[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2012 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
Title 12
Banks and Banking
________________________
Parts 900 to 1099
Revised as of January 1, 2012
Containing a codification of documents of general
applicability and future effect
As of January 1, 2012
Published by the Office of the Federal Register
National Archives and Records Administration as a
Special Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
As of January 1, 2012
Title 12, Part 900 to End
Revised as of January 1, 2011
Is Replaced by
Title 12, Parts 900 to 1099
and
Title 12, Part 1100 to End
[[Page v]]
Table of Contents
Page
Explanation................................................. vii
Title 12:
Chapter IX--Federal Housing Finance Board 3
Chapter X--Bureau of Consumer Financial Protection 85
Finding Aids:
Table of CFR Titles and Chapters........................ 1131
Alphabetical List of Agencies Appearing in the CFR...... 1151
List of CFR Sections Affected........................... 1161
[[Page vi]]
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 12 CFR 900.1 refers
to title 12, part 900,
section 1.
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[[Page vii]]
EXPLANATION
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Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
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[[Page viii]]
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[[Page ix]]
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Office of the Federal Register.
January 1, 2012.
[[Page xi]]
THIS TITLE
Title 12--Banks and Banking is composed of nine volumes. The parts
in these volumes are arranged in the following order: Parts 1-199, 200-
219, 220-229, 230-299, 300-499, 500-599, part 600-899, 900-1099 and
1100-end. The first volume containing parts 1-199 is comprised of
chapter I--Comptroller of the Currency, Department of the Treasury. The
second, third and fourth volumes containing parts 200-299 are comprised
of chapter II--Federal Reserve System. The fifth volume containing parts
300-499 is comprised of chapter III--Federal Deposit Insurance
Corporation and chapter IV--Export-Import Bank of the United States. The
sixth volume containing parts 500-599 is comprised of chapter V--Office
of Thrift Supervision, Department of the Treasury. The seventh volume
containing parts 600-899 is comprised of chapter VI--Farm Credit
Administration, chapter VII--National Credit Union Administration,
chapter VIII--Federal Financing Bank. The eighth volume containing parts
900-1099 is comprised of chapter IX--Federal Housing Finance Board, and
chapter X--Bureau of Consumer Financial Protection. The ninth volume
containing part 1100-end is comprised of chapter XI--Federal Financial
Institutions Examination Council, chapter XIV--Farm Credit System
Insurance Corporation, chapter XV--Department of the Treasury, chapter
XVII--Office of Federal Housing Enterprise Oversight, Department of
Housing and Urban Development and chapter XVIII--Community Development
Financial Institutions Fund, Department of the Treasury. The contents of
these volumes represent all of the current regulations codified under
this title of the CFR as of January 1, 2012.
For this volume, Jonn V. Lilyea was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Michael L. White, assisted by Ann Worley.
[[Page 1]]
TITLE 12--BANKS AND BANKING
(This book contains parts 900 to 1099)
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Part
chapter ix--Federal Housing Finance Board................... 900
chapter x-- Bureau of Consumer Financial Protection......... 1004
[[Page 3]]
CHAPTER IX--FEDERAL HOUSING FINANCE BOARD
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SUBCHAPTER A--GENERAL DEFINITIONS
Part Page
900 General definitions applying to all Finance
Board regulations....................... 5
SUBCHAPTER B--FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
905 Description of organization and functions... 8
906 Operations.................................. 12
907 Procedures.................................. 13
911 Availability of unpublished information..... 22
912 Information regarding meetings of the Board
of Directors of the Federal Housing
Finance Board........................... 27
SUBCHAPTER C--GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS
914 Data availability and reporting............. 33
917 Powers and responsibilities of Bank boards
of directors and senior management...... 33
SUBCHAPTER D--FEDERAL HOME LOAN BANK MEMBERS AND HOUSING ASSOCIATES
[RESERVED]
SUBCHAPTER E--FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL
STANDARDS
930 Definitions applying to risk management and
capital regulations..................... 41
931 Federal Home Loan Bank capital stock........ 42
932 Federal Home Loan Bank capital requirements. 46
933 Bank capital structure plans................ 58
SUBCHAPTER F--FEDERAL HOME LOAN BANK MISSION [RESERVED]
SUBCHAPTER G--FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS
952 Community Investment Cash Advance Programs.. 64
[[Page 4]]
955 Acquired member assets...................... 68
SUBCHAPTER H--FEDERAL HOME LOAN BANK LIABILITIES [RESERVED]
SUBCHAPTER I--MISCELLANEOUS FEDERAL HOME LOAN BANK OPERATIONS AND
AUTHORITIES
975 Collection, settlement, and processing of
payment instruments..................... 72
977 Miscellaneous bank authorities.............. 74
978 Bank requests for information............... 74
SUBCHAPTER J--NEW FEDERAL HOME LOAN BANK ACTIVITIES [RESERVED]
SUBCHAPTER K--OFFICE OF FINANCE [RESERVED]
SUBCHAPTER L--NON-BANK SYSTEM ENTITIES
995 Financing Corporation operations............ 77
996 Authority for bank assistance of the
Resolution Funding Corporation.......... 80
997 Resolution Funding Corporation obligations
of the banks............................ 80
SUBCHAPTER M--FEDERAL HOME LOAN BANK DISCLOSURES
998 Registration of Federal Home Loan Bank
equity securities....................... 83
[[Page 5]]
SUBCHAPTER A_GENERAL DEFINITIONS
PART 900_GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD
REGULATIONS--Table of Contents
Sec.
900.1 Basic terms relating to the Finance Board, the Bank System and
related entities.
900.2 Terms relating to Bank operations, mission and supervision.
900.3 Terms relating to other entities and concepts used throughout 12
CFR chapter IX.
Authority: 12 U.S.C. 1422b(a).
Source: 67 FR 12842, Mar. 20, 2002, unless otherwise noted.
Sec. 900.1 Basic terms relating to the Finance Board, the Bank System
and related entities.
As used throughout this chapter, the following basic terms relating
to the Finance Board, the Bank System and related entities have the
meanings set forth below, unless otherwise indicated in a particular
subchapter, part, section, or paragraph:
Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 1421
through 1449).
Bank, written in title case, means a Federal Home Loan Bank
established under section 12 of the Act (12 U.S.C. 1432).
Bank System means the Federal Home Loan Bank System, consisting of
the 12 Banks and the Office of Finance.
Board of Directors, written in title case, means the Board of
Directors of the Federal Housing Finance Board; the term board of
directors, written in lower case, has the meaning indicated in context.
Chairperson means the Chairperson of the Board of Directors of the
Finance Board.
Executive Secretary means an employee within the Office of
Management of the Finance Board who is responsible for records
management.
Finance Board means the Federal Housing Finance Board established by
section 2A of the Act (12 U.S.C. 1422a).
Financing Corporation or FICO means the Financing Corporation
established and supervised by the Finance Board under section 21 of the
Act (12 U.S.C. 1441) and part 995 of this chapter.
Housing associate means an entity that has been approved as a
housing associate pursuant to part 926 of this chapter.
Member means an institution that has been approved for membership in
a Bank and has purchased capital stock in the Bank in accordance with
Sec. Sec. 925.20 or 925.24(b) of this chapter.
Office of Finance or OF means the Office of Finance, a joint office
of the Banks referred to in section 2B of the Act (12 U.S.C. 1422b) and
established under part 985 of this chapter.
Resolution Funding Corporation or REFCORP means the Resolution
Funding Corporation established by section 21B of the Act (12 U.S.C.
1441b) and addressed in parts 996 and 997 of this chapter.
Secretary to the Board means employees within the Office of General
Counsel of the Finance Board who are responsible for issues concerning
meetings of the Board of Directors.
[67 FR 12842, Mar. 20, 2002, as amended at 68 FR 38169, June 27, 2003]
Sec. 900.2 Terms relating to Bank operations, mission and supervision.
As used throughout this chapter, the following terms relating to
Bank operations, mission and supervision have the meanings set forth
below, unless otherwise indicated in a particular subchapter, part,
section or paragraph:
Acquired member assets or AMA means those assets that may be
acquired by a Bank under part 955 of this chapter.
Advance means a loan from a Bank that is:
(1) Provided pursuant to a written agreement;
(2) Supported by a note or other written evidence of the borrower's
obligation; and
(3) Fully secured by collateral in accordance with the Act and part
950 of this chapter.
Affordable Housing Program or AHP means the Affordable Housing
Program, the CICA program that each Bank is required to establish
pursuant
[[Page 6]]
to section 10(j) of the Act (12 U.S.C. 1430(j)) and part 951 of this
chapter.
Capital plan means the capital structure plan required for each Bank
by section 6(b) of the Act, as amended (12 U.S.C. 1426(b)), and part 933
of this chapter, as approved by the Finance Board, unless the context of
the regulation refers to the capital plan prior to its approval by the
Finance Board.
CIP means the Community Investment Program, an advance program under
CICA required to be offered pursuant to section 10(i) of the Act (12
U.S.C. 1430(i)).
Community Investment Cash Advance or CICA means any advance made
through a program offered by a Bank under section 10 of the Act (12
U.S.C. 1430) and parts 951 and 952 of this chapter to provide funding
for targeted community lending and affordable housing, including
advances made under a Bank's Rural Development Funding (RDF) program,
offered under section 10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a
Bank's Urban Development Funding (UDF) program, offered under section
10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a Bank's Affordable
Housing Program (AHP), offered under section 10(j) of the Act (12 U.S.C.
1430(j)); a Bank's Community Investment Program (CIP), offered under
section 10(i) of the Act (12 U.S.C. 1430(i)); or any other program
offered by a Bank that meets the requirements of part 952 of this
chapter.
Community lending means providing financing for economic development
projects for targeted beneficiaries, and, for community financial
institutions (as defined in Sec. 925.1 of this chapter), purchasing or
funding small business loans, small farm loans or small agri-business
loans (as defined in Sec. 950.1 of this chapter).
Consolidated obligation or CO means any bond, debenture, or note
authorized under part 966 of this chapter to be issued jointly by the
Banks pursuant to section 11(a) of the Act, as amended (12 U.S.C.
1431(a)), or any bond or note issued by the Finance Board on behalf of
all Banks pursuant to section 11(c) of the Act (12 U.S.C. 1431(c)), on
which the Banks are jointly and severally liable.
Data Reporting Manual or DRM means a manual issued by the Finance
Board and amended from time to time containing reporting requirements
for the Banks.
Excess stock means that amount of a Bank's capital stock owned by a
member or other institution in excess of that member's or other
institution's minimum investment in capital stock required under the
Bank's capital plan, the Act, or the Finance Board's regulations, as
applicable.
Financial Management Policy or FMP means the Financial Management
Policy For The Federal Home Loan Bank System approved by the Finance
Board pursuant to Finance Board Resolution No. 96-45 (July 3, 1996), as
amended by Finance Board Resolution No. 96-90 (Dec. 6, 1996), Finance
Board Resolution No. 97-05 (Jan. 14, 1997), and Finance Board Resolution
No. 97-86 (Dec. 17, 1997).
[67 FR 12842, Mar. 20, 2002, as amended at 71 FR 35499, June 21, 2006;
71 FR 78050, Dec. 28, 2006]
Sec. 900.3 Terms relating to other entities and concepts used
throughout 12 CFR chapter IX.
As used throughout this chapter, the following terms relating to
other entities and concepts used throughout 12 CFR chapter IX have the
meanings set forth below, unless otherwise indicated in a particular
subchapter, part, section or paragraph:
Appropriate Federal banking agency has the meaning set forth in
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))
and, for federally-insured credit unions, means the NCUA.
Appropriate state regulator means any state officer, agency,
supervisor or other entity that has regulatory authority over, or is
empowered to institute enforcement action against, a particular
institution.
Fannie Mae means the Federal National Mortgage Association
established under authority of the Federal National Mortgage Association
Charter Act (12 U.S.C. 1716, et seq.).
FDIC means the Federal Deposit Insurance Corporation.
FRB means the Board of Governors of the Federal Reserve System.
[[Page 7]]
Freddie Mac means the Federal Home Loan Mortgage Corporation
established under authority of the Federal Home Loan Mortgage
Corporation Act (12 U.S.C. 1451, et seq.).
Generally Accepted Accounting Principles or GAAP means accounting
principles generally accepted in the United States.
Ginnie Mae means the Government National Mortgage Association
established under authority of the Federal National Mortgage Association
Charter Act (12 U.S.C. 1716, et seq.).
GLB Act means the Gramm-Leach-Bliley Act (Pub. L. 106-102 (1999)).
HUD means the United States Department of Housing and Urban
Development.
NCUA means the National Credit Union Administration.
NRSRO means a credit rating organization regarded as a Nationally
Recognized Statistical Rating Organization by the Securities and
Exchange Commission.
OCC means the Office of the Comptroller of the Currency.
OTS means the Office of Thrift Supervision.
SBIC means a small business investment company formed pursuant to
section 301 of the Small Business Investment Act (15 U.S.C. 681).
SEC means the United States Securities and Exchange Commission.
State means a state of the United States, American Samoa, the
Commonwealth of the Northern Mariana Islands, the District of Columbia,
Guam, Puerto Rico, or the United States Virgin Islands.
1934 Act means the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.).
[67 FR 12842, Mar. 20, 2002, as amended at 69 FR 38811, June 29, 2004]
[[Page 8]]
SUBCHAPTER B_FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
PART 905_DESCRIPTION OF ORGANIZATION AND FUNCTIONS--Table of Contents
Subpart A_Functions and Responsibilities of Finance Board
Sec.
