[Federal Register: July 1, 2003 (Volume 68, Number 126)]
[Proposed Rules]
[Page 39027-39038]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jy03-31]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 39027]]
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FEDERAL HOUSING FINANCE BOARD
12 CFR Parts 900, 932, 955
[No. 2003-10]
RIN 3069-AB18
Federal Home Loan Bank Acquired Member Assets
AGENCY: Federal Housing Finance Board.
ACTION: Proposed rule.
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SUMMARY: The Federal Housing Finance Board (Finance Board) is proposing
to amend its Acquired Member Assets (AMA) regulation, which authorizes
the Federal Home Loan Banks (Banks) to acquire certain whole loans from
their members. The changes proposed would place greater responsibility
with each Bank to design and manage its AMA program, subject to ongoing
supervisory review by the Finance Board. The proposed regulation would
maintain the core provisions relating to safety and soundness, but
would be less prescriptive and simpler than the current rule. The
proposed rule also would codify the authority of a Bank to acquire as
AMA assets instruments that are created by Bank members or housing
associates in cooperation with a Bank and that represent an interest in
loans that individually could qualify as AMA.
DATES: Comments on this proposed rule must be received in writing on or
before September 2, 2003.
ADDRESSES: Send comments by electronic mail to comments@fhfb.gov, by
facsimile to (202) 408-2580, or by regular mail to the Federal Housing
Finance Board, 1777 F Street, NW., Washington, DC 20006, Attn: Public
Comments. Comments will be available for public inspection at this
address.
FOR FURTHER INFORMATION CONTACT: Scott Smith, Associate Director,
smiths@fhfb.gov or (202) 408-2991; Christina Muradian, Senior Financial
Analyst, muradianc@fhfb.gov or (202) 408-2584, Office of Supervision;
Sharon Like, Senior Attorney Advisor, likes@fhfb.gov or (202) 408-2930;
Thomas Hearn, Senior Attorney Advisor, hearnt@fhfb.gov or (202) 408-
2976; or Thomas Joseph, Senior Attorney Advisor, josepht@fhfb.gov or
(202) 408-2512, Office of General Counsel, Federal Housing Finance
Board, 1777 F Street, NW., Washington, DC 20006.
SUPPLEMENTARY INFORMATION:
I. Background
This proposed rule is an important first step in the Finance
Board's effort to shift the focus of its regulations from a
prescriptive approach to an approach that places greater responsibility
on the Banks and relies more on supervisory review. The Finance Board
believes that an increased focus on the process of supervisory review
will enhance the safety and soundness of the Bank System.
On May 3, 2000, the Finance Board published a proposed rule to
authorize the Banks to acquire certain whole loans. See proposed rule,
Federal Home Loan Bank Acquired Member Assets, Core Mission Activities,
Investments and Advances, 65 FR 25676 (May 3, 2000) (hereinafter the
``Proposed AMA Rule''). The Finance Board subsequently adopted a final
AMA regulation, which became effective on July 17, 2000. See final
rule, Federal Home Loan Bank Acquired Member Assets, Core Mission
Activities, Investment and Advances, 65 FR 43969 (July 17, 2000)
(hereinafter the ``current rule'' or ``final AMA rule''). The current
rule authorizes the Banks to acquire certain loans (principally
conforming residential mortgage loans) from their members and housing
associates as a means of advancing their housing finance mission, and
prescribes in some detail the manner in which the Banks may do so.
Since implementation of the current rule, the Finance Board has
recognized that an alternative approach, one that places greater
responsibility on the Banks, would likely prove to be more effective
and efficient in regulating the Banks' mortgage purchase programs. In
addition, the Finance Board, now with several years experience in
overseeing these programs, has identified a number of opportunities to
clarify and simplify the current rule.
Specifically, the current rule includes prescriptive provisions
concerning the risk-sharing structure that may not be necessary for
safety and soundness purposes. Such provisions include the requirement
that the rating methodology be verified in writing by a Nationally
Recognized Statistical Rating Organization (NRSRO), even though the
methodology remains subject to Finance Board approval, and that there
must be certain restrictions on the credit enhancement structure, even
though the member must bear the economic cost regardless of structure.
Also, the current rule includes terms that have proven to be unclear
and difficult to define, such as ``expected losses'' and ``valid
business purpose.'' Further, the current rule does not specifically
incorporate language to authorize the Banks to acquire as AMA certain
instruments that are created by Bank members or housing associates in
cooperation with a Bank and that represent an interest in AMA-eligible
loans. See final AMA rule, 65 FR at 43974-78. Finally, the practice of
collecting AMA data has evolved from the reporting requirements set
forth in the current rule, such that some data elements have been found
to be either unnecessary or readily available from other sources, while
others must be collected going forward to comply with revised modeling
requirements and regulatory standards.
Although some opportunities to improve the current rule exist, the
current rule does contain a number of appropriate and necessary safety
and soundness provisions. These provisions would be maintained or
strengthened in the proposed rule, and include the requirements that
all AMA must be at least investment grade when acquired, and that only
highly rated insurers may provide some portion of the credit
enhancement.
The Finance Board invites anyone with an interest in this proposed
rule to submit written comments to the Finance Board during the comment
period.
II. Analysis of Proposed Rule
The proposed rule would revise the current rule as described in the
following sections.
A. Definitions--Section 955.1
The proposed rule would add four new defined terms, and would
delete two of the existing definitions. Changes to individual
definitions in the proposed rule are discussed in later sections of
this SUPPLEMENTARY
[[Page 39028]]
INFORMATION section in the context of specific regulatory requirements.
B. Authorization To Invest in AMA--Section 955.2
Section 955.2 of the current rule authorizes a Bank to invest in
AMA, and establishes a three-part test for AMA-eligible investments.
See 12 CFR 955.2. The current rule prescribes the types of assets that
may qualify as AMA, the required nexus between the Bank and its member
or housing associate, and the details of the credit risk-sharing
provisions. Under the proposed rule, this section would simply
authorize a Bank to invest in AMA, subject to the provisions of part
955 and 12 CFR part 980 (relating to new business activities). The
existing provisions relating to asset type, member nexus, and credit
risk sharing would be relocated to separate sections.
The proposed rule also would add a definition of ``AMA'' to Sec.
955.1, and would make conforming changes to the existing definition of
``AMA'' in 12 CFR 900.2. Under those definitions, the term ``AMA''
would mean any assets acquired in accordance with, and satisfying the
applicable requirements of, proposed Sec. Sec. 955.3, 955.4 and 955.5,
which address the asset type, member nexus, and credit enhancement
requirements, respectively.
C. Three-Part Test--Proposed Sec. Sec. 955.3, 955.4 and 955.5
The proposed rule would relocate and revise each element of the
three-part test, which currently is set forth in Sec. Sec. 955.2(a),
955.2(b) and 955.2(c).
1. Asset Requirement--Proposed Sec. 955.3
Proposed Sec. 955.3, which would specify the types of assets that
are AMA-eligible, would eliminate one item that currently qualifies as
AMA and add another item that the Finance Board has included as AMA by
interpretation. The proposed rule would retain the provisions of the
current rule relating to the acquisition of whole loans that are
eligible to secure Bank advances, or that are secured by manufactured
housing. See 12 CFR 955.2(a)(1), (a)(2). The proposed rule would
eliminate the current provision that allows certain state or local
housing finance agency (HFA) bonds to qualify as AMA. 12 CFR
955.2(a)(3). The Banks are authorized to invest in certain highly rated
HFA bonds under other provisions of the regulations, and the Finance
Board believes that eliminating the separate investment authority under
the AMA regulation would not affect the ability of a Bank to invest in
HFA bonds rated AA or higher. See 12 CFR 956.2(f), 956.3(a)(4)(iii).
Because the proposed rule would remove HFA bonds as AMA, the proposed
rule also would eliminate provisions that establish a process for
acquiring HFA bonds as AMA from a member or housing associate of
another Bank. 12 CFR 955.2(b)(2)(ii).
AMA-qualified interests in whole loans. Section 955.3(c) of the
proposed rule would expressly authorize as AMA investments certain
instruments that represent an interest in qualifying whole loans. The
Banks currently are authorized to make such AMA investments, based on
Finance Board guidance provided in the preamble to the current rule.
See final AMA rule, 65 FR at 43974-78. The proposed rule would codify
the existing guidance. The several provisions of the proposed rule that
relate to these interests are discussed together below, under the
section captioned AMA-Qualified Interests in Whole Loans.
2. Member or Housing Associate Nexus Requirement Proposed Sec. 955.4
Section 955.4 of the proposed rule would retain a nexus requirement
by providing that a Bank may acquire AMA-eligible loans only from its
members and housing associates, from members and housing associates of
another Bank, or from another Bank. The nexus requirement is intended
to ensure that AMA assets have an appropriate connection to the Bank's
member or housing associate. That connection advances the cooperative
nature of the Bank System, and effectively precludes the extension of
membership benefits to nonmembers. The proposed rule, however, would
simplify this member or housing associate nexus requirement. The
specific revisions are described below.
``Valid business purpose'' requirement. The proposed rule would
eliminate the ``valid business purpose'' requirement from Sec.
955.2(b)(1)(ii) of the current rule. 12 CFR 955.2(b)(1)(ii). This
provision of the current rule recognizes that members often acquire
mortgage loans both by originating them, as well as by purchasing them
from other parties and allows the Banks to acquire loans originated by
third parties, provided that the members have acquired them for a valid
business purpose. It is intended to discourage the use of members as
conduits for the sole purpose of passing mortgage loans from a
nonmember to the Bank. The current rule, however, does not define what
constitutes a ``valid business purpose,'' and this provision has been
difficult to enforce as written. The proposed elimination of this
requirement is intended only to simplify the rule, and does not alter
the underlying policy that AMA-eligible whole loans may be acquired
only from members and housing associates.
