FDIC and OCC Proposals on Valid-When-Made: SFA Responds To the Regulators
Earlier in 2020, SFA partnered with the Bank Policy Institute to respond to proposed rulemakings by the OCC and FDIC on the crucially important “valid-when-made” doctrine. If adopted, the proposals would reaffirm the power of national banks and federal savings associations, and state-chartered banks, respectively, to securitize, sell, assign or transfer loans without impacting the enforceability of the interest rate on a loan. SFA is pleased that the OCC and the FDIC have both moved to provide much-needed clarification on this issue.
Our letters highlight the importance of reversing the negative market impacts from the Madden case and recent follow-on complaints filed in New York against credit card securitization programs of large US national banks. We strongly support the proposals’ affirmation of existing law and the ability of national banks and federal savings associations to sell, assign, or securitize loans, which provides banks with the additional capital they need to continue lending into the market. Importantly, the proposed rule is a very positive development from a bank safety and soundness perspective – uncertainty around the enforceability of interest rate terms currently hinder banks’ risk management and loan sale activities which are crucial to the safety and soundness of these institutions and, by extension, the US banking system.
SFA appreciates the OCC and FDIC actions to address the market uncertainty that exists regarding enforceability of a loan’s interest rate once a loan has been sold or otherwise transferred and looks forward to their final rulemakings. Here are our responses to the OCC and FDIC proposals.