12 C.F.R. §§ 43.15–43.18

4 sections in range

§43.15. Qualifying commercial loans, commercial real estate loans, and automobile loans.

12 C.F.R. § 43.15

(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 § 43.16 (qualifying commercial loans), § 43.17 (qualifying CRE loans), or § 43.18 (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 § 43.3(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 of the securitized assets collateralizing the asset-backed securities issued pursuant to the securitization transaction;

(2)

If the qualifying asset ratio would exceed 50 percent, the qualifying asset ratio shall be deemed to be 50 percent; and

(3)

The disclosure required by paragraph (a)(4) of this section also includes descriptions of the qualifying commercial loans, qualifying CRE loans, and qualifying automobile loans (qualifying assets) and descriptions of the assets that are not qualifying assets, and the material differences between the group of qualifying assets and the group of assets that are not qualifying assets with respect to the composition of each group's loan balances, loan terms, interest rates, borrower credit information, and characteristics of any loan collateral.

(c)

Exception for securitizations of qualifying assets only. Notwithstanding other provisions of this section, the risk retention requirements of subpart B of this part shall not apply to securitization transactions where the transaction is collateralized solely by servicing assets and either qualifying commercial loans, qualifying CRE loans, or qualifying automobile loans.

(d)

Record maintenance. A sponsor must retain the disclosures required in paragraphs (a) and (b) of this section and the certifications required in §§ 43.16(a)(8), 43.17(a)(10), and 43.18(a)(8), as applicable, in its records until three years after all ABS interests issued in the securitization are no longer outstanding. The sponsor must provide the disclosures and certifications upon request to the Commission and the sponsor's appropriate Federal banking agency, if any.

Notes, amendments, and revision history

Authority

Authority: 12 U.S.C. 1 et seq., 93a, 161, 1464, 1818, 5412(b)(2)(B), and 15 U.S.C. 78o-11.

Source

Source: 79 FR 77740, 77764, Dec. 24, 2014, unless otherwise noted.

§43.16. Underwriting standards for qualifying commercial loans.

12 C.F.R. § 43.16

(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 to any of the borrower's property that serves as collateral for the loan;

(B)

The transfer of any of the borrower's assets that serve as collateral for the loan; and

(C)

Any change to the name, location or organizational structure of the borrower, or any other party that pledges collateral for the loan;

(iv)

Require the borrower and any other party that pledges collateral for the loan to—

(A)

Maintain insurance that protects against loss on the collateral for the commercial loan at least up to the amount of the loan, and that names the originator or any subsequent holder of the loan as an additional insured or loss payee;

(B)

Pay taxes, charges, fees, and claims, where non-payment might give rise to a lien on any collateral;

(C)

Take any action required to perfect or protect the security interest and first lien (as applicable) of the originator or any subsequent holder of the loan in any collateral for the commercial loan or the priority thereof, and to defend any collateral against claims adverse to the lender's interest;

(D)

Permit the originator or any subsequent holder of the loan, and the servicer of the loan, to inspect any collateral for the commercial loan and the books and records of the borrower; and

(E)

Maintain the physical condition of any collateral for the commercial loan.

(4)

Loan payments required under the loan agreement are—

(i)

Based on level monthly payments of principal and interest (at the fully indexed rate) that fully amortize the debt over a term that does not exceed five years from the date of origination; and

(ii)

To be made no less frequently than quarterly over a term that does not exceed five years.

(5)

The primary source of repayment for the loan is revenue from the business operations of the borrower.

(6)

The loan was funded within the six (6) months prior to 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.

(7)

At 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, all payments due on the loan are contractually current.

(8)

(i)

The depositor of the asset-backed security certifies that it has evaluated the effectiveness of its internal supervisory controls with respect to the process for ensuring that all qualifying commercial loans that collateralize the asset-backed security and that reduce the sponsor's risk retention requirement under § 43.15 meet all of the requirements set forth in paragraphs (a)(1) through (7) of this section and has concluded that its internal supervisory controls are effective;

(ii)

The evaluation of the effectiveness of the depositor's internal supervisory controls referenced in paragraph (a)(8)(i) of this section shall be performed, for each issuance of an asset-backed security, 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 (a)(8)(i) of this section to potential investors a reasonable period of time prior to the sale of asset-backed securities in the issuing entity, and, upon request, to its appropriate Federal banking agency, if any.