Origination or issuance requirement. The proposed rule would
eliminate the requirement that AMA must be originated or issued by or
through a member, housing associate, or affiliate thereof. 12 CFR
955.2(b)(1)(i). Eliminating this requirement is consistent with the
elimination of the ``valid business purpose'' requirement, noted above.
To eliminate only the ``valid business purpose'' requirement would
render ineligible for purchase by Banks AMA-qualifying loans owned by,
but not originated by, members. This limitation would put a large
segment of the mortgage market out of reach of the AMA programs.
If the ``valid business purpose'' and ``origination or issuance''
provisions are eliminated, as proposed, the AMA rule would no longer
use the term ``affiliate.'' Thus, the Finance Board is also proposing
to delete the definition of ``affiliate'' from Sec. 955.1.
Acquisition of assets from affiliates of a member. As noted
previously, the proposed rule would retain the requirement that a Bank
may acquire AMA only from a member, a housing associate, or another
Bank. 12 CFR 955.2(b)(2). Accordingly, a Bank could not purchase
mortgage assets directly from an affiliate of a member, and any such
assets would have to be acquired by the member before a Bank could
acquire them as AMA. A number of Banks have suggested that the Finance
Board permit the Banks to acquire assets directly from affiliates of a
member. As noted above, the nexus requirement ensures that AMA assets
have a connection to the members that reflects the cooperative nature
of the Bank System. Allowing a Bank to purchase AMA directly from an
affiliate would raise concerns about the extension of membership
benefits to a nonmember, even if the nonmember were under common
control with a member. Such an arrangement might also present practical
and operational concerns relating to AMA collateral and credit
enhancement because a Bank would have more extensive means of requiring
a member to meet its obligations than would be the case for a nonmember
institution. The Finance Board, however, is willing to consider this
issue further and requests comment on whether, and under what
conditions, a Bank may be permitted to acquire AMA-qualifying assets
from an affiliate of a member. Among the issues on which the Finance
Board seeks comments are whether the rule should treat a wholly-
[[Page 39029]]
owned subsidiary of a member differently from other affiliates that are
not controlled by the member, and whether the rule should allow an
affiliate to sell loans to a Bank, so long as the related member
provides the required credit enhancement.
3. Credit Risk-Sharing Requirements--Proposed Sec. 955.5
The proposed rule would revise certain aspects of the credit risk-
sharing requirements and would reorganize the credit risk-sharing
requirements to achieve greater clarity. As noted below, the proposed
rule would retain the requirements that the member must enhance the AMA
to at least investment grade and that supplemental insurance providers
must be rated at least the second highest investment grade. The Finance
Board believes that these provisions are important for safety and
soundness reasons.
a. Required Credit Risk-Sharing Structure--Proposed Sec. 955.5(a)
AMA product requirement. Proposed Sec. 955.5(a)(1) would retain
the current requirement that the Bank implement a credit risk-sharing
structure for each AMA Product,\1\ under which a member or housing
associate provides the credit enhancement necessary to enhance an asset
or pool of assets acquired by the Bank to the equivalent of investment
grade. 12 CFR 955.3(b). The proposed rule also would add a definition
of ``investment grade'' to Sec. 955.1, which would define the term to
mean a credit quality rating in one of the four highest credit rating
categories provided by an NRSRO.
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\1\ The Finance Board is proposing to add a new definition to
Sec. 955.1 that ``AMA Product'' means an AMA structure defined by a
specific set of terms and conditions.
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Asset requirement. Proposed Sec. 955.5(a)(2) would require a Bank
to specify the level within investment grade to which the credit
quality of the particular AMA asset or pool of assets must be
equivalent. In substance, this revision is the same as the current
provision, which authorizes a Bank to require a member or housing
associate to provide sufficient credit enhancement to raise the credit
quality of the AMA assets above the minimum level of investment grade,
e.g., BBB. See 12 CFR 955.3(b).
Satisfaction of credit enhancement requirement. Proposed Sec.
955.5(a)(3) would require, for each AMA Product, that the Bank have in
place a process and methodology that determines the credit enhancement
required, and that demonstrates that the economic value of the credit
enhancement provided by the member or housing associate is sufficient
to meet the credit enhancement required. The Bank must have the process
and methodology in place prior to the acquisition of any AMA assets,
and must maintain the process and methodology for however long the
assets remain on its books. The Bank would be required to satisfy the
Finance Board as to the adequacy of the process and methodology.
While the proposed rule would maintain the requirement that a Bank
must demonstrate the sufficiency of the methodology and economic value
of the credit enhancement, to the satisfaction of the Finance Board,
the proposed rule would eliminate the requirement that such
demonstration may be provided only by written verification from an
NRSRO. 12 CFR 955.3(a), (b)(4). Although a Bank could continue to use
written NRSRO verification to demonstrate this sufficiency, the
proposed rule is intended to allow the Banks the opportunity to
determine other means by which to satisfy the requirement. Moreover,
although the Finance Board is proposing to eliminate the specific
requirement that a Bank obtain written verification from an NRSRO, the
Finance Board would continue to use NRSRO standards and practices as
the benchmark against which it judges the sufficiency of a Bank's
methodology and the economic value of the credit enhancement. Thus, as
under the current rule, to the extent an NRSRO were to decline to rate
a structured finance transaction because the underlying asset pool
included particular types or categories of assets, then the presence of
such assets within an AMA pool would effectively preclude a Bank from
calculating a putative credit rating for that pool and from complying
with the proposed credit enhancement requirements with regard to that
particular pool.\2\
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\2\ For example, if Standard & Poor's continues to decline to
rate mortgage pools that contain loans subject to the Georgia Fair
Lending Act, as in effect from October 1, 2002, until March 7, 2003,
the Banks would not be in a position to demonstrate that they could
rate such loans. Thus, the Banks could not buy such mortgage loans
as AMA and still comply with proposed Sec. 955.5(a)(3).
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The proposed requirement that a Bank must have in place its process
and methodology ``prior to the acquisition of any asset or pool of
assets and throughout the life of the asset or pool of assets on the
Bank's books,'' would replace the current requirement that the Bank
must determine the required credit enhancement at the earlier of 270
days from the date of the Bank's acquisition of the first loan in a
pool, or the date at which the amount of a pool's assets reaches $100
million. 12 CFR 955.3(a). As a result of this provision, a Bank would
be responsible for ensuring that none of its actions, such as the
approval of the sale of mortgage servicing rights by a member or
housing associate that is responsible for the required credit
enhancement, would affect the estimated credit rating of an asset.
Elimination of outdated provisions. The proposed rule would
eliminate Sec. 955.3(c) of the current rule, which established a 90-
day period within which AMA programs in existence at the time of the
effective date of the current rule had to obtain new NRSRO opinion
letters. 12 CFR 955.3(c). This provision no longer has any effect, as
the 90-day period has since passed.
Decline in estimated credit rating. Section 955.5(a)(4) of the
proposed rule would clarify the responsibilities of a Bank in the event
that the estimated credit rating of an AMA asset or pool of assets were
to decline to below the initially required credit rating. In those
circumstances, the Bank must either require the member or housing
associate to provide sufficient additional credit enhancement to
restore the rating, or must recalculate and comply with the risk-based
capital requirement for that asset to reflect the reduced estimated
credit rating. The substance of this provision is much the same as
Sec. 955.6(b) of the current rule. See 12 CFR 955.6(b).
b. Credit Enhancement Requirements--Proposed Sec. 955.5(b)
Member or housing associate responsibility. Proposed Sec.
955.5(b)(1) would retain the requirement in Sec. 955.3(b) of the
current rule that the credit enhancement must be provided by a member
or housing associate of the Bank or, with the approval of both Banks,
by a member or housing associate of another Bank. 12 CFR 955.3(b). The
proposed rule would eliminate, however, many of the prescriptive
structural requirements with regard to the credit enhancement that are
now contained in Sec. 955.3(b). Instead, the proposed rule would allow
a Bank greater freedom to design specific AMA Products. The Finance
Board intends to rely on its examination and review process to verify
that a Bank's AMA Products comply with the proposed credit enhancement
requirements. Because the proposed credit enhancement requirements
would not refer to ``expected losses,'' as does the current rule, the
Finance Board is also proposing to delete the definition of this term
from Sec. 955.1.
Economic cost; third party credit enhancement. Section 955.5(b)(2)
of the proposed rule would broadly state that
[[Page 39030]]
the member or housing associate that initially provides the credit
enhancement must bear all of the direct economic consequences of the
credit enhancement responsibility. This means that no part of the
credit enhancement costs can be paid by a Bank, either directly or
indirectly. The proposed rule also would eliminate the criteria in
Sec. 955.3(b)(1) of the current rule that apply if a member or housing
associate provides a portion of its required credit enhancement through
a third party, i.e., by contracting with an insurance affiliate, by
purchasing loan-level or pool-level insurance, or by contracting with
another member or housing associate. Instead, the authority to provide
the required credit enhancement through a third party would be implied
from the more general requirement in proposed Sec. 955.5(b)(2) that
the member or housing associate must bear all of the economic
consequences of the credit enhancement responsibility. This broader
language would allow a member or housing associate to purchase
insurance (which could include United States government guarantees or
insurance) for a portion or all of the credit enhancement obligation,
or to sell a portion or all of the obligation to another qualified
party, so long as the member or housing associate bears all of the
economic consequences of the credit enhancement obligation. See
proposed Sec. 955.5(b)(1). The current requirement that a third party
may cover only those losses that remain after the member or housing
associate has borne expected losses, would be eliminated. See 12 CFR
955.3(b)(1)(i), (b)(1)(ii)(B), (b)(1)(iii)(B), (b)(2). Additional
requirements applicable where the third party is an insurer are
discussed in the Use of mortgage insurance section below.
