[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR627.2726]



[Page 282-283]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 627_TITLE IV CONSERVATORS, RECEIVERS, AND VOLUNTARY LIQUIDATIONS

--Table of Contents

 

                  Subpart B_Receivers and Receiverships

 

Sec. 627.2726  Treatment by the conservator or receiver of financial 

assets transferred in connection with a securitization or participation.



    (a) Definitions. For the purposes of this section, the following 

definitions apply:

    Beneficial interest means debt or equity (or mixed) interests or 

obligations of any type issued by a special purpose entity that entitle 

their holders to receive payments that depend primarily on the cash flow 

from financial assets owned by the special purpose entity.

    Financial asset means cash or a contract or instrument that conveys 

to one entity a contractual right to receive cash or another financial 

instrument from another entity.

    Participation means the transfer or assignment of an undivided 

interest in all or part of a loan or a lease from a seller, known as the 

``lead'', to a buyer, known as the ``participant'', without recourse to 

the lead, pursuant to an agreement between the lead and the participant. 

Without recourse means that the participation is not subject to any 

agreement that requires the lead to repurchase the participant's 

interest or to otherwise compensate the participant due to a default on 

the underlying obligation.

    Securitization means the issuance by a special purpose entity of 

beneficial interests:

    (1) The most senior class of which at the time of issuance is rated 

in one of the four highest categories assigned to long-term debt or in 

an equivalent short-term category (within either of which there may be 

sub-categories or gradations indicating relative standing) by one or 

more nationally recognized statistical rating organizations, or

    (2) Which are sold in transactions by an issuer not involving any 

public offering for purposes of section 4 of the Securities Act of 1933 

(15 U.S.C. 77d), as amended, or in transactions exempt from registration 

under such Act pursuant to Regulation S thereunder (or any successor 

regulation).

    Special purpose entity means a trust, corporation, or other entity 

demonstrably distinct from the Farm Credit institution that is primarily 

engaged in acquiring and holding (or transferring to another special 

purpose entity) financial assets, and in activities related or 

incidental thereto, in connection with the issuance by such special 

purpose entity (or by another special purpose entity that acquires 

financial assets directly or indirectly from such special purpose 

entity) of beneficial interests.

    (b) The receiver shall not, by exercise of its authority to 

repudiate contracts under Sec. 627.2725(b)(2) and (b)(14), reclaim, 

recover, or recharacterize as property of the institution or the 

receivership any financial assets transferred by a Farm Credit 

institution in connection with a securitization or participation, 

provided that such transfer meets all conditions for sale accounting 

treatment under generally accepted accounting principles, other than the 

``legal isolation'' condition as it applies to institutions for which 

the



[[Page 283]]



FCSIC may be appointed as receiver which is addressed by this section.

    (c) Paragraph (b) of this section shall not apply unless the Farm 

Credit institution received adequate consideration for the transfer of 

financial assets at the time of the transfer, and the documentation 

effecting the transfer of financial assets reflects the intent of the 

parties to treat the transaction as a sale, and not as a secured 

borrowing, for accounting purposes.

    (d) Paragraph (b) of this section shall not be construed as waiving, 

limiting, or otherwise affecting the power of the receiver to disaffirm 

or repudiate any agreement imposing continuing obligations or duties 

upon the institution in receivership.

    (e) Paragraph (b) of this section shall not be construed as waiving, 

limiting or otherwise affecting the rights or powers of the receiver to 

take any action or to exercise any power not specifically limited by 

this section, including, but not limited to, any rights, powers or 

remedies of the receiver regarding transfers taken in contemplation of 

the institution's insolvency or with the intent to hinder, delay, or 

defraud the institution or the creditors of such institution, or that is 

a fraudulent transfer under applicable law.

    (f) The receiver shall not seek to avoid an otherwise legally 

enforceable securitization agreement or participation agreement executed 

by a Farm Credit institution solely because such agreement does not meet 

the ``contemporaneous'' requirement of section 5.61(d) of the Act.

    (g) This section may be repealed or amended by the Farm Credit 

Administration, but any such repeal or amendment shall not apply to any 

transfers of financial assets made in connection with a securitization 

or participation that was in effect before such repeal or modification.



[70 FR 55515, Sept. 22, 2005]