[Federal Register Volume 59, Number 187 (Wednesday, September 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23985]


[Federal Register: September 28, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Notice of Submission of Proposed Information Collection to OMB

    Proposal: Supplemental Notice for GNMA Multiclass Securities 
Program (FR-3555).
    Office: Government National Mortgage Association.
    Description of the Need for the Information and its Proposed 
Use: This information is required in connection with the 
implementation of the Government National Mortgage Association 
Multiclass Securities Program Full Participation Stage. The Full 
Participation Stage will expand the opportunity to participate in 
the program to a greater number of qualified participants.
    Form: None.
    Respondents: Business or other for-profit.
    Frequency of Submission: Annually
    Reporting Burden:

----------------------------------------------------------------------------------------------------------------
                                                Number of         Frequency         Hours per           Burden  
                                               respondents   X   of response   =     response    =      hours   
----------------------------------------------------------------------------------------------------------------
Application Development......................          166  ...            1  ...           10  ...         1660
Recordkeeping................................          166  ...            1  ...            1  ...          166
----------------------------------------------------------------------------------------------------------------

    Total Estimated Burden Hours: 1826.
    Status: New.
    Contact: Jospeh F. Lackey, Jr., OMB (202) 395-7316; Guy S. 
Wilson, GNMA (202) 401-8970.
    Date: September 22, 1994.

Supporting Statement for Information Collection--GNMA Multiclass 
Securities Program

A. Justification

    1. This information collection is required in connection with the 
implementation of the full participation stage of GNMA's Multiclass 
Program. GNMA's authority to guarantee Multiclass instruments in 
contained in section 306(g)(1) of the National Housing Act (``NHA'') 
(12 U.S.C. 1721(g)(1)), which authorizes GNMA to guarantee ``securities 
* * * based on or backed by a trust or pool composed of mortgages * * 
*.'' The Multiclass securities will be based on or backed by mortgages 
since GNMA Mortgage-Backed Securities (``MBS'') will serve as the 
collateral. This position is consistent with the FNMA and FHLMC REMIC 
programs which are authorized by substantially similar statutory 
provisions. Further, GNMA's authority to operate a Multiclass program 
has recently been recognized in section 3004 of the Omnibus Budget 
Reconciliation Act of 1993 (``OBRA'') which amended section 306(g)(3) 
of the NHA (12 U.S.C. 1721(g)(3)) to provide GNMA with greater 
flexibility for the Multiclass program regarding fee structure, 
contracting, industry consultation and program implementation. Congress 
annually sets GNMA's commitment authority to guarantee MBS pursuant to 
section 306(g)(2) of the NHA (12 U.S.C. 1721(g)(2)). Since the 
Multiclass securities will be backed by GNMA MBS, GNMA has already 
guaranteed the collateral for the Multiclass instruments.
    The Multiclass Program had an initial stage and GNMA is now 
implementing a full participation stage. During the initial stage, GNMA 
guaranteed Multiclass instruments that were issued by a small number of 
participants, consisting of sponsors, co-sponsors, trustees, trust 
counsel and accounting firms, selected by GNMA through the use of 
Competitive Application Proposals (``CAPS''). At the conclusion of the 
initial stage, participation in the GNMA-guaranteed Multiclass Program 
will be expanded. GNMA is requiring information from entities that wish 
to participate as sponsor, co-sponsor, accountant, trust counsel and 
minority and women-owned law firms in the full participation stage.
    Each participant is required to certify annually that neither the 
participant nor any employee, partner or officer working on the GNMA 
Multiclass Securities Program has been convicted of or has been found 
liable in a civil action for fraud, forgery, bribery, falsification or 
destruction of records, making false statements or any other indicating 
a lack of business integrity that seriously and directly affects the 
present responsibility of the officer, partner or professional, and is 
not currently suspended or debarred by a state or the Federal 
government. Each sponsor is required to certify that the sponsor has 
developed and implemented a plan for minority and women-owned law firm 
participation and the extent to which the plan was achieved.
    To secure trustee services, GNMA is requesting applications from 
qualified institutions under a CAP. Trustees approved pursuant to the 
CAP will be authorized to serve with respect to securities issued 
during the period specified in the CAP.
    2. The information provided by the participants will be submitted 
to GNMA. GNMA requires the information requested in order to assure the 
financial integrity of the program.
    3. It is impractical and would be inefficient to design improved 
technology to collect this information.
    4. There will be no duplication of information.
    5. There is no similar information already available which could be 
used or modified for this purpose.
    6. We have attempted to minimize the burden on the participants by 
requiring the minimum amount of information needed to ensure the 
integrity of the Multiclass Program.
    7. The information will be collected on an annual basis to 
demonstrate that the participant continues to meet the eligibility 
requirements.
    8. There are no specific circumstances that require the information 
collection to be conducted in a manner which is inconsistent with 
guidelines in 5 CFR 1320.6.
    9. There has been no outside consultation on this information 
collection. The Notice will call for public comments after it is 
published.
    10. No assurances of confidentiality are provided.
    11. There is no sensitive information requirements in the 
application process.
    12. GNMA does not estimate that there will be any additional cost 
to the Federal Government. The information will be reviewed in 
accordance with GNMA's existing review and monitoring procedures. 
Annual cost to the participants is established to be minimal.
    13. We estimate that the information collection will have the 
following reporting burdens: 

