The U.S. Securities and Exchange Commission Thursday voted to adopt two sets of new rules to bolster disclosure in the asset-backed securities market.

The SEC approved one set of rules that requires ABS issuers make disclosures designed to help investors identify loan originators with clear underwriting deficiencies, by revealing the history of the requests they received and repurchases they made related to their outstanding securities. They will have to make these disclosures to the SEC and in prospectuses. Under the rule, issuers will be required to disclose the last three years of repurchase history by Feb. 14, 2012.

The SEC also approved a second set of rules that would require issuers to conduct a review of the assets underlying those securities. Issuers will be required to disclose the findings and conclusions of the review, including information about: how the loans in the pool differ from the loan underwriting criteria disclosed in the prospectus, loans that did not meet the disclosed underwriting criteria but were nonetheless included in the pool, the entity that decided to include these loans in the pool.

The hope is that these new rules help revive the securitization market. “At one time, the securitization market provided trillions of dollars of liquidity to virtually every sector of the economy. However, during the financial crisis, ABS investors suffered significant losses, causing the market for securitization to rapidly decline,” said SEC chairman, Mary Schapiro. “These rational measures are designed to help revitalize the important asset-backed securities market by encouraging better disclosure for investors.”

IE