(1) Parameter A is the attachment point for the exposure, which represents the threshold at which credit losses will first be allocated to the exposure. Parameter A equals the ratio of the current dollar amount of underlying exposures that are subordinated to the exposure of the Enterprise to the current dollar amount of underlying exposures. Any reserve account funded by the accumulated cash flows from the underlying exposures that is subordinated to the Enterprise's exposure may be included in the calculation of parameter A to the extent that cash is present in the account. Parameter A is expressed as a value between 0 and 100 percent.

(2) Parameter AggUPB_$ is the aggregate unpaid principal balance of the underlying mortgage exposures.

(3) Parameter CM% is the percentage of a tranche sold in the capital markets. CM% is expressed as a value between 0 and 100 percent.

(4) Parameter Collat%_RIF is the amount of financial collateral posted by a counterparty under a loss sharing contract expressed as a percentage of the risk in force. For multifamily lender loss sharing transactions where an Enterprise has the contractual right to receive future lender guarantee-fee revenue, the Enterprise may include up to 12 months of estimated lender retained servicing fees in excess of servicing costs on the multifamily mortgage exposures subject to the loss sharing contract. Collat%_RIF is expressed as a value between 0 and 100 percent.

(5) Parameter D is the detachment point for the exposure, which represents the threshold at which credit losses of principal allocated to the exposure would result in a total loss of principal. Parameter D equals parameter A plus the ratio of the current dollar amount of the exposures that are pari passu with the exposure (that is, have equal seniority with respect to credit risk) to the current dollar amount of the underlying exposures. Parameter D is expressed as a value between 0 and 100 percent.

(6) Parameter EL_$ is the remaining lifetime net expected credit risk losses of the underlying mortgage exposures. EL_$ must be calculated internally by an Enterprise. If the contractual terms of the CRT do not provide for the transfer of the counterparty credit risk associated with any loan-level credit enhancement or other loss sharing on the underlying mortgage exposures, then the Enterprise must calculate EL_$ assuming no counterparty haircuts. Parameter EL_$ is expressed in dollars.

(7) Parameter HC is the haircut for the counterparty in contractual loss sharing transactions.

(ii) For a CRT with respect to multifamily mortgage exposures, the counterparty haircut is set forth in table 1 to this paragraph (b)(7)(ii), with counterparty rating and mortgage concentration risk having the meaning given in § 1240.33(a).

(8) Parameter LS% is the percentage of a tranche that is either insured, reinsured, or afforded coverage through lender reimbursement of credit losses of principal. LS% is expressed as a value between 0 and 100 percent.

(9) Parameter LTF% is the loss timing factor which accounts for maturity differences between the CRT and the underlying mortgage exposures. Maturity differences arise when the maturity date of the CRT is before the maturity dates of the underlying mortgage exposures. LTF% is expressed as a value between 0 and 100 percent.

(i) An Enterprise must have the following information to calculate LTF% for a CRT with respect to multifamily mortgage exposures:

(A) The remaining months to the contractual maturity of the CRT (CRT_RMM).

(B) The UPB-weighted-average remaining months to maturity of the underlying multifamily mortgage exposures that have remaining months to maturity greater than CRT_RMM (MME_RMM). If the underlying multifamily mortgage exposures all have maturity dates less than or equal to CRT_RMM, MME_RMM should equal CRT_RMM.

(C) The sum of UPB on the underlying multifamily mortgage exposures that have remaining loan terms less than or equal to CRT_RMM expressed as a percent of total UPB on the underlying multifamily mortgage exposures (LTFUPB%).

(D) An Enterprise must use the following method to calculate LTF% for multifamily CRTs:

(ii) An Enterprise must have the following information to calculate LTF% for a newly issued CRT with respect to single-family mortgage exposures:

(A) The original closing date (or effective date) of the CRT and the maturity date on the CRT.

(B) UPB share of single-family mortgage exposures that have original amortization terms of less than or equal to 189 months (CRTF15%).

(C) UPB share of single-family mortgage exposures that have original amortization terms greater than 189 months and OLTVs of less than or equal to 80 percent (CRT80NotF15%).

(D) The duration of seasoning.

(E) An Enterprise must use the following method to calculate LTF% for single-family CRTs: Calculate CRT months to maturity (CRTMthstoMaturity) using one of the following methods:

(1) For single-family CRTs with reimbursement based upon occurrence or resolution of delinquency, CRTMthstoMaturity is the difference between the CRT's maturity date and original closing date, except for the following:

(i) If the coverage based upon delinquency is between one and three months, add 24 months to the difference between the CRT's maturity date and original closing date; and

(ii) If the coverage based upon delinquency is between four and six months, add 18 months to the difference between the CRT's maturity date and original closing date.

(2) For all other single-family CRTs, CRTMthstoMaturity is the difference between the CRT's maturity date and original closing date.

(i) If CRTMthstoMaturity is a multiple of 12, then an Enterprise must use the first column of Table 2 to paragraph (b)(9)(ii)(E)(2)(iii) of this section to identify the row matching CRTMthstoMaturity and take a weighted average of the three loss timing factors in columns 2, 3, and 4 as follows:

LTF % = (CRTLT15 * CRTLT15%) + (CRTLT80Not15 * CRTLT80NotF15%) + (CRTLTGT80Not15 * (1 − CRT80NotF15% − CRTF15%))

(ii) If CRTMthstoMaturity is not a multiple of 12, an Enterprise must use the first column of Table 2 to paragraph (b)(9)(ii)(E)(2)(iii) of this section to identify the two rows that are closest to CRTMthstoMaturity and take a weighted average between the two rows of loss timing factors using linear interpolation, where the weights reflect CRTMthstoMaturity.

(iii) For seasoned single-family CRTs, the LTF% is calculated:

where:

CRTLT_M is the loss timing factor calculated under (ii) of this subsection.

CRTLT_S is the loss timing factor calculated under (ii) of this subsection replacing CRTMthstoMaturity with the duration of seasoning.

CRTMthstoMaturity is calculated as per (E) of this section.

CRTLT15 is the CRT loss timing factor for pool groups backed by single-family mortgage exposures with original amortization terms <= 189 months.

CRTLT80Not15: is the CRT loss timing factor for pool groups backed by single-family mortgage exposures with original amortization terms > 189 months and OLTVs <=80 percent.

CRTLTGT80Not15 is the CRT loss timing factor for pool groups backed by single-family mortgage exposures with original amortization terms > 189 months and OLTVs > 80 percent.

(10) Parameter RWA_$ is the aggregate credit risk-weighted assets associated with the underlying mortgage exposures.

(11) Parameter CntptyRWA_$ is the aggregate credit risk-weighted assets due to counterparty haircuts from loan-level credit enhancements. CntptyRWA_$ is the difference between:

(1) When the detachment point, parameter D, for a retained CRT exposure is less than or equal to the sum of K_A and AggEL%, the exposure must be assigned a risk weight of 1,250 percent.

(2) When the attachment point, parameter A, for a retained CRT exposure is greater than or equal to or equal to the sum of K_A and AggEL%, determined in accordance with paragraph (d) of this section, the exposure must be assigned a risk weight of 10 percent.

(3) When parameter A is less than or equal to the sum of K_A and AggEL%, and parameter D is greater than the sum of K_A and AggEL%, the Enterprise must calculate the risk weight as the sum of:

(1) In general. The adjusted exposure amount (AEA) of a retained CRT exposure is equal to:

(2) Inputs -

(ii) Expected loss share. The expected loss share is the share of a tranche that is covered by expected loss (ELS):