CMSA: FASB Proposal Too Restrictive

A proposed amendment to FAS 140 relating to certain special-purpose entities and the isolation of transferred assets is too restrictive, according to the Commercial Mortgage Securities Association.In a comment letter to the Financial Accounting Standards Board, the CMSA says the proposed statement "places too many restrictions on qualifying SPEs, and will likely preclude virtually all securitization special purpose entities from being qualifying SPEs." According to the CMSA, which represents the interests of the commercial mortgage-backed securities industry, some of the proposed language "would leave a chilling effect on CMBS if left unchanged." The CMSA said it opposes a provision that would bar a qualifying SPE from requiring a mortgage lender to repurchase a mortgage loan or indemnify against losses. The trade association also objected to precluding QSPEs from receiving assignments from lenders of derivative instruments that are part of the security for the underlying mortgage loan, or from entering into "passive," so-called plain vanilla interest rate and currency derivative transactions under certain conditions. The CMSA can be found online at http://www.cmbs.org.