PART 380-FIDUCIARY ACTIVITIES

Sec.

380.1 General.

380.3 Appropriations.

AUTHORITY: Sec. 309, 82 Stat. 540; 12 U.S.C. 1723a.

§ 380.1 General.

The Association is authorized by section 302(c) of the National Housing Act to create, accept, execute, and administer trusts and other fiduciary undertakings appropriate for financing purposes. In relation thereto, it is authorized to acquire and otherwise deal in any mortgages or other types of obligations in which any department or agency of the United States listed in section 302(c)(2) of such Act may have a financial interest. Under its fiduciary powers, accounted for under the Management and Liquidating Functions, the Association creates, accepts, and administers trusts consisting of interests in mortgages and obligations, sells to private investors certificates of beneficial interest, or participations, in the mortgages or obligations or in the interest and principal payments derived therefrom, and provides for payment of interest and principal and for retirement of the participations. The Association under the Management and Liquidating Functions, in its ordinary corporate capacity as contrasted to its fiduciary capacity, is expressly authorized to guarantee the participations.

[36 FR 24700, Dec. 22, 1971]

§ 380.3 Appropriations.

There is authority for Congress to appropriate such sums as may be necessary to enable the trustor of any trust (as described in § 380.1) to pay to the Association, as trustee, any insufficiency in aggregate receipts from the obligations subject to the trust to provide for the timely payment by the trustee of all interest or principal on the beneficial interests or participations related to such trust.

[36 FR 24700, Dec. 22, 1971]

The Association is authorized by section 306(g) of the National Housing Act, upon such terms and conditions as it may deem appropriate, to guarantee the timely payment of principal of and interest on securities which are based on and backed by a trust or pool composed of mortgages which are insured by the Federal Housing Administration or the Farmers' Home Administration, or insured or guaranteed by the Veterans' Administration. The Association's guaranty of mortgagebacked securities is backed by the full faith and credit of the United States. This subpart is limited to "passthrough" securities, including (a) "straight pass-through" and (b) "modified pass-through" types, and does not purport to set forth all the procedures and requirements that apply to the issuance and guaranty of

such securities. All such transactions are governed by the specific terms and provisions of the Association's Mortgage-Backed Securities Guide and contracts entered into by the parties. Further information may be obtained from the Government National Mortgage Association, 451 Seventh Street SW., Washington, D.C. 20414.

§ 390.3 Eligible issuers of securities.

and

(a) Any mortgagee, including a State or local governmental instrumentality, which has been approved by the Federal Housing Administration which has adequate experience and facilities to issue mortgage-backed securities may be approved for a guaranty by the Association, except that no guaranty shall be made of any security which is tax exempt under the Internal Revenue Code of 1954. No issue of securities will be approved for guaranty unless the Issuer has net worth, in assets acceptable to the Association, in the following amounts:

(1) For straight pass-through securities, $100,000.

(2) For modified pass-through securities based on and backed by mortgages upon one- to four-family residences, (i) not less than 2 percent of the first $5 million of modified passthrough securities outstanding after such issue, and (ii) not less than 1 percent on all such securities outstanding over $5 million, but in no case need such net worth exceed $250,000.

(3) For modified pass-through securities based on and backed by mortgages on mobile homes, $500,000.

(4) For modified pass-through securities other than those described in paragraphs (a) (2) and (3) of this section, (i) not less than 3 percent of the first $5 million of modified passthrough securities outstanding after such issue, and (ii) not less than 2 percent on the succeeding $5 million of such securities, and (iii) not less than 1 percent on all over $10 million, provided that the minimum net worth shall be at least $100,000, but in no case need net worth exceed $500,000.

(b) No Issuer will be approved if, at the time of application for commitment, its lending policies permit any discrimination based on race, religion,

color, sex, national origin, or age, or the Issuer is not in compliance with any rules, regulations, or orders issued under Title VI of the Civil Rights Act of 1964, with Executive Order 11063, Equal Opportunity in Housing, issued by the President of the United States on November 20, 1962, and with the Fair Housing Law of 1968, in accordance with FHA and VA rules and regulations; any failure to be in compliance therewith will be considered a basis for rejecting an application. Subsequent thereto, an eligible Issuer shall continue to comply with the above rules, regulations, or orders; failure so to comply for a period of 60 days after the date on which written notice of such failure has been delivered via registered mail by GNMA to the Issuer, may be considered the basis for default.

(c) All Issuers must conduct their business operations in accordance with accepted mortgage banking practices, ethics, and standards. In the event that an Issuer does not comply with such practices, ethics, and standards, the Association may reject further applications received from an Issuer until such time as the Association is satisfied that the Issuer has resumed business operations in accordance with accepted mortgage banking practices, ethics, and standards.