905.1 [Reserved]
905.2 General statement and statutory authority.
905.3 Location and business hours.
905.4 Duties of the Finance Board.
Appendix A to Subpart A of Part 905--Federal Home Loan Banks
Subpart B_General Organization
905.10 Board of Directors.
905.11 Office of Inspector General.
905.12 Office of Management.
905.13 Office of Supervision.
905.14 Office of General Counsel.
Subpart C_Miscellaneous
905.25 Forms.
905.26 Official logo and seal.
905.27 OMB control numbers assigned under the Paperwork Reduction Act.
Authority: 5 U.S.C. 552; 12 U.S.C. 1422b(a) and 1423; 44 U.S.C.
3507; 5 CFR 1320.5 and 1320.8.
Source: 56 FR 67155, Dec. 30, 1991, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Subpart A_Functions and Responsibilities of Finance Board
Sec. 905.1 [Reserved]
Sec. 905.2 General statement and statutory authority.
(a) The Finance Board is an independent, executive agency in the
Federal Government, responsible for regulating the Bank System. It is
funded through assessments levied upon the Banks. These funds are not
considered Government Funds or appropriated monies. The Finance Board is
governed by a five-member Board of Directors and administered by a full-
time staff.
(b) The members of the Board of Directors individually are referred
to as Directors. Other than the Office of Inspector General and the
Office of General Counsel, the heads of the administrative units, called
offices, also are called Directors. The head of the Office of Inspector
General is called the Inspector General and the head of the Office of
General Counsel is called the General Counsel.
(c) The Finance Board administers the Act and is authorized to issue
rules, regulations and orders affecting the Bank System. The Finance
Board performs all such duties and responsibilities as may be required
by statute. As required by section 302(b)(2) of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1717(b)), it also conducts a
monthly survey of all major lenders to calculate a national average for
interest rates on mortgages for one-family homes, on behalf of the
Fannie Mae. As required by section 305(b) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1454(b)), it conducts a similar
survey for the Freddie Mac.
[56 FR 67155, Dec. 30, 1991, as amended at 65 FR 8256, Feb. 18, 2000; 67
FR 12843, Mar. 20, 2002; 68 FR 38169, June 27, 2003]
Sec. 905.3 Location and business hours.
(a) Location. All office units of the Finance Board are located at
1777 F Street, NW., Washington, DC 20006.
(b) Hours of operation. The regular hours of operation of the
Finance Board are from 8:30 a.m. to 5:30 p.m., Monday through Friday.
Sec. 905.4 Duties of the Finance Board.
(a) Bank System. The Finance Board supervises and regulates the
Banks and the Office of Finance. Specifically, its duties are:
(1) To ensure that the Banks operate in a safe and sound manner;
(2) To supervise all business operations of the Banks, which may
include:
(i) Prescribing conditions upon which Banks may advance funds to
their members and housing associates;
(ii) Prescribing rules and conditions under which a Bank may borrow
funds,
[[Page 9]]
pay interest on those funds, or issue obligations;
(iii) Requiring examinations of the Banks; and
(iv) Appointing the public interest members of the boards of
directors of the Banks;
(3) To ensure that the Banks fulfill their housing finance and
community lending mission;
(4) To ensure that the Banks remain adequately capitalized; and
(5) To ensure that the Banks are able to raise funds in the capital
markets.
(b) Financing Corporation. The Finance Board also oversees the
operations of the Financing Corporation, including its issuance of
obligations.
[67 FR 12843, Mar. 20, 2002]
Sec. Appendix A to Subpart A of Part 905--Federal Home Loan Banks
Federal Home Loan Bank District 1
(Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island,
Vermont)
Federal Home Loan Bank of Boston
111 Huntington Avenue, 24th Floor, Boston, MA 02199-7614
Federal Home Loan Bank District 2
(New Jersey, New York, Puerto Rico, Virgin Islands)
Federal Home Loan Bank of New York
101 Park Avenue, New York, NY 10178-0599
Federal Home Loan Bank District 3
(Delaware, Pennsylvania, West Virginia)
Federal Home Loan Bank of Pittsburgh
601 Grant Street, Pittsburgh, PA 15219-4455
Federal Home Loan Bank District 4
(Alabama, District of Columbia, Florida, Georgia, Maryland, North
Carolina, South Carolina, Virginia)
Federal Home Loan Bank of Atlanta
1475 Peachtree Street, NE., Atlanta, GA 30309
Federal Home Loan Bank District 5
(Kentucky, Ohio, Tennessee)
Federal Home Loan Bank of Cincinnati
221 East Fourth Street, Suite 1000, Cincinnati, OH 45202
Federal Home Loan Bank District 6
(Indiana, Michigan)
Federal Home Loan Bank of Indianapolis
8250 Woodfield Crossing Boulevard, Indianapolis, IN 46240
Federal Home Loan Bank District 7
(Illinois, Wisconsin)
Federal Home Loan Bank of Chicago
111 East Wacker Drive, Suite 700, Chicago, IL 60601
Federal Home Loan Bank District 8
(Iowa, Minnesota, Missouri, North Dakota, South Dakota)
Federal Home Loan Bank of Des Moines
907 Walnut Street, Des Moines, IA 50309
Federal Home Loan Bank District 9
(Arkansas, Louisiana, Mississippi, New Mexico, Texas)
Federal Home Loan Bank of Dallas
8500 Freeport Parkway South, Suite 100, Irving, TX 75063-2547
Federal Home Loan Bank District 10
(Colorado, Kansas, Nebraska, Oklahoma)
Federal Home Loan Bank of Topeka
One Security Benefit Place, Suite 100, Topeka, KS 66606-2444
Federal Home Loan Bank District 11
(Arizona, California, Nevada)
Federal Home Loan Bank of San Francisco
600 California Street, San Francisco, CA 94108
Federal Home Loan Bank District 12
(Alaska, American Samoa, the Commonwealth of the Northern Mariana
Islands, Guam, Hawaii, Idaho, Montana, Oregon, Utah, Washington,
Wyoming)
Federal Home Loan Bank of Seattle
1501 Fourth Avenue, 19th Floor, Seattle, WA 98101-1693
[56 FR 67155, Dec. 30, 1991, as amended at 63 FR 3455, Jan. 23, 1998; 67
FR 12843, Mar. 20, 2002; 68 FR 38170, June 27, 2003]
Subpart B_General Organization
Source: 68 FR 38170, June 27, 2003, unless otherwise noted.
[[Page 10]]
Sec. 905.10 Board of Directors.
(a) Board of Directors--(1) General. The Bank Act vests management
of the Finance Board in a five-member Board of Directors consisting of
four members appointed by the President with the advice and consent of
the Senate to serve staggered seven-year terms, and one ex-officio
member, the Secretary of the U.S. Department of Housing and Urban
Development. The four appointed directors must have backgrounds in
housing finance or a demonstrated commitment to providing specialized
housing credit and at least one appointed director must have a
background with an organization with a two-year record of representing
consumer or community interests on either banking services, credit
needs, housing or financial consumer protections. Not more than three of
the five directors may belong to the same political party.
(2) Responsibilities. The Board of Directors is responsible for
setting agency policy and issuing resolutions, rules, regulations,
orders and policies as necessary.
(b) Chairperson--(1) General. The President designates an appointed
director as chairperson of the Board of Directors.
(2) Responsibilities. The responsibilities of the chairperson
include:
(i) Presiding over the meetings of the Board of Directors;
(ii) Effecting the overall management, functioning and organization
of the Finance Board;
(iii) Ensuring effective coordination and communication with the
Congress and interest groups on legislative issues pertaining to the
Finance Board, the Bank System, and the Financing Corporation; and
(iv) Disseminating information about the Finance Board to other
government agencies, the public and the news media.
Sec. 905.11 Office of Inspector General.
(a) General. The Inspector General reports directly to the
chairperson of the Board of Directors and is subject to, and operates
under, the provisions of the Inspector General Act of 1978, as amended
(5 U.S.C. app. 3).
(b) Responsibilities. The responsibilities of the Office of
Inspector General under the Inspector General Act include:
(1) Conducting and supervising audits and investigations relating to
the programs and operations of the Finance Board;
(2) Providing leadership and coordination, and recommending policies
for Finance Board activities designed to promote the economy, efficiency
and effectiveness of programs and operations, and preventing and
detecting fraud and abuse in programs and operations; and
(3) Providing a means for keeping the Board of Directors, agency
managers and the Congress fully and currently informed regarding on-
going investigations and, if needed, the necessity for and progress of
corrective action.
Sec. 905.12 Office of Management.
(a) General. The Office of Management is the principal advisor to
the chairperson and the Board of Directors on management and
organizational policies and is responsible for the Finance Board's
administrative management programs.
(b) Responsibilities. The responsibilities of the Office of
Management include:
(1) Developing and managing agency policies and procedures governing
employment and personnel action requirements, compensation and agency
payroll requirements, travel, awards, insurance, retirement benefits and
other employee benefits;
(2) Facilities and property management and supply requirements;
(3) Procurement and contracting programs;
(4) Agency financial management, budgeting and accounting;
(5) Records management; and
(6) Coordinating the design, programming, operation and maintenance
of the Finance Board's technology and information systems.
Sec. 905.13 Office of Supervision.
(a) General. The Office of Supervision is responsible for conducting
on-site examinations of the twelve Federal
[[Page 11]]
Home Loan Banks and the Office of Finance and conducting off-site
monitoring and analysis. The Office of Supervision also is responsible
for providing expert policy advice and analyzing and reporting on
economic, housing finance, community investment and competitive
environments in which the Bank System and its members operate.
(b) Responsibilities. The responsibilities of the Office of
Supervision include:
(1) Conducting examinations, at least annually, of the Banks, the
Office of Finance and the Financing Corporation and resolving
outstanding examination issues;
(2) Monitoring Bank and Bank System market, credit and operational
risks;
(3) Analyzing the financial performance of the Banks;
(4) Preparing the Monthly Survey of Rates and Terms of Conventional
One-Family Nonfarm Mortgage Loans (MIRS) and determining the conforming
loan limit for Federal National Mortgage Association (Fannie Mae) and
Federal Home Loan Mortgage Corporation (Freddie Mac) purchases and
guarantees;
(5) Analyzing the Banks' performance and policy issues arising under
the Affordable Housing Program and the Community Investment Program; and
(6) Collecting and analyzing data on the housing and community and
economic development activities of the Banks.
Sec. 905.14 Office of General Counsel.
(a) General. The General Counsel is the chief legal officer of the
Finance Board and is responsible for advising the Board of Directors,
the chairperson and other Finance Board officials on interpretations of
law, regulation and policy.
(b) Responsibilities. The responsibilities of the Office of General
Counsel include:
(1) Preparing all legal documents on behalf of the Finance Board
such as opinions, regulations and memoranda of law;
(2) Representing the Finance Board in all administrative
adjudicatory proceedings before the Board of Directors and in all other
administrative matters involving the agency;
(3) Representing the Finance Board in judicial proceedings involving
the agency's supervisory or regulatory authority over the Federal Home
Loan Banks;
(4) Administering the Finance Board's Ethics, Freedom of Information
Act, Privacy Act, Paperwork Reduction Act, and Government in the
Sunshine Act programs; and
(5) Secretary to the Board functions.
Subpart C_Miscellaneous
Sec. 905.25 Forms.
The following forms are available at the Finance Board headquarters
facility and shall be used for the purpose indicated:
Form
10-91--Monthly Survey of Rates and Terms on Conventional 1 Family
Nonfarm Mortgage Loans.
9102--Certificate of Nomination, Election of Federal Home Loan Bank
Directors.
9103--Election Ballot, Election of Federal Home Loan Bank Directors.
A-1--Appointive Director Candidates--Personal Certification and
Disclosure Form.
E-1--Elective Director Nominees--Personal Certification and Disclosure
Form.
90-T04--Local Travel Claim.
[60 FR 49199, Sept. 22, 1995, as amended at 63 FR 65687, Nov. 30, 1998;
65 FR 8257, Feb. 18, 2000. Redesignated and amended at 67 FR 12843, Mar.
20, 2002]
Sec. 905.26 Official logo and seal.
This section describes and displays the logo adopted by the Board of
Directors as the official symbol representing the Finance Board. It is
displayed on correspondence and selected documents. This logo also
serves as the official seal used to certify and authenticate official
documents of the Board of Directors.
(a) Description. The logo is a disc with its center consisting of
three polygons arranged in an irregular line partially overlapping--each
polygon drawn in a manner resembling a silhouette of a pitched roof
house and with distinctive eaves under its roof--encircled by a
designation scroll having an outer and inner border of plain heavy lines
and containing the words ``FEDERAL
[[Page 12]]
HOUSING FINANCE BOARD'' in capital letters with serifs, with two mullets
on the extreme left and right of the scroll.
(b) Display. The Finance Board's official seal and logo appears
below:
[GRAPHIC] [TIFF OMITTED] TR20MR02.004
[67 FR 12843, Mar. 20, 2002]
Sec. 905.27 OMB control numbers assigned under the Paperwork Reduction
Act.
(a) Purpose. This section collects and displays the control numbers
assigned to information collection requirements contained in Finance
Board regulations by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) and OMB
regulations (5 CFR 1320.5 and 1320.8). The Finance Board may not sponsor
or conduct, and a person is not required to respond to, an information
collection unless the agency displays a currently valid OMB control
number.
(b) Display.
------------------------------------------------------------------------
12 CFR part or section where OMB
identified and described control No. Expiration date
------------------------------------------------------------------------
906.5............................... 3069-0001 July 2007.
915.3............................... 3069-0002 Nov. 2007.
915.4............................... 3069-0002 Nov. 2007.
915.5............................... 3069-0002 Nov. 2007.
915.6............................... 3069-0002 Nov. 2007.
915.7............................... 3069-0002 Nov. 2007.
915.8............................... 3069-0002 Nov. 2007.
915.10.............................. 3069-0002 Nov. 2007.
915.12.............................. 3069-0002 Nov. 2007.
925.2............................... 3069-0004 May 2007.
925.3............................... 3069-0004 May 2007.
925.5............................... 3069-0004 May 2007.
925.6............................... 3069-0004 May 2007.