------------------------------------------------------------------------
                                                      Estimate  Estimate
                                          Number of    average   annual 
            Reference hours              respondents  response   burden 
                                                        time     (Hrs)  
------------------------------------------------------------------------
Trustee ``CAPS''.......................          16         10       160
Sec. II Full Part. Stage...............         150         10     1500 
------------------------------------------------------------------------

    14. Not applicable.
    15. GNMA does not plan to use the collection of this information 
for any published statistical use.

Excerpts From GNMA Supplemental Notice for Multiclass Securities 
Program That Contain the Paperwork Provisions:

B. Sponsors

* * * * *
    GNMA requires entities wishing to participate in this program as 
Sponsors to provide GNMA with certain information and meet certain 
requirements. Currently, a Sponsor must have minimum capital assets of 
$250 million in shareholders' equity, evidenced by the Sponsor's most 
recent audited financial statements. GNMA also requires that Sponsors 
have had at least one REMIC transaction with the Federal National 
Mortgage Association (``FNMA'') or the Federal Home Loan Mortgage 
Corporation (``FHLMC''). If an entity that wishes to sponsor GNMA 
guaranteed transactions has not had this experience, GNMA requires an 
alternative demonstration of experience, as GNMA determines 
appropriate. A computer bulletin board, gREX, will be used to announce 
revisions to this policy.
    Entities that would like to obtain application forms or obtain 
further information should contact Chemical New York, Inc., 1325 G St., 
N.W., Suite 640, Washington, D.C. 20005.

C. Selection of Trustee

* * * * *
    To secure trustee services, GNMA has requested applications from 
qualified institutional trustees under a CAP. In the meantime, the 
trustees approved for the initial stage will continue to serve as 
trustees for multiclass securities transactions. Trustee services must 
include tax administration as well as customary securities 
administrative and payment functions. Trustees approved pursuant to the 
CAP will be authorized to serve with respect to securities issued 
during the period (not more than five years) specified in the request 
for applications. Once a trustee is assigned to a specific transaction, 
it will continue to act as trustee for the life of the security, unless 
removed in accordance with the Trust Agreement. Sponsors will use 
trustees approved pursuant to the CAP. Trustees will be paid from funds 
related to the transaction.

D. Trust Counsel and Accounting Firms

    Trust counsel selected by the Sponsor will provide customary 
securities and tax opinions on the transactions, in accordance with 
GNMA's requirements.
    Accounting firms selected by the Sponsor will perform customary 
procedures with respect to financial information included in the 
offering documents and as part of the closing process, in accordance 
with GNMA's requirements. GNMA currently requires entities wishing to 
participate in GNMA guaranteed transactions to submit certain 
information to GNMA. Interested parties may obtain the appropriate 
forms from Chemical New York, Inc. (``Chemical Bank'') at the address 
set out in section II.B. above.
* * * * *

C. Certification

    Sponsors are required to provide GNMA with two annual 
certifications:
    1. With respect to Co-sponsors:
    a. Certification that the Sponsor has developed and implemented a 
plan that sets goals for meaningful participation by Co-sponsors, and
    b. Certification of the extent to which MWOBs have been 
participants in the Sponsor's transactions as Co-sponsors.
    2. With respect to Co-trust Counsel:
    a. Certification from trust counsel used for transactions by the 
Sponsor that the trust counsel has developed and implemented a plan 
that sets goals for meaningful participation by MWOLFs, and
    b. Certification from such trust counsel of the extent to which 
MWOLFs have been participants in the transactions for the Sponsor.
* * * * *

VII. Terms and Conditions for Participants

    As a condition of participation in the program, each participant 
must agree to the conditions set out below.

