Servicers Get Smart About SEC's New Regulation AB

Thanks to the Securities and Exchange Commission and a little industry pressure, private-label issuers, servicers and their auditors are becoming more comfortable with the testing and reporting requirements of Regulation AB.

SEC officials have provided some informal interpretations to the big four accounting firms and the Mortgage Bankers Association. They also pledged to provide written interpretations involving several "troublesome" issues, MBA senior director Alison Utermohlen said.

"My sense they have developed guidance to ease implementation. At this stage of the game I don't think they want to make harder," the MBA official said. [SEC was expected to release the written interpretations on its website after Mortgage Servicing News went to press.]

Servicers of asset-backed securities are required to be audited this year under Reg AB for compliance with specific servicing criteria, which is spelled out in SEC regulation. If management is forced to render an opinion that they are not compliance, the company has to be disclose this non-compliance in their annual report (10-K)

Earlier this year, MBA and the accounting firms asked SEC to delay implementation while servicers and their auditors tried to reach agreement on various AB issues. But instead of a delay, SEC agreed to provide written guidance.

"Now that SEC has stepped forward to provide interpretative guidance, I think we have more comfort that companies can comply with the regulation as written," Ms. Utermohlen said. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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