925.7............................... 3069-0004 May 2007.
925.8............................... 3069-0004 May 2007.
925.9............................... 3069-0004 May 2007.
925.11.............................. 3069-0004 May 2007.
925.12.............................. 3069-0004 May 2007.
925.13.............................. 3069-0004 May 2007.
925.15.............................. 3069-0004 May 2007.
925.16.............................. 3069-0004 May 2007.
925.17.............................. 3069-0004 May 2007.
925.18.............................. 3069-0004 May 2007.
925.22.............................. 3069-0004 May 2007.
925.24.............................. 3069-0004 May 2007.
925.26.............................. 3069-0004 May 2007.
925.31.............................. 3069-0004 May 2007.
926.1............................... 3069-0005 Nov. 2005.
926.2............................... 3069-0005 Nov. 2005.
926.3............................... 3069-0005 Nov. 2005.
926.4............................... 3069-0005 Nov. 2005.
926.5............................... 3069-0005 Nov. 2005.
926.6............................... 3069-0005 Nov. 2005.
931.3............................... 3069-0059 Feb. 2007.
931.7............................... 3069-0004 May 2007.
933.2............................... 3069-0059 Feb. 2007.
944.2............................... 3069-0003 Feb. 2006.
944.3............................... 3069-0003 Feb. 2006.
944.4............................... 3069-0003 Feb. 2006.
944.5............................... 3069-0003 Feb. 2006.
950.17.............................. 3069-0005 Nov. 2005.
951.1............................... 3069-0006 July 2007.
951.3............................... 3069-0006 July 2007.
951.4............................... 3069-0006 July 2007.
951.6............................... 3069-0006 July 2007.
951.7............................... 3069-0006 July 2007.
951.8............................... 3069-0006 July 2007.
951.10.............................. 3069-0006 July 2007.
951.11.............................. 3069-0006 July 2007.
951.13.............................. 3069-0006 July 2007.
951.15.............................. 3069-0006 July 2007.
955.4............................... 3069-0058 Mar. 2007.
------------------------------------------------------------------------
[70 FR 9508, Feb. 28, 2005]
PART 906_OPERATIONS--Table of Contents
Subpart A [Reserved]
Subpart B_Monthly Interest Rate Survey (MIRS)
Sec.
906.5 Monthly interest rate survey.
Subpart C [Reserved]
Authority: 12 U.S.C. 4516.
Source: 70 FR 9509, Feb. 28, 2005, unless otherwise noted.
Subpart A [Reserved]
Subpart B_Monthly Interest Rate Survey (MIRS)
Sec. 906.5 Monthly interest rate survey.
The Finance Board conducts its Monthly Survey of Rates and Terms on
Conventional One-Family Non-farm Mortgage Loans in the following manner:
[[Page 13]]
(a) Initial survey. Each month, the Finance Board samples savings
institutions, commercial banks, and mortgage loan companies, and asks
them to report the terms and conditions on all conventional mortgages
(i.e., those not federally insured or guaranteed) used to purchase
single-family homes that each such lender closes during the last five
working days of the month. In most cases, the information is reported
electronically in a format similar to Finance Board Form FHFB 10-91. The
initial weights are based on lender type and lender size. The data also
is weighted so that the pattern of weighted responses matches the actual
pattern of mortgage originations by lender type and by region. The
Finance Board tabulates the data and publishes standard data tables late
in the following month.
(b) Adjustable-rate mortgage index. The weighted data, tabulated and
published pursuant to paragraph (a) of this section, is used to compile
the Finance Board's adjustable-rate mortgage index, entitled the
``National Average Contract Mortgage Rate for the Purchase of Previously
Occupied Homes by Combined Lenders.'' This index is the successor to the
index maintained by the former Federal Home Loan Bank Board and is used
for determining the movement of the interest rate on renegotiable-rate
mortgages and on some other adjustable-rate mortgages.
Subpart C [Reserved]
PART 907_PROCEDURES--Table of Contents
Subpart A_Definitions
Sec.
907.1 Definitions.
Subpart B_Waivers, Approvals, No-Action Letters, and Regulatory
Interpretations
907.2 Waivers.
907.3 Approvals.
907.4 No-Action Letters.
907.5 Regulatory Interpretations.
907.6 Submission requirements.
907.7 Issuance of Waivers, Approvals, No-Action Letters, and Regulatory
Interpretations.
Subpart C_Case-by-Case Determinations; Review of Disputed Supervisory
Determinations
907.8 Case-by-Case Determinations.
907.9 [Reserved]
907.10 Petitions.
907.11 Requests to Intervene.
907.12 Finance Board procedures.
907.13 Consideration and Final Decisions.
907.14 Meetings of the Board of Directors to consider Petitions.
907.15 General provisions.
907.16 Rules of practice.
Authority: 12 U.S.C. 1422b(a)(1).
Source: 64 FR 30883, June 9, 1999, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Editorial Note: Nomenclature changes to part 907 appear at 67 FR
12844, Mar. 20, 2002.
Subpart A_Definitions
Sec. 907.1 Definitions.
As used in this part:
Approval means a written statement issued to a Bank or the Office of
Finance approving a transaction, activity, or item that requires Finance
Board approval under the Act or a Finance Board rule, regulation,
policy, or order.
Case-by-Case Determination means a Final Decision concerning any
matter that requires a determination, finding, or approval by the Board
of Directors under the Act or Finance Board regulations, for which no
controlling statutory, regulatory, or other Finance Board standard
previously has been established, and that, in the judgment of the Board
of Directors, is best resolved on a case-by-case basis by a ruling
applicable only to the Petitioner and any Intervenor, and not by
adoption of a rule of general applicability.
Final Decision means a decision rendered by the Board of Directors
on issues raised in a Petition or Request to Intervene that have been
accepted for consideration.
Intervenor means a Bank, Member, or other entity that has been
granted leave to intervene in the consideration of a Petition by the
Board of Directors.
[[Page 14]]
Managing Director means the Managing Director of the Finance Board.
No-Action Letter means a written statement issued to a Bank or the
Office of Finance providing that Finance Board staff will not recommend
supervisory or other action to the Board of Directors for failure to
comply with a specific provision of the Act or a Finance Board rule,
regulation, policy, or order, if a requester undertakes a proposed
transaction or activity.
Party means a Petitioner, an Intervenor, or the Finance Board.
Petition means a Petition for Case-by-Case Determination or a
Petition for Review of a Disputed Supervisory Determination.
Petitioner means the Office of Finance or a Bank that has filed a
Petition.
Regulatory Interpretation means written guidance issued by Finance
Board staff with respect to application of the Act or a Finance Board
rule, regulation, policy, or order to a proposed transaction or
activity.
Requester means an entity or person that has submitted an
application for a Waiver or Approval or a request for a No-Action Letter
or Regulatory Interpretation.
Supervisory determination means a Finance Board finding in a report
of examination, order, or directive, or a Finance Board order or
directive concerning safety and soundness or compliance matters that
requires mandatory action by a Bank or the Office of Finance.
Waiver means a written statement issued to a Bank, a Member, or the
Office of Finance that waives a provision, restriction, or requirement
of a Finance Board rule, regulation, policy, or order, or a required
submission of information, not otherwise required by law, in connection
with a particular transaction or activity.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Subpart B_Waivers, Approvals, No-Action Letters, and Regulatory
Interpretations
Sec. 907.2 Waivers.
(a) Authority. The Board of Directors reserves the right, in its
discretion and in connection with a particular transaction or activity,
to waive any provision, restriction, or requirement of this chapter, or
any required submission of information, not otherwise required by law,
if such waiver is not inconsistent with the law and does not adversely
affect any substantial existing rights, upon a determination that
application of the provision, restriction, or requirement would
adversely affect achievement of the purposes of the Act, or upon a
showing of good cause.
(b) Application. A Bank, a Member, or the Office of Finance may
apply for a Waiver in accordance with Sec. 907.6.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.3 Approvals.
(a) Application. A Bank or the Office of Finance may apply for an
Approval of any transaction, activity, or item that requires Finance
Board approval under the Act or a Finance Board rule, regulation,
policy, or order in accordance with Sec. 907.6, unless alternative
application procedures are prescribed by the Act or a Finance Board
rule, regulation, policy, or order for the transaction, activity, or
item at issue.
(b) Reservation. The Finance Board reserves the right, in its
discretion, to prescribe additional or alternative procedures for any
application for Approval of a transaction, activity, or item.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.4 No-Action Letters.
(a) Authority. Finance Board staff, in its discretion, may issue a
No-Action Letter to a Bank or the Office of Finance stating that staff
will not recommend supervisory or other action to the Board of Directors
for failure to comply with a specific provision of the
[[Page 15]]
Act or a Finance Board rule, regulation, policy, or order, if a
requester undertakes a proposed transaction or activity. The Board of
Directors may modify or supersede a No-Action Letter.
(b) Requests. A Bank or the Office of Finance may request a No-
Action Letter in accordance with Sec. 907.6.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.5 Regulatory Interpretations.
(a) Authority. Finance Board staff, in its discretion, may issue a
Regulatory Interpretation to a Bank, a Member, an official of a Bank or
Member, the Office of Finance, or any other entity or person, providing
guidance with respect to application of the Act or a Finance Board rule,
regulation, policy, or order to a proposed transaction or activity. The
Board of Directors may modify or supersede a Regulatory Interpretation.
(b) Requests. A Bank, a Member, an official of a Bank or Member, the
Office of Finance, or any other entity or person may request a
Regulatory Interpretation in accordance with Sec. 907.6.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.6 Submission requirements.
Applications for a Waiver or Approval and requests for a No-Action
Letter or Regulatory Interpretation shall comply with the following
requirements:
(a) Filing. Each application or request shall be in writing. The
original and three copies shall be filed with the Secretary to the
Board, Federal Housing Finance Board, 1777 F Street NW., Washington, DC
20006.
(b) Authorization--(1) Waivers and Approvals. Applications for
Waivers and Approvals shall be signed by an official with authority to
sign such applications on behalf of the requester. Applications for
Waivers and Approvals from a Bank or the Office of Finance shall be
accompanied by a resolution of the board of directors of the Bank or the
Office of Finance concurring in the substance and authorizing the filing
of the application.
(2) Requests for No-Action Letters. The president of the Bank making
a Request for a No-Action Letter shall sign the Request. Requests for a
No-Action Letter from the Office of Finance shall be signed by the
chairperson of the board of directors of the Office of Finance.
(3) Requests for Regulatory Interpretations. The requester or an
authorized representative of the requester shall sign a request for a
Regulatory Interpretation.
(c) Information requirements. Each application or request shall
contain:
(1) The name of the requester, and the name, title, address,
telephone number, and electronic mail address, if any, of the official
filing the application or request on its behalf;
(2) The name, address, telephone number, and electronic mail
address, if any, of a contact person from whom Finance Board staff may
seek additional information if necessary;
(3) The section numbers of the particular provisions of the Act or
Finance Board rules, regulations, policies, or orders to which the
application or request relates;
(4) Identification of the determination or relief requested,
including any alternative relief requested if the primary relief is
denied, and a clear statement of why such relief is needed;
(5) A statement of the particular facts and circumstances giving
rise to the application or request and identifying all relevant legal
and factual issues;
(6) References to all relevant authorities, including the Act,
Finance Board rules, regulations, policies, and orders, judicial
decisions, administrative decisions, relevant statutory interpretations,
and policy statements;
(7) References to any Waivers, No-Action Letters, Approvals, or
Regulatory Interpretations issued to the requester in the past in
response to circumstances similar to those surrounding the request or
application;
(8) For any application or request involving interpretation of the
Act or Finance Board regulations, a reasoned opinion of counsel
supporting the relief or interpretation sought and distinguishing any
adverse authority;
[[Page 16]]
(9) Any non-duplicative, relevant supporting documentation; and
(10) A certification by a person with knowledge of the facts that
the representations made in the application or request are accurate and
complete. The following form of certification is sufficient for this
purpose: ``I hereby certify that the statements contained in the
submission are true and complete to the best of my knowledge. [Name and
Title].''
(d) Waiver of requirements. The Managing Director may waive any
requirement of this section for good cause. The Managing Director shall
provide prompt notice of any such waiver to the Board of Directors. The
Board of Directors may overrule any waiver granted by the Managing
Director under this paragraph.
(e) Withdrawal. Once filed, an application or request may be
withdrawn only upon written request. The Finance Board will not consider
a request for withdrawal after transmission by the Secretary to the
Board to the requester of a response in final form.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Sec. 907.7 Issuance of Waivers, Approvals, No-Action Letters, and
Regulatory Interpretations.
(a) Board of Directors review. At least three business days prior to
issuance to the requester, the Secretary to the Board shall transmit
each Approval, No-Action Letter, or Regulatory Interpretation issued by
the Chairperson or Finance Board staff to the Board of Directors for
review.
(b) Issuance and effectiveness. A Waiver, Approval, No-Action
Letter, or Regulatory Interpretation is not effective until the
Secretary to the Board has transmitted it in final form to the
requester.
(c) Abbreviated form. The Finance Board may respond to an
application or request in an abbreviated form, consisting of a concise
statement of the nature of the response, without restatement of the
underlying facts.
Subpart C_Case-by-Case Determinations; Review of Disputed Supervisory
Determinations
Sec. 907.8 Case-by-Case Determinations.
(a) Petition for Case-by-Case Determination. A Bank or the Office of
Finance may seek a Case-by-Case Determination concerning any matter that
may require a determination, finding or approval under the Act or
Finance Board regulations by the Board of Directors, and for which no
controlling statutory, regulatory or other Finance Board standard
previously has been established. The Office of Finance or a Bank seeking
a Case-by-Case Determination shall file a Petition for Case-by-Case
Determination in accordance with Sec. 907.10.
