cfr_sections
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22 rows where agency = "SEC" and part_number = 246 sorted by section_id
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| section_id ▼ | title_number | title_name | chapter | subchapter | part_number | part_name | subpart | subpart_name | section_number | section_heading | agency | authority | source_citation | amendment_citations | full_text |
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| 17:17:5.0.1.1.6.1.9.1 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | A | Subpart A—Authority, Purpose, Scope and Definitions | § 246.1 Purpose, scope, and authority. | SEC | [79 FR 77766, Dec. 24, 2014] | (a) Authority and purpose. This part (Regulation RR) is issued by the Securities and Exchange Commission (“Commission”) jointly with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and, in the case of the securitization of any residential mortgage asset, together with the Secretary of Housing and Urban Development and the Federal Housing Finance Agency, pursuant to Section 15G of the Securities Exchange Act of 1934 (15 U.S.C. 78o-11). The Commission also is issuing this part pursuant to its authority under Sections 7, 10, 19(a), and 28 of the Securities Act and Sections 3, 13, 15, 23, and 36 of the Exchange Act. This part requires securitizers to retain an economic interest in a portion of the credit risk for any asset that the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party. This part specifies the permissible types, forms, and amounts of credit risk retention, and establishes certain exemptions for securitizations collateralized by assets that meet specified underwriting standards or otherwise qualify for an exemption. (b) The authority of the Commission under this part shall be in addition to the authority of the Commission to otherwise enforce the federal securities laws, including, without limitation, the antifraud provisions of the securities laws. | ||||
| 17:17:5.0.1.1.6.1.9.2 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | A | Subpart A—Authority, Purpose, Scope and Definitions | § 246.2 Definitions. | SEC | For purposes of this part, the following definitions apply: ABS interest means: (1) Any type of interest or obligation issued by an issuing entity, whether or not in certificated form, including a security, obligation, beneficial interest or residual interest (other than an uncertificated regular interest in a REMIC that is held by another REMIC, where both REMICs are part of the same structure and a single REMIC in that structure issues ABS interests to investors, or a non-economic residual interest issued by a REMIC), payments on which are primarily dependent on the cash flows of the collateral owned or held by the issuing entity; and (2) Does not include common or preferred stock, limited liability interests, partnership interests, trust certificates, or similar interests that: (i) Are issued primarily to evidence ownership of the issuing entity; and (ii) The payments, if any, on which are not primarily dependent on the cash flows of the collateral held by the issuing entity; and (3) Does not include the right to receive payments for services provided by the holder of such right, including servicing, trustee services and custodial services. Affiliate of, or a person affiliated with, a specified person means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. Appropriate Federal banking agency has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). Asset means a self-liquidating financial asset (including but not limited to a loan, lease, mortgage, or receivable). Asset-backed security has the same meaning as in section 3(a)(79) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(79)). Collateral means, with respect to any issuance of ABS interests, the assets that provide the cash flow and the servicing assets that support such cash flow for the ABS interests irrespective of the legal structure of issuance, including security interests in assets… | |||||
| 17:17:5.0.1.1.6.2.9.1 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.3 Base risk retention requirement. | SEC | (a) Base risk retention requirement. Except as otherwise provided in this part, the sponsor of a securitization transaction (or majority-owned affiliate of the sponsor) shall retain an economic interest in the credit risk of the securitized assets in accordance with any one of §§ 246.4 through 246.10. Credit risk in securitized assets required to be retained and held by any person for purposes of compliance with this part, whether a sponsor, an originator, an originator-seller, or a third-party purchaser, except as otherwise provided in this part, may be acquired and held by any of such person's majority-owned affiliates (other than an issuing entity). (b) Multiple sponsors. If there is more than one sponsor of a securitization transaction, it shall be the responsibility of each sponsor to ensure that at least one of the sponsors of the securitization transaction (or at least one of their majority-owned or wholly-owned affiliates, as applicable) retains an economic interest in the credit risk of the securitized assets in accordance with any one of §§ 246.4, 246.5, 246.8, 246.9, or 246.10. | |||||
