On March 23, 2020, the Federal Reserve Bank of New York (“FRBNY”) established the Term Asset-Backed Securities Loan Facility (“TALF 2.0 Program”) to support the flow of credit to consumers and businesses. The FRBNY expects that the TALF 2.0 Program will enable the issuance of asset-backed securities (“ABS”) backed by underlying credit exposures in specified assets classes (student loans, auto loans and leases, commercial and consumer credit card receivables, equipment loans, floorplan loans, insurance premium finance loans, certain loans guaranteed by the Small Business Administration and eligible servicing advance receivables) during this time of economic uncertainty caused by the COVID-19 pandemic.  The FRBNY expects many of the details of the TALF 2.0 Program to mirror the TALF established in 2008, which was enacted to alleviate liquidity problems caused by the Great Recession.

Under the TALF 2.0 Program, FRBNY will commit to lend to a special purpose vehicle (SPV), which will make up to $100 billion in non-recourse three-year loans to investors in ABS, which loans will be secured by a pledge of those ABS as collateral.  The Department of the Treasury, using the Exchange Stabilization Fund, will make an initial equity investment of $10 billion in the SPV. The pledged eligible collateral will be valued and assigned a haircut based on the asset class and the historical volatility and weighted average life of the pledged ABS.

To be eligible as collateral for TALF, the ABS must: (1) have a credit rating in the highest investment grade category (long term-or short term) from at least two rating agencies; and (2) be issued on or after March 23, 2020.  All or substantially all of the underlying credit exposures must have been originated by a U.S. company and must be “newly issued.”  Implementing guidance is necessary to determine how to interpret this requirement for each of the specified asset classes above.  For example, guidance would be needed as to what constitutes a “newly issued” credit card receivables given that new extensions of credit within existing credit card accounts cannot be securitized separately from the older receivables within the same accounts.

The Structured Finance Association (“SFA”), in a letter sent to the FRBNY and Treasury yesterday, had urged the FRBNY to provide more flexibility under the TALF 2.0 Program, in particular the SFA had requested the FRBNY to add other allowable collateral such as certain private label residential mortgage, unsecured personal loans and commercial mortgage assets to the program as soon as possible.

A similar sentiment was expressed by Carol Hitselberger, co-head of Mayer Brown’s finance practice, in a Bloomberg report earlier today: “With the growth of online personal loans and small business loans in recent years, TALF has left out a whole group of non-bank lenders that can be critical in helping the economy. ‘Give them a rope.’”

The SFA and other market participants have also urged the FRBNY to consider allowing legacy ABS to be pledged as collateral and to relax the ratings requirement for eligible collateral.

When the federal Consumer Financial Protection Bureau (“CFPB”) last summer issued its Advance Notice of Proposed Rule Making (“ANPR”) to revise the definition of a “Qualified Mortgage” (“QM”) under the Dodd-Frank Act’s “ability to repay requirements”, all of the single-family housing finance advocates went into high gear. Particularly concerning was the CFPB’s announcement that it did not intend to renew the so-called “GSE Patch,” which by its terms expires on January 1, 2021, and provides a “safe harbor” compliance presumption for loans eligible for sale to Fannie Mae and Freddie Mac. Should there be a replacement, the CFPB asked, and, if so, what should it be?

Continue Reading Revising the Regulatory Definition of a Qualified Mortgage

On February 6, 2020, Russell Nance, Steven Garden and Brennan Young presented an overview of the proposed regulations addressing the US federal tax consequences of replacing an interbank offered rate (IBOR) with a successor rate as part of Mayer Brown’s Global Financial Markets Initiative.

You can listen to the discussion by clicking on the “Listen to” link (in the fourth paragraph) of Mayer Brown’s landing page for this event.

After three and a half years of negotiations and uncertainty, the United Kingdom left the European Union at 11:00 p.m. on 31 January 2020. But when will Brexit actually be done? In this Legal Update, we discuss the scale of the task ahead for the UK and EU and analyse the three following key questions that remain:

(i) will the ‘standstill’ transition period be extended beyond December 2020;

(ii) what kind of trade deal can be negotiated with the EU in the limited time available; and

(iii) how real is the threat of a further ‘no deal’ cliff edge at the end of December?

Read the Legal Update here.

The Taxpayer First Act (the “Act” or “TFA”) imposes new limits on the disclosure of US taxpayer tax information obtained on or after December 28, 2019.  The Act is designed, among other things, to overhaul and modernize operations at the Internal Revenue Service (“IRS”).  One provision of the TFA has a direct impact on a recipient of taxpayer return information obtained directly from the IRS.  Although questions remain about the reach of the new rule, it is already finding its way into structured finance and secondary market transactions.

Section 6103 of the Internal Revenue Code (the “Code”) governs the confidentiality and disclosure of tax returns and the information contained in tax returns.  The TFA, effective as of December 28, 2019, amends Code Section 6103(c) to require taxpayers to consent to: (i) the particular purposes for which the recipient will use the taxpayer’s tax return information (the recipient may not use the information for any other purpose); and (ii) the sharing of any information from the tax return with other persons.  Prior to the TFA amendment, Code Section 6103(c) simply authorized the IRS to release a taxpayer’s tax return information to parties designated by the taxpayer to receive it.

Continue Reading The Taxpayer First Act and the Impact on Secondary Market Participants

The NAIC Valuation of Securities (E) Task Force held a meeting on February 4, 2020 discussing the proposed definition of “Principal-Protected Notes“ (PPNs), following the release of a January 2020 staff memo on the proposed definition.

Join Mayer Brown today, February 5, at 4pm ET for a review of the release and findings from the Task Force meeting.


Mayer Brown’s Capital Markets Tax Quarterly provides capital markets-related US federal tax news and insights. In this issue of CMTQ, we look at final quarter of 2019. We discuss Section 871(m) phase-in, the Warren wealth tax proposal, and final nonresident alien withholding regulations, among other recent updates.


On January 30, 2020, five federal financial regulatory agencies published the long awaited notice of proposed rulemaking (the “NPR”) to revise certain aspects of the Volcker Rule (Section 13 of the Bank Holding Company Act) with respect to the treatment of covered funds.  The NPR follows over 2 ½ years of the agencies’ consideration of changes to the Volcker Rule, which was originally prompted by the June 2017 Treasury Report that solicited changes to ease the compliance burden on banks.  The NPR includes several changes Continue Reading Potential Volcker Rule Changes Announced

Since its adoption in 2010, the Federal Deposit Insurance Corporation’s (the “FDIC”) securitization safe harbor rule, 12 C.F.R. § 360.6 (the “Rule”), which relates to the treatment of financial assets transferred in connection with a securitization or participation transaction, has required that securitization documents require compliance with Regulation AB of the Securities and Exchange Commission (“SEC”), 17 C.F.R. §§ 229.1100 et. seq. (“Regulation AB”) even in circumstances where Regulation AB by its terms would not apply to the issuance of obligations backed by such financial assets.   On January 30, 2020, the FDIC finalized and adopted changes (the “Adopted Change”) to certain provisions of the Rule to eliminate such requirement where Regulation AB would not otherwise apply to the related securitization transaction.   Continue Reading FDIC Adopts Changes to Securitization Safe Harbor Rule