(b) Intervention. A Member, a Bank, or the Office of Finance may
file a Request to Intervene in the consideration of the Petition in
accordance with Sec. 907.11 if it believes its rights may be affected.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.9 [Reserved]
Sec. 907.10 Petitions.
Each Petition brought pursuant to this subpart shall comply with the
following requirements:
(a) Filing. The Petition shall be in writing. The original and three
copies shall be filed with the Secretary to the Board, Federal Housing
Finance Board, 1777 F Street NW., Washington, DC 20006.
(b) Information requirements. Each Petition shall contain:
(1) The name of the Petitioner, and the name, title, address,
telephone number, and electronic mail address, if any, of the official
filing the Petition on its behalf;
(2) The name, address, telephone number, and electronic mail
address, if any, of a contact person from whom Finance Board staff may
seek additional information if necessary;
(3) The section numbers of the particular provisions of the Act or
Finance Board rules, regulations, policies, or orders to which the
Petition relates, and, if the Petition is for Review
[[Page 17]]
of a Disputed Supervisory Determination, identification of the disputed
Supervisory Determination;
(4) Identification of the determination or relief requested,
including any alternative relief requested if the primary relief is
denied, and a clear statement of why such relief is needed;
(5) A statement of the particular facts and circumstances giving
rise to the Petition and identifying all relevant legal and factual
issues;
(6) A summary of any steps taken to date by the Petitioner to
address or resolve the dispute or issue; or, in cases involving safety
and soundness or compliance issues, a summary of any actions taken by
the Petitioner in the interim to implement corrective action;
(7) The Petitioner's argument in support of its position, including
citation to any supporting legal opinions, policy statements, or other
relevant precedent and supporting documentation, if any;
(8) References to all relevant authorities, including the Act,
Finance Board rules, regulations, policies, and orders, judicial
decisions, administrative decisions, relevant statutory interpretations,
and policy statements;
(9) A reasoned opinion of counsel supporting the relief or
interpretation sought and distinguishing any adverse authority;
(10) Any non-duplicative, relevant supporting documentation; and
(11) A certification by a person with knowledge of the facts that
the representations made in the Petition are accurate and complete. The
following form of certification is sufficient for this purpose: ``I
hereby certify that the statements contained in the Petition are true
and complete to the best of my knowledge. [Name and Title].''
(c) Authorization. Each Petition shall be accompanied by a
resolution of the Petitioner's board of directors concurring in the
substance and authorizing the filing of the Petition.
(d) Request to Appear. The Petition may contain a request that staff
or an agent of the Petitioner be permitted to make a personal appearance
before the Board of Directors at any meeting convened to consider the
Petition pursuant to these procedures. A statement of the reasons a
written presentation would not suffice shall accompany a Request to
Appear. The statement shall specifically:
(1) Identify any questions of fact that are in dispute;
(2) Summarize the evidence that would be presented at the meeting;
and
(3) Identify any proposed witnesses, and state the substance of
their anticipated testimony.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.11 Requests to Intervene.
(a) Filing--(1) Date. Any Request to Intervene in consideration of a
Petition under this subpart shall be in writing and shall be filed with
the Secretary to the Board within 45 days from the date the Petition is
filed.
(2) Information requirements. A Request to Intervene shall include
the information required by Sec. 907.10(b), where applicable, and a
concise statement of the position and interest of the Intervenor and the
grounds for the proposed intervention.
(3) Authorization. If the entity requesting intervention is a Bank
or the Office of Finance, the Request to Intervene shall be accompanied
by a resolution of the Petitioner's board of directors concurring in the
substance and authorizing the filing of the Request. If the entity
requesting intervention is not a Bank or the Office of Finance, the
Request to Intervene shall be signed by an official of the entity with
authority to authorize the filing of the Request, and shall include a
statement describing such authority.
(4) Request to Appear. A Request to Intervene may include a Request
to Appear before the Board of Directors in any meeting conducted under
these procedures to consider a Petition. A Request to Appear shall be
accompanied by a statement containing the information required by Sec.
907.10(d), and, in addition, setting forth the likely impact that
intervention will have on the expeditious progress of the meeting. A
Request to Appear shall be filed with the Secretary to the Board either
with the Request to Intervene or at least 20 days prior to the meeting
scheduled to consider the Petition.
(5) Intervenor is bound. Any Request to Intervene shall include a
statement
[[Page 18]]
that, if such leave to intervene is granted, the Intervenor shall be
bound expressly by the Final Decision of the Board of Directors, as
described in Sec. 907.13(b), subject only to judicial review or as
otherwise provided by law.
(b) Grounds for approval. The Managing Director may grant leave to
intervene if the entity requesting intervention has complied with
paragraph (a) of this section and, in the judgment of Managing Director:
(1) The presence of the entity requesting intervention would not
unduly prolong or otherwise prejudice the adjudication of the rights of
the original parties; and
(2) The entity requesting intervention may be adversely affected by
a Final Decision on the Petition.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.12 Finance Board procedures.
(a) Notice of Receipt of Petition or Request to Intervene. No later
than three business days following receipt of a Petition or Request to
Intervene, the Secretary to the Board shall transmit a written Notice of
Receipt to the Petitioner or Intervenor. In the case of a Petition for
Case-by-Case Determination, the Finance Board shall promptly publish a
notice of receipt of Petition, including a brief summary of the issue(s)
involved, in the Federal Register.
(b) Transmittal of filings. The Secretary to the Board shall
promptly transmit copies of any Petition, Request to Intervene, or other
filing under this subpart to the Board of Directors and all other
parties to the filing.
(c) Opportunity to cure defects. The Managing Director shall afford
the Petitioner or Intervenor a reasonable opportunity to cure any
failure to comply with the requirements of Sec. 907.10.
(d) Information request. The Managing Director may request
additional information from the Petitioner or Intervenor. No later than
20 calendar days after the date of a request under this paragraph, the
Petitioner shall provide to the Secretary to the Board all information
requested.
(e) Supplemental information. Upon good cause shown, the Managing
Director may grant permission to a Petitioner or Intervenor to submit
supplemental written information pertaining to the Petition or Request
to Intervene.
(f) Consolidation and severance--(1) Consolidation. The Managing
Director may consolidate any or all matters at issue in two or more
meetings on Petitions where:
(i) There exist common parties or common questions of fact or law;
(ii) Consolidation would expedite and simplify consideration of the
issues; and
(iii) Consolidation would not adversely affect the rights of parties
engaged in otherwise separate proceedings.
(2) Severance. The Managing Director may order any meetings and
issues severed with respect to any or all parties or issues.
(g) Notice of Board Consideration. Within 30 calendar days of
receipt of a Petition deemed by the Managing Director to be in
compliance with the requirements of Sec. 907.10, or, if the Petition
has been the subject of a request under paragraph (d) of this section,
within 30 calendar days of receipt of a response from the Petitioner
deemed by the Managing Director to complete the information necessary
for the Board of Directors to consider the Petition, the Managing
Director, after consultation with the Board of Directors, through the
Secretary to the Board, shall provide all parties with a Notice of Board
Consideration containing the following information:
(1) Identification of the issues accepted for consideration;
(2) Any decision to consolidate or sever pursuant to paragraph (f)
of this section;
(3) Whether the Petition will be considered by the Board of
Directors on the written record pursuant to Sec. 907.13(a)(1), or at a
meeting pursuant to Sec. 907.13(a)(2); and
(4) If the Petition will be considered by the Board of Directors at
a meeting:
(i) The date, time and place of the meeting; and
[[Page 19]]
(ii) A decision as to any Request to Appear filed pursuant to
Sec. Sec. 907.10(d) or 907.11(a)(4).
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.13 Consideration and Final Decisions.
(a) Consideration by Board of Directors. The Board of Directors may
consider a Petition and render a decision:
(1) Solely on the basis of the written record; or
(2) At a regularly scheduled meeting or a meeting convened
specifically for the purpose of considering the Petition. Consideration
of a Petition at a meeting shall be governed by the procedures described
in Sec. 907.14.
(b) Final Decision. The Board of Directors shall render a Final
Decision on the issue(s) presented in a Petition or Request to Intervene
that has been accepted for consideration, based upon consideration of
the entire record of the proceeding. The terms and conditions of the
Final Decision shall bind the parties as to any issue(s) presented in
the Petition or Request to Intervene and decided by the Board of
Directors. The decision of the Board of Directors is a final decision
for purposes of obtaining judicial review or as otherwise provided by
law.
(c) Time periods. Subject to extension by such additional time as
may reasonably be required, the Board of Directors shall render a Final
Decision within 120 calendar days of the date the Petition is received
in a form deemed by the Managing Director to be in compliance with the
requirements of Sec. 907.10 or, if the Petition has been the subject of
a request under Sec. 907.12(d), within 120 calendar days of receipt of
a response from the Petitioner deemed by the Managing Director to
complete the information necessary for the Board of Directors to
consider the Petition.
(d) Transmittal of Final Decision. The Secretary to the Board shall
transmit the Final Decision of the Board of Directors to all parties to
the submission.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.14 Meetings of the Board of Directors to consider Petitions.
(a) Full and fair opportunity to be heard. Any meeting of the Board
of Directors to consider a Petition shall be conducted in a manner that
provides the parties a full and fair opportunity to be heard on the
issues accepted for consideration. Any such meeting shall be conducted
so as to permit an expeditious presentation of such issues.
(b) Participation in meeting. (1) The presence of a quorum of the
Board if Directors is required to conduct a meeting under this section.
Members of the Board of Directors are deemed present if they appear in
person or by telephone.
(2) An act of the Board of Directors requires the vote of a majority
of the members of the Board of Directors voting at a meeting at which a
quorum of the Board of Directors is present.
(3) A Final Decision may be reached by a vote of the Board of
Directors after the meeting at which the Petition has been considered.
Only those members of the Board of Directors present at the meeting at
which the Petition was considered may vote on issues presented in the
Petition and accepted for consideration. A vote of the majority of the
members of the Board of Directors eligible to vote and voting shall be
an act of the Board of Directors.
(c) Chairperson--(1) Presiding officer. The Chairperson, or a member
of the Board of Directors designated by the Chairperson, shall preside
over a meeting of the Board of Directors convened under this section.
(2) Authority of the Chairperson. The Chairperson shall have all
powers and discretion necessary to conduct the meeting in a fair and
impartial manner, to avoid unnecessary delay, to regulate the course of
the meeting and the conduct of the parties and their counsel, and to
discharge the duties of a presiding officer.
(3) Board of Directors may overrule the Chairperson. Any member of
the Board of Directors may, by motion, challenge any action, finding, or
determination made by the Chairperson in the course of the meeting, and
the Board of Directors, by majority vote, may overrule any action,
finding or determination of the Chairperson.
[[Page 20]]
(d) Meeting may be closed. A party may request that the meeting, or
portion thereof, be closed to public observation. A request to close a
meeting shall be processed in accordance with the requirements of the
Government in the Sunshine Act (5 U.S.C. 552b) and the Finance Board's
implementing regulation (12 CFR part 912).
(e) Location of meeting. Unless otherwise specified, all meetings of
the Board of Directors will be held in the Board Room of the Finance
Board at 1777 F Street, NW., Washington, DC, at the time specified in
the notice of meeting issued pursuant to 12 CFR 912.6.
(f) Presentation of issues--(1) Stipulations. Subject to the
Chairperson's discretion, the parties may agree to stipulations of law
or fact, including stipulations as to the admissibility of exhibits, and
present such stipulations at the meeting. Stipulations shall be made a
part of the record of the proceeding.
(2) Order of presentation. The Chairperson shall determine the order
of presentation of the issues, testimony of any witnesses, presentation
of any other information or document, and all other procedural matters
at the meeting.
(g) Record. The meeting shall be recorded and transcribed.
Transcripts of the proceedings shall be governed by 12 CFR 912.5(c). The
Petition and all supporting documentation shall be made a part of the
record, unless otherwise determined by the Chairperson. The Chairperson
may order the record corrected, upon motion to correct, upon stipulation
of the parties, or at the Chairperson's discretion.
(h) Admissibility of documents and testimony. (1) The Chairperson
has discretion to admit and make a part of the record documents and
testimony that are relevant, material, and reliable, and may elect not
to admit documents and testimony that are privileged, unduly
repetitious, or of little probative value.
(2) The Board of Directors shall give such weight to documents and
testimony admitted and made part of the record as it may deem reasonable
and appropriate.
(3) The Chairperson may admit and make a part of the record, in lieu
of oral testimony, statements of fact or opinion prepared by a witness.
The admissibility of the information contained in the statement shall be
subject to the same rules as if the testimony were provided orally.
(i) Official notice. All matters officially noticed by the
Chairperson shall appear on the record.
(j) Exhibits and documents--(1) Copies. A legible duplicate copy of
a document shall be admissible to the same extent as the original.
(2) Exhibits. Witnesses may use existing or newly created charts,
exhibits, calendars, calculations, outlines, or other graphic materials
to summarize, illustrate, or simplify the presentation of testimony.
Subject to the Chairperson's discretion, such materials may be used with
or without being admitted into the record.
(3) Identification. All exhibits offered into the record shall be
numbered sequentially and marked with a designation identifying the
sponsor. The original of each exhibit offered into the record or marked
for identification shall be retained in the record of the meeting,
unless the Chairperson permits substitution of a copy for the original.
(4) Exchange of Exhibits. One copy of each exhibit offered into the
record shall be furnished to each of the parties and to each member of
the Board of Directors. If the Chairperson does not fix a time for the
exchange of exhibits, the parties shall exchange copies of proposed
exhibits at the earliest practicable time before the commencement of the
meeting to consider the Petition. Parties are not required to exchange
exhibits submitted as rebuttal information before the meeting commences
if submission of the exhibits is not reasonably certain at that time.
(5) Authenticity. The authenticity of all documents submitted or
exchanged as proposed exhibits prior to the meeting shall be admitted
unless written objection is filed before the commencement of the
meeting, or unless good cause is shown for failing to file such a
written objection.
