SPAIN Law and Practice Contributed by: Jaime de la Torre and Jaime Juan Rodríguez, Cuatrecasas
• legally discharged of its obligations for pay - ments made to the seller (as original lender); and • able to set off obligations against the seller (this can be an issue if the seller performs retail banking). As the seller is usually designated as servicer in Spanish securitisations, no notification is required, except in the following instances. • If required by law – several regional regula - tions require notification to borrowers if those borrowers are qualified as consumers and the loans meet certain requirements. • Upon a servicer event – certain event-specific scenarios normally trigger the servicer suc - cession mechanism, such as the insolvency of the servicer or a breach of obligations. In this scenario, a compulsory notification to all borrowers is usually the best practice to avoid a few operational risks. 3.4 Principal Covenants There are usually three sets of covenants in any securitisation from a subjective point of view: • from the seller; • from the originator; and • from the management company. The following key commitments are usually included in the documentation: • sale – the seller shall sell the relevant assets meeting the eligibility criteria (the R&W described in 3.2 Principal Warranties ) to the SPE; • collection – the servicer shall transfer the amounts collected from the debtors of the underlying assets to the SPE;
• servicing – the servicer shall manage the underlying assets (see 4.9 Banks Securitising Financial Assets ); • risk retention – the seller (as originator) shall retain a material net economic interest of not less than 5% of the nominal value of the securitisation (see 4.3 Credit Risk Retention ); and • compliance – the applicable regulations shall be complied with. 3.5 Principal Servicing Provisions Under Article 26 of the Spanish Securitisation Law, the primary rule is that the management company of the SPE is legally responsible for administering the assets pooled in the SPE. Usual Servicing Provisions The servicing provisions should be ring-fenced in a servicing agreement to be executed upon closing by the SPE. Those provisions should include at least the following: • custody of the documentation relating to the underlying assets; • collections – an undertaking to transfer all collection amounts to the SPE; • default process – the actions to be imple - mented in case of defaulted assets; • notices between the management company and the SPE; and • termination – servicer termination events and a replacement procedure. Servicing Differences Depending on the asset class, the servicing activity can be subject to certain requirements. • Mortgage loans – in the case of real estate mortgages, the Spanish Mortgage Mobilisa - tion Regulation requires the seller (as original lender) to retain a number of non-delegable
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