Risk-Based Capital Regulation Amendment, 75085-75106 [06-9446]

Download as PDF 75085 Rules and Regulations Federal Register Vol. 71, No. 240 Thursday, December 14, 2006 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Federal Housing Enterprise Oversight 12 CFR Part 1750 RIN 2550–AA35 Risk-Based Capital Regulation Amendment Office of Federal Housing Enterprise Oversight, HUD. ACTION: Final rule. AGENCY: SUMMARY: The Office of Federal Housing Enterprise Oversight (OFHEO) is amending Appendix A to Subpart B of 12 CFR part 1750 Risk-Based Capital, (Risk-Based Capital Regulation). The amendments are intended to enhance the accuracy and transparency of the calculation of the risk-based capital requirement for Fannie Mae and Freddie Mac (the Enterprises) and to update the Risk-Based Capital Regulation to incorporate approved new activities treatments. EFFECTIVE DATE: December 14, 2006. FOR FURTHER INFORMATION CONTACT: David A. Felt, Deputy General Counsel, telephone (202) 414–3750, 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: mstockstill on PROD1PC61 with RULES 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 (12 U.S.C. 4501 et seq.), established OFHEO as an VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 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 Regulation 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 to the Risk Based Capital Regulation, additional experience with the regulation raised further operational and technical issues. On June 26, 2006, at 71 FR 36231, OFHEO published a proposed notice of rulemaking (NPRM) for comment to incorporate a number of technical amendments to the Risk-Based Capital Regulation. The NPRM proposed amending the Risk-Based Capital Regulation to incorporate additional interest rate indices, clarify definitions, integrate Enterprise new activities and update treatment of certain mark-tomarket accounting issues. As stated in the NPRM, the proposed amendments are capital neutral and largely codify existing practice pursuant to the current Risk-Based Capital Regulation. The 30-day comment period ended July 26, 2006. All comments received have been made available to the public in the OFHEO Public Reading Room and also posted on the OFHEO Web site at http://OFHEO.gov. Comments Received Comments were received from the Consumer Mortgage Coalition (CMC), a trade group of national residential mortgage lenders; FM Policy Focus, a coalition of financial services and housing-related trade associations; the Mortgage Insurance Companies of 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). PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 America (MICA); the Mortgage Bankers Association (MBA), a national association representing the real estate finance industry; Fannie Mae; and Freddie Mac. All comments were taken into consideration. Significant comments related to the proposed regulation are discussed below. Purpose and Scope All of the commenters expressed support for OFHEO’s decision to revise the Risk-Based Capital Regulation to address ongoing financial and mortgage market developments that impact the risk profiles of the Enterprises. Commenters also supported OFHEO’s decision to provide notice and opportunity to comment on the proposed changes, notwithstanding their technical nature and capital neutrality. As noted in the comments, the RiskBased Capital Regulation should be revised periodically to respond to developments in the mortgage markets, address technical issues, and respond to new Enterprise activities. The technical changes proposed by OFHEO are in furtherance of its regulatory duties and enhance both the accuracy and transparency of the Risk-Based Capital Regulation. For these reasons, and the discussions that follow, OFHEO has determined to issue the amendments as discussed below. 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 proposed incorporating additions to the interest rate indices used to measure Enterprise risk. OFHEO proposed the incorporation of the new indices 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 of the Risk-Based Capital Regulation. 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. All of the commenters addressing this issue supported the adoption of the proposed interest rate indices used to measure more accurately E:\FR\FM\14DER1.SGM 14DER1 75086 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations Enterprise risk. OFHEO has determined to adopt the amendments as proposed. Revised Risk-Based Capital Regulation Definitions As stated in the NPRM, additional operational experience with the RiskBased Capital Regulation, as well as financial and mortgage market developments, motivated OFHEO to refine a number of defined terms in the regulation. Proposed amendments include changes to recognize that single family loans with interest-only periods have become common and that the Enterprises have guaranteed or acquired such loans. Sections 3.1.2.1, 3.6.3.3.1 and 3.6.3.3.3 of the appendix to the Risk-Based Capital Regulation currently provide a treatment for interest-only periods. However, sections 3.1.2.1, 3.6.3.3.1, and 3.6.3.3.2 currently assume that only multi-family loans have this feature. OFHEO’s proposed amendments would adopt the changes necessary to accommodate single-family interest-only loans. In addition to the single-family interest-only issue, OFHEO proposed amendments to the definition of ‘‘float-days’’ in sections 3.1.2.1.1 and 3.6.3.7.2 to improve the accuracy of that definition. Finally, an additional number of definitions throughout the Risk-Based Capital Regulation were revised to ensure consistency and accuracy. All of the commenters that addressed this issue supported the adoption of the proposed amendments. OFHEO has determined to adopt the amendments as proposed. mstockstill on PROD1PC61 with RULES Incorporation of New Enterprise Activities Risk-Based Capital Regulation Section 3.11.3, Treatment of New Activities, sets forth the procedures by which new Enterprise activities are reported to OFHEO and analyzed by OFHEO to determine an appropriately conservative treatment to be incorporated into the risk-based capital calculation. The section also describes how any newly incorporated treatment is made available for public comment and possible further revision. The subheadings below describe the responses to comments received on new Enterprise activities. a. Reverse Mortgages OFHEO proposed revisions to Section 3.6.3.3.1 of the Risk-Based Capital Regulation to incorporate an appropriate treatment for reverse mortgages. Freddie Mac commented that the proposed treatment for reverse mortgages was operationally complex and that it did not accurately tie capital to risk. Freddie Mac also noted in its comments that it VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 does not currently purchase or guarantee reverse mortgages. Freddie Mac suggested that it may propose an alternative treatment in the future if it ever purchases or guarantees reverse mortgages. Fannie Mae commented that the proposed treatment was ‘‘insufficiently robust with regard to accuracy.’’ Fannie Mae did not provide an alternative treatment. OFHEO considered both comments and determined that, in the absence of suggested alternative treatments or additional information that would support development of an alternative treatment, it would adopt the provision as proposed. b. Futures and Options on Futures OFHEO proposed technical amendments to Section 3.8 of the RiskBased Capital Regulation to address treatments for futures and for options on futures. OFHEO’s treatment specifies a multi-step process for modeling futures and options on futures. Freddie Mac agreed with the treatment for futures but suggested a better approach to modeling futures options would be to utilize the strike price in the calculation of the cash settlement amount. The comments did not provide an alternative treatment or additional supporting data. OFHEO considered Freddie Mac’s comments; however, in the absence of additional data, and given OFHEO’s favorable experience with the proposed method, OFHEO has determined to adopt the amendment as proposed. c. Split-Rate Adjustable Rate Mortgages OFHEO proposed a new activities treatment for split rate adjustable rate mortgages in Section 3.6 of the RiskBased Capital Regulation. The proposed treatment ignores the split-rate feature and treats split-rate ARMs as traditional ARMs. Fannie Mae commented that the treatment was ‘‘insufficiently robust.’’ Fannie Mae did not propose an alternative treatment. OFHEO considered the comment, and, in the absence of an alternative treatment that improves upon the accuracy or transparency of the OFHEO proposal, determined to adopt the amendment as proposed. d. CPI-Linked Floating Rate Instruments OFHEO proposed incorporating a treatment for CPI-linked floating rate instruments in Section 3.8 of the RiskBased Capital Regulation. Unlike interest rates, the stress test does not project the CPI. Enterprise issuance of CPI-linked instruments is tied to swap market transactions intended to create desired synthetic debt structure and terms. In such cases, the true economic PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 position nets to the payment terms of the related derivative contract. OFHEO proposed a treatment where the net synthetic position is evaluated, whereby the Enterprises would substitute the CPI-linked instrument’s coupon payment terms with those of the related swap contract. Fannie Mae commented that the treatment was incomplete and should not be incorporated into the regulation. Fannie Mae did not propose an alternative treatment. OFHEO’s proposed treatment provides a transparent and accurate method to assess the impact of these instruments on the risk profiles of the Enterprises. OFHEO has determined to adopt the amendment as proposed. Update of Mark-to-Market Accounting Treatment Since the adoption of the Risk-Based Capital Regulation, the Financial Accounting Standards Board has adopted a number of new accounting standards that introduce fair values to the balance sheet and that are similar in complexity to FAS 115 and FAS 133. OFHEO proposed a technical amendment to Section 3.10.3.6.2 [a][1] 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. Freddie Mac offered several comments regarding the proposed amendments that clarify the scope of the proposed treatment for fair values. Freddie Mac’s proposed language clarifies that applicable fair value standards will apply only to amounts that are measured at fair value, not to other amounts mentioned in such standards, and that amounts not measured at fair value are represented by and presented according to GAAP. OFHEO agrees that the language proposed by Freddie Mac will enhance the transparency and accuracy of the treatment and has amended the provision accordingly. Fannie Mae’s comment regarding Section 3.10.3.6.2.