| 17:17:5.0.1.1.6.2.9.2 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.4 Standard risk retention. | SEC | (a) General requirement. Except as provided in §§ 246.5 through 246.10, the sponsor of a securitization transaction must retain an eligible vertical interest or eligible horizontal residual interest, or any combination thereof, in accordance with the requirements of this section. (1) If the sponsor retains only an eligible vertical interest as its required risk retention, the sponsor must retain an eligible vertical interest in a percentage of not less than 5 percent. (2) If the sponsor retains only an eligible horizontal residual interest as its required risk retention, the amount of the interest must equal at least 5 percent of the fair value of all ABS interests in the issuing entity issued as a part of the securitization transaction, determined using a fair value measurement framework under GAAP. (3) If the sponsor retains both an eligible vertical interest and an eligible horizontal residual interest as its required risk retention, the percentage of the fair value of the eligible horizontal residual interest and the percentage of the eligible vertical interest must equal at least five. (4) The percentage of the eligible vertical interest, eligible horizontal residual interest, or combination thereof retained by the sponsor must be determined as of the closing date of the securitization transaction. (b) Option to hold base amount in eligible horizontal cash reserve account. In lieu of retaining all or any part of an eligible horizontal residual interest under paragraph (a) of this section, the sponsor may, at closing of the securitization transaction, cause to be established and funded, in cash, an eligible horizontal cash reserve account in the amount equal to the fair value of such eligible horizontal residual interest or part thereof, provided that the account meets all of the following conditions: (1) The account is held by the trustee (or person performing similar functions) in the name and for the benefit of the issuing entity; (2) Amounts in the account are invested only in cash and cash equ… | |||||
| 17:17:5.0.1.1.6.2.9.3 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.5 Revolving pool securitizations. | SEC | (a) Definitions. For purposes of this section, the following definitions apply: Revolving pool securitization means an issuing entity that is established to issue on multiple issuance dates more than one series, class, subclass, or tranche of asset-backed securities that are collateralized by a common pool of securitized assets that will change in composition over time, and that does not monetize excess interest and fees from its securitized assets. Seller's interest means an ABS interest or ABS interests: (1) Collateralized by the securitized assets and servicing assets owned or held by the issuing entity, other than the following that are not considered a component of seller's interest: (i) Servicing assets that have been allocated as collateral only for a specific series in connection with administering the revolving pool securitization, such as a principal accumulation or interest reserve account; and (ii) Assets that are not eligible under the terms of the securitization transaction to be included when determining whether the revolving pool securitization holds aggregate securitized assets in specified proportions to aggregate outstanding investor ABS interests issued; and (2) That is pari passu with each series of investor ABS interests issued, or partially or fully subordinated to one or more series in identical or varying amounts, with respect to the allocation of all distributions and losses with respect to the securitized assets prior to early amortization of the revolving securitization (as specified in the securitization transaction documents); and (3) That adjusts for fluctuations in the outstanding principal balance of the securitized assets in the pool. (b) General requirement. A sponsor satisfies the risk retention requirements of § 246.3 with respect to a securitization transaction for which the issuing entity is a revolving pool securitization if the sponsor maintains a seller's interest of not less than 5 percent of the aggregate unpaid principal balance of all outstanding inves… | |||||
| 17:17:5.0.1.1.6.2.9.4 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.6 Eligible ABCP conduits. | SEC | (a) Definitions. For purposes of this section, the following additional definitions apply: 100 percent liquidity coverage means an amount equal to the outstanding balance of all ABCP issued by the conduit plus any accrued and unpaid interest without regard to the performance of the ABS interests held by the ABCP conduit and without regard to any credit enhancement. ABCP means asset-backed commercial paper that has a maturity at the time of issuance not exceeding 397 days, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited. ABCP conduit means an issuing entity with respect to ABCP. Eligible ABCP conduit means an ABCP conduit, provided that: (1) The ABCP conduit is bankruptcy remote or otherwise isolated for insolvency purposes from the sponsor of the ABCP conduit and from any intermediate SPV; (2) The ABS interests acquired by the ABCP conduit are: (i) ABS interests collateralized solely by assets originated by an originator-seller and by servicing assets; (ii) Special units of beneficial interest (or similar ABS interests) in a trust or special purpose vehicle that retains legal title to leased property underlying leases originated by an originator-seller that were transferred to an intermediate SPV in connection with a securitization collateralized solely by such leases and by servicing assets; (iii) ABS interests in a revolving pool securitization collateralized solely by assets originated by an originator-seller and by servicing assets; or (iv) ABS interests described in paragraph (2)(i), (ii), or (iii) of this definition that are collateralized, in whole or in part, by assets acquired by an originator-seller in a business combination that qualifies for business combination accounting under GAAP, and, if collateralized in part, the remainder of such assets are assets described in paragraph (2)(i), (ii), or (iii) of this definition; and (v) Acquired by the ABCP conduit in an initial issuance by or on behalf of an intermediate SPV: (A) Directly from th… | |||||