Although the proposed rule would retain the current requirement
that members or housing associates are responsible for providing the
necessary credit enhancement to raise the credit quality to investment
grade, it is less prescriptive than the current rule. This approach is
not intended to alter the economics of the current risk-sharing
requirement. Instead, it is intended that with fewer restrictions on
the form of the credit enhancement, and on the type and degree of
supplemental mortgage insurance (SMI), the Banks may develop
alternative credit enhancement structures, such as through greater use
of pool insurance.
Direct obligations of members. Section 955.5(b)(3) of the proposed
rule would clarify provisions in the current rule by stating that any
portion of a credit enhancement that is a direct obligation of a member
or housing associate and that is not covered by third party insurance
generally must be fully secured by that member or housing associate
with collateral that is eligible to secure an advance. The current rule
had prompted questions about the need for collateral for obligations
that are covered by insurance, and the proposed rule would make clear
that collateral is required only to support a direct obligation of the
member or housing associate itself, not the obligations of an insurer.
The proposed rule also would clarify the effect of a transfer of the
credit enhancement responsibility to another member or housing
associate, by providing expressly that the successor shall continue to
comply with any collateral requirements that applied to the initial
member or housing associate. Under the proposed rule, a Bank would have
an option of holding permanent capital against such direct obligations,
in an amount equal to 100 percent of the nominal value of the
obligation, in lieu of obtaining collateral from the member or housing
associate.
The Finance Board has been asked previously to permit a member or
housing associate to secure its credit enhancement obligation with
collateral that is not eligible under the Bank Act to secure advances.
The Finance Board has not included such a provision in the proposed
rule, but requests comment on whether it would be appropriate to allow
a member or housing associate to use such non-Bank Act-eligible
collateral to secure its credit enhancement obligations.
Use of mortgage insurance. Section 955.5(b)(4) of the proposed rule
would authorize a member or housing associate to provide all or a
portion of its required credit enhancement through mortgage insurance,
provided that the insurer is rated not lower than the second highest
credit rating. If the rating of the insurer were to fall below the
second highest credit rating, the member or housing associate would
have 60 days to replace the insurance with an insurer that has the
required credit rating. This provision would modify the current rule,
which requires that such insurance be maintained at all times, and is
intended to recognize that a member or housing associate may not be
able to immediately obtain replacement insurance. 12 CFR
955.3(b)(1)(ii)(A). The proposed rule also would clarify the current
rule by making clear that the minimum credit rating requirement is
applicable to both loan-level and pool-level insurers.
The proposed rule also would eliminate the current restrictions on
the type of insurance, particularly pool insurance, that may be used to
cover any portion of the credit enhancement. Under the current rule, a
member may use pool-level insurance only to cover that portion of the
credit enhancement obligation that is attributable to geographic
concentration and pool size. See 12 CFR 955.3(b)(1)(iii). Allowing
broader use of pool insurance may enhance the safety and soundness of
the Banks' AMA programs. Although the proposed rule would place fewer
limitations on the use of mortgage insurance, the Finance Board expects
the Banks to continue to monitor closely their exposures to individual
mortgage insurers and to manage these exposures prudently. A Bank
should perform an independent credit analysis of the SMI companies with
which it does business to gain a more detailed understanding of their
financial condition and operating performance considering the potential
credit concentrations and exposure levels involved. A Bank should
evaluate its potential exposure in determining the depth of credit
analysis appropriate for individual SMI providers.
c. Grandfathered Transactions
The proposed rule would retain the existing AMA grandfather
provision, with minor technical revisions, and would relocate it to
proposed Sec. 955.5(c). 12 CFR 955.2(c)(2). Under the proposed
provision, any AMA-type assets acquired by a Bank in accordance with
prior resolutions of the Finance Board would not be subject to the
credit enhancement requirements in proposed Sec. 955.5 of the AMA
rule, provided that they remain within any total dollar cap imposed by
the Finance Board.
D. AMA-Qualified Interests in Whole Loans
The Finance Board is proposing to incorporate into the AMA rule
previous guidance addressing the acquisition of instruments that
represent an interest in AMA-eligible loans. The Finance Board had
previously provided this guidance as part of the SUPPLEMENTARY
INFORMATION section of the final AMA rule. See final AMA rule, 65 FR at
43974-78. Codifying this guidance is intended to make more transparent
the existing authority for the Banks to acquire such instruments as
AMA. In adopting the Final AMA Rule, the Finance Board stated that a
Bank may acquire certificates representing interests in whole loans as
AMA only if:
(1) The certificates are rated by an NRSRO to meet the credit
enhancement requirement of Sec. 955.3;
(2) The certificates are issued following the execution of, and
for the purpose of implementing an agreement between and
[[Page 39031]]
initiated by the Bank and a Bank System member or housing associate
to share risks in compliance with the requirements of Sec.
955.3(b); and
(3) The initiating Bank or Banks acquire substantially all of
the certificates. It is the Finance Board's view that, in such a
case, the use of a third party to securitize the whole loans would
merely represent a vehicle to invest in certain types of AMA under
more favorable terms and should therefore be permitted under the
rule. However, if the certificates have been created as a security
initially available to investors generally, they will not be
considered to qualify as ``whole loans'' under Sec. 955.2(a)(1).
Id. at 43974. The Finance Board further explained that mortgage
financing instruments structured into senior and subordinated tranches
also could be included in the general definition of AMA as long as the
transaction was ``implemented through a Bank's AMA program using assets
that conform with the AMA requirements'' and the member involved in the
transaction ``bore the risk of holding or selling the credit support
tranches.'' Id. at 43977. The proposed rule would incorporate the above
criteria, albeit in a less prescriptive form, into the three-part AMA
test in Sec. Sec. 955.3(c), 955.4(b) and 955.5.\3\
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\3\ The Finance Board's guidance in the final AMA rule was
applied in reviewing the Federal Home Loan Bank of Chicago's
(Chicago Bank) new business activity notice with regard to the
Chicago Bank's Shared Funding TM Program (SFP), an AMA
product offered under the Mortgage Partnership Finance Program
TM (MPF). See Approval of New Business Activity Notice,
2002-APP-07 (Dec. 4, 2002) (available at www.fhfb.gov). Generally,
under SFP, a member of the Chicago Bank will purchase AMA-eligible
whole loans from other Bank members that have been approved to
participate in the program. The Chicago Bank member will transfer
these loans to a special purpose entity (SPE) that it establishes.
The SPE, in turn, will issue certificates that represent senior
investment grade securities and credit support tranches and that are
backed by the whole loans. The member will acquire the credit
support tranches. The Chicago Bank will acquire the senior
investment grade securities, all of which will receive a credit
rating from an NRSRO of the second highest investment grade or
better. The approval permits the Chicago Bank, or any Bank that
subsequently purchases these senior securities, to sell the
securities only to other Banks or qualified Bank members. The new
business activity approval does not apply to transactions that would
involve any loans that a Bank previously purchased as AMA. Id. The
Chicago Bank announced the completion of its first SFP transaction
on March 21, 2003.
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Section 955.3(c) of the proposed rule, first, would require any
instrument that represents an interest in whole loans to be backed only
by loans that would be eligible for a Bank to acquire as AMA. In order
to qualify as AMA, any such interests also must be created by a member
or housing associate, in cooperation with a Bank. To help assure that
the Bank's purchase of such instruments is not a mere capital markets
transaction that would not advance the housing finance mission of the
Bank System, the Bank cooperating in the creation of the instruments
would be required initially to acquire substantially all of the assets
issued under this arrangement.
Proposed Sec. 955.3(c) also would make clear that interest only
strips (IOs), principal only strips (POs), as well as other interests
in the underlying loans that have risk characteristics similar to IOs
or POs, would not qualify as AMA.\4\ At this time, the Finance Board
does not believe that these classes of assets would be consistent with
the underlying purpose of the AMA rule, which is to allow a Bank to
acquire a high-quality asset from or through its members and housing
associates by transactions that support its statutory housing finance
mission. See proposed AMA rule, 65 FR at 25681.
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\4\ The Finance Board recognizes that Banks have expressed
interest in buying IOs or POs, specifically as hedging vehicles.
This proposed provision would not prevent the Finance Board from
removing restrictions that currently prohibit a Bank from acquiring
these types of assets for investment or hedging purposes under
authority in part 956 of the Finance Board's rules, should the
Finance Board decide that such restrictions are no longer warranted.
12 CFR part 956. The proposed provision, instead, would merely
clarify that these assets could not be considered AMA and could not
be purchased under the authority granted in proposed part 955.
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Second, Sec. 955.4(b)(1) of the proposed rule would require that
the whole loans underlying an AMA-qualified instrument may be acquired
only from the same sources from which a Bank may acquire AMA-qualified
whole loans. Thus, if a member were to use a trust or other special
purpose entity to issue the AMA-qualified interests, the underlying
loans must be purchased from: A member or housing associate of the
Bank; a member of another Bank, pursuant to an arrangement with that
Bank; or a Bank, if approved by the Finance Board. Section 955.6 of the
proposed rule would prohibit the use of existing AMA assets to create
an AMA-qualified instrument, without the prior approval of the Finance
Board. To preserve the nexus between any such AMA-qualified interests
in whole loans and the Bank System, the proposed rule also would allow
a Bank to sell AMA-qualified interests in whole loans only to other
Banks or to members of any Bank.
