A — Authority, Purpose, Scope and Definitions
The text of the common rule appears below:
246.1 — Purpose, scope, and authority.
(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.
[79 FR 77602, Dec. 24, 2014]
246.2 — Definitions.
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 (I) a non-economic residual interest issued by a REMIC or (ii) 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), 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.
An 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 or other property of the issuing entity, fractional undivided property interests in the
assets or other property of the issuing entity, or any other property interest in or rights to cash flow from such assets and related servicing assets.
Assets or other property collateralize an issuance of ABS interests if the assets or
property serve as collateral for such issuance.
Commercial real estate loan has the same meaning as in § 246.14.
Commission means the Securities and Exchange Commission.
Control including the terms "controlling," "controlled by" and "under common
control with":
(1) Means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.
(2) Without limiting the foregoing, a person shall be considered to control another person if the first person:
(i) Owns, controls or holds with power to vote 25 percent or more of any class of voting securities of the other person; or
(ii) Controls in any manner the election of a majority of the directors, trustees or persons performing similar functions of the other person.
Credit risk means:
(1) The risk of loss that could result from the failure of the borrower in the case of a securitized asset, or the issuing entity in the case of an ABS interest in the issuing entity, to make required payments of principal or interest on the asset or ABS interest on a timely basis;
(2) The risk of loss that could result from bankruptcy, insolvency, or a similar proceeding with respect to the borrower or issuing entity, as appropriate; or
(3) The effect that significant changes in the underlying credit quality of the asset or ABS interest may have on the market value of the asset or ABS interest.
Creditor has the same meaning as in 15 U.S.C. 1602(g).
Depositor means:
(1) The person that receives or purchases and transfers or sells the securitized assets to the issuing entity;
(2) The sponsor, in the case of a securitization transaction where there is not an intermediate transfer of the assets from the sponsor to the issuing entity; or
(3) The person that receives or purchases and transfers or sells the securitized assets to the issuing entity in the case of a securitization transaction where the person transferring or selling the securitized assets directly to the issuing entity is itself a trust.
Eligible horizontal residual interest means, with respect to any securitization
transaction, an ABS interest in the issuing entity:
(1) That is an interest in a single class or multiple classes in the issuing entity, provided that each interest meets, individually or in the aggregate, all of the requirements of this definition;
(2) With respect to which, on any payment date or allocation date on which the issuing entity has insufficient funds to satisfy its obligation to pay all contractual interest or principal due, any resulting shortfall will reduce amounts payable to the eligible horizontal residual interest prior to any reduction in the amounts payable to any other ABS interest, whether through loss allocation, operation of the priority of payments, or
any other governing contractual provision (until the amount of such ABS interest is reduced to zero); and
(3) That, with the exception of any non-economic REMIC residual interest, has the most subordinated claim to payments of both principal and interest by the issuing entity.
Eligible horizontal cash reserve account means an account meeting the
requirements of § 246.4(b).
Eligible vertical interest means, with respect to any securitization transaction, a
single vertical security or an interest in each class of ABS interests in the issuing entity issued as part of the securitization transaction that constitutes the same proportion of each such class.
Federal banking agencies means the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation.
GAAP means generally accepted accounting principles as used in the United
States.
Issuing entity means, with respect to a securitization transaction, the trust or other
entity:
(1) That owns or holds the pool of assets to be securitized; and
(2) In whose name the asset-backed securities are issued.
Majority-owned affiliate of a person means an entity (other than the issuing
entity) that, directly or indirectly, majority controls, is majority controlled by or is under common majority control with, such person. For purposes of this definition, majority
control means ownership of more than 50 percent of the equity of an entity, or ownership of any other controlling financial interest in the entity, as determined under GAAP.
Originator means a person who:
(1) Through an extension of credit or otherwise, creates an asset that collateralizes an asset-backed security; and
(2) Sells the asset directly or indirectly to a securitizer or issuing entity.
REMIC has the same meaning as in 26 U.S.C. 860D.
Residential mortgage means (i) a transaction that is a covered transaction as
defined in section 1026.43(b) of Regulation Z (12 CFR 1026.43(b)(1)); (ii) any transaction that is exempt from the definition of “covered transaction” under section 1026.43(a) of Regulation Z (12 CFR 1026.43(a)); and (iii) any other loan secured by a residential structure that contains one to four units, whether or not that structure is attached to real property, including an individual condominium or cooperative unit and, if used as a residence, a mobile home or trailer.
Retaining sponsor means, with respect to a securitization transaction, the sponsor
that has retained or caused to be retained an economic interest in the credit risk of the securitized assets pursuant to subpart B of this part.
Securitization transaction means a transaction involving the offer and sale of
asset-backed securities by an issuing entity.
Securitized asset means an asset that:
(1) Is transferred, sold, or conveyed to an issuing entity; and
(2) Collateralizes the ABS interests issued by the issuing entity.
Securitizer means, with respect to a securitization transaction, either:
(1) The depositor of the asset-backed securities (if the depositor is not the sponsor); or
(2) The sponsor of the asset-backed securities.
Servicer means any person responsible for the management or collection of the
securitized assets or making allocations or distributions to holders of the ABS interests, but does not include a trustee for the issuing entity or the asset-backed securities that makes allocations or distributions to holders of the ABS interests if the trustee receives such allocations or distributions from a servicer and the trustee does not otherwise perform the functions of a servicer.
Servicing assets means rights or other assets designed to assure the servicing or
timely distribution of proceeds to ABS interest holders and rights or other assets that are related or incidental to purchasing or otherwise acquiring and holding the issuing entity’s securitized assets. Servicing assets include amounts received by the issuing entity as proceeds of securitized assets, including proceeds of rights or other assets, whether as remittances by obligors or as other recoveries.
Single vertical security means, with respect to any securitization transaction, an
ABS interest entitling the sponsor to a specified percentage of the amounts paid on each class of ABS interests in the issuing entity (other than such single vertical security).
Sponsor means a person who organizes and initiates a securitization transaction
by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuing entity.
State has the same meaning as in Section 3(a)(16) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(16)).
United States or U.S. means the United States of America, including its territories
and possessions, any State of the United States, and the District of Columbia.
Wholly-owned affiliate means a person (other than an issuing entity) that, directly
or indirectly, wholly controls, is wholly controlled by, or is wholly under common control with, another person. For purposes of this definition, "wholly controls" means ownership of 100 percent of the equity of an entity.
[79 FR 77602, Dec. 24, 2014]