The Tax Reform Act made it easier for savings institutions and real estate investment trusts to hold mortgage securities as qualified portfolio investments. A savings institution, for instance, can include REMIC-issued mortgage-backed securities as qualifying assets in meeting federal requirements for treatment as a savings and loan for tax purposes. To qualify as a REMIC, an entity or pool of assets must make a REMIC election, follow certain rules as to composition of assets (by holding qualified mortgages and permitted investments), adopt reasonable methods to prevent disqualified organizations from holding its residual interests, and structure investors’ interests as any number of classes of regular interests and one –- and only one -– class of residual interests. The Internal Revenue Code does not appear to require REMICs to have a class of regular interests. A pooling and servicing agreement (PSA) is generally incorporated into each REMIC. A PSA is the legal document that defines the rights and obligations of the servicer, the trustee, and other parties over a pool of securitized mortgage loans. A typical PSA is worded, in part, as follows: “As promptly as practicable after any transfer of a Mortgage Loan under this Agreement, and in any event within thirty days after the transfer, the Trustee shall (i) affix the Trustee’s name to each assignment of Mortgage, as its assignee, and (ii) cause to be delivered for recording in the appropriate public office for real property records the assignments of the Mortgages to the Trustee,”   Qualified mortgages encompass several types of obligations and interests. Qualified mortgages are defined as “(1) any obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property, and is either transferred to the REMIC on the startup day in exchange for regular or residual interests, or purchased within three months after the startup day pursuant to a fixed-price contract in effect on the startup day, (2) any regular interest in another REMIC which is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC, (3) any qualified replacement mortgage, or (4) certain FASIT regular interests.” In (1), “obligation” is ambiguous; a broad reading would include contract claims but a narrower reading would involve only what would qualify as “debt obligations” under the Code. The IRC defines “principally secured” as either having “substantially all of the proceeds of the obligation . . . used to acquire or to improve or protect an interest in real property that, at the origination date, is the only security for the obligation” or having a fair market value of the interest that secures the obligation be at least 80% of the adjusted issue price (usually the amount that is loaned to the mortgagor) or be at least that amount when contributed to the REMIC.