Finally, to qualify as AMA, an instrument representing an interest
in whole loans would have to meet the same credit risk-sharing
requirements as are applicable to other AMA-qualified assets. Thus, the
instrument would need to be credit-enhanced to a credit quality
equivalent to one of the four categories of investment grade, as
determined by the Bank. The proposed rule would differ from the prior
guidance provided in the Final AMA Rule, in that it would not require
an AMA-qualified interest in whole loans to receive a public rating
from an NRSRO. If an NRSRO were to provide a public investment grade
rating of the level required by the Bank, that rating would generally
satisfy the requirements of proposed Sec. 955.5(a). Further, under
proposed Sec. Sec. 955.5(b)(1) and (b)(2), the member that arranged
the creation of the AMA-qualified interest would need to provide the
required credit enhancement, and bear all of the economic consequences
of the credit enhancement responsibility, as is the case with respect
to whole loan AMA assets. The required credit enhancement could be
provided through subordinated or credit support tranches. A member
generally could meet its obligations under the proposed rule if it were
to acquire these support tranches, even if the member later sold these
interests.\5\ The proposed rule also would allow forms of credit
enhancement other than a credit support or subordinated tranche,
subject to the Bank satisfying the Finance Board that the credit
enhancement obligations of the member or housing associate would meet
the requirements of proposed Sec. 955.5(b).
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\5\ By acquiring the subordinated credit support tranches, the
member would be bearing the direct economic consequences of losses
from the underlying loans. Clearly, this will be true if the member
holds the support tranches for the entire life of the pool of loans
underlying the assets, because it will absorb all actual losses up
to the required credit enhancement level. The member also will bear
the economic consequence of these losses, however, if it sells some
or all of the subordinated credit support interests, because of the
price risk inherent in the sale of these instruments. Markets will
reward low credit losses in the underlying pool of loans with higher
prices, and penalize high losses with lower prices. Because of this,
the member maintains a strong incentive to assure the credit quality
of the loans that will back the senior, AMA-qualified tranches
purchased by the Bank, even if the member intends to sell the credit
support tranches.
Moreover, given that credit support tranches would be structured
to absorb losses up to the initial required amount of the credit
enhancement, a Bank that buys the senior investment grade tranches
would have no credit exposure to the member that initially acquires
the credit support tranches or to any subsequent party that may
purchase these support tranches. A credit support tranche,
therefore, would not be within the meaning of the phrase ``direct
obligation of a member or a housing associate'' as used in proposed
Sec. 955.5(b)(3), and a member or housing associate would not need
to provide collateral in connection with this form of credit
enhancement. Because the member would not be required to post
collateral for the credit support tranches, there also would be no
need to restrict the member's sale of those tranches to other Bank
members.
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[[Page 39032]]
E. Restructuring of AMA--Proposed Sec. 955.6
The Finance Board is proposing to add new Sec. 955.6 to the AMA
regulation. This provision would prohibit a Bank from using or selling
AMA that it has already purchased and is holding on its books to create
alternative asset structures, including those assets described in Sec.
955.3(c) of the proposed rule, without first obtaining Finance Board
approval. Actions taken by a Bank with the intent to alter the putative
or actual rating of its existing AMA or otherwise change the form of an
asset or an asset's existing credit risk-sharing structure, would be
covered by this provision. Among the factors the Finance Board would
consider in reviewing a request for approval under this proposed
section would be: How a Bank intends to unwind an existing credit
enhancement structure or incorporate the credit enhancement into the
structure of the new asset; whether, after the proposed repackaging is
complete, a Bank would be holding an asset that it would not be
authorized to purchase under Finance Board rules; and whether the new
asset would advance or enhance the housing finance mission embedded in
the AMA rule.
F. Reporting Requirements for AMA--Proposed Sec. 955.7
Under the proposed rule, the reporting requirements for AMA, which
currently are contained in Sec. 955.4, would be revised and relocated
to Sec. 955.7.
The proposed rule would clarify, in new Sec. 955.7(a), that each
Bank that has members or housing associates that have provided the
initial credit enhancement for AMA, would be responsible for collecting
and maintaining the loan-level and pool-level data required by Sec.
955.7 for all residential mortgage loans that constitute or otherwise
back such AMA, including assets described in Sec. 955.3(c). The Bank
would have this responsibility regardless of whether the AMA is
participated in whole or in part to other Banks. Although the Bank
would be responsible for collecting and maintaining this data and
reporting the data to the Finance Board, the Bank could arrange by
contract with another Bank to have this responsibility carried out by
the other Bank.
The proposed rule is intended to reduce the overall burden of AMA
data collection on the Banks while improving the informational content
of the data that are collected. The burden would be lessened by
reducing the number of data elements to be collected, by eliminating
reporting redundancies, and by eliminating a requirement that the Banks
aggregate data prior to reporting. Informational content would be
improved by increasing the frequency of loan-level data reporting,
codifying in the proposed rule the current practice of reporting
certain data elements added since the implementation of the current
rule, and adding a few more data elements needed to satisfy updated
credit risk modeling requirements and to comply with revised Office of
Management and Budget (OMB) reporting classifications.
Conforming the requirements to existing practice. In consultation
with the Banks, the Finance Board designed a reporting format for the
semi-annual loan-level mortgage reports. In the course of these
consultations, non-substantive changes were made to the data
requirements of Sec. 955.4, including refining the definitions of some
of the reporting elements, and adding new elements to improve database
management and enhance monitoring.\6\ In addition, while the current
rule only requires reporting on loans acquired year-to-date, it was
determined that for purposes of safety and soundness monitoring,
certain variables should be required to be reported for all outstanding
AMA residential mortgage loans, not just for AMA residential mortgage
loans acquired during the calendar year. Thus, program-to-date data are
currently collected along with data on loans acquired in the calendar
year in order to track the performance of each loan and enhance the
ability to track delinquencies. The proposed amendments to the data
reporting structure and content would reflect the current reporting
system in this regard.
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\6\ The definition of ``County'' was changed from the county
name to the 3-digit Federal Information Processing Standard (FIPS)
code for the county. The definition of ``PMI Percent'' was changed
from percent of private mortgage insurance to percent of primary
mortgage insurance, including mortgages insured by government
agencies. The definition of ``Credit Enhancement'' was changed from
the numeric code indicating the type of credit enhancement to the
dollar value of the calculated loan-level credit enhancement.
``Prepayment Penalty Terms'' was changed to ``Prepayment Penalty
Date'' and defined as the date that the application of the
prepayment penalty ends. ``Default Status'' was changed to
``Delinquency Status'' and represented the delinquency status of the
loan at the end of the reporting period. ``Pool Rating'' for the
letter credit rating of the loan pool was added to the loan-level
data reporting requirement. ``Interest Rate'' was defined as the
note rate on the loan at the time of loan origination. New variables
added for database management purposes were: ``Program Type'' and
``Pool Number.''
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Proposed elimination of data elements. Since the current rule went
into effect, loan-level data have been reported for four semi-annual
reports, and this reporting experience has revealed that some fields
required in the current rule are either very sparsely populated or are
relatively difficult to collect and provide little information relative
to the housing finance mission of the Banks or safety and soundness
monitoring. The proposed rule would eliminate these fields.\7\
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\7\ Fields that were found to provide little information were
the geographic indicator ``Place Code,'' and mortgage identifiers
``Cooperative Unit Mortgage,'' ``Mortgage Purchased under the
Banks'' Community Investment Cash Advances (CICA) Programs'' (for
single-family AMA), and ``Bank Real Estate Owned.'' ``Acquisition
Type'' would be eliminated due to the addition of the ``Program
Type'' data element.
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The current rule also has resulted in reporting duplication. Basic
information on loans acquired during the first two quarters of the year
is reported twice--first in the second quarter loan-level report and
again in the fourth quarter loan-level report. Under proposed Sec.
955.7, loan-level data on the loan, borrower and property
characteristics would be required to be reported only once--at the end
of the calendar quarter in which the loan is acquired. See proposed
Appendices A and B, part I.
Proposed reduction in reporting burden. Proposed Sec. 955.7 would
reduce the reporting burden on the Banks by eliminating the requirement
that the Banks generate aggregate data reports from the loan-level data
they collect. Instead, the proposed rule would require that the Banks
submit loan-level data in place of the aggregate data. Because the
loan-level data are collected and maintained by the Banks in any event,
eliminating the aggregate reporting requirement would reduce the Banks'
computational burden of aggregating the loan-level data.
In addition, the proposed rule would relieve the Banks from
reporting elements that are already collected elsewhere by the Finance
Board. Specifically, elements the Banks would no longer report are
those that describe the acquiring lender, or member selling the AMA to
the Bank, and those containing census level demographic information
related to the property.\8\ These elements are collected now by the
Finance Board through its membership data collection and directly from
the Department of Housing and Urban Development (HUD). The proposed
rule
[[Page 39033]]
would instead add only a single element to identify such member, the
``Federal Housing Finance Board Identification (FHFBID) Number,'' which
will permit linking the AMA data with the Finance Board's membership
database.
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\8\ The eliminated elements include ``Acquiring Lender
Institution,'' ``Acquiring Lender City,'' ``Acquiring Lender
State,'' ``Type of Acquiring Lender Institution,'' ``Census Tract--
Percent Minority,'' ``Census Tract--Median Income,'' ``Local Area
Median Income,'' ``Tract Income Ratio,'' ``Area Median Family
Income,'' ``Borrower Income Ratio,'' ``Unit--Affordable Category,''
``Unit Type XX--Affordability Level'' (for multi-family AMA), and
``Geographically Targeted Indicator.''
