(April 7, 2010) [75 FR 23328] (the ``2010 ABS Proposing Release'').
Among other things, the 2010 ABS Proposing Release proposed new
disclosure requirements with respect to repurchase requests.
Specifically, we proposed that issuers disclose in prospectuses the
repurchase demand and repurchase and replacement activity for the
last three years of sponsors of asset-backed transactions or
originators of underlying pool assets if they are obligated to
repurchase assets pursuant to the transaction agreements. We also
proposed that issuers disclose the repurchase demand and repurchase
and replacement activity concerning the asset pool on an ongoing
basis in periodic reports.
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    As we discussed in the Proposing Release, in the underlying
transaction agreements for an asset securitization, sponsors or
originators typically make representations and warranties relating to
the pool assets and their origination, including about the quality of
the pool assets. For instance, in the case of residential mortgage-
backed securities, one typical representation and warranty is that each
of the loans has complied with applicable federal, state and local
laws, including truth-in-lending, consumer credit protection, predatory
and abusive laws and disclosure laws. Another representation that may
be included is that no fraud has taken place in connection with the
origination of the assets on the part of the originator or any party
involved in the origination of the assets. Upon discovery that a pool
asset does not comply with the representation or warranty, under
transaction covenants, an obligated party, typically the sponsor, must
repurchase the asset or substitute a different asset that complies with
the representations and warranties for the non-compliant asset. The
effectiveness of the contractual provisions related to representations
and warranties has been questioned and lack of responsiveness by
sponsors to potential breaches of the representations and warranties
relating to the pool assets has been the subject of investor
complaint.\14\
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    \14\ As we noted in the Proposing Release and the 2010 ABS
Proposing Release, transaction agreements typically have not
included specific mechanisms to identify breaches of representations
and warranties or to resolve a question as to whether a breach of
the representations and warranties has occurred. Thus, these
contractual agreements have frequently been ineffective because,
without access to documents relating to each pool asset, it can be
difficult for the trustee, which typically notifies the sponsor of
an alleged breach, to determine whether or not a representation or
warranty relating to a pool asset has been breached. In the 2010 ABS
Proposing Release, the Commission proposed a condition to shelf
eligibility that would require a provision in the pooling and
servicing agreement that would require the party obligated to
repurchase the assets for breach of representations and warranties
to periodically furnish an opinion of an independent third party
regarding whether the obligated party acted consistently with the
terms of the pooling and servicing agreement with respect to any
loans that the trustee put back to the obligated party for violation
of representations and warranties and which were not repurchased.
See Section II.A.3.b. of the 2010 ABS Proposing Release. See also
the Committee on Capital Markets Regulation, The Global Financial
Crisis: A Plan for Regulatory Reform, May 2009, at 135 (noting that
contractual provisions have proven to be of little practical value
to investors during the crisis); see also Investors Proceeding with
Countrywide Lawsuit, Mortgage Servicing News, Feb. 1, 2009
(describing class action investor suit against Countrywide in which
investors claim that language in the pooling and servicing
agreements requires the seller/servicer to repurchase loans that
were originated with ``predatory'' or abusive lending practices) and
American Securitization Forum, ASF Releases Model Representations
and Warranties to Bolster Risk Retention and Transparency in
Mortgage Securitizations, (Dec. 15, 2009), available at  http://www.americansecuritization.com. It has been reported that only large
ABS investors, such as Fannie Mae and Freddie Mac, have been able to
effectively exercise repurchase demands. See Aparajita Saha-Bubna,
``Repurchased Loans Putting Banks in Hole,'' Wall Street Journal
(Mar. 8, 2010) (noting that most mortgages put back to lenders are
coming from Fannie Mae and Freddie Mac). See also Joe Adler,
``Regulators See Growing Threat from Put-Backs,'' American Banker
(Dec. 6, 2010) (noting that investor put-back cases face procedural
hurdles and that investors are trying to unionize around
repurchasing). However, recent articles report that banks have begun
settlement efforts. See e.g., Dawn Kopecki and Hugh Son, ``Bank of
America Deal on Loan-Repurchase Demands Sets `Template' for Banks,''
Bloomberg (Jan. 4, 2011) available at http://www.bloomberg.com/news/2011-01-03/banks-stocks-rise-after-bank-of-america-settles-mortgage-putback-claims.html (noting recent settlements of repurchase
claims).
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    As discussed in more detail below, we have taken into consideration
the comments received on the proposed rules and are adopting new Rules
15Ga-1 and 17g-7, new Form ABS-15G and amendments to Regulation AB. The
rules and form that we are adopting today implement the requirements of
Section 943 of the Act, and also conform disclosure requirements for
prospectuses and ongoing reports for ABS sold in registered
transactions. We received over forty comment letters in response to the
proposed rules. These letters came from investors, securitizers,
corporations, credit rating agencies, professional and trade
associations, law firms, municipal entities, and other interested
parties.\15\ In general, commentators supported the manner in which we
proposed to implement Section 943 of the Act. Some commentators opposed
some aspects of the proposed rules and suggested modifications to the
proposals.
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    \15\ The public comments we received are available on our Web
site at http://sec.gov/comments/s7-24-10/s72410.shtml.
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    The adopted rules reflect changes made in response to many of these
comments. We discuss our revisions with respect to each proposed rule
in more detail throughout this release. The rules we are adopting
require:
     ABS securitizers to disclose demand, repurchase and
replacement history in a tabular format for an initial three-year look
back period ending December 31, 2011;
     ABS securitizers to disclose, subsequent to that date,
demand, repurchase and replacement activity in a tabular format on a
quarterly basis;
     ABS issuers to disclose demand, repurchase and replacement
history for a three-year look back period, in the same tabular format
as new Rule 15Ga-1, in the body of the prospectus;
     ABS issuers to disclose demand, repurchase and replacement
activity for a specific ABS, in the same tabular format, in periodic
reports filed on Form 10-D; and
     NRSROs to disclose, in any report accompanying a credit
rating for an ABS transaction, the representations, warranties and
enforcement mechanisms available to investors and how they differ from
the representations, warranties and enforcement mechanisms in issuances
of similar securities.

II. Discussion of Amendments

A. Disclosure Requirements for Securitizers

    We proposed and are adopting new Rule 15Ga-1 to implement Section
943(2) of the Act. This new rule would require any securitizer of
asset-backed securities to disclose fulfilled and unfulfilled
repurchase requests across all trusts aggregated by securitizer, so

that investors may identify asset originators with clear underwriting
deficiencies. Under the new rule, a securitizer would provide the
disclosure by filing new Form ABS-15G.\16\
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    \16\ See also Section II.B. for discussion of disclosures in
prospectuses and periodic reports.
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1. Definition of Exchange Act-ABS for Purposes of Rule 15Ga-1
    As we discussed in the Proposing Release, the Act amended the
Exchange Act to include a definition of an ``asset-backed security''
and Section 943 of the Act references that definition.\17\ The
statutory definition of an asset-backed security (``Exchange Act-ABS'')
is much broader than the definition of an asset-backed security in
Regulation AB (``Reg AB-ABS'').\18\ The definition of an Exchange Act-
ABS includes securities that are typically sold in transactions that
are exempt from registration under the Securities Act, such as
collateralized debt obligations (``CDOs''), as well as securities
issued or guaranteed by a government sponsored entity (``GSE''), such
as Fannie Mae and Freddie Mac and municipal securities that otherwise
come within the definition.\19\ Since Section 943 uses the broader
Exchange Act-ABS definition, our new Rule 15Ga-1 would require a
securitizer to provide disclosures relating to all asset-backed
securities that fall within the statutory definition, whether or not
sold in Securities Act registered transactions. However, as we discuss
further below, even if a security meets the definition of an Exchange
Act-ABS, the new disclosure requirement would only be triggered if the
underlying transaction agreements contain a covenant to repurchase or
replace an asset.
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    \17\ Section 3(a)(77) of the Exchange Act, as amended by the
Act, provides that the term ``asset-backed security'' means a fixed-
income or other security collateralized by any type of self-
liquidating financial asset (including a loan, a lease, a mortgage,
or a secured or unsecured receivable) that allows the holder of the
security to receive payments that depend primarily on cash flow from
the asset, including: A collateralized mortgage obligation; a
collateralized debt obligation; a collateralized bond obligation; a
collateralized debt obligation of asset-backed securities; a
collateralized debt obligation of collateralized debt obligations;
and a security that the Commission, by rule, determines to be an
asset-backed security for purposes of this section; and does not
include a security issued by a finance subsidiary held by the parent
company or a company controlled by the parent company, if none of
the securities issued by the finance subsidiary are held by an
entity that is not controlled by the parent company.
    \18\ In 2004, we adopted the definition of ``asset-backed
security'' in Regulation AB. The definition and our interpretations
of it are intended to establish parameters for the types of
securities that are appropriate for the alternate disclosure and
regulatory regime provided in Regulation AB and the related rules
for Form S-3 registration of ABS. The definition does not mean that
public offerings of securities outside of these parameters, such as
synthetic securitizations, may not be registered with the
Commission, but only that the alternate regulatory regime is not
designed for those securities. The definition does mean that such
securities must rely on non-ABS form eligibility for registration,
including shelf registration. See Section III.A.2 of Asset-Backed
Securities, SEC Release no. 33-8518 (January 7, 2005) [70 FR 1506]
(the ``2004 ABS Adopting Release'') and Item 1101(c) of Regulation
AB [17 CFR 1101(c)].
    \19\ Government sponsored enterprises (GSEs) such as Fannie Mae
and Freddie Mac purchase mortgage loans and issue or guarantee
mortgage-backed securities (MBS). MBS issued or guaranteed by these
GSEs have been and continue to be exempt from registration under the
Securities Act and reporting under the Exchange Act. For more
information regarding GSEs, see Task Force on Mortgage-Backed
Securities Disclosure, ``Staff Report: Enhancing Disclosure in the
Mortgage-Backed Securities Markets'' (Jan. 2003) available at http://www.sec.gov/news/studies/mortgagebacked.htm.
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2. Definition of Securitizer for Purposes of Rule 15Ga-1
    Section 943 and new Rule 15Ga-1 impose the disclosure obligation on
a ``securitizer'' as defined in the Exchange Act. The Act amended the
Exchange Act to include the definition of a ``securitizer.'' Under the
Exchange Act, a securitizer is either:
    (A) An issuer of an asset-backed security; or
    (B) A person who organizes and initiates an asset-backed securities
transaction by selling or transferring assets, either directly or
indirectly, including through an affiliate, to the issuer.\20\
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    \20\ See Section 15G(a)(3) of the Exchange Act, as amended by
the Act.
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    The definition of securitizer is not specifically limited to
entities that undertake transactions that are registered under the
Securities Act or conducted in reliance upon any particular
exemption.\21\ Consequently, it applies to any entity or person that
issues or organizes an Exchange Act-ABS as specified in Section
15G(a)(3) of the Exchange Act. Further, as noted above, Section 943 and
Section 15G(a)(3) do not distinguish between securitizers of Exchange
Act-ABS in registered or unregistered transactions, and our new Rule
15Ga-1 would apply equally to securitizers offering ABS in registered
and unregistered transactions.
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    \21\ We received comment letters on the application of proposed
Rule 15Ga-1 to ABS offered outside the United States and to ABS sold
in the United States by foreign securitizers. See e.g., letters from
American Bar Association (ABA), Association for Financial Markets in
Europe (AFME), Center for Responsible Lending (CFRL), U.S. Senator
Carl Levin (Levin), Metropolitan Life Insurance Company (Metlife)
and Securities Industry and Financial Markets Association (SIFMA).
Section 943 of the Act does not expressly provide for Commission
exemption for particular classes of securitizers from the
requirements. If securitizers of Exchange Act-ABS are subject to our
jurisdiction, then securitizers are required to provide the
disclosures required by Rule 15Ga-1.
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    With respect to registered transactions and the definitions of
transaction parties in Regulation AB, sponsors and depositors \22\ both
fall within the statutory definition of securitizer. A sponsor
typically initiates a securitization transaction by selling or pledging
to a specially created issuing entity a group of financial assets that
the sponsor either has originated itself or has purchased in the
secondary market.\23\ In some instances, the transfer of assets is a
two-step process: The financial assets are transferred by the sponsor
first to an intermediate entity, often a limited purpose entity created
by the sponsor for a securitization program and commonly called a
depositor, and then the depositor will transfer the assets to the
issuing entity for the particular asset-backed transaction.\24\ Because
both sponsors and depositors fit within the statutory definition of
securitizers, both entities would have the disclosure responsibilities
under new Rule 15Ga-1. However, if a sponsor filed all disclosures
required under new Rule 15Ga-1, which would include disclosures of the
activity of affiliated depositors, as described below, consistent with
the proposal final Rule 15Ga-1 provides that those depositors
affiliated with the sponsors would not have to separately provide and
file the same disclosures. We believe this is appropriate for
affiliated securitizers because otherwise such disclosure would be
duplicative and would not provide any additional useful information,
since as noted above, the depositor usually serves as an

