July28,2011 Viaelectronicsubmission OfficeoftheComptrolleroftheCurrency 250EStreet,S.W.

,MailStop23 Washington,DC20219 DocketNumberOCC20110002

55East52ndStreet NewYork,NY10055

Ms.ElizabethM.Murphy Secretary SecuritiesandExchangeCommission 100FStreet,NE Washington,DC205491090 FileNumberS71411 Ms.JenniferJ.Johnson Mr.AlfredM.Pollard Secretary GeneralCounsel BoardofGovernorsoftheFederal FederalHousingFinanceAgency ReserveSystem FourthFloor thStreetandConstitutionAvenue,NW 1700GStreet,NW 20 Washington,DC20551 Washington,DC20552 DocketNo.R1411 Comments/RIN2590AA43 Mr.RobertE.Feldman RegulationsDivision,OfficeofGeneral ExecutiveSecretary Counsel FederalDepositInsuranceCorporation DepartmentofHousingandUrban 55017thStreet,NW Development Washington,DC20429 4517thStreet,SW Comments/RIN3064AD74 Room10276 Washington,DC204100500 FR5504P01: CreditRiskRetention Re: CreditRiskRetention;ProposedRules DearLadiesandGentlemen: TheDepartmentoftheTreasurybyitsOfficeoftheComptrolleroftheCurrency (OCC),theBoardofGovernorsoftheFederalReserveSystem(theBoard),the FederalDepositInsuranceCorporation(theFDIC),theU.S.Securitiesand ExchangeCommission(theCommission),theFederalHousingFinanceAgency (theFHFA)andtheDepartmentofHousingandUrbanDevelopment(HUDand togetherwiththeOCC,theBoard,theFDIC,theCommission,andtheFHFA,the Agencies)haverequestedpubliccommentsontheProposedRulesentitledCredit RiskRetention,Fed.Reg.24,090(April29,2011)(theProposedRules).Dueto thetremendouspotentialimpactoftheProposedRulesonthefunctioningofthe capitalmarketsandtheorderlyflowofcreditthroughouttheeconomy,BlackRock Inc.(BlackRock)welcomestheopportunitytoexpressitsviewsontheProposed Rules. 1

 WeunderstandthattheProposedRuleswouldimplementthecreditriskretention requirementsofSection15GoftheSecuritiesandExchangeActof1934(Exchange Act)asaddedbySection941oftheDoddFrankWallStreetReformandConsumer ProtectionAct(theDoddFrankAct)togenerallyrequireanABSsponsortoretain notlessthanfivepercentofanyassetthatasponsor,throughtheissuanceof securitizeddebtobligations,transfers,sellsorconveystoathirdparty.Asoneof thelargestinvestorsinthefixedincomemarketsingeneral,withasignificantfocus onsecuritizeddebtproducts,BlackRockendorsestheeffortbytheAgenciesinthe ProposedRulestoenhanceandpromotemoreuniformprotectionofinvestor interests.BlackRockbelievesthattheAgenciesshouldadoptacoherentsetof regulationsthatprovideforthecoordinatedandconsistenttreatmentofregulated financialinstitutionsandtheassetbackedsecuritiestheyissueorsponsor. Bywayofbackground,BlackRockisoneoftheworldsleadingassetmanagement firms,managingapproximately$3.6trilliononbehalfofinstitutionalandindividual clientsgloballythroughavarietyofproducts,includingfixedincome,equity,cash management,alternativeinvestments,realestateandotheradvisoryservices.We manageassetsonbehalfofclientsincludingcorporate,publicandmultiemployer pensionplans;sponsoredmutualfunds;endowments;foundations;charities; corporations;officialinstitutions;andinsurancecompaniesandotherfinancial institutions.Ourfixedincomepracticeisoneofthelargestintheworld,with managementofapproximately$1.186trillionoffixedincomeassetsglobally.We haveanextremelystrongspecialization,andasaresult,significantclientholdings, inassetbackedsecuritiestotalingover$145.9billion;ofwhichover$16.4billion arebackedbyresidentialmortgageloans(excludingfederalGSEguaranteed securities);over$29.8billionarebackedbycommercialmortgageloans(excluding federalGSEguaranteedsecurities);approximately$95billioninfederalGSE guaranteedsecurities;andover$4.5billionareothertypesofassetbacked securities. Webelievethismakesusoneofthelargest,ifnotthelargest,investorsin securitizedassets,whichhighlightsourqualificationstocommentontheProposed Rulesaswellasthestrongalignmentofinterestofourobjectiveswiththeorderly functioningoftheassetbackedsecuritiesmarkets. I.OverviewandGuidingPrinciples BlackRockbelievesthatpromotinganorderlyrecoveryinthenewissueprocessin theassetbackedsecuritiesmarketisvitaltoassureadequateflowofcredittoa widerangeofassetclassesandindustrysectors,allofwhicharecriticalinorderto sustaineconomicrecovery.Acriticalissueistheneedforlendingdecisionsacross theeconomy,undertakenbyawiderangeoffinancialintermediaries,tobe undertakenutilizingprudentandappropriateunderwritingstandards,bothasto qualificationoftheborrowerandastothevalueofandriskfactorsassociatedwith pledgedcollateral,ifany.BlackRockbelievesthatsecuritizationisaveryimportant meansforfinancialinstitutionstofundtheirlendingactivities.Promotionof orderlyoversightandregulationoftheassetbackedmarketsisessentialtorestore investorconfidenceand,inturn,toassurethatadequateandwellpricedcapitalis 2

 continuouslyavailable.Restoringconsistentcapitalflowsintheresidential mortgagemarket,obviouslythemoststrickenofallassetlendingsectors,is particularlyimportantgiventheobjectivesarticulatedbytheAdministrations housingreforminitiativeswhichcallforthesystematicreductionofthemarket shareofthefederalmortgagegovernmentsponsoredentities(GSEs). Securitizationhasmanypositivecharacteristicsfromthepointofviewofthe sponsor,whichBlackRockfeelscanbealignedwithprotectinginvestorsinterestsin properlydesignedandexecutedprograms.Benefitstoissuersofassetbacked securitiesincludeassetsaletreatment(whichfreesbalancesheetcapacity);clearly identifiedtransferofcreditrisk;relieffromassetandliabilitymanagement challengesforlongterm,fixedrateassets;andthecreationofincomestreams resultingfromservicingoffbalancesheetassets.Assetbackedissuancealso achievesafundingcostthatisattractivetoborrowersrelativetootheralternatives, astheratingonmanyofthesecuritiesissuedaregenerallyhigherthanthe unsecuredratingsofthesponsorduetotheircollateralizednatureandthe bankruptcyremotenessofthespecialpurposevehicleissuer.BlackRockbelieves thatitiscriticaltopreservethesekeycharacteristicsofassetbackedsecuritiesin ordertoprotecttheultimatefinancialcharacteristicsoftheproductwhileatthe sametimetakingstepstoprotectinvestorinterestsinamannerthatassures adequateandconsistentlyfairlypricedcapital. Wehaveidentifiedseveraloverarchingissuesandconcernsthatshouldbe addressedintherulemakingprocess,whicharesummarizedbelow.BlackRock believesthatmanyoftheseissuesareaddressedwithintheProposedRules; however,wehaveseveralconcernsthatwehavehighlightedbelowanddiscussin moredetailinouranswerstotheAgenciesspecificrequestsforcomment, beginninginSectionIIIofthisletter. HighQualityMortgageUnderwritingStandardsShouldbeImplemented Thefundingandsecuritizationprocessmuststartwithhighquality mortgagesbeingoriginated.Manyoftheissuesandchallengesofthe financialcrisisbeganwithpoorlyunderwrittenloans.Loanunderwriting standardsshouldbeprudent,andmustbeevaluatedandadministered properly. NationalLoanServicingStandardsRegulationShouldbeEstablishedfor ResidentialMortgageLoans,ApplyingtoAllMortgagesandLenders Aswehaveseen,manyoftheproblemswithmortgagesecuritizationswere subsequentlyexacerbatedbyloanservicinginadequacies.Whilewe appreciatetheeffortmadetoidentifydefaultmitigationprotectionsforthe qualifiedresidentialmortgage(QRM)standard,wethinktheoverall approachisnotsufficientlyrobustandthatitwouldbepreferableto incorporatethesetypesofprovisionsinnationalmortgageservicing

 standardsregulationsthatwouldapplyuniformlytoallresidentialmortgage loans(regardlessofQRMeligiblestatus). HoldersofaFirstLienShouldMaintainSenioritytoSecondLien Holders Muchhasbeensaidabouttheimportanceofbringingbackprivatecapitalto thesecuritizationmarketsandthesponsorrole.Unfortunately,veryfew transactionshaveoccurredinwhatwasonceathrivingmarket.Akeyissueis thetreatmentofinvestorsinfirstlienmortgages.Contractualrightsofthe firstlienholdermustbeaffirmed.TheProposedRules(i.e.,throughtheQRM definition)provideprotectionatissuanceforfirstlienholders,butshouldgo furthertoensurethatsecondlienfinancingisnotusedtosignificantly increasetheriskprofileunderthefirstlien. AssetInformationShouldBeTransparentandAccessible Investorsshouldhavetimelyandaccurateinformationontheassetpool, includingallrelevantcreditperformancestatisticsatthepointofissuance andonanongoingbasis. Itiscriticalthatinformationbemadeavailableona timelybasisthroughmeansthatarenotimpactedbyanyconflictwithor controlbythesponsor,theservicerorotherpartiestothetransaction. Transparencyofassetinformationwillbenefitinvestors,sponsorsand servicersbyequalizingthedataevaluatedaspartoftheinvestmentdecision makingprocessatissuanceandduringtheongoingservicingoftheassets. ConflictsofInterestShouldbeIdentifiedandManagedProperly Anypotentialconflictsbetweenthesponsorand/ortheservicerand investorsshouldbeclearlyidentifiedandtheirimpactshouldbemitigated throughcarefulcommerciallydocumentedtermsthatarefullydisclosed. Thepotentialconflictsthatmayariseovertimebetweendifferentclassesof holdersintheassetbackedtransactionshouldberecognizedandcontractual procedurestodealwithsuchconflictsshouldbeidentifiedandclearly disclosed,includingfullanddemocraticdisseminationofinformationto decreasetheimpactofanyinformationarbitragebetweentheparties. InterestsBetweenSponsorsandInvestorsShouldbeAligned Recognizingthatassetbackedsecuritizationisarisktransferbetweenthe sponsorandtheinvestorsintheresultantsecurities,itiscriticaltohavefull andcleardisclosureofthenatureofallrisksbeingtransferred,bothatthe assetlevelandasaconsequenceofthestructuralcharacteristicsofthe securitizationsterms.Effortsshouldbemadetopromoteaccountability throughtheimplementationofappropriatecreditriskretentionbysponsors withrespecttohigherriskpools. 4