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The proposed rule would also reduce reporting redundancy by
removing pool variables from the loan-level data report and requiring a
separate pool-level data report. Under the current reporting system,
the pool-level credit rating, as well as the participation percentage
of each Bank in a loan's pool, is reported at the loan-level. Thus, the
same information about the pool is reported numerous times, once for
each loan in the pool. Under the proposed rule, a pool identifier would
be reported at the loan-level, and pool-level information would be
reported only once in the pool-level report. In addition to
streamlining the pool-level data reporting, proposed Sec. Sec.
955.7(c) and (d) would require the Banks to provide a quarterly update
on loan pools so that the Finance Board can monitor changes in the
credit quality of pools and estimated or actual credit enhancements,
which are important safety and soundness considerations. See proposed
Appendices A and B, part III. The pool-level report would include: The
``Bank District Flag;'' the ``Pool Number;'' 12 variables representing
the ``Participation Percentages'' of each of the 12 Banks in the pool;
and four variables representing information on the pool credit
enhancement and credit rating--``Pool Rating,'' ``Pool Credit
Enhancement,''\9\ ``Recalculated Pool Rating,'' and ``Recalculated
Credit Enhancement.''
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\9\ The new data element ``Pool Credit Enhancement'' would
replace the current data element ``Credit Enhancement,'' which
itself has been redefined since the current rule was adopted. See
n.6, supra. The Finance Board has effectively been collecting pool-
level credit enhancement values because it aggregates the loan-level
credit enhancement values currently collected. Standing alone,
however, the loan-level credit enhancement values are not as
meaningful as the pool-level values, and the Finance Board,
therefore, is proposing to collect the pool-level values directly.
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Proposed addition of new data elements. The proposed rule would add
several new fields to the list of required data elements to comply with
OMB Notice of Decision, ``Revisions to the Standards for the
Classification of Federal Data on Race and Ethnicity,'' 62 FR 58782
(October 30, 1997) (OMB Notice of Decision). Specifically, ``Borrower
Ethnicity'' and ``Co-Borrower Ethnicity,'' which currently are
collected and reported under the ``Borrower Race or National Origin''
and ``Co-Borrower Race or National Origin'' fields, would be separately
collected and reported. The race fields would be renamed ``Borrower
Race'' and ``Co-Borrower Race,'' consistent with the OMB Notice of
Decision.
The proposed rule also would add the following loan-level data
elements to allow for better tracking and modeling of prepayment and
default rates of AMA: ``Type of Credit Score;'' redefinitions of
``Borrower Credit Score'' and ``Co-Borrower Credit Score'' to include,
in addition to the Fair, Isaacs, Co. (FICO) score, the NextGen FICO
credit score; ``Adjustment Frequency;'' ``Negative Amortization;''
``Current Unpaid Principal Balance;'' ``Current Coupon;'' and ``Loan
Amount'' (for multi-family AMA).
Each of the two proposed Appendices would be sub-divided into three
parts for the three types of data that would be required to be
collected and reported: Part I--Loan-level data elements to be reported
for all single-family and multi-family AMA acquired during the calendar
quarter; part II--Loan-level data elements to be reported for all
single-family and multi-family AMA outstanding in the calendar quarter;
and part III--Pool-level data elements to be reported for pools of
single-family and multi-family AMA. The loan-level data elements
contained in part I of both Appendices generally reflect
characteristics of the loan or the borrower(s) and should not change
over the life of the loan. As indicated above, to simplify the current
reporting requirements, loan-level data specified in part I would only
be required to be submitted during the calendar quarter in which the
loan is acquired by a Bank.
The loan-level data elements contained in part II of the Appendices
would include data that the Bank would be required to report for all
single-family and multi-family AMA outstanding in a calendar quarter.
These data elements are more meaningful when monitored on a continuing
basis. This information would be used by the Finance Board to create
and maintain a database to be used for safety and soundness monitoring,
particularly of the Bank's risk management.
Part III of the Appendices would contain the data that the Bank
would be required to report for pools or assets backed by pools. This
information also would be used by the Finance Board to monitor the
safety and soundness of the Bank's AMA program.
The Finance Board seeks comments on whether the data descriptions
in proposed Appendices A and B are clear with regard to whole loans, or
pools of such loans, that would back assets described in proposed Sec.
955.3(c).
Failure to obtain data elements. The Finance Board recognizes that
members or housing associates from whom the Banks acquire AMA may be
unable to supply, or may fail to supply, all of the data items
specified in Appendices A and B for all assets.
Neither the Bank, nor the member or housing associate from which
the Bank acquires an asset, is expected to guarantee that all data
items for each asset will be supplied. However, the Finance Board does
expect the Banks to: Monitor how completely members or housing
associates supply the requested data; identify and report to the
Finance Board difficulties, problems or issues with respect to
particular data fields or particular members or housing associates; and
work with members and housing associates to minimize gaps in the data
submissions. This guidance should not be interpreted to mean that the
Banks may acquire an asset or a pool of assets if the Banks cannot
collect data items necessary for purposes of establishing the
equivalent credit rating of such asset or pool of assets under proposed
Sec. 955.5(a).
G. Administrative and Investment Transactions Between Banks--Proposed
Sec. 955.8
Under the proposed rule, the provisions governing administrative
and investment transactions between Banks, which currently are
contained in Sec. 955.5, would be relocated to Sec. 955.8. See 12 CFR
955.5. Section 955.5(c) of the current rule states that a Bank that has
delegated its AMA pricing function to another Bank shall retain a right
to refuse to acquire AMA at prices it does not consider appropriate. 12
CFR 955.5(c). Under the AMA programs, one Bank can provide the back-
office services for other Banks. Section 955.5(c) was included in the
current rule to ensure that the other Banks are not obligated to
acquire AMA at prices set by the Bank providing the back-office
functions. The Banks have now experienced several years of
participation in AMA programs, which have grown significantly in
volume. The Finance Board seeks comment on whether Sec. 955.5(c) is no
longer necessary or appropriate now that the Banks have more experience
and options relating to AMA programs.
H. Risk-Based Capital Requirement for AMA--Proposed Sec. 955.9
The proposed rule would include a risk-based capital provision that
specifies the type and amount of capital that a Bank must hold against
AMA for which the estimated credit rating is less than the second
highest category of
[[Page 39034]]
investment grade, e.g., less than AA. Until a Bank implements its
capital structure plan and complies with the capital requirements of 12
CFR part 932, it must hold retained earnings against any outstanding
AMA with an estimated credit rating of less than the second highest
category of investment grade. The amount to be held is to be determined
in accordance with Table 1 set forth in the proposed rule, which
assigns a factor to particular credit rating categories. This provision
simplifies Sec. 955.6(a) of the current rule by eliminating the
provision that would allow Banks to also hold general allowance for
losses in meeting their risk-based capital requirement. Because the
Banks do not hold general allowance for losses, this provision has no
practical effect. See 12 CFR 955.6(a).
The proposed rule also would make clear that a Bank's risk-based
capital requirement for its AMA is governed by Sec. 955.9 only until
it has implemented its capital structure plan and has complied with the
capital requirements of 12 CFR part 932. After that time, a Bank would
be governed solely by part 932 with respect to the risk-based capital
requirement for AMA. This provision codifies a position previously
stated by the Finance Board. See final AMA rule, 65 FR at 43978.
The proposed rule also would make a technical correction to apply
the risk-based capital requirement to multi-family AMA, as well as
single-family AMA.
The proposed rule would delete current Sec. 955.6(b) regarding the
recalculation of the credit enhancement, as provisions for dealing with
a decline in the estimated credit rating of an AMA asset or pool of
assets would be included under proposed Sec. 955.5(a)(4), discussed
above.
I. Acquisition Restrictions on Certain Loans
The Finance Board seeks comment on whether it should take measures
to prevent a Bank from acquiring loans or assets backed by loans,
through its AMA program, where the loans have certain features or were
made under circumstances that may be considered ``predatory'' or
``abusive.'' If the Finance Board seeks to limit the Banks' authority
to acquire such loans, or assets backed by such loans, what specific
measures would need to be incorporated in the rule? Among the issues on
which the Finance Board seeks comments are:
(a) Whether the Finance Board should address concerns regarding the
acquisition of loans or assets backed by loans where the loans have
certain features or were made under circumstances that may be
considered ``predatory'' or ``abusive,'' by adopting a new regulatory
provision that would require each Bank to develop policies to preclude
acquiring such loans, or assets backed by such loans;
(b) Whether the Finance Board should address the acquisition of
loans or assets backed by loans where the loans have certain features
or were made under circumstances that may be considered ``predatory''
or ``abusive,'' through specific and detailed guidance to each Bank, as
other Federal financial institution regulators have done with respect
to the institutions they regulate; and
(c) How loans covered by such regulation or guidance should be
identified.
III. Paperwork Reduction Act
The Finance Board's information collection related to AMA assets
under the current rule has been reviewed and authorized by the Office
of Management and Budget (OMB) under the Paperwork Reduction Act of
1995, as implemented by OMB in regulations at 5 CFR part 1320. The OMB
control number is 3069-0058. As described more fully in part F of the
SUPPLEMENTARY INFORMATION regarding information collection under the
proposed section 955.7, the proposed rule makes a series of minor
changes to the information presently collected under the current
information collection. Because the information collection changes
contained in this proposed rule are neither substantive nor material,
no additional review or approval is required from OMB. Thus, the
Finance Board has not submitted any information to OMB for review.