A. Participant Certifications

    Each Sponsor, Co-sponsor, all participating trust counsel and 
accounting firms, and other persons or entities designated by GNMA from 
time to time in the Multiclass Securities Guide, must certify as of 
January 1 each year that neither the corporate nor partnership entity, 
nor any officer, partner or professional presently employed and who 
will work on the subject matter of this Notice, has been convicted of, 
or found liable in a civil action for, fraud, forgery, bribery, 
falsification or destruction of records, making false statements or any 
other offense indicating a lack of business integrity that seriously 
and directly affects the present responsibility of the officer, partner 
or professional, and no entity or individual to which this 
certification is applicable is currently suspended or debarred by a 
State or the Federal government. Participants must report any event 
which would necessitate a change in this certification to GNMA within 
60 days of its occurrence.
    Material adverse changes in status, including voluntary and non-
voluntary terminations, defaults, fines, and agency findings of 
material non-compliance or non-conformance with agency rules and 
policies with state and federal agencies and government sponsored 
enterprises must be reported to GNMA within 60 business days of their 
occurrence.

[End of Excerpts From GNMA Supplemental Notice on Multiclass Securities 
Program]

Example of Procedure Involving Information Collection

Request for Competitive Application Proposals To Act as Trustee to the 
Government National Mortgage Association (GNMA) During the Full 
Participation Stage of the New GNMA Multiclass Securities Program

    To Interested Parties:
    Enclosed is Request for Competitive Application Proposals (CAP) 
GNMA-94-R-01. The purpose of this CAP is to solicit from qualified 
parties (applicants) detailed and comprehensive applications to 
serve as trustee for transactions during the full participation 
stage of the GNMA Multiclass Securities program.
    For over two decades, GNMA has operated a single class mortgage-
backed securities (MBS) program, under which GNMA guarantees, with 
the full faith and credit of the United States, the timely payment 
of principal and interest on securities issued by private firms 
approved as GNMA issuers. GNMA has recently initiated a Multiclass 
Securities program, which began with an initial stage that includes 
a limited number of participants who assisted in developing the 
program and in closing transactions to date. GNMA is now moving 
toward implementation of the full participation stage of the 
Multiclass Securities program. Henry Cisneros, Security of the 
Department of Housing and Urban Development, has approved a GNMA 
Multiclass Securities program, which will be operated to meet the 
requirements of the Real Estate Mortgage Investment Conduit (GNMA 
REMIC securities) provisions of the Internal Revenue Code of 1986. 
In addition, GNMA is considering implementing a Grantor Trust 
(STRIPs) and possibly other multiclass programs. GNMA's existing 
single class MBS program also will continue in operation.

        Sincerely yours,
Susan M. Taylor,
Contracting Officer, Director, Contracting Division.

Enclosure

I. Background

    The Government National Mortgage Association (GNMA) was created 
in 1968 through amendment of Title III of the National Housing Act 
(12 U.S.C. Sections 1716 et seq). GNMA is a wholly-owned government 
corporation within the Department of Housing and Urban Development 
and supports Federal housing initiatives by providing liquidity to 
the secondary mortgage market and attracting funds from national and 
international capital markets into the U.S. residential mortgage 
market. The operations of GNMA are overseen by the Secretary of 
Housing and Urban Development and by the President of GNMA, both of 
whom are appointed by the President of the United States and 
confirmed by the United States Senate.
    Through its MBS program, GNMA guarantees the timely payment 
principal and interest on securities issued by private institutions 
and backed by pools of Federally insured or guaranteed mortgage 
loans. The GNMA guarantee is backed by the full faith and credit of 
the United States. Each year, GNMA guaranteed securities provide the 
financing for approximately 95% of all loans insured or guaranteed 
by the Federal Housing Administration (FHA), the Department of 
Veterans Affairs (VA) or the Farmers Home Administration (FmHA) 
(Government mortgages).
    As of July 1994, more than one trillion dollars in securities 
have been issued assisting an estimated 15 million families to 
obtain financing. In excess of $440 billion of GNMA guaranteed 
securities are outstanding, of which more than $429 billion are 
based on single family (1-4 unit) residential mortgage loans. The 
GNMA guarantee lowers the cost of home ownership by attracting the 
substantial amounts of investor funds necessary to allow low- and 
moderate-income borrowers to acquire housing with Government 
mortgages.

