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

Agencies

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

[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\
---------------------------------------------------------------------------

    \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 https://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