[a] 1. b. 1) requested permission to estimate amortized cost basis when implementing applicable fair value standards in order to obviate the maintenance of amortized cost basis information if GAAP no longer requires it. Fannie Mae did not provide an analysis of the impact, savings, applicability or scope of its suggested change. When and if GAAP changes as described by Fannie Mae arise, an alternative treatment could be adopted via an appropriate regulatory method. Thus, OFHEO has determined not to incorporate Fannie Mae’s comment. E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations Other Comments Commenters also addressed matters beyond the scope of the NPRM. CMC suggested that OFHEO implement a new regulation mandating a scenario analysis of Enterprise capital to supplement the current analysis performed under the Risk-Based Capital Regulation. CMC suggested that OFHEO develop the alternative scenarios after a notice and comment procedure and a public hearing. This comment was beyond the scope of the NPRM and has not been considered in the current rulemaking. FM Policy Watch raised concerns regarding the transparency and effectiveness of the new activities provisions of the Risk-Based Capital Regulation. FM Policy Watch recommended that OFHEO amend the new activities process to allow notice and comment on Enterprise new activities prior to their posting on the OFHEO Web site and incorporation into the risk-based capital calculation. Although this comment is beyond the scope of the current rulemaking, OFHEO notes that in addition to posting new activities treatments on the OFHEO Web site, new activities treatments are disclosed as part of the public information provided with the quarterly capital classification. To date, OFHEO has not received any comment on a new activities treatment posted on its Web site. MICA commented that OFHEO should revise the treatment of loan-tovalue ratios (LTVs) in the Risk Based Capital Regulation from the current approach to one that recognizes the combined LTV of all loans outstanding on a property. MICA also urged OFHEO to adopt a formal process to review the safety and soundness implications of Enterprise products, programs and activities. This comment was beyond the scope of the NPRM and has not been considered in the current rulemaking. mstockstill on PROD1PC61 with RULES Regulatory Impacts Executive Order 12866, Regulatory Planning and Review The technical amendments address provisions of the Risk-Based Capital Regulation. The 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 to incorporate recognition of accounting rule changes adopted since the RiskBased Capital Regulation was promulgated. The technical amendments to the Risk-Based Capital Regulation are not classified as an VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 economically significant rule under Executive Order 12866 because they do 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 foreignbased enterprises in foreign or domestic markets. Accordingly, no regulatory impact assessment is required. Nevertheless, the 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 technical amendments to the Risk-Based Capital Regulation address matters which the Enterprises must comply with for Federal regulatory purposes. The 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 amendments to the Risk-Based Capital Regulation have no federalism implications that warrant preparation of a Federalism Assessment in accordance with Executive Order 13132. Paperwork Reduction Act The 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 PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 75087 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 technical amendments to the Risk-Based Capital Regulation under the Regulatory Flexibility Act. The General Counsel of OFHEO certifies that the 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: I PART 1750—CAPITAL 1. The authority citation for part 1750 continues to read as follows: I Authority: 12 U.S.C. 4513, 4514, 4611, 4612, 4614, 4615, 4618. 2. Amend Appendix A to subpart B of part 1750 as follows: I a. Revise Table 3–2 in paragraph 3.1.2.1 [c]; I b. Revise Table 3–4 in paragraph 3.1.2.1 [c]; I c. Revise Table 3–5 in paragraph 3.1.2.1.1; I d. Revise Table 3–8 in paragraph 3.1.2.1.1; I e. Revise Table 3–9 in paragraph 3.1.2.1.1; I f. Revise Table 3–12 in paragraph 3.1.2.2 [a]; I g. Revise Table 3–13 in paragraph 3.1.2.2 [b]; I h. Revise Table 3–14 in paragraph 3.1.2.2 [c]; I i. Revise Table 3–15 in paragraph 3.1.2.3; I j. Revise Table 3–16 in paragraph 3.1.2.4; I k. Revise Table 3–18 in paragraph 3.1.3.1 [c]; I l. Revise Table 3–27 in paragraph 3.3.3 [a] 3. b.; I 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; I E:\FR\FM\14DER1.SGM 14DER1 75088 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations n. Add new paragraphs 3.6.3.3.1 [c] 7. and [c] 8.; I o. Revise Table 3–32 in paragraph 3.6.3.3.2; I p. Revise Table 3–51 in paragraph 3.6.3.7.2; I q. Revise Table 3–54 in paragraph 3.6.3.8.2; I r. Revise Table 3–56 in paragraph 3.7.2.1.1; I s. Revise Table 3–57 in paragraph 3.7.2.1.2 [a]; I I t. Revise Table 3–58 in paragraph 3.7.2.1.3 [a]; I u. Revise Table 3–66 in paragraph 3.8.2 [a]; I v. Redesignate paragraph 3.8.3.6.2 [d] as new paragraph 3.8.3.6.2 [h]; I w. Add new paragraphs 3.8.3.6.2 [d] thru [g]; I x. Revise Table 3–70 in paragraph 3.9.2; I y. Revise paragraphs 3.10.3.6.2 [a] 1. a. and b. z. Remove paragraphs 3.10.3.6.2 [a] 1. c. and d. The revisions and additions read as follows: I Appendix A to Subpart B of Part 1750— Risk-Based Capital Test Methodology and Specifications * * 3.1.2.1 * * * * * * [c] * * * TABLE 3–2—WHOLE LOAN CLASSIFICATION VARIABLES Variable Description Range The last day of the quarter for the loan group activity that is being reported to OFHEO YYYY0331 YYYY0630 YYYY0930 YYYY1231 Enterprise Enterprise submitting the loan group data Fannie Mae 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 loan Conventional Government Original LTV Assigned LTV classes based on the ratio, in percent, between the original loan amount and the lesser of the purchase price or appraised value LTV<=60 60<LTV<=70 70<LTV<=75 75<LTV<=80 80<LTV<=90 90<LTV<=95 95<LTV<=100 100<LTV Interest-only Flag Indicates if the loan is currently paying interest-only. Loans that started as I/Os and are currently amortizing should be flagged as ‘N’ Yes No Current Mortgage Interest Rate Assigned classes for the current mortgage interest rate 0.0<=Rate<4.0 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 Original Mortgage Interest Rate mstockstill on PROD1PC61 with RULES Reporting Date Assigned classes for the original mortgage interest rate 0.0<=Rate<4.0 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 loan 0<=Age<=12 12<Age<=24 24<Age<=36 36<Age<=48 48<Age<=60 60<Age<=72 VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75089 TABLE 3–2—WHOLE LOAN CLASSIFICATION VARIABLES—Continued Variable Description Range 72<Age<=84 84<Age<=96 96<Age<=108 108<Age<=120 120<Age<=132 132<Age<=144 144<Age<=156 156<Age<=168 168<Age<=180 Age>180 Rate Reset Period Assigned classes for the number of months between rate adjustments Period=1 1<Period<=4 4<Period<=9 9<Period<=15 15<Period<=60 60<Period<999 Period=999 (not applicable) Payment Reset Period Assigned classes for the number of months between payment adjustments after the duration of the teaser rate Period<=9 9<Period<=15 15<Period<999 Period=999 (not applicable) ARM Index Specifies the type of index used to determine the interest rate at each adjustment FHLB 11th District Cost of Funds. 1 Month Federal Agency Cost of Funds. 3 Month Federal Agency Cost of Funds. 6 Month Federal Agency Cost of Funds. 12 Month Federal Agency Cost of Funds. 24 Month Federal Agency Cost of Funds. 36 Month Federal Agency Cost of Funds. 60 Month Federal Agency Cost of Funds. 120 Month Federal Agency Cost of Funds. 360 Month Federal Agency Cost of Funds. Overnight Federal Funds (Effective). 1 Week Federal Funds 6 Month Federal Funds 1 month LIBOR 3 Month LIBOR 6 Month LIBOR 12 Month LIBOR Conventional Mortgage Rate 15 Year Fixed Mortgage Rate 7 Year Balloon Mortgage Rate Prime Rate 1 Month Treasury Bill 3 Month CMT 6 Month CMT 12 Month CMT 24 Month CMT 36 Month CMT 60 Month CMT 120 Month CMT 240 Month CMT 360 Month CMT Cap Type Flag Indicates if a loan group is rate-capped, paymentcapped or uncapped Payment Capped Rate Capped No periodic rate cap OFHEO Ledger Code OFHEO-specific General Ledger account number used in the Stress Test Appropriate OFHEO Ledger Code based on the chart of accounts. * * * * * TABLE 3–4—ADDITIONAL MULTIFAMILY LOAN CLASSIFICATION VARIABLES Variable Description mstockstill on PROD1PC61 with RULES Multifamily Product Code VerDate Aug<31>2005 15:47 Dec 13, 2006 Range Identifies the mortgage product types for multifamily loans Jkt 211001 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 Fixed Rate Fully Amortizing Adjustable Rate Fully Amortizing 5 Year Fixed Rate Balloon 7 Year Fixed Rate Balloon 10 Year Fixed Rate Balloon 15 Year Fixed Rate Balloon Balloon ARM Other E:\FR\FM\14DER1.SGM 14DER1 75090 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–4—ADDITIONAL MULTIFAMILY LOAN CLASSIFICATION VARIABLES—Continued Variable Description Range New Book Flag ‘‘New Book’’ is applied to Fannie Mae loans acquired beginning in 1988 and Freddie Mac loans acquired beginning in 1993, except for loans that were refinanced to avoid a default on a loan originated or acquired earlier New Book Old Book Ratio Update Flag Indicates if the LTV and DCR were updated at origination or at Enterprise acquisition Yes No Current DCR Assigned classes for the Debt Service Coverage Ratio based on the most recent annual operating statement DCR<1.00 1.00<=DCR<1.10 1.10<=DCR<1.20 1.20<=DCR<1.30 1.30<=DCR<1.40 1.40<=DCR<1.50 1.50<=DCR<1.60 1.60<=DCR<1.70 1.70<=DCR<1.80 1.80<=DCR<1.90 1.90<=DCR<2.00 2.00<=DCR<2.50 2.50<=DCR<4.00 DCR>=4.00 Prepayment Penalty Flag Indicates if prepayment of the loan is subject to active prepayment penalties or yield maintenance provisions Yes No * * * * * 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) mstockstill on PROD1PC61 with RULES 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 VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75091 TABLE 3—5—MORTGAGE AMORTIZATION CALCULATION INPUTS—Continued Variable Description 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 Unlimited Payment Reset Period, in months PRP Payment Reset Period, in months Payment Reset Limit, as decimal fraction of prior payment * * * * * 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 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 Factor determined by reconciling reported Security Unamortized Balances to published financials * * * * * 3.1.2.2 * * * [a] * * * TABLE 3–12—INPUTS FOR SINGLE CLASS MBS CASH FLOWS Variable Description 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 mstockstill on PROD1PC61 with RULES Pool Number 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 Stress Test), adjusted by UPB scale factor and multiplied by the Enterprise’s percentage ownership Product Code Mortgage product type for the pool VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75092 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–12—INPUTS FOR SINGLE CLASS MBS CASH FLOWS—Continued Variable Description 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 Rate Mortgage Interest Rate of the 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 Rate The current UPB weighted average 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 Rate The current UPB weighted average 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 Period Number of months between unlimited 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 [b] * * * mstockstill on PROD1PC61 with RULES 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 VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75093 TABLE 3–13—INFORMATION FOR MULTI-CLASS AND DERIVATIVE MBS CASH FLOWS INPUTS—Continued Variable Description 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 [c] * * * TABLE 3–14—INPUTS FOR MRBS AND DERIVATIVE MBS CASH FLOWS INPUTS Variable Description 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 reporting date Principal Payment Window Starting Date, Down-Rate Scenario The month in the Stress Test