June 30, 1999
 
 

  THE MORTGAGE BANKERS ASSOCIATION OF AMERICA
  COMMENTS ON AIRCRAFT CARRIER RELEASE
 
 

I.  INTRODUCTION

A.     Introduction. The Mortgage Bankers Association of America (the "MBA") appreciates the opportunity to
         comment on the proposals made by the Securities and Exchange Commission (the "SEC") in November
         1998 in what is referred to as the aircraft carrier release (the "Release"). The MBA represents
         approximately 2,700 companies involved in real estate finance, including private conduits, independent
         mortgage companies, banks, thrifts, mortgage company subsidiaries, mortgage insurers and others who
         service the mortgage industry. Residential mortgage-backed securities, including securities backed by
         home equity loans, but exclusive of securities issued or guaranteed by federal agencies, were issued in
         1998 in an aggregate principal amount of approximately $210 billion. Because the members of the MBA
         include many large, periodic issuers of residential mortgage-backed securities, this response focuses
         primarily on the market for residential mortgage-backed securities currently issued under shelf registration
         statements. Mortgage-backed securities and asset-backed securities will be referred to herein collectively
         as asset-backed securities ("ABS").

B.     Topics.  The topics discussed in this response are set forth below.

         I.      Introduction
         II.    Executive Summary
         III.   Characteristics of ABS Market
         IV.   Form B Issuer
         V.    Registration Statement
         VI.   Delivery and Filing Requirements
         VII.  Exchange Act Reports
         VIII. Liability
         IX.   Conclusion

II.    EXECUTIVE SUMMARY

A.    Comprehensive Approach. We recommend developing a comprehensive approach to securities regulation
        which takes into account the unique features of the ABS market. We believe the approach should balance
        investor protection principles with the benefits to homeowners of efficient, cost-effective access of
        mortgage lenders to the capital markets. In developing an approach, we strongly support the SECís goals
        to facilitate market access by issuers and flexibility and timeliness in communications with investors.
        However, we believe applying many of the timing, filing and liability requirements proposed by the SEC in
        the Release to the ABS market would thwart the SECís goals and impose unfair burdens on the issuer.

B.    Suggested Modifications. Due to the special characteristics of the ABS market, we do not believe that
        many of the provisions that would apply to Form A or Form B offerings as proposed in the Release
        should be adopted for ABS. However, we also believe that a workable regulatory scheme can be
        developed utilizing certain concepts contained in the Release. Specifically, we propose extending to ABS
        the benefits proposed to be accorded to Form B issuers while also establishing timing, filing and liability
        requirements which take into account the characteristics of the ABS market. Our proposal for a
        regulatory system applicable to ABS is summarized as follows:

        1.    Registration Statement. The registration statement including the prospectus would include
                material information about the offering. It would be filed with the SEC prior to settlement and
                available to any investor upon request. It would become effective without SEC review at the
                time designated by the issuer.

         2.   Term Sheet. A preliminary term sheet could be distributed by or on behalf of the issuer to
                the investor at any time. The preliminary term sheet could be revised and redistributed to
                reflect any changes. Prior to settlement, a final term sheet would be filed with the SEC as
                part of the prospectus.

         3.   Computational Materials and Free Writing. Computational materials prepared by the
                underwriter and free writing could be disseminated in a flexible manner which would readily
                address the specific concerns of an investor. They would not be filed with the SEC or
                required to be distributed to all investors. Computational materials would mean mathematical
                calculations regarding yield, average life, duration, maturity and other characteristics of ABS
                based on assumptions about the collateral and assumed scenarios regarding prepayment
                speeds, interest rates, losses and other factors, with the assumed scenarios typically selected
                by the underwriter or the investor. Free writing would mean any material which is not
                required to be in the registration statement.

          4.  Safe Harbors. The preliminary and final term sheet, computational materials and any free
                writing would be qualified by any other information filed contemporaneously or subsequently
                with the SEC prior to settlement. The term sheet would benefit from a safe harbor for any
                omission of information, since a brief summary by its nature will not include a complete
                description of all the characteristics of the transaction. Computational materials would benefit
                from a safe harbor to be promulgated by the SEC specifically for ABS computational
                materials which would be similar to that for forward-looking statements under Section 27A
                of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities
                Exchange Act of 1934 (the "Exchange Act"). Such a safe harbor would only be available if
                the applicable computational materials were accompanied by "meaningful cautionary
                statements."

