SECTION 2. BACKGROUND-THE

ASF “FRAMEWORK”

.01 On December 6, 2007, the American Securitization Forum (“ASF”) released a document entitled, “Statement of Principles, Recommendations and Guidelines for a Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans” (the “Framework”). An Executive Summary of the Framework (entitled “Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans”) was released simultaneously and is attached as an Appendix to this revenue procedure.

.02 The Framework has been broadly supported as an appropriate step in addressing certain risks in the current economic environment.

.03 The Framework applies to first-lien subprime residential adjustable rate mortgage (ARM) loans that—

(1) Have an initial fixed rate period of 36 months or less (including “2/28s” and “3/27s”);

(2) Were originated between January 1, 2005, and July 31, 2007; (3) Are included in securitized pools; and

(4) Have an initial interest rate reset between January 1, 2008, and July 31, 2010.

This revenue procedure refers to these instruments as “Loans.”

.04 The Framework provides a “fast track” procedure for modifying Loans and details the criteria for determining which Loans are eligible for the procedure. Modifications pursuant to the procedure are referred to as “fast track modifications.”

.05 In a fast track modification, a borrower is offered a Loan modification under which the interest rate on the affected Loan will be kept at the existing rate, generally for five years following the date on which the rate would have reset in the absence of the modification.

SECTION 3. BACKGROUND—REMICS

.01 Real Estate Mortgage Investment Conduits (REMICs) are widely used securitization vehicles for mortgages. REMICs are governed by sections 860A through 860G of the Internal Revenue Code. .02 For an organization to qualify as a REMIC, all of the interests in the organization must consist of one or more classes of regular interests and a single class of residual interests, see section 860D(a), and those interests must be issued on the startup day, within the meaning of § 1.860G–2(k) of the Income Tax Regulations.

.03 A regular interest is one that is designated as a regular interest and whose terms are fixed on the startup day. Section 860G(a)(1). In addition, a regular interest must (1) unconditionally entitle the holder to receive a specified principal amount (or other similar amount), and (2) provide that interest payments, if any, at or before maturity are based on a fixed rate (or to the extent provided in regulations, at a variable rate).

.04 An interest issued after the startup day does not qualify as a REMIC regular interest.

.05 An entity qualifies as a REMIC only if, among other things, as of the close of the third month beginning after the startup day and at all times thereafter, substantially all of its assets constitute qualified mortgages

December 26, 2007 1257 2007–52 I.R.B.

the investment of the certificate holders; and

.04 The Internal Revenue Service will not challenge a securitization vehicle’s qualification as a REMIC on the grounds that the transactions resulted in a deemed reissuance of the REMIC regular interests.