that principal payment is expected to start for the security under the statutory ‘‘down’’ interest rate scenario, according to Enterprise projections Principal Payment Window Ending Date, Down-Rate Scenario The month in the Stress Test that principal payment is expected to end for the security under the statutory ‘‘down’’ interest rate scenario, according to Enterprise projections Principal Payment Window Starting Date, Up-Rate Scenario The month in the Stress Test that principal payment is expected to start for the security under the statutory ‘‘up’’ interest rate scenario, according to Enterprise projections Principal Payment Window Ending Date, Up-Rate Scenario The month in the Stress Test that principal payment is expected to end for the security under the statutory ‘‘up’’ interest rate scenario, according to Enterprise projections Notional Flag Indicates if the amounts reported in Original Security Balance and Current Security Balance are notional Security Rating The most current rating issued by any Nationally Recognized Statistical Rating Organization (NRSRO) for this security, as of the reporting date Security Rate Index If the rate on the security adjusts over time, the index on which the adjustment is based Security Rate Index Coefficient mstockstill on PROD1PC61 with RULES CUSIP Number If the rate on the security adjusts over time, the coefficient is the number used to multiply by the value of the index Security Rate Index Spread If the rate on the security adjusts over time, the spread is added to the value of the index multiplied by the coefficient to determine the new rate Security Rate Adjustment Frequency The number of months between rate adjustments VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75094 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–14—INPUTS FOR MRBS AND DERIVATIVE MBS CASH FLOWS INPUTS—Continued Variable Description Security Interest Rate Ceiling The maximum rate (lifetime cap) on the security Security Interest Rate Floor The minimum rate (lifetime floor) on the security Life Ceiling Interest Rate The maximum interest rate allowed throughout the life of the security Life Floor Interest Rate The minimum interest rate allowed throughout the life of security 3.1.2.3 * * * TABLE 3–15—INPUT VARIABLES FOR NONMORTGAGE INSTRUMENT CASH FLOWS Data elements Description Amortization Methodology Code Enterprise method of amortizing deferred balances (e.g., straight line) Asset ID CUSIP or Reference Pool Number identifying the asset underlying a derivative position Asset Type Code Code that identifies asset type used in the commercial information service (e.g. ABS, Fannie Mae pool, Freddie Mac pool) Associated Instrument ID Instrument ID of an instrument linked to another instrument Coefficient Indicates the extent to which the coupon is leveraged or de-leveraged Compound Indicator Indicates if interest is compounded Compounding Frequency Indicates how often interest is compounded Counterparty Credit Rating NRSRO’s rating for the counterparty Counterparty Credit Rating Type An indicator identifying the counterparty’s credit rating as short-term (‘S’) or long-term (‘L’) Counterparty ID Enterprise counterparty tracking ID Country Code Standard country codes in compliance with Federal Information Processing Standards Publication 10–4 Credit Agency Code Identifies NRSRO (e.g., Moody’s) Current Asset Face Amount Current face amount of the asset underlying a swap adjusted by UPB scale factor Current Coupon Current coupon or dividend rate of the instrument Current Unamortized Discount Current unamortized premium or unaccreted discount of the instrument adjusted by Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative Current Unamortized Fees Current unamortized fees associated with the instrument adjusted by Unamortized Balance Scale Factor. Generally fees associated with the issuance of debt or derivatives should be negative numbers. Fees associated with the purchase of an asset should generally be reported as positive numbers Current Unamortized Hedge Current unamortized hedging gains (positive) or losses (negative) associated with the instrument adjusted by the Unamortized Balance Scale Factor Current Unamortized Other Any other unamortized items originally associated with the instrument adjusted by Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative CUSIP_ISIN CUSIP or ISIN Number identifying the instrument Day Count Day count convention (e.g. 30/360) End Date The last index repricing date EOP Principal Balance End of Period face, principal or notional, amount of the instrument adjusted by UPB scale factor Indicates that an instrument is modeled according to its contractual terms Exercise Convention Indicates option exercise convention (e.g., American Option) Exercise Price Par = 1.0; Options First Coupon Date Date first coupon is received or paid Index Cap mstockstill on PROD1PC61 with RULES Exact Representation Indicates maximum index rate Index Floor Indicates minimum index rate Index Reset Frequency Indicates how often the interest rate index resets on floating-rate instruments Index Code Indicates the interest rate index to which floating-rate instruments are tied (e.g., LIBOR) VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75095 TABLE 3–15—INPUT VARIABLES FOR NONMORTGAGE INSTRUMENT CASH FLOWS—Continued Data elements Description Index Term Point on yield curve, expressed in months, upon which the index is based Instrument Credit Rating NRSRO credit rating for the instrument Instrument Credit Rating Type An indicator identifying the instruments credit rating as short-term (‘S’) or long-term (‘L’) Instrument ID An integer used internally by the Enterprise that uniquely identifies the instrument Interest Currency Code Indicates currency in which interest payments are paid or received Interest Type Code Indicates the method of interest rate payments (e.g., fixed, floating, step, discount) Issue Date Indicates the date that the instrument was issued Life Cap Rate The maximum interest rate for the instrument throughout its life Life Floor Rate The minimum interest rate for the instrument throughout its life Look-Back Period Period from the index reset date, expressed in months, that the index value is derived Maturity Date Date that the instrument contractually matures Notional Indicator Identifies whether the face amount is notional Instrument Type Code Indicates the type of instrument to be modeled (e.g., ABS, Cap, Swap) Option Indicator Indicates if instrument contains an option Option Type Indicates option type (e.g., Call option) Original Asset Face Amount Original face amount of the asset underlying a swap adjusted by UPB scale factor Original Discount Original premium or discount associated with the purchase or sale of the instrument adjusted by Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative Original Face Original face, principal or notional, amount of the instrument adjusted by UPB scale factor Original Fees Fees or commissions paid at the time of purchase or sale adjusted by the Unamortized Balance Scale Factor. Generally fees associated with the issuance of debt or derivatives should be negative numbers. Fees associated with the purchase of an asset should generally be reported as positive numbers Original Hedge Gains (positive) or losses (negative) from closing out a hedge associated with the instrument at settlement, adjusted by the Unamortized Balance Scale Factor Original Other Any other items originally associated with the instrument to be amortized or accreted adjusted by the Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds of the amounts paid were less than par, the value should be negative Parent Entity ID Enterprise internal tracking ID for parent entity Payment Amount Interest payment amount associated with the instrument (reserved for complex instruments where interest payments are not modeled) adjusted by UPB scale factor Payment Frequency Indicates how often interest payments are made or received ‘‘As of’’ date on which the data is submitted Periodic Adjustment The maximum amount that the interest rate for the instrument can change per reset Position Code Indicates whether the Enterprise pays or receives interest on the instrument Principal Currency Code Indicates currency in which principal payments are paid or received Principal Factor Amount EOP Principal Balance expressed as a percentage of Original Face Principal Payment Date A valid date identifying the date that principal is paid Settlement Date A valid date identifying the date the settlement occurred Spread An amount added to an index to determine an instrument’s interest rate Start Date The date, spot or forward, when some feature of a financial contract becomes effective (e.g., Call Date), or when interest payments or receipts begin to be calculated Strike Rate mstockstill on PROD1PC61 with RULES Performance Date The price or rate at which an option begins to have a settlement value at expiration, or, for interest-rate caps and floors, the rate that triggers interest payments Submitting Entity Indicates which Enterprise is submitting information Trade ID Unique code identifying the trade of an instrument Transaction Code Indicates the transaction that an Enterprise is initiating with the instrument (e.g. buy, issue reopen) VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75096 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–15—INPUT VARIABLES FOR NONMORTGAGE INSTRUMENT CASH FLOWS—Continued Data elements Description Transaction Date A valid date identifying the date the transaction occurred UPB Scale Factor Factor determined by reconciling reported UPB to published financials Unamortized Balances Scale Factor Factor determined by reconciling reported Unamortized Balances to published financials 3.1.2.4 * * * TABLE 3–16—INPUTS FOR ALTERNATIVE MODELING TREATMENT ITEMS Variable Description TYPE Type of item (asset, liability or off-balance sheet item) BOOK Book Value of item (amount outstanding adjusted for deferred items) FACE Face Value or notional balance of item for off-balance sheet items REMATUR Remaining Contractual Maturity of item in whole months. Any fraction of a month equals one whole month RATE Interest Rate INDEX Index used to calculate Interest Rate FAS115 Designation that the item is recorded at fair value, according to FAS 115 RATING Instrument or counterparty rating FHA In the case of off-balance sheet guarantees, a designation indicating 100% of collateral is guaranteed by FHA MARGIN Margin over an Index * * * * * 3.1.3.1 * * * [c] * * * TABLE 3–18—INTEREST RATE AND INDEX INPUTS Interest rate Index Description Source One-month Treasury bill yield, monthly simple average of daily rate, quoted as actual/360 Bloomberg Generic 1 Month. U.S. Treasury bill. Ticker: GB1M (index). 3 MO CMT Three-month constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 6 MO CMT Six-month constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 1 YR CMT One-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 2 YR CMT Two-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 3 YR CMT Three-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 5 YR CMT Five-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 10 YR CMT Ten-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 20 YR CMT mstockstill on PROD1PC61 with RULES 1 MO Treasury Bill Twenty-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield Federal Reserve H.15 Release. 