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Regulation AB Item 1122 Servicing Criteria vs. USAP
At the heart of item 1122 is the newly adopted servicing criteria put forth by the Securities and Exchange Commission (SEC). These new servicing criteria guidelines consist of four key areas for asset-backed securities:
General Servicing Considerations
Cash Collection and Administration
Investor Remittances and Reporting
Pool Asset Administration
Additionally, this newly adopted servicing criteria is much more in-depth and far reaching than that of the Uniform Single Attestation Program, known as USAP. According to the SEC, the USAP has "...significant limitations in the context of ABS reporting." (1)
Some of the USAP criteria may not be applicable to other asset types, such as criteria regarding property tax escrow accounts.
Because it was written to address compliance criteria for residential mortgages, it does not adequately address other ABS areas, such as auto loans.
There is no consistency as to which USAP criteria are applied to a particular asset type outside of residential mortgages. Thus, the list of exceptions varies from issuer to issuer.
Rarely in the USAP is substituted criteria included that would be relevant to that asset class.
The USAP does not clearly address the totality of activities and parties involved in servicing an ABS transaction.
(1) Securities and Exchange Commission 17 CFR Parts 210, 228, et al. Asset Backed Securities: Final Rule
The information contained herein is general in nature and is based on authorities that are subject to change. It is not intended, and should not be construed, as legal, accounting, or tax advice, or as an opinion provided (expressed or implied) by NDB LLP to the reader or any other person. This material may not be applicable to, or suitable for, the specific circumstances or needs, and may require consideration of legal, regulatory compliance, non-tax, or tax factors. Contact NDB LLP for engagement and a consultation prior to taking any action based upon this information or other marketing information. NDB LLP assumes no obligations to inform the reader of any changes in SEC legislation/regulations or tax laws or other factors that could affect the information contained herein.
Regulation AB Information Portal
View the Securities and Exchange Commission's (SEC) final ruling on Regulation AB; a comprehensive document that has brought about significant changes to the ABS Market.
A discussion and anlysis of all 24 regulation AB Items, ranging from Item 1100 to Item 1123.