intermediate entity of a transaction initiated by a sponsor.\25\ In
addition, investors would be able to find information ``aggregated by
securitizer'' as required by Section 943 in this case because the table
would be aggregated either by affiliated depositors or the sponsor the
ABS.
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    \22\ We interpret the term ``issuer'' in Section 15G(a)(3)(A) to
refer to the depositor of an asset-backed security. This treatment
is consistent with our historical regulatory approach to that term,
including the Securities Act and the rules promulgated under the
Securities Act and the Exchange Act. See, e.g., Securities Act Rule
191 (17 CFR 230.191) and Exchange Act Rule 3b-19 (17 CFR 240.3b-19).
    \23\ A sponsor, as defined in Regulation AB, is the person who
organizes and initiates an asset-backed securities transaction by
selling or transferring assets, either directly or indirectly,
including through an affiliate, to the issuing entity. See Item
1101(l) of Regulation AB [17 CFR 229.1101(l)]. Sponsors of asset-
backed securities often include banks, mortgage companies, finance
companies, investment banks and other entities that originate or
acquire and package financial assets for resale as ABS. See Section
II. of the 2004 ABS Adopting Release.
    \24\ A depositor receives or purchases and transfers or sells
the pool assets to the issuing entity. See Item 1101(e) of
Regulation AB [17 CFR 229.1101(e)]. For asset-backed securities
transactions where there is not an intermediate transfer of assets
from the sponsor to the issuing entity, the term depositor refers to
the sponsor. For asset-backed securities transactions where the
person transferring or selling the pool assets is itself a trust,
the depositor of the issuing entity is the depositor of that trust.
    \25\ There may be other situations where multiple affiliated
securitizers would have individual reporting obligations under Rule
15Ga-1 with respect to a particular transaction. Under our final
rule, if one securitizer has filed all the disclosures required in
order to meet the obligations under Rule 15Ga-1, which would include
disclosures of the activity of affiliated securitizers, those
securitizers would not be required to separately provide and file
the same disclosures. Several commentators also requested that a
securitizer be permitted to file separate reports for different
asset classes, instead of including the activity for all asset
classes in which the securitizer has issued ABS in a single report.
See discussion below in Section II.A.4.b. and fn. 82.
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    We received two comment letters that urged us to consider two other
situations related to a securitizer's filing requirement. One requested
that either the Exchange Act reporting party or the party that
contractually assumes a reporting duty would have the obligation to
disclose repurchase request information and file Form ABS-15G, but not
both.\26\ The other requested we allow securitizers to reference and
rely on originator disclosures to satisfy a securitizer's requirements
if they have made contractual arrangements to do so.\27\ Both of these
commentators requested filing accommodations that related to
unaffiliated parties, and we are concerned that the requested approach
could make it more difficult for investors to locate the information
``aggregated by securitizer'' as is required by Section 943 because the
relationship between unaffiliated transaction parties may not be
readily understood. Therefore, we are requiring that all securitizers
in a transaction file Form ABS-15G, unless they are affiliated
securitizers as discussed above.
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    \26\ See letter from SIFMA (noting, ``for example, in a `rent-a-
shelf' transaction, both the renter and the registrant could be
deemed securitizers'').
    \27\ See letter from ABA (noting that the Commission has
previously allowed ABS issuers to incorporate by reference
information filed by third parties, such as credit enhancement
providers or significant obligors).
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    One commentator explained that requiring disclosure of assets
``originated and sold,'' as proposed, could be construed to require the
securitizer to report demand and repurchase activity on loans
originated and sold by it but securitized by other securitizers which
might lead to inconsistent and duplicative reporting.\28\ In the case
of Exchange Act-ABS issued by the GSE's, we received several comment
letters noting that the term securitizer, for purposes of Rule 15Ga-1
should be applied solely to Fannie Mae or Freddie Mac and not the
financial institution transferring loans for securitization by Fannie
Mae or Freddie Mac.\29\ We agree with commentators observations that
``originated and sold'' may be read to require disclosure about
transfers of assets that were not securitized, and thus as discussed
further below, we have revised the rule to require disclosure
concerning assets ``securitized'' by securitizers.
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    \28\ See letter from American Securitization Forum (ASF).
    \29\ See e.g., letters from ASF, Bank of America (BOA), Fannie
Mae and Freddie Mac (GSEs), Mortgage Bankers Association (MBA), and
SIFMA.
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3. Application to Municipal Securitizers
    As stated earlier, Section 943 and the new rule apply to Exchange
Act-ABS whether or not offered and sold in Securities Act registered
transactions. In addition, Section 943 and the new rule impose the
disclosure obligation on any securitizer, as defined in the Exchange
Act. Thus, the new rule will apply to a municipal entity that is a
securitizer of Exchange Act-ABS (``municipal securitizer''). We sought
comment in the Proposing Release on whether we should provide further
guidance regarding the application of proposed Rule 15Ga-1 to
securities issued by municipal entities that would fall within the
definition of Exchange-Act ABS. We also asked whether the types of
municipal securities about which proposed Rule 15Ga-1 would require a
municipal securitizer to provide representation and warranty repurchase
disclosure was clear. Several commentators provided examples of
municipal securities that could fall within the definition of Exchange-
Act ABS such as student loan bonds, housing and mortgage bonds, bond-
bank issuances, and revolving fund bonds.\30\
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    \30\ See e.g., letters from Federated Investors, Inc.,
Investment Company Institute (ICI), National Association of Bond
Lawyers (NABL), Kutak Rock (Kutak) and Moody's Investors Service
(Moody's). We also received some comment letters that questioned
whether municipal securities fall within the definition of Exchange
Act-ABS. In particular, a few letters questioned whether a municipal
security would meet the Exchange-Act ABS criteria of payments
depending ``primarily on the cash flow from the asset'' if the
security also is secured by a general obligation of the municipal
issuer. See e.g., letters from Kutak, Education Finance Council
(EFC) and Minnesota Housing Finance Agency (MHFA).
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    With respect to proposed Rule 15Ga-1, a few commentators noted that
it would not likely apply to most municipal securities because the
underlying transaction documents typically would not contain a covenant
to repurchase or replace an asset if it does not comply with
representation and warranty provisions, if any.\31\ Commentators also
noted various reasons why proposed Rule 15Ga-1 should not apply to
municipal securitizers, such as a belief that they have an express
statutory exemption \32\ or that there is a requirement under the Act
to first make a rule determination about the status of the
securities.\33\ In addition, several commentators argued that the
Commission has authority to exempt municipal securitizers from
Rule15Ga-1, citing the overall structure of the Act's amendments and
legislative history. These commentators questioned whether Congress
intended to require Section 943 disclosures with respect to municipal
securities at all.\34\
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    \31\ See e.g., letters from NABL and Connecticut Housing Finance
Authority (CHFA).
    \32\ Several commentators noted that the Tower Amendment
(Section 15B(d)(1) of the Exchange Act [15 U.S.C. 78o-4]) expressly
prohibits the Securities and Exchange Commission and the Municipal
Securities Rulemaking Board (``MSRB'') from requiring an issuer of
municipal bonds (including housing bonds) to make any specific
disclosure filing with the SEC or MSRB prior to the sale of these
securities to investors. See e.g., letters from Kutak, Group of 14
Municipal Organizations (Muni Group), NABL, National Association of
Local Housing Finance Agencies (NALHFA), Treasurer of the State of
Connecticut (Nappier), National Council of State Housing Agencies
(NCHSA) and Robert W. Scott (Scott).
    \33\ Commentators cited to the phrase ``a security that the
Commission, by rule, determines to be an asset-backed security''
that appears after the description of examples of Exchange Act-ABS.
See Section 3(a)(77) of the Exchange Act, as amended by the Act. See
e.g., letters received from NABL, Muni Group, and Scott.
    \34\ In particular, one commentator noted that despite the broad
definition of ``asset-backed security,'' it believes the SEC has the
authority to exempt municipal securities from this rule, and doing
so is necessary and appropriate in light of Section 3(a)(2) of the
Securities Act and Section 3(a)(12) of the Exchange Act, which both
treat municipal securities as exempted securities. See letter from
NCHSA. Other commentators argued that the Commission has the
authority to exempt municipal securities from risk retention in
Section 941of the Act (Credit Risk Retention), and those same
exemptions should apply to Section 943. See e.g., letters from ICI,
NABL, NALHFA, NCSHA, Muni Group, and Scott. Specifically, four
commentators cited to language in the Joint Explanatory Statement of
the Conference Committee suggesting the Commission has authority to
grant total or partial exemptions from risk-retention and disclosure
requirements for municipal securities. See e.g., letters from ICI,
NCSHA, Muni Group, and Scott. But see letter from Nappier (noting
concerns from Senate staff that future transactions might be created
and structured through municipal issuers specifically to avoid the
asset-backed securities provisions).
---------------------------------------------------------------------------

    Other commentators suggested that the Commission wait for the
results of the municipal disclosure study required by Subtitle H of the
Act \35\ before

requiring compliance with the proposals \36\ as well as for the results
of the Commission's municipal field hearings, discussed below.\37\ One
investor group was concerned that a piecemeal approach to municipal
securities disclosure would have the unintended effect of creating
confusion for investors and issuers alike because different asset
classes of municipal securities would be subject to different
disclosure requirements.\38\
---------------------------------------------------------------------------

    \35\ Section 976 of the Act requires the Comptroller General of
the United States to submit a report to Congress on the results of a
study and review of the disclosure required to be made by issuers of
municipal securities, including recommendations for how to improve
disclosure by issuers of municipal securities no later than 24
months after the date of enactment of the Act. In addition, pursuant
to Section 977 of the Act, the Comptroller General of the United
States is also required to conduct a study of the municipal
securities markets and report no later than 18 months after the date
of enactment of the Act.
    \36\ See e.g., letters from CHFA, ICI, Muni Group, NABL, NALHFA,
Nappier, and NCHSA.
    \37\ See e.g., letters from ICI, Muni Group and Scott.
    \38\ See letter from ICI.
---------------------------------------------------------------------------