           5.  Liability. Material information about the offering would be contained in the registration
                 statement, available for review and subject to liability under the high standards imposed by
                 Sections 11 and 12 of the Securities Act. The preliminary term sheet, computational
                 materials and free writing materials would be subject to liability under Section 10(b) and
                 Rule 10b-5 under the Exchange Act.

C.        Investor Protection. Under our proposal, investors would benefit from greater access to information
            because adequate disclosure requirements would be balanced by reasonable timing and liability
            requirements.

            1.   More Information Prior to Investment Decision. We believe that a more permissive
                   approach in the ABS market would result in the dissemination of more information useful to
                   investors. Under our proposal, the underwriter would be permitted to distribute to an
                   investor a preliminary term sheet, computational materials and any free writing, and liability
                   for such material would be limited to Section 10(b) and Rule 10b-5 of the Exchange Act.
                   Historically the prohibition on free writing under Section 5 of the Securities Act has restricted
                   the dissemination of information which investors wanted to obtain and underwriters were
                   willing to provide in the ABS market. Likewise, the current requirement to file computational
                   and other materials with the SEC and the consequent liability for such materials have
                   constricted the dissemination of information in the ABS market.

            2.    Safeguards for Investment Decision. We believe that our proposal provides sufficient
                    safeguards for the investor even in the unlikely case where adequate information has not
                    been disseminated prior to an investment decision. The final term sheet would be filed with
                    the SEC prior to settlement. In the event significant terms were not agreed upon by the
                    investor, state law would determine whether the underwriter could enforce the trade.
 
 

   III.    CHARACTERISTICS OF ABS MARKET

A.    ABS Market. Certain unique characteristics of the ABS market described below justify
        modifications in the regulatory approach that was taken in the Release.

B.    Special Purpose Vehicle. In a typical ABS transaction, assets are transferred by the sponsor to a
        special purpose vehicle, and cash flows from the assets are used to pay various classes of
        securities. Even if the sponsor has created many other special purpose vehicles for ABS
        transactions, ABS issued by each special purpose vehicle is deemed an initial offering. Accordingly,
        the special purpose vehicle would not have any reporting history under the Exchange Act and
        therefore would not qualify for the more favorable treatment of a Form B issuer under the Release.
        We do not believe this would be an equitable result for ABS offerings.

C.    Term Sheet. Only an abbreviated term sheet can be prepared prior to the time when an investor
        makes an investment decision because an ABS offering typically involves multiple classes of
        securities with characteristics that are being negotiated over a period of time by the underwriter and
        the various investors, the structure of the transaction may change as new investors are brought into
        the transaction, and the pool of assets often is not final until shortly before settlement. For example,
        an investor may make an investment decision based on information about the class of securities the
        investor intends to purchase even though the structure for all the other classes has not been
        determined. As additional investors decide to purchase other classes, the final structure will be
        established. It is only at this later point that a final term sheet as contemplated by the Release could
        be prepared.

D.    Computational Materials. Many ABS investors expect the delivery of computational materials that
        are tailored specifically to their particular class of ABS. Unlike typical information required to be
        disclosed by an issuer for an equity or unsecured debt offering, the scenario analyses contained in
        ABS computational materials do not constitute information within the unique knowledge of the
        issuer and are not prepared by the issuer. Therefore, the filing requirements and liability standards
        proposed in the Release should be modified to recognize the particular nature of these materials.

E.     Approach to Date. To assist investors, the underwriter frequently distributes collateral and
        structural term sheets and computational materials prior to the time when a prospectus can be
        prepared. In no action letters dated May 20, 1994 to Kidder, Peabody Acceptance Corporation I
        and May 27, 1994, February 17, 1995 and March 9, 1995 to the Public Securities Association,
        the SEC imposed heavy and unfair burdens on the issuer by requiring such term sheets and
        computational materials to be filed with the SEC and incorporated in the issuerís registration
        statement.
 
