'Reg AB' Still a Source of Confusion

Regulation AB requires lenders and loan purchasers to provide static pool data for loans included in a securitization.

But the Securities and Exchange Commission has not provided any clear guidance on what a material percentage of a particular originator's loans in the pool is required for that originator to have to provide static pool data, said Richard D. Simonds Jr., a partner at the law firm Thacher Profitt & Wood.

This was part of the discussion at a panel session on the newly implemented regulation held at the Mortgage Bankers Association's National Secondary Market Conference here.

Kelly C. Johnson, senior vice president, secondary marketing at National City Mortgage Co., added that some people might require an originator to provide the static pool data no matter how few of its loans were in the transaction.

Part of the issue involves sellers who sell loans on a servicing-released basis, said Bill Felts, vice president, CitiMortgage Inc. These sellers do not have such data.

One solution has been for sellers who sell loans servicing released on a flow basis to be treated as a "qualified correspondent." Thus they are selling the loans to the purchaser's guidelines.

Therefore, he said, the purchaser's guidelines can be used in the securitization's prospectus and the purchaser may be able to use its own static pool data, instead of the sellers.

For bulk sales, Mr. Felts said, some are trying to take the qualified correspondent definition and have it apply, but this is a little more difficult because these loans are usually underwritten to the seller's guidelines, not the purchasers.

The panel also warned attendees that the Securities and Exchange Commission is being adamant about Reg AB, although there are moves afoot to have the agency be lenient on the requirements in the first year. (For additional coverage from the MBA Secondary Market conference, see page 16).

As for private transactions, Mr. Simonds commented that those could gradually move closer to looking like public ones (private transactions are not covered by Reg AB). If the investor market asks for the data in a private transaction, it will be required, he said.

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