---
kind: "section"
citation: "12 C.F.R. § 1248.5"
title: "12"
number: "1248.5"
heading: "Misalignment."
url: "https://uscodex.org/cfr/12/1248.5"
---

# §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.

## Notes

### Authority

Authority: 12 U.S.C. 1451 note; 1716; 4511; and 4526.

### Source

Source: 84 FR 7799, Mar. 5, 2019, unless otherwise noted.