[Federal Register Volume 67, Number 212 (Friday, November 1, 2002)]
[Rules and Regulations]
[Pages 66533-66540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26863]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1750

RIN 2550-AA26


Risk-Based Capital; Technical Amendment

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Final rule.

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

SUMMARY: The Office of Federal Housing Enterprise Oversight (OFHEO) is 
adopting technical amendments to Appendix A to Subpart B of 12 CFR part 
1750 Risk-Based Capital. The amendments are intended to enhance the 
accuracy of the calculation of the

[[Page 66534]]

risk-based capital requirement for the Enterprises.

EFFECTIVE DATE: November 1, 2002.

FOR FURTHER INFORMATION CONTACT: Jeannine Schroeder, Manager of 
Operations, Office of Risk Analysis and Model Development, telephone 
(202) 414-8881 or Jamie Schwing, Associate General Counsel, telephone 
(202) 414-3787 (not toll free numbers), Office of Federal Housing 
Enterprise Oversight, Fourth Floor, 1700 G Street, NW., Washington, DC 
20552. The telephone number for the Telecommunications Device for the 
Deaf is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

Background

    OFHEO published a final regulation setting forth a risk-based 
capital stress test on September 13, 2001, 12 CFR part 1750 (the Rule), 
which formed the basis for determining the risk-based capital 
requirement for the federally sponsored housing enterprises--Federal 
National Mortgage Association (Fannie Mae) and Federal Home Loan 
Mortgage Corporation (Freddie Mac) (collectively, the Enterprises).\1\
---------------------------------------------------------------------------

    \1\ Risk-based Capital, 66 FR 47730 (September 13, 2001), 12 CFR 
part 1750, as amended, 67 FR 11850 (March 15, 2002), 67 FR 19321 
(April 19, 2002).
---------------------------------------------------------------------------

    On September 12, 2002, OFHEO published a notice of proposed 
rulemaking (NPRM), 67 FR 57760, which proposed twelve technical and 
corrective amendments to the Rule. One commenter, Freddie Mac, 
expressed concern regarding the appropriate effective date for a 
proposed technical amendment that corrected a table that utilized 
original loan-to-value ratios rather than amortized original loan-to-
value ratios (amendment number eight in the list of 12 amendments in 
the preamble of the NPRM). Freddie Mac also requested a delay in the 
effective date for two amendments relating to the implementation of 
Financial Accounting Standard 133 (FAS 133) in the Rule (amendments 
numbered 11 and 12 in the list of 12 amendments in the preamble of the 
NPRM).\2\ OFHEO also received comments requesting additional time to 
comment upon these two amendments. Subsequently, OFHEO reopened and 
extended the comment period regarding the two FAS 133-related proposed 
amendments, noting that it might move to final action on any of the 
other ten.\3\ OFHEO is also reviewing, and will delay action on, a 
proposed technical amendment regarding the definition of ``unamortized 
balance'' (amendment number seven in the list of 12 amendments in the 
preamble of the NPRM). OFHEO has determined to adopt as final 
immediately, the following eight proposed amendments as to which there 
were no issues remaining and to defer final action on the other four 
proposed amendments until after the extended comment period closes on 
October 29, 2002.
---------------------------------------------------------------------------

    \2\ Financial Account Standards Board Statement of Financial 
Accounting Standard 133, ``Accounting for Derivative Instruments and 
Hedging Activities,'' June 1998.
    \3\ Risk-Based Capital, 67 FR 61300 (September 20, 2002).
---------------------------------------------------------------------------

