Replies to post #701582 on Mr Cooper Group Inc (COOP)

[Petewamu]

FDIC's first option is similar to the safe harbor provisions under the
Code. If FDIC retains QFCs in the receivership, the counterparty may
terminate the contract and exercise any contractual right to net any
payment the counterparty owes to the institution against the payment
the institution owes to the counterparty on a different QFC.[Footnote
23] While this right is immediate under the Code's safe harbor, the
QFC counterparty generally cannot exercise it against a failed insured
depository institution in FDIC receivership until after 5:00 p.m.
(eastern standard time or eastern daylight time) on a normal business
day following the date of appointment of FDIC as receiver.[Footnote
24] Because bank regulators almost always close depository
institutions on Fridays, the stay remains in effect until 5:00 p.m.
the following Monday. The second option involves FDIC's transfer of
QFCs to another financial institution or permissible entity. If FDIC
transfers a QFC to another financial institution, the counterparty
cannot exercise its contractual right to terminate the QFC solely as a
result of the transfer, the insolvency, or the appointment of the
receiver.[Footnote 25] Under the third option, FDIC may repudiate
(reject) a QFC, within a reasonable period of time, if FDIC determines
that the contract is burdensome.[Footnote 26] However, FDIC must pay
actual direct compensatory damages, which may include the normal and
reasonable costs of cover or other reasonable measure of damages used
in the industry for such claims, calculated as of the date of
repudiation. If FDIC decides to transfer or repudiate (reject) a QFC,
all other QFCs entered into between the failed institution and that
counterparty, as well as those QFCs entered into with any of that
counterparty's affiliates, must be transferred to the same financial
institution or repudiated at the same time.[Footnote 27]

Safe harbor treatment was first added to the Code in 1982 for forward
contracts, commodity contracts, and security contracts, and over time
the Congress has expanded the types of contracts and counterparties
covered.[Footnote 28] The most recent changes to the treatment of safe
harbor contracts under the
and repurchase agreements, an overnight source of funding used by
financial institutions, and included provisions to strengthen and
clarify the enforceability of such contracts.[Footnote 29] According
to legislative history and FDIC regulations, the purpose of these safe
harbors and the QFC provisions in the FDI Act is to maintain market
liquidity and reduce systemic risk, which we define as the risk that
the failure of one large institution would cause other institutions to
fail or that a market event could broadly affect the financial system
rather than just one or a few institutions.[Footnote 30]