| 17:17:5.0.1.1.6.2.9.5 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.7 Commercial mortgage-backed securities. | SEC | (a) Definitions. For purposes of this section, the following definition shall apply: Special servicer means, with respect to any securitization of commercial real estate loans, any servicer that, upon the occurrence of one or more specified conditions in the servicing agreement, has the right to service one or more assets in the transaction. (b) Third-party purchaser. A sponsor may satisfy some or all of its risk retention requirements under § 246.3 with respect to a securitization transaction if a third party (or any majority-owned affiliate thereof) purchases and holds for its own account an eligible horizontal residual interest in the issuing entity in the same form, amount, and manner as would be held by the sponsor under § 246.4 and all of the following conditions are met: (1) Number of third-party purchasers. At any time, there are no more than two third-party purchasers of an eligible horizontal residual interest. If there are two third-party purchasers, each third-party purchaser's interest must be pari passu with the other third-party purchaser's interest. (2) Composition of collateral. The securitization transaction is collateralized solely by commercial real estate loans and servicing assets. (3) Source of funds. (i) Each third-party purchaser pays for the eligible horizontal residual interest in cash at the closing of the securitization transaction. (ii) No third-party purchaser obtains financing, directly or indirectly, for the purchase of such interest from any other person that is a party to, or an affiliate of a party to, the securitization transaction (including, but not limited to, the sponsor, depositor, or servicer other than a special servicer affiliated with the third-party purchaser), other than a person that is a party to the transaction solely by reason of being an investor. (4) Third-party review. Each third-party purchaser conducts an independent review of the credit risk of each securitized asset prior to the sale of the asset-backed securities in the securitizati… | |||||
| 17:17:5.0.1.1.6.2.9.6 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.8 Federal National Mortgage Association and Federal Home Loan Mortgage Corporation ABS. | SEC | (a) In general. A sponsor satisfies its risk retention requirement under this part if the sponsor fully guarantees the timely payment of principal and interest on all ABS interests issued by the issuing entity in the securitization transaction and is: (1) The Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation operating under the conservatorship or receivership of the Federal Housing Finance Agency pursuant to section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617) with capital support from the United States; or (2) Any limited-life regulated entity succeeding to the charter of either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation pursuant to section 1367(i) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617(i)), provided that the entity is operating with capital support from the United States. (b) Certain provisions not applicable. The provisions of § 246.12(b), (c), and (d) shall not apply to a sponsor described in paragraph (a)(1) or (2) of this section, its affiliates, or the issuing entity with respect to a securitization transaction for which the sponsor has retained credit risk in accordance with the requirements of this section. (c) Disclosure. A sponsor relying on this section shall provide to investors, in written form under the caption “Credit Risk Retention” and, upon request, to the Federal Housing Finance Agency and the Commission, a description of the manner in which it has met the credit risk retention requirements of this part. | |||||
| 17:17:5.0.1.1.6.2.9.7 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.9 Open market CLOs. | SEC | (a) Definitions. For purposes of this section, the following definitions shall apply: CLO means a special purpose entity that: (i) Issues debt and equity interests, and (ii) Whose assets consist primarily of loans that are securitized assets and servicing assets. CLO-eligible loan tranche means a term loan of a syndicated facility that meets the criteria set forth in paragraph (c) of this section. CLO manager means an entity that manages a CLO, which entity is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (15 U.S.C. 80b-1 et seq. ), or is an affiliate of such a registered investment adviser and itself is managed by such registered investment adviser. Commercial borrower means an obligor under a corporate credit obligation (including a loan). Initial loan syndication transaction means a transaction in which a loan is syndicated to a group of lenders. Lead arranger means, with respect to a CLO-eligible loan tranche, an institution that: (i) Is active in the origination, structuring and syndication of commercial loan transactions (as defined in § 246.14) and has played a primary role in the structuring, underwriting