The Federal Deposit Insurance Corp. has clarified its position on the seizure of asset-backed securities when a non-bank enters bankruptcy. In a letter to the American Securitization Forum, the FDIC stated that while under the Dodd-Frank Act it can seize ABS through repudiation powers, it would not exercise its authority at least for the first six months after the Jan. 1 enactment of the law. The clarification is expected to remove uncertainty regarding the fate of ABS and thereby boost issuance of the securities.
