Risk-Based Capital Regulation Amendment, 36231-36252 [06-5330]

Agencies

• Federal Housing Enterprise Oversight Office
• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
• Office of Federal Housing Enterprise Oversight

[Federal Register Volume 71, Number 122 (Monday, June 26, 2006)]
[Proposed Rules]
[Pages 36231-36252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5330]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1750

RIN 2550-AA35


Risk-Based Capital Regulation Amendment

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Notice of Proposed Rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Office of Federal Housing Enterprise Oversight (OFHEO) is 
proposing technical amendments to Appendix A to Subpart B Risk-Based 
Capital Regulation Methodology and Specifications of 12 CFR part 1750, 
(Risk-Based Capital Regulation). The proposed amendments are intended 
to enhance the accuracy and transparency of the calculation of the 
risk-based capital requirement for the Enterprises and updates the 
Risk-Based Capital Regulation to incorporate approved new activities 
treatments.

DATES: Comments regarding this Notice of Proposed Rulemaking must be 
received in writing on or before July 26, 2006. For additional 
information, see SUPPLEMENTARY INFORMATION.

ADDRESSES: You may submit your comments on the proposed rulemaking, 
identified by ``RIN 2550-AA35,'' by any of the following methods:
     U.S. Mail, United Parcel Post, Federal Express, or Other 
Mail Service: The mailing address for comments is: Alfred M. Pollard, 
General Counsel, Attention: Comments/RIN 2550-AA35, Office of Federal 
Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552.
     Hand Delivery/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2550-AA35, 
Office of Federal Housing Enterprise Oversight, Fourth Floor, 1700 G 
Street, NW., Washington, DC 20552. The package should be logged at the 
Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m.
     E-mail: Comments to Alfred M. Pollard, General Counsel, 
may be sent by e-mail at RegComments@OFHEO.gov. Please include ``RIN 
2550-AA35'' in the subject line of the message.

FOR FURTHER INFORMATION CONTACT: Isabella W. Sammons, Deputy General 
Counsel, telephone (202) 414-3790 or Jamie Schwing, Associate General 
Counsel, telephone (202) 414-3787 (not toll free numbers), Office of 
Federal Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. The telephone number for the Telecommunications 
Device for the Deaf is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    The Office of Federal Housing Enterprise Oversight (OFHEO) invites 
comments on all aspects of the proposed regulation, and will take all 
comments into consideration before issuing the final regulation. OFHEO 
requests that comments submitted in hard copy also be accompanied by 
the electronic version in Microsoft[supreg] Word or in portable 
document format (PDF) on 3.5'' disk or CD-ROM.
    Copies of all comments will be posted on the OFHEO Internet web 
site at https://www.ofheo.gov. In addition, copies of all comments 
received will be available for examination by the public on business 
days between the hours of 10 a.m. and 3 p.m., at the Office of Federal 
Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. To make an appointment to inspect comments, 
please call the Office of General Counsel at (202) 414-3751.

II. Background

    Title XIII of the Housing and Community Development Act of 1992, 
Pub. L. 102-550, titled the Federal Housing Enterprise Financial Safety 
and Soundness Act of 1992 (Act) (12 U.S.C. 4501 et seq.) established 
OFHEO as an independent office within the Department of Housing and 
Urban Development to ensure that the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac) (collectively, the Enterprises) are adequately 
capitalized, operate safely and soundly, and comply with applicable 
laws, rules and regulations.
    In furtherance of its regulatory responsibilities, OFHEO published 
a final regulation setting forth a risk-based capital test which forms 
the basis for determining the risk-based capital requirement for each 
Enterprise.\1\ The Risk-Based Capital Test has been amended to 
incorporate corrective and technical amendments that enhance the 
accuracy and transparency of the calculation of the risk-based capital 
requirement.\2\ Since the last amendment

[[Page 36232]]

to the Risk-Based Capital Regulation, additional experience with the 
regulation has raised further operational and technical issues. OFHEO 
now proposes technical amendments to address four aspects of the Risk-
Based Capital Regulation. The proposed technical amendments would 
incorporate additional interest rates indices, clarify definitions, 
incorporate approved new Enterprise activities and update treatment of 
certain mark-to-market accounting issues. These amendments are capital 
neutral and largely codify existing practice undertaken pursuant to the 
current Risk-Based Capital Regulation. In addition to the proposed 
technical amendments, OFHEO plans additional future rulemakings to 
address substantial topics such as making adjustments to the loss 
severity equations used to calculate Enterprise risk-based capital and 
the appropriateness of incorporating mark-to-market accounting into the 
Risk-Based Capital Regulation. OFHEO also plans to update the Minimum 
Capital Regulation to address fair value accounting and other 
issues.\3\
---------------------------------------------------------------------------