(b)

Cure or buy-back requirement. If a sponsor has relied on the exception provided in § 43.15 with respect to a qualifying commercial loan and it is subsequently determined that the loan did not meet all of the requirements set forth in paragraphs (a)(1) through (7) of this section, the sponsor shall not lose the benefit of the exception with respect to the commercial loan if the depositor complied with the certification requirement set forth in paragraph (a)(8) of this section and:

(1)

The failure of the loan to meet any of the requirements set forth in paragraphs (a)(1) through (7) of this section is not material; or

(2)

No later than 90 days after the determination that the loan does not meet one or more of the requirements of paragraphs (a)(1) through (7) of this section, the sponsor:

(i)

Effectuates cure, establishing conformity of the loan to the unmet requirements as of the date of cure; or

(ii)

Repurchases the loan(s) from the issuing entity at a price at least equal to the remaining principal balance and accrued interest on the loan(s) as of the date of repurchase.

(3)

If the sponsor cures or repurchases pursuant to paragraph (b)(2) of this section, the sponsor must promptly notify, or cause to be notified, the holders of the asset-backed securities issued in the securitization transaction of any loan(s) included in such securitization transaction that is required to be cured or repurchased by the sponsor pursuant to paragraph (b)(2) of this section, including the principal amount of such loan(s) and the cause for such cure or repurchase.

Notes, amendments, and revision history

Authority

Authority: 12 U.S.C. 1 et seq., 93a, 161, 1464, 1818, 5412(b)(2)(B), and 15 U.S.C. 78o-11.

Source

Source: 79 FR 77740, 77764, Dec. 24, 2014, unless otherwise noted.

§43.17. Underwriting standards for qualifying CRE loans.

12 C.F.R. § 43.17

(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 constituting, any of the collateral described in paragraphs (a)(1)(i) or (ii) of this section; and

(B)

In the form of a perfected security interest if the security interest in such property can be perfected by the filing of a financing statement, fixture filing, or similar document pursuant to the law governing the perfection of such security interest;

(2)

Prior to origination of the CRE loan, the originator—

(i)

Verified and documented the current financial condition of the borrower and each operating affiliate;

(ii)

Obtained a written appraisal of the real property securing the loan that—

(A)

Had an effective date not more than six months prior to the origination date of the loan by a competent and appropriately State-certified or State-licensed appraiser;

(B)

Conforms to generally accepted appraisal standards as evidenced by the USPAP and the appraisal requirements 1 of the Federal banking agencies; and

(C)

Provides an “as is” opinion of the market value of the real property, which includes an income approach; 2

(iii)

Qualified the borrower for the CRE loan based on a monthly payment amount derived from level monthly payments consisting of both principal and interest (at the fully-indexed rate) over the term of the loan, not exceeding 25 years, or 30 years for a qualifying multi-family property;

(iv)

Conducted an environmental risk assessment to gain environmental information about the property securing the loan and took appropriate steps to mitigate any environmental liability determined to exist based on this assessment;

(v)

Conducted an analysis of the borrower's ability to service its overall debt obligations during the next two years, based on reasonable projections (including operating income projections for the property);

(vi)

(A)

Determined that based on the two years' actual performance immediately preceding the origination of the loan, the borrower would have had:

(1) A DSC ratio of 1.5 or greater, if the loan is a qualifying leased CRE loan, net of any income derived from a tenant(s) who is not a qualified tenant(s);

(2) A DSC ratio of 1.25 or greater, if the loan is a qualifying multi-family property loan; or

(3) A DSC ratio of 1.7 or greater, if the loan is any other type of CRE loan;

(B)

If the borrower did not own the property for any part of the last two years prior to origination, the calculation of the DSC ratio, for purposes of paragraph (a)(2)(vi)(A) of this section, shall include the property's operating income for any portion of the two-year period during which the borrower did not own the property;

(vii)

Determined that, based on two years of projections, which include the new debt obligation, following the origination date of the loan, the borrower will have:

(A)

A DSC ratio of 1.5 or greater, if the loan is a qualifying leased CRE loan, net of any income derived from a tenant(s) who is not a qualified tenant(s);

(B)

A DSC ratio of 1.25 or greater, if the loan is a qualifying multi-family property loan; or

(C)

A DSC ratio of 1.7 or greater, if the loan is any other type of CRE loan.