and distribution on the primary market of the CLO-eligible loan tranche. (ii) Has taken an allocation of the funded portion of the syndicated credit facility under the terms of the transaction that includes the CLO-eligible loan tranche of at least 20 percent of the aggregate principal balance at origination, and no other member (or members affiliated with each other) of the syndication group that funded at origination has taken a greater allocation; and (iii) Is identified in the applicable agreement governing the CLO-eligible loan tranche; represents therein to the holders of the CLO-eligible loan tranche and to any holders of participation interests in such CLO-eligible loan tranche that such lead arranger satisfies the requirements of paragraph (i) of this definition and, at the time of initial funding of the CLO-eligible tranche, will s… | |||||
| 17:17:5.0.1.1.6.2.9.8 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | B | Subpart B—Credit Risk Retention | § 246.10 Qualified tender option bonds. | SEC | (a) Definitions. For purposes of this section, the following definitions shall apply: Municipal security or municipal securities shall have the same meaning as the term “municipal securities” in Section 3(a)(29) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(29)) and any rules promulgated pursuant to such section. Qualified tender option bond entity means an issuing entity with respect to tender option bonds for which each of the following applies: (i) Such entity is collateralized solely by servicing assets and by municipal securities that have the same municipal issuer and the same underlying obligor or source of payment (determined without regard to any third-party credit enhancement), and such municipal securities are not subject to substitution. (ii) Such entity issues no securities other than: (A) A single class of tender option bonds with a preferred variable return payable out of capital that meets the requirements of paragraph (b) of this section, and (B) One or more residual equity interests that, in the aggregate, are entitled to all remaining income of the issuing entity. (C) The types of securities referred to in paragraphs (ii)(A) and (B) of this definition must constitute asset-backed securities. (iii) The municipal securities held as assets by such entity are issued in compliance with Section 103 of the Internal Revenue Code of 1986, as amended (the “IRS Code”, 26 U.S.C. 103), such that the interest payments made on those securities are excludable from the gross income of the owners under Section 103 of the IRS Code. (iv) The terms of all of the securities issued by the entity are structured so that all holders of such securities who are eligible to exclude interest received on such securities will be able to exclude that interest from gross income pursuant to Section 103 of the IRS Code or as “exempt-interest dividends” pursuant to Section 852(b)(5) of the IRS Code (26 U.S.C. 852(b)(5)) in the case of regulated investment companies under the Investment Company Act of 1940… | |||||
| 17:17:5.0.1.1.6.3.9.1 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | C | Subpart C—Transfer of Risk Retention | § 246.11 Allocation of risk retention to an originator. | SEC | (a) In general. A sponsor choosing to retain an eligible vertical interest or an eligible horizontal residual interest (including an eligible horizontal cash reserve account), or combination thereof under § 246.4, with respect to a securitization transaction may offset the amount of its risk retention requirements under § 246.4 by the amount of the eligible interests, respectively, acquired by an originator of one or more of the securitized assets if: (1) At the closing of the securitization transaction: (i) The originator acquires the eligible interest from the sponsor and retains such interest in the same manner and proportion (as between horizontal and vertical interests) as the sponsor under § 246.4, as such interest was held prior to the acquisition by the originator; (ii) The ratio of the percentage of eligible interests acquired and retained by the originator to the percentage of eligible interests otherwise required to be retained by the sponsor pursuant to § 246.4, does not exceed the ratio of: (A) The unpaid principal balance of all the securitized assets originated by the originator; to (B) The unpaid principal balance of all the securitized assets in the securitization transaction; (iii) The originator acquires and retains at least 20 percent of the aggregate risk retention amount otherwise required to be retained by the sponsor pursuant to § 246.4; and (iv) The originator purchases the eligible interests from the sponsor at a price that is equal, on a dollar-for-dollar basis, to the amount by which the sponsor's required risk retention is reduced in accordance with this section, by payment to the sponsor in the form of: (A) Cash; or (B) A reduction in the price received by the originator from the sponsor or depositor for the assets sold by the originator to the sponsor or depositor for inclusion in the pool of securitized assets. (2) Disclosures. In addition to the disclosures required pursuant to § 246.4(c), the sponsor provides, or causes to be provided, to potential investors a reaso… | |||||