    \1\Risk-Based capital, 66 FR 47730 (September 13, 2001), 12 CFR 
part 1750.
    \2\Risk-Based Capital, 66 FR 47730 (September 13, 2001), 12 CFR 
part 1750, as amended, 67 FR 11850 (March 15, 2002), 67 FR 19321 
(April 19, 2002), 68 FR 7309 (February 13, 2003).
    \3\Minimum Capital, 61 FR 35607 (July 8, 1996), 12 CFR 1750, as 
amended, 67 FR 19321 (April 19, 2002).
---------------------------------------------------------------------------

    Although the changes set forth in this amendment are technical and 
are being proposed to incorporate proxy treatments, new activities, and 
updates already used to calculate Enterprise capital requirements, 
OFHEO welcomes comment as to whether these changes are optimal and on 
any additional issues mentioned herein. The proposed technical 
amendments are discussed in greater detail below.

A. Additional Interest Rate Indices

    Due to developments in the mortgage and financial markets since the 
promulgation of the Risk-Based Capital Regulation and the introduction 
of a number of approved new activities at each Enterprise, OFHEO is 
proposing additions to the interest rate indices used to measure 
Enterprise risk. These new indices would be incorporated into the Risk-
Based Capital Regulation through revisions to Table ``3-18, Interest 
Rate and Index Inputs,'' and Table ``3-27, Non-Treasury Interest 
Rates,'' of Appendix A to Subpart B. The new interest rate indices are 
the Constant Maturity Mortgage Index, 12 month Moving Treasury Average, 
One month Freddie Mac Reference Bill, Certificate of Deposits Index, 2 
Year Swap, 3 Year Swap, 5 Year Swap, 10 Year Swap, and 30 Year Swap.

B. Revised Risk-Based Capital Regulation Definitions

    Additional operational experience with the Risk-Based Capital 
Regulation, as well as financial and mortgage market developments, have 
led OFHEO to conclude that a number of defined terms in the Risk-Based 
Capital Regulation lack clarity or were otherwise insufficient. 
Proposed technical amendments in this area include changes to recognize 
that single family loans with interest-only periods have become common 
and that the Enterprises have acquired or guaranteed such loans. 
Sections 3.1.2.1, 3.6.3.3.1, and 3.6.3.3.2 of Appendix A to Subpart B, 
currently provide a treatment for loans with interest-only periods. 
However, the data definitions in sections 3.1.2.1, 3.6.3.3.1, and 
3.6.3.3.2 assume only multifamily loans have this feature. OFHEO 
proposes modifications to the data definitions in those sections of the 
Risk-Based Capital Regulation to accommodate single family interest-
only loans. In addition to the single family interest-only issue, there 
are more than 30 definitions related to deferred balances throughout 
the Risk-Based Capital Regulation. These definitions are not clear or 
consistent throughout the Risk-Based Capital Regulation and across 
product type. Finally, the Risk-Based Capital Regulation definition of 
``float days'' in sections 3.1.2.1.1 and 3.6.3.7.2 would be revised to 
indicate more accurately that amounts referred to in that definition 
are based on weighted averages for a given loan group.

C. Incorporation of New Enterprise Activities

    Section 3.11 of the Risk-Based Capital Regulation provides a method 
for recognizing and quantifying the capital impact of the innovations 
in the financial and mortgage markets that impact the risk profiles of 
the Enterprises. Section 3.11.3, Treatment of New Activities, sets 
forth the procedures by which new Enterprise activities are reported to 
OFHEO, analyzed by OFHEO to determine an appropriately conservative 
treatment, and incorporated into the risk-based capital calculation. 
The section also describes how each newly incorporated treatment is 
made available to the public for comment and possible further revision. 
Since the promulgation of the Risk-Based Capital Regulation, many new 
activities treatments have been incorporated into the capital 
calculation and posted on the OFHEO web site for public comment. 
Because these new activities appear to be permanent and their 
treatments have proved effective, OFHEO is proposing to incorporate 
them into the text of the Risk-Based Capital Regulation. The proposed 
technical amendments regarding new activities treatments in section 
3.6, whole loan cash flows, include treatments concerning reverse 
mortgages and split-rate arm loans. New activities treatments in 
section 3.8, nonmortgage instrument cash flows, relate to futures and 
options on futures, swaptions, consumer price index coupon linked 
instruments, and pre-refunded tax-exempt municipal bonds. The proposed 
amendments would appear at sections 3.6.3.3.1 and 3.8.3.6.2.

