Page:United States Statutes at Large Volume 100 Part 3.djvu/508

 100 STAT. 2316

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PUBLIC LAW 99-514—OCT. 22, 1986 "(4) QUALIFIED REPLACEMENT MORTGAGE.—The term 'qualified replacement mortgage' means any obligation— "(A) which would be described in paragraph (3)(A) if it were transferred to the REMIC on or before the startup day, and "(B) which is received for— "(i) another obligation within the 3-month period beginning on the startup day, or "(ii) a defective obligation within the 2-year period beginning on the startup day. "(5) PERMITTED INVESTMENTS.—The term 'permitted investments' means any— "(A) cash flow investment, "(B) qualified reserve asset, or "(C) foreclosure property. "(6) CASH FLOW INVESTMENT.—The term 'cash flow investment' means any investment of amounts received under qualified mortgages for a temporary period before distribution to holders of interests in the REMIC. "(7) QUALIFIED RESERVE ASSET.—

"(A) IN GENERAL.—The term 'qualified reserve asset' means any intangible property which is held for investment and as part of a qualified reserve fund. "(B) QUALIFIED RESERVE FUND.—For purposes of subparagraph (A), the term 'qualified reserve fund' means any reasonably required reserve to provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages. The amount of any such reserve shall be promptly and appropriately reduced as payments of qualified mortgages are received. "(C) SPECIAL RULE.—A reserve shall not be treated as a qualified reserve for any taxable year (and all subsequent taxable years) if more than 30 percent of the gross income from the assets in such fund for the taxable year is derived from the sale or other disposition of property held for less than 3 months. For purposes of the preceding sentence, gain on the disposition of a qualified reserve asset shall not be taken into account if the disposition giving rise to such gain is required to prevent default on a regular interest where the threatened default resulted from a default on 1 or more qualified mortgages. "(8) FORECLOSURE PROPERTY.—The term 'foreclosure property' means property— "(A) which would be foreclosure property under section 856(e) if acquired by a real estate investment trust, and "(B) which is acquired in connection with the default or imminent default of a qualified mortgage held by the REMIC. Property shall cease to be foreclosure property with respect to the REMIC on the date which is 1 year after the date such real estate mortgage pool acquired such property. "(9) STARTUP DAY.—The term 'startup day* means any day selected by a REMIC which is on or before the 1st day on which interests in such REMIC are issued. "(10) ISSUE PRICE.—The issue price of any regular or residual interest in a REMIC shall be determined under section 12730?) in the same manner as if such interest were a debt instrument;

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