FDIC Federal Register Citations

From: Henry W. Hayssen
Sent: Monday, October 27, 2008 11:41 AM
To: Comments
Subject: Deposit Insurance Regulations Temp Increase in Standard Coverage Amt - RIN-3064-AD36 

Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D.C. 20429
 
Attn: RIN 3064-AD36
 
Re: Interim Rule Regarding Mortgage Servicing Accounts
 73 FR 61658 (October 17, 2008)
 
Dear Mr. Feldman:

As a securitization professional with over 20 years in the industry, I believe this change in policy for covering principal and interest payments held at FDIC insured institutions for the benefit of securitizations is long over due.  Although securitization funds are often invested outside of insured institutions, they nearly always pass through such institutions on the dates surrounding distributions.  It is an unnecessary risk to the transactions that the funds might not be fully insured.  To help the credit/financial markets recover from the current crisis, it is imperative that all possible steps be taken to restore confidence in all aspects of the securitization system.  To this end, the FDIC should extend the current policy to similar cash flows from all types of securitizations, not simply mortgages.  The contagion that began with mortgage performance is affecting all types of asset-backed securities, and all of these markets need the same support that the mortgage industry is receiving under the temporary rule.

Furthermore, the FDIC should make clear that tax and insurance accounts, as well as any similar accounts, held by a servicer, paying agent or like party would not be aggregated with personal accounts of a mortgagor.  Mortgagors often are unaware of which depository institution is holding their funds from these accounts and therefore are unlikely to act to limit their exposure to an insured institution beyond the insurance cap amount.   (In other words, a mortgagor may be holding $250,000 in personal funds at an institution while the servicer of their mortgage could be holding, say $50,000,  in tax and insurance funds for that individual’s mortgage.  Both sets of funds should be covered separately by the FDIC.  It is not clear to me from my reading of the proposed rule that the policy would work in this manner.

Sincerely yours,

Henry W. Hayssen   
New York City, New York