GNMA's Current Single Class Program

    Prior to the development of single class MBS, investments in 
residential mortgages were largely illiquid. Beginning in 1970, GNMA 
pioneered the creation and orderly maintenance of a secondary 
mortgage market by guaranteeing, with the full faith and credit of 
the United States, privately issued certificates backed by pools of 
mortgages provided for the purchase of single family, multifamily, 
and manufactured housing.
    Holders of GNMA MBS receive monthly payments of principal and 
interest made on the underlying mortgage loans. The amount of 
interest ``passed through'' to security holders is reduced by 
payment of a fee to cover servicing of the mortgages (in the case of 
single family mortgages, at an annual rate of 44 basis points on the 
unpaid principal balance of the mortgage) and a fee to GNMA for its 
guarantee (for single family mortgages, at an annual rate of 6 basis 
points).
    Under the ``modified pass-through'' approach used by GNMA, the 
issuer of the MBS is initially responsible for advancing scheduled 
but delinquent principal and interest payments to security holders. 
That is, if mortgagors fail to make timely payments of principal and 
interest, the issuer of the GNMA MBS promises to advance the 
necessary funds so that scheduled payments can be made to the 
security holders. If the issuer fails to advance or pass through 
payments, GNMA pays pursuant to its guarantee.
    The MBS guaranteed by GNMA have a single class of ownership 
interests. Each security bears the same coupon rate of interest, has 
the same scheduled maturity, and has the same expected weighted 
average life.
    Evidence of ownership of GNMA securities takes two forms: 
physical securities or book entry securities. Beginning in July of 
1990, all GNMA MBS, except for serial notes and construction loan 
securities, were issued in book entry depository form. More than 90 
percent of GNMA securities are currently held in book entry form. 
The Participants Trust Company (PTC) is the depository that holds 
GNMA securities in book entry form. The PTC collects and disburses 
principal and interest (P&I) payments to its participants for all 
deposited MBS.

II. Operating a GNMA Multiclass Securities Program

    The GNMA Multiclass Securities program will be operated in a 
manner consistent with the traditional GNMA approach of relying upon 
the private sector to the greatest extent possible, maintaining GNMA 
in the position of a guarantor rather than an issuer.

The GNMA REMIC program

    The MBS making up the corpus of the trust will be assembled by a 
knowledgeable and financially sound firm (the Sponsor) that also 
takes the initiative in forming the trust, in developing the 
structure for the REMIC Securities (i.e., how many tranches with 
what characteristics), in preparing the description and disclosure 
for the offering documents and in marketing the securities. The 
principal responsibility for initiating and carrying out GNMA REMIC 
Securities transactions will rest not with GNMA but with the sponsor 
and with the Trustee of the issuing trust, assisted by trust 
counsel.
    A separate trust will be used for each series of securities. A 
Trustee of proven reliability and competence must ensure that 
amounts owed to the trust are collected by it, that the correct 
amounts are distributed in a timely manner to the right persons, and 
that accurate records and reports are prepared and furnished to 
security holders, auditors, the Internal Revenue Service (the IRS), 
GNMA and its agents. Rules and procedures governing the trust and 
its operation, including detailed rules about the timing and amounts 
to be distributed to security holders will be spelled out in trust 
documents drafted by experienced trust counsel based on documents 
prepared by GNMA and its legal advisor (the ``LA''), and 
incorporated in the GNMA Multiclass Securities program Guide.
    The sponsor will guarantee to GNMA that payments on the MBS held 
by a trust will be sufficient to support all amounts due on the 
securities under all circumstances (assuming no default on the MBS 
themselves). The sponsor's guarantee of ``structural integrity'' 
will be confirmed by an approved accounting firm and GNMA's 
financial advisor (the ``FA'').

The GNMA Strips Program

    GNMA anticipates a Grantor Trust (Strip) securities program. For 
each Strip securities transaction, a grantor trust would be formed 
to issue the Strip securities. The sponsor would provide the MBS 
collateral which was combined into a larger GNMA Platinum security 
(a mega MBS), which in turn is the collateral for the Strip 
securities. Interest Only (IO), Principal Only (PO) classes 
(completely stripped) and partially stripped classes (synthetics) 
would be issued by the grantor trust. The Strip securities would be 
sold directly to investors or may be used as collateral for REMICs. 
An investor would combine an IO and PO and swap the recombined IO/OP 
for an interest in the Platinum security that has the same aggregate 
principal balance and same interest payment. Various other 
recombinations may also be allowed as the program progresses.
    The GNMA Strip program in general will work the same way as a 
GNMA REMIC trust. The transfer agent, Chemical Bank and PTC will 
perform the same functions except that provisions will have to be 
made for the recombinations and exchanges. An accounting firm must 
provide a comfort letter and trust counsel must opine on the 
validity of the securities and that the transaction will not be 
subject to double taxation because it qualifies as a grantor trust 
under the Tax Code.