[39 FR 18446, May 28, 1974]

§ 390.5 Securities.

(a) Instruments. Securities to be issued pursuant to the provisions of this subpart may, at the option of the issuer, be of one of the following types, but only one of such types may be issued against any single pool of mortgages: (1) Straight pass-through securities, which provide for the payment by the issuer to the holders of a proportionate share of the proceeds of principal and interest, as collected, on account of a pool of mortgages, less servicing fees and other specified costs approved by the Association; and (2) modified pass-through securities, which provide for such payment, whether or not collected, of both specified principal installments and a fixed rate of interest on the unpaid principal balance, with all prepayments

being passed through to the holder. In the case of delinquent mortgages in a pool backing modified pass-through securities, the issuer is required to make advances if necessary to maintain the specified schedule of interest and principal payments to the holders, or at its option, at any time 90 days or more after default of any such mortgage, the issuer may repurchase such mortgage. Both straight pass-through and modified pass-through securities must specify the dates by which payments are to be made to the holders thereof, and must indicate the accounting period for collections on the pool's mortgages relating to each such payment, and the securities must also specify a date on which the entire principal to be collected will have been paid or will be payable.

(b) Issue amount. Each issue of guaranteed securities must be in a minimum face amount of $1 million, Provided That in the case of modified pass-through securities based on and backed by mortgages on mobile homes or projects said minimum face amount is $500,000. The total face amount of any issue of securities cannot exceed the aggregate unpaid principal balances of the mortgages in the pool.

(c) Face amount of securities. The face amount of any security cannot be less than $25,000.

(d) Transferability. Securities are transferable, but the share of the proceeds collected on account of the pool of mortgages may not be payable to more than one holder with respect to any security.

(e) Disclosure. The issuer must disclose both the average and the total costs to the issuer of the mortgages in the pool, whether the issuer acquired the mortgages by origination or purchase.

(Sec. 306(g), 12 U.S.C. 1721)

[36 FR 24700, Dec. 22, 1971, as amended at 39 FR 18446, May 28, 1974]

§ 390.7 Mortgages.

Each issue of guaranteed securities must be backed by a separate pool of mortgages which:

(a) Are insured under the National Housing Act or title V of the Housing Act of 1949, or insured or guaranteed

under the Servicemen's Readjustment Act of 1944 or chapter 37 of title 38, United States Code;

(b) Have been insured or guaranteed no longer than 12 months prior to the date on which the Association issues its commitment to guarantee the securities;

(c) Will be replaced by the issuer if found defective by the Association at any time prior to 4 months after the date on which the Association issues its guaranty of the securities; and

(d) Meet such other standards of acceptability as may be prescribed by the Association.

§ 390.9 Pool administration.

The Association will not guarantee securities if the pool arrangement proposed by the issuer does not satisfactorily provide for:

(a) Servicing of the mortgages in the pool;

(b) Segregation of the cash flow from mortgages in the pool from the other assets of the issuer;

(c) Timely payment of principal and interest, in accordance with the terms of the guaranteed securities;

(d) Notification to the Association of an impending default, on the part of the issuer, in adequate time for the Association to make timely payments on the securities; and

(e) Delivery to a designated custodial agent satisfactory to the Association of the mortgage notes or other evidences of indebtedness secured by the mortgages in the pool and protection of the Association's interest in all assets in the pool as collateral for its guaranty.

§ 390.11 Excess collateral.

The issuer shall maintain, for the benefit of the Association, excess collateral in assets acceptable to the Association of 3 percent of the amount of guaranteed securities outstanding. In lieu of such excess collateral the Association may accept a bond or other assurance of the faithful performance of the fiduciary responsibilities of the issuer.

§ 390.13 Guaranty.

With respect to straight passthrough securities, the Association guarantees the timely payment to the security holder of the proceeds of principal and interest, as collected, as undertaken in the Association's guaranty appearing on the face of the security. With respect to modified passthrough securities, the Association guarantees the timely payment, whether or not collected, of the fixed rate of interest on the outstanding balance and the specified principal installments, as undertaken in the Association's guaranty appearing on the face of the security. As to straight pass-through type securities, any failure or inability of the issuer to make payment as due, to the holders of the securities, from the proceeds from the pool of mortgages which have been collected, or because of failure to make collections, under reasonable and accepted standards of mortgage servicing, shall constitute a default of the issuer. As to modified passthrough securities, any failure or inability of the issuer to make fixed or other payments as due shall be deemed such a default. Upon any default by the issuer and payment under its guaranty by the Association, or any failure of the issuer to comply with the terms of the guaranty transaction, the Association may institute a claim against the excess collateral, or against any assurance in lieu of excess collateral, or may, pursuant to section 306(g) of the National Housing Act, extinguish all the ownership, control, or other interest of the issuer in the pooled mortgages, by letter directed to the issuer and making the mortgages the absolute property of the Association, subject only to unsatisfied rights therein of the holders of the securities, or the Association may do both.