| 17:17:5.0.1.1.6.3.9.2 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | C | Subpart C—Transfer of Risk Retention | § 246.12 Hedging, transfer and financing prohibitions. | SEC | (a) Transfer. Except as permitted by § 246.7(b)(8), and subject to § 246.5, a retaining sponsor may not sell or otherwise transfer any interest or assets that the sponsor is required to retain pursuant to subpart B of this part to any person other than an entity that is and remains a majority-owned affiliate of the sponsor and each such majority-owned affiliate shall be subject to the same restrictions. (b) Prohibited hedging by sponsor and affiliates. A retaining sponsor and its affiliates may not purchase or sell a security, or other financial instrument, or enter into an agreement, derivative or other position, with any other person if: (1) Payments on the security or other financial instrument or under the agreement, derivative, or position are materially related to the credit risk of one or more particular ABS interests that the retaining sponsor (or any of its majority-owned affiliates) is required to retain with respect to a securitization transaction pursuant to subpart B of this part or one or more of the particular securitized assets that collateralize the asset-backed securities issued in the securitization transaction; and (2) The security, instrument, agreement, derivative, or position in any way reduces or limits the financial exposure of the sponsor (or any of its majority-owned affiliates) to the credit risk of one or more of the particular ABS interests that the retaining sponsor (or any of its majority-owned affiliates) is required to retain with respect to a securitization transaction pursuant to subpart B of this part or one or more of the particular securitized assets that collateralize the asset-backed securities issued in the securitization transaction. (c) Prohibited hedging by issuing entity. The issuing entity in a securitization transaction may not purchase or sell a security or other financial instrument, or enter into an agreement, derivative or position, with any other person if: (1) Payments on the security or other financial instrument or under the agreement, derivative … | |||||
| 17:17:5.0.1.1.6.4.9.1 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.13 Exemption for qualified residential mortgages. | SEC | (a) Definitions. For purposes of this section, the following definitions shall apply: Currently performing means the borrower in the mortgage transaction is not currently thirty (30) days or more past due, in whole or in part, on the mortgage transaction. Qualified residential mortgage means a “qualified mortgage” as defined in section 129C of the Truth in Lending Act (15 U.S.C.1639c) and regulations issued thereunder, as amended from time to time. (b) Exemption. A sponsor shall be exempt from the risk retention requirements in subpart B of this part with respect to any securitization transaction, if: (1) All of the assets that collateralize the asset-backed securities are qualified residential mortgages or servicing assets; (2) None of the assets that collateralize the asset-backed securities are asset-backed securities; (3) As of the cut-off date or similar date for establishing the composition of the securitized assets collateralizing the asset-backed securities issued pursuant to the securitization transaction, each qualified residential mortgage collateralizing the asset-backed securities is currently performing; and (4)(i) The depositor with respect to the securitization transaction certifies that it has evaluated the effectiveness of its internal supervisory controls with respect to the process for ensuring that all assets that collateralize the asset-backed security are qualified residential mortgages or servicing assets and has concluded that its internal supervisory controls are effective; and (ii) The evaluation of the effectiveness of the depositor's internal supervisory controls must be performed, for each issuance of an asset-backed security in reliance on this section, as of a date within 60 days of the cut-off date or similar date for establishing the composition of the asset pool collateralizing such asset-backed security; and (iii) The sponsor provides, or causes to be provided, a copy of the certification described in paragraph (b)(4)(i) of this section to potential investors a r… | |||||
| 17:17:5.0.1.1.6.4.9.10 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.22 Periodic review of the QRM definition, exempted three-to-four unit residential mortgage loans, and community-focused residential mortgage exemption | SEC | (a) The Federal banking agencies and the Commission, in consultation with the Federal Housing Finance Agency and the Department of Housing and Urban Development, shall commence a review of the definition of qualified residential mortgage in § 246.13, a review of the community-focused residential mortgage exemption in § 246.19(f), and a review of the exemption for qualifying three-to-four unit residential mortgage loans in § 246.19(g): (1) No later than four years after the effective date of the rule (as it relates to securitizers and originators of asset-backed securities collateralized by residential mortgages), five years following the completion of such initial review, and every five years thereafter; and (2) At any time, upon the request of any Federal banking agency, the Commission, the Federal Housing Finance Agency or the Department of Housing and Urban Development, specifying the reason for such request, including as a result of any amendment to the definition of qualified mortgage or changes in the residential housing market. (b) The Federal banking agencies, the Commission, the Federal Housing Finance Agency and the Department of Housing and Urban Development shall publish in the Federal Register notice of the commencement of a review and, in the case of a review commenced under paragraph (a)(2) of this section, the reason an agency is requesting such review. After completion of any review, but no later than six months after the publication of the notice announcing the review, unless extended by the agencies, the agencies shall jointly publish a notice disclosing the determination of their review. If the agencies determine to amend the definition of qualified residential mortgage, the agencies shall complete any required rulemaking within 12 months of publication in the Federal Register of such notice disclosing the determination of their review, unless extended by the agencies. | |||||