    (1) Provisions relating to new activities are updated to cross-
reference the Prompt Supervisory Response and Corrective Action 
regulation, 12 CFR part 1777, in paragraph 3.11.3[c] and to correct a 
typographical error in paragraph 3.11.2[a];
    (2) Out-of-date third party sources of information related to 
interest rate indexes (e.g. 30-year CMT, Bloomberg Tickers) are updated 
to reflect currently available indexes and to update the Rule to 
incorporate a reference to the applicable U.S. Treasury Department 
methodology. Specifically, the 30-year constant maturity yield is no 
longer reported by the Federal Reserve in the H.15 Release. In its 
place, the U.S. Treasury Department has developed a methodology using 
its ``Long-Term Average Rate'' and ``Extrapolation Factors'' designed 
to generate a substitute for the 30-year CMT yield series discontinued 
in February 2002. Similarly, the Bloomberg tickers for the Federal 
Agency Cost of Funds are being updated. Table 3-18 and paragraphs 
3.3.1[b] and 3.3.2 are amended to reflect these changes;
    (3) Credit Ratings in Table 3-30 are updated to include certain 
credit ratings used in the marketplace that were not listed in the 
original table. Specifically, Moody's assigns an additional rating from 
VMIG1 through VMIG3 to quantify the risks of the demand feature of 
variable-rate demand obligations and Standard & Poor's rates short term 
issuances as SP-1+, SP-1, SP-2, and SP-3;
    (4) Paragraph 3.6.3.4.3.1 [a] 3. a. on single family default and 
prepayment explanatory variables is replaced in full, including 
equations, to correct the parenthetical (q= -7, -6,...0, 1,...40);
    (5) Table 3-35, in which the explanatory variable categories for 
Relative Spread (RSq) in the explanatory variable column 
were identified incorrectly, is replaced and a typographical error in 
paragraph 3.6.3.6.3.3[a]1. is corrected;
    (6) The equation related to mortgage credit enhancement procedures 
at paragraph 3.6.3.6.4.3 is corrected to reflect the fact that in 
extreme circumstances (i.e., when defaults are zero), an equation in 
section 3.6.3.6.4.3 Mortgage Credit Enhancement Procedures produces 
``divide by zero'' errors in the computer code;
    (7) A typographical error in the equation in 3.7.3.1[g]2. for 
calculating haircuts for mortgage backed securities is corrected by 
changing a specified addition sign (+) to a multiplication sign (x); 
and
    (8) Table 3-68 is revised to reflect that the Table relates to long 
caps and floors.
    In order to make these eight adjustments applicable to the first 
fully enforceable risk-based capital calculation for each Enterprise, 
OFHEO has determined that the amendments shall be effective immediately 
and shall apply to any data submissions from the Enterprises received 
after the effective date. Waiver of the normal 30-day delay in 
effective date is in the public interest because these changes rectify 
errors in the code and in the language of the rule that could mislead 
the public if left unamended. In some cases they simply reflect changes 
that have already been implemented in the computer software used to 
implement the stress test and are necessary for the stress test to be 
operational. Moreover, both Enterprises have participated in data and 
software validation processes with OFHEO for the past year and have 
been aware of the pendency of these technical changes, which have no 
material impact on capital requirements, for many months.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review

    This document contains amendments to the Rule, which was designated 
a major rule by the Office of Management and Budget (OMB). The 
amendments address provisions of the Rule that are out-of-date, 
incorrect or contain typographical errors. OFHEO has determined that 
the amendments to the Rule are not economically significant for 
purposes of Executive Order 12866. Further, they implement technical 
changes and do not involve novel policy issues. Therefore, these 
amendments are not a ``significant rule'' under Executive Order 12866.

Paperwork Reduction Act

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

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a

[[Page 66535]]

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

List of Subjects in 12 CFR Part 1750

    Capital classification, Mortgages, Risk-based capital.


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

PART 1750--CAPITAL

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

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

    2. Amend Appendix A to subpart B of part 1750 as follows:
    a. Revise Table 3-18 in paragraph 3.1.3.1[c];
    b. Revise paragraph 3.3.1[b];
    c. In paragraph 3.3.2, add the following sentence after the word 
``Appendix.'': ``Inputs for the 30-year CMT yield after February 15, 
2002 are estimated according to the Department of Treasury methodology 
using long-term average rates and extrapolation factors.''
    d. Revise Table 3-30 in paragraph 3.5.3[a]2.a.;
    e. Revise paragraph 3.6.3.4.3.1[a]3.a.;
    f. Revise Table 3-35 in paragraph 3.6.3.4.3.2[a]1.;
    g. In paragraph 3.6.3.6.3.3[a]1., remove the term 
``GLm'' both places it appears and replace it with the term 
``GLSm'';
    h. In paragraph 3.6.3.6.4.3[a]5., after the words ``Defaulted 
UPB:'' and before the equation, add the following equation:
[GRAPHIC] [TIFF OMITTED] TR85AD02.000

    i. Revise paragraph 3.7.3.1[g]2.;
    j. Revise Table 3-68 in paragraph 3.8.3.6.1[e]2.;
    k. In paragraph 3.11.2[a], remove the cross-reference ``1750.2(c)'' 
and replace it with the cross-reference ``1750.12(c)''; and
    l. Revise paragraph 3.11.3[c].
    The revisions and additions read as follows:

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

* * * * *

3.1.3.1 * * *

    [c] * * *

                                   Table 3-18--Interest Rate and Index Inputs
----------------------------------------------------------------------------------------------------------------
          Interest Rate Index                       Description                             Source
----------------------------------------------------------------------------------------------------------------
1 MO Treasury Bill                      One-month Treasury bill yield,       Bloomberg Generic 1 Month U.S.
                                         monthly simple average of daily      Treasury bill
                                         rate, quoted as actual/360          Ticker: GB1M (index).
---------------------------------------
3 MO CMT                                Three-month constant maturity        Federal Reserve H.15 Release.
                                         Treasury yield, monthly simple
                                         average of daily rate, quoted as
                                         bond equivalent yield
---------------------------------------
6 MO CMT                                Six-month constant maturity          Federal Reserve H.15 Release.
                                         Treasury yield, monthly simple
                                         average of daily rate, quoted as
                                         bond equivalent yield
---------------------------------------
1 YR CMT                                One-year constant maturity Treasury  Federal Reserve H.15 Release.
                                         yield, monthly simple average of
                                         daily rate, quoted as bond
                                         equivalent yield
---------------------------------------
2 YR CMT                                Two-year constant maturity Treasury  Federal Reserve H.15 Release.
                                         yield, monthly simple average of
                                         daily rate, quoted as bond
                                         equivalent yield
---------------------------------------
3 YR CMT                                Three-year constant maturity         Federal Reserve H.15 Release.
                                         Treasury yield, monthly simple
                                         average of daily rate, quoted as
                                         bond equivalent yield
---------------------------------------
5 YR CMT                                Five-year constant maturity          Federal Reserve H.15 Release.
                                         Treasury yield, monthly simple
                                         average of daily rate, quoted as
                                         bond equivalent yield
---------------------------------------
10 YR CMT                               Ten-year constant maturity Treasury  Federal Reserve H.15 Release.
                                         yield, monthly simple average of
                                         daily rate, quoted as bond
                                         equivalent yield
---------------------------------------
20 YR CMT                               Twenty-year constant maturity        Federal Reserve H.15 Release.
                                         Treasury yield, monthly simple
                                         average of daily rate, quoted as
                                         bond equivalent yield
---------------------------------------

[[Page 66536]]