Other GNMA Multiclass Securities Programs

    From time to time, GNMA may introduce additional multiclass 
products for which the Trustee would provide similar services.

Fees and Expenses

    GNMA will have no liability for payment of any fees or expenses, 
such as those of the FA, trust counsel and accounting firms. These 
will be payable by the sponsor. Trustee's fees will be payable as 
provided in Section IV, below.

III. Scope of Services To Be Provided By Trustee

    Trustee functions are critical to the successful operation of 
the GNMA Multiclass Securities program. Therefore, the selected 
trust firms will provide general Trustee services in accordance with 
the GNMA Multiclass Securities guide and other operative documents. 
This guide may be obtained by calling (800) 2341-REX. These 
guidelines and documents are subject to amendment and modification. 
The equivalent documents for the Grantor Trust (Strips) program are 
not available at this time. The general Trustee functions include, 
but are not limited to:
    A. For each Multiclass Securities transaction to which a Trustee 
is retained by a Sponsor, that Trustee shall provide all services 
and documents customarily provided by Trustees in similar 
transactions and necessary or helpful to establish the trust and 
issue the Multiclass Securities, including:
    1. Execute the documents under which the trust shall receive 
GNMA MBS from the sponsor in exchange for Multiclass Securities and 
under which the trust shall operate for its term, and fulfill all 
appropriate responsibilities thereunder. Enclosed as exhibits are 
the Operational Guidelines (Exhibit I), the current form of Trust 
Agreement (Exhibit II), the Trust Provisions (Exhibit III), and the 
Tax Administration Guidelines (Exhibit IV). These exhibits are for 
information purposes and are subject to change.
    2. Verify ownership of the MBS backing the multiclass securities 
and ensure that all of the MBS meet the requirements of the relevant 
Multiclass Securities program.
    3. Administer physical securities as necessary.
    B. For each multiclass securities transaction the Trustee shall 
provide all necessary ongoing Trustee services to the trust for the 
life of the trust, including:
    1. Calculate distributions of principal and interest to 
multiclass security holders; ensure that amounts owed to the trust 
are collected by it, that the correct amounts are paid out timely by 
the trust to the proper security holders, and that accurate records 
and reports are prepared and furnished to security holders, 
auditors, and IRS, GNMA and its agents.
    2. Properly maintain, report on and, if necessary, access the 
variance account, which is a separate holding account used to 
maintain overages/shortages of funds in the Multiclass Securities 
program. Variance issues arise when cash received from MBS issuers 
differs from cash payable to Multiclass Security holders, usually 
because of missing or incorrect information on the factor tape used 
to calculate multiclass payment factors (the R-7 tape). To the 
extent that cash actually received from the issuers is greater than 
the multiclass distribution amount, that amount will be held in the 
variance account for payment in the following month and a 
``prepayment interest shortfall'' (the Multiclass Security rate less 
the reinvestment rate) difference will likely be created. The 
variance account must be established by the Trustee. Losses caused 
by the prepayment interest shortfall will be paid by GNMA as part of 
its guarantee obligation.
    To illustrate the variance process, assume the Trustee receives 
MBS payments of $100 more than is required to be distributed on the 
Multiclass Securities for that month. This $100 must be deposited in 
the variance account by the Trustee until the next month before it 
is distributed to the investor. Meanwhile, the $100 is earning 
interest at the reinvestment rate while the Trust owes the investors 
the multiclass coupon rate, creating negative arbitrage. The Trustee 
must calculate the prepayment interest shortfall and notify GNMA, 
which will make the funds available to the Trustee, and/or PTC, 
prior to payment to the investors.
    Subsequent to the monthly distributions to the investors, PTC 
will reconcile the MBS payments received from issuers with 
distributions made to the trust. This may result in PTC distributing 
additional cash to the trust or the trust being required to refund 
overpayments to PTC. Should insufficient funds be available to pay 
such ``refunds'' from the trust's accounts, then the Trustee will be 
required to advance such refund until the next distribution date 
when the Trustee will be reimbursed from funds available in the 
accounts or from GNMA.
    The Trustee will establish all accounts needed for each Trust. 
These currently include the Depository Account at PTC, the 
Certificated Securities Account for payment of non-book entry 
distributions, if applicable, and the Variance Account. The variance 
process will consider all three accounts and therefore, all three 
accounts will be included in the monthly reconciliation and 
reporting process. Reporting for the variance process will involve 
determining any shortfalls prior to the distribution date and 
