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The Week in Review highlights this week's important
legal and regulatory developments affecting the financial
industry.
Featured in this week's edition:
OCC Approves First Use of "Shelf Charter"
On January 22, the OCC approved the first
use of a "shelf charter" for the acquisition
of a failed bank, allowing Bond Street Bank,
National Association to acquire a Florida bank that was placed
in receivership. A "shelf charter" gives preliminary
approval to investors to establish a national bank charter and
remains inactive, or "on the shelf", until the investor group
is in a position to acquire a troubled institution.
Final approval for a national bank charter is subject to
various conditions. OCC
Release.
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Derivatives Decision in
Lehman Bankruptcy Case
On January 25, the U.S. Bankruptcy
Court for the Southern District of New York granted
summary judgment to Lehman Brothers Special
Financing Inc. (LBSF) in a dispute arising out of a
credit-linked note program known as
Dante. The court found that the
document provisions related to the subordination of a swap
counterparty's rights to a swap early termination payment when
the swap counterparty or one of its close affiliates goes into
bankruptcy were unenforceable. Orrick
Client Alert.
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SEC Approves Money Market Fund
Reforms
On January 27, the SEC adopted
new rules designed to significantly strengthen the regulatory
requirements governing money market funds and
better protect investors. The rules impose: (i) tightened
maturity and credit quality standards, (ii) new liquidity
requirements, (iii) enhanced disclosure, and (iv) operational
changes. The rules will be effective 60 days after their
publication in the Federal Register, and mandatory compliance
with some of the rules will be phased in throughout the
year. SEC
Release. Orrick
Client Alert.
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Updated HAMP Documentation
On January 28, Treasury issued
Supplemental Directive 10-01, which provides updated guidance
for servicers participating in HAMP and
revises documentation requirements in an effort to expedite
the conversions of trial modifications to permanent
modifications. Under the new procedures, a set of standard
documents (including proof of income) must be obtained from
the borrower upfront before the borrower can be evaluated for
and receive a trial modification. This process will be
required for all new HAMP modifications with effective dates
on or after June 1, although servicers may elect to implement
it sooner. Treasury
Release. Supplemental
Directive 10-01.
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FASB Update on Fair
Value Standards
On January 21, the FASB issued an
Accounting Standards Update (ASU) amending
the Accounting Standards Codification Subtopic 820-10
(originally FAS 157), Fair Value Measurements.
The ASU requires new disclosures regarding transfers into
and out of Levels 1 and 2 and separate disclosures about
purchases, sales, issuances,
and settlements relating to Level 3 measurements. It
also clarifies the level of disaggregation and types of
disclosure about inputs and valuation techniques that should
be provided with respect to existing disclosure
requirements.
ASU.
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Rating Agency Criteria and Methodology
Updates
On January 28, S&P refined its
methodology and assumptions for U.S. credit card
ABS. The principal updates include: (i) comparing all
credit card master trust portfolios with S&P's Bankcard
Credit Card Quality Index, (ii) establishing a 'AAA' peak
charge-off rate of 33% for the benchmark pool, (iii)
evaluating the credit risk of an actual pool relative to that
of the benchmark pool as well as its peer group, and (iv)
adjusting the actual pool's specific 'AAA' stressed charge off
rates to reflect a number of factors. S&P
Release.
On January 28, S&P revised its
interest rate assumptions for U.S.
RMBS with a first distribution date in
January 2010. S&P
Release.
On January 26, S&P changed its
analysis approach for state housing finance agency (HFA)
mortgage insurance funds. S&P
Release.
On January 27, Moody's revised its loss
projections for U.S. Option ARM RMBS issued
from 2005 through 2007. Moody's
Release.
On January 28, DBRS released its
methodologies for rating U.S. auto lease and
retail auto loan securitizations. DBRS
Retail Auto Loan Methodology. DBRS
Auto Lease Methodology.
On January 26, DBRS published its final
rating methodology for U.S. ABS backed by rental
car fleets. DBRS
Release. DBRS
Methodology.
Note: Free registration is required for Moody's and
S&P releases and reports.
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