ReconsidertheDefinitionofQualifiedCreditStandardsasan ExemptionfromtheCreditRiskRetentionRequirements Whileweendorsetheefforttoestablishqualifiedcreditstandardsthat wouldexemptanissuerfromcreditriskretentionrequirements,webelieve theproposedstandardsaretooconservativeandincludetoosmalla universeofpotentialnewloanoriginations,particularlyinthecaseof residentialandcommercialrealestatemortgageloans. Inthecaseofresidentialmortgageloans,webelieveaconservativeQRM standardshouldbeestablishedthatasamatterofcoursewouldbeexpected toaccommodatebetween40and60percentofcurrentloanproductionand establishtheQRMstandardasapracticalindustrybestpractice. Inthecaseoftheresidentialmortgageloanstandards,lendersshouldbe incentivizedtoconformlendingstandardstoseekQRMeligibility,whichwill notoccurifthestandardsareunachievableduetotheirdegreeof conservatism. Itwouldalsominimizethepotentialcostsassociatedwith creditriskretentionforareasonablesegmentofthemarket,whichis importanttoprovideforthemostcosteffectivemortgageratesinorderto promotetheongoinghousingrecovery. ImplementMoreFlexibleQualifiedCreditStandardsbyEvaluating IndividualLoansonaMatrixBasis,ParticularlyforResidentialand CommercialMortgages Weendorsetheconceptofevaluatingqualifyingloanexemptionsonan individualloanbasisasopposedtoapoolingbasis.Wethinkthiswill minimizeabusesandbetterprotectinvestorinterests.However,webelieve thataonesizefitsallapproachisnotappropriate.Foranindividualloanwe believethatthecreditstandardsshouldbedefinedonamatrixbasis,which wouldallowaconservativeloanunderwritingfactortooffsetanaggressive loanunderwritingfactoruptopredefinedlimitsforindividualfactors(as definedinthematrix).Forresidentialloans,themainvariablefactorswithin thematrixshouldbeloantovalueratio,abilitytorepayandborrowers credithistory.Forcommercialloans,themainvariablefactorswithinthe matrixshouldbeloantovalueratioanddebtservicecoverageratiowhich couldbesetbyproducttype. FormsofCreditRiskRetentionShouldbeMoreFlexible Weendorsethenotionofprovidingmultiplemeansforsponsorstofulfill creditriskretentionrequirements,aswebelievethiswillresultinsponsors selectingamethodwhichwillminimizetheeffectivecoststothemofthe arrangement(whichwillinturnbepassedonintheformoflowercoststo 5

 theborrowers). Weadvocategivingsponsorsmoreflexibilitythanthe requirementsoutlinedintheProposedRulestosatisfycreditriskretention throughthecombinationofvariousmeanswithinasingletransaction. However,webelievetherepresentativesamplemethodofcreditrisk retentionshouldberemovedasanoption.Ourviewsaredescribedmore fullybelowinSectionIII.B.5. EliminatetheProposedPremiumCaptureCashReserveAccount Provisions BlackRockbelievesthepremiumcapturecashreserveaccountprovisions shouldbeeliminatedfromtheProposedRules.AsoutlinedbelowinSection III.B.9,webelievethemethodasdescribeddoesnotfairlycharacterizea sponsorsgainuponasecuritizationandcouldresultfrommarketmoves duringtheaccumulationperiodfororiginatedcollateral,withsuchamounts requiredtobedepositedinthepremiumcapturecashreserveaccount actuallyoffsetbylossesonhedgetransactions. RefinetheCreditRiskTransferProvisionsforCommercialRealEstate MortgageSecuritizations Weendorsetheefforttoprovideuniquetreatmentforsponsorsof commercialrealestatemortgageloansecuritizationsthroughtheindustry practiceofthesaleofsubordinateintereststoqualifiedinvestorsthat conducttheirownindependentreviewoftheloanpool.However,asnoted belowinSectionV,thereareseveralrefinementsthatwefeelarecriticalto bemadetotheProposedRulesinthisrespectinordertomaintainaviable CMBSnewissueprocessandadequateflowofcapitaltothecommercialreal estateloanindustry. ConsiderBroaderRelieffromCreditRiskTransferRequirementsfor AssetClassesWhereCreditAbuseGenerallyHasNotOccurredorHas BeenSufficientlyMitigatedThroughtheExistingStructures,Sponsors orServicersintheMarkets. Wesupportbroaderrelieffromcreditrisktransferrequirementsforasset classes(e.g.,creditcards,autoloans,studentloans,tenderoptionbonds,and assetbackedcommercialpaper)wherecreditabusegenerallyhasnot occurredorhasbeenmitigatedthroughtheexistingstructures,sponsorsor servicersinthemarkets.Inparticular,wenotethat: Theproposedqualificationstandardsforanexemptionfromcreditrisk retentionforautomobileloansaretooconservativegiventhe characteristicsofthatmarketanditspoolofborrowers.

 Theexemptionformunicipalsecuritiesshouldincludetenderoption bondscollateralizedbymunicipalsecurities. Thecriteriaforassetbackedcommercialpaperissuancesshouldbe expandedtoincludethetypesofprogramspredominantlyavailableinthe currentmarket.

II.GeneralDefinitionsandScope BlackRockissupportiveoftheAgenciesefforttoproposetighterregulationand controlswithrespecttoassetbackedsecuritizationsacrossthewiderangeof assetclassesandstructures. Inourview,whatisnowreferredtoastheshadow bankingsystemgrewtotremendousscaleduringthecreditbubbleandthelack ofcleardefinition,regulationandoversightclearlyledtoabuses,including insufficientrepresentationofinvestorsinterests.WebelievethattheAgencies arecorrectinfocusingonvariousformsofsecuritizeddebtissuance,including termassetbackedsecuritizations,revolvingtruststructuresandassetbacked commercialpaperconduits,asallrepresentedsubstantialscaleinthe marketplaceatthepeakofissuanceforsuchproducts. Wealsobelievethatthoughtfulcoordinationbeyondvariousinitiativesmustbe undertakentoensuresoundcapitalmarketconditions,includingconformity withthedefinitionofaQualifiedMortgageundertheTruthinLendingAct (TILA);strengtheningofregulationandsupervisionofnationallyrecognized statisticalratingagencies;greaterreportingandcertificationrequirementsof assetbackedsecuritiesissuers;andadoptionofnationalmortgageservicing standards. Togetheralloftheseactionsmustbecompletedandwell coordinatedtoensureappropriatemarkettransparencyandinvestorprotection. Weappreciateandsupportthedifferentiationthathasbeenestablished betweenthetreatmentofdifferentassetclasseswithinsecuritizedproducts,as clearlydifferentfactsandcircumstancesexistbetweenthesesectors,including thelevelofdisciplineamonglendersandissuersduringthecreditbubble. BlackRockendorsesthedifferentiateddefinitionofsponsorandoriginatorinthe ProposedRules,forthepurposeofprovidingfortheoptiontoallocaterisk retentionresponsibilitiestotheoriginatorincertaincircumstances.We generallysupportexpandingthescopeofthisprovisiontomakeitmoreflexible, aswebelievethattheoriginatorisinthemostaccountablepositionto understandandassumetheriskgivenitscloseconnectiontotheborrower. Topromotemaximumflexibilityinthefuture,BlackRockbelievesthatitmaybe prudenttoallowtransactionswithmultiplesponsorstoassumeindividual proportionsoftheriskretentionresponsibilities,ratherthanrequiringoneof thepartiestoassumetheentiretyoftheriskretention.Thiscouldbedefinedto beallocatedproportionatelytoassetcontributionandwouldpromotebetter accountabilitybetweentheparties. 7

 Wedonotbelievethatconsiderationoftheriskofnonpaymentbytheissuing entity,unrelatedtotheassets,isappropriatetoconsiderintheProposedRules andthetreatmentofriskretention.Itisimportanttopreservethebankruptcy remotestatusofandaccountingtreatmentforsecuritizationinordertopreserve thefinancialadvantagesoftheproductandpromotetheorderlyflowofcredit. Whiletheremaybenumerousformationstepsinanysecuritization,webelieve thatitisvalidtolookthroughthevariousstepsandimplementtheriskretention rulesonlyonceandattheappropriatepointforthebenefitofthesecuritized debtholders. However,providingforadequateflexibilityastowhereinthe securitizationchainthisisaccomplishediscriticaltoallowforsaletreatmentof aprospectiveissuanceandthusthefinancingcostadvantageofsecuritization whichispassedontoborrowersintheformoflowerborrowingrates. III.GeneralRiskRetentionRequirement A. Minimum5PercentRiskRetentionRequired BlackRockissupportiveinprincipleoftheminimumrequirementof5%risk retentionbysecuritizationsponsorswithanappropriateexceptionforQRM eligibleresidentialmortgagepoolsandotherqualifiedcreditstandardsforother assettypesorotherexemptionsasdiscussedinthisletter.Webelievethatsuch arulewillpromotebetterlendingquality;protectinvestorinterests;andsharply limittheoriginatetosellbusinessmodel,wheresufficientincentivesfor prudentloanoriginationstandardsgenerallywerenotmaintained. B. PermissibleFormsofRiskRetention Withsomeexceptionsasnotedbelow,wearesupportiveofofferingsponsors multipleavenuestofulfilltheirriskretentionrequirements,includingvertical risk,horizontalriskandLshapedriskretentionoptions.Werecommend eliminationoftherepresentativesamplemethodofriskretentionforthe reasonscitedbelow. Werecommendallowingsponsorstosatisfytherisk retentionrequirementthroughablendedcombinationoftheoptions,suchthat theinvestorprotectioncanbeachievedwhilesimultaneouslyallowingissuersto optimizetheirfinancial,capitalandaccountingoutcomeswithrespecttoa transaction.Wethinkthiswillproveusefultooptimizethecostofcapitalina securitizationwhich,inturn,willpasstheoptimalandmostcompetitiverates throughtoborrowers. Wethinkitisimportanttonotethattheproposedpermissibleriskretention optionsultimatelyhavedifferentfinancialproperties.However,asthefinancial characteristicsoftheindividualriskretentionoptionsarequitedifferent,the marketvalueoftheriskretentionasapercentageofthemarketvalueofthe wholetransactionwillgenerallybelessthan5%,possiblysignificantlylessthan 5%.Wepointthisoutforclarificationas,inouropinion,theactualskininthe gamewillbejudgedonamarketvaluebasis,andthevariousoptionsarenot likelytoresultinuniformcharacteristics. 8

Forthereasonssetforthbelow,BlackRockdoesnotrecommendadoptingthe provisionsrequiredbythePremiumCaptureCashReserveAccountassetforth intheProposedRules. BlackRockbelievesthatitisreasonabletoconsiderallowingthesponsorto transfertheriskretentionholdingatsomepointpriortothefullmaturityofthe transaction.Inthecaseofresidentialmortgagesecuritizations,thefullfinal maturityistypically30yearswhichseemstobeanunreasonablylongholding period. Forresidentialmortgageloans,wethinkitwouldbereasonableforthe sponsortobeabletotransferthecreditriskretentioninterests,subjecttoall rightsremaininginplaceforthesubsequentholder,afteraperiodof5years subjecttoabsenceoflitigationandmaintenanceofpreagreedspecific performancecriteria.Weconcurwiththeproposedtransferproceduresrelative toCMBSissuanceintheProposedRules,whichconformtoexistingprocedures inthatmarket. Fromaninvestorsperspective,webelievethatnumerousissuesofsignificance continuetoexistwithrespecttoassetbackedsecuritiesandshouldberesolved, includingtheCommissionadoptingadditionalregulationsaddressingdisclosure inABStransactionsascontemplatedbySection942(b)oftheDoddFrankActas wellasauniformnationalmortgageservicingstandard.Wealsobelievethere shouldbeimprovementsinrepresentationsandwarrantiesinsecuritization transactionsandthatinvestorsshouldbeinapositiontoensurethe enforcementofremediesassociatedwiththebreachofrepresentationsand warranties,inaconflictfreeenvironment.WenotethatonJuly26,2011,the Commissionreleaseda"ReproposalofShelfEligibilityConditionsforAsset BackedSecuritiesandOtherAdditionalRequestsforComment"(RIN3235 AK37). Whilewehavenothadanopportunitytofullyreviewtheproposaland arenotcommentingonithere,wereiterateourgeneralsupportforrules promotinggreatertransparencyinsecuritizationtransactions,providingfor enhancedmeansforcommunicationsamonginvestorsandprovidingadditional meanstoenforce,andresolvedisputeswithrespecttobreachesof, representationsandwarranties. WenotethatinfashioningappropriateriskretentionrequirementstheAgencies shouldbecautioustoavoidimposingrequirementsthatcouldchokeoffsectors ofthesecuritizationmarket.Webelievethedifferentiatedtreatmentof commercialloansandcommercialrealestateloansintheProposedRules,for instance,isappropriateinlightofthedifferentiatedfactsandcircumstancesof thoseproductscomparedwithresidentialmortgageproducts. InresponsetotheRequestforComment(RFC): RFC13.Weagreethattheproposedmenuofoptionsapproachtorisk retentionisappropriateandsponsorsshouldbeabletosatisfytheriskretention requirementthroughacombinationofoptionsastheydeemappropriate.We 9