D. Update of Mark-to-Market Accounting Treatment

    During the notice and comment development of the Risk-Based Capital 
Regulation, commenters raised concerns regarding treatment of the 
impact of mark-to-market accounting. At that time, Financial Accounting 
Standard (FAS) 115 and FAS 133 required mark-to-market accounting for 
certain instruments. In response to the requirements of FAS 115 and FAS 
133, and taking into account public comments, OFHEO determined to 
implement simplified procedures to allow the efficient and practical 
implementation of the stress test. Generally, the simplified procedures 
provide for the removal of the effects of mark-to-market accounting 
from the balance sheet such that the balance sheet is stated on an 
amortized cost basis.
    Since the adoption of the Risk-Based Capital Regulation, a number 
of new accounting standards have been adopted by the Financial 
Accounting Standards Board that introduce fair values to the balance 
sheet and that are similar in complexity to FAS 115 and FAS 133. OFHEO 
is proposing a technical amendment to Section 3.10.3.6.2 [a] of the 
Risk-Based Capital Regulation that would extend the current risk-based 
capital regulatory treatment of FAS 115 and FAS 133 to other accounting 
standards that require mark-to-market accounting. Under current 
guidance from OFHEO, the Enterprises back out the impact of the new 
mark-to-market accounting standards from their respective balance 
sheets prior to submitting their Risk-Based Capital Reports to OFHEO. 
The treatment set forth in the proposed amendment would codify this 
practice.

[[Page 36233]]

Regulatory Impacts

Executive Order 12866, Regulatory Planning and Review

    The proposed technical amendments address provisions of the Risk-
Based Capital Regulation. The proposed technical amendments incorporate 
new activities treatments of the Enterprises adopted in accordance with 
the Risk-Based Capital Regulation, corrections to certain definitions, 
updates to interest-rate indices and recognition of accounting rule 
changes adopted since the Risk-Based Capital Regulation was 
promulgated. The proposed technical amendments to the Risk-Based 
Capital Regulation are not classified as an economically significant 
rule under Executive Order 12866 because they would not result in an 
annual effect on the economy of $100 million or more or a major 
increase in costs or prices for consumers, individual industries, 
Federal, state or local government agencies, or geographic regions; or 
have significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
foreign or domestic markets. Accordingly, no regulatory impact 
assessment is required. Nevertheless, the proposed technical amendments 
were submitted to the Office of Management and Budget (OMB) for review 
under the provisions of Executive Order 12866 as a significant 
regulatory action.

Executive Order 13132, Federalism

    Executive Order 13132 requires that Executive departments and 
agencies identify regulatory actions that have significant federalism 
implications. A regulation has federalism implications if it has 
substantial direct effects on the states, on the relationship or 
distribution of power between the Federal Government and the states, or 
on the distribution of power and responsibilities among various levels 
of government. The Enterprises are federally chartered entities 
supervised by OFHEO. The proposed technical amendments to the Risk-
Based Capital Regulation address matters which the Enterprises must 
comply with for Federal regulatory purposes. The proposed technical 
amendments to the Risk-Based Capital Regulation address matters 
regarding the risk-based capital calculation for the Enterprises and 
therefore do not affect in any manner the powers and authorities of any 
state with respect to the Enterprises or alter the distribution of 
power and responsibilities between Federal and state levels of 
government. Therefore, OFHEO has determined that the proposed 
amendments to the Capital regulation have no federalism implications 
that warrant preparation of a Federalism Assessment in accordance with 
Executive Order 13132.

Paperwork Reduction Act

    These amendments do not contain any information collection 
requirements that require the approval of OMB under the Paperwork 
Reduction Act (44 U.S.C. 3501 et seq.).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation does not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). OFHEO has considered the impact of the 
proposed technical amendments to the Risk-Based Capital Regulation 
under the Regulatory Flexibility Act. The General Counsel of OFHEO 
certifies that the proposed technical amendments to the Risk-Based 
Capital Regulation are not likely to have a significant economic impact 
on a substantial number of small business entities because the 
regulation is applicable only to the Enterprises, which are not small 
entities for purposes of the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1750

    Capital classification, Mortgages, Risk-based capital.

