Savings institutions must more accurately report the market value and the interest rate sensitivity of certain mortgage derivatives, the Office of Thrift Supervision said Thursday.

Under new guidelines, thrifts must account for interest rate caps and floors contained in some collateralized mortgage obligations. These instruments, known as CMO floaters, are debt obligations whose values fluctuate with market conditions. They are backed by pools of mortgages or mortgage-backed securities.

Thrifts currently account for these instruments under pricing guidelines issued in 1991 by the Federal Financial Institutions Examination Council. The Office of Thrift Supervision said the current method serves as a general indicator of a CMO floater's interest rate sensitivity. But it tends to overstate the value of the instrument when interest rates rise because it does not account for the existence of an interest rate cap, the thrift regulator said.

The new method must be incorporated into June call reports.

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