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B 1975, petitioner made minimum payments on all payment dates
after December 31, 1984.
Petitioner initially funded the acquisition of the mortgages
held as collateral for each of the CMOs and GMCs at issue by
means other than the issuance of those particular CMOs and GMCs.
When issuing its GMCs, petitioner disclosed that the proceeds
would provide funds for petitioner to engage in additional
activities consistent with its statutory purposes, including the
purchase of additional mortgages and interests in mortgages and
that some portion of the proceeds could be used to repay part of
petitioner’s borrowings. When issuing its CMOs, petitioner
disclosed that the proceeds would be used to provide funds for
the corporation to finance its purchase of the mortgages securing
the CMOs.
With respect to the CMOs and GMCs, petitioner received
monthly payments of interest and principal on the mortgages that
served as collateral. Petitioner made semiannual or annual
payments of principal and interest to the CMO and GMC holders.
Petitioner paid interest through the date of payment to the
holders on the outstanding principal balance of the CMOs or GMCs,
notwithstanding any receipt of principal amounts on the mortgages
serving as collateral since the previous date of payment.
Petitioner received spread and float income with respect to
the CMOs and GMCs. Spread income is the amount by which the
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