 notethatwerecommendeliminationoftherepresentativesampleoption,for thereasonssetforthbelow. RFC14(a).WebelievethattheAgenciesshouldnotmandatethatsponsorsusea particularformofriskretentionforspecifictypesofassetclassesorspecific typesoftransactions.Instead,sponsorsshouldselecttheoptionachievingthe bestaccounting,capitalandcostalternativefortheircircumstances,whichwill resultinthelowestcostofcapitalbeingpassedontoborrowers. RFC15.Theproposedmenuofoptionsapproachfurtherstheobjectivesofthe statutetoprovidesecuritizerswithanincentivetomonitorandcontrolthe underwritingqualityofsecuritizedassetsandtohelpalignincentivesamong originators,sponsorsandinvestors. RFC20.Additionaldisclosureastowhythesponsorchoseaparticularrisk retentionoptiondoesnotseemnecessaryfromaninvestorperspective. RFC22.Withrespecttowhetherthemethodologiesproposedforcalculatingthe required5%exposureundereachoftheoptionsareappropriate,wenotethat, asdiscussedinourintroductorystatementsabove,thevarious5%options wouldrepresentadifferent,andinsomecasesmuchlower,percentageofthe totalmarketvalueofthetransaction. Withrespecttotheproposedformsofriskretention,wenotethefollowing: 1. VerticalRiskRetention BlackRockbelievesthatverticalriskretentionistheproposalthatistheleast likelytoresultinconflictsbetweenthesponsorandinvestors,giventhe sponsorsproportionateexposureacrosstheentiretransaction.Wethinkit isaveryeffectivemeansofpromotingalignmentofinterestbetween sponsorsandinvestors. 2. HorizontalRiskRetention Whilethisoptiontheoreticallyplacesthesponsoratthelargestriskinthe transaction,asapracticalmatteritinallprobabilityallowsthesponsorto retainthelowestpercentageofmarketvalueofthetotaltransaction.This optionalsocreatesthelargestpotentialconflictofinterestbetweenthe sponsorandtheholdersoftheotherclassesofsecurities,totheextentthe servicerhascontroloverdecisionsthatcouldoptimizethevalueofthis particulartranchebutarenotalignedwiththeoptimizedinterestsofthe otherandmuchlargertranches. Inprinciple,BlackRockfeelsthatasponsorshouldnotbeprohibitedfrom selectingthehorizontalriskoptionandactingasservicer,butitisextremely

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 importantthatservicingstandardsbedevelopedthatwouldaddressthe inherentpotentialconflictofinterestsinherentinsuchaconstruct. Weendorsetheconceptofthecashreserveaccountasanoption;however, wefeelitwouldbebeneficialtoallowamixofacashreserveaccountand securityretentionforasponsortosatisfyitsriskretentionrequirements. Whiletheprincipaloftheretainednoteshouldbesubordinatetoallother tranches,itwouldbecustomaryfortheholderofthisretainedinterestto receivecurrentpaymentsofinterestifcreditperformanceofthewholepool isabovepreidentifiedtriggerpoints.Insomecases,interestmayaccrue untilatargetedleveloftotalovercollateralizationisachieved,again accordingtoapredeterminedformula. BlackRockfavorsthehorizontalholdingnothavingastepdown,whereby principalamortizationoccursinparallelwithothertranches,whichisour interpretationoftheProposedRulesaspresented. 3. LShapedRiskRetention BlackRockissupportiveoftheLshapedRiskRetentionoption.Inprinciple wearenotopposedtotheproposedrequiredequalproportionofholdingsof classes(verticalandhorizontal)underthisoption;however,webelievethat sponsorsshouldhavegreaterflexibilitytocombinetheoptionsastheyseefit tooptimizethetreatmentofthetransactionfromtheirperspective. 4. RevolvingAssetMasterTrusts(SellersInterest) BlackRockissupportiveofa5%Seller'sInterestriskretentionoptionfor revolvingassetmastertruststhatreflectscurrentmarketpractices.Weare concerned,however,thattheProposedRulesrequireaSeller'sInterestto conformtocertainstandardsthatarenotconsistentwithSeller'sInterestsin thecurrentmarketandthatwouldbedetrimentaltotheinterestsof investors. InresponsetotheRequestforComment: RFC41(a). Retentionofa5%Seller'sInterestinarevolvingassetmaster trustshouldbepermittedtosatisfyabaseriskretentionrequirement.We aresupportiveofanalternativethatexposestheholderoftheSeller's InteresttoriskthatisnolessthantheriskbornebytheABSinvestorsonthe assetpool. 5. RepresentativeSample BlackRockrecommendsthattherepresentativesamplemethodofrisk retentionberemovedfromtheProposedRule.Wefundamentallybelieve thatriskshouldbeisolatedandretainedwithrespecttoeachtransactionto 11

 ensureprecisionandaccountability.Further,itisquiteclearthatcompliance withsucharepresentativesampleriskretentiontestcouldbeaccomplished onaninstitutionwidebasiswhilenotholdingindividualbusinessunits accountableforthequalityandsupervisionoflendingandsecuritization activities. Inspiteofeffortstoprescribeacceptablemethodstoverifythe sample,characteristicsofloansandlayeredriskscanbedifficulttoidentify inordertoensuresimilaritytosecuritizedpools.Acommonoccurrencein thepastwasforinstitutionstosecuritizeriskierassetsandholdlowerrisk assets,anasymmetrythatthisformofriskretentioncouldcontinueto inadvertentlyencourage. BlackRockbelievesthemonitoringandsurveillanceaspectsofthisformof riskretentionareparticularlycumbersomeandpotentiallyunrealistic, includingbutnotlimitedtothetrackingandpublishingofcredit performanceresultsoftheloansampleandthesecuritizedloanpool. InresponsetotheRequestforComment: RFC47.BlackRockopposestheinclusionoftherepresentativesample alternativeasariskretentionoptionintheProposedRules.Weseeitas fundamentallydifferentfromtheotheroptionsasitisnotaselfcontained optionspecificallyrelatedtothesecuritizationissueandstructureandthe particulargroupingofloanssecuringthesecuritization. Forlarger institutions,theconditioncouldeasilybemetbytheorganizationasawhole holdingtherisk,which,inlightofthepotentiallysmallsizeofthe5% requirementrelativetoanentireportfolioofloanholdings,wouldresultin anindividualbusinessunitengagedintherelatedcapitalmarketsactivities notbeingheldaccountable.Theproposednatureofselection,particularlyas tocomparability,andtheongoingreportingrequirementsareuntenableand intheabsenceofspecialsupportdifficultforindividualinvestorstomonitor andinterpret.Beyondthenewissueprocess,webelievetherandomsample methodprovidesalessviablemethodologyinthesecondarymarket,as opposedtoastructuralretentioninthesecuritization,asitiscumbersometo explain,theimplicationsoftheriskretentiononthepartofthesponsoris hardertounderstand,andtheongoingsurveillanceoftheindependentloan pool,andresultsthereof,aredifficulttorelaytoanindividualsecurities purchaser. RFC48.BlackRockbelievesthatthemechanismsintheProposedRulesare inadequatetoensuremonitoringoftherandomizationprocessifsuchan alternativewerepermitted.Webelievethatitisproblematictodevelopand maintainaviablemonitoringprocessforthisparticularoptionthatwouldbe understandabletothemarketplace.Inaddition,asnotedelsewhereinthe comments,webelievethatfurtherdetailsonsurveillance,complianceand monitoringshouldbeincludedacrosstheProposedRulesasawhole.

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 RFC49. Withrespecttotherequestforcommentregardingtheappropriate numberofassetsforthedesignatedpool,wenotethatrequiringaloan sampleof1,000loansinherentlyfavorstheuseofthisoptionforconsumer loanshavingsmallerbalances,versuslargercommercialandcommercialreal estateloans. Eventhen,thenatureoftheproposalundulyfavorslarger institutionsgiventherequiredscaleofa1,000loansample.Forinstance,in thecaseofresidentialmortgageloanswheretheaverageloanbalanceis $350,000,a1,000loansamplewouldrequireaminimumportfolioholdingof $350millioninorderforaninstitutiontobeeligibletoutilizethismethod. Ingeneral,BlackRockfavorsalevelplayingfieldtoassurethebroadestflow ofcredit. RFC50.Thelargestproblemwiththerandomsamplemethod,inourview,is thedifficultyindeterminingtheexactcharacteristicswithinaloan,and hencefromabroadsample,thatloansareinfactcomparablecreditsand thereforelikelytoexhibitsimilarriskandperformancecharacteristics.We believethatthismatterinvolvestheexerciseofprofessionaljudgmentand hence,acrossthewiderangeofloantypescontemplatedbytheProposed Rules,wouldbedifficulttocodifyinameaningful,reliableandconsistent manner. 6. AssetBackedCommercialPaperConduits TheProposedRulesincludeaspecificexemptionfromthegeneralrisk retentionrequirementsforeligibleassetbackedcommercialpaper(ABCP) conduits. ThecommentarytotheProposedRulesstatesthatthisoptionis designedtotakeaccountofthespecialstructuresthroughwhichABCPis issuedaswellasthemannerinwhichexposuretotheunderlyingcreditrisk istypicallyretained.However,therequirementsintheProposedRulesfor aneligibleABCPconduitareoverlyrestrictiveandarenotconsistentwith thestructureofexistingcommercialpaperconduitsorthestructureof originatorsellerswhosellABSintereststoconduits. InresponsetotheRequestforComment: RFC59. BlackRockbelievesthatitwouldbeappropriatetoprovidearisk retentionexemptionforABCPconduitswhicharecollateralizedby"15G compliantABS"(ABSissuedinasecuritizationtransactionforwhichcredit riskwasretainedasrequiredundertheriskretentionrulesorwhichwas exemptfromthecreditriskretentionrequirementsinaccordancewiththe rule),wheretheissuingentityisbankruptcyremoteandoneormore regulatedliquidityprovidershaveenteredintoalegallybindingcommitment toprovide100percentliquiditycoveragetoallABCPissuedbytheissuing entity.Wefurthernotethatintypicaltransactionstructures,banksponsors ofmultisellerABCPconduitsmayprovideadditionalcreditenhancementby issuinganirrevocable,unconditionalletterofcredit(LOC)totheABCP conduit. Asaresult,thebanksponsoroftheconduitisinplacetoabsorb 13

 lossesuptothelimitoftheLOC.WebelievethatthisLOCstructure effectivelyprovidesforadditionalriskretentionbythebanksponsor,and thatanirrevocable,unconditionalLOCshouldbeonemechanismfor providingqualifiedriskretentionundertheProposedRules. RFC60(a)(b).TheProposedRulesdefinitionofeligibleABCPconduitis overlynarrow;existingmultisellerconduitswouldnotbeeligible.With respecttowhetherthedescriptionofABCPstructuresintheProposedRules isaccurate,wenotethatundertheProposedRulesanoriginatorsellerthat sellsassetstoacommercialpaperconduitisrequiredtoretainaneligible horizontalresidualinterestandsellanyremaininginterestintheassetsit securitizestooneormoreABCPconduits.Thisisinconsistentwithtypical transactionstructureswhere,forinstance,acreditcardmastertrustmaysell seniornotestoaconduitandatthesametimesellmezzaninenotestoother investors. Also,insomecasesanABCPconduitpurchasesaninterestina classofsecuritiesorprovidesfinancingtoanoriginatorwhileother investorswhoarenotABCPconduitspurchasesecuritiesofthesameclassor provideloansofequalpriority.Limitingtheownershipoftheremaining interestsolelytoABCPconduitswouldsimilarlyprohibitamastertrustfrom availingitselfofthisexemptionifithadothertranchesorseriesofnotes outstandingthatwereheldbyinvestorsthatwerenotABCPconduits. Requiringanoriginatorsellerthatsellsassetstoacommercialpaperconduit tosellallinterests(otherthantheretainedeligiblehorizontalresidual interest)toABCPconduitswillneedlesslyreduceliquidityinthemarket. BlackRockthereforerecommendsthattheABCPconduitexemptionbe broadenedtoallowforthesaleofintereststootherentitiesaswellasto ABCPconduits. RFC61.WebelieveitisnotnecessaryfortheProposedRulestomandate financialdisclosurerequirementsregardingtheliquidityproviderfor securitizationsstructuredusingABCPconduits.Marketparticipantsand investorscurrentlyhaveaccesstofinancialinformationregardingliquidity providers. RFC6566. TheProposedRuleswouldrequiredisclosuretoinvestorsof thenamesoftheoriginatorsellerstoaneligibleABCPconduit.Weare significantinvestorsintheABCPconduitmarket,andwhilewearestrongly infavoroftransparencyandmarketinformation,webelievethatinthis instance,theproposeddisclosurerequirementisunnecessaryduetothe marketstructureforthesesecuritizations,includingtheirtypicalcredit enhancements.Inparticular,wenotethatprogramsponsorsviewthenames oforiginatorsellersasahighlyconfidentialandproprietaryclientlist.Other informationregardingoriginatorsellersisalreadyprovidedtoinvestors withoutidentifyingthembyname.Providingthenamesoforiginatorsellers, particularlyformultisellerABCPconduits,couldsignificantlyshrinkthis criticalfundingmarket.Asanalternative,theprogramsponsorcouldprovide