    Accordingly, for the reasons stated in the preamble, OFHEO amends 
12 CFR part 1750 as follows:

PART 1750--CAPITAL

    1. The authority citation for part 1750 continues to read as 
follows:

    Authority: 12 U.S.C. 4513, 4514, 4611, 4612, 4614, 4615, 4618.

    2. Amend Appendix A to subpart B of part 1750 as follows:
    a. Revise Table 3-2 in paragraph 3.1.2.1 [c];
    b. Revise Table 3-4 in paragraph 3.1.2.1 [c];
    c. Revise Table 3-5 in paragraph 3.1.2.1.1;
    d. Revise Table 3-8 in paragraph 3.1.2.1.1;
    e. Revise Table 3-9 in paragraph 3.1.2.1.1;
    f. Revise Table 3-12 in paragraph 3.1.2.2 [a];
    g. Revise Table 3-13 in paragraph 3.1.2.2 [b];
    h. Revise Table 3-14 in paragraph 3.1.2.2 [c];
    i. Revise Table 3-15 in paragraph 3.1.2.3;
    j. Revise Table 3-16 in paragraph 3.1.2.4;
    k. Revise Table 3-18 in paragraph 3.1.3.1 [c];
    l. Revise Table 3-27 in paragraph 3.3.3 [a] 3. b.;
    m. Redesignate paragraphs 3.6.3.3.1 [d] and [e] as new paragraphs 
3.6.3.3.1. [c] 5. and [c] 6., respectively;
    n. Add new paragraphs 3.6.3.3.1 [c] 7. and [c] 8.;
    o. Revise Table 3-32 in paragraph 3.6.3.3.2;
    p. Revise Table 3-51 in paragraph 3.6.3.7.2;
    q. Revise Table 3-54 in paragraph 3.6.3.8.2;
    r. Revise Table 3-56 in paragraph 3.7.2.1.1;
    s. Revise Table 3-57 in paragraph 3.7.2.1.2 [a];
    t. Revise Table 3-58 in paragraph 3.7.2.1.3 [a];
    u. Revise Table 3-66 in paragraph 3.8.2 [a];
    v. Redesignate paragraph 3.8.3.6.2 [d] as new paragraph 3.8.3.6.2 
[h];
    w. Add new paragraphs 3.8.3.6.2 [d] thru [g];
    x. Revise Table 3-70 in paragraph 3.9.2;
    y. Amend paragraphs 3.10.3.6.2 [a] 1. a. and b.
    The revisions and additions read as follows:

Appendix A to Subpart B of Part 1750--Risk-Based Capital Test 
Methodology and Specifications

* * * * *

3.1.2.1 * * *

    [c] * * *

[[Page 36234]]



                                 Table 3-2--Whole Loan Classification Variables
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              Variable                             Description                              Range
----------------------------------------------------------------------------------------------------------------
Reporting Date                        The last day of the quarter for the   YYYY0331
                                       loan group activity that is being    YYYY0630
                                       reported to OFHEO                    YYYY0930
                                                                            YYYY1231
----------------------------------------------------------------------------------------------------------------
Enterprise                            Enterprise submitting the loan group  Fannie Mae
                                       data                                 Freddie Mac
----------------------------------------------------------------------------------------------------------------
Business Type                         Single family or multifamily          Single family
                                                                            Multifamily
----------------------------------------------------------------------------------------------------------------
Portfolio Type                        Retained portfolio or Sold portfolio  Retained Portfolio
                                                                            Sold Portfolio
----------------------------------------------------------------------------------------------------------------
Government Flag                       Conventional or Government insured    Conventional
                                       loan                                 Government
----------------------------------------------------------------------------------------------------------------
Original LTV                          Assigned LTV classes based on the     LTV<=60
                                       ratio, in percent, between the       60 16.0
----------------------------------------------------------------------------------------------------------------
Original Mortgage Interest Rate       Assigned classes for the original     0.0<=Rate<4.0
                                       mortgage interest rate               4.0<=Rate<5.0
                                                                            5.0<=Rate<6.0
                                                                            6.0<=Rate<7.0
                                                                            7.0<=Rate<8.0
                                                                            8.0<=Rate<9.0
                                                                            9.0<=Rate<10.0
                                                                            10.0<=Rate<11.0
                                                                            11.0<=Rate<12.0
                                                                            12.0<=Rate<13.0
                                                                            13.0<=Rate<14.0
                                                                            14.0<=Rate<15.0
                                                                            15.0<=Rate<16.0
                                                                            Rate=>16.0
----------------------------------------------------------------------------------------------------------------
Mortgage Age                          Assigned classes for the age of the   0<=Age<=12
                                       loan                                 12180
----------------------------------------------------------------------------------------------------------------