§ 390.15 Fees.

The Association may impose application and guaranty fees, which may vary for straight pass-through and modified pass-through issuances.

(a) In addition to the "passthrough" securities dealt with in subpart A of this part, the Association is authorized by section 306(g) of the National Housing Act, upon such terms and conditions as it may deem appropriate, to guarantee the timely payment of principal of and interest on securities of the "bond-type" which are based on and backed by a trust or pool composed of mortgages which are insured by the Federal Housing Administration or the Farmers' Home Administration, or insured or guaranteed by the Veterans' Administration. The Association's guaranty of mortgage-backed securities is backed by the full faith and credit of the United States.

(b) Sections 390.21 through 390.35 deal with such "bond-type" securities and do not purport to set forth all the procedures and requirements that apply to the issuance and guaranty of such securities. All such transactions are governed by the specific terms and provisions of the contracts entered into by the parties. Further information may be obtained from the Government National Mortgage Association, 451 Seventh Street SW., Washington, D.C. 20414.

§ 390.23 Eligible issuers.

Any corporation, trust, partnership, or other entity with a net worth in assets acceptable to the Association of $50 million or more, and which has the capability to assemble acceptable and eligible mortgages in sufficient quantity to support required minimum issuances of securities, may be approved for a guaranty by the Association. Further, the Association reserves the right to limit the number of issuers in the interest of conducting an orderly market of securities of this type.

§ 390.25 Securities.

(a) Instruments. Securities to be issued pursuant to the provisions of this subpart may be in registered or bearer form. Each security shall have

terms acceptable to the Association and shall specify its principal amount, the interest rate, and the maturity date, and the securities may include call provisions and other characteristics depending on current market conditions.

(b) Issue amount. Until further authorization is given, each issue of guaranteed securities must be in a minimum face amount of $100 million, and no single maturity of an issue may be in face amount less than $100 million unless the total issue exceeds $200 million. The total of the outstanding principal balances of the mortgages upon which any issue is originally based and backed must be at least equal to 100 percent of the face amount of the issue of guaranteed securities. Such ration as may be required by the governing trust arrangements, between mortgages and other pooled assets and securities outstanding at any one time, shall be maintained, subject to adjustment with the approval of the Association in accord with such trust arrangements.

(c) Face amount of securities. The face amount of any security cannot be less than $25,000.

(d) Transferability. Securities are transferable but, if registered, are transferable, as to the Association and the issuer, only on the books of a fiscal agent as shall be agreed upon by the Association and the issuer.

(e) Treasury approval. Issues of $100 million or larger will be subject to approval of the Secretary of the Treasury.

§ 390.27 Mortgages.

Guaranteed securities issued under these provisions must be based on and backed by mortgages pooled under trust arrangements satisfactory to the Association. Such mortgages must:

(a) Be insured under the National Housing Act or title V of the Housing Act of 1949, or insured or guaranteed under the Servicemen's Readjustment Act of 1944 or chapter 37 of title 38, United States Code.

(b) Have been insured or guaranteed no longer than 12 months prior to the date on which the Association issues

its commitment to guarantee the securities; and

(c) Meet such other standards of acceptability and eligibility as may be prescribed by the Association from time to time for the issue of mortgagebacked securities of the bond type. But with respect to any particular issue of securities, the related mortgages shall meet only such standards as may be in effect or imposed at the time of the issuance of the related commitment to guarantee.

§ 390.29 Trust arrangements.

(a) The pool of mortgages, together with all proceeds thereof and all other assets backing each issue of "bondtype" securities, shall be held and administered by a corporate trustee which is subject to Federal or State regulation and which is acceptable to the Association. The issuer of the securities may qualify as trustee:

(b) The trust agreement which will be executed by the issuer, the trustee and the Association and which may be reopened subject to the approval of the Association, will provide for:

(1) The issuance of the securities, including the size or other ceilings of the issuance or issuances, the nature and provisions of the securities, the principles and methods of sale and distribution, and other material matters pertaining to issuance;

(2) Conveyance of the pooled mortgages to the trustee, in trust, to provide the base and backing for the securities and otherwise for purposes of the trust arrangements, and custody of mortgage documents;

(3) Administration of the trust, to include servicing and retirement of the securities, and servicing of the mortages through their payment or other liquidation;

(4) Principles and methods with respect to reporting requirements, the handling of losses realized from the pooled mortgages, defaults by the issuer, and other appropriate matters;

(5) Timely payment of principal and interest in accord with the terms of securities issued;

(6) Segregation of the cash and other assets flowing or resulting from the pooled mortgages;