 

   IV.    FORM B ISSUER

 A.    Form B. Under the SECís proposal, an issuer eligible for Form B has several advantages: (i) the
        issuer may distribute any type of communication at any time prior to or during an offering; (ii) the
        registration statement will become effective at the time requested by the issuer without pre-sale staff
        review; (iii) the issuer has more flexibility with respect to a transaction term sheet or a preliminary
        prospectus; (iv) the issuer may incorporate by reference in its registration statement its Exchange
        Act filings; and (v) the issuer need not deliver to the investor the final prospectus or the Exchange
        Act filings incorporated by reference. Under the SECís proposal, an issuer generally will qualify for
        Form B if, among other things, the following standards are satisfied:

        1.    Reporting History. The issuer has a one-year reporting history under the Exchange Act
               including at least one filed annual report, the issuer has filed all reports due, and the issuer
               has timely filed all reports in the 12-month period prior to the filing; and

         2.   Investment Grade. The offering pertains to non-convertible investment grade securities and a
               below investment grade rating has not been received from any rating agency; or

               QIBs. The offering is made solely to qualified institutional buyers as defined under Rule
               144A of the Securities Act ("QIBs") other than dealers and investment advisors; or

                Market Making. The offering involves certain market-making transactions by brokers and
                dealers affiliated with the issuer; and

         3.   Prior Form. The issuer has previously registered an offering of securities on a form that did
               not become effective upon filing.

B.     ABS Modification. We believe that ABS should be eligible for Form B or a similar form adopted
        specifically for ABS. ABS have a huge market predominately consisting of sophisticated issuers
        offering investment grade securities backed by familiar asset types to sophisticated investors. Unlike
        a typical initial public offering or an equity or unsecured debt offering by a less seasoned issuer, the
        asset types and securitization structures for ABS offerings are generally well-known in the market.
        To apply to ABS, the standards for Form B should be modified for the following reasons:

        1.    No Reporting History. An ABS issuer typically would not meet the reporting requirements
               for a Form B issuer because the staff views each issuance of ABS as an initial public offering
               for Exchange Act reporting purposes. For this reason, Form S-3 currently allows shelf
               registration for ABS as defined in the form without a reporting period requirement.

        2.    Investment Grade. We would permit registration under Form B of any class of investment
               grade ABS. Since many investors purchase investment grade securities on the basis of the
               rating and yield, delays caused by SEC review would interfere with market access without
               meeting a demonstrable need for better disclosure. In addition, we do not believe the
               issuance of securities rated investment grade by one rating agency should be impeded if
               another rating agency provides a lower rating because (i) investors are purchasing the
               securities on the basis of the rating by the rating agency described in the offering documents
               and (ii) a rating by a rating agency which has not been selected for the transaction may not
               be based on adequate information. The instructions for use of the form should clearly state
               the security rating requirement must be met at the time of settlement.

        3.    QIB or IAI. We would permit eligibility for Form B if all the publicly offered non-investment
               grade ABS were sold to either QIBs or institutional accredited investors ("IAIs"). We
               support expanding the QIB market by maintaining the QIB threshold for assets under
               management at $100 million and including additional categories of investors, such as state
               pension plans. We support permitting IAIs because it would facilitate transactions and
               benefit investors. Under current practice, an ABS transaction often entails a public offering
               of the senior, investment grade classes and a private placement to IAIs of the subordinate,
               non-investment grade classes. Since investors in the non-investment grade classes frequently
               are IAIs but not QIBs, permitting sales to IAIs would allow the entire transaction to be
               publicly offered.

        4.    Prior Form. We do not believe SEC review should be required for ABS which are either
               investment grade or sold to QIBs or IAIs. Even if SEC review is required for an initial
               offering by a sponsor or issuer, it should only affect the ability to go effective and not other
               advantages accorded to a Form B issuer. Moreover, the issuer should not be subject to
               review if the sponsor or any affiliate has been subject to the SEC review process for ABS
               because the experience of the sponsor or affiliate with the SEC registration process for ABS
               should be sufficient.

C.    ABS Qualifications. Accordingly, we propose that an ABS issuer should have the advantages of a
        Form B issuer if the offering meets the following standards:

        1.    ABS under Current Form S-3. The offering pertains to ABS defined in a manner similar to
               the definition in the instructions to Form S-3; and

         2.   Investment Grade. The offering of a registered ABS class pertains to non-convertible
               investment grade securities; or

              QIB or IAI. The offering of a registered ABS class is made solely to QIBs and IAIs other
               than dealers and investment advisors.

