The recent challenge mounted in the LTV Steel bankruptcy case to the legal "true sale" analysis that supports nearly every mortgage-backed and asset-backed securitization transaction has prompted participants in the MBS and ABS markets to focus on a provision of federal legislation that had been largely ignored until now.

The U.S. House of Representatives recently passed its version of a widely publicized bankruptcy reform bill, and passage by the Senate of similar legislation appears likely. Although the legislation is principally designed to guard against consumer bankruptcy abuse, the Bankruptcy Reform Act of 2001 (the "Reform Act") includes several little-noticed amendments that would clarify, expand, and add provisions to the Bankruptcy Code dealing with financing transactions, including securitizations.

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