[[Page 36235]]

 
Rate Reset Period                     Assigned classes for the number of    Period=1
                                       months between rate adjustments      1=4.00
----------------------------------------------------------------------------------------------------------------
Prepayment Penalty Flag               Indicates if prepayment of the loan   Yes
                                       is subject to active prepayment      No
                                       penalties or yield maintenance
                                       provisions
----------------------------------------------------------------------------------------------------------------

* * * * *
3.1.2.1.1* * *


           Table 3-5--Mortgage Amortization Calculation Inputs
------------------------------------------------------------------------
              Variable                           Description
------------------------------------------------------------------------
                                     Rate Type (Fixed or Adjustable)
------------------------------------------------------------------------
                                     Product Type (30/20/15-Year FRM,
                                      ARM, Balloon, Government, etc.)
------------------------------------------------------------------------
UPBORIG                              Unpaid Principal Balance at
                                      Origination (aggregate for Loan
                                      Group)
------------------------------------------------------------------------
UPB0                                 Unpaid Principal Balance at start
                                      of Stress Test (aggregate for Loan
                                      Group), adjusted by UPB scale
                                      factor
------------------------------------------------------------------------
MIR0                                 Mortgage Interest Rate for the
                                      Mortgage Payment prior to the
                                      start of the Stress Test, or
                                      Initial Mortgage Interest Rate for
                                      new loans (weighted average for
                                      Loan Group) (expressed as a
                                      decimal per annum)
------------------------------------------------------------------------
PMT0                                 Amount of the Mortgage Payment
                                      (Principal and Interest) prior to
                                      the start of the Stress Test, or
                                      first Payment for new loans
                                      (aggregate for Loan Group),
                                      adjusted by UPB scale factor
------------------------------------------------------------------------
AT                                   Original loan Amortizing Term in
                                      months (weighted average for Loan
                                      Group)
------------------------------------------------------------------------
RM                                   Remaining term to Maturity in
                                      months (i.e., number of
                                      contractual payments due between
                                      the start of the Stress Test and
                                      the contractual maturity date of
                                      the loan) (weighted average for
                                      Loan Group)
------------------------------------------------------------------------
A0                                   Age of the loan at the start of
                                      Stress Test, in months (weighted
                                      average for Loan Group)
------------------------------------------------------------------------
IRP                                  Initial Rate Period, in months
------------------------------------------------------------------------
                                     Interest-only Flag
------------------------------------------------------------------------
RIOP                                 Remaining Interest-only period, in
                                      months (weighted average for loan
                                      group)
------------------------------------------------------------------------
UPB Scale Factor                     Factor determined by reconciling
                                      reported UPB to published
                                      financials
------------------------------------------------------------------------
Additional Interest Rate Inputs
------------------------------------------------------------------------
GFR                                  Guarantee Fee Rate (weighted
                                      average for Loan Group) (decimal
                                      per annum)
------------------------------------------------------------------------
SFR                                  Servicing Fee Rate (weighted
                                      average for Loan Group) (decimal
                                      per annum)
------------------------------------------------------------------------
Additional Inputs for ARMs (weighted averages for Loan Group, except for
 Index)
------------------------------------------------------------------------
INDEXm                               Monthly values of the contractual
                                      Interest Rate Index
------------------------------------------------------------------------
LB                                   Look-Back period, in months
------------------------------------------------------------------------
MARGIN                               Loan Margin (over index), decimal
                                      per annum
------------------------------------------------------------------------
RRP                                  Rate Reset Period, in months
------------------------------------------------------------------------
                                     Rate Reset Limit (up and down),
                                      decimal per annum
------------------------------------------------------------------------
                                     Maximum Rate (life cap), decimal
                                      per annum
------------------------------------------------------------------------
                                     Minimum Rate (life floor), decimal
                                      per annum
------------------------------------------------------------------------
NAC                                  Negative Amortization Cap, decimal
                                      fraction of UPBORIG
------------------------------------------------------------------------