        3.    Market Making. In addition, if the registration and prospectus delivery requirements are
               applicable contrary to our views expressed below, we believe that Form B should apply to
               an ABS offering involving a market-making transaction by broker or dealer affiliated with the
               issuer or other resale by an affiliate of the issuer where the initial offering qualified for Form
               B.

D.      "Bad Boy" Provisions. As proposed in the Release, an issuer is disqualified from using Form B
          because of (i) certain legal violations of, or SEC actions against, the issuer, its directors, executive
          officers or underwriters, (ii) significant liquidity problems such as defaults on material indebtedness,
          a "going concern" qualification by its accountants or recent insolvency proceedings, or (iii) a failure
          to amend an Exchange Act report in accordance with a staff comment. We do not think such
          disqualifications will materially improve the quality of disclosure. We are particularly concerned with
          disqualifications for (i) action by an underwriter, (ii) actions by officers and directors unknown to
          the issuer, (iii) liquidity problems of the sponsor which would not affect the special purpose vehicle,
          or (iv) the lack of response to a staff comment based on a reasonable position taken in good faith.

E.       Shelf. The SEC has questioned whether delayed shelf offerings should be permitted. We strongly
          believe that shelf registration or a similar process should be continued for the many high volume
          issuers of ABS. The leading sponsors of ABS frequently issue ABS many times a month and
          continuous, efficient access to the capital markets is essential to assuring low costs of mortgage
          financing to homeowners. In addition, the preparation and filing of all information and exhibits
          would be considerably more burdensome if done for each transaction rather than done upon the
          filing of a shelf registration statement and supplemented for each takedown. Accordingly, we would
          permit basic information about the sponsorís program, the operative agreements, opinions and
          other exhibits to be either (i) filed in a shelf registration statement or (ii) filed with the SEC from time
          to time at the issuerís election and incorporated by reference in a registration statement for a single
          offering. Finally, we support the SECís proposal that registration fees be paid only upon an issuerís
          request to proceed with a transaction instead of upon the filing of a shelf registration statement.
 
 

V.    REGISTRATION STATEMENT

A.       Registration Statement. As proposed in the Release, an issuer could file a registration statement on
           Form B at any time prior to the first sale of registered securities. Under one proposal for Form B,
           transactional information would be contained in a term sheet which would be included in the
           prospectus. Under an alternative proposal, transactional information would consist of information
           currently required by Form S-3 and would be contained in a traditional preliminary prospectus.

B.        Contents of Registration Statement. We support a flexible approach to a term sheet and other parts
           of the registration statement. We believe issuers should be required to provide material transaction
           information and use their judgment as to materiality.

          1.  ABS Offering Information. We suggest including as offering information in the prospectus for
               ABS:   (i) the amount and terms of the securities, (ii) who is selling the securities, (iii) the plan
               of distribution, (iv) the method of determining the offering price, (v) the underwriterís
               discounts and commissions and (vi) material risks and other information about the
               transaction, including information about the assets, the servicer and any credit enhancer.

         2.   Other Information. The Release includes as offering information any written and, at the
               issuerís election, oral offering information disclosed by or on behalf of the issuer during the
               offering period. We believe this requirement confuses the content of the registration
               statement with other disclosure which should have different liability and filing requirements.
               We support including in the registration statement information which is material to an investor
               and within the unique knowledge of the issuer. We do not believe the issuer should be
               required to include in the registration statement (i) the same information which is distributed
               to prospective investors in a different format, (ii) other information distributed to prospective
               investors which is not material to the offering or is not materially different from the
               information included in the registration statement, or (iii) computational and other materials
               which are not within the unique knowledge of the issuer.

        3.    Market-Making Prospectus. We think the SEC should not require a prospectus for
               market-making transactions involving secondary trading in ABS by a broker-dealer affiliated
               with the issuer or the sponsor of the ABS or for resales by any other affiliates of the issuer or
               the sponsor that did not purchase with a view to the distribution of the securities. However, if
               the SEC determines that some form of market-making prospectus would be necessary, the
               SEC should clarify that delivery of the prospectus filed at the time of the offering, plus a copy
               of the most recent periodic report accompanying payments to investors, is sufficient.

