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(i) Initial Capitalization of Mortgage Servicing Rights Under SFAS No 140, each time an entity undertakes an obligation to service mortgage loans, the entity shall recognize either a servicing asset or a servicing liability for that servicing contract, unless it retains the underlying mortgage loans as an investment on its balance sheet If a servicing asset was purchased or assumed rather than undertaken in a sale or securitization of the mortgage loans being serviced, the servicing asset shall be measured initially at its fair value, presumptively the price paid for the right to service the underlying loans Under SFAS No 140, servicing rights retained in a sale of mortgage loans shall be initially recorded on the balance sheet at their allocated portion of the total cost of the mortgage loans purchased or originated The allocation of the total cost basis of the mortgage loans shall be based on the relative fair values of the mortgage loans and their respective servicing rights (ii) Amortization of Mortgage Servicing Rights SFAS No 140 requires that amounts capitalized as servicing assets (net of any recorded valuation allowances) be amortized in proportion to, and over the period of, estimated net servicing income For this purpose, estimates of future servicing revenue shall include expected late charges and other ancillary revenue, including oat Estimates of expected future servicing costs shall include direct costs associated with performing the servicing function and appropriate allocations of other costs Estimated future servicing costs may be determined on an incremental cost basis (iii) Impairment of Mortgage Servicing Rights For the purpose of evaluating and measuring impairment of servicing assets, SFAS No 140 requires that servicing assets be strati ed based on one or more of the predominant risk characteristics of the underlying loans Those characteristics may include loan type, size, note rate, date of origination, term, and geographic location Historically, note or interest rate has been the predominant prepayment risk characteristic considered by most mortgage bankers because in declining interest rate environments, loans have tended to prepay more rapidly with corresponding impairment to the servicing asset Impairment shall be recognized through a valuation allowance for an individual stratum The amount of impairment recognized shall be the amount by which the carrying value of the servicing assets in a stratum exceeds their fair value The fair value of servicing assets that have not been recognized through a sale or securitization shall not be used in the evaluation of impairment Subsequent to the initial measurement of impairment, the mortgage banking enterprise shall adjust the valuation allowance to re ect changes in the measurement of impairment Fair value in excess of the amount capitalized as servicing assets (net of amortization), however, shall not be recognized SFAS No 140 does not address when a mortgage banking enterprise should record a direct write-down of servicing assets (iv) Fair Value of Mortgage Servicing Rights SFAS No 140 de nes the fair value of an asset or a liability as the amount at which that asset or liability could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale Quoted market prices in active markets are the best evidence of fair value and under SFAS No 140 shall be used as the basis for the measurement, if available If quoted market prices are not available, the estimate of fair value shall be based on the best information available in the circumstances The estimate of fair value shall consider prices for similar assets or liabilities and the results of valuation techniques to the extent available in the circumstances Examples of valuation techniques include the present value of estimated expected future cash ows using a discount rate commensurate with the risks involved, option-pricing models, matrix pricing, option-adjusted spread models, and fundamental analysis Valuation techniques for measuring nancial assets and liabilities and servicing assets and liabilities shall be consistent with the objective of measuring fair value Those techniques shall incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment, and volatility In measuring nancial liabilities and servicing liabilities at fair value by discounting estimated future cash ows,.

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// (3) Top-level Class // (7) Static Method // (8) Implements interface at (1)

AS777 128000/12

CHAPTER 8: NESTED TYPE DECLARATIONS Systemoutprintln("Drawing a new IDrawable"); } }; } } //

31 49

The following code is an example of a typical use of anonymous classes in building GUI-applications The anonymous class at (1) implements the ActionListener interface that has the method actionPerformed() When the addActionListener() method is called on the GUI-button denoted by the reference quitButton, the anonymous class is instantiated and the reference value of the object is passed as a parameter to the method The method addActionListener() of the GUI-button can use the reference value to invoke the method actionPerformed() in the ActionListener object

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an objective is to use discount rates at which those liabilities could be settled in an arm s-length transaction Estimates of expected future cash ows, if used to estimate fair value, shall be the best estimate based on reasonable and supportable assumptions and projections All available evidence shall be considered in developing estimates of expected future cash ows The weight given to the evidence shall be commensurate with the extent to which the evidence can be veri ed objectively If a range is estimated for either the amount or timing of possible cash ows, the likelihood of possible outcomes shall be considered in determining the best estimate of future cash ows If it is not practicable to estimate the fair values of assets, the transferor shall record those assets at zero If it is not practicable to estimate the fair values of liabilities, the transferor shall recognize no gain on the transaction and shall record those liabilities at the greater of:

quitButtonaddActionListener( new ActionListener() { // (1) Anonymous class implements an interface // Invoked when the user clicks the quit button public void actionPerformed(ActionEvent evt) { Systemexit(0); // (2) Terminates the program } } );

Assigns 64040/22

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The discussion on instantiating local classes (see Example 810) is also valid for instantiating anonymous classes The class AnonClassClient in Example 812 creates one instance at (11) of the non-static anonymous class defined at (5), and two instances at (12) and (13) of the static anonymous class defined at (8) The program output shows the polymorphic behavior and the runtime types of the objects Similar to a non-static local class, an instance of a non-static anonymous class has an instance of its enclosing class at (11) An enclosing instance is not mandatory for creating objects of a static anonymous class, as shown at (12) The names of the anonymous classes at runtime are also shown in the program output in Example 812 They are also the names used to designate their respective class files Anonymous classes are not so anonymous after all

Access rules for local classes (see Section 84, p 372) also apply to anonymous classes Example 813 is an adaptation of Example 89 and illustrates the access rules for anonymous classes The local classes in Example 89 have been adapted to anonymous classes in Example 813 The TLCWithAnonClasses class has two methods, one non-static and the other static, which return an instance of a nonstatic and a static anonymous class, respectively Both anonymous classes extend the Base class

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