(3)

The loan documentation for the CRE loan includes covenants that—

(i)

Require the borrower to provide the borrower's financial statements and supporting schedules to the servicer on an ongoing basis, but not less frequently than quarterly, including information on existing, maturing and new leasing or rent-roll activity for the property securing the loan, as appropriate; and

(ii)

Impose prohibitions on—

(A)

The creation or existence of any other security interest with respect to the collateral for the CRE loan described in paragraphs (a)(1)(i) and (a)(1)(ii)(A) of this section, except as provided in paragraph (a)(4) of this section;

(B)

The transfer of any collateral for the CRE loan described in paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section or of any other collateral consisting of fixtures, furniture, furnishings, machinery or equipment other than any such fixture, furniture, furnishings, machinery or equipment that is obsolete or surplus; and

(C)

Any change to the name, location or organizational structure of any borrower, operating affiliate or other pledgor unless such borrower, operating affiliate or other pledgor shall have given the holder of the loan at least 30 days advance notice and, pursuant to applicable law governing perfection and priority, the holder of the loan is able to take all steps necessary to continue its perfection and priority during such 30-day period.

(iii)

Require each borrower and each operating affiliate to—

(A)

Maintain insurance that protects against loss on collateral for the CRE loan described in paragraph (a)(1)(i) of this section for an amount no less than the replacement cost of the property improvements, and names the originator or any subsequent holder of the loan as an additional insured or lender loss payee;

(B)

Pay taxes, charges, fees, and claims, where non-payment might give rise to a lien on collateral for the CRE loan described in paragraphs (a)(1)(i) and (ii) of this section;

(C)

Take any action required to— (1) Protect the security interest and the enforceability and priority thereof in the collateral described in paragraphs (a)(1)(i) and (a)(1)(ii)(A) of this section and defend such collateral against claims adverse to the originator's or any subsequent holder's interest; and

(2) Perfect the security interest of the originator or any subsequent holder of the loan in any other collateral for the CRE loan to the extent that such security interest is required by this section to be perfected;

(D)

Permit the originator or any subsequent holder of the loan, and the servicer, to inspect any collateral for the CRE loan and the books and records of the borrower or other party relating to any collateral for the CRE loan;

(E)

Maintain the physical condition of collateral for the CRE loan described in paragraph (a)(1)(i) of this section;

(F)

Comply with all environmental, zoning, building code, licensing and other laws, regulations, agreements, covenants, use restrictions, and proffers applicable to collateral for the CRE loan described in paragraph (a)(1)(i) of this section;

(G)

Comply with leases, franchise agreements, condominium declarations, and other documents and agreements relating to the operation of collateral for the CRE loan described in paragraph (a)(1)(i) of this section, and to not modify any material terms and conditions of such agreements over the term of the loan without the consent of the originator or any subsequent holder of the loan, or the servicer; and

(H)

Not materially alter collateral for the CRE loan described in paragraph (a)(1)(i) of this section without the consent of the originator or any subsequent holder of the loan, or the servicer.

(4)

The loan documentation for the CRE loan prohibits the borrower and each operating affiliate from obtaining a loan secured by a junior lien on collateral for the CRE loan described in paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section, unless:

(i)

The sum of the principal amount of such junior lien loan, plus the principal amount of all other loans secured by collateral described in paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section, does not exceed the applicable CLTV ratio in paragraph (a)(5) of this section, based on the appraisal at origination of such junior lien loan; or

(ii)

Such loan is a purchase money obligation that financed the acquisition of machinery or equipment and the borrower or operating affiliate (as applicable) pledges such machinery and equipment as additional collateral for the CRE loan.