C.    Section 5 Violation for Improper Form. The SEC proposes to eliminate the presumption that a
        registration statement on Form B is on the proper form. Accordingly, if any element of eligibility for
        the form were subsequently found lacking, an issuer and its underwriters would be in violation of
        Section 5, and investors may be able to rescind the sale under Section 12(a)(1). For example, the
        definition of ABS for use of Form S-3 states that the assets must by their terms convert into cash.
        The SEC staff has interpreted this definition to mean that no more than a specified percentage of
        the credit cards in a trust may be delinquent. Until the staffís pronouncement, practitioners had not
        taken this position because the credit card holder is obligated to pay by the terms of the account
        even if the holder has failed to do so. If the definition of ABS under Form S-3 had been used for
        Form B, the issuer of any offering with credit card defaults exceeding a specified percentage
        arguably would be subject to Section 5 liability. We believe such liability would be a severe penalty
        for what could be a reasonable judgment made in good faith. We do not expect that the
        presumption of a proper form is likely to result in abuse especially in light of the SECís intention to
        screen registration statements. As an alternative proposal, the form for the offering could be
        presumed to be correct, but an issuer using a form without a reasonable basis could be subject to
        pre-sale SEC review for a future offering.

D.    Staff Review Policy. We do not believe staff review should be required prior to effectiveness on
        Form B or the equivalent form for ABS. Staff review prior to effectiveness has frequently resulted
        in uneven adoption of the staffís views. An issuer filing a new registration statement must comply
        with staff articulated policies whereas an issuer which has sufficient shelf capacity may avoid such
        policies. Participants in the industry have frequently expressed concern over the absence of a level
        playing field and the absence of procedures for proposing and commenting on staff positions.
        Eliminating staff review will mitigate these concerns. Staff positions could be taken by more formal
        means such as interpretative releases.

E.     Officers and Directors. The SEC proposes to add a certification to Form B that the officers and
        directors signing the registration statement have read it and do not know of any misstatement or
        omission. Criminal liability could apply if the statement is false; i.e., the signer had not read the final
        document. We believe such a certification is unrealistic in light of the time constraints for
        preparation of documents involving the complex collateral and structures of ABS transactions,
        could result in severe consequences and would not materially improve the quality of disclosure.
 
 

  VI.    DELIVERY AND FILING REQUIREMENTS

A.    Delivery and Filing. The Release proposes substantial changes regarding the delivery and filing of a
        term sheet, free writing and the prospectus.

        1.    Term Sheet Prior to Sale. Under Form B, a document containing "transactional information"
               would be required to be delivered to an investor before the date an investor makes a binding
               investment decision. Currently, there is no comparable requirement mandating delivery of
               any document for a large seasoned issuer prior to sale. In addition, the SEC staff has taken
               the position in no action letters that an ABS transaction need not comply with Rule 15c2-8
               under the Exchange Act which requires a broker or dealer in connection with an offering by
               a first time issuer to deliver a copy of the preliminary prospectus at least 48 hours before
               sending a confirmation.

         2.   Free Writing. Under the proposal, a Form B issuer would be able to communicate at any
               time prior to or during an offering period. Free writing materials used after the
               commencement of the offering period would be required to be filed when the registration
               statement is filed. Free writing materials used after the filing of the registration statement
               would be required to be filed upon use. Any free writing material (whether or not filed)
               would be subject to Section 12(a)(2) liability.

         3.   Final Prospectus. The SEC proposes that no final prospectus would be required to be
               delivered in connection with Form B offerings. The final prospectus would be required to be
               filed with the SEC prior to transmission of confirmations and, if free writing materials are
               used, prior to sale. Pricing information could be filed subsequently pursuant to Rule 430A.
               Since an ABS issuer currently may file the prospectus supplement two business days after it
               is sent with a confirmation, the proposed timing is at least two business days earlier if free
               writing is not used and substantially earlier if free writing is used.

B.    Insufficient Time to Prepare Lengthy Documents. Although we agree with the SECís concern about
        the need of investors to obtain adequate information, we believe the SECís approach requires
        issuers to delay the speed of and disclosure for an offering or face severe liability. The gap between
        the disclosure used to sell and the disclosure filed with the SEC has developed because of the
        difficulty in preparing complex documents subject to high standards of liability while a transaction is
        evolving. An ABS transaction typically involves multiple classes of complex cash flow securities
        which are structured and modified from time to time to meet the requirements of various investors
        and to reflect changes in the collateral.