notifying GNMA and its agent thereof, as well as subsequent detail 
reconciliations of payment differences in accordance with procedures 
and forms prescribed by GNMA.
    Differences between MBS payments received and amounts 
distributable to multiclass security holders (MBS factor errors) may 
also arise because of errors in the computation of tranche factors 
by the Trustee. In that case, the Trustee is responsible for funding 
the difference.
    3. Indemnify and hold harmless GNMA (including each official, 
officer and agent of GNMA) from and against any and all losses, 
claims, demands, liabilities, or expenses (including, without 
limitation, all attorneys' fees and related charges and expenses) 
resulting, directly or indirectly, from any Trustee default or other 
failure to perform under their agreements with or for the benefit of 
GNMA. Without limiting the foregoing, GNMA's right to 
indemnification shall include the right to reimbursement of any and 
all amounts paid by GNMA to any holder of any certificate, security, 
or pass-through interest as a result of any failure of the Trustee 
to properly calculate the amount of any required distribution to any 
such holder or to cause the proper distributions to be made to any 
such holder, together with interest thereon at a rate equal to the 
yield on three month treasury securities.
    4. All initial and ongoing tax administration with respect to 
the trusts and, in the case of REMIC transactions, the REMICs. The 
Trustee may subcontract its tax administration duties, but, if it 
does so, (i) it must retain the subcontractor for the duration of 
the Trustee's engagement (unless the subcontractor fails to perform 
its duties in a satisfactory manner), (ii) the Trustee will retain 
liability for the proper performance of all tax administration 
duties and (iii) GNMA must approve the successor tax administrator.
    Various of the documents in the GNMA multiclass securities 
program Guide set forth duties of a ``Tax Administrator'' with 
respect to each Series of securities. The Trustee will be 
responsible for all of the duties assigned to the Tax Administrator 
in the GNMA Multiclass Program Guide, as that Guide may be in effect 
from time to time. Those duties include, but are not limited to the 
following:
    a. Startup. Computing the yields, amounts of original issue 
discount (``OID'') and other information required to be set forth in 
the OID legends on the securities. The Tax Administrator shall 
confirm that information with the results of the sponsor, which 
independently is responsible for producing the same information. The 
Tax Administrator shall be responsible for supplying such 
information to trust counsel, which will be responsible for the 
preparation of the text of the legends.
    b. Ongoing Accounting. Preparing the federal, state, and local 
tax returns of the trust and any related REMICs (including the 
computation of all necessary underlying information), computing the 
information concerning OID, market discount, premium, interest, and 
other reportable items on the securities, and forwarding that 
information to (or otherwise making that information available to) 
security holders and the IRS. Income tax accounting and reporting 
shall be done in accordance with the law, tax administration 
guidelines for accounting set forth in the GNMA Multiclass program 
Guide or other instructions distributed by GNMA (as those may be in 
effect from time to time), and accepted industry practice, in that 
order of priority. The Tax Administrator shall consult with GNMA on 
any significant tax accounting issues that arise.
    c. Controversy. The Tax Administrator shall represent the trust 
and any related REMIC in any inquiry or assessment of liability by 
the IRS or state or local tax authorities. The Tax Administrator 
shall keep GNMA and the LA informed of the initiation of any inquiry 
or assessment of liability and of any significant related 
development.
    5. Rebate--Transfer in a timely manner to GNMA any amounts from 
PTC as a result of investment earnings on funds received by PTC on 
the MBS from the date these funds are received to the date the funds 
are distributed on the Multiclass Securities. These amounts are 
commonly called the PTC rebate and are distributed quarterly by PTC 
at this time.
    6. If another approved Trustee is no longer permitted by GNMA to 
act as a Trustee or fails to perform in the Multiclass Securities 
Program, all other Trustees must be willing to assume the ongoing 
administration of any Trust formerly held by a Trustee which is no 
longer approved to participate in the program.
    7. Cross Default Provision--GNMA shall have the right to 
terminate a Trustee's approved status for cause. If a Trustee fails 
to properly administer a trust, which results in a finding of cause 
by GNMA, all trusts administered by the Trustee may be transferred 
to another GNMA approved Trustee.
    C. For the strip securities, the Trustee will perform all of the 
services outlined in paragraphs A and B above, as necessary. The 
Trustee must also provide all services necessary for recombining the 
IO/PO securities into Platinum securities and must accurately track 
all securities through the recombination process.

