At a regulatory meeting last week, the Federal Deposit Insurance Corp. (FDIC) distributed its adaptation of the final recourse/residual ruling for U.S. banks.

Washington sources said this document is nearly a final draft, and, pending the other federal agencies' adaptations of the guidelines (given their various jurisdictions and enforcement powers), the rules will be written into the Federal Register Dec. 1, and implemented on Jan. 1, 2002.

There will be a year transition period for transactions that have settled before Jan. 1, 2002.

Deloitte & Touche's Marty Rosenblatt promptly released a comment on the recourse/residual treatment guidelines last week, currently posted on both and

In his response, Roseblatt summarizes the new guidelines, and, notably, examines the capital requirements for deferred tax liabilities, in which the liability must be on the balance sheet and specifically identifiable with the residual interest.

"For example," Rosenblatt writes, "if a securitization was accounted for as a sale for GAAP but treated as debt-for-tax, and gain on sale was recognized in an amount approximating the present value of a retained I/O strip, then it is likely that deferred taxes would have been provided on that timing difference, which will reverse over the life of the securitization. On the other hand, if the residual interest was represented by a deposit into a cash collateral account, it is unlikely that there would be any associated deferred taxes."

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.