IV. Regulatory Flexibility Act
The proposed rule, if adopted as a final rule, will apply only to
the Banks, which do not come within the meaning of ``small entities,''
as defined in the Regulatory Flexibility Act (RFA). See 5 U.S.C.
601(6). Therefore, in accordance with section 605(b) of the RFA, 5
U.S.C. 605(b), the Finance Board hereby certifies that the proposed
rule, if promulgated as a final rule, will not have a significant
economic impact on a substantial number of small entities.
List of Subjects
12 CFR Part 900
Credit, Federal home loan banks, Reporting and recordkeeping
requirements.
12 CFR Part 932
Capital, Credit, Federal home loan banks, Housing, Investments,
Reporting and recordkeeping requirements.
12 CFR Part 955
Credit, Federal home loan banks, Housing, Reporting and
recordkeeping requirements.
Accordingly, the Finance Board hereby proposes to amend parts 900,
932 and 955, chapter IX, title 12, Code of Federal Regulations, to read
as follows:
PART 900--GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD
REGULATIONS
1. The authority citation for part 900 continues to read as
follows:
Authority: 12 U.S.C. 1422b(a).
2. Revise the definition of ``acquired member assets'' to read as
follows:
Sec. 900.2 Terms relating to Bank operations, mission and
supervision.
* * * * *
Acquired member assets or AMA means assets acquired in accordance
with, and satisfying the applicable requirements of, Sec. Sec. 955.3,
955.4 and 955.5 of this chapter.
* * * * *
PART 932--FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS
3. The authority citation for part 932 continues to read as
follows:
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443,
1446.
Sec. 932.4 [Amended]
4. Amend the first sentence in Sec. 932.4(e)(2)(ii)(E) by:
a. Removing the phrase ``described in Sec. 955.2 of this
chapter''; and
b. Removing ``Sec. 955.3'' and adding, in its place, ``Sec.
955.5''.
Sec. 932.9 [Amended]
5. Amend the first sentence of Sec. 932.9(a)(3) by removing the
phrase ``acquired member assets identified in Sec. 955.2(a)(3) of this
chapter or are otherwise''.
6. Revise part 955 to read as follows:
PART 955--ACQUIRED MEMBER ASSETS
Sec.
955.1 Definitions.
955.2 Authorization to invest in AMA.
955.3 Asset requirement.
955.4 Member or housing associate nexus requirement.
955.5 Credit risk-sharing requirements.
955.6 Restructuring of AMA.
[[Page 39035]]
955.7 Reporting requirements.
955.8 Administrative and investment transactions between Banks.
955.9 Risk-based capital requirement.
Appendix A to Part 955--Reporting Requirements for AMA That Are Single-
Family
Residential Mortgage Loans or Single-Family Residential Mortgage Loans
Backing AMA
Appendix B to Part 955--Reporting Requirements for AMA That Are Multi-
Family
Residential Mortgage Loans or Multi-Family Residential Mortgage Loans
Backing AMA
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1430, 1430b,
1431.
Sec. 955.1 Definitions.
As used in this part:
Acquired member assets or AMA means assets acquired in accordance
with, and satisfying the applicable requirements of, Sec. Sec. 955.3,
955.4 and 955.5.
AMA Product means an AMA structure defined by a specific set of
terms and conditions.
Investment grade means a credit quality rating in one of the four
highest credit rating categories provided by an NRSRO.
Pool means a group of assets acquired under a given master
commitment or similar agreement.
Residential real property has the meaning set forth in Sec. 950.1
of this chapter.
Sec. 955.2 Authorization to invest in AMA.
Each Bank is authorized to invest in assets that qualify as AMA,
subject to the requirements of this part and part 980 of this chapter.
Sec. 955.3 Asset requirement.
Assets that qualify as AMA shall be limited to the following:
(a) Whole loans that are eligible to secure advances under
Sec. Sec. 950.7(a)(1)(i), (a)(2)(ii), (a)(4), or (b)(1) of this
chapter, excluding:
(1) Single-family mortgage loans where the loan amount exceeds the
limits established pursuant to 12 U.S.C. 1717(b)(2); and
(2) Loans made to an entity, or secured by property, not located in
a state;
(b) Whole loans secured by manufactured housing, regardless of
whether such housing qualifies as residential real property under state
law; or
(c) Other assets that are created by a member or housing associate
in cooperation with a Bank, where the assets are backed by whole loans
that meet the requirements of paragraphs (a) or (b) of this section,
provided that the Bank must initially acquire substantially all of such
assets and the assets do not constitute interest only strips (IO),
principal only strips (PO), or other interests in the underlying loans
that have risk characteristics that are similar to IO or PO
instruments.
Sec. 955.4 Member or housing associate nexus requirement.
(a) In the case of assets described in Sec. Sec. 955.3(a) and (b),
a Bank shall acquire the assets, by means of either a purchase or a
funding transaction, only from:
(1) A member or housing associate of the Bank;
(2) A member of another Bank, pursuant to an arrangement with that
other Bank; or
(3) Another Bank.
(b) In the case of assets described in Sec. 955.3(c):
(1) The whole loans underlying the assets shall be acquired only
from:
(i) A member or housing associate of the Bank;
(ii) A member of another Bank, pursuant to an arrangement with that
other Bank; or
(iii) A Bank, if approved by the Finance Board under Sec. 955.6;
and
(2) The assets may be sold by a Bank only to other Banks or to
members of any Bank.
Sec. 955.5 Credit risk-sharing requirements.
(a) Required credit risk-sharing structure. (1) Product
requirement. For each AMA Product, the Bank shall implement, and have
in place, a credit risk-sharing structure under which a member or
housing associate provides the credit enhancement necessary to enhance
an asset or pool of assets acquired by the Bank to a credit quality
that is equivalent to investment grade.
(2) Asset requirement. For each AMA asset or pool of assets to be
acquired, a Bank shall specify the particular credit rating within
investment grade to which the credit quality of the asset or pool of
assets shall be equivalent, after accounting for the credit enhancement
provided by the member or housing associate.
(3) Satisfaction of credit enhancement requirement. For each AMA
Product, prior to the acquisition of any asset or pool of assets and
throughout the life of the asset or pool of assets on the Bank's books,
the Bank shall have in place a process and methodology that, to the
satisfaction of the Finance Board:
(i) Determines the applicable credit enhancement required under
paragraphs (a)(1) and (a)(2) of this section; and
(ii) Demonstrates that the economic value of the credit enhancement
provided by the member or housing associate is sufficient to meet the
applicable credit enhancement required under paragraphs (a)(1) and
(a)(2) of this section.
(4) Decline in estimated credit rating. If the estimated credit
rating of an asset or pool of assets declines to a credit rating below
the credit rating required by the Bank at the time of acquisition of
the asset or pool of assets, the Bank, at its discretion, shall either:
(i) Require the member or housing associate to provide additional
credit enhancement in an amount sufficient to restore the estimated
credit rating for such asset or pool of assets; or
(ii) Recalculate, and comply with, the risk-based capital
requirement for the asset or pool of assets in accordance with Sec.
932.4 of this chapter or Sec. 955.9, as applicable, based on the
reduced estimated credit rating.
(b) Credit enhancement requirements. (1) Members and housing
associates. The credit enhancement required under paragraphs (a)(1) and
(a)(2) of this section shall be provided by:
(i) A member or housing associate of the Bank; or
(ii) With the approval of both Banks, a member or housing associate
of another Bank.
(2) Economic cost. The member or housing associate that initially
provides the required credit enhancement shall bear all of the economic
consequences of the credit enhancement responsibility.
(3) Direct obligations. Any portion of the required credit
enhancement that is a direct obligation of a member or housing
associate of any Bank and that is not covered by insurance from a third
party insurance company, shall be fully secured by collateral eligible
to secure advances under part 950 of this chapter, except as otherwise
provided in this paragraph. If a member or housing associate transfers
such credit enhancement responsibility to another member or housing
associate, the successor shall continue to satisfy the collateral
requirement. In lieu of obtaining collateral to secure such direct
obligations, a Bank may hold permanent capital (or retained earnings,
if the Bank has not yet converted its capital structure) against the
direct obligation in an amount equal to 100 percent of the nominal
value of the direct obligation. This requirement shall apply in
addition to the risk-based capital requirements under Sec. 932.4 of
this chapter or Sec. 955.9, as applicable.
(4) Mortgage insurance. A member or housing associate may provide
all or a portion of its required credit enhancement through mortgage
[[Page 39036]]
insurance purchased from an insurer that is rated not lower than the
second highest credit rating. If the rating of the insurer falls below
the second highest credit rating, the member or housing associate shall
have 60 days to replace the insurer with another insurer rated not
lower than the second highest credit rating.
(c) Grandfathered transactions. Assets acquired in transactions
otherwise authorized by resolution of the Finance Board and that are
within any total dollar cap established by the Finance Board at the
time of such authorization, shall not be subject to the requirements of
this section.
Sec. 955.6 Restructuring of AMA.
A Bank shall not alter the credit risk-sharing structure of any AMA
that it has acquired, nor shall it take any actions with the intent or
effect of altering the actual or putative credit rating of any such
AMA, without the prior approval of the Finance Board. A Bank also shall
not sell or otherwise use any AMA in order to create a new type of
asset, including assets described in Sec. 955.3(c), without prior
Finance Board approval.
Sec. 955.7 Reporting requirements.
(a) Bank responsibility for collecting and maintaining data. Each
Bank that has members or housing associates that have provided the
initial credit enhancement for AMA, shall be responsible for collecting
and maintaining the loan-level and pool-level data required by this
section for all residential mortgage loans that constitute or otherwise
back such AMA, including assets described in Sec. 955.3(c).