IV. Trustee Fee

    During the initial stage of the Multiclass Securities program, 
the Trustee fee was paid as a ``strip'' out of monthly interest 
collections, based on the aggregate remaining principal balance of 
the Multiclass Securities outstanding at the beginning of the month. 
However, this method created a general awkwardness of having 
security classes bearing interest at, for instance, 7.99%, which is 
not favorably received in the market place.
    In the full participation stage, the Trustee's fee will be paid 
initially through the creation of an interest bearing REMIC Class 
which would only be transferrable to a successor Trustee.
    This so-called ``T Class'' would be structured to receive a pro 
rata share of principal of the underlying MBS and interest at the 
certificate rate of the underlying MBS. The Class would be 
designated as a class of securities in the offering circular and the 
underlying documents; however it would not be tradeable and would 
not carry any voting rights or other substantive rights associated 
with the other regular interests in the REMIC trusts. The principal 
amount of the T Class would be negotiated between sponsors and 
Trustees with no involvement by GNMA.
    To pay a Trustee in the GNMA Strip program it is expected that 
IO and PO classes will be delivered and immobilized at the Trustee 
to replicate the REMIC fee structure.
    These fee arrangements may be changed at any time only at the 
option of GNMA. Such a change would only occur with extensive 
consultation with GNMA Trustees and Sponsors.

V. Period of Performance

    The selections to be made under this CAP will be for an initial 
period of two years and will provide for three one-year extension 
periods at GNMA's option. Trustees will have an ongoing obligation 
to administer for the life of all trusts received during that time 
period.

VI. Evaluation Factors

    The criteria for evaluation will be based on overall 
responsiveness to the CAP with respect to three broad categories--
technical abilities, experience and knowledge, and personnel 
qualifications (as described below). Proposals shall not exceed 50 
pages of 8\1/2\'' by 11'' paper in total length (excluding resumes 
of proposed team members and financial statements). The Proposal 
shall not merely offer to perform work in accordance with the 
statement of work, but shall outline the actual work proposed as 
specifically as is practical. No monetary cost information is to be 
included in the Proposal. Those firms selected will negotiate their 
fees with the Sponsor. Sponsors will select their own Trustees 
without regard to a rotation.

A. Technical Abilities (40%)

    1. The extent to which the proposal shows an understanding of 
the services described in Section III and an ability to provide 
these required services. (10 points)
    2. The degree to which knowledge of the systems and procedures 
necessary to perform this award are demonstrated. (10 points)
    3. The extent to which the proposal includes a complete 
description and justification of the proposed approach and 
methodology. (10 points)
    4. The extent to which adequacy of financial resources is 
demonstrated. Explain your firm's financial strength and staying 
power, taking into consideration the length of the obligations to be 
incurred hereunder. No firm will be regarded as being responsive to 
this CAP, despite its technical qualifications, if it does not 
demonstrate that its performance and assurances are backed by 
meaningful capital. In order to demonstrate this qualification, 
please provide copies of audited financial statements for the prior 
two years as well as evidence of your firm's credit rating or other 
institutional evaluations. (10 points)

B. Experience and Knowledge (35%)

    1. The extent to which your firm has experience and knowledge in 
providing services of a similar nature, specifically including (a) 
GNMA's current MBS program; (b) Multiclass Securities programs of 
the Department of Veterans Affairs, Fannie Mae, Freddie Mac, the 
Resolution Trust Corporation, and other large issuers (including 
private issuers); (c) past experience as Trustee in mortgage-backed 
pass-through and Multiclass Securities transactions. Provide a brief 
description of significant Multiclass Securities (REMICs and Strips) 
transactions for which you currently serve as Trustee, and 
demonstrate your firm's ability to accomplish tasks within adequate 
time frames. (10 points)
    2. The extent to which your firm demonstrates its philosophy of 
crisis management. (10 points)
    3. The extent to which your firm is experienced and 
knowledgeable in providing comprehensive tax administration 
functions. If your firm contracts out this responsibility, then you 
must provide complete information regarding the subcontractor, 
discussing the experience and knowledge of the firm and provide 
assurance that the subcontractor relationship will be established 
and maintained throughout the course of Trustee's engagement. (5 
points)
    4. The extent to which your firm demonstrates experience and 
knowledge in providing bond administration duties. If your firm 
contracts out this responsibility, then you must provide complete 
information regarding the subcontractor, discussing the experience 
and knowledge of the firm, and provide assurance that the 
subcontractor relationship will be established and maintained 
throughout the course of Trustee's engagement. (5 points)
    5. The extent to which the firm is experienced and knowledgeable 
in providing general Trustee functions as they relate to Strips. (5 
points)