(k) Sanction for obstruction of the proceedings. The Board of
Directors may
[[Page 21]]
impose sanctions it deems appropriate for violation of any applicable
provision of this subpart or any applicable law, rule, regulation, or
order, or any dilatory, frivolous, or obstructionist conduct by any
witness or counsel during the course of a meeting.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.15 General provisions.
(a) Waiver of requirements. The Managing Director may waive any
filing requirement or deadline in this subpart for good cause shown. The
Managing Director shall provide prompt notice of any such waiver to the
Board of Directors.
(b) Actions of the Managing Director subject to the authority of the
Board of Directors. The Board of Directors may overrule any action by
the Managing Director under this subpart.
(c) Withdrawal. At any time prior to the issuance by the Managing
Director of a Notice of Board Consideration pursuant to Sec. 907.12(g),
an authorized representative of a Petitioner may withdraw the Petition,
or an authorized representative of an Intervenor may withdraw the
Request to Intervene, by filing a written request to withdraw with the
Secretary to the Board. Only the Board of Directors may grant a request
to withdraw after issuance by the Managing Director of a Notice of Board
Consideration pursuant to Sec. 907.12(g). Unless otherwise agreed,
withdrawal of a Petition or Request to Intervene shall not foreclose a
Petitioner from resubmitting a Petition, or an Intervenor from
submitting a Request to Intervene, on the same or similar issues.
(d) Settlement agreement. (1) At any time during the course of
proceedings pursuant to this subpart, the Finance Board shall give
Petitioners and Intervenors the opportunity to submit offers of
settlement when the nature of the proceedings and the public interest
permit. With the approval of the Managing Director, an authorized
representative of a Petitioner or Intervenor may enter into a proposed
settlement agreement with the Finance Board disposing of some or all of
the issues presented in a Petition or Request to Intervene.
(2) No proposed settlement agreement shall be final until approved
by the Board of Directors. The Board of Directors shall consider any
proposed settlement agreement within 30 calendar days of receiving a
notice of the proposed settlement agreement. If the Board of Directors
disapproves or fails to approve a proposed settlement agreement within
30 days, the proposed settlement agreement shall be null and void and
the previously filed Petition or Request to Intervene shall be
considered in accordance with this subpart.
(3) A settlement agreement approved by the Board of Directors shall
be deemed final and binding on all parties to the agreement. At the time
a proposed settlement agreement becomes final, a Petition or Request to
Intervene previously filed by a party to the agreement shall be deemed
withdrawn as to all issues resolved in the agreement, and the parties to
the agreement shall be estopped from raising objection to those issues
or to the terms of the settlement agreement.
(e) No rights created; Finance Board not prohibited. Nothing in this
subpart shall be deemed to create any substantive or discovery right in
any party. Nothing in this subpart shall limit in any manner the right
of the Finance Board to conduct any examination or inspection of any
Bank or the Office of Finance, or to take any action with respect to a
Bank or the Office of Finance, or its directors, officers, employees or
agents, otherwise authorized by law.
(f) Exhaustion requirement. When seeking a Case-by-Case
Determination of any matter or review by the Board of Directors of any
Supervisory Determination, a Bank or the Office of Finance shall follow
the procedures in this subpart as a prerequisite to seeking judicial
review. Failure to do so shall be deemed to be a failure to exhaust all
available administrative remedies.
(g) Improper conduct prohibited. No party shall, by act or omission,
unduly burden or frustrate the efforts of the Board of Directors to
carry out its duties under the laws and regulations of
[[Page 22]]
the Finance Board. A Petitioner or Intervenor shall confine its
communications with the Board of Directors, or any individual member
thereof, concerning issues raised in a pending Petition, to written
communications for inclusion in the record of the proceeding, filed with
the Secretary to the Board.
(h) Costs. Petitioners are encouraged to contain costs associated
with the preparation and filing of Petitions and related personal
appearances, if any, at any meeting held by the Board of Directors under
this subpart. The Petitioner shall be solely responsible for all costs
associated with any such Petitions and appearances.
(i) Procedures are exclusive. All Case-by-Case Determinations by the
Board of Directors and all Reviews of Disputed Supervisory
Determinations shall be considered exclusively pursuant to the
procedures described in this subpart.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.16 Rules of practice.
In connection with any matter initiated or pending pursuant to this
part, petitioners, requestors or intervenors, or their representatives,
shall be subject to the provisions of subpart F of 12 CFR part 908. No
other provision of part 908 shall apply under this part
[67 FR 9903, Mar. 5, 2002]
PART 911_AVAILABILITY OF UNPUBLISHED INFORMATION--Table of Contents
Sec.
911.1 Definitions.
911.2 Purpose and scope.
911.3 Prohibition on unauthorized use and disclosure of unpublished
information.
911.4 Requests for unpublished information by document or testimony.
911.5 Consideration of requests.
911.6 Persons and entities with access to unpublished information.
911.7 Availability of unpublished information by testimony.
911.8 Availability of unpublished information by document.
911.9 Fees.
Authority: 5 U.S.C. 301; 12 U.S.C. 1422b(a)(1).
Source: 64 FR 44106, Aug. 13, 1999, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Sec. 911.1 Definitions.
As used in this part:
Legal proceeding means any administrative, civil, or criminal
proceeding, including a grand jury or discovery proceeding, in which
neither the Finance Board nor the United States is a party.
Supervised entity means a Bank, the Office of Finance, and the
Financing Corporation.
Unpublished information means information and documents created or
obtained by the Finance Board in connection with the performance of
official duties, whether the information or documents are in the
possession of the Finance Board, a current or former Finance Board
employee or agent, a supervised entity, a Bank member, government
agency, or some other person or entity; and information and documents
created or obtained by, or in the memory of, a current or former Finance
Board employee or agent, that was acquired in the person's official
capacity or in the course of performing official duties. It does not
include information or documents the Finance Board must disclose under
the Freedom of Information Act (5 U.S.C. 552), Privacy Act (5 U.S.C.
552a), or the Finance Board's implementing regulations (12 CFR parts 910
and 913, respectively). It also does not include information or
documents that were previously published or disclosed or are customarily
furnished to the public in the course of the performance of official
duties such as the annual report the Finance Board submits to Congress
pursuant to section 2B(d) of the Act (12 U.S.C. 1422b(d)), press
releases, Finance Board forms, and materials published in the Federal
Register.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Sec. 911.2 Purpose and scope.
(a) Purpose. The purposes of this part are to:
(1) Maintain the confidentiality and control the dissemination of
unpublished information;
[[Page 23]]
(2) Conserve the time of employees for official duties and ensure
that Finance Board resources are used in the most efficient manner;
(3) Maintain the Finance Board's impartiality among private
litigants; and
(4) Establish an orderly mechanism for the Finance Board to process
expeditiously and respond appropriately to requests for unpublished
information.
(b) Scope. (1) This part applies to a request for and use and
disclosure of unpublished information, including a request for
unpublished information by document or testimony arising out of a legal
proceeding in which neither the Finance Board nor the United States is a
party. It does not apply to a request for unpublished information in a
legal proceeding in which the Finance Board or the United States is a
party or a request for information or records the Finance Board must
disclose under the Freedom of Information Act, Privacy Act, or the
Finance Board's implementing regulations.
(2) This part does not, and may not be relied upon to create any
substantive or procedural right or benefit enforceable against the
Finance Board.
Sec. 911.3 Prohibition on unauthorized use and disclosure of
unpublished information.
(a) In general. Possession or control by any person, supervised
entity, Bank member, government agency, or other entity of unpublished
information does not constitute a waiver by the Finance Board of any
privilege or its right to control, supervise, or impose limitations on,
the subsequent use and disclosure of the information.
(b) Current and former employees and agents. Except as authorized by
this part or otherwise by the Finance Board, no current or former
Finance Board employee or agent may disclose or permit the disclosure in
any manner of any unpublished information to anyone other than a Finance
Board employee or agent for use in the performance of official duties.
(c) Other persons or entities possessing unpublished information.
(1) Except as authorized in writing by the Finance Board, no person,
supervised entity, Bank member, government agency, or other entity in
possession or control of unpublished information may disclose or permit
the use or disclosure of such information in any manner or for any
purpose.
(2) All unpublished information made available under this part
remains the property of the Finance Board and may not be used or
disclosed for any purpose other than that authorized under this part
without the prior written permission of the Finance Board.
(3) Reports of examination, supervisory correspondence, and other
unpublished information lawfully in the possession of a supervised
entity, Bank member, or government agency remains the property of the
Finance Board and may not be used or disclosed for any purpose other
than that authorized under this part without the prior written
permission of the Finance Board.
(4) Any person or entity that discloses or uses unpublished
information except as expressly authorized under this part may be
subject to the penalties provided in 18 U.S.C. 641 and other applicable
laws. A current Finance Board, Bank, or Office of Finance employee also
may be subject to administrative or disciplinary proceedings.
(d) Exception for supervised entities and Bank members. When
necessary or appropriate for business purposes, a supervised entity,
Bank member, or any director, officer, employee, or agent thereof, may
disclose unpublished information, including information contained in, or
related to, supervisory correspondence or reports of examination, to a
person or entity officially connected with the supervised entity or Bank
member as officer, director, employee, attorney, agent, auditor, or
independent auditor. A supervised entity, Bank member, or a director,
officer, employee, or agent thereof, also may disclose unpublished
information to a consultant under this paragraph if the consultant is
under a written contract to provide services to the supervised entity or
Bank member and the consultant has agreed in writing:
(1) To abide by the prohibition on the disclosure of unpublished
information contained in this section; and
(2) That it will not to use the unpublished information for any
purposes
[[Page 24]]
other than those stated in its contract to provide services to the
supervised entity or Bank member.
(e) Government agencies. The Finance Board may make reports of
examination, supervisory correspondence, and other unpublished
information available to another federal agency or a state agency for
use where necessary in the performance of the agency's official duties.
As used in this paragraph, the term agency does not include a grand
jury.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Sec. 911.4 Requests for unpublished information by document or
testimony.
(a) Form of requests. A request for unpublished information must be
submitted to the Finance Board in writing and include a detailed
description of the basis for the request. At a minimum, the request must
demonstrate that:
(1) The requested information is highly relevant to the purpose for
which it is sought;
(2) The requested information is not available from any other
source;
(3) The need for the information clearly outweighs the need to
maintain its confidentiality; and
(4) The need for the information clearly outweighs the burden on the
Finance Board to produce it.
(b) Requests for documents. If the request is for unpublished
information by document, the request must include the elements in
paragraph (a) of this section and also must adequately describe the
record or records sought by type and date.
(c) Requests for testimony. (1) If the request is for unpublished
information by testimony, the request must include the elements in
paragraph (a) of this section and also must set forth the intended use
of the testimony, a summary of the scope of the testimony requested, and
a showing that no document or the testimony of other non-Finance Board
persons, including retained experts, could be provided and used in lieu
of the testimony.
(2) Upon submitting a request to the Finance Board for unpublished
information by testimony, the requester must notify all other parties to
the matter at issue of the request.
(3) After receipt of a request for unpublished information by
testimony but before the requested testimony occurs, a party to the
matter at issue who did not join in the request and who wishes to
question the witness beyond the scope of the testimony sought by the
request, must timely submit its own request for unpublished information
pursuant to this part.
(d) Requests in connection with legal proceedings. If the request
for unpublished information arises out of a legal proceeding, the
Finance Board generally will require that the legal proceeding already
be filed before it will consider the request. In addition to the
elements in paragraph (a) of this section, requests in connection with
legal proceedings must include the caption and docket number of the
case; the forum; the name, address, phone number, and electronic mail
address, if available, of counsel to all other parties to the legal
proceeding; the requester's interest in the case; a summary of the
issues in litigation; and the reasons for the request, including the
relevance of the unpublished information and how the requested
information will contribute substantially to the resolution of one or
more specifically identified issues in the legal proceeding.
(e) Expedited requests. If a requester seeks a response in less than
60 days, the request must explain why the request was not submitted
earlier and why the Finance Board should expedite the request.
(f) Where to submit requests. Send requests for unpublished
information to the Office of General Counsel, Federal Housing Finance
Board, 1777 F Street, NW., Washington, DC 20006.
(g) Additional information--(1) From the requester. The Office of
General Counsel may consult with the requester to refine and limit the
scope of the request to make compliance less burdensome or to obtain
information necessary to make an informed determination on the request.
A requester's failure to cooperate in good faith with the Office of
General Counsel may serve as the basis for a determination not to grant
the request.
[[Page 25]]
(2) From others. The Office of General Counsel may inquire into the
facts and circumstances underlying a request for unpublished information
and rely on sources of information other than the requester, including
other parties to the matter at issue.
Sec. 911.5 Consideration of requests.
(a) Discretion. Each decision concerning the availability of
unpublished information is at the sole discretion of the Finance Board
based on a weighing of all appropriate factors. The decision is a final
agency action that exhausts administrative remedies for disclosure of
the information.
(b) Time to respond. The Finance Board generally will respond in
writing to a request for unpublished information within 60 days of
receipt absent exigent or unusual circumstances and dependent upon the
scope and completeness of the request.
(c) Factors the Finance Board may consider. The factors the Finance
Board may consider in making a determination regarding the availability
of unpublished information include:
(1) Whether and how the requested information is relevant to the
purpose for which it is sought;
(2) Whether information reasonably suited to the requester's needs
other than the requested information is available from another source;
(3) Whether the requested information is privileged;
(4) If the request is in connection with a legal proceeding, whether
the proceeding has been filed;
(5) The burden placed on the Finance Board to respond to the
request;
(6) Whether production of the information would be contrary to the
public interest; and
(7) Whether the need for the information clearly outweighs the need
to maintain the confidentiality of the information.