[[Page 36237]]

 
                                     Unlimited Payment Reset Period, in
                                      months
------------------------------------------------------------------------
PRP                                  Payment Reset Period, in months
------------------------------------------------------------------------
                                     Payment Reset Limit, as decimal
                                      fraction of prior payment
------------------------------------------------------------------------

* * * * *
3.1.2.1.1 * * *


   Table 3-8--Miscellaneous Whole Loan Cash and Accounting Flow Inputs
------------------------------------------------------------------------
              Variable                           Description
------------------------------------------------------------------------
GF                                   Guarantee Fee rate (weighted
                                      average for Loan Group) (decimal
                                      per annum)
------------------------------------------------------------------------
FDS                                  Float Days for Scheduled Principal
                                      and Interest (weighted average for
                                      Loan Group)
------------------------------------------------------------------------
FDP                                  Float Days for Prepaid Principal
                                      (weighted average for Loan Group)
------------------------------------------------------------------------
FREP                                 Fraction Repurchased (weighted
                                      average for Loan Group) (decimal)
------------------------------------------------------------------------
RM                                   Remaining Term to Maturity in
                                      months
------------------------------------------------------------------------
UPD0                                 Sum of all unamortized discounts,
                                      premiums, fees, commissions, etc.,
                                      for the loan group, such that the
                                      unamortized balance equals the
                                      book value minus the face value
                                      for the loan group at the start of
                                      the Stress Test, adjusted by the
                                      Unamortized Balance Scale Factor
------------------------------------------------------------------------
Unamortized Balance Scale Factor     Factor determined by reconciling
                                      reported Unamortized Balance to
                                      published financials
------------------------------------------------------------------------

* * * * *
3.1.2.1.1 * * *


            Table 3-9--Additional Inputs for Repurchased MBS
------------------------------------------------------------------------
              Variable                           Description
------------------------------------------------------------------------
Wtd Ave Percent Repurchased          For sold loan groups, the percent
                                      of the loan group UPB that gives
                                      the actual dollar amount of loans
                                      that collateralize single class
                                      MBSs that the Enterprise holds in
                                      its own portfolio.
------------------------------------------------------------------------
SUPD0                                The aggregate sum of all
                                      unamortized discounts, premiums,
                                      fees, commissions, etc.,
                                      associated with the securities
                                      modeled using the Wtd Ave Percent
                                      Repurchased, such that the
                                      unamortized balance equals the
                                      book value minus the face value
                                      for the relevant securities at the
                                      start of the Stress Test, adjusted
                                      by the percent repurchased and the
                                      Security Unamortized Balance Scale
                                      Factor.
------------------------------------------------------------------------
Security Unamortized Balances Scale  Factor determined by reconciling
 Factor                               reported Security Unamortized
                                      Balances to published financials
------------------------------------------------------------------------

* * * * *
3.1.2.2 * * *
    [a] * * *


           Table 3-12--Inputs for Single Class MBS Cash Flows
------------------------------------------------------------------------
              Variable                           Description
------------------------------------------------------------------------
Pool Number                          A unique number identifying each
                                      mortgage pool
------------------------------------------------------------------------
CUSIP Number                         A unique number assigned to
                                      publicly traded securities by the
                                      Committee on Uniform Securities
                                      Identification Procedures
------------------------------------------------------------------------
Issuer                               Issuer of the mortgage pool
------------------------------------------------------------------------
Government Flag                      Indicates Government insured
                                      collateral
------------------------------------------------------------------------
Original UPB Amount                  Original pool balance adjusted by
                                      UPB scale factor and multiplied by
                                      the Enterprise's percentage
                                      ownership
------------------------------------------------------------------------
Current UPB Amount                   Initial Pool balance (at the start
                                      of the StressTest), adjusted by
                                      UPB scale factor and multiplied by
                                      the Enterprise's percentage
                                      ownership
------------------------------------------------------------------------
Product Code                         Mortgage product type for the pool
------------------------------------------------------------------------

[[Page 36238]]