 
30 YR CMT                               Thirty-year constant maturity        Federal Reserve H.15 Release,
                                         Treasury yield, monthly simple       Extrapolation Factors used for
                                         average of daily rate, quoted as     estimation, U.S. Dept. of
                                         bond equivalent yield; after         Treasury.
                                         February 15, 2002, estimated
                                         according to the Department of
                                         Treasury methodology using long-
                                         term average rates and
                                         extrapolation factors as
                                         referenced in OFHEO guideline 402
---------------------------------------
Overnight Fed Funds (Effective)         Overnight effective Federal Funds    Federal Reserve H.15 Release.
                                         rate, monthly simple average of
                                         daily rate
---------------------------------------
1 Week Federal Funds                    1 week Federal Funds rate, monthly   Bloomberg Term Fed Funds U.S.
                                         simple average of daily rates        Domestic
                                                                             Ticker: GFED01W(index).
---------------------------------------
6 Month Fed Funds                       6 month Federal Funds rate, monthly  Bloomberg Term Fed Funds U.S.
                                         simple average of daily rates        Domestic
                                                                             Ticker: GFED06M(index).
---------------------------------------
Conventional Mortgage Rate              FHLMC (Freddie Mac) contract         Federal Reserve H.15 Release.
                                         interest rates for 30 YR fixed-
                                         rate mortgage commitments, monthly
                                         average of weekly rates
---------------------------------------
FHLB 11th District COF                  11th District (San Francisco)        Bloomberg Cost of Funds for the
                                         weighted average cost of funds for   11th District
                                         savings and loans, monthly          Ticker: COF11 (index).
---------------------------------------
1 MO LIBOR                              One-month London Interbank Offered   British Bankers Association.
                                         Rate, average of bid and asked,     Bloomberg Ticker: US0001M (index).
                                         monthly simple average of daily
                                         rates, quoted as actual/360
---------------------------------------
3 MO LIBOR                              Three-month London Interbank         British Bankers Association.
                                         Offered Rate, average of bid and    Bloomberg Ticker: US0003M (index).
                                         asked, monthly simple average of
                                         daily rates, quoted as actual/360
---------------------------------------
6 MO LIBOR                              Six-month London Interbank Offered   British Bankers Association.
                                         Rate, average of bid and asked,     Bloomberg Ticker: US0006M (index).
                                         monthly simple average of daily
                                         rates, quoted as actual/360
---------------------------------------
12 MO LIBOR                             One-year London Interbank Offered    British Bankers Association.
                                         Rate, average of bid and asked,     Bloomberg Ticker: US0012M (index).
                                         monthly simple average of daily
                                         rates, quoted as actual/360
---------------------------------------
Prime Rate                              Prevailing rate as quoted, monthly   Federal Reserve H.15 Release.
                                         average of daily rates
---------------------------------------
1 MO Federal Agency COF                 One-month Federal Agency Cost of     Bloomberg Generic 1 Month Agency
                                         Funds, monthly simple average of     Discount Note Yield.
                                         daily rates, quoted as actual/360   Ticker: AGDN030Y (index).
---------------------------------------
3 MO Federal Agency COF                 Three-month Federal Agency Cost of   Bloomberg Generic 3 Month Agency
                                         Funds, monthly simple average of     Discount Note Yield.
                                         daily rates, quoted as actual/360   Ticker: AGDN090Y (index).
---------------------------------------
6 MO Federal Agency COF                 Six-month Federal Agency Cost of     Bloomberg Generic 6 Month Agency
                                         Funds, monthly simple average of     Discount Note Yield.
                                         daily rates, quoted as actual/360   Ticker: AGDN180Y (index).
---------------------------------------
1 YR Federal Agency COF                 One-year Federal Agency Cost of      Bloomberg Generic 12 Month Agency
                                         Funds, monthly simple average of     Discount Note Yield.
                                         daily rates, quoted as actual/360   Ticker: AGDN360Y (index).
---------------------------------------
2 YR Federal Agency COF                 Two-year Federal Agency Fair Market  Bloomberg Generic 2 Year Agency
                                         Yield, monthly simple average of     Fair Market Yield.
                                         daily rates                         Ticker: CO842Y (index).
---------------------------------------
3 YR Federal Agency COF                 Three-year Federal Agency Fair       Bloomberg Generic 3 Year Agency
                                         Market Yield, monthly simple         Fair Market Yield.
                                         average of daily rates              Ticker: CO843Y (index).
---------------------------------------
5 YR Federal Agency COF                 Five-year Federal Agency Fair        Bloomberg Generic 5 Year Agency
                                         Market Yield, monthly simple         Fair Market Yield.
                                         average of daily rates              Ticker: CO845Y (index).
---------------------------------------

[[Page 66537]]

 
10 YR Federal Agency COF                Ten-year Federal Agency Fair Market  Bloomberg Generic 10 Year Agency
                                         Yield, monthly simple average of     Fair Market Yield.
                                         daily rates                         Ticker: CO8410Y (index).
---------------------------------------
30 YR Federal Agency COF                Thirty-year Federal Agency Fair      Bloomberg Generic 30 Year Agency
                                         Market Yield, monthly simple         Fair Market Yield.
                                         average of daily rates              Ticker: CO8430Y (index).
---------------------------------------
15 YR fixed-rate mortgage               FHLMC (Freddie Mac) contract         Bloomberg FHLMC 15 YR, 10 day
                                         interest rates for 15 YR fixed-      commitment rate.
                                         rate mortgage commitments, monthly  Ticker: FHCR1510 (index).
                                         average of FHLMC (Freddie Mac)
                                         contract interest rates for 15 YR
---------------------------------------
7-year balloon mortgage rate            Seven-year balloon mortgage, equal   Computed.
                                         to the Conventional Mortgage Rate
                                         less 50 basis points
----------------------------------------------------------------------------------------------------------------

* * * * *

3.3.1 * * *

    [b] The process for determining Interest Rates is as follows: 
first, identify the values for the necessary Interest Rates at time 
zero; second, project the ten-year CMT for each month of the Stress 
Period as specified in the 1992 Act; third, project the 1-month 
Treasury yield, the 3-month, 6-month, 1-, 2-, 3-, 5-, 20-year, and 
30-year CMTs; fourth, project non-treasury Interest Rates, including 
the Federal Agency Cost of Funds Index; and fifth, project the 
Enterprises Cost of Funds Index, which provides borrowing rates for 
the Enterprises during the Stress Period, by increasing the Agency 
Cost of Funds Index by 10 basis points for the last 108 months of 
the Stress Test. Guidance in determining interest rates is available 
under OFHEO Guideline No. 402, ``Risk Based Capital Process for 
Capturing and Utilizing Interest Rates Files,'' which is available 
on OFHEO's Web site, http://www.OFHEO.Gov.
* * * * *