30 YR CMT Thirty-year constant maturity Treasury yield, monthly simple average of daily rate, quoted as bond equivalent yield; after February 15, 2002, estimated according to the Department of Treasury methodology using long-term average rates and extrapolation factors as referenced in OFHEO guideline 402 Federal Reserve H.15 Release, Extrapolation Factors used for estimation, U.S. Dept. of Treasury. VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75097 TABLE 3–18—INTEREST RATE AND INDEX INPUTS—Continued Interest rate Index Description Source 12-month Federal Reserve cumulative average 1 year CMT, monthly simple average of daily rate Bloomberg Ticker: 12MTA (Index). Overnight Fed Funds (Effective) Overnight effective Federal Funds rate, monthly simple average of daily rate Federal Reserve H.15 Release. Certificate of Deposits Index (CODI) 12-month average of monthly published yields on 3-month certificates of deposit, based on the Federal Reserve Board statistical release, H–15 Bloomberg Ticker: COF CODI (index). 1 Week Federal Funds 1 week Federal Funds rate, monthly simple average of daily rates Bloomberg Term Fed Funds U.S. Domestic Ticker: GFED01W (index). 6 Month Fed Funds 6 month Federal Funds rate, monthly simple average of daily rates Bloomberg Term Fed Funds U.S. Domestic Ticker: GFED06M (index). Conventional Mortgage Rate FHLMC (Freddie Mac) contract interest rates for 30 YR fixedrate mortgage commitments, monthly average of weekly rates Federal Reserve H.15 Release. Constant Maturity Mortgage (CMM) Index Bond equivalent yield on TBA mortgage-backed security which prices at the par price TradeWeb. 1-mo Freddie Mac Reference Bill 1-month Freddie Mac Reference Bill, actual price and yield by auction date Freddiemac.com website: http://www.freddiemac.com/debt/data/ cgi-bin/refbillaucres.cgi?order=AD. FHLB 11th District COF 11th District (San Francisco) weighted average cost of funds for savings and loans, monthly Bloomberg Cost of Funds for the 11th District Ticker: COF11 (index). 1 MO LIBOR One-month London Interbank Offered Rate, average of bid and asked, monthly simple average of daily rates, quoted as actual/360 British Bankers Association Bloomberg Ticker: US0001M (index). 3 MO LIBOR Three-month London Interbank Offered Rate, average of bid and asked, monthly simple average of daily rates, quoted as actual/360 British Bankers Association Bloomberg Ticker: US0003M (index). 6 MO LIBOR Six-month London Interbank Offered Rate, average of bid and asked, monthly simple average of daily rates, quoted as actual/360 British Bankers Association Bloomberg Ticker: US0006M (index). 12 MO LIBOR One-year London Interbank Offered Rate, average of bid and asked, monthly simple average of daily rates, quoted as actual/360 British Bankers Association Bloomberg Ticker: US0012M (index). Prime Rate Prevailing rate as quoted, monthly average of daily rates Federal Reserve H.15 Release. 1 MO Federal Agency COF One-month Federal Agency Cost of Funds, monthly simple average of daily rates, quoted as actual/360 Bloomberg Generic 1 Month Agency Discount Note Yield Ticker: AGDN030Y (index). 3 MO Federal Agency COF Three-month Federal Agency Cost of Funds, monthly simple average of daily rates, quoted as actual/360 Bloomberg Generic 3 Month Agency Discount Note Yield Ticker: AGDN090Y (index). 6 MO Federal Agency COF Six-month Federal Agency Cost of Funds, monthly simple average of daily rates, quoted as actual/360 Bloomberg Generic 6 Month Agency Discount Note Yield Ticker: AGDN180Y (index). 1 YR Federal Agency COF One-year Federal Agency Cost of Funds, monthly simple average of daily rates, quoted as actual/360 Bloomberg Generic 12 Month Agency Discount Note Yield. Ticker: AGDN360Y (index). 2 YR Federal Agency COF Two-year Federal Agency Fair Market Yield, monthly simple average of daily rates Bloomberg Generic 2 Year Agency Fair Market Yield. Ticker: CO842Y (index). 3 YR Federal Agency COF Three-year Federal Agency Fair Market Yield, monthly simple average of daily rates Bloomberg Generic 3 Year Agency Fair Market Yield. Ticker: CO843Y (index). 5 YR Federal Agency COF Five-year Federal Agency Fair Market Yield, monthly simple average of daily rates Bloomberg Generic 5 Year Agency Fair Market Yield. Ticker: CO845Y (index). 10 YR Federal Agency COF Ten-year Federal Agency Fair Market Yield, monthly simple average of daily rates Bloomberg Generic 10 Year Agency Fair Market Yield. Ticker: CO8410Y (index). 30 YR Federal Agency COF Thirty-year Federal Agency Fair Market Yield, monthly simple average of daily rates Bloomberg Generic 30 Year Agency Fair Market Yield. Ticker: CO8430Y (index). 15 YR fixed-rate mortgage mstockstill on PROD1PC61 with RULES 12-mo Moving Treasury Average (MTA) FHLMC (Freddie Mac) contract interest rates for 15 YR fixedrate mortgage commitments, monthly average of FHLMC (Freddie Mac) contract interest rates for 15 YR Bloomberg FHLMC 15 YR, 10 day commitment rate Ticker: FHCR1510 (index). 7-year balloon mortgage rate Seven-year balloon mortgage, equal to the Conventional Mortgage Rate less 50 basis points Computed. 2-yr Swap 2-yr U.S. Dollar Swap Rate, quoted as semi-annually fixed rate vs. 3-mo U.S. dollar Bloomberg Ticker: USSWAP2 (index). VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75098 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–18—INTEREST RATE AND INDEX INPUTS—Continued Interest rate Index Description Source 3-yr Swap 3-yr U.S. Dollar Swap Rate, quoted as semi-annually fixed rate vs. 3-mo U.S. dollar LIBOR Bloomberg Ticker: USSWAP3 (Index). 5-yr Swap 5-yr U.S. Dollar Swap Rate, quoted as semi-annually fixed rate vs. 3-mo U.S. dollar LIBOR Bloomberg Ticker: USSWAP5 (Index). 10-yr Swap 10-yr U.S. Dollar Swap Rate, quoted as semi-annually fixed rate vs. 3-mo U.S. dollar LIBOR Bloomberg Ticker: USSWAP10 (Index). 30-yr Swap 30-yr U.S. Dollar Swap Rate, quoted as semi-annually fixed rate vs. 3-mo U.S. dollar LIBOR Bloomberg Ticker: USSWAP30 (Index). 3.3.3 * * * [a] * * * 3. * * * b. * * * TABLE 3–27—NON-TREASURY INTEREST RATES Mortgage Rates Spread Based on 15-year Fixed-rate Mortgage Rate 10-year CMT 30-year Conventional Mortgage Rate 10-year CMT 7-year Balloon Mortgage Rate (computed from Conventional Mortgage Rate) Constant Maturity Mortgage Index 10-year CMT Other Non-Treasury Interest Rates Overnight Fed Funds 1-month Treasury Yield 7-day Fed Funds 1-month Treasury Yield 1-month LIBOR 1-month Treasury Yield 1-month Federal Agency Cost of Funds 1-month Treasury Yield 1-mo Freddie Mac Reference Bill 1-month Treasury Yield 3-month LIBOR 3-month CMT 3-month Federal Agency Cost of Funds 3-month CMT PRIME 3-month CMT 6-month CMT 6-month Federal Agency Cost of Funds 6-month CMT 6-month Fed Funds 6-month CMT FHLB 11th District Cost of Funds 1-year CMT 12-month LIBOR 1-year CMT 12-mo Moving Treasury Average 1-year CMT Certificate of Deposits Index 1-year CMT 1-year Federal Agency Cost of Funds 1-year CMT 2-year Federal Agency Cost of Funds 2-year CMT 3-year Federal Agency Cost of Funds 3-year CMT 5-year Federal Agency Cost of Funds 5-year CMT 10-year Federal Agency Cost of Funds 10-year CMT 30-year Federal Agency Cost of Funds mstockstill on PROD1PC61 with RULES 6-month LIBOR 30-year CMT 2-yr Swap 2-year CMT 3-yr Swap 3-year CMT 5-yr Swap 5-year CMT VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75099 TABLE 3–27—NON-TREASURY INTEREST RATES—Continued Mortgage Rates Spread Based on 10-yr Swap 10-year CMT 30-yr Swap 30-year CMT * * 3.6.3.3.1 * * * * * * [c] * * * 7. Reverse Mortgages. In a reverse mortgage, a borrower receives one or more payments from the lender and the lender is repaid with a lump sum when the borrower dies, sells the property or moves out of the home permanently. The stress test models reverse mortgages as a ladder of zero-coupon securities: a. 11 proxy securities for each reverse mortgage program are created. b. A 10% conditional payment rate is used to create the zero-coupon securities that will mature in every year of the stress test. The zero-coupon securities are a laddered series of floating-rate couponbearing accreting bonds with a first payment date at maturity. c. The 11th zero-coupon security will mature three months after the stress test to reflect the 35% of UPB not paid down during the stress period. d. An OFHEO credit rating equivalent to AAA for the FHA insured programs and AA for other reverse mortgage programs is assigned. 8. Split-Rate ARM Loans. In split-rate ARM loans, the principal portion of the payment is based on a fixed-rate amortization schedule while the interest portion is based on a floating rate index. These multifamily loans are available as fully amortizing product or with a balloon feature. The stress test model does not provide treatment for split-rate ARM loans. Split-rate loans shall be treated as ARMs when they are issued without a balloon payment feature or as Balloon ARMs when the loans contain a balloon payment feature. 3.6.3.3.2 * * * TABLE 3–32—LOAN GROUP INPUTS FOR MORTGAGE AMORTIZATION CALCULATION Variable* Description Source Rate Type (Fixed or Adjustable) RBC Report Product Type (30/20/15-Year FRM, ARM, Balloon, Government, etc.) RBC Report UPBORIG Unpaid Principal Balance at Origination (aggregate for Loan Group) RBC Report UPB0 Unpaid Principal Balance at start of Stress Test (aggregate for Loan Group) RBC Report 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) RBC Report 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) RBC Report AT Original loan Amortizing Term in months (weighted average for Loan Group) RBC Report 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) RBC Report A0 Age immediately prior to the start of the Stress Test, in months (weighted average for Loan Group) RBC Report Interest-only Flag RBC Report RIOP Remaining Interest-only period, in months (weighted average for loan group) RBC Report Additional Interest Rate Inputs GFR Guarantee Fee Rate (weighted average for Loan Group) (decimal per annum) RBC Report SFR Servicing Fee Rate (weighted average for Loan Group) (decimal per annum) RBC Report Additional Inputs for ARMs (weighted averages for Loan Group, except for Index) Monthly values of the contractual Interest Rate Index section 3.3, Interest Rates LB Look-Back period, in months RBC Report MARGIN Loan Margin (over index), decimal per annum RBC Report RRP Rate Reset Period, in months RBC Report Rate Reset Limit (up and down), decimal per annum RBC Report Maximum Rate (life cap), decimal per annum mstockstill on PROD1PC61 with RULES INDEXm RBC Report Minimum Rate (life floor), decimal per annum RBC Report Negative Amortization Cap, decimal fraction of UPBORIG RBC Report Unlimited Payment Reset Period, in months RBC Report NAC VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75100 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–32—LOAN GROUP INPUTS FOR MORTGAGE AMORTIZATION CALCULATION—Continued Variable* Description PRP Source Payment Reset Period, in months Payment Reset Limit, as decimal fraction of prior payment RBC Report Initial Rate Period, in months IRP RBC Report RBC Report * Variable name is given when used in an equation * * 3.6.3.7.2 * * * * * * TABLE 3–51—INPUTS FOR FINAL CALCULATION OF STRESS TEST WHOLE LOAN CASH FLOWS Variable Description Source UPBm Aggregate Unpaid Principal Balance in month m = 0 ... RM section 3.6.3.3.4, Mortgage Amortization Schedule Outputs NYRm Net Yield Rate in month m = 1 ... RM section 3.6.3.3.4, Mortgage Amortization Schedule Outputs GF Guarantee Fee rate (weighted average for Loan Group) (decimal per annum) RBC Report PTRm Pass-Through Rate in month m = 1 ... RM section 3.6.3.3.4, Mortgage Amortization Schedule Outputs SPm Aggregate Scheduled Principal (Amortization) in month m = 1 ... RM section 3.6.3.3.4, Mortgage Amortization Schedule Outputs PREmSF PREmMF Prepaying