    Moreover, many commentators argued that certain municipal ABS, such
as housing bonds, only include assets originated under strict
underwriting standards and are subject to legal and program
requirements in order to obtain and maintain guarantees and tax-exempt
status \39\ and noted that issues regarding underwriting deficiencies
and unfulfilled repurchase requests that the Act intends to address
have not been an issue in the municipal securities market.\40\
Furthermore, according to a few commentators, any repurchase
obligations that do exist for municipal ABS have been enforced by the
relevant municipal issuer in order to ensure the continual tax-exempt
status of the municipal ABS.\41\
---------------------------------------------------------------------------

    \39\ See e.g., letters from Connecticut Higher Education
Supplemental Loan Authority (CHESLA), CHFA, Hawkins, Delafield and
Wood (Hawkins), Kutak, MHFA, NABL, and NCSHA.
    \40\ See generally letters from CHESLA CHFA, EFC, Hawkins,
Kutak, MHFA, Muni Group, NABL, NCSHA, and City of New York (NYC)
(noting generally that the policy concerns that led to adoption of
the Act are not present in the case of municipal securities and the
municipal securities markets did not experience the failures or
defaults that led to the Act). See also Moody's Investors Service,
Inc., Special Report: U.S. Municipal Bond Defaults and Recoveries,
1970-2009, February, 2010 (noting that municipal issuers have a very
limited default experience with only 54 defaults over the period
1970-2009). See also letter from NYC (noting that tax lien
securitizations arise out of operation of law and are not originated
pursuant to underwriting standards).
    \41\ See e.g., letters from CHESLA, CHFA and NABL.
---------------------------------------------------------------------------

    Commentators also noted that a significant difference between
municipal ABS and more typical Exchange Act-ABS is that the Municipal
Securities Rulemaking Board (MSRB) \42\ collects and publicly
disseminates market information and information about municipal
securities issuers and offerings on its centralized public database,
EMMA.\43\ Thus, even though most municipal securities are sold in
unregistered transactions in reliance on exemptions from registration,
as commentators noted,\44\ as a result of the applicability of Exchange
Act Rule 15c2-12 to municipal securities offerings by underwriters,
municipal issuers issuing municipal securities subject to that rule
already provide disclosures in offering documents and disclosures to
the secondary market pursuant to continuing disclosure agreements
entered into for the benefit of bondholders. Under Rule 15c2-12,
specified annual and event notices are required to be submitted to the
MSRB's EMMA system.\45\ However, Rule 15c2-12 does not specifically
require representation and warranty repurchase disclosure.
---------------------------------------------------------------------------

    \42\ The MSRB, a self-regulatory organization subject to
oversight by the Commission, regulates securities firms and banks
that underwrite, trade and sell municipal securities. The Act
broadened the mission of the MSRB to include the protection of state
and local governments and other municipal entities, in addition to
investors and the public interest. The MSRB also regulates municipal
advisors. See Section 975 of the Act.
    \43\ See e.g., letters from EFC, Kutak, MHFA, NABL and NCSHA.
The Web site address for EMMA is http://www.emma.msrb.org.
    \44\ See e.g., letters from EFC, Kutak, MHFA, NABL and NCSHA.
    \45\ Pursuant to Exchange Act Rule 15c2-12 [17 CFR 240.15c2-12],
municipal underwriters must submit final official statements, for
municipal securities offerings subject to the rule, on EMMA, which
must include, at a minimum, information on the terms of the
securities, financial information or operating data concerning the
issuer and other entities, enterprises, funds, accounts or other
persons material to an evaluation of the offering, and a description
of the continuing disclosure undertaking made in connection with the
offering (including any indication of any failures to comply with
such undertaking during the past five years). Official statements
typically also include information regarding the purposes of the
issuance, how the securities will be repaid, and the financial and
economic characteristics of the obligor with respect to the offered
securities. Several commentators stated that, if the final rules
applied the Section 943 disclosure requirements to municipal
securitizers, then these disclosures should be made on EMMA rather
than on EDGAR because they argued that filing such disclosures on
EDGAR would be confusing to issuers and to investors who have become
accustomed to using EMMA as the repository of municipal-related
disclosures. See e.g., letters from EFC, Kutak, NABL and NCSHA.
---------------------------------------------------------------------------

    Commentators noted other factors that distinguish securitizers of
municipal ABS from other Exchange Act-ABS securitizers. For instance,
commentators noted that municipal securitizers generally are state or
local government entities and exist to serve a public purpose.\46\ In
addition, commentators also noted that municipal ABS in some cases are
secured by a pledge of assets or are secured by a general obligation of
the municipal issuer.\47\ Finally, commentators stated that market
participants do not identify or consider municipal securities as
substantially similar to ABS.\48\
---------------------------------------------------------------------------

    \46\ See e.g., letters from CHESLA and CHFA (public purpose is
to alleviate the shortage of quality affordable housing) and NALHFA
(public purpose is to provide mortgage assistance to first-time home
buyers, and multi-family below-market financing for the acquisition,
construction and preservation of rental housing for lower-income
households).
    \47\ See e.g., letters from EFC, Kutak, MHFA, and NABL.
    \48\ See e.g., letters from Muni Group and Scott.
---------------------------------------------------------------------------

    Despite the distinguishing factors discussed above, we have
determined that the final rules should apply to municipal securitizers.
Section 943(2) of the Act requires the Commission to adopt rules
mandating that ``any securitizer'' of an Exchange Act-ABS, including
municipal ABS, provide the disclosures specified therein. The statute
does not expressly provide the Commission the authority to provide
exemptions for particular classes of securitizers, including municipal
securitizers. We note that Section 943 is a stand-alone provision and
is not included as an amendment to the Exchange Act or the Securities
Act. As a result, our final rule applies to municipal ABS if they
otherwise come within the definition of Exchange Act-ABS. Nonetheless,
we recognize that municipal securitizers may have had less experience
with developing and providing the types of information required by
Section 943(2) and the new rule, and thus may have less developed
infrastructures for providing the required disclosures.\49\ We believe
that a delayed compliance date for municipal securitizers should allow
those securitizers to observe how the rule operates for other
securitizers and to better prepare for implementation of the rules. We
also believe that delayed compliance for municipal securitizers will
allow us to evaluate the implementation of Rule 15Ga-1 by other
securitizers and provide us with the opportunity to consider whether
adjustments to the rule would be appropriate for municipal securitizers
before the rule becomes applicable to them. As commentators also noted,
we are currently undergoing a review of the municipal securities
market, and as part of that review, we recently began a

series of field hearings to examine the municipal securities markets,
including disclosure and transparency within the municipal securities
markets.\50\ At the conclusion of this process, the staff of the
Commission expects to prepare a report containing information learned
and any recommendations for regulatory changes, industry ``best
practices,'' or legislative changes.\51\ The results of our review and
the studies required by the Act \52\ could lead us to conclude that
changes to the requirements of Rule 15Ga-1 would be appropriate for
municipal securitizers.
---------------------------------------------------------------------------

    \49\ See e.g., letters from CHESLA (noting that it operates with
a staff of two and a part-time Executive Director); Kutak (noting
that many municipal issuers rely on paper files and do not have the
technology or staff to produce historical information); and NABL
(noting that certain state agencies will need to obtain the
necessary funds to meet the filing requirements, and certain state
agencies determine their budgets on a biannual cycle).
    \50\ See SEC Press Release 2010-64, SEC Sets Field Hearings on
State of Municipal Markets, Sept. 7, 2010 available on the
``Spotlight on the State of the Municipal Securities Market'' page
of our Web site at http://www.sec.gov/spotlight/municipalsecurities.shtml.
    \51\ Id.
    \52\ See fn. 35.
---------------------------------------------------------------------------

    Therefore, we are delaying compliance for new Rule 15Ga-1 for
municipal securitizers for a period of three years after the date
applicable to securitizers other than municipal securitizers.\53\ For
purposes of the delayed compliance only, a municipal securitizer would
be any securitizer that is a State or Territory of the United States,
the District of Columbia, any political subdivision of any State,
Territory or the District of Columbia, or any public instrumentality of
one or more States, Territories or the District of Columbia.
---------------------------------------------------------------------------

    \53\ See discussion below regarding transition period in Section
III.
---------------------------------------------------------------------------

    In addition, as discussed below, in an effort to limit the cost and
burden on municipal securitizers subject to the new rule, as well as
provide the disclosures for investors in the same location as other
disclosures regarding municipal securities, we will permit municipal
securitizers to satisfy the rule's filing obligation by filing the
information on EMMA.\54\
---------------------------------------------------------------------------

    \54\ Id.
---------------------------------------------------------------------------

4. Disclosures Required by Rule 15Ga-1
    In accordance with Section 943 of the Act, we are adopting new Rule
15Ga-1 \55\ to require any securitizer of an Exchange Act-ABS to
provide tabular disclosure of fulfilled and unfulfilled repurchase
requests, so that investors may identify asset originators with clear
underwriting deficiencies.
---------------------------------------------------------------------------

    \55\ We are adopting this rule as an Exchange Act rule because
of the relationship with other requirements under the Exchange Act
and other statutory requirements we are implementing.
---------------------------------------------------------------------------

(a) Proposed New Rule 15Ga-1
    We proposed that if the underlying transaction agreements include a
covenant to repurchase or replace an underlying asset for breach of a
representation or warranty, then a securitizer would be required to
provide the information described below for all assets originated or
sold by the securitizer that were the subject of a demand for
repurchase or replacement with respect to all outstanding Exchange Act-
ABS of the securitizer held by non-affiliates of the securitizer. As
discussed further below, we proposed that a securitizer provide the
repurchase history for the last five years by filing Form ABS-15G at
the time a securitizer first offers an Exchange Act-ABS or organizes
and initiates an offering of Exchange Act-ABS, registered or
unregistered, after the effective date of the new rules, as adopted. In
addition, we proposed that going forward, a securitizer would provide
the disclosures for all outstanding Exchange Act-ABS on a monthly basis
by filing Form ABS-15G.
    Section 943(2) requires disclosure of fulfilled and unfulfilled
repurchase requests. Therefore, we proposed to require tabular
disclosure of assets subject to any and all demands for repurchase or
replacement of the underlying pool assets as long as the transaction
agreements provide a covenant to repurchase or replace an underlying
asset, which would include demands that did not result in a repurchase
under the transaction agreements and demands that were made by the
investors upon the trustee. We also proposed that securitizers be
permitted to footnote the table to provide additional explanatory
disclosures to describe the data disclosed.
    In the Proposing Release, we expressed concern that initially a
securitizer may not be able to obtain complete information from a
trustee about demands made by investors because it may not have tracked
these demands. Because securitizers may not have access to historical
information about investor demands made upon the trustee, (as opposed
to trustee demands upon the securitizer, which presumably, would be
known to the securitizer) prior to the effective date of the new rules,
we proposed an instruction that a securitizer may disclose in a
footnote, if true, that a securitizer requested and was able to obtain
only partial information or was unable to obtain any information with
respect to investor demands to a trustee that occurred prior to the
effective date of the proposed rules and state that the disclosures do
not contain all investor demands made to the trustee prior to the
effective date.
    In the Proposing Release, we acknowledged that a single securitizer
(i.e., sponsor) may have several securitization programs to securitize
different types of asset classes. Because the Act requires information
``aggregated by securitizer,'' we proposed that a securitizer list the
names of all the issuing entities \56\ of Exchange Act-ABS outstanding,
in order of the date of formation of the issuing entity, so that
investors may identify the securities that contain the assets subject
to the demands for repurchase and when the issuing entity was formed.
We also proposed to require disclosure of the asset class and grouping
of the information in the table by asset class. Additionally, if any of
the Exchange Act-ABS of the issuing entity were registered under the
Securities Act, we proposed that the Central Index Key (``CIK'') number
of the issuing entity be disclosed and that the securitizer indicate by
check mark whether any Exchange Act-ABS were registered. We noted that
these items would provide important information that would enable an
investor to locate additional publicly available disclosure for
registered transactions, if applicable. Because the Act provided that
disclosure is required ``so that investors may identify asset
originators with clear underwriting deficiencies,'' \57\ we proposed
that securitizers further break out the information by originator of
the underlying assets.
---------------------------------------------------------------------------