3.5.3 * * *

    [a] * * *
2. * * *
    a. * * *

                        Table 3-30--Rating Agencies Mappings to OFHEO Ratings Categories
----------------------------------------------------------------------------------------------------------------
     OFHEO Ratings Category            AAA           AA             A           BBB       Below BBB and Unrated
----------------------------------------------------------------------------------------------------------------
Standard & Poor's Long-Term.....  AAA           AA            A             BBB          Below BBB and Unrated
---------------------------------
Fitch Long-Term.................  AAA           AA            A             BBB          Below BBB and Unrated
---------------------------------
Moody's Long-Term...............  Aaa           Aa            A             Baa          Below Baa and Unrated
---------------------------------
Standard & Poor's Short-Term....  A-1+          A-1           A-2           A-3          SP-3, B or Below and
                                  SP-1+         SP-1          SP-2                        Unrated
---------------------------------
Fitch Short-Term................  F-1+          F-1           F-2           F-3          B and Below and Unrated
---------------------------------
Moody's \1\.....................  Prime-1       Prime-1       Prime-2       Prime-3      Not Prime, SG and
                                  MIG1          MIG1          MIG2          MIG3          Unrated
                                  VMIG1         VMIG1         VMIG2         VMIG3
---------------------------------
Fitch Bank Individual Ratings...  A             B             C             D            E
                                                A/B           B/C           C/D          D/E
---------------------------------
Moody's Bank Financial Strength   A             B             C             D            E
 Rating.
----------------------------------------------------------------------------------------------------------------
\1\ Any rating that appears in more than one OFHEO category column is assigned the lower OFHEO rating category.

* * * * *

3.6.3.4.3.1 * * *

    [a] * * *
3. * * *
    a. Compare mortgage rates for each quarter of the Stress Test 
and for the eight quarters prior to the start of the stress test (q 
= -7, -6,...0, 1,...40):
[GRAPHIC] [TIFF OMITTED] TR85AD02.001

    Note: For this purpose, MCONm is required for the 24 
months (eight quarters) prior to the start of the Stress Test. Also, 
MIRm = MIR0 for m < 0.
* * * * *

3.6.3.4.3.2. * * *

    [a] * * *
1. * * *

[[Page 66538]]



