The Public Securities Association has been meeting with bank and thrift regulatory staff in an attempt to produce more flexibility in the implementation of the suitable investment policy of the Federal Financial Institutions Examination Council. One portion of the policy applies a three-part stress test to determine mortgage-backed derivatives that are too risky for thrifts and banks.

One result of the meetings could be a series of educational seminars attended by examiners, brokers and investors, according to James F. Faust Jr., chairman of the sales and marketing committee of PSA's Mortgage Division.

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