(5)

At origination, the applicable loan-to-value ratios for the loan are—

(i)

LTV less than or equal to 65 percent and CLTV less than or equal to 70 percent; or

(ii)

LTV less than or equal to 60 percent and CLTV less than or equal to 65 percent, if an appraisal used to meet the requirements set forth in paragraph (a)(2)(ii) of this section used a direct capitalization rate, and that rate is less than or equal to the sum of:

(A)

The 10-year swap rate, as reported in the Federal Reserve's H.15 Report (or any successor report) as of the date concurrent with the effective date of such appraisal; and

(B)

300 basis points.

(iii)

If the appraisal required under paragraph (a)(2)(ii) of this section included a direct capitalization method using an overall capitalization rate, that rate must be disclosed to potential investors in the securitization.

(6)

All loan payments required to be made under the loan agreement are—

(i)

Based on level monthly payments of principal and interest (at the fully indexed rate) to fully amortize the debt over a term that does not exceed 25 years, or 30 years for a qualifying multifamily loan; and

(ii)

To be made no less frequently than monthly over a term of at least ten years.

(7)

Under the terms of the loan agreement—

(i)

Any maturity of the note occurs no earlier than ten years following the date of origination;

(ii)

The borrower is not permitted to defer repayment of principal or payment of interest; and

(iii)

The interest rate on the loan is—

(A)

A fixed interest rate;

(B)

An adjustable interest rate and the borrower, prior to or concurrently with origination of the CRE loan, obtained a derivative that effectively results in a fixed interest rate; or

(C)

An adjustable interest rate and the borrower, prior to or concurrently with origination of the CRE loan, obtained a derivative that established a cap on the interest rate for the term of the loan, and the loan meets the underwriting criteria in paragraphs (a)(2)(vi) and (vii) of this section using the maximum interest rate allowable under the interest rate cap.

(8)

The originator does not establish an interest reserve at origination to fund all or part of a payment on the loan.

(9)

(10)

(i)

The depositor of the asset-backed security certifies that it has evaluated the effectiveness of its internal supervisory controls with respect to the process for ensuring that all qualifying CRE loans that collateralize the asset-backed security and that reduce the sponsor's risk retention requirement under § 43.15 meet all of the requirements set forth in paragraphs (a)(1) through (9) of this section and has concluded that its internal supervisory controls are effective;

(ii)

The evaluation of the effectiveness of the depositor's internal supervisory controls referenced in paragraph (a)(10)(i) of this section shall be performed, for each issuance of an asset-backed security, 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;

(iii)

The sponsor provides, or causes to be provided, a copy of the certification described in paragraph (a)(10)(i) of this section to potential investors a reasonable period of time prior to the sale of asset-backed securities in the issuing entity, and, upon request, to its appropriate Federal banking agency, if any; and

(11)

Within two weeks of the closing of the CRE loan by its originator or, if sooner, prior to the transfer of such CRE loan to the issuing entity, the originator shall have obtained a UCC lien search from the jurisdiction of organization of the borrower and each operating affiliate, that does not report, as of the time that the security interest of the originator in the property described in paragraph (a)(1)(iii) of this section was perfected, other higher priority liens of record on any property described in paragraph (a)(1)(iii) of this section, other than purchase money security interests.

(b)

Cure or buy-back requirement. If a sponsor has relied on the exception provided in § 43.15 with respect to a qualifying CRE loan and it is subsequently determined that the CRE loan did not meet all of the requirements set forth in paragraphs (a)(1) through (9) and (a)(11) of this section, the sponsor shall not lose the benefit of the exception with respect to the CRE loan if the depositor complied with the certification requirement set forth in paragraph (a)(10) of this section, and:

(1)

The failure of the loan to meet any of the requirements set forth in paragraphs (a)(1) through (9) and (a)(11) of this section is not material; or;

(2)

No later than 90 days after the determination that the loan does not meet one or more of the requirements of paragraphs (a)(1) through (9) or (a)(11) of this section, the sponsor:

(i)

Effectuates cure, restoring conformity of the loan to the unmet requirements as of the date of cure; or

(ii)

Repurchases the loan(s) from the issuing entity at a price at least equal to the remaining principal balance and accrued interest on the loan(s) as of the date of repurchase.