(d) Disclosure of unpublished information by others. When a person
or entity other than the Finance Board has a claim of privilege
regarding unpublished information and the information is in the
possession or control of that person or entity, the Finance Board, at
its sole discretion, may respond to a request for the information by
authorizing the person or entity to disclose the information to the
requester pursuant to an appropriate confidentiality order. Finance
Board authorization to disclose information under this paragraph does
not preclude the person or entity in possession of the unpublished
information from asserting its own privilege, arguing that the
information is not relevant, or asserting any other argument to protect
the information from disclosure.
(e) Notice to supervised entities and Bank members. The Finance
Board generally will notify a supervised entity or Bank member that it
is the subject of a request, unless the Finance Board, in its sole
discretion, determines that to do so would advantage or prejudice any of
the parties to the matter at issue.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]
Sec. 911.6 Persons and entities with access to unpublished information.
(a) Notice to Finance Board. Any person, including a current or
former Finance Board employee or agent, or any entity, including a
supervised entity, Bank member, or government agency that receives a
request for, or is served with a subpoena, order, or other legal process
to disclose unpublished information by document or testimony, must
immediately notify the Office of General Counsel.
(b) Response of person or entity served with request. Unless the
Finance Board has authorized in writing disclosure of the requested
information:
(1) A current or former Finance Board employee or agent or a
supervised entity that must respond to a subpoena, order, or other legal
process, must decline to disclose the requested information, citing this
part as authority.
(2) A non-Finance Board person or entity may not disclose
unpublished information unless:
(i) The requester has sought the information from the Finance Board
under this part; and
(ii) After the Finance Board or the Department of Justice has had
the opportunity to appear and oppose disclosure, a Federal court has
ordered the person or entity to disclose the information.
[[Page 26]]
(c) Finance Board response. If the Finance Board does not authorize
in writing disclosure of the requested information, the Finance Board
will provide a copy of this part to the person or entity at whose
instance the process was issued and advise that person or entity or the
court or other body that the Finance Board has prohibited disclosure of
the information under this part. The Finance Board or the Department of
Justice may intervene in the matter at issue, attempt to have the
compulsory process withdrawn, or register other appropriate objections.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]
Sec. 911.7 Availability of unpublished information by testimony.
(a) Scope. (1) The scope of permissible testimony is limited to that
set forth in the written authorization granted by the Finance Board. The
Finance Board may act to ensure that the scope of testimony provided is
consistent with the written authorization.
(2) A party to the matter at issue that did not join in a request
for unpublished information who wishes to question a witness beyond the
authorized scope must request expanded authorization under this part.
The Finance Board will attempt to render decisions on such requests in
an expedited manner.
(3) The Finance Board generally will not authorize a current
employee or agent to provide expert or opinion testimony for a private
party.
(b) Manner in which testimony is given. (1) The Finance Board
ordinarily will make the authorized testimony of a former or current
employee or agent available only through written interrogatories or
deposition. The Finance Board will not authorize testimony at a trial or
hearing unless the requester shows that properly developed deposition
testimony could not be used or would be inadequate at the trial or
hearing.
(2) If the Finance Board has authorized testimony in connection with
a legal proceeding, the requester must cause a subpoena to be served on
the employee in accordance with applicable rules of procedure, with a
copy by registered or certified mail to the Office of General Counsel.
(3) If the authorized testimony is through deposition, the
deposition ordinarily will take place at the Finance Board's offices at
a time that will avoid substantial interference with the performance of
the employee's official duties.
(4) The requester is responsible for all costs associated with an
employee's appearance, including provision of a copy of a transcript of
the deposition at the request of the Office of General Counsel. The
person whose deposition was transcribed does not waive his or her right
to review the transcript and note errors.
(c) Restrictions on use and disclosure. The Finance Board may
condition its authorization of deposition testimony on an agreement of
the parties to appropriate limitations, such as an agreement to keep the
transcript of the testimony under seal or to make the transcript
available only to the parties, the court or other body, or the jury.
Upon request made pursuant to this part or on its own initiative, the
Finance Board may authorize use of a deposition transcript in another
legal proceeding or non-adversarial matter.
(d) Responsibility of litigants. If the testimony is disclosed in
connection with a legal proceeding, the requester is responsible for:
(1) Promptly notifying all other parties to the legal proceeding of
the disclosure, and, after entry of a protective order, providing copies
of the testimony to the other parties who are signatories and subject to
the protective order; and
(2) At the conclusion of the legal proceeding, retrieving the
testimony from the court or other body's file as soon as it is no longer
required and certifying to the Finance Board that every party covered by
the protective order has destroyed the unpublished information.
Sec. 911.8 Availability of unpublished information by document.
(a) Scope. The scope of permissible document disclosure is limited
to that set forth in the written authorization granted by the Finance
Board. The Finance Board may act to ensure that
[[Page 27]]
the scope of documents provided is consistent with the written
authorization.
(b) Restrictions on use and disclosure. The Finance Board may
condition a decision to disclose unpublished information by document on
entry of a protective order satisfactory to the Finance Board by the
court or other body presiding in a legal proceeding or, in non-
adversarial matters, on a written agreement of confidentiality that
limits access of third parties to the unpublished information. In a
legal proceeding in which a protective order already has been entered,
the Finance Board may condition a decision to disclose unpublished
information upon inclusion of additional or amended provisions in the
protective order. Upon request made pursuant to this part or on its own
initiative, the Finance Board may authorize use of the documents in
another legal proceeding or non-adversarial matter.
(c) Responsibility of litigants. If the documents are disclosed in
connection with a legal proceeding, the requester is responsible for:
(1) Promptly notifying all other parties to the legal proceeding of
the disclosure, and, after entry of a protective order, providing copies
of the documents to the other parties that are signatories and subject
to the protective order; and
(2) At the conclusion of the legal proceeding, retrieving the
documents from the court or other body's file as soon as they are no
longer required and certifying to the Finance Board that every party
covered by the protective order has destroyed the unpublished
information.
(d) Certification or authentication. If the Finance Board has
authorized disclosure of unpublished information by document, it will
provide certified or authenticated copies of the document upon request.
Sec. 911.9 Fees.
(a) Fees for records search, copying, and certification. Unless
waived or reduced, a requester must pay a fee to the Finance Board for
the costs of searching, copying, authenticating, or certifying
unpublished information in accordance with 12 CFR 910.9. The Office of
Resource Management generally will bill a requester upon completion of
the production, but, in certain instances, may require a requester to
remit payment prior to providing the requested information. To pay fees
assessed under this section, a requester must deliver to the Office of
Resource Management, located at the Federal Housing Finance Board, 1777
F Street, NW., Washington, DC 20006, a check or money order made payable
to the ``Federal Housing Finance Board.''
(b) Witness fees and mileage--(1) Current Finance Board or federal
employees. If the Finance Board authorizes disclosure of unpublished
information by testimony of a current Finance Board employee or agent or
a former Finance Board employee or agent who is still in the employ of
the United States, upon completion of the testimonial appearance the
requester must remit promptly to the Office of Resource Management
payment for witness fees and mileage computed in accordance with 28
U.S.C. 1821.
(2) Former employees or agents. If the Finance Board authorizes
disclosure of unpublished information by testimony of a former Finance
Board employee or agent who is not currently employed by the United
States, upon completion of the testimonial appearance the requester must
remit promptly to the witness any witness fees or mileage due in
accordance with 28 U.S.C. 1821.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]
PART 912_INFORMATION REGARDING MEETINGS OF THE BOARD OF DIRECTORS
OF THE FEDERAL HOUSING FINANCE BOARD--Table of Contents
Sec.
912.1 Definitions.
912.2 Purpose and scope.
912.3 Open meetings.
912.4 Closed meetings.
912.5 Procedures for closing meetings.
912.6 Notice of meetings.
Authority: 5 U.S.C. 552b.
Source: 58 FR 19202, Apr. 13, 1993, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
[[Page 28]]
Effective Date Note: At 76 FR 74649, Dec. 1, 2011, part 912 was
removed, effective January 3, 2012.
Sec. 912.1 Definitions.
As used in this part:
Board Director or Director means a member of the Board of Directors.
Chairperson includes the Acting Chairperson.
Meeting means any deliberations of three or more Directors of the
Board of Directors, that determines or results in the joint conduct or
disposition of official Finance Board business, but does not include:
(1) Discussions to determine whether meetings will be open or closed
or whether information pertaining to closed meetings will be disclosed;
(2) Discussions to determine whether to schedule a meeting with less
than seven days notice, or to change the time, place or subject matter
of a scheduled meeting; and
(3) Disposition of Finance Board business by circulation of written
materials on proposed actions to individual Directors for proposed
actions, and notational voting by the individual Directors on such
proposed actions.
Public observation means the right of the general public to attend
open meetings of the Board of Directors, but does not include the right
to participate therein unless invited to do so by the Chairperson.
Secretary to the Board includes the Acting Secretary if the position
of Secretary is vacant.
Sunshine Act means the Government in the Sunshine Act (5 U.S.C.
552b).
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000.
Redesignated and amended at 67 FR 12844, Mar. 20, 2002]
Sec. 912.2 Purpose and scope.
(a) This part is issued by the Finance Board pursuant to the
Sunshine Act, which requires Federal agencies, headed by collegial
bodies, to promulgate regulations to implement its provisions. The
purpose of these regulations is to provide the public with access to
information regarding the decisionmaking processes of the Board of
Directors of the Finance Board, while protecting the privacy rights of
individuals and the ability of the Board of Directors to carry out its
responsibilities.
(b) The Board of Directors shall not jointly conduct or dispose of
official Finance Board business other than in accordance with this part.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000.
Redesignated and amended at 67 FR 12844, Mar. 20, 2002]
Sec. 912.3 Open meetings.
(a) Except as provided in Sec. 912.4, every portion of every
meeting of the Board of Directors shall be open to public observation.
(b) Unless otherwise specified in the public notice, open meetings
of the Board of Directors shall be held in the Board Room of the Finance
Board at 1777 F Street, NW., Washington, DC, at the time specified in
the public notice.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]
Sec. 912.4 Closed meetings.
(a) The Board of Directors may close a meeting, or portion thereof,
to public observation, or withhold information from the public
pertaining to a meeting, when it determines that opening the meeting, or
a portion thereof, or the public disclosure of information pertaining to
such meeting, or portion thereof, is likely to:
(1) Disclose matters that are:
(i) Specifically authorized under criteria established by an
Executive Order to be kept secret in the interests of national defense
or foreign policy; and
(ii) Are, in fact, properly classified pursuant to such Executive
Order;
(2) Relate solely to the internal personnel rules and practices of
the Finance Board;
(3) Disclose matters specifically exempt from disclosure by statute
(other than the Freedom of Information Act (5 U.S.C. 552)), provided
that such statute:
(i) Requires that the matters be withheld from the public in such a
manner as to leave no discretion on the issue; or
(ii) Establishes particular criteria for withholding matters from
the public or refers to particular types of matters to be withheld;
[[Page 29]]
(4) Disclose trade secrets or commercial or financial information
that is obtained from a person and is privileged or confidential;
(5) Involve accusing any person of a crime, or formally censuring
any person;
(6) Disclose information of a personal nature where disclosure would
constitute a clearly unwarranted invasion of personal privacy;
(7) Disclose investigatory records compiled for law enforcement
purposes, or information which if written would be contained in such
records, but only to the extent that the production of such records or
information would:
(i) Interfere with enforcement proceedings;
(ii) Deprive a person of a right to a fair trial or an impartial
adjudication;
(iii) Constitute an unwarranted invasion of personal privacy;
(iv) Disclose the identity of a confidential source and, in the case
of a record compiled by a criminal law enforcement authority in the
course of a criminal investigation or by an agency conducting a lawful
national security intelligence investigation, confidential information
furnished only by the confidential source;
(v) Disclose investigative techniques and procedures; or
(vi) Endanger the life or physical safety of law enforcement
personnel;
(8) Disclose information contained in or related to examination,
operating, or condition reports prepared by, on behalf of, or for the
use of the Finance Board or another agency responsible for the
regulation or supervision of Banks or other financial institutions;
(9) Disclose information the premature disclosure of which would be
likely to:
(i) (A) Lead to significant financial speculation in currencies,
securities, or commodities;
(B) Significantly endanger the stability of any of the Banks or any
other financial institution; or
(ii) Significantly frustrate implementation of a proposed Finance
Board action, except that this paragraph shall not apply in any instance
where the Finance Board has already disclosed to the public the content
or nature of its proposed action, or where the Finance Board is required
by law to make such disclosure on its own initiative prior to taking
final action on such proposal; or
(10) Specifically concern the issuance of a subpoena by the Board of
Directors, or the Finance Board's participation in a civil action or
proceeding, an action in a foreign court or international tribunal, or
an arbitration, or the initiation, conduct or disposition of a
particular case of formal adjudication pursuant to the procedures in 5
U.S.C. 554 or otherwise involving a determination on the record after
opportunity for a hearing.
(b) A meeting or portions of a meeting shall not be closed nor
information withheld pursuant to paragraph (a) of this section if the
Board of Directors finds that the public interest requires otherwise.
[58 FR 19202, Apr. 13, 1993. Redesignated at 65 FR 8256, Feb. 18, 2000,
as amended at 67 FR 12844, Mar. 20, 2002]
Sec. 912.5 Procedures for closing meetings.
(a) Regular procedures. (1) Except as provided in paragraph (b) of
this section, a meeting of the Board of Directors, or portion thereof,
will be closed to public observation, and information pertaining to such
meeting, or portion thereof, will be withheld from the public, when a
majority of the Board of Directors determines by recorded vote that such
meeting, or portion thereof, or the withholding of information qualifies
for exemption under Sec. 912.4, and the Board of Directors does not
find that the public interest requires otherwise.