| 17:17:5.0.1.1.6.4.9.2 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.14 Definitions applicable to qualifying commercial loans, qualifying commercial real estate loans, and qualifying automobile loans. | SEC | The following definitions apply for purposes of §§ 246.15 through 246.18: Appraisal Standards Board means the board of the Appraisal Foundation that develops, interprets, and amends the Uniform Standards of Professional Appraisal Practice (USPAP), establishing generally accepted standards for the appraisal profession. Automobile loan: (1) Means any loan to an individual to finance the purchase of, and that is secured by a first lien on, a passenger car or other passenger vehicle, such as a minivan, van, sport-utility vehicle, pickup truck, or similar light truck for personal, family, or household use; and (2) Does not include any: (i) Loan to finance fleet sales; (ii) Personal cash loan secured by a previously purchased automobile; (iii) Loan to finance the purchase of a commercial vehicle or farm equipment that is not used for personal, family, or household purposes; (iv) Lease financing; (v) Loan to finance the purchase of a vehicle with a salvage title; or (vi) Loan to finance the purchase of a vehicle intended to be used for scrap or parts. Combined loan-to-value (CLTV) ratio means, at the time of origination, the sum of the principal balance of a first-lien mortgage loan on the property, plus the principal balance of any junior-lien mortgage loan that, to the creditor's knowledge, would exist at the closing of the transaction and that is secured by the same property, divided by: (1) For acquisition funding, the lesser of the purchase price or the estimated market value of the real property based on an appraisal that meets the requirements set forth in § 246.17(a)(2)(ii); or (2) For refinancing, the estimated market value of the real property based on an appraisal that meets the requirements set forth in § 246.17(a)(2)(ii). Commercial loan means a secured or unsecured loan to a company or an individual for business purposes, other than any: (1) Loan to purchase or refinance a one-to-four family residential property; (2) Commercial real estate loan. Commercial real estate (CRE) loan means:… | |||||
| 17:17:5.0.1.1.6.4.9.3 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.15 Qualifying commercial loans, commercial real estate loans, and automobile loans. | SEC | (a) General exception for qualifying assets. Commercial loans, commercial real estate loans, and automobile loans that are securitized through a securitization transaction shall be subject to a 0 percent risk retention requirement under subpart B, provided that the following conditions are met: (1) The assets meet the underwriting standards set forth in §§ 246.16 (qualifying commercial loans), 246.17 (qualifying CRE loans), or 246.18 (qualifying automobile loans) of this part, as applicable; (2) The securitization transaction is collateralized solely by loans of the same asset class and by servicing assets; (3) The securitization transaction does not permit reinvestment periods; and (4) The sponsor provides, or causes to be provided, to potential investors a reasonable period of time prior to the sale of asset-backed securities of the issuing entity, and, upon request, to the Commission, and to its appropriate Federal banking agency, if any, in written form under the caption “Credit Risk Retention”, a description of the manner in which the sponsor determined the aggregate risk retention requirement for the securitization transaction after including qualifying commercial loans, qualifying CRE loans, or qualifying automobile loans with 0 percent risk retention. (b) Risk retention requirement. For any securitization transaction described in paragraph (a) of this section, the percentage of risk retention required under § 246.3(a) is reduced by the percentage evidenced by the ratio of the unpaid principal balance of the qualifying commercial loans, qualifying CRE loans, or qualifying automobile loans (as applicable) to the total unpaid principal balance of commercial loans, CRE loans, or automobile loans (as applicable) that are included in the pool of assets collateralizing the asset-backed securities issued pursuant to the securitization transaction (the qualifying asset ratio); provided that: (1) The qualifying asset ratio is measured as of the cut-off date or similar date for establishing the composition… | |||||
