Last week the Securities and Exchange Commission released clarifying guidance on Regulation AB -Item 1122, Compliance with applicable servicing criteria. Early in April, representatives from the big four accounting firms as well as officials from the American Securitization Forum and the Mortgage Bankers Association met with 10 members of the SEC staff to seek clarification on a number of interpretive issues regarding this item.

The additional guidance provided by the SEC will assist mortgage servicers in planning and performing tasks required by Item 1122, such as filing annual reports with investors regarding servicers' compliance with specified activities or criteria as outlined by the said regulation. The issues that were raised in the meetings in April include defining what should be part of a servicing platform, testing the accuracy of investor reporting, and evaluating the materiality of noncompliance.

"The SEC response is quite consistent with the suggestions relayed at our meetings in April," said Tom Deutsch, associate director at the ASF. "The market applauds the SEC's responsiveness to the interpretive requests."

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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