(b) Loan-level data elements. The loan-level data collected and
maintained by each Bank shall include the data elements specified in
Appendix A, Parts I and II, or in Appendix B, Parts I and II.
(c) Pool-level data elements. The pool-level data collected and
maintained by each Bank shall include the data elements specified in
Appendix A, Part III, or in Appendix B, Part III.
(d) Quarterly Mortgage Reports. Beginning in calendar year 2004,
each Bank that is required to collect and maintain data under this
section shall be responsible for submitting such data to the Finance
Board within 60 days of the end of each calendar quarter and in a
machine-readable format specified by the Finance Board.
(e) Additional reports. The Finance Board may at any time require a
Bank to submit reports in addition to those required under paragraph
(d) of this section.
Sec. 955.8 Administrative and investment transactions between Banks.
(a) Delegation of administrative duties. A Bank may delegate the
administration of an AMA Product to another Bank whose administrative
office has been examined and approved by the Finance Board to process
AMA transactions. Prior to entering into any AMA-related agreements
with a member or housing associate, a Bank shall disclose the existence
of any such delegation, or the possibility that the Bank may later make
such a delegation.
(b) Terminability of agreements. Any agreement made between two or
more Banks in connection with any AMA Product shall be made terminable
by either party after a reasonable notice period.
(c) Delegation of pricing authority. A Bank that has delegated its
AMA pricing function to another Bank shall retain a right to refuse to
acquire AMA at prices it does not consider appropriate.
Sec. 955.9 Risk-based capital requirement.
(a) General. Until a Bank implements its capital structure plan and
complies with part 932 of this chapter, it shall hold retained earnings
against any outstanding AMA for which the estimated credit rating is
less than the second highest category of investment grade.
(b) Requirement. The amount of retained earnings to be held under
this section shall be at least equal to the product of the outstanding
balance of the AMA and the factor associated with its putative credit
rating, as set forth in Table 1 of this section.
Table 1
------------------------------------------------------------------------
Percentage
applicable to
on-balance
Putative credit rating of AMA sheet
equivalent
value of AMA
------------------------------------------------------------------------
Third Highest Investment Grade.......................... 0.90
Fourth Highest Investment Grade......................... 1.50
If Downgraded to Below Investment Grade After
Acquisition By Bank:
Highest Below Investment Grade...................... 2.25
Second Highest Below Investment Grade............... 2.60
All Other Below Investment Grade.................... 100.00
------------------------------------------------------------------------
Appendix A to Part 955--Reporting Requirements for AMA That Are Single-
Family Residential Mortgage Loans or Single-Family Residential Mortgage
Loans Backing AMA
Part I--Fields To Be Reported for All Such Loans Acquired During the
Calendar Quarter
1. Bank District Flag--Two-digit code designating the District
Bank where the member institution that initially provides the credit
enhancement for the AMA is located.
2. Program Type--Two-digit code, as designated by the Finance
Board, identifying AMA Program type (e.g., MPP-FHA; MPF-100, etc.).
3. Loan Number--Bank assigned numeric identifier, unique to each
mortgage loan within a Bank's AMA portfolio.
4. Pool Number--Bank assigned numeric identifier for the pool in
which the mortgage loan is a part; the Pool Number should be unique
within a Bank's AMA portfolio.
5. U.S. Postal State--Two-digit Federal Information Processing
Standard (FIPS) code for the property.
6. U.S. Postal Zip Code--Five-digit zip code for the property.
7. MSA Code--Five-digit code for the property's Metropolitan
Statistical Area (MSA).
8. County--Three-digit FIPS code for the property's county, as
designated in the most recent decennial census by the Bureau of the
Census.
9. Census Tract/Block Numbering Area (BNA)--Tract/BNA number for
the property as used in the most recent decennial census by the
Bureau of the Census.
10. Borrower(s) Annual Income--Combined income of all borrowers
at the time of mortgage loan origination.
11. Acquisition Unpaid Principal Balance (UPB)--UPB in whole
dollars of the mortgage loan when the loan was first acquired by a
Bank, or of each mortgage loan backing an asset when such asset was
first acquired by a Bank.
12. Loan-to-Value (LTV) Ratio at Origination--LTV ratio of the
mortgage loan at the time of origination.
13. Date of Mortgage Loan--Date the mortgage loan was
originated.
14. Date of Acquisition--Date a Bank first acquires the mortgage
loan, or the asset backed by the mortgage loan.
15. Purpose of Mortgage Loan--Code indicating the purpose of the
mortgage loan (e.g., purchase money mortgage, refinancing,
construction mortgage, property rehabilitation).
16. Product Type--Code indicating the product type of the
mortgage (e.g., fixed rate mortgage, adjustable rate mortgage (ARM),
balloon mortgage, graduated payment mortgage (GPM) or growing equity
mortgage (GEM), reverse annuity mortgage, or other).
17. Federal Insurance or Guarantee--Code that indicates whether
any part of the mortgage loan has Federal insurance or a Federal
guarantee, and from which agency.
18. Primary Mortgage Insurance Percent--Percent of loan balance
at origination covered by private and/or government mortgage
insurance.
[[Page 39037]]
19. Term of Mortgage at Origination--Term of the mortgage loan
at the time of origination, in months.
20. Amortization Term--For amortizing mortgage loans, the
amortization term of the mortgage loan, in months.
21. FHFBID Number--Federal Housing Finance Board Identification
Number of the member institution that initially provides the credit
enhancement for the AMA.
22. Number of Borrowers--Number of borrowers at the time of
origination.
23. First-Time Home Buyers--Code indicating whether the
mortgagor(s) are first-time homebuyers.
24. Borrower Race--Code indicating the race of the borrower
(e.g., Asian, Native Hawaiian or Other Pacific Islander). Codes are
to be consistent with the race codes used in the latest decennial
census.
25. Borrower Ethnicity--Code indicating the ethnicity of the
borrower (i.e., ``Hispanic or Latino'' or ``Not Hispanic or
Latino''), consistent with the latest decennial census ethnicity
codes.
26. Co-Borrower Race--Code indicating the race of the co-
borrower (e.g., Asian, Native Hawaiian or Other Pacific Islander).
Codes are to be consistent with the race codes used in the latest
decennial census.
27. Co-Borrower Ethnicity--Code indicating the ethnicity of the
co-borrower (i.e., ``Hispanic or Latino'' or ``Not Hispanic or
Latino''), consistent with the latest decennial census ethnicity
codes.
28. Borrower Gender--Code that indicates whether the borrower is
male or female.
29. Co-Borrower Gender--Code that indicates whether the co-
borrower is male or female.
30. Age of Borrower--Age of borrower, in years, at the time of
mortgage loan origination.
31. Age of Co-Borrower--Age of co-borrower, in years, at the
time of mortgage loan origination.
32. Occupancy Code--Code that indicates whether the mortgaged
property is an owner-occupied principal residence, or a rental
investment property.
33. Number of Units--Number of units in the mortgaged property
(i.e., one to four).
34. Unit--Number of Bedrooms--Four separate fields indicating,
where the property contains non-owner-occupied dwelling units, the
number of bedrooms in each of those units.
35. Unit--Reported Rent Level--Four separate fields indicating,
where the property contains non-owner-occupied dwelling units, the
rent level for each unit in whole dollars.
36. Unit--Reported Rent Level Plus Utilities--Four separate
fields indicating, where the property contains non-owner-occupied
dwelling units, the rent level plus the utility cost for each unit
in whole dollars.
37. Unit--Owner-Occupied--Four separate fields indicating
whether each of the units is owner-occupied.
38. Original Interest Rate--Interest rate on the loan at the
time of origination.
39. Loan Amount--Mortgage loan balance at the time of
origination.
40. Front-end Ratio--Ratio of principal, interest, taxes, and
insurance to Borrower(s) Annual Income at the time of origination.
41. Back-end Ratio--Ratio of all debt payments to Borrower(s)
Annual Income at the time of origination.
42. Type of Credit Score--Code indicating borrower(s)'credit
score type (i.e., Fair, Isaacs, Co. (FICO) or NextGen FICO).
43. Borrower Credit Score--The Fair, Isaacs, Co. (FICO) or
NextGen FICO credit score of borrower at the time of mortgage loan
origination.
44. Co-Borrower Credit Score--The Fair, Isaacs, Co. (FICO) or
NextGen FICO credit score of co-borrower at the time of mortgage
loan origination.
45. Self-Employed Indicator--Code indicating whether the
borrower was self-employed at the time of mortgage loan origination.
46. Property Type--Code indicating the type of property (e.g.,
single-family detached, condominium, PUD).
47. ARM Index--For ARMs only, index used for the calculation of
interest on an ARM.
48. ARM Margin--For ARMs only, margin added to the index used
for the calculation of the interest on an ARM.
49. Adjustment Frequency--For ARMs only, interest rate
adjustment frequency in months.
50. Negative Amortization--For ARMs only, code indicating if
amortization is negative.
51. Prepayment Penalty Date--Date that the application of a
prepayment penalty ends.
Part II--Fields To Be Reported for All Such Loans That Are Outstanding
in the Calendar Quarter
52. Bank District Flag--Two-digit code designating the District
Bank where the member institution that initially provides the credit
enhancement for the AMA is located.
53. Loan Number--Bank assigned numeric identifier, unique to
each mortgage loan within a Bank's AMA portfolio.
54. Delinquency Status--Code indicating the delinquency status
of the mortgage loan at the end of the calendar quarter.
55. Termination Date--For mortgage loans that terminated during
the calendar quarter, date on which the mortgage loan terminated.