    \56\ Issuing entity is defined in Item 1101(f) of Regulation AB
[17 CFR 229.1101(f)] as the trust or other entity created at the
direction of the sponsor or depositor that owns or holds the pool
assets and in whose name the asset-backed securities supported or
serviced by the pool assets are issued.
    \57\ See Section 943(2) of the Act.
---------------------------------------------------------------------------

    We also proposed that the table provide information about the
assets that were subject of a demand; the assets that were repurchased
or replaced; the assets that were not repurchased or replaced; and the
assets that are pending repurchase or replacement.\58\ Additionally, we
proposed an instruction to include footnote

disclosure about the reasons why repurchase or replacement is
pending.\59\ Lastly, we proposed that the table include totals by asset
class for columns that require numbers of assets and principal
amounts.\60\
---------------------------------------------------------------------------

    \58\ We noted that if the ABS were offered in a registered
transaction, an investor may be able to locate additional detailed
information. For instance, in the 2010 ABS Proposing Release, we
proposed that issuers be required to provide loan-level disclosure
of repurchase requests on an ongoing basis. If the proposal is
adopted, then an issuer would be required to indicate whether a
particular asset has been repurchased from the pool with each
periodic report on a Form 10-D. If the asset has been repurchased,
then the registrant would have to indicate whether a notice of
repurchase has been received, the date the asset was repurchased,
the name of the repurchaser and the reason for the repurchase. That
proposal remains outstanding. See previously proposed Item 1(i) of
Schedule L-D [Item 1121A of Regulation AB] in the 2010 ABS Proposing
Release.
    \59\ For example, the securitizer would indicate by footnote if
pursuant to the terms of a transaction agreement, assets have not
been repurchased or replaced pending the expiration of a cure
period.
    \60\ See letter from Association of Mortgage Investors on the
2010 ABS Proposing Release (requesting that disclosure of
information regarding claims made and satisfied under representation
and warranties provisions of the transaction documents be broken
down by securitization and then aggregated).
---------------------------------------------------------------------------

(b) Comments on the Proposed Rule
    Comments on this aspect of the proposal were mixed. We received
several comments on the form and the content of the table. Four
commentators expressed general support that the proposed rule would
implement the statutory requirements.\61\ Some commentators suggested
that we only require reporting where the repurchase obligation is tied
to representations and warranties regarding the underwriting
criteria.\62\ Another commentator remarked that while repurchase
requests occur for many reasons, they serve as a useful benchmark to
identify loans with potential problems, such as early payment defaults,
incorrect loan information, fraud problems, impermissible adverse
selection procedures, or paperwork deficiencies.\63\
---------------------------------------------------------------------------

    \61\ See letters from ICI, Levin, Metlife, and SIFMA (investor
members).
    \62\ See e.g., letters from ASF, BOA, GSEs, Kutak, NABL, MHFA,
and NCHSA.
    \63\ See letter from Levin.
---------------------------------------------------------------------------

    Several commentators also requested that demands be limited to
those that comport with the procedures specified in the transaction
documents.\64\ One commentator noted that its investor members believe
that existing transaction agreements include overly restrictive
thresholds for recognizing bona fide repurchase demands, and noted that
even where the data may be incomplete, demands that were not made in
accordance with the relevant transaction documents would provide
directional information as to the responsiveness of securitizers and
originators of assets as well as identify originators with a history of
underwriting deficiencies.\65\
---------------------------------------------------------------------------

    \64\ See e.g., letters from ABA, American Bankers Association
and ABA Securities Association (ABASA), American Financial Services
Association (AFSA), ASF, BOA, Commercial Real Estate Finance Council
(CREFC), Financial Services Roundtable (Roundtable), SIFMA and Wells
Fargo Bank (Wells) (effectively excluding investor demands upon a
trustee if not provided for in the transaction agreements). See also
fn. 14.
    \65\ See letter from SIFMA.
---------------------------------------------------------------------------

    Comments regarding the proposal to provide repurchase history for
an initial five-year look back period were mixed. Several commentators
were generally supportive of an initial look back period.\66\ Two
commentators noted that the requirement should apply regardless of
whether the ABS is outstanding at the end of the reporting period.\67\
Several others did not support an initial look back period and
requested prospective application only.\68\ Several commentators noted
issues with historical information, such as lack of systems to capture
the data, the change in underwriting standards since the housing
crisis, misperceptions that may arise from analyzing fragmented data,
and the ability to obtain the data from other transaction parties
including that certain transaction parties may no longer exist.\69\ We
also received comment letters suggesting that a three- or five-year
look back period would be appropriate for ongoing periodic
disclosures.\70\
---------------------------------------------------------------------------

    \66\ See e.g., letters from Association of Financial Guaranty
Insurers (AFGI), CFRL, Metlife, MBIA Inc. (MBIA), and SIFMA.
    \67\ See letters from Metlife and SIFMA.
    \68\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA,
Community Mortgage Banking Project (CMBP), CREFC, GSEs, Kutak, MBA,
NABL, Roundtable, and Wells. In addition, three commentators
suggested that the statute did not clearly require historical
information. See letters from ABA, ABASA and GSEs.
    \69\ See e.g., letters from ABA, ABASA, BOA, CREFC, GSEs, Kutak,
MBA, Roundtable and Wells.
    \70\ See e.g., letters from AFSA, ASF, Metlife and SIFMA.
---------------------------------------------------------------------------

    Several commentators requested that a securitizer should report
activity for different asset classes in separate reports, instead of
including the activity for all asset classes in which the securitizer
has issued ABS in a single report, as proposed.\71\ One commentator
acknowledged that the result of this suggested change would be that
some securitizers may be required to file more than one report, but its
members believed reports by asset class would produce more consistent
reports that are more useful to investors in evaluating particular
offerings.\72\
---------------------------------------------------------------------------

    \71\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA, CREFC,
Roundtable, and SIFMA.
    \72\ See letter from SIFMA.
---------------------------------------------------------------------------

    Most commentators generally supported disclosure of the name of the
asset originator.\73\ A few commentators suggested that disclosure
should only be required if the number of assets or amounts related to a
particular originator exceeds a certain de minimis amount of the asset
pool.\74\ Another commentator requested that instead of listing all
issuing entities, it be allowed to aggregate the data by seller of the
loan and noted that the GSEs have hundreds of thousands of individual
GSE securities outstanding; therefore, a listing by individual issuing
entity would likely result in extremely unwieldy and disjointed
disclosures.\75\
---------------------------------------------------------------------------

    \73\ See e.g., letters from AFGI, CFRL, CMBP, MBIA and Metlife.
    \74\ See e.g., letters from GSEs, Kutak, and SIFMA. In addition,
SIFMA noted that to the extent that an originator is no longer in
existence, the securitizer should have the option of not providing
the information related to such originator.
    \75\ See letter from GSEs.
---------------------------------------------------------------------------

    We also received several comments regarding revisions to the
columns in the table in order to provide more standardized disclosures.
Generally, commentators requested more standardization regarding
demands that were pending and not repurchased or replaced.\76\ One
commentator also strongly recommended that whether, and to what extent
detail is provided, should be left to the judgment of each individual
securitizer, rather than mandated.\77\ Other commentators requested we
specifically require more narrative disclosure about the information
presented in the table.\78\
---------------------------------------------------------------------------

    \76\ See e.g., letters from ASF, CMBP, Metlife and SIFMA
(suggesting that additional columns should be added to the table to
make clear which demand requests have not been resolved and are
subject of arbitration, litigation or negotiation). See also letters
from ABA, BOA and Roundtable (suggesting that standardized
categories of information would better reflect the repurchase
request and resolution process so that investors may more easily
compare information presented in the table than if it were presented
in footnotes only).
    \77\ See letter from CREFC.
    \78\ See e.g., letters from CFRL and Metlife.
---------------------------------------------------------------------------

(c) Final Rule
    After considering the comments, we are adopting the table
substantially as proposed, with some modifications to the format of the
table. We are also adopting modifications to the filing requirement for
the initial disclosures and to the filing requirements for periodic
disclosures. We continue to believe that Section 943(2) requires
historical disclosures about a securitizer's repurchase history, in
order to give investors a clearer sense of potential problems with
originators' underwriting practices, but as we recognized in the
Proposing Release, and as commentators stated, securitizers may not
have all of the information readily available. Therefore, we have
tailored the final amendments to address many of the concerns expressed
by the commentators that we believe are consistent with the purposes of
Section 943.

    As proposed, we are requiring disclosure in the table with respect
to any Exchange Act-ABS where the underlying transaction agreements
contain a covenant to repurchase or replace an underlying asset for
breach of a representation or warranty. We are not limiting the
disclosure requirement to representations and warranties concerning
underwriting standards, as suggested by some commentators \79\ because
as discussed above, covenants may require repurchase if the underlying
asset does not meet other types of representations and warranties, such
as applicable laws or fraud, which could also be indicative of
underwriting deficiencies.\80\ We are also revising the text of the
regulation to refer to assets ``securitized'' by a securitizer instead
of ``originated and transferred'' as proposed to address commentators
concerns as described above.\81\
---------------------------------------------------------------------------

    \79\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA, CREFC,
Roundtable, SIFMA and Wells.
    \80\ See Section I. See also letter from Levin (noting
repurchase requests may occur for early payment defaults, incorrect
loan information, fraud, impermissible adverse selection procedures
and paperwork deficiencies).
    \81\ See e.g., letters from ASF, BOA, GSEs, MBA and SIFMA
(generally noting that the requirement should apply solely to Fannie
Mae or Freddie Mac and not the institution transferring loans for
securitization by Fannie Mae or Freddie Mac. See also Section
II.A.2. regarding the definition of securitizer for purposes of Rule
15Ga-1.
---------------------------------------------------------------------------

    After considering the comments received, we are adopting additions
to the table in order to provide better disclosures about the demand,
repurchase and replacement history so that investors may identify asset
originators with clear underwriting deficiencies.
BILLING CODE 8011-01-P

[GRAPHIC] [TIFF OMITTED] TR26JA11.004

BILLING CODE 8011-01-C

    First, the final rule requires, as proposed, that a securitizer
disclose the asset class and group the information in the table by
asset class (column (a)).\82\
---------------------------------------------------------------------------

    \82\ Rule 15Ga-1(a)(1)(i). As noted earlier, some commentators
requested that a securitizer should report activity for different
asset classes in separate reports, instead of including the activity
for all asset classes in a single report. See e.g., letters from
ABA, ASF, BOA, CMBP, Metlife, Roundtable and SIFMA. As discussed in
Section II.A.2., both sponsor and depositors fall within the
definition of securitizer and thus are obligated under Section 943
and the new rule to provide the disclosures. The final rule
addresses commentators' requests because sponsors typically
securitize assets of different classes through separate affiliated
depositors for each asset class. For example, if a sponsor has two
different affiliated depositors, one that securitizes auto loans and
the other credit cards, the sponsor's reporting obligation would be
satisfied if each of the depositors filed the required disclosures
with respect to all of their respective trusts. Thus, a sponsor
would not have to separately provide and file the same disclosures,
if they were filed by an affiliated depositor of the same
transaction. We expect users will find reports disclosing the
information by asset class useful in making comparisons regarding
originators of the same asset class.
---------------------------------------------------------------------------