(3)

Notes, amendments, and revision history

Authority

Authority: 12 U.S.C. 1 et seq., 93a, 161, 1464, 1818, 5412(b)(2)(B), and 15 U.S.C. 78o-11.

Source

Source: 79 FR 77740, 77764, Dec. 24, 2014, unless otherwise noted.

§43.18. Underwriting standards for qualifying automobile loans.

12 C.F.R. § 43.18

(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 incorporated into the calculation of the borrower's DTI ratio under paragraph (a)(1)(iii) of this section;

(2)

An originator will be deemed to have met the requirements of paragraph (a)(1)(i) of this section if:

(i)

The originator, no more than 30 days before the closing of the loan, obtains a credit report regarding the borrower from a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis (within the meaning of 15 U.S.C. 1681a(p));

(ii)

Based on the information in such credit report, the borrower meets all of the requirements of paragraph (a)(1)(i) of this section, and no information in a credit report subsequently obtained by the originator before the closing of the loan contains contrary information; and

(iii)

The originator obtains electronic or hard copies of the credit report.

(3)

At closing of the automobile loan, the borrower makes a down payment from the borrower's personal funds and trade-in allowance, if any, that is at least equal to the sum of:

(i)

The full cost of the vehicle title, tax, and registration fees;

(ii)

Any dealer-imposed fees;

(iii)

The full cost of any additional warranties, insurance or other products purchased in connection with the purchase of the vehicle; and

(iv)

10 percent of the vehicle purchase price.

(4)

The originator records a first lien securing the loan on the purchased vehicle in accordance with State law.

(5)

The terms of the loan agreement provide a maturity date for the loan that does not exceed the lesser of:

(i)

Six years from the date of origination; or

(ii)

10 years minus the difference between the current model year and the vehicle's model year.

(6)

The terms of the loan agreement—

(i)

Specify a fixed rate of interest for the life of the loan;

(ii)

Provide for a level monthly payment amount that fully amortizes the amount financed over the loan term;

(iii)

Do not permit the borrower to defer repayment of principal or payment of interest; and

(iv)

Require the borrower to make the first payment on the automobile loan within 45 days of the loan's contract date.

(7)

(8)

(i)

The depositor of the asset-backed security certifies that it has evaluated the effectiveness of its internal supervisory controls with respect to the process for ensuring that all qualifying automobile loans that collateralize the asset-backed security and that reduce the sponsor's risk retention requirement under § 43.15 meet all of the requirements set forth in paragraphs (a)(1) through (7) of this section and has concluded that its internal supervisory controls are effective;

(ii)

(iii)

(b)

Cure or buy-back requirement. If a sponsor has relied on the exception provided in § 43.15 with respect to a qualifying automobile loan and it is subsequently determined that the loan did not meet all of the requirements set forth in paragraphs (a)(1) through (7) of this section, the sponsor shall not lose the benefit of the exception with respect to the automobile loan if the depositor complied with the certification requirement set forth in paragraph (a)(8) of this section, and:

(1)

The failure of the loan to meet any of the requirements set forth in paragraphs (a)(1) through (7) of this section is not material; or

(2)

No later than ninety (90) days after the determination that the loan does not meet one or more of the requirements of paragraphs (a)(1) through (7) of this section, the sponsor:

(i)

Effectuates cure, establishing conformity of the loan to the unmet requirements as of the date of cure; or

(ii)

Repurchases the loan(s) from the issuing entity at a price at least equal to the remaining principal balance and accrued interest on the loan(s) as of the date of repurchase.

(3)

Notes, amendments, and revision history

Authority

Authority: 12 U.S.C. 1 et seq., 93a, 161, 1464, 1818, 5412(b)(2)(B), and 15 U.S.C. 78o-11.

Source

Source: 79 FR 77740, 77764, Dec. 24, 2014, unless otherwise noted.

12 C.F.R. §§ 43.15–43.18

§43.15. Qualifying commercial loans, commercial real estate loans, and automobile loans.

Authority

Source

§43.16. Underwriting standards for qualifying commercial loans.

Authority

Source

§43.17. Underwriting standards for qualifying CRE loans.

Authority

Source

§43.18. Underwriting standards for qualifying automobile loans.

Authority

Source

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