SEC Guidance Eases Reg AB
Mortgage securitization market participants can avoid paying millions of dollars of audit attestation fees and the burden of compiling reports from hundreds of vendors thanks to a Feb. 2 Securities and Exchange Commission move made in response to a request by industry groups. "Millions of dollars of annual reporting costs will be saved" under the new SEC guidance on a portion of its new Regulation AB, said Tom Deutsch, associate director of the American Securitization Forum.
An ASF/Mortgage Bankers Association group had requested relief from certain reporting requirements of Reg AB's item 1122 late last year and the guidance the SEC provided in its Feb. 2 interpretation of this item is "fundamentally, in all material respects ... the ... interpretation we requested," Mr. Deutsch told this publication.
The SEC's guidance is "most beneficial" to the residential mortgage-backed securities industry "because there is a much larger number of vendors in the RMBS market" than in other securitized product areas, said Mr. Deutsch. However, the guidance is helpful to non-mortgage securitization market participants as well, he said.
The guidance "is what we were looking for," Bill Felts, senior vice president and director of mortgage finance at CitiMortgage, told NMN. He said he and other market participants in the ASF/MBA group that requested the guidance are "pleased with the SEC reviewing the issue and understanding the points we were trying to get across."
As an alternative to filing individual attestation reports, public issuers that have to file annual 10-Ks with the SEC can now have their primary servicers set policies, procedures and controls that demonstratively provide a "reasonable assurance" these vendors are in compliance, Mr. Felts said. The guidance removes the burden from a large number of vendors that otherwise would have to produce the attestation reports, said Mr. Felts. It also provides relief to the issuers/servicers to compile the individual reports, Mr. Deutsch said. A number of these market participants have been working to get vendors' reports completed and filed by April 2, he said.
The new SEC guidance is elective and says it allows the "responsible party" approach to be used specifically for vendors that perform what the SEC describes in its interpretation as "specific and limited activities or ... activities scripted by the servicer."
This ensures that "Reg AB's aim of investor protection by requiring at least one party to assess performance of the applicable servicing criteria and obtain a third-party accountant's attestation on the performance of those criteria," Mr. Deutsch said. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com