    Second, the final rule requires, as proposed, that the securitizer
disclose the names of the issuing entities \83\ of the ABS and list the
issuing entities in order of the date of formation (column (a)).\84\ In
addition, we are adding an instruction to clarify that the activity
should include all issuing entities that had securities outstanding
during the reporting period in order to provide investors with complete
and comparable disclosure for the entire reporting period.\85\
---------------------------------------------------------------------------

    \83\ 17 CFR 229.1101(f).
    \84\ Rule 15Ga-1(a)(1)(ii). In a stand-alone trust structure,
usually backed by a pool of amortizing loans, a separate issuing
entity is created for each issuance of ABS backed by a specific pool
of assets. The date of formation of the issuing entity would most
likely be at the same time of the issuance of the ABS. In a
securitization using a master trust structure, the ABS transaction
contemplates future issuances of ABS by the same issuing entity,
backed by the same, but expanded, asset pool. Master trusts would
organize the data using the date the issuing entity was formed,
which would most likely be earlier than the date of the most recent
issuance of securities.
    \85\ See e.g., letters from Metlife and SIFMA (suggesting that
disclosure should include any deals that were outstanding at any
point in time during a reporting period).
---------------------------------------------------------------------------

    Third, the final rule requires, as proposed, that the securitizer
indicate by check mark whether the transaction was registered under the
Securities Act of 1933 (column (b)) and provide the CIK number of the
issuing entity (column (a)).\86\
---------------------------------------------------------------------------

    \86\ Rule 15Ga-1(a)(1)(iii).
---------------------------------------------------------------------------

    Fourth, the final rule requires, as proposed, that securitizers
disclose the name of the originator of the underlying assets. In
addition, we are adopting an instruction to clarify that all
originators must be disclosed.\87\ As noted earlier, some commentators
requested that we require only disclosure of originators that
originated more than a de minimis amount of the assets within an
issuing entity, or that were responsible for more than a de minimis
number of repurchase requests.\88\ We, however, believe that in order
for the disclosures to meet the purpose of the statute to ``identify
asset originators with clear underwriting deficiencies,'' it must be
comparable, and even de minimis amounts may in the aggregate over time
create information gaps about an originators' repurchase history. In
addition, originators with no repurchase request activity should be
listed in the table also to provide comparable disclosures.
---------------------------------------------------------------------------

    \87\ Rule 15Ga-S1(a)(1)(iv). We are adding the instruction to
clarify that all originators are required to be included. See
generally, letters from AFGI, CFRL, CMBP, MBIA and Metlife (noting
that without the disclosure requirement of the originator, it may be
more difficult for investors to make fair comparisons regarding the
repurchase history, including which originators are most likely to
be subject to repurchase or replacement requests and which are most
likely to honor such requests when made).
    \88\ See e.g., letters from Kutak, GSEs and SIFMA.
---------------------------------------------------------------------------

    Fifth, the final rule requires new columns to disclose the number,
outstanding principal balance and percentage by principal balance of
the assets originated by each originator in the pool at the time of
securitization for each issuing entity (columns (d) through (f)).\89\
We were persuaded by one commentator's suggestion that the columns
should be added in order to assist investors in placing the information
on repurchase demands in the proper context.\90\ This way, investors
may be able to determine the concentration of each originators' assets
in each securitized asset pool.
---------------------------------------------------------------------------

    \89\ Rule 15Ga-1(a)(1)(v).
    \90\ See letter from CMBP.
---------------------------------------------------------------------------

    Sixth, we are adopting, as proposed, a requirement to disclose the
number, outstanding principal balance and percentage by principal
balance of assets that were subject of a demand to repurchase or
replace for breach of representations and warranties (columns (g)
through (i)), including investor demands upon a trustee.\91\ As stated
earlier, Section 943(2) requires disclosure of fulfilled and
unfulfilled repurchase requests. We continue to believe that disclosure
should not be limited to only those demands, repurchases and
replacements made pursuant to the transaction agreement alone.
Investors have demanded that trustees enforce repurchase covenants
because transaction agreements do not typically contain a provision for
an investor to directly make a repurchase demand.\92\ Since Section
943(2) does not limit the required disclosures to those demands
successfully made by the trustee, under our final rule, investor
demands upon a trustee are required to be included in the table,
irrespective of the trustee's determination to make a repurchase demand
on a securitizer based on the investor request. As we discussed above,
we recognize that initially a securitizer may not be able to obtain
complete information from a trustee because it may not have established
systems to track investor demands. To address this concern, we are
adopting, substantially as proposed, a provision in Rule 15Ga-1 that a
securitizer may include a footnote if the securitizer was unable to
obtain all information with respect to investor demands upon a trustee
that occurred prior to July 22, 2010 (the effective date of the Act)
and state that the disclosure does not contain investor demands upon a
trustee made prior to July 22, 2010.\93\
---------------------------------------------------------------------------

    \91\ Rule 15Ga-1(a)(1)(vi).
    \92\ See Jody Shenn, ``BNY Won't Investigate Countrywide
Mortgage Securities,'' Bloomberg Business Week (Sep. 13, 2010)
available at http://www.businessweek.com/news/2010-09-13/bny-won-t-investigate-countrywide-mortgage-securities.html (noting the
difficulties that investors are facing to enforce contracts with
respect to repurchase demands) and Al Yoon, ``NY Fed joins other
investors on loan repurchase bid,'' Reuters (Aug. 4, 2010) available
at http://www.reuters.com/article/idUSTRE6736DZ20100804 (noting that
investors have been frustrated with trustees and servicers and are
banding together to force trustees to act on repurchase requests).
See also Kevin J. Buckley, ``Securitization Trustee Issues,'' The
Journal of Structured Finance (Summer 2010) (discussing investors
demands upon trustees to enforce sellers' repurchase obligations).
    \93\ Rule 15Ga-1(a)(2). See also Section 4 of the Act.
---------------------------------------------------------------------------

    The Act does not specify when the disclosure should first be
provided, or the frequency with which it should be updated. We are
adopting a three-year look back period for the initial disclosures,
instead of a five-year look back period, as proposed. We believe a
three-year look back period for the initial disclosures strikes the
right balance between the disclosure benefits to investors,
availability of historical information and compliance costs to
securitizers.\94\ Commentators suggested that periods from three to
five years would provide a sufficient period of data for investors to
make comparisons in order to identify underwriting deficiencies.\95\
However, we also recognize other commentators' suggestions that the
rule apply only prospectively because of concerns regarding the
availability and

comparability of historical information relating to repurchase demands
(including investor demands upon a trustee).\96\ In particular, older
data may be very hard or impossible for securitizers to obtain if they
have not had systems in place to track the data required for the
required disclosures, which may lead to less comparable data. In order
to balance the goals of the Act with commentators' concerns that all
securitizers may not be able to provide complete information, we are
also adopting a provision in Rule 15Ga-1 \97\ to permit a securitizer
to omit information that is unknown or not reasonably available to the
securitizer without unreasonable effort or expense similar to Exchange
Act Rule 12b-21.\98\ Under the final rule, a securitizer must provide
the information it possesses or it can acquire without unreasonable
effort or expense, and the securitizer must include a statement
describing why unreasonable effort or expense would be involved in
obtaining the omitted information.
---------------------------------------------------------------------------

    \94\ See also discussion in Section II.A.5.c.
    \95\ See e.g., letters from AFSA, ASF, Metlife and SIFMA.
    \96\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA, CMBP,
CREFC, GSEs, Kutak, MBA, NABL, Roundtable, and Wells.
    \97\ Rule 15Ga-1(a)(2). See e.g., letters from AFSA, ASF, BOA,
CREFC, Roundtable, and SIFMA.
    \98\ 17 CFR 240.12b-21.
---------------------------------------------------------------------------

    Seventh, we are adopting, as proposed, a requirement to disclose
the number, outstanding principal balance and percentage by principal
balance of assets that were repurchased or replaced for breach of
representation and warranties (columns (j) through (l)).\99\
---------------------------------------------------------------------------

    \99\ Rule 15Ga-1(a)(1)(vii).
---------------------------------------------------------------------------

    Eighth, we are persuaded by commentators' suggestions that we
should clarify our proposal for disclosures related to pending purchase
requests in order to better reflect the repurchase request and
resolution process in a comparable format, as opposed to if the
information were presented in footnotes.\100\ As a result, we are
adopting requirements to present more specific information about the
pending nature of the demand. We are requiring disclosure of the
number, outstanding principal balance and percentage by principal
balance of assets that are pending repurchase or replacement
specifically due to the expiration of a cure period (columns (m)
through (o))\101\ and where the demand is currently in dispute (columns
(p) through (r)).\102\ If the cure period has expired, and the demand
is not in dispute, the asset should be reflected in the ``demand
rejected'' columns described below.\103\
---------------------------------------------------------------------------

    \100\ See e.g., letters from ABA, ASF, BOA, CMBP, Metlife,
Roundtable, and SIFMA.
    \101\ Rule 15Ga-1(a)(1)(viii). See e.g., letters from BOA,
Roundtable, and SIFMA.
    \102\ Rule 15Ga-1(a)(1)(ix). See e.g., letters from ASF, CMBP,
Metlife, and SIFMA.
    \103\ See e.g., letter from SIFMA.
---------------------------------------------------------------------------

    Ninth, we are also persuaded by commentator's suggestions that we
should clarify our proposal for disclosures related to unfulfilled
repurchase requests.\104\ As a result, we are adopting requirements to
present the number, outstanding principal balance and percentage by
principal balance of assets that were not repurchased or replaced
because the demand was withdrawn (columns (s) through (u)) \105\ and
because the demand was rejected (columns (v) through(x)).\106\
---------------------------------------------------------------------------

    \104\ See fn. 100.
    \105\ Rule 15Ga-1(a)(1)(x). See e.g., letters from CMBP,
Roundtable and SIFMA.
    \106\ Rule 15Ga-1(a)(1)(xi). See e.g., letters from BOA,
Roundtable and SIFMA.
---------------------------------------------------------------------------

    Tenth, we are addressing commentators' requests \107\ that we
clarify the disclosures required for the amount of outstanding
principal balance and percentage by principal balance by adopting an
instruction to specify that outstanding principal balance shall be the
principal balance as of the reporting period end date and the
percentage by principal balance shall be the outstanding principal
balance of the asset(s) subject to the repurchase request(s) divided by
the outstanding principal balance of the asset pool as of the reporting
period end date.
---------------------------------------------------------------------------

    \107\ See e.g., letters from AFSA (suggesting that a method of
calculation should be prescribed or disclosed in order to provide
comparable data) and Roundtable (noting that the percentage by
principal balance is not straightforward, given that the pool size
will vary over time).
---------------------------------------------------------------------------

    Eleventh, we are adopting, with slight modification from our
proposal, a requirement that the securitizer provide totals by each
issuing entity reported, and for all issuing entities for columns that
require number of assets and principal balance amounts.\108\
---------------------------------------------------------------------------

    \108\ Rule 15Ga-1(a)(1)(xii). We had proposed to require totals
by asset class only.
---------------------------------------------------------------------------

