The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) has approved an extension through September 30, 2010 of the FDIC’s rule (the “Safe Harbor”) relating to the treatment of securitizations in receivership or conservatorship (12 CF 360.6). As described in our December 21, 2009 update, "A Peek at the Future of the FDIC Securitization Safe Harbor," recent changes in US accounting standards for securitizations created uncertainty about the continuing availability of the portion of the Safe Harbor relating to the FDIC’s repudiation power. That portion of the Safe Harbor, as originally adopted, was conditioned upon satisfaction by the subject securitization of the conditions for sale accounting (other than the legal isolation condition, since the Safe Harbor was meant to help satisfy that condition). Because the accounting changes make it difficult for securitizations to achieve sale accounting, this requirement threatened to make the repudiation portion of the Safe Harbor unavailable at least for transfers completed after the accounting changes took effect (January 1, 2010, for most banks).
In November 2009, the FDIC provided crucial transitional relief on this issue by relaxing the accounting sale requirement for transactions closed through March 31, 2010 (including sales of financial assets after that date in revolving transactions closed on or before the deadline). Under the interim relief, transactions need not achieve sale accounting, so long as they meet the conditions for sale accounting that applied prior to the recent changes (again, other than the legal isolation condition). The Board’s most recent action extends this interim relief through September 30, 2010.
In December 2009, the FDIC proposed more extensive amendments to the Safe Harbor to apply on a permanent basis. Having received extensive public comment on those proposals, the FDIC is extending the interim relief to provide more time to finalize the permanent changes.