                                 Table 3-35--Coefficients for Single Family Default and Prepayment Explanatory Variable
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             30-Year Fixed-Rate Loans      Adjustable-Rate Loans (ARMs)       Other Fixed-Rate Loans
                                                         -----------------------------------------------------------------------------------------------
                Explanatory Variable (V)                                    Prepayment                      Prepayment                      Prepayment
                                                          Default Weight      Weight      Default Weight      Weight      Default Weight      Weight
                                                             ([beta]v)      ([gamma]v)       ([beta]v)      ([gamma]v)       ([beta]v)      ([gamma]v)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Aq
0 <= Aq <= 4                                                     -0.6276         -0.6122         -0.7046         -0.5033         -0.7721         -0.6400
---------------------------------------------------------
5<= Aq <= 8                                                      -0.1676          0.1972         -0.2259          0.1798         -0.2738          0.1721
---------------------------------------------------------
9<= Aq <= 12                                                    -0.05872          0.2668         0.01504          0.2744        -0.09809          0.2317
---------------------------------------------------------
13 <= Aq <= 16                                                   0.07447          0.2151          0.2253          0.2473          0.1311          0.1884
---------------------------------------------------------
17 <= Aq <= 20                                                    0.2395          0.1723          0.3522          0.1421          0.3229          0.1900
---------------------------------------------------------
21 <= Aq <= 24                                                    0.2773          0.2340          0.4369          0.1276          0.3203          0.2356
---------------------------------------------------------
25 <= Aq <= 36                                                    0.2740          0.1646          0.2954          0.1098          0.3005          0.1493
---------------------------------------------------------
37 <= Aq <= 48                                                    0.1908         -0.2318         0.06902         -0.1462          0.2306         -0.2357
---------------------------------------------------------
49 <= Aq                                                         -0.2022         -0.4059         -0.4634         -0.4314         -0.1614         -0.2914
---------------------------------------------------------
                         LTVORIG
LTVORIG <= 60                                                     -1.150         0.04787          -1.303         0.08871          -1.280         0.02309
---------------------------------------------------------
60ORIG <=70                                                  -0.1035        -0.03131         -0.1275       -0.005619        -0.06929        -0.02668
---------------------------------------------------------
70ORIG <= 75                                                  0.5969        -0.09885          0.4853        -0.09852          0.6013        -0.05446
---------------------------------------------------------
75ORIG <=80                                                   0.2237        -0.04071          0.1343        -0.03099          0.2375        -0.03835
---------------------------------------------------------
80ORIG <=90                                                   0.2000       -0.004698          0.2576        0.004226          0.2421        -0.01433
---------------------------------------------------------
90< LTVORIG                                                       0.2329          0.1277          0.5528         0.04220          0.2680          0.1107
---------------------------------------------------------
                          PNEQq
0< PNEQq <= 0.05                                                  -1.603          0.5910         -1.1961          0.4607          -1.620          0.5483
---------------------------------------------------------
0.05< PNEQq <= 0.1                                               -0.5241          0.3696         -0.3816          0.2325         -0.5055          0.3515
---------------------------------------------------------
0.1< PNEQq <= 0.15                                               -0.1805          0.2286         -0.1431          0.1276         -0.1249          0.2178
---------------------------------------------------------
0.15< PNEQq <= 0.2                                               0.07961        -0.02000        -0.04819         0.03003         0.07964        -0.02137
---------------------------------------------------------
0.2< PNEQq <= 0.25                                                0.2553         -0.1658          0.2320         -0.1037          0.2851         -0.1540
---------------------------------------------------------
0.25< PNEQq <= 0.3                                                0.5154         -0.2459          0.2630         -0.1829          0.4953         -0.2723
---------------------------------------------------------
0.3< PNEQq <= 0.35                                                0.6518         -0.2938          0.5372         -0.2075          0.5979         -0.2714
---------------------------------------------------------
0.35< PNEQq                                                       0.8058         -0.4636          0.7368         -0.3567          0.7923         -0.3986
---------------------------------------------------------
                           Bq                                      1.303         -0.3331          0.8835         -0.2083           1.253         -0.3244
---------------------------------------------------------
                           RLS
0ORIG<= 0.4                                           ..............         -0.5130  ..............         -0.4765  ..............         -0.4344
---------------------------------------------------------
0.4ORIG<= 0.6                                         ..............         -0.3264  ..............         -0.2970  ..............         -0.2852
---------------------------------------------------------
0.6ORIG<= 0.75                                        ..............         -0.1378  ..............         -0.1216  ..............         -0.1348
---------------------------------------------------------
0.75ORIG<= 1.0                                        ..............         0.03495  ..............         0.04045  ..............         0.01686
---------------------------------------------------------
1.0ORIG<= 1.25                                        ..............          0.1888  ..............          0.1742  ..............          0.1597
---------------------------------------------------------
1.25ORIG<= 1.5                                        ..............          0.3136  ..............          0.2755  ..............          0.2733
---------------------------------------------------------
1.5ORIG                                               ..............          0.4399  ..............          0.4049  ..............          0.4045
---------------------------------------------------------

[[Page 66539]]