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 thenamesoforiginatorsellersormakethemavailabletotheirprimary regulatoronaconfidentialbasis. 7. CommercialMortgageBackedSecurities BlackRocksupportstheretentionofthefirstlosspositionbyathirdparty purchaserwithrespecttosecuritizationsofcommercialmortgages.We believethattheBPiecebuyersprovideastrongcheckandbalancetothe originateforsalemodelutilizedbytheCMBSmarket.Theoriginateforsale modelwascriticalinattractingcapitaltotheoriginationofcommercialreal estate(CRE)loansacrossthecreditspectrumandtheabilitytorecyclethat capitalintothatspecificmarketniche;theincentivesofthemodelwere mitigatedmoreeffectivelyalignedintheCMBSmarketduetothepresenceof BPiecebuyers.TheBPiecebuyerhadtheabilitytorejectCREloansor demandtherestructureofloanspriortogoingintothesecuritization transaction,thusprovidingloanbyloanindependentviewoftheportfolio priortosecuritization.Thisisthesamelevelofinvestorprotectionthe AgenciesareattemptingtoreinstatewiththeProposedRules.TheAgencies arecorrectinrestrictingthetransfertotwomethods:(1)sponsorretention of5%ofthefirstlosspositioninthecapitalstructureofadeal;or(2)the restrictivesale(s)oftheBPiecetoasetofqualifiedbuyersthatwouldnotbe abletoutilizenonrecoursefinancing. InresponsetotheRequestforComment: RFC68(a).Forreasonsmentionedabove,BlackRockagreesthatathirdparty purchasershouldbeallowedtopurchasetheBPiece.However,BlackRock believesthatsuchBPiecebuyershouldbeaqualifiedBPiecebuyerbased oncertainpredeterminedcriteriaofexperience,financialanalysiscapability, capabilitytodirectthespecialservicerandcertainfinancialcapabilitiesto sustainsomelosses. RFC70.Theuseofathirdpartypurchaseroptionshouldbeconditioned,as proposed,onarequirementthatthethirdpartypurchaserseparately examinetheassetsinthepoolandhavealimitedabilitytosellorhedgethe interestitisrequiredtoretain.Intermsofasaleoftheretainedinterest,aB Piecebuyershouldbefreelyabletosellitsinteresttoaqualifiedtransferee atanytime.Aqualifiedtransfereewouldhavethesamequalificationsasthe BPiecebuyersothisentitywouldbequalifiedtoconductitsowndue diligenceandhavethecapabilitytodirectthespecialservicer. RFC71(a).BlackRockdoesnotbelievethatuseofathirdpartypurchaser optionshouldbeconditionedonarequirementthatthepurchasepricepaid bythethirdpartybedisclosedifallotherrequireddisclosuresareprovided. (b)Thepurchasepriceisnonpubliceconomicinformation.Further, disclosureofthepurchasepricedoesnotfurthertheobjectivesofthe inclusionofthisoption,whicharetoallowotherinvestorstoavail 15

 themselvesofthediligenceconductedbytheBPiecebuyeranddisclosureof therisksdiscoveredintheindividualloans. RFC72.CertaindisclosureconcerningthefinancialresourcesoftheBPiece purchasershouldberequired. Asdescribedearlier,BlackRockbelievesthat BPiecefinancingshouldbelimitedtorecoursefinancingsthusrequiringthe BPiecebuyertoretainsufficientriskandnotentirelyoffloadthisriskwith 100%nonrecoursefinancing. RFC 73(a).Theruleshouldspecifyparticularinformationaboutathirdparty purchaserthatshouldbedisclosedratherthanrequiringdisclosureofany otherinformationofthethirdpartypurchaserthatismaterialtoinvestors, asthislatterrequirementisvague.BlackRockrecommendsthatthefinal rulerequiredisclosureofthefollowingadditionalinformation: (i)thename andformoforganizationofthethirdpartypurchaser,(ii)adescriptionofthe thirdpartypurchasersexperienceininvestinginCMBS,(iii)theamountof theeligiblehorizontalresidualinterestthatthethirdpartypurchaserwill retain(orhasretained)inthetransaction(expressedasapercentageofABS interestsintheissuingentityandasadollaramount),(iv)thematerialterms ofsuchinterest,(v)theamountoftheinterestthatthesponsorwouldhave beenrequiredtoretainifthesponsorhadretainedaninterestinthe transactionpursuanttothehorizontalmenuoptionand(vi)thematerial assumptionsandmethodologyusedindeterminingtheaggregateamountof ABSinterestsoftheissuingentity. RFC74.BlackRocksuggeststhefollowingmodificationstotheOperating Advisor(OA)framework: o ensurethatanOAwillbepresentineveryCMBStransaction; o modifythestructureoftheOAframeworksothattheOAsauthority tooverseethespecialservicersperformanceandtoremovethe servicerdependsonwhethertheBpieceisthecontrollinginvestor class,ratherthanonwhethertheservicerisaffiliatedwiththeBpiece buyer; o clarifythevagueconsultationauthoritythatisaccordedtotheOAin theProposedRulessothattheOAwouldplayanoversightroleunder theappropriatecircumstances.Thiscouldbeaccomplishedby requiringtheOAtooverseethespecialservicerandmakesurethat theservicersatisfiestheservicingstandards(includinginformation disseminationprovisions)setforthinthepoolingandservicing agreement(PSA)governingthetransactionwhen(1)theBpiece buyerisnotthecontrollinginvestorclass,or(2)theBpiecebuyeris thecontrollinginvestorclassandanyinvestorhassubmitteda complaintaboutthespecialservicersperformance; 16

 o qualifytheauthorityprovidedtotheOAtoremoveaspecialservicer forfailuretocomplywiththespecialservicersobligationsunderthe PSA,byalsorequiringaminimumaffirmativeinvestorvotein circumstanceswheretheBpiecebuyeristhecontrollinginvestor class; o adjustthecriteriaforOAindependencetoaddressthefactthata limitednumberofinstitutionswillbequalifiedtoserveasOAsfor CMBStransactions,butincludedisclosurerequirementsandinternal controlstoaddresspotentialconflictsofinteresttotheextentthey ariseinthemarket;and o includearequirementthattheOAisinformedofalldefaults, workoutsandanymajordecisionstakenbythespecialservicer,even duringtheperiodwhentheBpiecebuyeristhecontrolling shareholder. RFC75(a). BlackRockbelievesthatadditionaldisclosurerelatingto representationsandwarrantiesconcerningtheassetsforCMBSshouldbe required. Inparticular,astandardizedformatofdisclosureof representationsandwarrantiesshouldbeemployed.Forexample,theCRE FinanceCouncil,comprisedofawiderangeofindustryleadingparticipants, hasdevelopedModelRepresentationsandWarrantiesthatrepresenttheir membersviews.Whilenotallmarketparticipantsmaysubscribetothis standardform,BlackRockfeelsitiscriticaltodiscloserepresentationand warrantiesinamannerthatallowseasyandstraightforwardevaluationand comparisonbetweentransactions.Inaddition,loanbyloanexceptionsto therepresentationsandwarrantiesshouldalsobedisclosedtoall prospectivebondinvestors. RFC76(a).BlackRockbelievesthatitisunnecessarytorequirethatinvestors beprovidedwithablacklineoftherepresentationsandwarrantiesforthe securitizationtransactionagainstanindustryacceptedstandardsolongas therepresentationsandwarrantiesthemselvesaredisclosed.However,the ruleshouldrequirethatallexceptionstotherepresentationsandwarranties forthesecuritizationtransactionbeprovidedtoinvestorsinthepreliminary offeringdocumentsandasanexhibittothepoolingandservicingagreement andbefiledwithEdgarinthecaseofpublicofferings. 8. TreatmentofGovernmentSponsoredEnterprises BlackRocksupportstheproposedtreatmentoftheGSEsintheProposed Rules.InthecaseofFannieMaeandFreddieMac,thepresumedlimitedlife oftheirrespectiveconservatorshipsandtheoversightofFHFAprovidesa brightline,sunsetprovisiontorevisittheproposedexemptionsrelatingto riskretentionwhentheircircumstancesevolveinthefuture.Webelievethe factthattheGSEsallprovidefullguaranteeoftimelyprincipalandinterest 17

 ontheirsecuritizationsmorethanfulfillstheletterandspiritoftheProposed Rulesandhencequalifiesthemforthisexemption. InresponsetotheRequestforComments: RFC79.BlackRockbelievestheproposedtreatmentoftheGSEsinthe ProposedRulesisappropriate. RFC80.BlackRockbelievesthatthereliefgrantedtotheGSEspermitting hedgingofretainedcreditriskisappropriate,sincetheGSEsare guaranteeing100%oftheexposurethathasbeentransferredtothe marketplaceintheirsecuritizations.Bycomparison,othersponsorsunder theProposedRulesarerequiredtoretainonly5%oftheriskrelatingto securitizationsandthehedgingofthatriskretentionwouldneutralizethe impactoftheskininthegameofsuchretention. RFC81(a).WithrespecttowhetherthecredithedgingoftheGSEexposure shouldbelimitedto95%ofsecuritizedinterests(therebyensuringthata minimumof5%ofissuesexposureisretained),BlackRockbelievesthatthis isamootpoint. Itisunfeasibleforthoseentitiestoenterintocredithedges inanamountanywherenearthatmagnitudeofexposurebyvirtueofthe volumeoftheirlendingandsecuritizationactivities. 9. PremiumCaptureCashReserveAccount Inprinciple,BlackRockopposestheconceptofthepremiumcapturecash reserveaccount(PCCRA)assetforthintheProposedRules.Whilewe understandtheintentoftheprovisions,webelievetheriskretention requirementsof5%aresufficientasincrementalchangestothe securitizationprocesstopromotealignmentofinterestbetweenissuerand investorswithoutthisadditionalrequirement. Firstandforemost,thedeterminationastowhetheranissuerhasagain uponsecuritizationasdeterminedonacashproceedsbasisisquitedistinct fromanaccountinggain,theactualmeasureofprofitabilityofa securitizationtransaction. Theaccountinggainorlossonasecuritizationis determinedbyundergenerallyacceptedaccountingprinciples(GAAP), involvingconsiderationofthecharacteristicsofallretainedriskandaccrual andamortizationconcepts.Asaresult,wefeelthecashbasedconceptof proceedsintheproposedPCCRArequirementistoosimplistictobe meaningfulandnotalignedwiththeeffectiveaccountingtreatmentof securitizations. Second,anyexcessproceedsfromsecuritizationoverthepar valueoftheloansisdrivenbyavarietyoffactorssuchasthecouponofthe loansrelativetotheissuedsecurities;theshapeoftheyieldcurve;andthe ratingsontheindividualbondtranches,inadditiontootherfactors.The combinationofallthesefactorsandtheissuersabilitytomonetizethevalue ofloansdrivesthevalueofsecuritizationandhencethepassthroughof 18

 lowerfinancingcoststoborrowers.Finally,lowercreditborrowersmustpay ahighercoupononloanstooffsetfuturepotentialcreditlosses.Asa securitizationisfundamentallyasaleofassets,theissuersmusthavethe meansoftransferringthevalueofthecouponuponissuanceasanincentive tomakehigherriskloans(asopposedtoretainingsuchriskonasubordinate basisandindependentoftheothersecuritizationtranches). Fundamentally,mostissuersofsecuritizationsfunctionaslenderswiththe securitizationultimatelyprovidingfundingforlending.Anysuchoperation hasinherentcosts,comprisedofbothcashflowandexpensecomponentsfor financialreportingpurposes.Securitizationisafinancingactivity,andany inherentaccountinggainorreceiptofcashflowinexcessofparvalue,isjust onedimensionofthewholebusinessmodel.BlackRockbelievesthatthe amountstobedepositedintothePCCRAmaydeprivesponsorsofthe opportunitytorecoverlegitimateoriginationandothercostsandtherefore deterlending. Premiumsasmeasuredbyexcesscashflowgeneratedatthepointof securitizationmayresultfromachangeininterestratesorspreadssince origination.Ifinterestratesfallrelativetoloancouponorcreditspreads tightentheconsequencewouldbetogenerateapremiumofcashproceeds uponsecuritization.However,asmostlendershedgeinterestrateandcredit spreadsonloaninventorypendingsecuritization,thisgainincashwouldbe offsetbyacorrespondingshortfallderivedfromlossesinhedgepositions.In addition,requiringsponsorstodepositsuchcashpremiumsintothePCCRA wouldresultinasymmetricaltreatmentforthesponsor. InresponsetotheRequestforComment: RFC82;83;84;85(a),(b).Forthereasonsoutlineddirectlyabove,BlackRock recommendswithdrawalofthePCCRAprovisionsassetforthinthe ProposedRules.