 
Security Rate Index                  If the rate on the security adjusts
                                      over time, the index that the
                                      adjustment is based on
------------------------------------------------------------------------
Unamortized Balance                  The sum of all unamortized
                                      discounts, premiums, fees,
                                      commissions, etc., such that the
                                      unamortized balance equals book
                                      value minus face value, adjusted
                                      by Unamortized Balance Scale
                                      Factor
------------------------------------------------------------------------
Wt Avg Original Amortization Term    Original amortization term of the
                                      underlying loans, in months
                                      (weighted average for underlying
                                      loans)
------------------------------------------------------------------------
Wt Avg Remaining Term of Maturity    Remaining maturity of the
                                      underlying loans at the start of
                                      the Stress Test (weighted average
                                      for underlying loans)
------------------------------------------------------------------------
Wt Avg Age                           Age of the underlying loans at the
                                      start of the Stress Test (weighted
                                      average for underlying loans)
------------------------------------------------------------------------
Wt Avg Current Mortgage Interest     Mortgage Interest Rate of the
 rate                                 underlying loans at the start of
                                      the Stress Test (weighted average
                                      for underlying loans)
------------------------------------------------------------------------
Wt Avg Pass-Through Rate             Pass-Through Rate of the underlying
                                      loans at the start of the Stress
                                      Test (Sold loans only) (weighted
                                      average for underlying loans)
------------------------------------------------------------------------
Wtg Avg Original Mortgage Interest   The current UPB weighted average
 Rate                                 mortgage interest rate in effect
                                      at origination for the loans in
                                      the pool
------------------------------------------------------------------------
Security Rating                      The most current rating issued by
                                      any Nationally Recognized
                                      Statistical Rating Organization
                                      (NRSRO) for this security, as of
                                      the reporting date
------------------------------------------------------------------------
Wt Avg Gross Margin                  Gross margin for the underlying
                                      loans (ARM MBS only) (weighted
                                      average for underlying loans)
------------------------------------------------------------------------
.Wt Avg Net Margin                   Net margin (used to determine the
                                      security rate for ARM MBS)
                                      (weighted average for underlying
                                      loans)
------------------------------------------------------------------------
Wt Avg Rate Reset Period             Rate reset period in months (ARM
                                      MBS only) (weighted average for
                                      underlying loans)
------------------------------------------------------------------------
Wt Avg Rate Reset Limit              Rate reset limit up/down (ARM MBS
                                      only) (weighted average for
                                      underlying loans)
------------------------------------------------------------------------
Wt Avg Life Interest Rate Ceiling    Maximum rate (lifetime cap) (ARM
                                      MBS only) (weighted average for
                                      underlying loans)
------------------------------------------------------------------------
Wt Avg Life Interest Rate Floor      Minimum rate (lifetime floor) (ARM
                                      MBS only) (weighted average for
                                      underlying loans)
------------------------------------------------------------------------
Wt Avg Payment Reset Period          Payment reset period in months (ARM
                                      MBS only) (weighted average for
                                      underlying loans)
------------------------------------------------------------------------
Wt Avg Payment Reset Limit           Payment reset limit up/down (ARM
                                      MBS only) (weighted average for
                                      underlying loans)
------------------------------------------------------------------------
Wt Avg Lockback Period               The number of months to look back
                                      from the interest rate change date
                                      to find the index value that will
                                      be used to determine the next
                                      interest rate. (weighted average
                                      for underlying loans)
------------------------------------------------------------------------
Wt Avg Negative Amortization Cap     The maximum amount to which the
                                      balance can increase before the
                                      payment is recast to a fully
                                      amortizing amount. It is expressed
                                      as a fraction of the original UPB.
                                      (weighted average for underlying
                                      loans)
------------------------------------------------------------------------
Wt Avg Original Mortgage Interest    The current UPB weighted average
 Rate                                 original mortgage interest rate
                                      for the loans in the pool
------------------------------------------------------------------------
Wt Avg Initial Interest Rate Period  Number of months between the loan
                                      origination date and the first
                                      rate adjustment date (weighted
                                      average for underlying loans)
------------------------------------------------------------------------
Wt Avg Unlimited Payment Reset       Number of months between unlimited
 Period                               payment resets, i.e., not limited
                                      by payment caps, starting with
                                      origination date (weighted average
                                      for underlying loans)
------------------------------------------------------------------------
Notional Flag                        Indicates if the amounts reported
                                      in Original Security Balance and
                                      Current Security Balance are
                                      notional
------------------------------------------------------------------------
UPB Scale Factor                     Factor determined by reconciling
                                      reported UPB to published
                                      financials
------------------------------------------------------------------------
Unamortized Balance Scale Factor     Factor determined by reconciling
                                      reported Unamortized Balance to
                                      published financials
------------------------------------------------------------------------
Whole Loan Modeling Flag             Indicates that the Current UPB
                                      Amount and Unamortized Balance
                                      associated with this repurchased
                                      MBS are included in the Wtg Avg
                                      Percent Repurchased and Security
                                      Unamortized Balance fields
------------------------------------------------------------------------
FAS 115 Classification               The financial instrument's
                                      classification according to FAS
                                      115
------------------------------------------------------------------------
HPGRK                                Vector of House Price Growth Rates
                                      for quarters q=1...40 of the
                                      Stress Period.
------------------------------------------------------------------------

