Completion of the March submissions and a call with the AIs raised a number of points about completing the certificates and supporting files of the Loss Share Data Specification. We have summarized the guidance on these points below.
Clarifications affecting both Single Family and Commercial files
1. FDIC Adjustments
The FDIC Adjustment template is being amended to reflect the following:
- The AI Adjustment amount in field 6 of the FDIC Adjustment workbook should foot to the total FDIC Adjustment amounts reported in the NSF and SFR Certificates.
- The Description of the FDIC Adjustment Amount and the AI Adjustment Amount has the signs of the amounts reversed. In both cases, the Description should read: "Amounts which are due to the FDIC should be reported as a negative, Amounts which are due from the FDIC should be reported as a positive."
- The field FDIC Adjustment Amount should be zero in cases where the field Adjustment Requested By has a value of 'AI'.
- The FDIC Adjustment Amount should have a numeric value when the field Adjustment Requested By has a value of 'FDIC'
- The FDIC Adjustment in field 11 of the NSF Loss and Recoveries file should tie to the AI Adjustment amount reported in the FDIC Adjustments file.
- The field Shared Loss Period must be populated with the appropriate Shared Loss reporting period
Additionally, the FDIC adjustment amount should also be reported in the NSF Loss and Recoveries file as it is included in the calculation of Total Covered Loss.
2. Recovery and Expense amounts and reasons.
Recovery and Expense amounts in the NSF Loss and Recoveries file (fields 8 and 9) state "If there are multiple recoveries (expenses) for the asset, report as a sum." Instead, the Comments should read "If there are multiple recoveries (expenses) with the same reason for the asset, report as a sum. Otherwise, report amounts separately for each unique recovery or expense reason." The same reporting approach should be followed for the Recovery and Expense amounts in the SFR Recoveries and Expense file (fields 4 and 7). As a result of this, the following validation rules are eliminated:
|Field||Validation Criteria||Error or Warning|
|Loan number||Must be unique||Warning|
|ORE number||Must be unique||Warning|
|FDIC Asset ID||Must be unique||Error|
Recovery and Expense reasons should be reported using the code number for the reason. For example, report "1" for "1 = Accrued Interest". This also applies to fields 20 and 21 in the NSF Loss and Recoveries file and fields 5 and 8 in the SFR Recovery and Loss file.
If either the Recovery or Expense amount is zero, report "98 = Not Applicable" for the corresponding reason.
3. The Active loan file is for loans that are active at the end of the period. Therefore, active loans should not also be found in the PIF, Loan Sale, or ORE files. Further, it is inappropriate to report loans on the PIF file where a partial payment has been made.
4. Validation of Unique IDs.The validation test for a unique Loan number has been relaxed across all files. The validation test for a unique FDIC Asset ID has been relaxed for the Related loans files, the NSF Loss and Recoveries file, and the SFR Recovery and Loss file. Duplicate FDIC Asset IDs may exist in all these cases.
5. Locations outside the U.S. Property or borrower locations may be outside the U.S. For countries outside the U.S. where a US postal service state abbreviation code is not applicable, please use "CN" for Canada, "MX" for Mexico or "FC" for other foreign countries and enter in the state field.
6. Resubmissions. When resubmitting Certificates or supporting files, do not resubmit files until the full revised Certificate submission package is complete. For example, if critical issues exist for both the Active and ORE file, the AI should adjust both files and submit both files at the same time. The AI should not submit first the Active file prior to adjusting the ORE file and vice versa.
7. Entry for a Date field that is required but there is a legitimate reason why the field should be blank. In this case, please report a Null.
Clarifications affecting Commercial files
1. Recoveries in NSF Certificate Section 2.
Part A, line 2 Adjustments d) Other:
Recoveries of prior period Charge-offs of principal and capitalized expenditures which affect Shared-Loss asset balances should be entered in line "2. Adjustments d) Other". This will be a subset of the total amount of recoveries reported in the Loss and Recoveries file and only applies if the recovery amount impacts the current asset balance in either the Active or ORE file.
Part B, line 10 b) Other Recoveries:
This will include the sum total of all recoveries reported in field 8 (Recoveries) of the Loss and Recoveries file.
2. Total Covered Loss (Gain) Amount in the NSF Loss and Recoveries file:
The definition of Total Covered Loss (Gain) in version 1.3.1 was expanded to include Full Chargeoff Recoveries and Full Chargeoff Reimbursable Expenses as given in field 12 of the Loss and Recoveries file:
Total Covered Loss = Chargeoffs (excluding accrued interest) + Qualifying loss on sale + Accrued interest charge Recoveries + Reimbursable expense charges Offsetting income + FDIC adjustment - Full Chargeoff Recoveries + Full Chargeoff Reimbursable Expenses.
As a result, please include Full Chargeoff Recoveries (field 17) and Full Chargeoff Reimbursable Expenses (field 18) in the calculation of Total Covered Loss.
This is the source of a significant number of errors for the March Certificate reporting cycle. Please ensure that you review the Total Loss calculation prior to the June Certificate reporting cycle and direct any questions to your Shared Loss Specialist.
