US

The Equitable Right of Redemption: Why an old legal concept is causing FDIC-Insured institutions new problems in their desire to securitize assets

Douglas P. Faucette. Muldoon Murphy & Faucette LLP. Dfaucette@mmf-law.com. (assisted by Bernard S. Sharfman)

For a number of years, US financial institutions insured by the Federal Deposit Insurance Corporation (the “FDIC”) have been using asset securitization to access alternative funding sources, improve financial ratios, balance their asset portfolios, and meet regulatory capital guidelines. Essentially, such institutions use asset securitization to transfer assets off their balance sheets. There is no doubt that this financing technique will continue to be used by FDIC-insured institutions. However, European investors of asset-backed securities will be interested to know that new financial accounting requirements will soon be changing how these financial institutions structure their asset transfers.