Fraction of original Loan Group in month m = 1 ... RM section 3.6.3.4.4, Single Family Default and Prepayment Outputs and, section 3.6.3.5.4, Multifamily Default and Prepayment Outputs DEFmSF DEFmMF Defaulting Fraction of original Loan Group in month m = 1 ... RM section 3.6.3.4.4, Single Family Default and Prepayment Outputs and, section 3.6.3.5.4, Multifamily Default and Prepayment Outputs PERFmSF PERFmMF Performing Fraction of original Loan Group in month m = 1 ... RM section 3.6.3.4.4, Single Family Default and Prepayment Outputs and, section 3.6.3.5.4, Multifamily Default and Prepayment Outputs FDS Float Days for Scheduled Principal and Interest (weighted average for Loan Group) RBC Report FDP Float Days for Prepaid Principal (weighted average for Loan Group) RBC Report FERm Float Earnings Rate in month m = 1 ... RM 1 week Fed Funds Rate; section 3.3, Interest Rates LSmSF Loss Severity Rate in month m = 1 ... RM section 3.6.3.6.5.2, Single Family and Multifamily Net Loss Severity Outputs FREP Fraction Repurchased (weighted average for Loan Group) (decimal) RBC Report * * 3.6.3.8.2 * * * * * * TABLE 3–54—INPUTS FOR WHOLE LOAN ACCOUNTING FLOWS Variable Description Source Remaining Term to Maturity in months RBC Report UPD0 mstockstill on PROD1PC61 with RULES RM 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 RBC Report NYR0 Net Yield Rate at time zero section 3.6.3.3.4, Mortgage Amortization Schedule Outputs PUPBm Performing Loan Group UPB in months m = 0 ... RM section 3.6.3.7.4, Stress Test Whole Loan Cash Flow Outputs VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75101 TABLE 3–54—INPUTS FOR WHOLE LOAN ACCOUNTING FLOWS—Continued Variable Description Source PTR0 Pass-Through Rate at time zero section 3.6.3.3.4, Mortgage Amortization Schedule Outputs SPUPBm Security Performing UPB in months m = 0 ... RM section 3.6.3.7.4, Stress Test Whole Loan Cash Flow Outputs SUPD0 The 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 RBC Report * * 3.7.2.1.1 * * * * * * TABLE 3–56—RBC REPORT INPUTS FOR SINGLE CLASS MBS CASH FLOWS Variable Description 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 Original UPB Amount Original pool balance multiplied by the Enterprise’s percentage ownership Current UPB Amount Initial Pool balance (at the start of the Stress Test), multiplied by the Enterprise’s percentage ownership Product Code Mortgage product type for the pool 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 the 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 rate Mortgage Interest Rate of the 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 (weighted average for underlying loans) Wtg Avg Original Mortgage Interest Rate The current UPB weighted average 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. In the case of a ‘‘split’’ rating, the lowest rating should be given 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 mstockstill on PROD1PC61 with RULES Pool Number Payment reset limit up/down (ARM MBS only) (weighted average for underlying loans) Wt Avg Lookback 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 (ARM MBS only) (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. (ARM MBS only) (weighted average for underlying loans) VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75102 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–56—RBC REPORT INPUTS FOR SINGLE CLASS MBS CASH FLOWS—Continued Variable Description Wt Avg Initial Interest Rate Period Number of months between the loan origination date and the first rate adjustment date (ARM MBS only) (weighted average for underlying loans) Wt Avg Unlimited Payment Reset Period Number of months between unlimited payment resets, i.e., not limited by payment caps, starting with Origination date (ARM MBS only) (weighted average for underlying loans) Notional Flag Indicates that amounts reported in Original UPB Amount and Current UPB Amount are notional UPB Scale Factor Factor applied to the current UPB that offsets any timing adjustments between the security level data and the Enterprise’s 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 3.7.2.1.2 * * * [a] * * * TABLE 3–57—RBC REPORT INPUTS FOR MULTI-CLASS AND DERIVATIVE MBS CASH FLOWS 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, multiplied by the Enterprise’s percentage ownership Current Security Balance Initial principal balance, or notional amount, at the start of the Stress Period multiplied by the Enterprise’s percentage ownership Current Security Percentage Owned The percentage of a security’s total current balance owned by the Enterprise 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. * * * * * 3.7.2.1.3 * * * [a] * * * TABLE 3–58—RBC REPORT INPUTS FOR MRBS AND DERIVATIVE MBS CASH FLOWS Variable Description A unique number assigned to publicly traded securities by the Committee on Uniform Securities Identification Procedures Original Security Balance Original principal balance, multiplied by the Enterprise’s percentage ownership Current Security Balance Initial principal balance (at start of Stress Period), 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 the Unamortized Balance Scale Factor 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 reporting date Principal Payment Window Starting Date, Down-Rate Scenario mstockstill on PROD1PC61 with RULES CUSIP Number The month in the Stress Test that principal payment is expected to start for the security under the statutory ‘‘down’’ interest rate scenario, according to Enterprise projections Principal Payment Window Ending Date, Down-Rate Scenario The month in the Stress Test that principal payment is expected to end for the security under the statutory ‘‘down’’ interest rate scenario, according to Enterprise projections Principal Payment Window Starting Date, Up-Rate Scenario The month in the Stress Test that principal payment is expected to start for the security under the statutory ‘‘up’’ interest rate scenario, according to Enterprise projections VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75103 TABLE 3–58—RBC REPORT INPUTS FOR MRBS AND DERIVATIVE MBS CASH FLOWS—Continued Variable Description Principal Payment Window Ending Date, Up-Rate Scenario The month in the Stress Test that principal payment is expected to end for the security under the statutory ‘‘up’’ interest rate scenario, according to Enterprise projections Security Rating The most current rating issued by any Nationally Recognized Statistical Rating Organization (NRSRO) for this security, as of the reporting date. In the case of a ‘‘split’’ rating, the lowest rating should be given. Security Rate Index If the rate on the security adjusts over time, the index on which the adjustment is based Security Rate Index Coefficient If the rate on the security adjusts over time, the coefficient is the number used to multiply by the value of the index Security Rate Index Spread If the rate on the security adjusts over time, the spread is added to the value of the index multiplied by the coefficient to determine the new rate Security Rate Adjustment Frequency The number of months between rate adjustments Security Interest Rate Ceiling The maximum rate (lifetime cap) on the security Security Interest Rate Floor The minimum rate (lifetime floor) on the security * * * * * 3.8.2 * * * [a] * * * TABLE 3–66—INPUT VARIABLES FOR NONMORTGAGE INSTRUMENT CASH FLOWS Data elements Description Enterprise method of amortizing deferred balances (e.g., straight line) Asset ID CUSIP or Reference Pool Number identifying the asset underlying a derivative position Asset Type Code Code that identifies asset type used in the commercial information service (e.g., ABS, Fannie Mae pool, Freddie Mac pool) Associated Instrument ID Instrument ID of an instrument linked to another instrument Coefficient Indicates the extent to which the coupon is leveraged or de-leveraged Compound Indicator Indicates if interest is compounded Compounding Frequency Indicates how often interest is compounded Counterparty Credit Rating NRSRO’s rating for the counterparty Counterparty Credit Rating Type An indicator identifying the counterparty’s credit rating as short-term (‘S’) or long-term (‘L’) Counterparty ID Enterprise counterparty tracking ID Country Code Standard country codes in compliance with Federal Information Processing Standards Publication 10–4 Credit Agency Code Identifies NRSRO (e.g., Moody’s) Current Asset Face Amount Current face amount of the asset underlying a swap Current Coupon Current coupon or dividend rate of the instrument Current Unamortized Discount Current unamortized premium or unaccreted discount of the instrument adjusted by the Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative Current Unamortized Fees Current unamortized fees associated with the instrument adjusted by the Unamortized Balance Scale Factor. Generally fees associated with the issuance of debt or derivatives should be negative numbers. Fees associated with the purchase of an asset should generally be reported as positive numbers Current Unamortized Hedge Current unamortized hedging gains (positive) or losses (negative) associated with the instrument adjusted by the Unamortized Balance Scale Factor Current Unamortized Other mstockstill on PROD1PC61 with RULES Amortization Methodology Code Any other unamortized items originally associated with the instrument adjusted by the Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset was greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative CUSIP_ISIN CUSIP or ISIN Number identifying the instrument Day Count Day count convention (e.g., 30/360) VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 75104 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–66—INPUT VARIABLES FOR NONMORTGAGE INSTRUMENT CASH FLOWS—Continued Data elements Description End Date The last index repricing date EOP Principal Balance End of Period face, principal or notional, amount of the instrument Exact Representation Indicates that an instrument is modeled according to its contractual terms Exercise Convention Indicates option exercise convention (e.g., American Option) Exercise Price Par = 1.0; Options First Coupon Date Date first coupon is received or paid Index Cap Indicates maximum index rate Index Floor Indicates minimum index rate Index Reset Frequency Indicates how often the interest rate index resets on floating-rate instruments Index Code Indicates the interest rate index to which floating-rate instruments are tied (e.g., LIBOR) Index Term Point on yield curve, expressed in months, upon which the index is based Instrument Credit Rating NRSRO credit rating for the instrument Instrument Credit Rating Type An indicator identifying the instruments credit rating as short-term (‘S’) or long-term (‘L’) Instrument ID An integer used internally by the Enterprise that uniquely identifies the instrument Interest Currency Code Indicates currency in which interest payments are paid or received Interest Type Code Indicates the method of interest rate payments (e.g., fixed, floating, step, discount) Issue Date Indicates the date that the instrument was issued Life Cap Rate The maximum interest rate for the instrument throughout its life Life Floor Rate The minimum interest rate for the instrument throughout its life Look-Back Period Period from the index reset date, expressed in months, that the index value is derived Maturity Date Date that the instrument contractually matures Notional Indicator Identifies whether the face amount is notional Instrument Type Code Indicates the type of instrument to be modeled (e.g., ABS, Cap, Swap) Option Indicator Indicates if instrument contains an option