* * * * *
3.1.2.2 * * *
    [b] * * *


[[Page 36239]]



  Table 3-13--Information for Multi-Class and Derivative MBS Cash Flows
                                 Inputs
------------------------------------------------------------------------
              Variable                           Description
------------------------------------------------------------------------
CUSIP Number                         A unique number assigned to
                                      publicly traded securities by the
                                      Committee on Uniform Securities
                                      Identification Procedures
------------------------------------------------------------------------
Issuer                               Issuer of the security: FNMA,
                                      FHLMC, GNMA or other
------------------------------------------------------------------------
Original Security Balance            Original principal balance of the
                                      security (notional amount for
                                      interest-only securities) at the
                                      time of issuance, adjusted by UPB
                                      scale factor, multiplied by the
                                      Enterprise's percentage ownership
------------------------------------------------------------------------
Current Security Balance             Initial principal balance, or
                                      notional amount, at the start of
                                      the Stress Period, adjusted by UPB
                                      scale factor, multiplied by the
                                      Enterprise's percentage ownership
------------------------------------------------------------------------
Current Security Percentage Owned    The percentage of a security's
                                      total current balance owned by the
                                      Enterprise
------------------------------------------------------------------------
Notional Flag                        Indicates if the amounts reported
                                      in Original Security Balance and
                                      Current Security Balance are
                                      notional
------------------------------------------------------------------------
Unamortized Balance                  The sum of all unamortized
                                      discounts, premiums, fees,
                                      commissions, etc., such that the
                                      unamortized balance equals book
                                      value minus face value, adjusted
                                      by the Unamortized Balance Scale
                                      Factor
------------------------------------------------------------------------
Unamortized Balance Scale Factor     Factor determined by reconciling
                                      reported Unamortized Balance to
                                      published financials
------------------------------------------------------------------------
UPB Scale Factor                     Factor determined by reconciling
                                      the reported current security
                                      balance to published financials
------------------------------------------------------------------------
Security Rating                      The most current rating issued by
                                      any Nationally Recognized
                                      Statistical Rating Organization
                                      (NRSRO) for this security, as of
                                      the reporting date
------------------------------------------------------------------------

* * * * *
3.1.2.2 * * *
    [c] * * *


    Table 3-14--Inputs for MRBs and Derivative MBS Cash Flows Inputs
------------------------------------------------------------------------
              Variable                           Description
------------------------------------------------------------------------
CUSIP Number                         A unique number assigned to
                                      publicly traded securities by the
                                      Committee on Uniform Securities
                                      Identification Procedures
------------------------------------------------------------------------
Original Security Balance            Original principal balance,
                                      adjusted by UPB scale factor and
                                      multiplied by the Enterprise's
                                      percentage ownership
------------------------------------------------------------------------
Current Security Balance             Initial principal balance (at start
                                      of Stress Period), adjusted by UPB
                                      scale factor and multiplied by the
                                      Enterprise's percentage ownership
------------------------------------------------------------------------
Unamortized Balance                  The sum of all unamortized
                                      discounts, premiums, fees,
                                      commissions, etc., such that the
                                      unamortized balance equals book
                                      value minus face value, adjusted
                                      by Unamortized Balance scale
                                      factor
------------------------------------------------------------------------
Unamortized Balance Scale Factor     Factor determined by reconciling
                                      reported Unamortized Balance to
                                      published financials
------------------------------------------------------------------------
UPB Scale Factor                     Factor determined by reconciling
                                      the reported current security
                                      balance to published financials
------------------------------------------------------------------------
Floating Rate Flag                   Indicates the instrument pays
                                      interest at a floating rate
------------------------------------------------------------------------
Issue Date                           The issue date of the security
------------------------------------------------------------------------
Maturity Date                        The stated maturity date of the
                                      security
------------------------------------------------------------------------
Security Interest Rate               The rate at which the security
                                      earns interest, as of the