C.AllocationtotheOriginator BlackRocksupportstherightsaffordedintheProposedRulethatallowthe sponsortoallocateatleastaportionofthecreditriskitisrequiredtoretainto originatorsofthesecuritizedassets.Thisfeature,inourview,promotes soundnessandaccountabilitysincetheoriginatorhastheclosestconnectionto andbestknowledgeoftheborrowerontheloanobligations.Further,it promotestheviabilityofsponsoredsecuritizationconduits,whichaffordloan originatorsofallsizesaccesstothemarketandtheadvantagesofparticipating inlarger,pooledsecuritizations. InresponsetotheRequestforComments:

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 RFC86(a).BlackRockbelievesthatsponsorsshouldbeabletoallocaterisk retentiontooriginatorsundertheverticalandhorizontaloptions,asproposed, aswellasundertheLshapedriskretentionoption.(b)Whilewecannot specificallypredictwhendifferentrisktransferalternativeswouldbeused,as mostoriginatorsareregulatedfinancialinstitutions,itisdesirabletoafford originatorsthesamerangeofoptionsassecuritizedsponsorsintheProposed Rules,forcapital,accountingandotherconsiderations.(c)Thebenefitsof providingthisflexibilitytooriginatorsoutweighconcernsregardingcomplexity. Asmonitoringactivitiesmustnecessarilytrackongoingholdingsofrisk retentionassets,BlackRockdoesnotseeadistinctionbetweenthecomplexityof monitoringvertical,horizontalandLshapedholdings. RFC87.BlackRockbelievesthatsponsorselectingthehorizontalcashreserve accountoptionshouldalsobepermittedtoallocateriskretentiontooriginators, forthesamereasonsassetforthintheresponseto86(b)above. RFC88(a).Inordertopromotebroadandequalaccesstothemarketby participantsofallsizes,BlackRockfirmlybelievesthattheallocationofrisk retentiontoanoriginatorshouldnothavetomeeta20%minimumthreshold, butinsteadshouldbeallowedproportionatetoanyoriginatorcontribution (perhapssubjecttosomeadministrativeminimumthreshold,suchas0.5%of totalassets).Manypooledsecuritizationsareverylarge,suchthatinthecaseof a$4billionoffering,forinstance,a0.5%contributorwouldprovide$20million ofcollateral.Weseenoreason,giventhesignificantamountthatcontribution representsonanabsolutebasis,thatanysuchoriginatorshouldbeafforded differentoptionsthanlargermarketparticipants.Thisfeatureiscriticaltothe fairandequaltreatmentofallmarketparticipants,regardlessofsize,andwould, inourview,betterpromotetheflowofcredit. RFC90.Asnotedelsewhere,BlackRockbelievesthatriskretention(asdefinedin theProposedRules)overthelifeofthetransactionwithoutanyformof exceptionorreliefisundulyrestrictive. Itisappropriate,inourview,to considerallowingsponsorstotransferrisktothirdparties,subjecttosomeset ofpredeterminedconditionsthatcouldinclude:(i)minimumqualificationsof thethirdpartytransferee(aqualifiedtransferee)iftransferredinthefirst threeyearssinceissuance;(ii)minimumamountoftimesinceissuance(e.g., threeyears)ifthetransfereeisnotaqualifiedtransferee;(iii)achievementof specifiedcumulativecreditperformanceoftheassetsinthesecuritizedpool; and/or(iv)maintenanceofratingstosomepredetermined,minimumstandard (relativetoratingsatissuance). RFC91;92(a),(b);93(a);94(a);95.Theproposeddisclosuresincludedinthe ProposedRulesareinsufficienttoprovideinvestorswithallmaterial informationregardingthesecuritization.Additionaldisclosuresshouldbe required. Asnotedelsewhereinourcomments,sponsorcompliance; transparencytoinvestors;surveillanceandreporting;noticeofbreach;andcure forbreachgenerallyrequirebetterdefinitionacrosstheProposedRules.Thisis 20

 equallytrueregardingtheprovisionsaddressingrisktransfertooriginators. Withrespecttowhetherasponsorshouldberequiredtoobtainacontractual commitmentfromtheoriginatortoretaintheinterestinaccordancewiththe rule,weagreethatcommerciallyreasonableandenforceablecontractualmeans shouldgoverntherelationshipsbetweensponsorandoriginators,withcontinual transparencyandclarityofbreachandconsequencesthereof.Sponsorsshould bereasonablyaccountablefortheactionsoforiginators,undertheseprovisions, subjecttothereasonableconstraintsofapplicablecontractlaw. D.Hedging,TransferandFinancingRestrictions Forcommercialmortgages,theDoddFrankActessentiallyallowsthesponsorto transfertheretainedinteresttoaqualifiedtransfereeintheformoftheB piecebuyer,whomeetsallofthequalificationsoutlinedinthestatute(e.g., retainingafirstlossposition,conductingtherequisitediligence,etc.).Asthe DoddFrankActallowsaCMBSsponsortotransfertheretainedinteresttoaB piecebuyer,BlackRocksuggeststhataBpiecebuyerbepermittedtotransfer theretainedinteresttoaqualifiedtransferee. Tocreateproperalignmentof interests,thequalifiedtransfereeshouldberequiredtomeetthesamecriteria asaresetforthinthefinalruleforBpiecebuyerretention,ortherequirements foraQualifiedInstitutionalBuyerinSECRule144AorforanInstitutional AccreditedInvestor. Thequalifiedtransfereeconceptwouldsatisfypolicy goalsoffacilitatingappropriatealignmentofrisk,encouragingsound underwritingandprovidingliquidityfortransferors. RFC96(a). Thepermittedtransferofaretainedinteresttoconsolidated affiliatesisappropriate.Further,transfersshouldalsobepermittedtoother qualifiedentities.TheinabilitytotransferorsellthecreditinterestinaCMBS transactionisparticularlyproblematicforBpiecebuyers.Investorsofalltypes, includingBpiecebuyers,willnotwant,andinsomecasesarebarredfrom accepting,apermanentinabilitytotransferaninvestment.Inaddition,no fiduciaryofcapitalforotherswouldeveragreetoinvestinasecuritythatcould notbesold. IftheBpiecebuyercannottransferitsinterest,therewillbefew,if any,BpiecebuyersabletobidforthebottomoftheCMBScapitalstackand capitalwillbesubstantiallycurtailedinthecreditportionoftheCMBSmarket. Thelackofcapitalwillincreaseborrowingcostsandwillalsofrustratethe directionintheDoddFrankActtoutilizetheBpiecebuyerasariskretention modality. RFC102(a). ACMBSsponsorshouldbepermittedtotransferorhedgeits retainedexposuretoaqualifiedtransfereeatanytime.Inreferenceto commercialrealestate,apermanentriskretentionobligationwillcreatebalance sheetcapacityconstraints.Eventuallyasponsorsholdingofretainedinterests (withouttheabilitytotransfer)willresultinthatsponsorhavingnomore capacitytolend,withoutregardtoothermarketconditions.Asponsorthat becomescapacityconstrainedmayholdbackonnewissuances,further constrainingthemarket.Apermanentretentionobligationwouldbeparticularly 21

 problematicforBpiecebuyerswhocannotsurrendertherighttosellan
investment.
RFC102(b). Asnotedabove,withtheexceptionoftransferstoaqualified transferee,BlackRockrecommendsaretentionperiodofthreeyearsforCMBS andRMBStransactions.Forotherassetclasses,wewouldsuggestthata reasonableretentionperiodbesetinrelationtothelifeoftheasset.Afterthe retentionperiod,transfersshouldnotbelimitedtoqualifiedtransferees. RFC105.Inreferencetocommercialrealestate,creditprotectiononthe sponsorscreditexposureshouldbeprohibitedasitwouldlimitthesponsors skininthegamewithrespecttothesecuritizedassets. IV.QualifiedResidentialMortgages A. OverallApproachtoDefiningQualifyingResidentialMortgages OurviewontheoverallapproachfordefiningQRMsiscoveredbelow. B. ExemptionforQRMs BlackRockendorsestheefforttoestablishaQRMstandard.However,webelieve thattheproposedcriteriaaretoorestrictiveandarenotgenerallyachievable exceptforasmallpercentageofnewmortgageoriginations.Asnotedbelow, BlackRockproposesaseriesofrecommendedchangestotheeligibilitycriteria which,inourview,shouldaccommodate40to60%ofmortgageloanorigination whichwebelieveisareasonableobjectivetoencourageresponsiblelending behavior. WealsobelievethattheQRMeligibility,whiledeterminedonanindividualloan basis,shouldbeestablishedbyamatrixofcreditvalueswherebyaconservative underwritingfactoroffsetsanaggressiveunderwritingfactor,uptoanagreed uponalimit. Themainvariablesforresidentialmortgageloanswouldbeloan tovalueratio;abilitytorepayandborrowerscredithistory. Belowweprovidesomediscussionoftheaverageandlimitvaluesthatshouldbe withinthematrixforthevariousunderwritingfactorsthatwebelieveshould comprisethematrix. C. EligibilityCriteria 1. EligibleLoans,FirstLien,NoSubordinateLiens,OriginalMaturityand WrittenApplicationRequirements BlackRocksupportstheproposedloanandpropertydefinitionsfor qualificationasaQRMincluding: 22

 Closedend,firstlienloan; Onetofourfamilyunit(owneroccupied); Prohibitiononconstructionandbridgeloans;and Inclusivenessofcondominiumandcooperativeunitsaswellas manufacturedhousing.

BlackRockunderstandsthetechnicalreasonsfornotincludingreverse mortgages;however,webelieveproperlydesigned,transparentlystructured andappropriatelyunderwrittenreversemortgagesareanimportant mortgageproductforsuitableborrowersandshouldbeQRMeligible. BlackRockwholeheartedlyendorsestheprohibitiononsecondlienfinancing forpurchasemoneymortgages.Webelievetheexistenceofsecondary financing,andtheimplicittotalleveragecausedthereby,significantly contributedtotheincreaseindefaultratesandlossseveritiesasa consequenceofthecreditbubble. Theavailabilityofeasymoneywith limiteddownpaymentsalsoservedtocreateabubbleinhouseprice appreciationbydecreasingthesignificanceofanyskininthegamefrom theborrowerandbyremovingrationalconsiderationofpurchasepriceand relativevalue. BlackRockbelievesthatsecondlienfinancingshouldalsobedisallowedfor QRMeligiblerefinancingtransactions.Asproposed,thecriteriaforallowing existingsecondlienstoremainineffecthasnocombinedloantovaluelimit, whichisnotinkeepingwiththestrictriskprofileotherwiseadvocated withintheQRMguidelines.Inlightofthisrecommendation,andtheposition oftheProposedRuleswithrespecttosecondliensbeingprohibitedfor purchasemoneymortgages,BlackRockrecommendssecondlienfinancingbe disallowedduringthefulltermofaQRM,absentfirstmortgageholder consent. Theguidelinesforsuchconsentcouldbeestablishedinanasset backedsecuritizationandbegovernedbycombinedloantovalueratioatthe timethesecondlienistobeincurred. BlackRockbelievesthataprioritystatusshouldbeestablishedforQRM loans,prohibitinganymodificationordefaultmitigationpriortoanysecond lienorjuniorlienbeingfullywrittenoff.Wealsohavegeneralconcerns relatingtodefaultmitigationactivities,includingbehaviorofservicers responsibleforbothfirstandsecondliens,assetforthincommentsunder SectionIV.C.10below.