Indicates option type (e.g., Call option) Original Asset Face Amount Original face amount of the asset underlying a swap Original Discount Original premium or discount associated with the purchase or sale of the instrument adjusted by the Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative Original Face Original face, principal or notional, amount of the instrument Original Fees Fees or commissions paid at the time of purchase or sale adjusted by the Unamortized Balance Scale Factor. Generally fees associated with the issuance of debt or derivatives should be negative numbers. Fees associated with the purchase of an asset should generally be reported as positive numbers Original Hedge Gains (positive) or losses (negative) from closing out a hedge associated with the instrument at settlement, adjusted by the Unamortized Balance Scale Factor Original Other Any other amounts originally associated with the instrument to be amortized or accreted adjusted by the Unamortized Balance Scale Factor. If the proceeds from the issuance of debt or derivatives or the amount paid for an asset were greater than par, the value should be positive. If the proceeds or the amounts paid were less than par, the value should be negative Parent Entity ID Enterprise internal tracking ID for parent entity Payment Amount Interest payment amount associated with the instrument (reserved for complex instruments where interest payments are not modeled) Payment Frequency mstockstill on PROD1PC61 with RULES Option Type Indicates how often interest payments are made or received Performance Date ‘‘As of’’ date on which the data is submitted Periodic Adjustment The maximum amount that the interest rate for the instrument can change per reset Position Code Indicates whether the Enterprise pays or receives interest on the instrument VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations 75105 TABLE 3–66—INPUT VARIABLES FOR NONMORTGAGE INSTRUMENT CASH FLOWS—Continued Data elements Description Principal Currency Code Indicates currency in which principal payments are paid or received Principal Factor Amount EOP Principal Balance expressed as a percentage of Original Face Principal Payment Date A valid date identifying the date that principal is paid Settlement Date A valid date identifying the date the settlement occurred Spread An amount added to an index to determine an instrument’s interest rate Start Date The date, spot or forward, when some feature of a financial contract becomes effective (e.g., Call Date), or when interest payments or receipts begin to be calculated Strike Rate The price or rate at which an option begins to have a settlement value at expiration, or, for interest-rate caps and floors, the rate that triggers interest payments Submitting Entity Indicates which Enterprise is submitting information Trade ID Unique code identifying the trade of an instrument Transaction Code Indicates the transaction that an Enterprise is initiating with the instrument (e.g., buy, issue reopen) Transaction Date A valid date identifying the date the transaction occurred UPB Scale Factor Factor applied to UPB to adjust for timing differences Unamortized Balances Scale Factor Factor applied to Unamortized Balances to adjust for timing differences * * * * * 3.8.3.6.2 * * * [a] * * * [b] * * * [c] * * * [d] Futures and Options on Futures also require special treatment: 1. Settle positions on their expiration dates. Exercise only in-the-money options (settlement value greater than zero). 2. Settle all contracts for cash 3. Calculate the cash settlement amount—the change in price of a contract from the contract trade date to its expiration date. Calculate the price on the expiration date based on stress test interest rates (or, as necessary, forward rates extrapolated from these rates). 4. Amortize amounts received or paid at the expiration date into income or expense on a straight-line basis over the life of the underlying instrument (in the case of an option on a futures contract, the life of the instrument underlying the futures contract). 5. Amortize an option premium on a straightline basis over the life of the option. (Amortize any remaining balances upon option exercise.) [e] Swaptions also require special treatment: 1. Assume swap settlement (i.e., initiation of the underlying swap) when a swap option is exercised. 2. Calculate a ‘‘normalized’’ fixed-pay coupon by subtracting the spread over the index, if any, from the coupon on the fixed-rate swap leg. 3. For all exercise types (American, Bermudan, and European), consistent with RBC Rule section 3.8.3.7, assume exercise by the party holding the swap option if the equivalent maturity Enterprise Cost of Funds is more than a. 50 basis points above the normalized fixed-pay coupon, for a pay-fixed swaption (a call or ‘payor’ swaption), or b. 50 basis points below the normalized fixed pay coupon for a receive-fixed swaption (a put or ‘receiver’ swaption). 4. Amortize option premiums on a straightline basis over the option term. (Amortize any remaining balances upon option exercise). [f] CPI-Linked Instruments also require special treatment. The stress test lacks the ability to accommodate floating-rate instruments that reset in response to changes in the consumer price index (CPI) as published by the Bureau of Labor Statistics. Enterprise issuance of CPI-linked instruments is tied to swap market transactions intended to create desired synthetic debt structure and terms. In such cases, the true economic position nets to the payment terms of the related derivative contract. Accordingly, in order to accommodate and address the existence of CPI-linked instruments in the Enterprises’ portfolios, the net synthetic position shall be evaluated in the stress test. That is, for CPIlinked instruments tied to swap transactions that are formally linked in a hedge accounting relationship, the Enterprise should substitute the CPI-linked instrument’s coupon payment terms with those of the related swap contract. [g] Pre-refunded municipal bonds also require special treatments. Pre-refunded municipal bonds are collateralized by securities that are structured to fund all the cash flows of the refunded municipal bonds until the bonds are callable. Since the call date for the bonds, also referred to as the prerefunded date, is a more accurate representation of the payoff date than the contractual maturity date of the bonds, the stress test models the bonds to mature on the call date. * * 3.9.2 * * * * TABLE 3–70—ALTERNATIVE MODELING TREATMENT INPUTS Variable Description Type of item (asset, liability or off-balance sheet item) BOOK mstockstill on PROD1PC61 with RULES TYPE Book Value of item (amount outstanding adjusted for deferred items) FACE Face Value or notional balance of item for off-balance sheet items REMATUR Remaining Contractual Maturity of item in whole months. Any fraction of a month equals one whole month. RATE Interest Rate INDEX Index used to calculate Interest Rate VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 E:\FR\FM\14DER1.SGM 14DER1 * * 75106 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Rules and Regulations TABLE 3–70—ALTERNATIVE MODELING TREATMENT INPUTS—Continued Variable Description FAS115 Designation that the item is recorded at fair value, according to FAS 115 RATING Instrument or counterparty rating FHA In the case of off-balance sheet guarantees, a designation indicating 100% of collateral is guaranteed by FHA MARGIN Margin over an Index * * 3.10.3.6.2 * * * DEPARTMENT OF TRANSPORTATION * * * [a] * * * 1. Fair Values a. The valuation impact of any Applicable Fair Value Standards (AFVS), cumulative from their time of implementation, will be reversed out of the starting position data, by debiting any accumulated credits, and crediting any accumulated debits. (1) AFVS are defined as GAAP pronouncements that require or allow fair value measurements, e.g., EITF 99– 20, FAS 65, FAS 87, FAS 115, FAS 133, FAS 140, FAS 149 and FIN 45. Valuation impacts of AVFS pertain only to amounts that are measured at fair value and not to other amounts that are included in AFVS but are not measured at fair value. (2) The GAAP pronouncements covered by this treatment are subject to OFHEO review. The Enterprises will submit a list of standards and pronouncements that are being reversed in their RBC Reports. b. After reversing the valuation impact of AFVS, any affected items are presented as follows: (1) If absent the adoption of the AFVS, the affected transactions measured at fair value would have been accounted for on an amortized cost basis, they are presented as if they had always been accounted for on an amortized cost basis. Amounts not measured at fair value are represented as specified by GAAP and are presented using current GAAP rules. (2) To the extent that transactions would not have been accounted for on an amortized cost basis, they are accounted for as if they were income and expense items. * * * * * Dated: November 21, 2006. James B. Lockhart III, Director, Office of Federal Housing Enterprise Oversight. [FR Doc. 06–9446 Filed 12–13–06; 8:45 am] mstockstill on PROD1PC61 with RULES BILLING CODE 4220–01–P VerDate Aug<31>2005 15:47 Dec 13, 2006 Jkt 211001 Federal Aviation Administration 14 CFR Part 39 [FAA–2006–26437; Directorate Identifier 2006–CE–73–AD; Amendment 39–14855; AD 2006–25–14] RIN 2120–AA64 Airworthiness Directives; SchemppHirth Flugzeugbau GmbH Model Duo Discus T Gliders Federal Aviation Administration (FAA), DOT. ACTION: Final rule; request for comments. AGENCY: SUMMARY: We are adopting a new airworthiness directive (AD) for the products listed above. This AD results from mandatory continuing airworthiness information (MCAI) issued by the aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as the possible failure of the attachment of the propeller blades. This AD requires actions that are intended to address the unsafe condition described in the MCAI. DATES: This AD becomes effective January 3, 2007. We must receive comments on this AD by January 16, 2007. ADDRESSES: You may send comments by any of the following methods: • DOT Docket Web site: Go to http://dms.dot.gov and follow the instructions for sending your comments electronically. • Fax: (202) 493–2251. • Mail: Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL–401, Washington, DC 20590– 0001. • Hand Delivery: Room PL–401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 Examining the AD Docket You may examine the AD docket on the Internet at http://dms.dot.gov; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone (800) 647– 5227) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Greg Davison, Glider Program Manager, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone: (816) 329– 4130; fax: (816) 329–4090. SUPPLEMENTARY INFORMATION: Streamlined Issuance of AD The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. The streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to follow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and Federal Register requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products. This AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The AD contains text copied from the MCAI and for this reason might not follow our plain language principles. Discussion The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued AD No.: 2006– 0294–E, dated September 25, 2006 (referred to after this as ‘‘the MCAI’’), to correct an unsafe condition for the specified products. The MCAI states that the aircraft manufacturer has identified a possible failure of the attachment of the propeller blades and E:\FR\FM\14DER1.SGM 14DER1