56. Termination Type--For mortgage loans that terminated during
the calendar quarter, code indicating the reason for the mortgage
loan termination (e.g., prepayment, foreclosure).
57. Current Unpaid Principal Balance (UPB)--UPB on the mortgage
loan at the end of the calendar quarter.
58. Current Coupon--For ARMs only, mortgage interest rate on the
mortgage loan at the end of the calendar quarter.
Part III--Fields To Be Reported for Pools of Such Loans
59. Bank District Flag--Two-digit code designating the District
Bank where the member institution that initially provides the credit
enhancement for the AMA is located.
60. Pool Number--Bank assigned numeric identifier for the pool
in which the mortgage loan is a part; the Pool Number should be
unique within a Bank's AMA portfolio.
61. Participation Percentages--Twelve separate fields indicating
each Bank's percentage participation in the AMA-eligible pool or
asset backed by such a pool, as of the date the Bank acquires any
portion of the pool or asset.
62. Pool Rating--For pools of mortgage loans or assets backed by
such mortgage loans, the putative or actual letter credit rating of
the pool as of the date the Bank acquires any portion of the pool or
asset backed by such pools.
63. Pool Credit Enhancement--The dollar amount of the credit
enhancement required to bring the pool to the credit rating as
specified by the Bank.
64. Recalculated Pool Rating--For pools of mortgage loans where
the credit enhancement is recalculated during the calendar quarter,
the recalculated putative or actual letter credit rating using the
initial amount of the Pool Credit Enhancement.
65. Recalculated Credit Enhancement--For pools of mortgage loans
that have the credit enhancement recalculated during the calendar
quarter, the dollar amount of the credit enhancement required to
bring the pool to the initial putative or actual letter credit
rating.
Appendix B to Part 955--Reporting Requirements for AMA That Are Multi-
Family Residential Mortgage Loans or Multi-Family Residential Mortgage
Loans Backing AMA
Part I--Fields To Be Reported for All Such Loans Acquired During the
Calendar Quarter
1. Bank District Flag--Two-digit code designating the District
Bank where the member institution that initially provides the credit
enhancement for the AMA is located.
2. Program Type--Two-digit code, as designated by the Finance
Board, identifying AMA Program type.
3. Loan Number--Bank assigned numeric identifier, unique to each
mortgage loan within a Bank's AMA portfolio.
4. Pool Number--Bank assigned numeric identifier, for the pool
in which the mortgage loan is a part; the Pool Number should be
unique within a Bank's AMA portfolio.
5. U.S. Postal State--Two-digit Federal Information Processing
Standard (FIPS) code for the property.
6. U.S. Postal Zip Code--Five-digit zip code for the property.
7. MSA Code--Five-digit code for the property's Metropolitan
Statistical Area (MSA).
8. County--Three-digit FIPS code for the property's county, as
designated in the most recent decennial census by the Bureau of the
Census.
9. Census Tract/Block Numbering Area (BNA)--Tract/BNA number for
the property as used in the most recent decennial census by the
Bureau of the Census.
10. Acquisition Unpaid Principal Balance (UPB)--UPB in whole
dollars of the mortgage loan when the loan was first acquired by a
Bank, or of each mortgage loan backing an asset when such asset was
first acquired by a Bank.
11. Original Interest Rate--Interest rate on the loan at the
time of origination.
12. Loan Amount--Mortgage loan balance at the time of
origination.
[[Page 39038]]
13. Loan-to-Value (LTV) Ratio at Origination--LTV ratio of the
mortgage loan at the time of origination.
14. Date of Mortgage Loan--Date the mortgage loan was
originated.
15. Date of Acquisition--Date a Bank first acquires the mortgage
loan or the asset backed by the mortgage loan.
16. Purpose of Mortgage Loan--Code indicating the purpose of the
mortgage loan (e.g., purchase money mortgage, refinancing,
construction mortgage, property rehabilitation).
17. Cooperative Project Loan--Code indicating whether the
mortgage loan is a project loan on a cooperative housing building.
18. Mortgagor Type--Code indicating the type of mortgagor (i.e.,
an individual, a for-profit entity such as a corporation or
partnership, a nonprofit entity such as a corporation or
partnership, a public entity, or other type of entity).
19. Product Type--Code indicating the product type of the
mortgage (e.g., fixed rate mortgage, adjustable rate mortgage (ARM),
balloon mortgage, graduated payment mortgage (GPM) or growing equity
mortgage (GEM), reverse annuity mortgage, or other).
20. Construction Loan--Code indicating whether the mortgage is
for a construction loan.
21. Federal Insurance or Guarantee--Code that indicates whether
any part of the mortgage loan has Federal insurance or a Federal
guarantee, and from which agency.
22. Primary Mortgage Insurance Percent--Percent of loan balance
at origination covered by private and/or government mortgage
insurance.
23. FHA Risk Share Percent--The percentage of the risk assumed
for the mortgage purchased under a risk-sharing arrangement with
FHA.
24. Mortgage Purchased under the Banks' Community Investment
Cash Advances (CICA) Programs--Code indicating whether the mortgage
is on a project under an AHP, CIP or other CICA program.
25. Term of Mortgage at Origination--Term of the mortgage loan
at the time of origination, in months.
26. Amortization Term--For amortizing mortgage loans, the
amortization term of the mortgage loan, in months.
27. FHFBID Number--Federal Housing Finance Board Identification
Number of the member institution that initially provides the credit
enhancement for the AMA.
28. Number of Units--The number of units in the mortgaged
property.
29. Public Subsidy Program--Code indicating whether the
mortgaged property is involved in a public subsidy program and which
level(s) of government are involved in the subsidy program (i.e.,
Federal government only, other only, Federal government, etc.).
30. Unit Class Level--The following data apply to unit types in
a particular mortgaged property. The unit types are defined by the
Banks for each property and are differentiated based on the number
of bedrooms in the units and on the average contract rent for the
units. A unit type must be included for each bedroom size category
in the property:
A. Unit Type XX-Number of Bedroom(s)--The number of bedrooms in
the unit type;
B. Unit Type XX-Number of Unit--The number of units in the
property within the unit type;
C. Unit Type XX-Average Reported Rent Level--The average rent
level for the unit type in whole dollars;
D. Unit Type XX-Average Reported Rent Plus Utilities--The
average reported rent level plus the utility cost for each unit in
whole dollars; and
E. Unit Type XX-Tenant Income Indicator--Indicates whether the
tenant's income is less than 60 percent of area median income,
greater than or equal to 60 percent but less than 80 percent of area
median income, greater than or equal to 80 percent but less than 100
percent of area median income, or greater than or equal to 100
percent of area median income.
31. Debt Service Coverage Ratio--Ratio of net operating income
to debt service.
32. ARM Index--For ARMs only, index used for the calculation of
interest on an ARM.
33. ARM Margin--For ARMs only, margin added to the index used
for the calculation of the interest on an ARM.
34. Adjustment Frequency--For ARMs only, interest rate
adjustment frequency in months.
35. Negative Amortization--For ARMs only, code indicating if
amortization is negative.
36. Prepayment Penalty Date--Date that the application of a
prepayment penalty ends.
Part II--Fields To Be Reported for All Such Loans That Are Outstanding
in the Calendar Quarter
37. Bank District Flag--Two-digit code designating the District
Bank where the member institution that initially provides the credit
enhancement for the AMA is located.
38. Loan Number--Bank assigned numeric identifier, unique to
each mortgage loan within a Bank's AMA portfolio.
39. Delinquency Status--Code indicating the delinquency status
of the mortgage loan at the end of the calendar quarter.
40. Termination Date--For mortgage loans that terminated during
the reporting period, date on which the mortgage loan terminated.
41. Termination Type--For mortgage loans that terminated during
the calendar quarter, code indicating the reason for the mortgage
loan termination (e.g., prepayment, foreclosure).
42. Current Unpaid Principal Balance (UPB)--UPB on the mortgage
loan at the end of the calendar quarter.
43. Current Coupon--For ARMs only, mortgage interest rate on the
mortgage loan at the end of the calendar quarter.
Part III--Fields To Be Reported for Pools of Such Loans
44. Bank District Flag--Two-digit code designating the District
Bank where the member institution that initially provides the credit
enhancement for the AMA is located.
45. Pool Number--Bank assigned numeric identifier for the pool
of which the mortgage loan is a part; the Pool Number should be
unique within a Bank's AMA portfolio.
46. Participation Percentages--Twelve separate fields indicating
each Bank's percentage participation in the AMA-eligible pool or
asset backed by such a pool, as of the date the Bank acquires any
portion of the pool or asset.
47. Pool Rating--For pools of mortgage loans or assets backed by
such mortgage loans, the putative or actual letter credit rating of
the pool as of the date the Bank acquires any portion of the pool or
asset backed by such pools.
48. Pool Credit Enhancement--The dollar amount of the credit
enhancement required to bring the pool to the credit rating as
specified by the Bank.
49. Recalculated Pool Rating--For pools of mortgage loans where
the credit enhancement is recalculated during the calendar quarter,
the recalculated putative or actual letter credit rating using the
initial amount of the Pool Credit Enhancement.
50. Recalculated Credit Enhancement--For pools of mortgage loans
that have the credit enhancement recalculated during the calendar
quarter, the dollar amount of the credit enhancement required to
bring the pool to the initial putative or actual letter credit
rating.
Dated: June 19, 2003.
The Board of Directors of the Federal Housing Finance Board.
John T. Korsmo,
Chairman.
[FR Doc. 03-16477 Filed 6-30-03; 8:45 am]
BILLING CODE 6725-01-P