FDIC Proposes Far-Reaching Changes to the Legal Isolation Safe Harbor: New Requirements May Affect Securitization Sponsors, Servicers and Investors
By Sean P. Mahoney and Anthony R. G. Nolan
A possible rule change being considered by the Federal Deposit Insurance Corporation (“FDIC”) may make it difficult for banks and other securitization market participants to manage risks associated with FDIC conservatorship or receivership of sponsoring banks. This troubling development warrants attention not only from banks, but also from other participants in bank securitization transactions including servicers, rating agencies, law firms and auditors.
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