Agencies

[Federal Register Volume 71, Number 240 (Thursday, December 14, 2006)]
[Rules and Regulations]
[Pages 75085-75106]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-9446]



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Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / 
Rules and Regulations

[[Page 75085]]



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: Final rule.

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

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

EFFECTIVE DATE: December 14, 2006.

FOR FURTHER INFORMATION CONTACT: David A. Felt, Deputy General Counsel, 
telephone (202) 414-3750, 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:

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 (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 Regulation 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\
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    \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).
---------------------------------------------------------------------------

    Since the last amendment to the Risk Based Capital Regulation, 
additional experience with the regulation raised further operational 
and technical issues. On June 26, 2006, at 71 FR 36231, OFHEO published 
a proposed notice of rulemaking (NPRM) for comment to incorporate a 
number of technical amendments to the Risk-Based Capital Regulation. 
The NPRM proposed amending the Risk-Based Capital Regulation to 
incorporate additional interest rate indices, clarify definitions, 
integrate Enterprise new activities and update treatment of certain 
mark-to-market accounting issues. As stated in the NPRM, the proposed 
amendments are capital neutral and largely codify existing practice 
pursuant to the current Risk-Based Capital Regulation.
    The 30-day comment period ended July 26, 2006. All comments 
received have been made available to the public in the OFHEO Public 
Reading Room and also posted on the OFHEO Web site at http://OFHEO.gov.

Comments Received

    Comments were received from the Consumer Mortgage Coalition (CMC), 
a trade group of national residential mortgage lenders; FM Policy 
Focus, a coalition of financial services and housing-related trade 
associations; the Mortgage Insurance Companies of America (MICA); the 
Mortgage Bankers Association (MBA), a national association representing 
the real estate finance industry; Fannie Mae; and Freddie Mac. All 
comments were taken into consideration. Significant comments related to 
the proposed regulation are discussed below.

Purpose and Scope

    All of the commenters expressed support for OFHEO's decision to 
revise the Risk-Based Capital Regulation to address ongoing financial 
and mortgage market developments that impact the risk profiles of the 
Enterprises. Commenters also supported OFHEO's decision to provide 
notice and opportunity to comment on the proposed changes, 
notwithstanding their technical nature and capital neutrality.
    As noted in the comments, the Risk-Based Capital Regulation should 
be revised periodically to respond to developments in the mortgage 
markets, address technical issues, and respond to new Enterprise 
activities. The technical changes proposed by OFHEO are in furtherance 
of its regulatory duties and enhance both the accuracy and transparency 
of the Risk-Based Capital Regulation. For these reasons, and the 
discussions that follow, OFHEO has determined to issue the amendments 
as discussed below.

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 
proposed incorporating additions to the interest rate indices used to 
measure Enterprise risk. OFHEO proposed the incorporation of the new 
indices 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 of the Risk-Based Capital Regulation. 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. All of the commenters addressing this issue supported the 
adoption of the proposed interest rate indices used to measure more 
accurately

[[Page 75086]]

Enterprise risk. OFHEO has determined to adopt the amendments as 
proposed.

Revised Risk-Based Capital Regulation Definitions

    As stated in the NPRM, additional operational experience with the 
Risk-Based Capital Regulation, as well as financial and mortgage market 
developments, motivated OFHEO to refine a number of defined terms in 
the regulation. Proposed amendments include changes to recognize that 
single family loans with interest-only periods have become common and 
that the Enterprises have guaranteed or acquired such loans. Sections 
3.1.2.1, 3.6.3.3.1 and 3.6.3.3.3 of the appendix to the Risk-Based 
Capital Regulation currently provide a treatment for interest-only 
periods. However, sections 3.1.2.1, 3.6.3.3.1, and 3.6.3.3.2 currently 
assume that only multi-family loans have this feature. OFHEO's proposed 
amendments would adopt the changes necessary to accommodate single-
family interest-only loans. In addition to the single-family interest-
only issue, OFHEO proposed amendments to the definition of ``float-
days'' in sections 3.1.2.1.1 and 3.6.3.7.2 to improve the accuracy of 
that definition. Finally, an additional number of definitions 
throughout the Risk-Based Capital Regulation were revised to ensure 
consistency and accuracy. All of the commenters that addressed this 
issue supported the adoption of the proposed amendments. OFHEO has 
determined to adopt the amendments as proposed.

