Notice of Submission of Proposed Information Collection to OMB

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.

By---------------------------------------------------------------------

Title------------------------------------------------------------------

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