2. BorrowerCreditHistory BlackRockbelievesthattheProposedRuleshavelaidoutalogicalsetof standards,proposedasderogatoryfactors,asabasisofidentifying qualificationsasaQRM,namely:

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 Borrowernotcurrently30ormoredayspastdueonanydebt obligation; Borrowerhasnotbeen60daysormorepastdueonanydebt obligationwithinthelast24months; Borrowerhasnotwithinthepreceding36monthsbeenadebtorina bankruptcyproceeding,hadpropertyrepossessed,engagedinashort saleordeedinlieuforeclosure,orbeensubjecttoaFederalorState judgmentforcollectionofunpaiddebt.

However,secondarymarketpracticeandpracticalproceduresinloan originationaresupportedbytheuseofcreditscorestomeasurethepotential impactsuchderogatoryfactorsmayhaveonanindividualscredit.Whilethe factorsdescribedabovenodoubtareimportant,therearenumerousother factorsthatmightimpactanindividualcreditscore,positivelyornegatively, thatshouldrightlybeconsideredbythelender.Thesefactorsincludeyears inindustryandcurrentjob;priorexperienceintermsofcreditleveland historicperformance;andotherfactors.Manyindividuallendershave createdproprietarycreditscoringmodelsthatareadaptedspecificallyto theirlendingsegmentandfocusthatarehighlyinformedbytheirexperience. BlackRockbelievesthattheProposedRuleshouldnotsimplyhavetherigid derogatoryfactorsasthecriteriaforborrowercredithistory.Ifanyrigid derogatoryfactorsremainedinthecriteriaatall,BlackRockwouldfavor includingthefactorssetforthinthethirdbulletpointaboveasabsolute standards;makingunsafeloanstoborrowerswiththesecharacteristicsisan exampleofrecent,verifiedbadbehaviorthatshouldbespecifically discouraged. Detailedregulationscouldbeestablishedtobenchmarkdifferentcreditscore servicestospecificcriteria,suchasthederogatoryfactorscitedabove,with someconfidenceofrelativebenchmarklimits.Forthemostcommon industryprovider,FairIsaacs(orFICO),webelievetheQRMmatrixshould allownoindividualFICObelow680andtheaverageresultsinthematrix shouldcenteraroundaFICOof700. Creditscoreshaveproventobeextremelyaccuratepredictorsofthe probabilityofdefault. Theprincipalissuesduringthecreditbubblewerea departurefromreasonablestandardsofminimumacceptablecreditscores aswellastheintroductionoflayeredrisk,inparticularhighloantovalue ratios;presenceofpiggybacksecondsandloanswithnegativeamortization andinitialteaserrates.Becausethefactorsoflayeredriskbydefinition cannotbepresentinaQRM,byvirtueoftherigorousnessoftheproposed criteria,BlackRockfavorsincorporatingacreditscoreelementintotheQRM eligibilitymatrixasdiscussedabovetoencourageongoingsophisticated evolutionofcreditmodelingandscoringpracticeswithintheindustry.

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 InresponsetotheRequestforComment: RFC115.Webelievetheproposedcredithistorystandardsarereasonable andareusefulindicatorsofthelikelihoodthataborrowermightdefaultona newresidentialmortgageloan.However,webelievethatusingasmall subsetofderogatoryfactorsoversimplifiestheprocessofdetermininga borrowersabilitytorepay.Wefeelthattheuseofcreditscoresisamore scientificmethodofestablishingthecreditcharacteristicsofborrowers. BlackRockbelievessuchasystemtobemoreconsistentwithprudentlender practiceandconsumerbehaviorandwouldalsoencouragetheongoing evolutionofscientificborrowercreditbehaviormodels(providedby multiplevendorsandsupportedbylendersonaproprietarybasis). RFC117(a). Asdiscussedinourresponsetocomment115above,BlackRock believesthataminimumcreditscorethresholdshouldbeincorporatedinto theQRMstandard.Ascreditscoresareacommonlanguageofevaluating borrowercreditworthiness,itisimportantthatmortgagelendingnotdepart fromstandardsotherwiseusedbyconsumerlendersinthecreditcard, automobileandhomeequitysectors. (b)IntheeventthatcreditscoresareincorporatedintotheQRMstandard, creditscoreprovidersshouldbequalifiedandapprovedbyaregulatorybody andtheresultsofhistoricprobabilityofdefaultsbasedonscores; transparencyofmodelingchanges;andotherusefulconsumerandinvestor featuresshouldallbemademoreavailablepublicly.Anadditionalbenefitto thisapproachwouldbethatgreatertransparencyonhowcreditscoresare reportedwouldbeachievedandborrowerswouldunderstandbetterthe implicationsofanindividualcreditrating.Creditscoreshavetremendous powerandinfluenceonconsumerlendingpractices.BlackRockfeelsthat theirinclusionintheQRMstandardandtheadditionalstructureand guidanceresultingfromsuchinclusionwouldcontributetobothconsumer andlenderprotection,benefitingnotonlymortgagelendersbutother consumercreditchannelsaswell. RFC118.BlackRockbelievesthesafeharbortestintheProposedRules allowinganoriginatortosatisfythedocumentationandverification requirementsregardingaborrowerscredithistorybyobtainingcredit reportsfromatleasttwoconsumerreportingagenciesisreasonablein practiceandwouldresultinatransparentandverifiablechainforinvestors. 3. PaymentTerms BlackRocksupportstheproposedelementsofpaymenttermsfor qualificationasaQRMincluding:

25

 Disallowanceofinterestonlyornegativeamortization; DisallowanceofBorroweroptiontodeferpaymentofinterestor repaymentofprincipal; ProhibitionofBalloonpayments(asdefined); Limitationsonannualandlifetimeadjustmentsofinterestrateson adjustableratemortgageloans;and Prohibitionofprepaymentpenalties(asdefined).

Webelievethatmanyofthesefeatureswereimportantcomponentsof layeredriskwhichcontributedtoanincreaseintheriskofmortgage lendingandgenerallyallaligntoapprovemarginallyqualifiedborrowers inappropriatelyformortgagecredit. Theproposedlimitsontheadjustmentofinterestratesof(i)twopercent (200basispoints)inanytwelvemonthperiodand(ii)sixpercent(600basis points)overthelifeofthemortgagetransactionisreasonableforoneyear adjustableratemortgagesandBlackRocksupportsthoselimitations. HoweverBlackRockdoesnotendorsetheproposedlimitsforhybridloans, whicharemortgageloansthathaveamaturityof15or30years;aninitial fixedrateperiod,typicallybetween3and10years;andfollowingthefixed periodhave(i)aonetimerateresetaccordingtoapredeterminedindex andmargin;and(ii)thereafterresetasoneyearadjustableratemortgage loans. Onceintheoneyearadjustableperiod,themortgageloansgenerally havealimitofadjustmentof200basispointsperyear.Theloansalso generallyhavealifetimelimitofrateincreaseof600basispoints.However, atthefirstresetperiodtheinterestratecantypicallyincreasebyupto500 basispoints. Webelievehybridloansplayanimportantroleinthemortgagemarket, particularlyaccommodatingborrowersthatanticipatemobilityor refinancingduringtheinitialfixedrateterm.Theloansalsohavesuperior characteristicsforbanksandotherdepositariesintheirabilitytomeetasset andliabilitymanagementtargets.Asaresult,wefavortheexpansionofthe limitsoninterestrateadjustmentsfortheQRMdefinitiontoencompass hybridloans. Whilethereisacasetobemadetocreateanexceptionforinterestonly mortgages,inthecaseofhighlyqualifiedborrowers,thelinkageofthese features(paymenttermsandborrowerabilitytopay)isbeyondthe proposedscopeandfunctionoftheProposedRules. InresponsetotheRequestforComment: RFC119. (a)BlackRockgenerallysupportstheProposedRuleslimitson paymenttermsofaQRMasproposed.Asnotedabove,BlackRock recommendsexpandingthecriteriaforlimitsonadjustmentofinterestrates 26

 forQRMstocontemplatetheuniqueproductfeaturesof3to10yearhybrid loans(asdescribedmorefullyabove). 4. LoantoValueRatio BlackRockbelievesthedatapresentedbytheAgenciesinthenarrativeofthe ProposedRulerelatingtoprobabilityofdefault,asindexedbyloantovalue ratios,wereheavilyinfluencedbyanumberoffactorsincluding:(i)lackof verificationofincomeandassetsforlargesegmentsoflendingvolumes;(ii) poorpropertyappraisalpractices;(iii)highincidenceofsecondaryfinancing makingeffectiveloantovaluemuchhigherthanindicated;and(iv) availabilityofloanswithahighriskofpaymentshocktounqualified borrowers.NoneofthesefactorsispossiblewithintheQRMstandardsand hence,inourview,theloantovaluecriteriaproposedistooconservative. Wefurtherbelievethattheaggressivepracticesduringthecreditbubble inflatedhousingvalues. Loantovalueratioshouldbeoneofthevariablesinthecreditmatrix describedbelow,withaconservativeoraggressiveresultoffsettingother factorsinthematrix(borrowercreditandabilitytorepay). BlackRocksupportstheuseofprivatemortgageinsurance,byaqualified provider,thatwouldpermitaloantovalueratioofupto90%ifthevalueof theinsurancereducestheeffectiveloantovalueratioto75%to80%. InresponsetotheRequestforComment: RFC120.BlackRockproposesthefollowingloantovaluelimitswithrespect toQRMeligibilityintheProposedRules,inthecontextoftheproposed matrix: 85%forpurchasemoneytransactions; 80%(combinedloantovalue)forrateandtermrefinances;and 80%(combinedloantovalue)forcashoutrefinances.