C.    Adequate Information. Nonetheless, an ABS investor is able to make an investment decision based
        on familiarity with transactions involving the same asset type, abbreviated information about the
        assets and structure for the particular transaction, computational materials showing yield under
        various assumptions, and the proposed rating by a rating agency of the securities. If this information
        changes, a revised or expanded description is circulated reflecting the assets, structure or yield
        analysis. Prior to settlement, the investor also has available the final prospectus base and
        supplement describing the transaction.

D.     Term Sheet. We would permit a preliminary term sheet for ABS to be distributed to an investor
         prior to the time of an investment decision. From time to time, the preliminary term sheet could be
         revised to reflect different or additional terms, and any preliminary term sheet could be redistributed
         to an investor. A final prospectus or prospectus supplement including a final term sheet would be
         filed with the SEC prior to settlement. Each term sheet would contain a legend referring the investor
         to the other information filed with the SEC, stating how such information could be obtained from
         the SEC web site or the issuer, and stating the term sheet is qualified in its entirety by such other
         information.

E.      Free Writing. Although we support more flexibility in communicating with investors, we strongly
         object to any filing requirements for computational materials and free writing. We also believe
         certain definitions in the SECís proposal need clarification. For example, as proposed, factual
         business communications and information filed as part of a registration statement would be
         excluded from the filing requirement for free writing. However, factual business communications
         would exclude information about the offering. Excluding information about the offering from the
         definition of factual business communications is confusing since many factual business
         communications could be considered pertinent to the assets subject to the offering. Moreover, the
         distinction between a registration statement and free writing is confusing since offering information
         required to be in the registration statement includes any offering information disclosed by the issuer
         during the offering period. If the information is not required to be included in the registration
         statement, it should be considered free writing, and it should not be required to be filed with the
         SEC.

F.      Liability. The approach we recommend would not require filing the preliminary term sheet,
         computational materials or free writing with the SEC and would not result in liability for such
         materials under Sections 11 and 12(a)(2). The filing requirements and consequent liability for
         collateral and structural term sheets and computational materials described in the Kidder and PSA
         no action letters have been strenuously objected to by issuers. We would create a safe harbor for
         any preliminary and final term sheet, computational materials and free writing by providing that it
         must be read in the context of other documents and an omission would not be deemed material if
         the omitted information is included in other documents. The investor would have sufficient
         protection because liability under Section 10(b) and Rule 10b-5 of the Exchange Act could be
         imposed with respect to the preliminary term sheet, computational materials and free writing and the
         usual liability for a prospectus could be imposed with respect to the final term sheet as part of the
         prospectus. In addition, the investor would have any available remedies under state law if the terms
         of the transaction are sufficiently unknown or revised after the sale occurs. By taking a balanced
         approach to the standard of liability for ABS, the SEC is more likely to encourage a free flow of
         communication which will benefit investors.

G.      Computational Materials Safe Harbor. To the extent any party is liable for computational materials,
          we believe there should be a safe harbor adopted specifically for ABS comparable to the current
          safe harbor for forward-looking statements under Section 27A of the Securities Act and Section
          21E of the Exchange Act. Unfortunately, Sections 27A and 21E are limited to reporting companies
          under the Exchange Act and exclude initial public offerings; these Sections pertain to
          forward-looking statements such as projections; and these Sections do not clearly cover
          mathematical calculations such as computational materials. In addition, we suggest that the safe
          harbor provision confirm that a legend covering the following types of "warnings" would be
          sufficient as a meaningful cautionary statement for computational materials: (i) the computational
          materials are based on numerous assumptions about the collateral, prepayment speeds, interest
          rates, losses and other factors and (ii) actual results may vary materially.

H.      Prospectus. We support the SECís proposal to require the delivery of a final prospectus only upon
          an investorís request. Eliminating the delivery requirement would save substantial costs and ease an
          administrative burden. We also support delivery of a prospectus in electronic form if such means of
          transmission is acceptable to an investor requesting delivery. We do not support the proposal to
          require earlier prospectus filings with the SEC.
 
 

  VII.    EXCHANGE ACT REPORTS

A.      Exchange Act Proposals.  The SEC has proposed improving the quality and timeliness of
          information in Exchange Act reports by: (i) expanding items of disclosure required to be reported
          on Form 8-K; (ii) accelerating the deadlines for filing reports on Form 8-K; (iii) extending risk
          factor disclosure to Exchange Act reports; (iv) drafting the risk factor and possibly all Exchange
          Act reports in plain English; and (v) expanding the signatories and liability of the signatories for
          Exchange Act reports.

