Securities Regulation Daily Wrap Up, PUBLIC COMPANY REPORTING DISCLOSURE—SEC issues concept release on asset-backed securities, (Sep 29, 2025)
Organizations Mentioned:Fannie Mae | Freddie Mac
By Jay Fishman, J.D.
The Commission solicits comments on residential mortgage-backed security disclosures and definition.
The SEC issued a concept release on asset-back securities (ABS), particularly residential mortgage-backed securities (RMBS). The Commission is giving issuers and investors, collectively “market participants,” 60 days to respond to the questions concerning both the RMBS disclosure requirements, including sensitive information disclosures, and the ABS definition.
Why a concept release on RMBS’s now? Commissioner Mark Uyeda answered the question by stating “the Commission’s current approach does not work.” How did we get to that point? Uyeda said it was the 2008 financial crisis that began the downward spiral for public RMBS’s—with critics blaming securitized offerings, particularly RMBS’s for being opaque with little information about the underlying assets. Further, credit rating agencies were blamed for concealing poorly performing collateralized assets behind the high investment grade ratings.
Uyeda went on to say that the Commission’s initially adopted Regulation AB (asset-back securities rule) in 2004 was amended in 2014 to meet certain Dodd-Frank Act requirements, to prevent future financial crisis fallouts. But the problem with the amended Regulation AB, Commissioner Hester Peirce declared, when trying to register their public RMBS’s issuers have to include 270 different data points for each underlying mortgage, an onerous task. Commissioner Uyeda remarked that as a result, not a single registered RMBS offering has occurred since the 2014 amendments. Investors have, instead, turned to offerings from federal government agencies, e.g., Fannie Mae and Freddie Mac, or to private offerings made under SEC Rule 144A—despite investment criteria restrictions limiting the amount of Rule 144A ABS that many institutional investors can hold. Nevertheless, Uyeda declared, there were over $145 billion in privately offered RMBS offerings. As for public RMBS’s, only car- and credit card-related securitizations have been registered with the Commission, bringing in billions of dollars.
Disclosure requirement questions.
Whether the Commission’s 2014 adopted RMBS disclosure requirements in Regulation AB, Item 1125 are a contributing factor to the absence of publicly offered RMBS?
Whether any of the RMBS asset-level disclosure requirements should be revised, removed, added or modified to: (i) better align with market practice and needs; (ii) reduce potential burdens associated with obtaining and disclosing certain sensitive information; and (iii) reduce ambiguity contained in the current requirements?
Whether the Commission should consider changing the frequency of certain disclosures?
Whether the Commission should allow issuers to omit information as long as they identify the omission and provide an explanation?
Whether it would be appropriate to permit RMBS issuers to provide certain sensitive information to investors on an issuer-sponsored website like the current market practice for privately offered RMBS, and any concerns arising from this approach?
The Concept release addresses the “sensitive information” problem, namely, how to strike the right balance between providing investors with detailed mortgage obligor information they need to make a sound investment decision while simultaneously protecting issuers’ sensitive information such as their five-digit zip codes, credit scores and income. Commission Chair Paul Atkins in his remarks on the concept release mentioned that the SEC, in 2014, proposed the above-mentioned approach, permitting sensitive obligor data to be provided to investors on an issuer-sponsored website instead of on EDGAR. However, public feedback at the time directed the Commission to not adopt that approach. Atkins now, however, advocates revisiting it.
Whether there are appropriate alternative approaches to providing RMBS investors with access to sensitive asset-level information?
Whether RMBS issuers should make any representations, underwritings, or certifications with respect to the sensitive asset-level information?
ABS definition questions.
Whether Regulation AB’s ABS definition should be revised to better align with the Exchange Act definition and, if so, how?
SEC Commissioner Hester Peirce in her remarks praising the concept release pointed out the two very different definitions, the 2004 definition in Regulation AB and the Exchange Act’s 3(a)79 definition added by Section 941(a) of the Dodd-Frank Act. Peirce noted that the differences between the two definitions creates some complexity in the SEC’s regulatory regime because while Regulation AB’s ABS will meet the Exchange Act ABS definition, an Exchange Act ABS does not necessarily meet the Reg AB ABS definition.
Whether such revision would mandate revisions to other definitions or other requirements in Regulation AB?
The potential impacts to market participants that would result from such revisions?
Any market trends or developments that the Commission should consider in connection with such potential changes?
Opposition to concept release. Commissioner Caroline Crenshaw, in her remarks, emphasized that there is no need to hastily replace the allegedly onerous Regulation AB with a relaxed new rule until the reasons for why there have been no public RMBS’s since 2014 have been examined. She suggested investors have, instead, turned to agency RMBS’s, namely those securitized mortgage loans provided by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association or, alternatively, private RMBS’s generated by SEC Rule 144A simply because the investors remain wary from the severe losses they took on public RMBS’s during the 2008 financial crises. Crenshaw particularly urged investor commenters to be mindful of removing requirements that currently provide them with transparency and consistency. But in favoring the concept release, Chair Atkins proclaimed that a public market for RMBS provides market benefits and investor protections that a Rule 144A market cannot, including increased liquidity, a broader investor base, greater transparency and public disclosure.
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