The FDIC’s board approved an advance notice of proposed rulemaking Tuesday regarding its safe harbor provision for securitized loans seized from failed banks, which would restrict the protection to loan bundles that meet certain regulatory criteria.

Since 2000, the FDIC has taken a hands-off approach to securitized assets when it stepped into to shut down a problem financial institution. But in June, the Financial Accounting Standards Board amended its FAS 166 and 167 rules to make most securitizations ineligible for off-balance sheet standards for sale treatment. These accounting changes are set to take effect on January 1, 2010, essentially moving securitized assets back onto banks’ books, which means the FDIC must revisit how to deal with them in receivership.

On November 12, the FDIC approved a transitional safe harbor that permanently grandfathered securitizations in process through March 31st, 2010.

The new rule proposed Tuesday focuses on what underwriting standards should be applied for safe harbor treatment on transactions created after March 31st.

“The misalignment of incentives in securitizations has contributed to massive losses to insured institutions, to the [FDIC’s deposit insurance fund], and to our financial system,” said FDIC Chairman Sheila Bair. “Fostering a sustainable securitization market that emphasizes transparency, loan quality, risk retention, and appropriate incentives and authorities for restructuring troubled loans will restore investor confidence and help banks diversify their funding sources while managing interest-rate risk for longer dated assets.”

The FDIC’s proposed safe harbor rule is similar to legislation being considered by Congress, but regulators were divided on its application and consequences. Board member John Dugan, who is also comptroller of the currency, said he was “not comfortable” with Bair’s sample guidelines and was quick to point out that they do not reflect the views of the entire board.

“I want to be clear that these are only examples, do not indicate the presumptive view of the board, and in fact include a number of provisions with which I would have significant concerns,” Dugan said.

The advance notice of proposed rulemaking for the safe harbor provision will be open to public comment for 45 days following publication in the “Federal Register”:http://www.gpoaccess.gov/fr.