Webelievethematrixshouldcenteronaloantovalueratioof80%for purchasemoneytransactionsandof75%forrateandtermrefinancesand cashoutrefinances. 5. DownPayment InresponsetotheRequestforComment: RFC121.BlackRockissupportiveoftheproposedrequirementspertaining totheformandnatureofdownpaymentsforeligibleQRMsassetforthinthe

27

 ProposedRules,subjecttoadjustmentifmoreliberalloantovaluelimitsare institutedaswehavesuggestedabove. 6. QualifyingAppraisal BlackRockissupportiveoftheproposedrequirementsforaqualifying appraisalforQRMeligibilityassetforthintheProposedRules. InresponsetotheRequestforComment: RFC122. Indeterminingthevalueoftherealpropertypledgedonthe mortgagetransaction,BlackRocksuggeststhatatleasttwoappraisalsbe requiredforloanswithanoriginalprincipalbalanceinexcessof$500,000 andthreeappraisalsberequiredforloansofover$1millionwhenthevalues derivedbythefirsttwoappraisalsdifferbymorethan5%. 7. AbilitytoRepay BlackRockwholeheartedlyendorsesthecriteriaintheProposedRuleswhich specifyboththemethodandtheverificationforunderwritingabilitytorepay bytheborrower. Inourview,theidentificationoflimitsonfrontendand backendratiosarethecorrectparametersforfocus. Webelievetheabsolutelimitofafrontendandbackendratioof28%and 36%,however,aretooconservative,particularlyinlightoftheothercredit parametersoftheQRMeligibilityguidelines.Wealsobelievethatother factors,suchastheabsolutelevelofborrowerearningsaswellastheassets oftheborrowers,shouldinfluenceprofessionaljudgmentinassessingan appropriatefrontendandbackendratiolimit.Theselimitsshouldbe componentsoftheeligibilitymatrixdescribedbelowandwebelievethat higherratiosshouldbeallowedatthelimitsforQRMstandards. InresponsetotheRequestforComment: RFC123. BlackRocksupportstheproposedincomemethodologyand verificationrequirementssetforthintheProposedRules.Wealsoagreethat thefrontendandbackendratiosarethemostappropriatemeansof measuringtheborrowersabilitytorepay. Webelievethecriteriashouldincludebothanaverageandamaximumfront endandbackendratioforaQRMsecuritizedpool,withsuggestedcriteria being: Maximumfrontendandbackendrationottoexceed34and42
percentrespectivelyforaQRM;and

28

 Thematrixwouldcenterat30%withrespecttotherequiredfrontend ratioforaQRMand38%withrespecttotherequiredbackendratio foraQRM. 8. PointsandFees BlackRockbelievesthatthecriteriaforpointsandfeessetforthinthe ProposedRuleareunnecessarywithrespecttoQRMqualificationandshould beeliminatedasstatedcriteria.Robustregulation,includingconsumer reportingandprotection,alreadyexistsanditisaconfusingcriteriawhen consideredrelativetomortgagecreditstandards. Asapointoffact,alegitimatebuydownofinterestratesviathepaymentof pointsinfactincreasescreditworthinessandproperlymonitoredand regulatedisasoundpractice. InresponsetotheRequestforComment: RFC124(a)BlackRockrecommendsremovingpointsandfeesfromtheQRM definition;theyarenotapurecreditstandardonparwithothercriteria,so theirinclusionisconfusing. Aproperlyconstructedbuydownofinterest rateonaloanactuallyincreasescreditworthiness.Webelievethatconsumer protectionsrelatingtopointsandfeesshouldbeincludedinTILAandother appropriateregulations. 9. AssumabilityProhibition BlackRocksupportstheproposedprohibitiononassumabilityofaQRMasa standard,forthereasonsoutlinedintheProposedRules. 10. DefaultMitigation BlackRockcompletelysupportstheongoinginteragencyeffortthatisfocused ondevelopingnationalmortgageservicingstandardsthatwouldapplyto servicersofresidentialmortgages,includingbankaffiliatedservicersand servicersthatarenotaffiliatedwithbanks.Wenotethatinrecentyears therehavebeensignificantissueswiththeprocessingofmortgageloans.In particular,thehighlevelsofmortgageloandelinquenciesandlowstaffing levelsofservicershaveresultedinpoorservicingofloansatriskforandin defaultwhichhasnegativelyimpactedinvestorsinmortgagebacked securities. BlackRockbelievesrequiringservicerstofollowaspecificsetof policiesandprocedures,andassuringthereisadequateandfair compensationforsuchservices,willhelpaddressthisissue. Webelievestronglythatsuchrulesshouldapplyuniformlytoallresidential mortgageloans,notjustQRMeligibleloans,topromotesoundnessinthe creditmarketsandfairandconsistenttreatmentofborrowersandtoprotect 29

 investorsinterests.Anysuchservicingstandards,particularlywithrespect todefaultmitigationprovisions,shouldbecomprehensiveinscope(much moresothantheelementsaddressedintheProposedRules).Wearewaryof theproposeddefaultmitigationaspectsoftheQRMProposedRulesinthat theyonlyaddresscertainissuesthatshouldbecoveredinthenational mortgageservicingstandardsandbytheirexistenceraisethepossibilitythat QRMdefaultmitigationstandardsmayultimatelyvaryfromnational standardsinsomerespects. Asecuritizationsgoverningdocuments,particularlythepoolingand servicingagreement,limittherangeandnatureofeligibleloanmodification techniquesthataservicercanpursue.Inordertoachieveasecuritization outcomeforQRMloansundertheseprovisions,bothcapitalmarket standardsandotherelements,suchasratingagencycriteria,wouldneedto conformtotheproposedrules. Inaddition,REMICtaxregulationsfurther limitthenatureandcircumstancesofloanmodifications.Conformityof REMICtaxregulations,toaddressanyconflictwithanyproposeddefault mitigationregimen,iscriticalinordertopreservetheabilitytosecuritize loanshavingthesefeatures. BlackRockisparticularlyconcernedaboutconflictsofinterestarisingfroma sponsororitsaffiliateactingasaservicerinasecuritizationwhilealso holdingajuniorlienonthesameproperty.Wenotethattheservicing policesandproceduresdescribedintheProposedRuleswouldrequire servicerstotakelossmitigationactions,suchasengaginginloan modification,undercertaincircumstances.Whilewearesupportiveofthese efforts,asnotedabove,westronglyopposeanyprovisionthatwould encourageamodificationofafirstlienmortgageloanpriortothewriteoffof secondlienloansandaborrowersunsecuredloans.Themereexistenceof thepotentialconflictofaservicerwethinkissignificantandshouldbe disclosedandsomehowmonitoredwithrespecttoallmortgage securitizations,whetherofQRMloansorothermortgageloans. InresponsetotheRequestforComment: RFC125. WithrespecttowhetherthedefinitionofQRMshouldinclude servicingrequirements,BlackRockisgenerallysupportiveofthesuggestions relatingtodefaultmitigationsetforthintheProposedRules. However,we considerthemtobegenerallyincompleteandwearewaryofreducedor simplifiedstandardsforQRMeligibleloans.Wethinkthatnationalservicing standards,includingdefaultmitigationprovisions,shoulduniformlycoverall mortgageloans. RFC126(a).Asnotedabove,whileBlackRockagreesingeneralwiththe proposedservicingrequirements,theyarenotsufficientlyrobustanddonot fullycoverallrequirementsthatshouldbeinplacenationallytoprotect investorsinterests.(b)Analternativeapproachtoincludingservicing 30

 requirementsintheQRMdefinitionwouldbetorelyinsteadonthebroader nationalstandardsthataretobeproposedandadoptedinthenearfuture,as notedintheProposedRules. RFC127(a). Servicersshouldberequiredtohavepoliciesandprocedures thatprovideforlossmitigationactivitiesiftheborroweris90days delinquentbutdefaulthasnotoccurredunderthemortgageloantransaction documents. However,aservicershouldhavetheflexibilitytoexercise professionaljudgmentinthetimingofmodificationfollowingreviewofthe factsandcircumstancesinordertoavoidunintendedmoralhazardof inappropriateborrowersseekingmodificationthatisnotnecessarygiven theirfinancialcircumstances. (b)Similarly,thesepoliciesandprocedures shouldrequireinitiationoflossmitigationactivitieswhendefaultis reasonablyforeseeable,subjecttoflexibilitytoexerciseprofessional judgment. RFC128(a)and(b). Servicersshouldberequiredtohavepoliciesand proceduresthatprovideforlossmitigationactionsforQRMswhenthe estimatednetpresentvalueoftheactionwouldexceedtheestimatednet presentvalueofrecoverythroughforeclosure.Thesepoliciesand proceduresshouldrequiretheservicertotakespecificactionstomitigate losses. However,asnotedabove,aservicershouldhavetheflexibilityto exerciseprofessionaljudgmentinthetimingofmodification.(c)Asnoted above,themainimplicationofrequiringtheinclusionofsuchstandardsis thatthegoverningdocumentsforasecuritizationtransactionwouldbe requiredtobemodifiedtocontemplatetherangeofoptions.Theneedfor otheractions,suchasapprovalbyratingagencies,mustalsobeaddressed. Further,adjustmentstoREMICtaxregulationsmayberequiredtoallow loanswithsuchfeaturestobesecuritizedandmaintainREMICtreatment. RFC137(a)BlackRockbelievestheadvancingofprincipalandinterest paymentsiscriticaltothefunctioningofthemortgagebackedsecurities market. Assuchadvancesaretobemadeunlessdeemedunrecoverable,in mostcasesinvestorsshouldexpectadvancestobemadeinallcaseswith respecttodelinquentloans.Exceptinextrememarketcircumstances,such advancesshouldnotintroduceanundueburdenonmortgageservicersgiven whattypicallyshouldbealowlevelofdelinquentloansoverthelifeofa mortgagepool.ThiswouldbeparticularlytrueofaQRMpool,asdefinedin theProposedRules,giventheconservativeconstructofthedefinition;as such,delinquentloansandtheobligationtoadvanceshouldnotresultin servicersprematurelyengaginginforecloseordefaultmitigationactions.(b) BlackRockbelievesnoregulationisrequiredrelativetoserviceradvancing obligationsinsecuritizationdocuments.Therequirementtoadvanceshould becommerciallyaddressedinsecuritizationdocuments(whichhavebeen clarifiedandenhancedsincetheconsequencesandimplicationsofthe housingandcreditcrisishavebeenobservedbymarketparticipants). 31

 RFC138and140. BlackRockbelievesthatanationalservicingstandard shouldbeadoptedandthatitshoulduniformlyapplytoallresidential mortgageloans,notjustQRMeligibleloans.Inlightoftheexpectationand requirementthatregulationsregardingsuchnationalservicingstandardwill beadoptedinthenearfuture,BlackRocksuggeststhattheservicing standardsanddefaultmitigationelementswithrespecttoQRMberemoved fromtheProposedRules,especiallyastheproceduresdescribedinthe ProposedRulesarenotsufficientlyrobusttocoverallcircumstancesand couldconflict,insomerespect,withfinalnationalstandardswhenadopted. D.RepurchaseofLoansSubsequentlyDeterminedtoBeNonQualifiedafter Closing BlackRockendorsestheproposedefforttoprovidesponsorcertificationof controlsandthoughtfulrequirementstorepurchaseloanstoprotectthe integrityofthetransactionandinvestorinterests.

V.ReducedRiskRetentionRequirementsforABSBackedbyQualifying CommercialRealEstateLoansorAutomobileLoans A. AssetClasses BlackRockhasnocommentsonthisSectionoftheProposedRules. B. ABSCollateralizedExclusivelybyQualifyingCRELoans,CommercialLoans,or AutomobileLoans BlackRockhasnocommentsonthisSectionoftheProposedRules. C. QualifyingCommercialLoans BlackRockscommentsonthisSectionoftheProposedRulesarenotedbelow. 1. AbilitytoRepay BlackRockhasnocommentsonthisSectionoftheProposedRules. 2. RiskManagementandMonitoringRequirements InresponsetotheRequestforComment: RFC154.BlackRockbelievesthatthecriteriaforeligibilityforcommercial loansshouldbemorelenient. Inparticular,wewouldrecommendthat permittedloanobligationsincludebothfirstlienandsecondlienobligations, solongasthesamecreditcriteriaareachieved. D. QualifyingCRELoans
32

SimilartoourpositiononQRMstandards,BlackRockbelievesthatthe
underwritingstandardsforqualifyingCREloansshouldbedevelopedona
matrixbasis,whereconservativeunderwritingfactorscanoffsetany
aggressiveunderwritingfactors,withthematrixoverallcenteredonan
average,expectedunderwritingcriteriaforeachfactor.
TheexemptioncriteriaintheProposedRules,whentakentogether,areso
narrowthatevenifonlythreeofthecorecriteriaareapplied(loantovalue
ratioofnotmorethan65%,debtservicecoverageratioofnotlessthan1.7x
andastraightlineamortizationperiodofnotmorethan20years),itis
estimatedthatlessthan0.4%(or$2.9billion)ofthe$671billioninCREloans
thathavebeensecuritizedsincethebeginningoftheCMBSmarketwould
qualifyforexemption.Asstatedabove,BlackRockwouldliketoseea
standarddevelopedwherebyupto50%ofnewlyoriginatedCREmortgage
loanscouldbeeligibleforexemptionforcreditriskretentionthrough
adoptionofconservativeyetachievablecriteria.
BlackRockconcurswiththerequirementthatalenderperformatwoyear
lookbackattheborrowersfinancialstabilityandananalysisoftheir
paymenthistoryontheirotherdebts.Thisisareasonableandprudent
requirementandisalreadyapartofmostlenderscurrentunderwriting
practices. Forwardlookinganalysispostclosingmaybepossibleif
borrowersarerequiredbystatutetoproviderentrolls(office,retail,
industrial)andconsistentfinancialstatementsforallproperties.
AdditionalrecommendationstothestandardsthatBlackRockproposes
include:
Moreliberaleligibilityforfloatingrateloans;
Minimumallowableamortizationof30years;
Fewerconstraintsonminimumloanmaturity,asBlackRockbelievesthat
factorinisolationisnotadriverofadditionalcreditrisk; Possibleconsiderationofsecondaryfinancing,ifcombinedloantovalue ratios(andothercreditcriteriaonacombinedbasis)conformtothe eligibilitystandards);and
Allowanceforinterestonlypaymentperiods,possiblyforloanswith
conservativeloantovalueratios(e.g.,70%orless).

