102 STAT. 3420	PUBLIC LAW 100-647—NOV. 10, 1988
(4) Subparagraph (A) of section 860F(b)(l) of the 1986 Code is
amended by striking out "the transfer of any property to a
REMIC" and inserting in lieu thereof "the transfer of any
property to a REMIC in exchange for regular or residual in-
terests in such REMIC".
(5)(A) Paragraph (1) of section 860G(a) of the 1986 Code is
amended to read as follows:
"(1) regular interest.—The term 'regular interest' means
any interest in a REMIC which is issued on the startup day with
fixed terms and which is designated as a regular interest if—
"(A) such interest unconditionally entitles the holder to
receive a specified principal  amount (or other similar
amount), and
"(B) interest payments (or other similar amount), if any,
with respect to such interest at or before maturity—
"(i) are payable based on a fixed rate (or to the extent
provided in regulations, at a variable rate), or
"(ii) consist of a specified portion of the interest
payments on qualified mortgages and such portion does
not vary during the period such interest is outstanding.
The interest shall not fail to meet the requirements of subpara-
graph (A) merely because the timing (but not the amount) of the
principal payments (or other similar amounts) may be contin-
gent on the extent of prepayments on qualified mortgages and
the amount of income from permitted investments."
(B)	Paragraph (2) of section 860G(a) of the 1986 Code is
amended to read as follows:
"(2) residual iNTEREST.—The term 'residual interest' means
an interest in a REMIC which is issued on the startup day,
which is not a regular interest, and which is designated as a
residual interest."
(C)	Paragraph (3) of section 860G(a) of the 1986 Code is
amended—
(i) by striking out "on or before the startup day" in
subparagraph (AXi) and inserting in lieu thereof "on the
startup day in exchange for regular or residual interests in
the REMIC",
(ii) by inserting "if, except as provided in regulations,
such purchase is pursuant to a fixed-price contract in effect
on the startup day" before the comma at the end of
subparagraph (AXii), and
(iii) by striking out "on or before the startup day" in
subparagraph (C) and inserting in lieu thereof "on the
startup day in exchange for regular or residual interests in
the REMIC".
(D)	Subparagraph (A) of section 860G(a)(4) of the 1986 Code is
amended to read as follows:
"(A) which would be a qualified mortgage if transferred
on the startup day in exchange for regular or residual
interests in the REMIC, and".
(E)	Paragraph (9) of section 860G(a) of the 1986 Code is
amended to read as follows:
"(9) startup day.—The term 'startup day^1 means the day on
which the REMIC issues all of its regular and residual interests.
To the extent provided in regulations, all interests issued (and
all transfers to the REMIC) during any period (not exceeding 10
days) permitted in such regulations shall be treated as occur-