On November 25, 2015, the FDIC announced a proposed rule which would clarify the relationship between the loan servicing provisions of the Securitization Safe Harbor Rule (Rule) (12 CFR 360.6) and the CFPB's mortgage loan servicing requirements under Regulation X (12 CFR 1024.41) implementing the Real Estate Settlement Procedures Act (RESPA).

The FDIC implemented the Rule in 2010 to protect banks and other investors from FDIC seizure of the securitized assets of a distressed bank that enters into receivership. Under the Rule, the FDIC would not exercise its authority to recover the financial assets of a failed bank that were transferred in connection with certain securitization transactions. In other words, those asset transfers that qualify under the Rule would not be subject to recovery or reclamation from the FDIC. For more information on the Rule, see Practice Note, Summary of the Dodd-Frank Act: Securitization: Other Relevant US Securitization Regulations: The FDIC's Bank Securitization Safe Harbor Rules.

To benefit from this safe harbor, the Rule requires that, for transfers involving residential mortgage-backed securities (RMBS), where the underlying securitized assets are residential mortgage loans, the securitization documentation must require the servicer to take “action to mitigate losses” within 90 days of delinquency. The FDIC has clarified that this documentation should not require a servicer to act contrary to the CFPB's mortgage loan servicing requirements as set forth in Regulation X, which prohibit a servicer from commencing foreclosure proceedings unless the mortgage obligation is more than 120 days delinquent. For more information, see Practice Note, The Mortgage Servicing Rules Implementing Dodd-Frank.

The FDIC noted that, although the original text of the Rule does not define what constitutes loss mitigation action, the preamble to the original proposal did distinguish between mitigating losses (such as through contact with the borrower) and initiating foreclosure proceedings, the latter of which is not required by the Rule. However, since a situation could occur where foreclosure may result in the only appropriate loss mitigation option, the FDIC has clarified that the Rule does not require that securitization documents require a servicer to initiate foreclosure before the 120-day delinquency mark, or otherwise violate any other mortgage servicing standard of Regulation X.

Comments on the Rule are due on or before January 25, 2016. They should be addressed to Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, DC 20429. Comments also may be submitted via the Federal eRulemaking Portal at www.regulations.gov. All comments should be identified by RIN 3064-AE38.