3. Guidance on NSF Loan Sales File and Loss and Recoveries File reporting for NSF Loan and ORE asset sales
The Loan Sale file should include both ORE and Loan Sales. The file name will be changed to "Asset Sale" in version 1.4.
AIs should report all loans, ORE and other sales in the Loan Sale file regardless (1) if the sale resulted in a loss or (2) if the asset was a loan or ORE prior to sale.
The field Loss Share in the Loan Sale file applies to asset sales requiring FDIC approval. For a general ORE sale or a loan sale where no Loss claim has been or will be submitted, the field Loss Share should be coded "X=Not Applicable" for 1.3.2 certificate submissions.
In the case where a loan sale or ORE sale results in a loss, the sale itself should be recorded in the Loan Sale file per instructions above and the following instructions should be followed for filing the associated claim in the NSF Loss and Recoveries file.
If the loan sale is noted as an approved loan sale in the Loan Sale file (field Loss Share = 'Y') then the associated Loss amount should be reported in the field "Loss on Sale" in the NSF Loss and Recoveries file and in line 5e) Qualifying loss on sales in Section 2 of the NSF Certificate. Only losses associated with sales requiring FDIC approval are reported in line 5e.
If the loan sale required FDIC approval and approval was not provided (field Loss Share = 'N') then no associated Loss should be reported in the NSF Loss and Recoveries file.
If the ORE sale is a general ORE Sale, the Loss amount should be reported in the field Charge-offs in the Loss and Recoveries file and in line 5d) Charge-Offs (excluding accr int) in Section 2 of the NSF Certificate.
Please refer to the Shared Loss Agreement to determine if the asset sale requires FDIC approval.
4. Paid in Full line 5b on NSF Certificate Section 2. The Paid in Full line 5b in Section 2 of the NSF Certificate is new to the version 1.3 certificate as a separate line. Therefore, AIs may not have a Cumulative at beginning of Quarter balance for Paid in Full. If this is the case, please assign a zero amount to the Cumulative beginning of Quarter balance and focus on reporting Paid in Full amounts for the current and future periods.
5. Reporting Nonaccrual loans where Foreclosure proceedings have not begun in the NSF Certificate Section 3. As stated in the NSF Instructions, please include all nonaccrual loans where foreclosure proceedings have not begun in the 90+ days Delinquent category. For these loans, the field Nonaccrual in the NSF Active file must be reported with a value of 'Y'.
6. FDIC Asset type - may only contain allowable values. Some AIs have not been reporting the FDIC Asset type field 84 in the NSF Active loan file. The FDIC Asset type is required to tie the asset type balances in the loan detail to the Cert balances in line 7 of Section 2. Therefore, AIs must report the allowable values for the FDIC Asset type.
Field 54 (Loan Type) will no longer be a required field for the NSF Active file.
7. New Reason Codes for Recovery and Expense reasons in the NSF Loss and Recoveries file.
New allowable values will be added to the Recovery and Expense reasons in fields 20 and 21, respectively, of the Loss and Recoveries file to capture reasons not listed. The new reason codes are:
|Code Number||Recovery Reason|
|Code Number||Expense Reason|
8. How should gains on Sale be reported in the NSF Certificate.Guidance on reporting gains on sale is provided in the NSF Reporting Instructions for version 1.3.2:
"5c. Sales (qualifying and non-qualifying):
Report all principal recoveries from asset sales. Do not include losses or gains on sale. Gains on sale are excluded from Part A of the report altogether; however, certain gains on sale for assets are reported as recoveries in the bottom section of the report (row 10b.). Qualifying losses are reported on 5e; non-qualifying losses are reported on 2c. Do not include principal collections from short sales; report those in 5a."
Certain gains on sales, such as gains on sales of assets written down by the failed bank or assets for which a loss claim has been processed, are reported as recoveries in the bottom section of the report (row 10b).
9. Reporting Recovery and Expense detail for the June 30 reporting period. The Loss Share Data Specifications version 1.3.2 introduces reasons codes for NSF Recoveries and Expenses and asks AIs to provide this additional detail in their submissions for the June 30 reporting period. Specifically, the inclusion of the recovery reason and expense reason fields requires AIs to list detailed categories of recovery or expense types; this may result in multiple records reported for individual assets. Several AIs have commented that the time period between the announcement of the requirement and the due date of the June 30 submissions is insufficient to revise their systems to provide the additional detail.
Therefore, our guidance is if an AI is unable to prepare the additional detail in time for the June Certificate reporting cycle the AI may adopt a phased approach to the requirement. For June 30 Certificate submissions, AIs may gross recoveries and expenses and report using either (1) the recovery or expense reason code for the primary (largest dollar amount) recovery or expense or (2) using the recovery and expense reason of "Other". AIs should focus on achieving full compliance with their September 30 submissions.
