§ 1248.5 Misalignment. ( a ) The Enterprises must report any misalignment to FHFA.
( b ) The Enterprises must submit, in a timely manner, a written report to FHFA on any material misalignment describing, at a minimum, the likely cause of material misalignment and the Enterprises' plan to address the material misalignment.
( c ) FHFA will *temporarily* adjust the percentages in the definitions of align, misalignment, and material misalignment, if FHFA determines that market conditions dictate that an adjustment is appropriate. ( 1 ) In adjusting the percentages, FHFA will consider: ( i ) The prevailing level and volatility of interest rates;
( ii ) The level of credit risk embedded in the Enterprises' TBA-eligible MBS; and
( iii ) Such other factors as FHFA may, in consultation with the Enterprises, determine to be appropriate to promote market confidence in the alignment of cash flows to TBA-eligible MBS investors and to foster the efficiency and liquidity of the secondary mortgage market.
( 2 ) FHFA will publicly announce any temporary adjustment to the percentages in the definition of align, misalignment, and material misalignment in a timely manner.
( 3 ) If adjusted percentages remain in effect for six months or more, FHFA will amend this part's definitions by Federal Register Notice, with opportunity for public comment.
( 4 ) Temporarily adjusted percentages will remain in effect until six months after the date on which FHFA announced the temporary adjustment unless within six months of that date— ( i ) FHFA announces a reversion to the previously prevailing percentages; or
( ii ) FHFA initiates the notice and comment process, in which case the temporary percentages will remain in effect until the conclusion of that process.
( d ) FHFA will *temporarily* adjust the definitions of cohort, fastest paying quartile of a cohort, and specified pools, if FHFA determines that changes in market practices or conditions dictate that an adjustment is appropriate. ( 1 ) In adjusting those definitions, FHFA will consider: ( i ) Changes in prevailing market practices related to the identification of specified pools;
( ii ) The prevailing interest rates environment;
( iii ) Observed relationships between pool characteristics and prepayment behavior of the Enterprises' TBA-eligible MBS; and
( iv ) Such other factors as FHFA may, in consultation with the Enterprises, determine to be appropriate to promote market confidence in the alignment of cash flows to TBA-eligible MBS investors and to foster the efficiency and liquidity of the secondary mortgage market.
( 2 ) FHFA will publicly announce any temporary adjustment to the definitions of cohort and specified pools in a timely manner.
( 3 ) If adjusted definitions remain in effect for six months or more, FHFA will amend this part's definitions by Federal Register Notice, with opportunity for public comment.
( 4 ) Temporarily adjusted definitions will remain in place until six months after the date on which FHFA announced the temporary adjustment unless within six months of that date— ( i ) FHFA announces a reversion to the previously prevailing definitions; or
( ii ) FHFA initiates the notice and comment process, in which case the temporary definitions will remain in effect until the conclusion of that process.