1. AbilitytoRepay BlackRockbelievesthattherequireddebtserviceguidelinesof1.7orgreater, withallowancedownto1.5forstabilizedproperties,aretooconservative, andshouldbeadjustedasfollows: Debtservicecoverageratioofgreaterthan1.35;and 33

 Debtservicecoverageratioforstabilizedpropertiesofgreaterthan 1.20.

2. LoantoValueRequirement BlackRockbelievestheproposedloantovaluelimitof65%istoo conservative,andshouldbesetbyassetclass;wesuggestthefollowing levels: Multifamily:notgreaterthan80%

Office:notgreaterthan75%
Industrial:notgreaterthan70%
Retail:notgreaterthan70%
Hotelandotherhospitality:notgreaterthan65%
3. ValuationofCollateral BlackRockbelievestherestrictionsandproceduresrelatingtovaluationof collateralaretoogranularinnaturetobegenerallyappliedacrossallCRE lendingandshouldbewithdrawnfromtheCREloaneligibilitycriteria. 4. RiskManagementandMonitoringRequirements Theproposalrequiressponsorstomonitorathirdpartypurchasers compliancewiththeriskretentionrulesrequirementsforthirdparty retention,andnotifythebondholdersofanynoncompliance.Thisstandard isnotpractical,assponsorsdonothaveaccesstoalltheinformationneeded toperformsuchmonitoringandsomeothermonitoringorreportingmethod shouldbeconsidered. BlackRocksupportsaprotocolwherebyabuyerofahorizontalresidual interestcertifiesannuallythatitisincompliancewiththerequirementsfor thirdpartyretentionundertheProposedRules.Thiscertificationcouldbe madebytheholdertoanOperatingAdvisor,andtheOperatingAdvisorcould begiventheauthoritytoenforcethecomplianceobligation,inadditiontothe otherdutiessuggestedabovefortheOperatingAdvisor. E. QualifyingAutomobileLoans BlackRockendorsestheefforttoestablishaqualifyingautomobileloan (QAL)standard. However,webelievethattheproposedcriteriaaretoo restrictiveandarenotconsistentwithcurrentautomobileloanorigination practices. Mostautoloanscurrentlybeingoriginatedwouldnotqualify undertheProposedRules. Fundamentally,automobileloansaredifferent frommortgages. Theavailabilityoffinancingiscrucialtoautomobilesales, andforpeoplesabilitytocommutetowork.Whileafamilycanrentinstead 34

 ofbuyingasinglefamilyhouse,itisprohibitivelyexpensivetocommuteto workortoparticipateinotherdaytodayactivitieswitharentalcar. BlackRockrecommendschangestotheeligibilitycriteriawhichinourview shouldaccommodateasubstantialportion,atleastamajority,ofautoloan originationsunderthecurrentmarketlevels,whichwebelieveisa reasonableobjectivetoencourageresponsiblelendingbehavior. WealsobelievethattheQALeligibility,whiledeterminedonanindividual loanbasis,shouldbeestablishedbyamatrixofcreditvalueswherebya conservativeunderwritingfactoroffsetsanaggressivefactoruptoan agreeduponlimit.Themainvariablesforautomobileloanswouldbeloan tovalueratio,abilitytopayandaborrowerscredithistory. Belowweprovideadiscussionontheaverageandlimitvaluesforthe variousunderwritingfactorsthatwebelieveshouldcomprisethematrix. 1. AbilitytoRepay BlackRockbelievesthattherequiredmaximumdebttoincomeratiofora borrowerunderaqualifyingautoloanshouldbehigherthanthe36%set forthintheProposedRules.Veryfewautoloanswillqualifyforthe exemptionifthisratioremainsatitscurrentlevel.Inmuchofthecountry autotransportationistheonlywayforpeopletocommutetowork. Therefore,itisdesirabletohaveaveryhighdebttoincomeratiolimitorto removeitaltogetherfromtheProposedRules. 2. LoanTerms Therequirementthataqualifyingautomobileloanmusthaveamaturityof fiveyearsorlesswouldpreventasignificantnumberofautoloansfrom qualifyingundertheproposeddefinition.Inthecaseofusedcarloansthe ProposedRulesrequirethatthetermoftheloan,plusthedifferencebetween thecurrentmodelyearandthevehiclesmodelyear,notexceedfiveyears. Wenotethatautoloansmaturitieshavebeenrisinginrecentyears.Asa result,thematurityrestrictionswillconstraincreditavailabilitybymaking thelongertermloansnonqualified. Itisalsoimportantthatqualifyingloansshouldnothaveadverse characteristicssuchasballoonordelayedamortizationfeatures,payment holidays,andthepresenceofresidualrisk. 3. ReviewingCreditHistory Ourcommentsontheuseofthecredithistoryoftheborrowerformortgages, includingaFICOcutoffalsoapplyhere(seeSectionIV.C.2above). 4. LoantoValue 35

 Therequirementthataborrowertenderadownpaymentofthesumof(i) thecostofvehicletitle,tax,registrationfeesanddealerimposedfeesand(ii) 20%ofthepurchasepriceisquiteonerousanddoesnotreflectcurrent marketpracticeinautomobilefinancing.Webelievethatalowerdown paymentrequirementonanotherwiseconservativelyunderwritten automobileloanwillnotposeanysignificantadditionalcreditrisk. InresponsetotheRequestforComments: RFC159(a) BlackRockrecommendsasignificantlylowerdownpayment minimumof5%forqualifiedautomobileloans.BlackRockalsorecommends thatthemaximummaturityallowedunderthequalifyingautomobileloan definitionbeincreasedtosixyearsinkeepingwiththecurrentorigination practices. F. BuybackRequirements BlackRockhasnocommentsonthisSectionoftheProposedRules. VI.GeneralExemptions A. ExemptionforFederallyInsuredorGuaranteedResidential,Multifamilyand HealthCareMortgageLoanAssets BlackRockhasnocommentsonthisSectionoftheProposedRules. B. OtherExemptions RFC166(b). BlackRockbelievesthattheproposedexemptionforABSissued orguaranteedbyaStateormunicipalentityisunderinclusive.While securitiesissuedorguaranteedbyastateoftheUnitedStates,orany subdivisionorinstrumentalitythatisexemptfromtheregistration requirementsoftheSecuritiesAct,areexemptfromtheriskretention requirementsundertheProposedRules,securitiesthatarecollateralizedby suchsecurities,suchastenderoptionbonds(TOBs),falloutsideofthe exemption. AsnotedintheProposedRules,itisappropriateinthepublicinterestandfor theprotectionofinvestorsthatsecuritiesissuedorguaranteedbyastateor municipalitybeexemptedfromtheriskretentionrequirements,inlightofthe roleofthestateormunicipalentityinissuing,insuringorguaranteeingthe ABSorcollateralandthespecialtreatmentaffordedsuchsecuritiesby Congress.Similarly,securitieswhicharecollateralizedbysuchexempted securitiesshouldalsobeexemptfromtheriskretentionrequirement. RequiringthesponsorsofTOBsandsimilarsecuritiestoretainriskwouldnot furtherthegoalofprudentunderwritingandwouldimposeanunnecessary 36

 burdenonsponsorsofsuchsecurities.BlackRockthereforerecommendsthat theexemptionrelatingtoABSissuedorguaranteedbyastateormunicipal entitybebroadenedtoincludesecuritiescollateralizedbysuchexempt securities. C. ExemptionforCertainResecuritizationTransactions TheProposedRulesprovideanexemptionforresecuritizationtransactions(i) whicharecollateralizedsolelyby15GcompliantABS(whichareABSissued inasecuritizationtransactionforwhichcreditriskwasretainedasrequired undertheruleorwhichwasexemptedfromthecreditriskretention requirementsoftherule)and(ii)whereonlyasingleclassofABSinterestsis issuedandthetransactionstructurerequiresthepassthroughofallprincipal andinterestpaymentsreceivedontheunderlyingABStotheholdersofthis class. BlackRockbelievesthatothertypesofresecuritizationtransactionsbackedby 15GcompliantABSshouldbeexemptfromtheriskretentionrequirement. Inparticular,therequirementthatresecuritizationsbeexemptfromrisk retentiononlyifthereisasinglepassthroughtrancheistoorestrictive. Privatemarketresecuritizationtransactionsusuallyinvolvetheissuanceof multipleclassesofsecurities.Thisstructureisemployedinordertoallocate riskbetweentheclassesofsecurities:themoresubordinateclassesof securitiesbearagreaterriskofloss,whereasthemoreseniorclassesof securitiesbearasmallerriskofloss.Thisenablesthemoreseniorclassesof securitiestoobtainahighercreditratingormeetothercriteriadesiredby investors. Additionally,seniorclassesmaybetranchedbasedontimingof cashflowsorprepaymentstomeettherequirementsofinvestors.The limitationoftheresecuritizationexemptiontoasinglepassthroughtranche restrictsinvestorsfromcarvingouthigherratedtranchesfromexisting securitizationsinordertocreatesecuritieswhichwillmeettheseinvestor needs.Italsorestrictsinvestorsfromchoosingseniortrancheswith maturitiesorprepaymentcharacteristicsthatmeettheirinvestmentneeds. InresponsetotheRequestforComment: RFC168(a).BlackRockbelievesthattheresecuritizationexemptionshouldbe expandedtoincludemultitrancheresecuritizationsof15GcompliantABSin additiontosingletrancheresecuritizations. RFC169(a)and(b).Anexemptionforasequentialpayresecuritizationthatis collateralizedby15GcompliantABSshouldbeincludedinthefinalrules. Timetranchingofcashflowsisawellestablishedpracticeinsecuritizationand benefitsinvestorsbymatchingthematurityofthetranchestotheir investmentneeds. 37

 RFC170(a)and(b). Anexemptionforprepaymenttranchedresecuritizations thatarebackedby15GcompliantABSshouldalsobeincludedinthefinal rules. Itisstandardpracticetouseprepaymentbasedtranchingofmortgage cashflowsinsecuritizations.Suchtranchesareexposedonlytoprepayment riskandarenotexposedtocreditrisk. RFC171. BlackRockagreesthatonlyresecuritizationsinvolving15G compliantABSshouldqualifyfortheriskretentionexemption,eventhough initiallyonlyresecuritizationsbasedonGSEguaranteedABSmayqualifyfor theexemption.However,resecuritizationsofprivatelabelABSshouldbe exemptaswelloncetheriskretentionrequirementshavebeenmetbythe underlyingABS.Webelievethatsimpleandconservativeresecuritizations thatincludecredit,timeandprepaymenttranchingofcashflowswithoutany stepdownfeaturesorperformancetriggerswillbenefitinvestorsby providingtheminvestmentchoicesthatmeettheirneeds. D. Additionalexemptions BlackRockhasnocommentsonthisSectionoftheProposedRules. E. Safeharborforcertainforeignrelatedtransactions BlackRockhasnocommentsonthisSectionoftheProposedRules. * * * WethanktheAgenciesfortheopportunitytocommentontheseProposedRules. WelookforwardtoworkingwiththeAgenciesonthisrulemakingprocess.Ifyou haveanyquestionsorwouldlikefurtherinformation,pleasedonothesitateto contactme. Sincerely,

BarbaraNovick
ViceChairman,BlackRock,Inc.

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