| 17:17:5.0.1.1.6.4.9.4 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.16 Underwriting standards for qualifying commercial loans. | SEC | (a) Underwriting, product and other standards. (1) Prior to origination of the commercial loan, the originator: (i) Verified and documented the financial condition of the borrower: (A) As of the end of the borrower's two most recently completed fiscal years; and (B) During the period, if any, since the end of its most recently completed fiscal year; (ii) Conducted an analysis of the borrower's ability to service its overall debt obligations during the next two years, based on reasonable projections; (iii) Determined that, based on the previous two years' actual performance, the borrower had: (A) A total liabilities ratio of 50 percent or less; (B) A leverage ratio of 3.0 or less; and (C) A DSC ratio of 1.5 or greater; (iv) Determined that, based on the two years of projections, which include the new debt obligation, following the closing date of the loan, the borrower will have: (A) A total liabilities ratio of 50 percent or less; (B) A leverage ratio of 3.0 or less; and (C) A DSC ratio of 1.5 or greater. (2) Prior to, upon or promptly following the inception of the loan, the originator: (i) If the loan is originated on a secured basis, obtains a perfected security interest (by filing, title notation or otherwise) or, in the case of real property, a recorded lien, on all of the property pledged to collateralize the loan; and (ii) If the loan documents indicate the purpose of the loan is to finance the purchase of tangible or intangible property, or to refinance such a loan, obtains a first lien on the property. (3) The loan documentation for the commercial loan includes covenants that: (i) Require the borrower to provide to the servicer of the commercial loan the borrower's financial statements and supporting schedules on an ongoing basis, but not less frequently than quarterly; (ii) Prohibit the borrower from retaining or entering into a debt arrangement that permits payments-in-kind; (iii) Impose limits on: (A) The creation or existence of any other security interest or lien with respect t… | |||||
| 17:17:5.0.1.1.6.4.9.5 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.17 Underwriting standards for qualifying CRE loans. | SEC | (a) Underwriting, product and other standards. (1) The CRE loan must be secured by the following: (i) An enforceable first lien, documented and recorded appropriately pursuant to applicable law, on the commercial real estate and improvements; (ii)(A) An assignment of: ( 1 ) Leases and rents and other occupancy agreements related to the commercial real estate or improvements or the operation thereof for which the borrower or an operating affiliate is a lessor or similar party and all payments under such leases and occupancy agreements; and ( 2 ) All franchise, license and concession agreements related to the commercial real estate or improvements or the operation thereof for which the borrower or an operating affiliate is a lessor, licensor, concession granter or similar party and all payments under such other agreements, whether the assignments described in this paragraph (a)(1)(ii)(A)( 2 ) are absolute or are stated to be made to the extent permitted by the agreements governing the applicable franchise, license or concession agreements; (B) An assignment of all other payments due to the borrower or due to any operating affiliate in connection with the operation of the property described in paragraph (a)(1)(i) of this section; and (C) The right to enforce the agreements described in paragraph (a)(1)(ii)(A) of this section and the agreements under which payments under paragraph (a)(1)(ii)(B) of this section are due against, and collect amounts due from, each lessee, occupant or other obligor whose payments were assigned pursuant to paragraphs (a)(1)(ii)(A) or (B) of this section upon a breach by the borrower of any of the terms of, or the occurrence of any other event of default (however denominated) under, the loan documents relating to such CRE loan; and (iii) A security interest: (A) In all interests of the borrower and any applicable operating affiliate in all tangible and intangible personal property of any kind, in or used in the operation of or in connection with, pertaining to, arising from, or c… | |||||
| 17:17:5.0.1.1.6.4.9.6 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.18 Underwriting standards for qualifying automobile loans. | SEC | (a) Underwriting, product and other standards. (1) Prior to origination of the automobile loan, the originator: (i) Verified and documented that within 30 days of the date of origination: (A) The borrower was not currently 30 days or more past due, in whole or in part, on any debt obligation; (B) Within the previous 24 months, the borrower has not been 60 days or more past due, in whole or in part, on any debt obligation; (C) Within the previous 36 months, the borrower has not: ( 1 ) Been a debtor in a proceeding commenced under Chapter 7 (Liquidation), Chapter 11 (Reorganization), Chapter 12 (Family Farmer or Family Fisherman plan), or Chapter 13 (Individual Debt Adjustment) of the U.S. Bankruptcy Code; or ( 2 ) Been the subject of any federal or State judicial judgment for the collection of any unpaid debt; (D) Within the previous 36 months, no one-to-four family property owned by the borrower has been the subject of any foreclosure, deed in lieu of foreclosure, or short sale; or (E) Within the previous 36 months, the borrower has not had any personal property repossessed; (ii) Determined and documented that the borrower has at least 24 months of credit history; and (iii) Determined and documented that, upon the origination of the loan, the borrower's DTI ratio is less than or equal to 36 percent. (A) For the purpose of making the determination under paragraph (a)(1)(iii) of this section, the originator must: ( 1 ) Verify and document all income of the borrower that the originator includes in the borrower's effective monthly income (using payroll stubs, tax returns, profit and loss statements, or other similar documentation); and ( 2 ) On or after the date of the borrower's written application and prior to origination, obtain a credit report regarding the borrower from a consumer reporting agency that compiles and maintain files on consumers on a nationwide basis (within the meaning of 15 U.S.C. 1681a(p)) and verify that all outstanding debts reported in the borrower's credit report are incorpora… | |||||
