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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules unsecured debt; and ii $10 billion i.e., the Daily Excess Requirement.
365-day Requirement. The Highest Cumulative Daily Net Cash Outflows over 365 days, including cash inflows from possible though not scheduled FICC MBS repurchase transactions where the Enterprise pledges its FICCeligible collateral assuming a 15
percent haircut to raise cash on its worst cumulative net cash outflow day.
The proposed rule assumes a conservative haircut of 15 percent given FHFAs wrong-way risk concerns. The proposed rule limits this ability to pledge FICC-eligible MBS collateral solely for purposes of meeting the 365day requirement; such collateral is not eligible for purposes of meeting the 30day liquidity requirement. Moreover, the proposed rule does not include nonFICC-eligible collateral as eligible for meeting any of the liquidity requirements.
To determine the 30-day requirement as of calculation date, the proposed rule would require an Enterprise to calculate its highest stressed cumulative net cash outflow amount for the next 30 calendar days following the calculation date, thereby establishing the dollar value that must be offset by the high quality liquid asset portfolio. Similarly, to determine the 365-day requirement as of calculation date, the proposed rule would require an Enterprise to calculate its highest stressed cumulative net cash outflow amount for the next 365
calendar days following the calculation date, thereby establishing the dollar value that must be offset by the high quality liquid asset portfolio combined with cash inflows from possible though not scheduled secured borrowings using FICC cleared repurchase transactions where the Enterprise raises cash by pledging its FICC-eligible collateral assuming a 15 percent haircut on its worst cumulative net cash outflow day.

Under the proposed rule, the highest cumulative daily net cash outflow amount would be the dollar amount on the day within a 30 calendar-day and 365-day stress period that has the highest amount of net cumulative cash outflows, respectively. The FHFA
believes that using the highest cumulative daily calculation rather than using total cash outflows over a 30
calendar-day or 365-day stress period is necessary because it takes into account potential timing mismatches between an Enterprises outflows and inflows, that is, the risk that an Enterprise could have a substantial amount of contractual inflows late in a 30 calendar-day stress period while also having substantial outflows earlier in the same period.
Such mismatches could threaten the liquidity of the Enterprise. By requiring the recognition of the highest net cumulative outflow day of a particular 30 calendar-day stress period and a particular 365-day stress period, FHFA
believes that the proposed liquidity requirements would better capture an Enterprises liquidity risk and help foster more sound liquidity management.
The proposed rule would require that the high quality liquid asset portfolio be sufficient to fund all enterprise-wide net cash flows, which includes all corporate daily inflows and outflows of cash from whatever source and includes, but is not limited to, mortgage operations that use cash such as MBS payments to investors, reimbursement of servicer advances of P&I payments to the MBS
trusts, the continued purchase of loans through the cash window or whole loan conduit, increases in collateral requirements arising from Enterprise derivative positions, and other uses of corporate cash.
Sources of cash include principal and interest payments from servicers that include guaranty fees from the singlefamily business, including the
Temporary Payroll Tax Cut Continuation Act of 2011 fees. Other sources of cash, like existing To-beannounced TBA contracts in place as of 6 p.m. EST on Day 0, are assumed to be valid and represent cash inflows on the contract settlement date. Other sources of cash for the 365-day liquidity requirement include the borrowing of cash secured by FICC-eligible securities post 15 percent haircut. Less-liquid assets, like non-performing loans and reperforming loans, are not considered sources of cash unless the assets have been sold and are awaiting settlement.
In this case, the Enterprise may assume that the cash inflow occurs on the expected settlement date.
With respect to any MBS trust-related cash flows, an Enterprise must include, at a minimum, the net corporate cash flows to and from the MBS trusts. The proposed rule stresses the expected corporate cash flows by excluding expected cash inflows from expected future debt issuance with an exception for Enterprise debt issued but not yet settled, described below, and by imposing six other stress assumptions that increase cash outflows or limit cash inflows see discussion below.
The proposed rule defines Daily Net Cash Flows to mean, for any day, the total cash outflows minus the total cash inflows for that day. The proposed rule further defines the Cumulative Daily Net Cash Outflows to mean, for any day, the sum of the Daily Net Cash Flows for each day in the period up through and including the measurement day. The proposed rule further defines the Highest Cumulative Daily Net Cash Outflows to mean, with respect to either the 30-day or 365-day metric, the maximum Cumulative Daily Net Cash Outflows amount over the respective period, see the 30-day example in Table 1 below.

TABLE 1EXAMPLE DETERMINATION OF HIGHEST DAILY CUMULATIVE NET CASH OUTFLOW
$B

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Day Day Day Day Day Day Day Day Day Day Day Day Day Day
Cash outflows
1
2
3
4
5
6
7
8
9
10
11
12
13

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$100
40
25
50
90
60
40
60
50
25
30
40
40

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Cash inflows $90
45
30
40
70
60
50
50
50
30
25
40
75

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Daily net cash outflow
Daily cumulative net cash outflow
$10
5 5
10
20
10
10
5
5
35

$10
5
10
30
30
20
30
30
25
30
30
5

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