The FDIC Board of Directors voted to extend until September 30, 2010 the safe harbor provided at 12 C.F.R. §360.6 (the “Safe Harbor”) from the FDIC’s ability, as conservator or receiver, to recover assets securitized or participated out by a federally insured depository institution (an “IDI”). This extension of the interim rule issued on November 13, 2009 (the “Interim Rule”), which would have expired on March 31, 2010 (See the November 17, 2009 Alert), permanently grandfathers all securitization or participation contracts closed through September 30, 2010.
The FDIC issued the Interim Rule in order to address questions over the continuing availability of the Safe Harbor in light of certain changes to generally accepted accounting principles that made it impossible for some participations and most securitizations to satisfy the requirements of the Safe Harbor (absent the Interim Rule). These changes, set forth in FAS 166 and FAS 167, amend FAS 140 and FAS 46(R), and could have resulted in many securitizations and some participations being treated as secured borrowings rather than as sales for accounting purposes. Therefore, absent relief, many securitizations originated by IDIs after November 15, 2009 (the effective date of the accounting rule changes) would not have satisfied the requirements of the Safe Harbor (See the June 16, 2009 Alert).The FDIC’s December 2009 advanced notice of proposed rulemaking, which proposed extensive amendments to the Safe Harbor on a permanent basis, garnered extensive public comment. Therefore, the FDIC is extending the Interim Rule to allow additional time to finalize the permanent changes to the Safe Harbor.