B.       Periodic Reports. Through no action letters and other means, the SEC has recognized for many
          years that financial statements and many other disclosure items in Exchange Act reports are not
          relevant to ABS. Typically an ABS issuer satisfies any reporting requirement primarily by filing the
          periodic reports to investors which are prepared in connection with payments to investors. These
          reports generally include the amount of principal and interest being distributed to various classes,
          loss and delinquency information about the assets, and the availability of any credit enhancement.
          We believe the SECís current approach should be formally provided for in the new regulatory
          system.

C.       No Risk Factors.  An ABS issuer should not be required to include risk factors in Exchange Act
          reports. The essential risks, such as loss and delinquency of the assets and prepayment and interest
          rate impact on yield, are disclosed at the time of the offering, and data relating to such risks are
          disclosed in the periodic reports. A periodic discussion of risks would not be useful or feasible
          because the issuer is a passive entity without an active management.

D.       Deadlines. We believe a filing requirement with respect to ABS issuers could be based on a
          specified number of days after a periodic report is required to be distributed to investors. Special
          deadlines for various events are not necessary because most events of significance to operating
          companies have little significance to ABS transactions. For example, a change in personnel of the
          sponsor would not concern investors in ABS. Other developments, such as a change in the servicer
          or trustee, could be included in the periodic reports.

E.       Plain English. The periodic reports primarily provide numerical information. The reports do not
          contain legal jargon.

F.       Signatories. Increasing the number of signatories and liability of the signatories does not improve
          disclosure because the preparation of the periodic reports is an administrative function performed
          by the servicer of the assets or the trustee for the transaction.
 
 

   VIII.    LIABILITY

A.       Section 11. As proposed by the SEC, Section 11 liability would apply to all the information in the
          registration statement. Consistent with the views of many commentators, we believe that Section 11
          liability currently does not apply to a prospectus supplement or Exchange Act reports incorporated
          into a registration statement after its effective date.

B.       Section 12(a)(2). As proposed by the SEC, Section 12(a)(2) liability would apply to (i) free writing
          materials used during the offering period including forward-looking information and (ii) factual
          business communications made during the offering period to offer securities. We believe that liability
          under Section 10(b) and Rule 10b-5 under the Exchange Act provides sufficient protection of
          investors.

C.      Term Sheet and Computational Materials. In our view, only the final term sheet for ABS should be
          subject to Section 11 and 12(a)(2) liability. Liability of the underwriter under Section 10(b) and
          Rule 10b-5 for computational materials should be sufficient. As explained previously, safe harbors
          should pertain to the ABS term sheet and computational materials.

D.      Sections 5 and 12(a)(1). As proposed by the SEC, the form of the registration statement would not
          be presumed to be correct. Violations under Section 5 of the Securities Act, and the resulting
          availability of rescission rights to investors under Section 12(a)(1) of that Act, may arise if the
          registration is not on the proper form or the registration statement does not contain required
          information. We believe the presumptive form rule should remain applicable.

E.       Signatories. The additional signatories to the registration statement and Exchange Act reports and
          the certification requirement imposed on signatories may result in additional liability of officers and
          directors. As explained previously, we believe that these requirements would produce an
          inequitable result for ABS participants and would not improve the quality of disclosure for ABS.

F.       Underwriterís Due Diligence. We are not commenting directly on the proposals for underwriterís
          due diligence because these proposals generally would not apply to ABS. However, we caution
          that a procedure should not be encouraged as an indication of due diligence unless the SEC
          reasonably believes that the procedure materially adds to the quality of disclosure. Otherwise
          issuers may bear the expense of such procedure without a corresponding benefit to investors.
 
 

   IX.    CONCLUSION

A.      Further Discussion. We commend the SEC for its goal of providing a comprehensive approach to
          ABS which facilitates access to the capital markets in a manner that protects investors. The MBA
          is available to meet with the SEC and the staff and to discuss any questions or comments.

B.       Contact. For questions concerning the matters discussed herein, please contact Starr L. Tomczak
          at LeBoeuf, Lamb, Greene & MacRae, L.L.P. Her telephone number is (212) 424-8444; her
          telecopy number is (212) 424-8500; and her e-mail is STomczak@LLGM.com.