(2) Except as provided in paragraph (a)(3) of this section, a
separate vote of the Board Directors will be taken with respect to the
closing or the withholding of information as to each meeting or portion
thereof that is proposed to be closed to public observation, or with
respect to information that is proposed to be withheld pursuant to
paragraph (a) of this section.
(3) A single vote may be taken with respect to a series of meetings,
a portion or portions of which are proposed to be closed to public
observation, or with respect to any information concerning such series
of meetings proposed to be withheld, so long as each
[[Page 30]]
meeting in such series involves the same particular matters and is
scheduled to be held no more than thirty days after the initial meeting
in such series.
(4) The vote of each Board Director taken pursuant to paragraph (a)
of this section shall be recorded, and no proxies shall be allowed.
(5) Whenever any person's interests may be directly affected by any
portion of a meeting for any of the reasons referred to in Sec.
912.4(a)(5), (6), or (7), such person may send a written request to the
Secretary to the Board asking that such portion of the meeting be closed
to public observation. The Secretary to the Board will transmit the
request to each Board Director, and upon the request of a Director, a
recorded vote will be taken of the Board of Directors whether to close
the meeting to public observation.
(6)(i) Within one day of any vote taken pursuant to paragraph (a) of
this section, the Finance Board will make publicly available through the
Secretary to the Board a written copy of such vote reflecting the vote
of each Board Director.
(ii) If a meeting or portion thereof is to be closed to public
observation, the Finance Board within one day of the vote taken pursuant
to paragraph (a) of this section will make publicly available through
the Secretary to the Board a full, written explanation of its action
closing the meeting, or portion thereof, together with a list of all
persons expected to attend the meeting and their affiliation, except to
the extent such information is determined by the Board of Directors to
be exempt from disclosure under Sec. 912.4(a).
(7) Any person may request in writing to the Secretary to the Board
that an announced closed meeting, or portion thereof, be open to public
observation. The Secretary to the Board will transmit the request to
each Board Director, and upon the request of a Director, a recorded vote
will be taken of the Board of Directors on whether to open the meeting
to public observation.
(b) Expedited procedures. (1) Since a majority of the meetings, of
the Board of Directors may be closed pursuant to Sec. 912.4(a)(4), (8),
(9)(i) or (10), 5 U.S.C. 552b(d)(4) allows the Finance Board to use
expedited procedures in closing such meetings. The following are
examples of meetings of the Board of Directors, or portions thereof,
that may be closed to the public under these expedited procedures: sale
of consolidated obligations, and review of examination, operating or
condition reports of Banks.
(2) A decision to close a meeting, or portion thereof, under
paragraph (b) of this section shall be made at the beginning of the
meeting, or portion thereof, by majority vote of the Directors.
(3)(i) The Finance Board shall maintain a record of each of the
votes taken by its Board of Directors to close a meeting, or portion
thereof, or to withhold public access to information thereof, under
paragraph (b) of this section.
(ii) A copy of such record, reflecting the vote of each Board
Director on the question of closing a meeting, or portion thereof, or
withhholding public access to information thereof, under this paragraph
(b) of this section, shall be made available to any member of the public
upon request to the Secretary to the Board.
(4) Public announcement of the time, place and subject matter of
meetings, or portions thereof, closed under this paragraph (b) of this
section shall be made at the earliest practical time.
(c) Records of closed proceedings--(1) Transcripts or electronic
recording. Except as provided in paragraph (c)(2) of this section, the
Finance Board shall make and maintain a complete transcript or verbatim
electronic recording of the proceedings at each meeting, or portion
thereof, closed to public observation under paragraph (a) or (b) of this
section.
(2) Minutes. The Finance Board may make and maintain a set of
complete minutes, in lieu of such transcript or electronic recording,
with respect to meetings, or portions thereof, closed or information
withheld under Sec. 912.4(a)(8), (9)(i) or (10). Such set of minutes
shall fully and clearly describe all matters discussed and provide a
full and accurate summary of any action taken, and the reasons therefor,
including a description of each of the views expressed on any item and
the record of any roll
[[Page 31]]
call vote (reflecting the vote of each Board Director on the question).
All documents considered in connection with any action shall be
identified in such set of minutes.
(3) Availability of Records. (i) The transcript, electronic
recording or set of minutes of an item discussed, or of testimony
received, at a meeting, shall be made available promptly to the public
through the Secretary to the Board except in cases where the Board of
Directors determines that the item or testimony contains information
which may be withheld under Sec. 912.4(a).
(ii) Copies of such transcript, electronic recording or set of
minutes, disclosing the identity of each speaker, shall be furnished to
any person at the actual cost of duplication or transcription.
(iii) The Finance Board shall maintain a complete copy of the
transcript, verbatim electronic recording or complete set of minutes of
each meeting, or portion thereof closed to the public, for at least two
years after such meeting, or until one year after the conclusion of any
proceeding of the Board of Directors with respect to which the meeting
or portion thereof was held, whichever occurs later.
(d) Legal certification for closing meeting. (1) For every meeting,
or portion thereof, of the Board of Directors closed pursuant to
paragraphs (a) or (b) of this section, the General Counsel (or in the
General Counsel's absence or incapacity the senior legal officer
available) shall publicly certify that the meeting or portion thereof
may be closed to the public pursuant to the Sunshine Act and this part,
and specifically state the relevant exemption in support thereof.
(2) A copy of the certification, together with a statement from the
Chairperson or, when appropriate, the Acting Chairperson or designee,
setting forth the time and place of the meeting and the persons present,
shall be retained in the permanent files of the Finance Board.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000; 65
FR 12844, Mar. 20, 2002]
Sec. 912.6 Notice of meetings.
(a) Scope of notice. (1) Except as provided in Sec. 912.4(a) that
such information is determined to be exempt from disclosure, each open
meeting of the Board of Directors, or each meeting closed under the
regular procedures in Sec. 912.5(a), will be preceded by public notice
as described in this section.
(2) The notices for meetings of the Board of Directors closed under
the expedited procedures pursuant to Sec. 912.5(b) will be made in
accordance with Sec. 912.5(b)(4).
(b) Content of notice. A notice of an open meeting or a meeting
closed under the regular procedures in Sec. 912.5(a) will state the
time, place, and subject matter of the meeting, whether it is to be open
or closed to the public, and the name and telephone number of the
Secretary to the Board for information about the meeting. Each such
notice shall be posted in the lobby of the Finance Board offices, and
may be made available in addition by other means or at other locations
as deemed desirable. Immediately following the posting of each such
notice, the Finance Board will publish the notice in the Federal
Register.
(c) Time--(1) Seven days notice. Except as provided in paragraph
(c)(2) of this section, a public notice of open meetings or meetings
closed under Sec. 912.5(a) will be made at least seven days in advance
of each meeting.
(2) Less than seven days notice. When a majority of the Board of
Directors determine by recorded vote that Finance Board business
requires a meeting to be called at any earlier date, the seven-day prior
notice rule may be suspended and notice shall be made at the earliest
practicable time.
(d) Amendment of notice--(1) Time and place. A change in the time or
place of a meeting following public notice may be made only if announced
at the earliest practicable time.
(2) Subject matter. A change in the subject matter of a meeting or a
re-determination to open or close a meeting, or portions thereof, may be
made, after public notice, only if:
(i) At least a majority of the Board Directors determines by
recorded vote
[[Page 32]]
that Finance Board business so requires and that no earlier notice of
the change was possible; and
(ii) The Finance Board publicly announces the change and the vote of
each Board Director by posting a notice thereof in the lobby of the
Finance Board offices at the earliest practicable time.
(3) Timing of amendment. A public announcement of a change in either
the time, place or subject matter of a meeting may be made after the
commencement of the meeting affected.
(4) Publication of amendment. Each change to a notice of a meeting
will be published in the Federal Register, following the Finance Board's
public announcement of the change.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000; 67
FR 12845, Mar. 20, 2002]
[[Page 33]]
SUBCHAPTER C_GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS
PART 914_DATA AVAILABILITY AND REPORTING--Table of Contents
Sec.
914.1 Regulatory Report defined.
914.2 Filing Regulatory Reports.
914.3 [Reserved]
Authority: 12 U.S.C. 1440 and 4526.
Source: 71 FR 35499, June 21, 2006, unless otherwise noted.
Sec. 914.1 Regulatory Report defined.
(a) Definition. Regulatory Report means any report of raw or summary
data needed to evaluate the safe and sound condition and operations of a
Bank or to determine compliance with any:
(1) Provision in the Act or other law, order, rule, or regulation;
(2) Condition imposed in writing by the Finance Board in connection
with the granting of any application or other request by a Bank; or
(3) Written agreement entered into between the Finance Board and a
Bank.
(b) Examples. Regulatory Report includes:
(1) Call reports and reports of instrument-level risk modeling data;
(2) Reports related to a Bank's housing mission achievement, such as
reports related to AMA, AHP, CIP, and other CICA programs; and
(3) Reports submitted in response to requests to one or more Banks
for information on a nonrecurring basis.
Sec. 914.2 Filing Regulatory Reports.
Each Bank shall file Regulatory Reports with the Finance Board in
accordance with the forms, instructions, and schedules issued by the
Finance Board from time to time. If no regularly scheduled reporting
dates are established, Regulatory Reports shall be filed as requested by
the Finance Board.
Sec. 914.3 [Reserved]
PART 917_POWERS AND RESPONSIBILITIES OF BANK BOARDS OF DIRECTORS
AND SENIOR MANAGEMENT--Table of Contents
Sec.
917.1 Definitions.
917.2 General authorities and duties of Bank boards of directors.
917.3 Risk management.
917.4 Bank Member Products Policy.
917.5 Strategic business plan.
917.6 Internal control system.
917.7 Audit committees.
917.8 Budget preparation.
917.9 Dividends.
917.10 Bank bylaws.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1427, 1432(a),
1436(a), 1440.
Source: 65 FR 25274, May 1, 2000, unless otherwise noted.
Sec. 917.1 Definitions.
As used in this part:
Business risk means the risk of an adverse impact on a Bank's
profitability resulting from external factors as may occur in both the
short and long run.
Community financial institution has the meaning set forth in Sec.
925.1 of this chapter.
Contingency liquidity means the sources of cash a Bank may use to
meet its operational requirements when its access to the capital markets
is impeded, and includes:
(1) Marketable assets with a maturity of one year or less;
(2) Self-liquidating assets with a maturity of seven days or less;
(3) Assets that are generally accepted as collateral in the
repurchase agreement market; and
(4) Irrevocable lines of credit from financial institutions rated
not lower than the second highest credit rating category by an NRSRO.
Credit risk means the risk that the market value, or estimated fair
value if market value is not available, of an obligation will decline as
a result of deterioration in creditworthiness.
[[Page 34]]
Immediate family member means a parent, sibling, spouse, child,
dependent, or any relative sharing the same residence.
Internal auditor means the individual responsible for the internal
audit function at the Bank.
Liquidity risk means the risk that a Bank will be unable to meet its
obligations as they come due or meet the credit needs of its members and
associates in a timely and cost-efficient manner.
Market risk means the risk that the market value, or estimated fair
value if market value is not available, of a Bank's portfolio will
decline as a result of changes in interest rates, foreign exchange
rates, equity and commodity prices.
Operational liquidity means sources of cash from both a Bank's
ongoing access to the capital markets and its holding of liquid assets
to meet operational requirements in a Bank's normal course of business.
Operations risk means the risk of an unexpected loss to a Bank
resulting from human error, fraud, unenforceability of legal contracts,
or deficiencies in internal controls or information systems.
Reportable conditions means matters that represent significant
deficiencies in the design or operation of the internal control system
that could adversely affect a Bank's ability to record, process,
summarize and report financial data consistent with the assertions of
management.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.2 General authorities and duties of Bank boards of directors.
(a) Management of a Bank. The management of each Bank shall be
vested in its board of directors. While Bank boards of directors may
delegate the execution of operational functions to Bank personnel, the
ultimate responsibility of each Bank's board of directors for that
Bank's management is non-delegable.
(b) Duties of Bank directors. Each Bank director shall have the duty
to:
(1) Carry out his or her duties as director in good faith, in a
manner such director believes to be in the best interests of the Bank,
and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances;
(2) Administer the affairs of the Bank fairly and impartially and
without discrimination in favor of or against any member;
(3) At the time of appointment or election, or within a reasonable
time thereafter, have a working familiarity with basic finance and
accounting practices, including the ability to read and understand the
Bank's balance sheet and income statement and to ask substantive
questions of management and the internal and external auditors; and
(4) Direct the operations of the Bank in conformity with the
requirements set forth in the Act and this chapter.
(c) Authority regarding staff and outside consultants. (1) In
carrying out its duties and responsibilities under the Act and this
chapter, each Bank's board of directors and all committees thereof shall
have authority to retain staff and outside counsel, independent
accountants, or other outside consultants at the expense of the Bank.
(2) Bank staff providing services to the board of directors or any
committee of the board under paragraph (c)(1) of this section may be
required by the board of directors or such committee to report directly
to the board or such committee, as appropriate.
Sec. 917.3 Risk management.
(a) Risk management policy--(1) Adoption. Beginning August 29, 2000,
each Bank's board of directors shall have in effect at all times a risk
management policy that addresses the Bank's exposure to credit risk,
market risk, liquidity risk, business risk and operations risk and that
conforms to the requirements of paragraph (b) of this section and to all
applicable Finance Board regulations and policies.
(2) Review and compliance. Each Bank's board of directors shall:
(i) Review the Bank's risk management policy at least annually;
(ii) Amend the risk management policy as appropriate;
(iii) Re-adopt the Bank's risk management policy, including interim
[[Page 35]]
amendments, not less often than every three years; and
(iv) Ensure that policies and procedures are in place that are
reasonably designed to achieve continuing Bank compliance with the risk
management policy.
