§2279aa–7. Reserves and subordinated participation interests of certified facilities
(a) Cash contributions
(1) Contributions by originators
For each pool of loans, a certified facility and the participating originators may each contribute a share of the minimum reserve required under section 2279aa–6(b)(2) of this title.
(2) Composition of reserves
The reserves required under this section, other than retained subordinated participation interests, shall be held in the form of United States Treasury securities or other securities issued, guaranteed, or insured by an agency or instrumentality of the United States Government.
(3) Use and disposition of assets in reserve
Subject to the requirements of subsection (c) of this section, any certified facility that establishes a reserve pursuant to this subsection shall be required by the Corporation to maintain such reserve as a segregated account consisting of the amounts contributed (but not the earnings accruing on such amounts) to ensure the repayment of principal of, and the payment of interest on, the securities representing an interest in, or obligations backed by, the pool of qualified loans with respect to which such reserve is established.
(b) Retention of subordinated participation interests
(1) In general
A certified facility may meet the requirements of section 2279aa–6(b)(2) of this title with respect to any pool of qualified loans by retaining a subordinated participation interest in each loan included in each such pool in an amount not less than the amount that is equal to 10 percent of the principal amount of such loan.
(2) Retention of such interests by loan originators
Under the terms of the sale of any qualified loan by the originator of such loan to a certified facility, the originator of such loan may agree to retain a subordinated participation interest in such loan and the amount of the subordinated interest so retained by such loan originator shall be attributed to the facility for purposes of determining whether the requirements of paragraph (1) have been met.
(3) Distribution rights of holders of subordinated interests
The rights of the holders of the subordinated participation interests to receive distributions with respect to the loans constituting the pool shall be subordinated as prescribed by the Corporation to enhance the likelihood of regular receipt by the other holders of interests in such pool of the full amount of scheduled payments of principal and interest on loans constituting the pool.
(c) Additional requirements relating to section 2279aa–6(b)(2) reserves
(1) Distribution of earnings accruing in section 2279aa–6(b)(2) reserves
In the case of each applicable loan pool, a certified facility shall distribute to originators, at least semiannually, any earnings on the contributions of the originators to the reserve.
(2) Exception for withdrawals that would decrease reserve levels below reserve requirement
No withdrawal and distribution authorized under paragraph (1) may be made to the extent such withdrawal would cause the reserve to fall below the amount required to be held in such reserve under section 2279aa–6(b)(2) of this title.
(3) Separate loan loss accounting
Any certified facility that maintains a reserve (pursuant to section 2279aa–6(b)(2) of this title) to which any originator has contributed shall maintain separate loan loss accounting for each loan for which a contribution was made by such originator to such reserve.
(4) Loan loss attribution rule
Except for that portion of losses absorbed by a contribution of a certified facility to the reserve as provided in subsection (a)(1) of this section, each originator participating in the pool shall absorb any losses on loans originated up to the total amount the originator has contributed to the reserve before the losses are absorbed by the contributions of other originators who are participating in the pool.
(d) Authority of Board to establish other policies and procedures
The Board may establish such other policies and procedures with respect to-
(1) the establishment of reserves and the retention of subordinated participation interests under this section; and
(2) the manner in which such reserves or interests shall be available to make payments of interest on, and repayments of principal of, securities for which the Corporation has provided guarantees, as the Board determines to be necessary or appropriate to carry out the purposes of this subchapter.
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Section Referred to in Other Sections
This section is referred to in section 2279aa of this title.