    Finally, the rule requires securitizers to include narrative
disclosure in order to further explain the information presented in the
table, if applicable. We are revising the proposed instruction to
clarify that securitizers should indicate by footnote and provide
narrative disclosure in order to further explain information presented
in all columns of the table, as appropriate.\109\ As noted above, we
received several comments requesting that we expressly require certain
disclosures to be provided by footnote or accompanying narrative
disclosure.\110\ Some commentators also requested confirmation that
providing narrative information would not jeopardize an issuer's
reliance upon a private offering exemptions or safe harbors.\111\ As we
noted in the Proposing Release, filing proposed Form ABS-15G would not
foreclose the reliance of an issuer on the private offering exemption
in the Securities Act of 1933 and the safe harbor for offshore
transactions from the registration provisions in Section 5.\112\
---------------------------------------------------------------------------

    \109\ We had urged footnote disclosure for the entire table;
however, we had specifically proposed an instruction with respect to
repurchase requests that were pending.
    \110\ See e.g., letters from SIFMA (requesting disclosure of the
party responsible for the breach, exclusion of originator no longer
in existence, and notation of assets subject to multiple repurchase
requests); Metlife (requesting disclosure of specific violations of
representations and warranties, status of the claims and the reason
for denial); and ABA (requesting disclosure of whether a demand was
resolved through an indemnity payment or purchase price adjustment
but not a repurchase).
    \111\ See e.g., letters from ABA, ASF, BOA and SIFMA.
    \112\ 15 U.S.C. 77e.
---------------------------------------------------------------------------

5. Form ABS-15G
(a) Proposed Form ABS-15G
    As we discussed in the Proposing Release, the disclosures required
by Rule 15Ga-1 do not fit neatly within the framework of existing
Securities Act and Exchange Act Forms because those forms relate to
registered ABS transactions, and unregistered ABS transactions are not
required to file those forms.\113\ Therefore, we proposed new Form ABS-
15G to be filed on EDGAR so that parties obligated to make disclosures
related to Exchange Act-ABS under Rule 15Ga-1 could file the
disclosures on EDGAR. We proposed that a securitizer provide the
repurchase history for the last five years by filing Form ABS-15G at
the time a securitizer first offers an Exchange Act-ABS or organizes
and initiates an offering of Exchange Act-ABS, registered or
unregistered, after the effective date of the new rules, as adopted. In
addition, we proposed that going forward, a securitizer would provide
the disclosures for all outstanding Exchange Act-ABS on a monthly basis
by filing Form ABS-15G within 15 calendar days after the end of each
calendar month. We proposed continued periodic reporting through and
until the last payment on the last Exchange Act-ABS outstanding held by
a non-affiliate that was issued by the securitizer or an affiliate. We
also proposed that securitizers file Form ABS-15G to provide a notice
to terminate the reporting obligation and disclose the

date the last payment was made. Consistent with current filing
practices for other ABS forms,\114\ for purposes of making the
disclosures required by Rule 15Ga-1, we proposed that Form ABS-15G be
signed by the senior officer of the securitizer in charge of the
securitization.
---------------------------------------------------------------------------

    \113\ However, a portion of the information required by Rule
15Ga-1 would be required in a registration statement and in periodic
reports as we discuss further below.
    \114\ The Form 10-K report for ABS issuers must be signed either
on behalf of the depositor by the senior officer in charge of
securitization of the depositor, or on behalf of the issuing entity
by the senior officer in charge of the servicing. See General
Instruction J.3. of Form 10-K [17 CFR 249.310]. In addition, the
certifications for ABS issuers that are required under Section 302
of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241] must be signed
either on behalf of the depositor by the senior officer in charge of
securitization of the depositor if the depositor is signing the Form
10-K report, or on behalf of the issuing entity by the senior
officer in charge of the servicing function of the servicer if the
servicer is signing the Form 10-K report. In our 2010 ABS Proposing
Release, we also proposed to require that the senior officer in
charge of securitization of the depositor sign the registration
statement (either on Form SF-1 or Form SF-3) for ABS issuers. See
Section II.F. of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

(b) Comments on the Proposed Rule
    Comments received on new Form ABS-15G were mixed. Two commentators
requested that disclosures be provided on currently available forms
because Section 943 does not expressly require, nor create an
obligation to file on a new form.\115\ One commentator suggested that
the disclosure requirements apply only to an initial offering of an
Exchange Act-ABS, and not to ongoing reporting because they believe
that ongoing information regarding repurchase activity will provide
little benefit to investors who have already made the decision to
purchase a particular ABS.\116\ However, another commentator stated
that filing Form ABS-15G on EDGAR would make the disclosures readily
available to all investors and the public and would ensure that the
data is maintained, easy to find, and cost free for investors as well
as regulators and policymakers.\117\
---------------------------------------------------------------------------

    \115\ See letters from AFSA (suggesting that securitizers be
given a choice of providing the information either on new Form ABS-
15G or by presenting the disclosure in related offering documents)
and ASF (noting that disclosure would be more useful to investors in
an offering document).
    \116\ See letter from AFSA (but also noting that frequent
securitizers who sponsor multiple asset classes would find it easier
to make a single filing on Form ABS-15G rather than in a series of
prospectuses).
    \117\ See letter from Levin.
---------------------------------------------------------------------------

    Several commentators suggested that the trigger for the initial
filing not be tied to when a securitizer completes its first offering
after the effective date of the new rule.\118\ Of those, two
commentators suggested that the Form ABS-15G filings be required on a
certain date after the effective date of the new rules.\119\ In support
of the proposed trigger, one commentator noted that the prospect of a
new issuance by many securitizers may be delayed for a long period
following the effective date of the final rules. As a result, investors
and insurers of outstanding ABS would be deprived of the information at
a time when representation and warranty repurchase claims and disputes
related to residential mortgages, in particular, are increasing.\120\
Several commentators requested a long implementation period in order to
set up systems and gather historical data.\121\ Three commentators
proposed alternative filing rules suggesting we require securitizers to
file a single Form ABS-15G if no demands are received.\122\ Three
suggested that, thereafter, an annual confirmation could be filed to
confirm that no demands have occurred since the filing of the previous
Form ABS-15G.\123\
---------------------------------------------------------------------------

    \118\ See e.g., letters from AFGI, AFSA, ASF, MBIA, Metlife and
SIFMA.
    \119\ See Metlife (suggesting 90 days after effective date), and
ASF (suggesting no earlier than one year after effective date).
    \120\ See letter from AFGI. Metlife also requested that sponsors
with significant outstanding securitizations should file Form ABS-
15G in order to enable fair comparisons for investors.
    \121\ See e.g., letters from ASF, BOA, GSEs, MBA and SIFMA. See
further discussion about the transition period below in Section III.
    \122\ See letters from ABA, ASF and SIFMA. In addition, two
other commentators suggested that only a statement or checkbox be
provided to confirm no activity to report if periodic reporting
would still be required. See letters from AFSA and NABL.
    \123\ See letters from ABA, ASF and SIFMA.
---------------------------------------------------------------------------

    Comments received on reporting frequency of ongoing reporting were
mixed, with some supporting monthly,\124\ quarterly,\125\ and annual
\126\ ongoing reporting. Several commentators suggested that reporting
should only be required if any repurchase activity has occurred.\127\
The preferred due date of the filing ranged from 30 days to 90 days
after the end of the period.\128\ In addition, some commentators
requested that the table be presented in periodic intervals rather than
on a cumulative basis.\129\
---------------------------------------------------------------------------

    \124\ See letters from AFGI and ICI (generally supporting
monthly reporting), and Metlife (noting that monthly reporting would
be adequate and that a frequency longer than quarterly would fail to
provide investors with information about underwriting
deterioration).
    \125\ Some commentators noted that the repurchase process may
move slowly, and monthly reporting may not be a useful interval for
investors. In particular, residential mortgage ABS typically provide
for cure periods of 60-90 days. Further, commentators argued that
monthly reporting of no change in activity would be burdensome. See
e.g., letters from ABA, ABASA, ASF, CREFC, Roundtable and SIFMA.
Other commentators generally supported a quarterly reporting
interval. See letters from BOA, CMBP, GSEs, MBA and NYC.
    \126\ See letters from AFSA, GSEs, Kutak, NABL and NYC
(generally supporting an annual reporting interval).
    \127\ See e.g., letters from ABA, AFSA, BOA, NABL, Roundtable
and SIFMA.
    \128\ See letters from ABA and NABL (suggesting the Form ABS-15G
be required 45 days after period end). See also letters from AFSA,
CREFC, NYC and SIFMA.
    \129\ See letter from Metlife (noting that repurchase activity
in more recent windows of time would provide useful information on
trends in asset quality). See also letter from ABA (noting that
cumulative reporting may make the information unwieldy and that
information about earlier periods would be available on the SEC Web
site).
---------------------------------------------------------------------------

(c) Final Form ABS-15G
    We are adopting new Form ABS-15G so that securitizers may provide
the disclosures required by new Rule 15Ga-1. As noted above, the Act
does not specify when the disclosure should first be provided, or the
frequency with which it should be updated. As discussed above in
Section III.A.4.c., we are adopting a requirement to file initial
disclosures required by new Rule 15Ga-1 for the last three years.
However, we were persuaded by commentators' concerns that our proposal
to trigger the filing requirement of Form ABS-15G at the time a
securitizer first offers an Exchange Act-ABS or organizes and initiates
an offering of Exchange Act-ABS, registered or unregistered, after the
effective date of the new rules could deny market participants of
information about demand, repurchase and replacement activity.\130\
Further, delaying the required disclosure of information about
originators could impair investors' ability to compare issuing entities
and the originators of the underlying pools. Therefore, we are adopting
a requirement that any securitizer that issued an Exchange Act-ABS
during the three-year period ended December 31, 2011, that includes a
covenant to repurchase or replace an underlying asset for breach of a
representation or warranty, would be required to file on new Form ABS-
15G the disclosures required by new Rule 15Ga-1, if the securitizer has
Exchange Act-ABS that had such a covenant to repurchase or replace
outstanding held by non-affiliates as of December 31, 2011.\131\ If a
securitizer has no activity to report for the three-year period, then
it may indicate that by checking the appropriate box on Form ABS-15G.
The initial Form ABS-15G will be required to be filed no later than 45
days after the end of the three-year period, or on February 14, 2012.
---------------------------------------------------------------------------

    \130\ See e.g., letters from AFGI, MBIA, Metlife and SIFMA.
    \131\ Rule 15Ga-1(c).