| 17:17:5.0.1.1.6.4.9.7 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.19 General exemptions. | SEC | (a) Definitions. For purposes of this section, the following definitions shall apply: Community-focused residential mortgage means a residential mortgage exempt from the definition of “covered transaction” under § 1026.43(a)(3)(iv) and (v) of the CFPB's Regulation Z (12 CFR 1026.43(a)). First pay class means a class of ABS interests for which all interests in the class are entitled to the same priority of payment and that, at the time of closing of the transaction, is entitled to repayments of principal and payments of interest prior to or pro-rata with all other classes of securities collateralized by the same pool of first-lien residential mortgages, until such class has no principal or notional balance remaining. Inverse floater means an ABS interest issued as part of a securitization transaction for which interest or other income is payable to the holder based on a rate or formula that varies inversely to a reference rate of interest. Qualifying three-to-four unit residential mortgage loan means a mortgage loan that is: (i) Secured by a dwelling (as defined in 12 CFR 1026.2(a)(19)) that is owner occupied and contains three-to-four housing units; (ii) Is deemed to be for business purposes for purposes of Regulation Z under 12 CFR part 1026, Supplement I, paragraph 3(a)(5)(i); and (iii) Otherwise meets all of the requirements to qualify as a qualified mortgage under § 1026.43(e) and (f) of Regulation Z (12 CFR 1026.43(e) and (f)) as if the loan were a covered transaction under that section. (b) This part shall not apply to: (1) U.S. Government-backed securitizations. Any securitization transaction that: (i) Is collateralized solely by residential, multifamily, or health care facility mortgage loan assets that are insured or guaranteed (in whole or in part) as to the payment of principal and interest by the United States or an agency of the United States, and servicing assets; or (ii) Involves the issuance of asset-backed securities that: (A) Are insured or guaranteed as to the payment of pri… | |||||
| 17:17:5.0.1.1.6.4.9.8 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.20 Safe harbor for certain foreign-related transactions. | SEC | (a) Definitions. For purposes of this section, the following definition shall apply: U.S. person means: (i) Any of the following: (A) Any natural person resident in the United States; (B) Any partnership, corporation, limited liability company, or other organization or entity organized or incorporated under the laws of any State or of the United States; (C) Any estate of which any executor or administrator is a U.S. person (as defined under any other clause of this definition); (D) Any trust of which any trustee is a U.S. person (as defined under any other clause of this definition); (E) Any agency or branch of a foreign entity located in the United States; (F) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person (as defined under any other clause of this definition); (G) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (H) Any partnership, corporation, limited liability company, or other organization or entity if: ( 1 ) Organized or incorporated under the laws of any foreign jurisdiction; and ( 2 ) Formed by a U.S. person (as defined under any other clause of this definition) principally for the purpose of investing in securities not registered under the Act; and (ii) “U.S. person(s)” does not include: (A) Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a person not constituting a U.S. person (as defined in paragraph (i) of this section) by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States; (B) Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person (as defined in paragraph (i) of this section) if: ( 1 ) An executor or administrator of the estate who is not a U.S. person … | |||||
| 17:17:5.0.1.1.6.4.9.9 | 17 | Commodity and Securities Exchanges | II | 246 | PART 246—CREDIT RISK RETENTION | D | Subpart D—Exceptions and Exemptions | § 246.21 Additional exemptions. | SEC | (a) Securitization transactions. The federal agencies with rulewriting authority under section 15G(b) of the Exchange Act (15 U.S.C. 78o-11(b)) with respect to the type of assets involved may jointly provide a total or partial exemption of any securitization transaction as such agencies determine may be appropriate in the public interest and for the protection of investors. (b) Exceptions, exemptions, and adjustments. The Federal banking agencies and the Commission, in consultation with the Federal Housing Finance Agency and the Department of Housing and Urban Development, may jointly adopt or issue exemptions, exceptions or adjustments to the requirements of this part, including exemptions, exceptions or adjustments for classes of institutions or assets in accordance with section 15G(e) of the Exchange Act (15 U.S.C. 78o-11(e)). |
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chapter TEXT,
subchapter TEXT,
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