REPEAL OF SPECIAL RULES FOR FASITS.

SEC. 835. REPEAL OF SPECIAL RULES FOR FASITS.(a) In General.—Part V of subchapter M of chapter 1 (relating to financial asset securitization investment trusts) is hereby repealed.(b) Conforming Amendments.—(1) Paragraph (6) of section 56(g) is amended by striking “REMIC, or FASIT” and inserting “or REMIC”.(2) Clause (ii) of section 382(l)(4)(B) is amended by striking “a REMIC to which part IV of subchapter M applies, or a FASIT to which part V of subchapter M applies,” and inserting “or a REMIC to which part IV of subchapter M applies,”.(3) Paragraph (1) of section 582(c) is amended by striking “, and any regular interest in a FASIT,”.(4) Subparagraph (E) of section 856(c)(5) is amended by striking the last sentence.(5)(A) Section 860G(a)(1) is amended by adding at the end the following new sentence: “An interest shall not fail to qualify as a regular interest solely because the specified principal amount of the regular interest (or the amount of interest accrued on the regular interest) can be reduced as a result of the nonoccurrence of 1 or more contingent payments with respect to any reverse mortgage loan held by the REMIC if, on the startup day for the REMIC, the sponsor reasonably believes that all principal and interest due under the regular interest will be paid at or prior to the liquidation of the REMIC.”. (B) The last sentence of section 860G(a)(3) is amended by inserting “, and any reverse mortgage loan (and each balance increase on such loan meeting the requirements of subparagraph (A)(iii)) shall be treated as an obligation secured by an interest in real property” before the period at the end.(6) Paragraph (3) of section 860G(a) is amended by adding “and” at the end of subparagraph (B), by striking “, and” at the end of subparagraph (C) and inserting a period, and by striking subparagraph (D).(7) Section 860G(a)(3), as amended by paragraph (6), is amended by adding at the end the following new sentence: “For purposes of subparagraph (A), if more than 50 percent of the obligations transferred to, or purchased by, the REMIC are originated by the United States or any State (or any political subdivision, agency, or instrumentality of the United States or any State) and are principally secured by an interest in real property, then each obligation transferred to, or purchased by, the REMIC shall be treated as secured by an interest in real property.”.(8)(A) Section 860G(a)(3)(A) is amended by striking “or” at the end of clause (i), by inserting “or” at the end of clause (ii), and by inserting after clause (ii) the following new clause: “(iii) represents an increase in the principal amount under the original terms of an obligation described in clause (i) or (ii) if such increase—“(I) is attributable to an advance made to the obligor pursuant to the original terms of the obligation, “(II) occurs after the startup day, and 118 STAT. 1594“(III) is purchased by the REMIC pursuant to a fixed price contract in effect on the startup day.”. (B) Section 860G(a)(7)(B) is amended to read as follows:“(B) Qualified reserve fund.—For purposes of subparagraph (A), the term ‘qualified reserve fund’ means any reasonably required reserve to—“(i) provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages or lower than expected returns on cash flow investments, or“(ii) provide a source of funds for the purchase of obligations described in clause (ii) or (iii) of paragraph (3)(A).The aggregate fair market value of the assets held in any such reserve shall not exceed 50 percent of the aggregate fair market value of all of the assets of the REMIC on the startup day, and the amount of any such reserve shall be promptly and appropriately reduced to the extent the amount held in such reserve is no longer reasonably required for purposes specified in clause (i) or (ii) of this subparagraph.”.(9) Subparagraph (C) of section 1202(e)(4) is amended by striking “REMIC, or FASIT” and inserting “or REMIC”.(10) Clause (xi) of section 7701(a)(19)(C) is amended—(A) by striking “and any regular interest in a FASIT,”, and(B) by striking “or FASIT” each place it appears.(11) Subparagraph (A) of section 7701(i)(2) is amended by striking “or a FASIT”.(12) The table of parts for subchapter M of chapter 1 is amended by striking the item relating to part V.(c) Effective Date.—(1) In general.—Except as provided in paragraph (2), the amendments made by this section shall take effect on January 1, 2005.(2) Exception for existing fasits.—Paragraph (1) shall not apply to any FASIT in existence on the date of the enactment of this Act to the extent that regular interests issued by the FASIT before such date continue to remain outstanding in accordance with the original terms of issuance.