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

    As we discussed in the Proposing Release, while we believe that
Congress intended to provide investors with historical information
about repurchase activity so that investors may identify asset
originators with clear underwriting deficiencies, we also recognized
that securitizers may not have historically collected the information
required under the new rules. We are requiring that the initial
disclosures be limited to the last three years of activity, rather than
five years as proposed, in order to balance the requirements of Section
943 and the burden on securitizers to provide the historical
disclosures. As we note above, we are also adopting certain provisions
in new Rule 15Ga-1 in order to address commentators' concerns regarding
the production of historical information.\132\ On balance, we believe
that the new rule addresses the Act's requirement and investors' need
for historical disclosures in order to identify asset originators with
clear underwriting deficiencies, while also addressing securitizers'
concerns with the challenges of producing historical information and
related liability.
---------------------------------------------------------------------------

    \132\ See Section II.A.4.c., Rule 15Ga-1(c)(1) and Item 1.01 of
Form ABS-15G.
---------------------------------------------------------------------------

    We are also persuaded by commentators' views regarding the
frequency of reporting and, therefore, we are adopting a requirement
for securitizers to provide periodic disclosures of demand, repurchase
and replacement history on a quarterly basis \133\ by filing Form ABS-
15G on EDGAR within 45 days of the end of the calendar quarter.\134\ In
the Proposing Release, we noted that most transaction agreements
provide for monthly distributions, and also provide for reporting on a
monthly basis. We were persuaded, however, by commentators' suggestions
that demand, repurchase and replacement history could be presented in
less frequent intervals while still providing meaningful disclosure.
For instance, as commentators noted, the repurchase process may move
slowly, and monthly reporting may not be a useful interval for
investors if no activity typically occurs during such periods.\135\ We
also had proposed that ongoing disclosures be presented on a cumulative
basis, for each issuing entity. Instead, we are adopting, as suggested
by commentators, a requirement for securitizers to present only the
information for the quarter in their quarterly filing because
cumulative data may be cumbersome to manipulate and not be as useful to
identify recent trends as information presented on a quarter by quarter
basis.\136\ In addition, as noted in the Proposing Release, we
recognize that demands may have been made prior to the beginning of the
initial look back period and that resolution may have occurred after
that date. We are also adopting two instructions to clarify that a
securitizer would need to disclose activity during the reporting
period, even if it relates to assets that were subject to demands made
prior to the beginning of the reporting period,\137\ including if they
were made prior to the beginning of the three-year look back period.
Securitizers should include footnote disclosure to clarify, if
applicable.
---------------------------------------------------------------------------

    \133\ See e.g., letters from ABA, ABASA, ASF, BOA, CMBP, CREFC,
GSEs, MBA, Metlife, NYC, Roundtable and SIFMA.
    \134\ See Rule 15Ga-1(c)(2) and Item 1.02 of Form ABS-15G. See
e.g., letters from ABA and NABL.
    \135\ See fn. 125. Also, as we discuss further below, we are
adopting amendments to Regulation AB that would require disclosure
of demand, repurchase and replacement history with respect to a
particular issuing entity to be provided in distribution reports,
which may occur more frequently than quarterly. For example, if a
Form 10-D is due to be filed monthly for a particular issuing
entity, then demand, repurchase and replacement history of that
particular ABS would have to be reported monthly. See e.g., letter
from SIFMA.
    \136\ Rule 15Ga-1(c)(2). See letters from ABA (suggesting that
only updated information be provided) and Metlife (noting that
repurchase activity in more recent windows of time would provide
useful information on trends in asset quality). In addition,
investors may locate information about prior periods on our website
and as we discuss below in Section II.B.3., we are amending
Regulation AB to require cumulative repurchase history for a three-
year look back period in prospectuses. We also highlight the
instruction to Rule 15Ga-1(a)(1)(ii) which specifies that the table
should include all issuing entities with activity during the
quarterly reporting period, including those that are no longer
outstanding at the end of the calendar quarter.
    \137\ See instructions to paragraph (a)(1) and (c)(1) of Rule
15Ga-1.
---------------------------------------------------------------------------

    Further, to address commentators' concerns that certain issuers who
include a covenant to repurchase or replace pool assets in their
transaction agreements, but who are never presented with a repurchase
demand would be required to make disclosure, we are adopting a
provision, suggested by commentators,\138\ that in lieu of providing
the table, a securitizer may check a box indicating that it had no
demands during the quarter.\139\ Thereafter, a securitizer would have
suspended its obligation to report on a quarterly basis, until the time
when a demand occurs during the quarterly reporting period.\140\
However, the securitizer would be required to file an annual Form ABS-
15G to confirm that no demands were made during the entire year.\141\
If demands were made during a calendar quarter, the securitizer would
have to report that activity for the calendar quarter by filing Form
ABS-15G within 45 days of the end of the calendar quarter. The new rule
would also apply to new securitizers where the new securitizer would
have to file Form ABS-15G for the calendar quarter in which it issued
Exchange Act-ABS.\142\ If no demand activity occurred, it could check
the box indicating that no activity occurred and thereafter, would not
have to file Form ABS-15G on a quarterly basis until it had demand
history to report. A new securitizer would still be required to file an
annual Form ABS-15G to indicate it had no demand activity if true.
---------------------------------------------------------------------------

    \138\ See e.g., letters from ABA and ASF.
    \139\ Rule 15Ga-1(c)(2)(i).
    \140\ If a securitizer had no activity during the initial three-
year period, and indicated that by checking the box on the initial
filing, then its obligation to file periodic filings would be
suspended. See Rule 15Ga-1(c)(2)(i).
    \141\ Rule 15Ga-1(c)(2)(ii).
    \142\ Rule 15Ga-1(c)(2)(i). We had proposed that the disclosure
requirements would be triggered with an offering of Exchange Act-
ABS. Under the final rule, a new securitizer would not be required
to make the initial three-year look back filing because it would not
have any Exchange Act-ABS outstanding as of December 31, 2011 and
thus, would not have any historical repurchase activity to report.
Thus, a new securitizer is only required to provide information on a
prospective basis.
---------------------------------------------------------------------------

    We are also adopting, as proposed, the ability to terminate the
reporting obligation. The new rule allows a securitizer to terminate
its reporting obligation when the last payment is made on the last
Exchange Act-ABS outstanding held by a non-affiliate that was issued by
the securitizer or an affiliate.
    Lastly, as discussed above, in an effort to limit the cost and
burden on municipal securitizers subject to the new rule as well as
allow issuers to provide the Rule 15Ga-1 disclosures for investors in
the same location as other disclosures regarding municipal securities,
we will permit municipal securitizers to satisfy the filing obligation
by filing the information required by new Rule 15Ga-1 on EMMA.\143\
---------------------------------------------------------------------------

    \143\ Rule 314 of Regulation S-T.
---------------------------------------------------------------------------

B. Disclosure Requirements in Regulation AB Transactions

1. Proposed Amendments to Regulation AB
    We re-proposed some of our 2010 ABS proposals for Regulation AB
with respect to disclosures regarding sponsors in prospectuses and with
respect to disclosures about the asset pool in periodic reports, so
that issuers would be required to include the disclosures in the same
format as

required by proposed Rule 15Ga-1(a).\144\ We proposed that issuers of
Reg AB-ABS provide disclosures in the same format as proposed Rule
15Ga-1(a) within a prospectus and within ongoing reports on Form 10-D.
For prospectuses, we proposed that if the underlying transaction
agreements provide a covenant to repurchase or replace an underlying
asset for breach of a representation or warranty, then issuers would be
required to provide in the body of the prospectus disclosure of a
sponsor's repurchase demand and repurchase and replacement history for
the last three years, pursuant to the format proscribed in Rule 15Ga-
1(a). In addition, we proposed to limit the disclosure required in the
prospectus to repurchase history for the same asset class as the
securities being registered. Our proposal did not include a materiality
threshold, as Section 943 includes no such standard. We proposed that a
reference be included in the prospectus to the Form ABS-15G filings
made by the securitizer (i.e., sponsor) of the transaction and disclose
the CIK number of the securitizer so that investors may easily locate
Form ABS-15G filings on EDGAR.
---------------------------------------------------------------------------

    \144\ In the 2010 ABS Proposing Release, we also proposed to
amend Item 1110(c) of Regulation AB to require originators (of
greater than 20% of the assets underlying the pool) to disclose the
amount, if material, of publicly securitized assets originated or
sold by the sponsor that were the subject of a demand to repurchase
or replace for breach of the representations and warranties
concerning the pool assets that has been made in the prior three
years pursuant to the transaction agreements on a pool by pool basis
as well as the percentage of that amount that were not then
repurchased or replaced by the sponsor. That proposal remains
outstanding.
---------------------------------------------------------------------------

    We also proposed to amend Item 1121 of Regulation AB so that
issuers would be required to disclose the demand, repurchase and
replacement history regarding the assets in the pool in the format
prescribed by new Rule 15Ga-1(a) in Form 10-D. In order to conform the
requirements to proposed Rule 15Ga-1, we also did not include a
materiality threshold. We proposed that the Form 10-D include a
reference to the Form ABS-15G filings made by the securitizer of the
transaction and disclose the CIK number of the securitizer so that
investors may easily locate Form ABS-15G filings on EDGAR. As we noted
in the Proposing Release, providing repurchase history disclosure in
prospectuses and in Form 10-D would be independent from and would not
alleviate a securitizer's obligation to disclose ongoing information
for all of their transactions as required by new Rule 15Ga-1.
2. Comments Received on the Proposal
    Commentators generally supported our proposal to have Regulation AB
disclosures in the same format as required under proposed Rule 15Ga-1
to lessen the burden on securitizers and permit investors to more
readily review and compare the data.\145\ However, we also received
three comment letters suggesting that Regulation AB should be subject
to a materiality threshold.\146\
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    \145\ See letters from Metlife and SIFMA.
    \146\ See letters from ASF, BOA and SIFMA.
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    One commentator suggested that the information presented in the
prospectus should be presented as of a date not later than 135 days
prior to the date of first use of the prospectus.\147\ We received one
comment letter which stated that monthly reporting is appropriate at
the issuing entity level where most ABS are making distributions to
investors on a monthly basis and monthly reporting is tied directly to
that schedule.\148\
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    \147\ See letter from BOA.
    \148\ See letter from SIFMA.
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    Five commentators supported a different liability standard for
historical data \149\ and some suggested that we adopt implementation
in a fashion similar as we had provided for static pool
implementation.\150\
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    \149\ See letters from AFSA, ASF, BOA, Roundtable and SIFMA.
    \150\ See letters from AFSA, ABA, BOA and SIFMA (suggesting that
information related to periods prior to the effective date or ABS
issued prior to the effective date not be considered part of the
prospectus or registration statement). See also Section III.B.4. of
the 2004 ABS Adopting Release.
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3. Final Rule
    We are adopting the amendment to Item 1104 substantially as
proposed with a few modifications in response to comments
received.\151\ We are revising the text of the regulation to refer to
assets ``securitized'' by a securitizer instead of ``originated and
transferred'', as proposed, to address commentators concerns and to
conform to Rule 15Ga-1 as described above in Section II.A.2. Also, as
proposed, tabular disclosure is required in prospectuses in the format
required by new Rule 15Ga-1 for the last three years.\152\ We are also
adopting, as proposed, a requirement that issuers include a reference
to the CIK number of the securitizer. In addition, and as suggested by
a commentator,\153\ we are adopting a requirement that the information
presented in the prospectus shall not be more than 135 days old.\154\
This provision should reduce the burdens on securitizers because it is
consistent with the disclosure conventions for static pool and interim
financial information as well as the quarterly filing deadlines we are
adopting today for Form ABS-15G.\155\ It also should not diminish the
quality of the information provided to investors because, as we discuss
above, commentators stated that the repurchase process is typically
slow and quarterly reporting is an appropriate interval to provide
useful information about demand and repurchase activity.\156\ In
addition, information subsequent to the last quarterly reporting period
may be available for a particular Exchange Act-ABS if it is required to
report on Form 10-D on a more frequent basis than quarterly, such as
monthly.
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    \151\ Item 1104(e) of Regulation AB.
    \152\ Item 1104(e)(1) of Regulation AB. As we noted in the
Proposing Release, we proposed that prospectuses include disclosure
about the same asset class for a three-year look back period because
information about other asset classes and information older than
three years may make the size of the prospectus unwieldy and
investors should have ready access to more current information. See
fn. 57 of the Proposing Release.
    \153\ See letter from BOA.
    \154\ Item 1104(e)(3). For example, a prospectus dated May 12,
2012 could include information as of December 31, 2011 (the
information would be 133 days old); however, because a quarterly
report on Form ABS-15G for the period ending March 31, 2012, would
be due on May 15, 2012 (45 days after quarter end), then a
prospectus dated May 17, 2012 would need to provide disclosures as
of March 31, 2012.
    \155\ See, e.g., Item 1105 of Regulation AB (17 CFR 229.1105),
Rule 3-01 of Regulation S-X (17 CFR 210.3-01) and Rule 3-12 of
Regulation S-X (17 CFR 210.3-12).
    \156\ See fn. 125 and 135.
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    Finally, as we discuss above, commentators expressed significant
concern about the ability to produce historical data to meet the
requirements of Item 1104 and requested specific relief from liability
for historical information.\157\ We recognize that issuers may not have
been collecting the necessary data for periods before the compliance
date of the new rules and even if they had been collecting the
necessary information, the information may not have been collected
under processes and controls with a view toward disclosure in a
prospectus. However, we believe that concerns regarding the
availability of data on a going forward basis will not be applicable.
Therefore, we are addressing commentators' concerns by phasing in the
disclosure requirement. A prospectus filed in the first year after the
compliance date, will be permitted to include a one-year look back
period, and in the second year after the compliance date, a two-year
look back period.\158\ Prospectuses filed in the third

year after the compliance date and thereafter must include the full
three-year look back period.
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    \157\ See e.g. letters from AFSA, ASF, BOA, Roundtable and
SIFMA.
    \158\ Therefore, prospectuses filed between February 14, 2012
and February 13, 2013 would be permitted to include only one year of
repurchase activity; prospectuses filed between February 14, 2013
and February 13, 2014 would be permitted to include only two years
of repurchase activity. All prospectuses filed on or after February
14, 2014 would be required to include three years of repurchase
activity. Investors may locate information for prior periods on Form
ABS-15G.
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    We are also adopting the amendment to Item 1121, as proposed, so
that investors will receive disclosures with their reports on Form 10-D
about the demand, repurchase and replacement history with respect to a
particular issuing entity.

