The Securities and Exchange Commission has issued long-awaited guidance that should make it easier for servicers to comply with the SEC's new testing and reporting requirements on asset-backed securities, which went into effect Jan. 1."We think this new guidance really will go a long way to addressing a lot of nagging questions that people have been struggling with over the past year," said Alison Utermohlen, senior director at the Mortgage Bankers Association. Under the SEC's regulation AB (Item 1122), servicers are required to assess their compliance with a list of servicing activities and hire accountants to test the accuracy of their assessment. The written guidance, which the SEC calls "Telephone Interpretations," addresses a range of issues, including testing platforms. The SEC clarified that servicers can divide ABS by asset type (residential or commercial) for testing and reporting purposes. They can also define their testing platforms by the servicing systems they use. However, platforms have to be consistent from year to year. "If there is a change, there has to be a reasonable basis for that change," Ms. Utermohlen said.
