ABA ISSUES POSITION PAPER ON ROLE OF THE TRUSTEE
IN ASSET-BACKED AND RESIDENTIAL MORTGAGE-BACKED SECURITIES
WASHINGTON, March 12 - The American Bankers Association
today issued a
position paper focusing on the role of the trustee in asset-backed
securities and residential mortgage-backed securities. The
paper
specifically addresses concerns expressed by Moody's Investor Service
in
its report of February 4, 2003 in which there was noted to be
a
"divergence between Moody's understanding and the trustees'
views of
their responsibilities".
The position paper outlines the duties of a trustee
of asset-backed
securities, which typically include administrative functions, such
as
maintaining accounts, receiving payments, performing calculations
and
making distributions of information and payments. Since these duties
are critical to carrying out the intent of the parties to asset-backed
securities transactions, they are carefully spelled out in transaction
documentation to avoid misunderstanding.
"In the view of the ABA Corporate Trust Committee,
to suggest that
there are implied or vague oversight duties imposed on trustees
is
financially unfair to trustees, legally indefensible as an abrogation
of
their right of contract and destructive to the certainty of debt
terms
that underlies successful capital markets," the position paper
states.
"If there are identifiable, additional services of value to
the
asset-backed market, which may be performable by trustees, trustees
are
willing to consider such if appropriately defined in transaction
documents and with reasonable compensation," according to the
paper.
A primary purpose in issuing the position paper
was not only to clarify
the understanding of the trustee's role, but also to express a
willingness as an active industry participant to engage in a dialogue
to
address concerns impacting security structures. The recent views
released by Fitch Ratings, which focused on the dominant role of
the
seller-servicer in the current asset-backed securities model, were
productive in advancing this dialogue.
Members of the ABA corporate trust committee include
representatives
from Banc One Investment Management Group, Bank of New York, Citibank,
Deutsche Bank, First American Bank, J.P.Morgan Chase Bank, LaSalle
Bank,
SunTrust Bank, US Bank, Wachovia Bank and Wells Fargo.
The entire position paper, "The Trustee's Role
in Asset-Backed
Securities," is available in the "Trust Solutions"
area of http://www.aba.com.
http://www.aba.com/NR/rdonlyres/00007510neloebogduayxmka/TRUSTEES5.doc
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