C. Disclosure Requirements for NRSROs

1. Proposed New Rule 17g-7
    We proposed to add new Exchange Act Rule 17g-7, which would
implement Section 943(1) of the Act by requiring an NRSRO to make
certain disclosures in any report accompanying a credit rating relating
to an asset-backed security.\159\ Specifically, in accordance with
Section 943(1), Rule 17g-7 as proposed would require an NRSRO \160\ to
include, in such reports, a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations, warranties and
enforcement mechanisms in issuances of similar securities.\161\ As
discussed above, the Act also amended the Exchange Act to include the
definition of an ``asset-backed security'' and Section 943 of the Act
references that definition.\162\ Therefore, we proposed that under Rule
17g-7 an NRSRO must provide the disclosures with respect to any
Exchange Act-ABS, whether or not the security is offered in a
transaction registered with the Commission.
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    \159\ In June 2008, we proposed a new Rule 17g-7 that would have
required an NRSRO to publish a report containing certain information
each time the NRSRO published a credit rating for a structured
finance product or, as an alternative, use ratings symbols for
structured finance products that differentiated them from the credit
ratings for other types of debt securities. See Exchange Act Release
No. 57967 (June 16, 2008), [73 FR 36212]. In November 2009, we
announced that we were deferring consideration of action on that
proposal and separately proposed a new Rule 17g-7 to require annual
disclosure by NRSROs of certain information. See Proposed Rules for
Nationally Recognized Statistical Rating Organizations, SEC Release
34-61051 (November 23, 2009), [74 FR 63866]. Although we are
adopting a new rule with the same rule number, that proposal remains
outstanding.
    \160\ Current Item 1111(e) of Regulation AB [17 CFR 1111(e)]
already requires issuers to disclose the representations and
warranties related to the transaction in prospectuses. Additionally,
in the 2010 ABS Proposing Release, the Commission proposed changes
to this item to require a description of any representation and
warranty relating to fraud in the origination of the assets, and a
statement if there is no such representation or warranty.
    \161\ As discussed in the Proposing Release, we anticipate that
one way an NRSRO could fulfill the requirement to describe how
representations, warranties and enforcement mechanisms differ from
those provided in similar securities would be to review previous
issuances both on an initial and an ongoing basis in order to
establish ``benchmarks'' for various types of securities and revise
them as appropriate.
    \162\ See Section 3(a)(77) of the Exchange Act, as amended by
the Act.
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    In the Proposing Release we noted that Section 943, by its terms,
applies to any report accompanying a credit rating for an ABS
transaction, regardless of when or in what context such reports and
credit ratings are issued. Proposed Rule 17g-7 was intended to reflect
the broad scope of this congressional mandate. In addition, we proposed
a note to the new rule which would clarify that for the purposes of the
proposed rule, a ``credit rating'' would include any expected or
preliminary credit rating issued by an NRSRO.\163\ We noted in the
Proposing Release that in ABS transactions, pre-sale reports are
typically issued by an NRSRO at the time the issuer commences the
offering and typically include an expected or preliminary credit rating
and a summary of the important features of a transaction. We also noted
that disclosure at the time pre-sale reports are issued is particularly
important to investors, since such reports provide them with important
information prior to the point at which they make an investment
decision.\164\
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    \163\ As explained in the Proposing Release, we intend the term
``preliminary credit rating'' to include any rating, any range of
ratings, or any other indications of a rating used prior to the
assignment of an initial credit rating for a new issuance. See
generally Credit Ratings Disclosure, SEC Release No. 33-9070
(October 7, 2009) [74 FR 53086].
    \164\ We further noted that Section 932 of the Act amends
Section 15E of the Exchange Act to require the Commission to adopt
rules requiring NRSROs to prescribe and use a form to accompany the
publication of each credit rating that discloses certain
information. See Section 932 of the Act. For the purposes of Section
943 and new Rule 17g-7, such a form would clearly be a ``report''
and, as such, if published in connection with a rating relating to
an asset-backed security, would therefore require the necessary
disclosures regarding the representations, warranties and
enforcement mechanisms available to investors and how they differ
from the representations, warranties and enforcement mechanisms in
issuances of similar securities.
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2. Comments Received on Proposed Rule
    We received two comment letters expressing general support for the
enhanced disclosure that the proposed Rule 17g-7 would require.\165\
One commentator noted that it should facilitate an investor's
understanding of available remedies for a breach and that the
additional requirement for NRSROs to produce information regarding the
representations, warranties and enforcement mechanisms available to
investors in issuances of similar securities would further enhance the
value of this information for investors by allowing them to readily
compare various transactions involving the same asset class or similar
asset class.\166\
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    \165\ See letters from ICI and Levin.
    \166\ See letter from ICI.
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    Two commentators requested that the rule text be revised to refer
exclusively to representations and warranties regarding the pool
assets.\167\ One commentator expressed its belief that Congress
intended Section 943(1) to include those representations and warranties
that an issuer makes about the underlying assets, not those concerning
other aspects of the transaction, e.g., corporate or governance
representations.\168\
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    \167\ See letters from ABA and Moody's.
    \168\ See letter from Moody's.
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    We received several comments regarding the term ``similar
securities.'' Several commentators requested that we clarify or
expressly define the term,\169\ while one commentator suggested that we
require all NRSROs (in collaboration with investors and other market
participants) to agree on concepts of ``similar securities.'' \170\ On
the other hand, one commentator argued that deciding whether one
security is similar to another, and therefore deciding whether their
terms are comparable, is ultimately a question of analytic judgment
that should be left in the hands of the NRSRO.\171\
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    \169\ See e.g., letters from ASF, CREFC, Fitch, Levin, MBA,
Realpoint and SIFMA.
    \170\ See letter from Metlife.
    \171\ See letter from S&P.
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    Some commentators urged us to allow NRSROs to provide the required
disclosures by reference to a transaction's offering documents or other
materials disclosed by the issuer or underwriter, primarily due to the
anticipated length of the disclosures.\172\ One commentator suggested
as an alternative limiting the disclosure requirement to a summary of
the provisions.\173\ However, another commentator opposed allowing
NRSROs to satisfy the proposed disclosure requirement by referring to
prospectus disclosure, noting the enhanced utility to investors that
would arise from placing the relevant disclosure in a ratings report
alongside information about the representations,

warranties and enforcement mechanisms available to investors in
issuances of similar securities.\174\
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    \172\ See letters from ASF, Moody's, Realpoint and S&P.
    \173\ See letter from ASF.
    \174\ See letter from ICI.
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    Commentators were also divided on the issue of utilizing, for the
purpose of the required disclosure, industry standards for the
representations, warranties and enforcement mechanisms available to
investors. Several commentators voiced support for allowing comparisons
to industry standards for the representations, warranties and
enforcement mechanisms available to investors as an alternative to
comparisons to the representations, warranties and enforcement
mechanisms available to investors in issuances of similar
securities,\175\ while others suggested that the rule should eliminate
the comparison to standard securities altogether and replace it with a
requirement to provide comparisons to industry standards.\176\ One
commentator suggested instead that the rule itself establish or
reference mechanisms ``to encourage the development and standardization
of effective ABS representations and warranties to increase the ability
to make meaningful comparisons among ABS securities and to strengthen
investor confidence that promises made to investors can be enforced.''
\177\ Other commentators, however, opposed the use of industry
standards for comparative purposes.\178\ Finally, some commentators
suggested that the rule should expressly state that comparisons to
either an NRSRO's internal benchmarks for representations, warranties
and enforcement mechanisms or to any applicable industry standards
would meet the requirement.\179\
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    \175\ See letters from ASF, CREFC, Moody's and S&P.
    \176\ See letters from Realpoint and Metlife. The latter
commentator suggested comparisons to industry standards as an
alternative to its preferred basis of comparison, a uniform set of
representations, warranties and enforcement mechanisms within each
underlying asset class agreed upon by all NRSROs in collaboration
with investors and other market participants.
    \177\ See letter from Levin.
    \178\ See letters from MBA and SIFMA.
    \179\ See letters from ASF and S&P. The ASF noted that its NRSRO
members have broad-based internal measures for representations and
warranties in ABS transactions, and believe that these measures
could act as benchmarks, or as a starting point for developing
benchmarks, to meet the required comparison.
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    We received two comment letters expressing conditional support for
the note to the proposed rule clarifying that for the purposes of the
proposed rule, a ``credit rating'' would include any expected or
preliminary credit rating issued by an NRSRO.\180\ One of these
commentators expressed its belief that the required disclosure should
be limited only to pre-sale reports,\181\ while the second stated that
its support was contingent on our allowing all required disclosure
under the rule to be done by reference to issuer or underwriter
materials.\182\ Another commentator, noting that under existing market
practice, the timing of pre-sale reports is often unpredictable and
there may have been instances where rating agencies have not provided
pre-sale reports for rated transactions, expressed its belief that the
required disclosure should be part of the offering memorandum.\183\
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    \180\ See letters from Realpoint and S&P.
    \181\ See letter from Realpoint (also arguing for the exclusion
of surveillance reports from the rule's scope).
    \182\ See letter from S&P.
    \183\ See letter from Metlife.
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    Two commentators expressed their belief that the rule's
requirements should apply to issuer paid ratings only.\184\ Another
commentator, however, argued against exempting non-issuer paid ratings
from the scope of the rule, noting that Section 943(1) does not
discriminate between NRSRO business models.\185\ Finally, one
commentator argued that the rule should not apply to ratings of ABS
issuances by foreign issuers that are not issuing securities into the
U.S. market.\186\
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    \184\ See letters from ABA and Realpoint.
    \185\ See letter from S&P.
    \186\ See letter from Moody's.
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3. Final Rule
    We are adopting new Rule 17g-7 as proposed, including the proposed
note to the rule indicating that for the purposes of the rule's
requirement, a ``credit rating'' includes any expected or preliminary
credit rating issued by an NRSRO. As explained in the Proposing
Release, we intend the term ``preliminary credit rating'' to include
any rating, any range of ratings, or any other indications of a rating
used prior to the assignment of an initial credit rating for a new
issuance.
    We acknowledge commentators' concerns about the interpretation of