As an integral part of the Securities and Exchange Commission's proposed new reporting requirements for asset-backed and mortgage-backed securities, the commission is proposing to require a report of the "responsible party" on an assessment of compliance with specified, uniform servicing criteria. The report is to be filed as an exhibit to the ABS Form 10-K, together with a report of a public accounting firm on its examination of the responsible party's assertion of compliance with the servicing criteria.

The Commission believes that the current reporting criteria (USAP or its equivalent) does not address the totality of activities and parties involved in servicing an ABS transaction, such as flow of funds allocation and distribution functions that are important to the transaction, particularly as the complexity of waterfalls has increased. In addition, the current regime does not adequately take into account the fact that multiple unaffiliated parties may be involved in servicing and potentially leaves gaps in servicing compliance reporting.

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