 
                           IF                                     0.4133         -0.3084          0.6419         -0.3261          0.4259         -0.3035
---------------------------------------------------------
                           RSq
RSq <= -0.20                                              ..............          -1.368  ..............         -0.5463  ..............          -1.195
---------------------------------------------------------
-0.20 q <= -0.10                                       ..............          -1.023  ..............         -0.4560  ..............         -0.9741
---------------------------------------------------------
-0.10 < RSq <= 0                                          ..............         -0.8078  ..............         -0.4566  ..............         -0.7679
---------------------------------------------------------
0< RSq <= 0.10                                            ..............         -0.3296  ..............         -0.3024  ..............         -0.2783
---------------------------------------------------------
0.10 < RSq <= 0.20                                        ..............          0.8045  ..............          0.3631  ..............          0.7270
---------------------------------------------------------
0.20 < RSq <= 0.30                                        ..............           1.346  ..............          0.7158  ..............           1.229
---------------------------------------------------------
0.30 < RSq                                                ..............           1.377  ..............          0.6824  ..............           1.259
---------------------------------------------------------
                           PSq
PSq <= -0.20                                              ..............  ..............         0.08490          0.6613  ..............  ..............
---------------------------------------------------------
-0.20 < PSq <= -0.10                                      ..............  ..............          0.3736          0.4370  ..............  ..............
---------------------------------------------------------
-0.10 < PSq <= 0                                          ..............  ..............          0.2816          0.2476  ..............  ..............
---------------------------------------------------------
0< PSq <= 0.10                                            ..............  ..............          0.1381          0.1073  ..............  ..............
---------------------------------------------------------
0.10 < PSq <= 0.20                                        ..............  ..............         -0.1433         -0.3516  ..............  ..............
---------------------------------------------------------
0.20 < PSq <= 0.30                                        ..............  ..............         -0.2869         -0.5649  ..............  ..............
---------------------------------------------------------
0.30 < PSq                                                ..............  ..............         -0.4481         -0.5366  ..............  ..............
---------------------------------------------------------
                          YCSq
YCSq < 1.0                                                ..............         -0.2582  ..............         -0.2947  ..............         -0.2917
---------------------------------------------------------
1.0 <= YCSq < 1.2                                         ..............        -0.02735  ..............         -0.1996  ..............        -0.01395
---------------------------------------------------------
1.2 <= YCSq < 1.5                                         ..............        -0.04099  ..............         0.03356  ..............        -0.03796
---------------------------------------------------------
1.5 <= YCSq                                               ..............          0.3265  ..............          0.4608  ..............          0.3436
---------------------------------------------------------
                          IREFq                           ..............  ..............          0.1084        -0.01382  ..............  ..............
---------------------------------------------------------
                          PROD
ARMs                                                      ..............  ..............          0.8151          0.2453  ..............  ..............
---------------------------------------------------------
Balloon Loans                                             ..............  ..............  ..............  ..............           1.253          0.9483
---------------------------------------------------------
15-Year FRMs                                              ..............  ..............  ..............  ..............          -1.104         0.07990
---------------------------------------------------------
20-Year FRMs                                              ..............  ..............  ..............  ..............         -0.5834         0.06780
---------------------------------------------------------
Government Loans                                          ..............  ..............  ..............  ..............          0.9125         -0.5660
---------------------------------------------------------
                         BCalLTV
LTVORIG <= 60                                                      2.045  ..............           2.045  ..............           2.045  ..............
---------------------------------------------------------
60ORIG <=70                                                   0.3051  ..............          0.3051  ..............          0.3051  ..............
---------------------------------------------------------
70ORIG <= 75                                                -0.07900  ..............        -0.07900  ..............        -0.07900  ..............
---------------------------------------------------------
75ORIG <=80                                                 -0.05519  ..............        -0.05519  ..............        -0.05519  ..............
---------------------------------------------------------
80ORIG <=90                                                  -0.1838  ..............         -0.1838  ..............         -0.1838  ..............
---------------------------------------------------------
90< LTVORIG                                                       0.2913  ..............          0.2913  ..............          0.2913  ..............
---------------------------------------------------------
              Intercept ([beta]0, [gamma]0)                       -6.516          -4.033          -6.602          -3.965          -6.513          -3.949
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 66540]]

* * * * *

3.7.3.1 * * *

    [g] * * *
2. Compute:
[GRAPHIC] [TIFF OMITTED] TR85AD02.002

* * * * *

3.8.3.6.1 * * *

    [e] * * *
2. * * *

 Table 3-68--Calculation of Monthly Cash Flows for Long Caps and Floors
------------------------------------------------------------------------
                Instrument                           Cash Flows
------------------------------------------------------------------------
Cap                                         (I-K) x N x D if I  K; O if I <=K
-------------------------------------------
Floor                                       (K-I) x N x D if I < K; O if
                                             I =K
------------------------------------------------------------------------

* * * * *

3.11.3 * * *

    [c] OFHEO will provide the Enterprise with its estimate of the 
capital treatment as soon as possible after receiving notice of the 
New Activity. In any event, the Enterprise will be notified of the 
capital treatment in accordance with the notice of proposed capital 
classification provided for in Sec.  1777.21 of this chapter.
* * * * *

    Dated: October 17, 2002.
Armando Falcon, Jr.
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 02-26863 Filed 10-31-02; 8:45 am]
BILLING CODE 4220-01-P