FDIC Acts to Facilitate Securitizations by Covered Financial Companies

January 18, 2011
Participants in the securitization market recently became concerned about how the FDIC might apply the repudiation and consent provisions contained in Title II of the Dodd-Frank Act in the event a covered financial company (“CFC”) was placed in receivership under Title II. On January 14, 2011, the FDIC’s Acting General Counsel issued an opinion intended to temporarily resolve this uncertainty. The opinion indicates that the FDIC will apply sale principles under bankruptcy law rather than make determinations under the FDIC’s repudiation authority in deciding how the FDIC will treat securitizations by a CFC that is placed in receivership, and that the interpretation will remain in effect for securitizations issued until at least June 30, 2011.