10. Should Rental Income be reported as Offsetting Income or as a Recovery in the NSF Certificate. The answer to this depends on the version of the agreement. Under the new agreement (April 2011), ORE Income is listed as a Recovery item. Therefore, if the new agreement applies, please report ORE Income as a Recovery item. If reporting using an older agreement, then ORE Income is reported as Offsetting Income. Please review the applicable Shared-Loss agreement to determine appropriate reporting. If the AI is a repeat acquirer and treatment differs across agreements, the AI may choose to report either way. In this case, please inform your FDIC RSAM Specialist of the reporting protocol.
Clarifications affecting Single Family files
1. Payment History may only contain allowable values.AIs must map to FDIC allowable values for field 44 in the SFR Active loan file. Some AIs, for example, have reported "B" for bankruptcy which is not accepted. The intent of this field is to capture borrower payment history regardless if the borrower has declared bankruptcy. Borrowers may continue to make payments on loans while in bankruptcy status.
Allowable values for the payment history field include: C = Current; 3 = 30 days DQ; 6 = 60 days DQ; 9 = 90 days DQ; 4 = 120+ days DQ; U =Unknown.
2. SFR ORE file - Pre-Agreement Foreclosure, field 15: this field may only contain allowable values. Please populate the Pre-agreement Foreclosure field with an allowable value of Y (=Yes, for assets that are either ORE or written down prior to the Shared-Loss agreement) or N (=No). Other values such as "1", "0", or null values are not permitted.
If answer for this field is Y (yes), the validation applied is book value minus post closing principal payments. Book value refers to the written down value of the asset as reflected on Schedule 4.15A. Reversion UPB refers to the UPB after the final borrower payment for assets that had not been written down by the failed institution.
This clarification supersedes the description of the Pre-Agreement Foreclosure field provided in the data specification.
3. Single Family Loan Sale file. The Single Family Loan Sale file is described as "Required if any loans in the SFR portfolio were sold during the reporting period". The SFR Certificate validation for Page 2, Section 2 Part C 15. Qualifying Loss on Loan Sale indicates that the Covered Loss/Gain Amount reported must match the count and amount reported in the Single Family Loan Sale file. This creates a conflict where Loan Sales that were either not approved by the FDIC or were sold at par are reported. In either case, the covered loss reported is zero. The Certificate validation will be adjusted to validate the count of Loan Sales only where the covered loss amount is not equal to zero.
4. SFR Covered Loss Exhibits.
Charge-off Calculation Exhibit 2d(1). The Gross Balance Recoverable in the SFR Charge-off Loss file should be the sum of fields 13-21 instead of 13-20. The Total Cash Recovery should be the sum of fields 22-27 instead of 21-26.
Property classified as ORE or foreclosure prior to closing Exhibit 2c(1). The Gross Balance Recoverable in the Foreclosure and ORE Sale Loss file is correctly stated in v 1.3.2 as equal to field 13 minus field 14 plus fields 19-25. In version 1.3.1, field 18 (Accrued Interest) was incorrectly included in the calculation.
5. Who must sign a Single Family Certificate. A Single Family Certificate must be signed by an officer of the AI involved in, or responsible for, the administration and servicing of the Shared-Loss Loans, whose name appears on a list provided to the Receiver (as updated by the AI and provided to your FDIC RSAM Specialist as needed from time to time).
6. New Reason Codes for Recovery and Expense in the SFR Recoveries and Expense file. The following allowable values will be added to the Recovery and Expense reasons in fields 5 and 8, respectively, of the SFR Recoveries and Expense file:
|Code Number||Recovery Reason|
|22||HAMP Borrower Incentives|
|23||HAMP Borrower Incentives|
|24||HAFA Investor Incentives|
|25||HAFA Lien Holder|
|26||HAMP Investor Incentives|
|Code Number||Expense Reason|
7. Valuation Date. The validations for Valuation Dates for SFR loss events are as follows:
|File Name||Field Name||Validation Criteria||Warning/Error|
|Charge Off||Valuation Date||Must be populated||Warning|
|Foreclosure||Valuation Date||Must be populated||Warning|
|Charge Off||Valuation Date||Valuation Date must not exceed 90 days from the Charge-off date||Warning|
|Foreclosure||Valuation Date||Valuation Date must not exceed 90 days from the liquidation date||Warning|
|Loan Sale||Valuation Date||Valuation Date must not exceed 90 days from the sale date||Warning|
|Restructure||Valuation Date||Valuation Date must not exceed 90 days from the lesser of the 1st trial payment due date or modification effective date||Warning|
|Short Sale||Valuation Date||Valuation Date must not exceed 90 days from the short sale payoff date||Warning|
In cases where the valuation date occurs more than 90 days prior to the liquidation or charge-off date, your FDIC Specialist may contact you for additional information.
8. Difference between Property Insurance and Hazard Insurance.
Property Insurance and Hazard Insurance often are used interchangeably but the latter may insure for specific events not covered by standard policies such as damage due to flood or underground water, earthquakes, mudslides, birds, rodents, insects, or domestic animals, settling or deterioration of the home's structure, lack of maintenance, and mold.
AIs may choose to either group together or split separately if sufficient information is readily available to differentiate. If it is difficult to determine the appropriate category, please contact your RSAM Specialist for guidance.