C. Personnel Qualifications and Staffing (25%)

    1. The extent to which your firm identifies the personnel that 
would be assigned to this project, and includes resumes detailing 
their skills, qualifications, years of experience in similar 
projects, formal education and training, and ability to perform all 
aspects of the work described in the statement of work. Include 
professional references for all personnel and explain the 
organization of the team or teams, including the individual who will 
be the lead contact with GNMA, as well as which persons would be 
assigned lead responsibility for which tasks. (15 points)
    2. The extent to which adequacy of the proposed management plan 
is demonstrated to assure compliance with all requirements of this 
solicitation. (10 points)
    In addition to responding to the above criteria, in order to be 
considered responsive to this CAP your firm must certify its 
willingness to provide the indemnification referred to in Section 
III above and indicate this by signing below.
    Further, you are required to certify for your firm that neither 
the corporate nor partnership entity, nor any officer, partner or 
professional presently employed and who will work on the GNMA 
Multiclass Securities Program has been convicted of, or found liable 
in a civil action for, fraud forgery, bribery, falsification or 
destruction of records, making false statements or any other offense 
indicating a lack of business integrity that seriously and directly 
affects the present responsibility of the officer, partner or 
professional, and is not currently suspended or debarred by state or 
the Federal government.
    I hereby certify and agree to the above indemnification and 
certifications.

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VII. Organizational Conflicts of Interest

    The applicant must warrant that to the best of its knowledge and 
belief and except as otherwise disclosed, it does not have any 
organizational conflict of interest, which is defined as a situation 
in which the nature of the work herein and the organization's 
financial, contractual or other interests are such that unfair 
competitive advantage would result or objectivity in performing the 
work may be impaired. If after award it discovers an organizational 
conflict of interest with respect to this work, an immediate and 
full disclosure will be made in writing to the contracting officer, 
which shall include a description of the action which will be taken 
to eliminate or neutralize the conflict.

VIII. Submission Procedures

    Each applicant must submit an original and seven copies of its 
application, which shall consist of the technical and management 
submittal for the proposed work. The material must be submitted and 
arrive at GNMA at the address and room below no later than September 
23, 1994. Washington, D.C. time.

Government National Mortgage Association, Department of Housing and 
Urban Development, Attn: Susan M. Taylor, 451 7th Street SW., Suite 
6151, Washington, D.C. 20410-9000, Telephone: 202/401-8787.

    To prevent opening by unauthorized individuals, your application 
must be clearly identified on the envelop or wrapper as follows:

Application Submitted in Response to CAP GNMA 94-R-1

DUE DATE September 23, 1994--------------------------------------------

    Potential offerors should be aware that the HUD building is a 
secure building. All visitors will be required to walk through a 
metal detector, have all belongings screened by an x-ray system, 
show valid picture identification, and sign the visitor's log. 
Guards will telephone the visitors HUD contact to announce their 
arrival and receive verification to permit the visitor into the 
building prior to allowing entry. These procedures will require 
extra time. Offerors must therefore ensure that any commercial 
delivery service or company employee has appropriate identification, 
and should allow extra time for any hand carried deliveries. Delays 
experienced at the guard desk or refusal of admission DO NOT 
constitute excusable delays. Any applications that arrive at Suite 
6151 after the date and time specified will be rejected and will be 
returned to the applicant.

No Applications Will Be Accepted by FAX

    All questions pertaining to this CAP should be sent to the FAX 
number (202) 401-8857 no later than September 23, 1994. No questions 
will be accepted after that time. All questions and responses will 
be mailed or faxed to all parties who requested a copy of the CAP 
and will be made available to all other parties.
    GNMA reserves the right to make an award either on the basis of 
proposals as originally submitted or, following discussions with the 
offerors in the competitive range, on the basis of the respective 
best and final offers.

[FR Doc. 94-23985 Filed 9-27-94; 8:45 am]
BILLING CODE 4210-01-M