Incorporation of New Enterprise Activities

    Risk-Based Capital Regulation Section 3.11.3, Treatment of New 
Activities, sets forth the procedures by which new Enterprise 
activities are reported to OFHEO and analyzed by OFHEO to determine an 
appropriately conservative treatment to be incorporated into the risk-
based capital calculation. The section also describes how any newly 
incorporated treatment is made available for public comment and 
possible further revision. The subheadings below describe the responses 
to comments received on new Enterprise activities.
a. Reverse Mortgages
    OFHEO proposed revisions to Section 3.6.3.3.1 of the Risk-Based 
Capital Regulation to incorporate an appropriate treatment for reverse 
mortgages. Freddie Mac commented that the proposed treatment for 
reverse mortgages was operationally complex and that it did not 
accurately tie capital to risk. Freddie Mac also noted in its comments 
that it does not currently purchase or guarantee reverse mortgages. 
Freddie Mac suggested that it may propose an alternative treatment in 
the future if it ever purchases or guarantees reverse mortgages. Fannie 
Mae commented that the proposed treatment was ``insufficiently robust 
with regard to accuracy.'' Fannie Mae did not provide an alternative 
treatment. OFHEO considered both comments and determined that, in the 
absence of suggested alternative treatments or additional information 
that would support development of an alternative treatment, it would 
adopt the provision as proposed.
b. Futures and Options on Futures
    OFHEO proposed technical amendments to Section 3.8 of the Risk-
Based Capital Regulation to address treatments for futures and for 
options on futures. OFHEO's treatment specifies a multi-step process 
for modeling futures and options on futures. Freddie Mac agreed with 
the treatment for futures but suggested a better approach to modeling 
futures options would be to utilize the strike price in the calculation 
of the cash settlement amount. The comments did not provide an 
alternative treatment or additional supporting data. OFHEO considered 
Freddie Mac's comments; however, in the absence of additional data, and 
given OFHEO's favorable experience with the proposed method, OFHEO has 
determined to adopt the amendment as proposed.
c. Split-Rate Adjustable Rate Mortgages
    OFHEO proposed a new activities treatment for split rate adjustable 
rate mortgages in Section 3.6 of the Risk-Based Capital Regulation. The 
proposed treatment ignores the split-rate feature and treats split-rate 
ARMs as traditional ARMs. Fannie Mae commented that the treatment was 
``insufficiently robust.'' Fannie Mae did not propose an alternative 
treatment. OFHEO considered the comment, and, in the absence of an 
alternative treatment that improves upon the accuracy or transparency 
of the OFHEO proposal, determined to adopt the amendment as proposed.
d. CPI-Linked Floating Rate Instruments
    OFHEO proposed incorporating a treatment for CPI-linked floating 
rate instruments in Section 3.8 of the Risk-Based Capital Regulation. 
Unlike interest rates, the stress test does not project the CPI. 
Enterprise issuance of CPI-linked instruments is tied to swap market 
transactions intended to create desired synthetic debt structure and 
terms. In such cases, the true economic position nets to the payment 
terms of the related derivative contract. OFHEO proposed a treatment 
where the net synthetic position is evaluated, whereby the Enterprises 
would substitute the CPI-linked instrument's coupon payment terms with 
those of the related swap contract. Fannie Mae commented that the 
treatment was incomplete and should not be incorporated into the 
regulation. Fannie Mae did not propose an alternative treatment. 
OFHEO's proposed treatment provides a transparent and accurate method 
to assess the impact of these instruments on the risk profiles of the 
Enterprises. OFHEO has determined to adopt the amendment as proposed.

Update of Mark-to-Market Accounting Treatment

    Since the adoption of the Risk-Based Capital Regulation, the 
Financial Accounting Standards Board has adopted a number of new 
accounting standards that introduce fair values to the balance sheet 
and that are similar in complexity to FAS 115 and FAS 133. OFHEO 
proposed a technical amendment to Section 3.10.3.6.2 [a][1] 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. Freddie Mac offered 
several comments regarding the proposed amendments that clarify the 
scope of the proposed treatment for fair values. Freddie Mac's proposed 
language clarifies that applicable fair value standards will apply only 
to amounts that are measured at fair value, not to other amounts 
mentioned in such standards, and that amounts not measured at fair 
value are represented by and presented according to GAAP. OFHEO agrees 
that the language proposed by Freddie Mac will enhance the transparency 
and accuracy of the treatment and has amended the provision 
accordingly.
    Fannie Mae's comment regarding Section 3.10.3.6.2.[a] 1. b. 1) 
requested permission to estimate amortized cost basis when implementing 
applicable fair value standards in order to obviate the maintenance of 
amortized cost basis information if GAAP no longer requires it. Fannie 
Mae did not provide an analysis of the impact, savings, applicability 
or scope of its suggested change. When and if GAAP changes as described 
by Fannie Mae arise, an alternative treatment could be adopted via an 
appropriate regulatory method. Thus, OFHEO has determined not to 
incorporate Fannie Mae's comment.

[[Page 75087]]

Other Comments

    Commenters also addressed matters beyond the scope of the NPRM.
    CMC suggested that OFHEO implement a new regulation mandating a 
scenario analysis of Enterprise capital to supplement the current 
analysis performed under the Risk-Based Capital Regulation. CMC 
suggested that OFHEO develop the alternative scenarios after a notice 
and comment procedure and a public hearing. This comment was beyond the 
scope of the NPRM and has not been considered in the current 
rulemaking.
    FM Policy Watch raised concerns regarding the transparency and 
effectiveness of the new activities provisions of the Risk-Based 
Capital Regulation. FM Policy Watch recommended that OFHEO amend the 
new activities process to allow notice and comment on Enterprise new 
activities prior to their posting on the OFHEO Web site and 
incorporation into the risk-based capital calculation. Although this 
comment is beyond the scope of the current rulemaking, OFHEO notes that 
in addition to posting new activities treatments on the OFHEO Web site, 
new activities treatments are disclosed as part of the public 
information provided with the quarterly capital classification. To 
date, OFHEO has not received any comment on a new activities treatment 
posted on its Web site.
    MICA commented that OFHEO should revise the treatment of loan-to-
value ratios (LTVs) in the Risk Based Capital Regulation from the 
current approach to one that recognizes the combined LTV of all loans 
outstanding on a property. MICA also urged OFHEO to adopt a formal 
process to review the safety and soundness implications of Enterprise 
products, programs and activities. This comment was beyond the scope of 
the NPRM and has not been considered in the current rulemaking.

Regulatory Impacts

Executive Order 12866, Regulatory Planning and Review

    The technical amendments address provisions of the Risk-Based 
Capital Regulation. The 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 to incorporate recognition of accounting rule 
changes adopted since the Risk-Based Capital Regulation was 
promulgated. The technical amendments to the Risk-Based Capital 
Regulation are not classified as an economically significant rule under 
Executive Order 12866 because they do 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 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 technical amendments to the Risk-Based Capital 
Regulation address matters which the Enterprises must comply with for 
Federal regulatory purposes. The 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 amendments to the Risk-Based Capital Regulation 
have no federalism implications that warrant preparation of a 
Federalism Assessment in accordance with Executive Order 13132.

Paperwork Reduction Act

    The 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 
technical amendments to the Risk-Based Capital Regulation under the 
Regulatory Flexibility Act. The General Counsel of OFHEO certifies that 
the 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.


0
Accordingly, for the reasons stated in the preamble, OFHEO amends 12 
CFR part 1750 as follows:

PART 1750--CAPITAL

0
1. The authority citation for part 1750 continues to read as follows:

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

0
2. Amend Appendix A to subpart B of part 1750 as follows:
0
a. Revise Table 3-2 in paragraph 3.1.2.1 [c];
0
b. Revise Table 3-4 in paragraph 3.1.2.1 [c];
0
c. Revise Table 3-5 in paragraph 3.1.2.1.1;
0
d. Revise Table 3-8 in paragraph 3.1.2.1.1;
0
e. Revise Table 3-9 in paragraph 3.1.2.1.1;
0
f. Revise Table 3-12 in paragraph 3.1.2.2 [a];
0
g. Revise Table 3-13 in paragraph 3.1.2.2 [b];
0
h. Revise Table 3-14 in paragraph 3.1.2.2 [c];
0
i. Revise Table 3-15 in paragraph 3.1.2.3;
0
j. Revise Table 3-16 in paragraph 3.1.2.4;
0
k. Revise Table 3-18 in paragraph 3.1.3.1 [c];
0
l. Revise Table 3-27 in paragraph 3.3.3 [a] 3. b.;
0
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;

[[Page 75088]]

0
n. Add new paragraphs 3.6.3.3.1 [c] 7. and [c] 8.;
0
o. Revise Table 3-32 in paragraph 3.6.3.3.2;
0
p. Revise Table 3-51 in paragraph 3.6.3.7.2;
0
q. Revise Table 3-54 in paragraph 3.6.3.8.2;
0
r. Revise Table 3-56 in paragraph 3.7.2.1.1;
0
s. Revise Table 3-57 in paragraph 3.7.2.1.2 [a];
0
t. Revise Table 3-58 in paragraph 3.7.2.1.3 [a];
0
u. Revise Table 3-66 in paragraph 3.8.2 [a];
0
v. Redesignate paragraph 3.8.3.6.2 [d] as new paragraph 3.8.3.6.2 [h];
0
w. Add new paragraphs 3.8.3.6.2 [d] thru [g];
0
x. Revise Table 3-70 in paragraph 3.9.2;
0
y. Revise paragraphs 3.10.3.6.2 [a] 1. a. and b.
0
z. Remove paragraphs 3.10.3.6.2 [a] 1. c. and d.
    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] * * *

                                 Table 3-2--Whole Loan Classification Variables
----------------------------------------------------------------------------------------------------------------
              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       6016.0
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------

* * * * *

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

[[Page 75091]]

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

* * * * *

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


            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 Stress Test), adjusted by
                                      UPB scale factor and multiplied by
                                      the Enterprise's percentage
                                      ownership
------------------------------------------------------------------------
Product Code                         Mortgage product type for the pool
------------------------------------------------------------------------

[[Page 75092]]

 
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             Remaining maturity of the
Maturity                              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              Mortgage Interest Rate of the
Interest 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            The current UPB weighted average
Interest 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            Maximum rate (lifetime cap) (ARM
Ceiling                               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             The current UPB weighted average
Interest Rate                         original mortgage interest rate
                                      for the loans in the pool
------------------------------------------------------------------------
Wt Avg Initial Interest Rate         Number of months between the loan
Period                                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
------------------------------------------------------------------------

    [b] * * *

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

[[Page 75093]]

 
Original Security Balance            Original principal balance of the