(b) Risk management policy requirements. In addition to meeting any
other requirements set forth in this chapter, each Bank's risk
management policy shall:
(1) After the Finance Board has approved a Bank's capital plan, but
before the plan takes effect, the Bank shall amend its risk management
policy to describe the specific steps the Bank will take to comply with
its capital plan and to include specific target ratios of total capital
and permanent capital to total assets at which the Bank intends to
operate. The target operating capital-to-assets ratios to be specified
in the risk management policy shall be in excess of the minimum leverage
and risk-based capital ratios and may be expressed as a range of ratios
or as a single ratio;
(2) Set forth the Bank's tolerance levels for the market and credit
risk components; and
(3) Set forth standards for the Bank's management of each risk
component, including but not limited to:
(i) Regarding credit risk arising from all secured and unsecured
transactions, standards and criteria for, and timing of, periodic
assessment of the creditworthiness of issuers, obligors, or other
counterparties including identifying the criteria for selecting dealers,
brokers and other securities firms with which the Bank may execute
transactions;
(ii) Regarding market risk, standards for the methods and models
used to measure and monitor such risk;
(iii) Regarding day-to-day operational liquidity needs and
contingency liquidity needs:
(A) An enumeration of specific types of investments to be held for
such liquidity purposes; and
(B) The methodology to be used for determining the Bank's
operational and contingency liquidity needs;
(iv) Regarding operations risk, standards for an effective internal
control system, including periodic testing and reporting; and
(v) Regarding business risk, strategies for mitigating such risk,
including contingency plans where appropriate.
(c) Risk assessment. The senior management of each Bank shall
perform, at least annually, a risk assessment that is reasonably
designed to identify and evaluate all material risks, including both
quantitative and qualitative aspects, that could adversely affect the
achievement of the Bank's performance objectives and compliance
requirements. The risk assessment shall be in written form and shall be
reviewed by the Bank's board of directors promptly upon its completion.
[65 FR 25274, May 1, 2000, as amended at 66 FR 8308, Jan. 30, 2001; 67
FR 12846, Mar. 20, 2002]
Sec. 917.4 Bank Member Products Policy.
(a) Adoption and review of member products policy--(1) Adoption.
Beginning November 15, 2000, each Bank's board of directors shall have
in effect at all times a policy that addresses the Bank's management of
products offered by the Bank to members and housing associates,
including but not limited to advances, standby letters of credit and
acquired member assets, consistent with the requirements of the Act,
paragraph (b) of this section, and all applicable Finance Board
regulations and policies.
(2) Review and compliance. Each Bank's board of directors shall:
(i) Review the Bank's member products policy annually;
(ii) Amend the member products policy as appropriate; and
(iii) Re-adopt the member products policy, including interim
amendments, not less often than every three years.
(b) Member products policy requirements. In addition to meeting any
other requirements set forth in this chapter, each Bank's member
products policy shall:
(1) Address credit underwriting criteria to be applied in evaluating
applications for advances, standby letters of credit, and renewals;
(2) Address appropriate levels of collateralization, valuation of
collateral and discounts applied to collateral
[[Page 36]]
values for advances and standby letters of credit;
(3) Address advances-related fees to be charged by each Bank,
including any schedules or formulas pertaining to such fees;
(4) Address standards and criteria for pricing member products,
including differential pricing of advances pursuant to Sec. 950.5(b)(2)
of this chapter, and criteria regarding the pricing of standby letters
of credit, including any special pricing provisions for standby letters
of credit that facilitate the financing of projects that are eligible
for any of the Banks' CICA programs under part 952 of this chapter;
(5) Provide that, for any draw made by a beneficiary under a standby
letter of credit, the member will be charged a processing fee calculated
in accordance with the requirements of Sec. 975.6(b) of this chapter;
(6) Address the maintenance of appropriate systems, procedures and
internal controls; and
(7) Address the maintenance of appropriate operational and personnel
capacity.
[65 FR 44426, July 18, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.5 Strategic business plan.
(a) Adoption of strategic business plan. Beginning on July 30, 2000,
each Bank's board of directors shall have in effect at all times a
strategic business plan that describes how the business activities of
the Bank will achieve the mission of the Bank consistent with part 940
of this chapter. Specifically, each Bank's strategic business plan
shall:
(1) Enumerate operating goals and objectives for each major business
activity and for all new business activities, which must include plans
for maximizing activities that enhance the carrying out of the mission
of the Bank, consistent with part 940 of this chapter;
(2) Discuss how the Bank will:
(i) Address credit needs and market opportunities identified through
ongoing market research and consultations with members, associates and
public and private organizations; and
(ii) Notify members and associates of relevant programs and
initiatives;
(3) Establish quantitative performance goals for Bank products
related to multi-family housing, small business, small farm and small
agri-business lending;
(4) Describe any proposed new business activities or enhancements of
existing activities; and
(5) Be supported by appropriate and timely research and analysis of
relevant market developments and member and associate demand for Bank
products and services.
(b) Review and monitoring. Each Bank's board of directors shall:
(1) Review the Bank's strategic business plan at least annually;
(2) Amend the strategic business plan as appropriate;
(3) Re-adopt the Bank's strategic business plan, including interim
amendments, not less often than every three years; and
(4) Establish management reporting requirements and monitor
implementation of the strategic business plan and the operating goals
and objectives contained therein.
(c) Report to Finance Board. Each Bank shall submit to the Finance
Board annually a report analyzing and describing the Bank's performance
in achieving the goals described in paragraph (a)(3) of this section.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.6 Internal control system.
(a) Establishment and maintenance. (1) Each Bank shall establish and
maintain an effective internal control system that addresses:
(i) The efficiency and effectiveness of Bank activities;
(ii) The safeguarding of Bank assets;
(iii) The reliability, completeness and timely reporting of
financial and management information and transparency of such
information to the Bank's board of directors and to the Finance Board;
and
(iv) Compliance with applicable laws, regulations, policies,
supervisory determinations and directives of the Bank's board of
directors and senior management.
(2) Ongoing internal control activities necessary to maintain the
internal
[[Page 37]]
control system required under paragraph (a)(1) of this section shall
include, but are not limited to:
(i) Top level reviews by the Bank's board of directors and senior
management, including review of financial presentations and performance
reports;
(ii) Activity controls, including review of standard performance and
exception reports by department-level management on an appropriate
periodic basis;
(iii) Physical and procedural controls to safeguard, and prevent the
unauthorized use of, assets;
(iv) Monitoring for compliance with the risk tolerance limits set
forth in the Bank's risk management policy;
(v) Any required approvals and authorizations for specific
activities; and
(vi) Any required verifications and reconciliations for specific
activities.
(b) Internal control responsibilities of Banks' boards of directors.
Each Bank's board of directors shall ensure that the internal control
system required under paragraph (a)(1) of this section is established
and maintained, and shall oversee senior management's implementation of
such a system on an ongoing basis, by:
(1) Conducting periodic discussions with senior management regarding
the effectiveness of the internal control system;
(2) Ensuring that an internal audit of the internal control system
is performed annually and that such annual audit is reasonably designed
to be effective and comprehensive;
(3) Requiring that internal control deficiencies be reported to the
Bank's board of directors in a timely manner and that such deficiencies
are addressed promptly;
(4) Conducting a timely review of evaluations of the effectiveness
of the internal control system made by internal auditors, external
auditors and Finance Board examiners;
(5) Directing senior management to address promptly and effectively
recommendations and concerns expressed by internal auditors, external
auditors and Finance Board examiners regarding weaknesses in the
internal control system;
(6) Reporting any internal control deficiencies found, and the
corrective action taken, to the Finance Board in a timely manner;
(7) Establishing, documenting and communicating an organizational
structure that clearly shows lines of authority within the Bank,
provides for effective communication throughout the Bank, and ensures
that there are no gaps in the lines of authority;
(8) Reviewing all delegations of authority to specific personnel or
committees and requiring that such delegations state the extent of the
authority and responsibilities delegated; and
(9) Establishing reporting requirements, including specifying the
nature and frequency of reports it receives.
(c) Internal control responsibilities of Banks' senior management.
Each Bank's senior management shall be responsible for carrying out the
directives of the Bank's board of directors, including the
establishment, implementation and maintenance of the internal control
system required under paragraph (a)(1) of this section, by:
(1) Establishing, implementing and effectively communicating to Bank
personnel policies and procedures that are adequate to ensure that
internal control activities necessary to maintain an effective internal
control system, including the activities enumerated in paragraph (a)(2)
of this section, are an integral part of the daily functions of all Bank
personnel;
(2) Ensuring that all Bank personnel fully understand and comply
with all policies, procedures and legal requirements applicable to their
positions and responsibilities;
(3) Ensuring that there is appropriate segregation of duties among
Bank personnel and that personnel are not assigned conflicting
responsibilities;
(4) Establishing effective paths of communication upward, downward
and across the organization in order to ensure that Bank personnel
receive necessary and appropriate information, including:
(i) Information relating to the operational policies and procedures
of the Bank;
(ii) Information relating to the actual operational performance of
the Bank;
[[Page 38]]
(iii) Adequate and comprehensive internal financial, operational and
compliance data; and
(iv) External market information about events and conditions that
are relevant to decision making;
(5) Developing and implementing procedures that translate the major
business strategies and policies established by the Bank's board of
directors into operating standards;
(6) Ensuring adherence to the lines of authority and responsibility
established by the Bank's board of directors;
(7) Overseeing the implementation and maintenance of management
information and other systems;
(8) Establishing and implementing an effective system to track
internal control weaknesses and the actions taken to correct them; and
(9) Monitoring and reporting to the Bank's board of directors the
effectiveness of the internal control system on an ongoing basis.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.7 Audit committees.
(a) Establishment. The board of directors of each Bank shall
establish an audit committee, consistent with the requirements set forth
in this section.
(b) Composition. (1) The audit committee shall comprise five or more
persons drawn from the Bank's board of directors, each of whom shall
meet the criteria of independence set forth in paragraph (c) of this
section.
(2) The audit committee shall include a balance of representatives
of:
(i) Community financial institutions and other members; and
(ii) Appointive and elective directors of the Bank.
(3) The terms of audit committee members shall be appropriately
staggered so as to provide for continuity of service.
(4) At least one member of the audit committee shall have extensive
accounting or related financial management experience.
(c) Independence. Any member of the Bank's board of directors shall
be considered to be sufficiently independent to serve as a member of the
audit committee if that director does not have a disqualifying
relationship with the Bank or its management that would interfere with
the exercise of that director's independent judgment. Such disqualifying
relationships include, but are not limited to:
(1) Being employed by the Bank in the current year or any of the
past five years;
(2) Accepting any compensation from the Bank other than compensation
for service as a board director;
(3) Serving or having served in any of the past five years as a
consultant, advisor, promoter, underwriter, or legal counsel of or to
the Bank; or
(4) Being an immediate family member of an individual who is, or has
been in any of the past five years, employed by the Bank as an executive
officer.
(d) Charter. (1) The audit committee of each Bank shall adopt, and
the Bank's board of directors shall approve, a formal written charter
that specifies the scope of the audit committee's powers and
responsibilities, as well as the audit committee's structure, processes
and membership requirements.
(2) The audit committee and the board of directors of each Bank
shall:
(i) Review, assess the adequacy of and, where appropriate, amend the
Bank's audit committee charter on an annual basis;
(ii) Amend the audit committee charter as appropriate; and
(iii) Re-adopt and re-approve, respectively, the Bank's audit
committee charter not less often than every three years.
(3) Each Bank's audit committee charter shall:
(i) Provide that the audit committee has the responsibility to
select, evaluate and, where appropriate, replace the internal auditor
and that the internal auditor may be removed only with the approval of
the audit committee;
(ii) Provide that the internal auditor shall report directly to the
audit committee on substantive matters and that the internal auditor is
ultimately accountable to the audit committee and board of directors;
and
(iii) Provide that both the internal auditor and the external
auditor shall have unrestricted access to the audit committee without
the need for any
[[Page 39]]
prior management knowledge or approval.
(e) Duties. Each Bank's audit committee shall have the duty to:
(1) Direct senior management to maintain the reliability and
integrity of the accounting policies and financial reporting and
disclosure practices of the Bank;
(2) Review the basis for the Bank's financial statements and the
external auditor's opinion rendered with respect to such financial
statements (including the nature and extent of any significant changes
in accounting principles or the application therein) and ensure that
policies are in place that are reasonably designed to achieve disclosure
and transparency regarding the Bank's true financial performance and
governance practices;
(3) Oversee the internal audit function by:
(i) Reviewing the scope of audit services required, significant
accounting policies, significant risks and exposures, audit activities
and audit findings;
(ii) Assessing the performance and determining the compensation of
the internal auditor; and
(iii) Reviewing and approving the internal auditor's work plan;
(4) Oversee the external audit function by:
(i) Approving the external auditor's annual engagement letter;
(ii) Reviewing the performance of the external auditor; and
(iii) Making recommendations to the Bank's board of directors
regarding the appointment, renewal, or termination of the external
auditor;
(5) Provide an independent, direct channel of communication between
the Bank's board of directors and the internal and external auditors;
(6) Conduct or authorize investigations into any matters within the
audit committee's scope of responsibilities;
(7) Ensure that senior management has established and is maintaining
an adequate internal control system within the Bank by:
(i) Reviewing the Bank's internal control system and the resolution
of identified material weaknesses and reportable conditions in the
internal control system, including the prevention or detection of
management override or compromise of the internal control system; and
(ii) Reviewing the programs and policies of the Bank designed to
ensure compliance with applicable laws, regulations and policies and
monitoring the results of these compliance efforts;
(8) Review the policies and procedures established by senior
management to assess and monitor implementation of the Bank's strategic
business plan and the operating goals and objectives contained therein;
and
(9) Report periodically its findings to the Bank's board of
directors.
(f) Meetings. The audit committee shall prepare written minutes of
each audit committee meeting.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.8 Budget preparation.
(a) Adoption of budgets. Each Bank's board of directors shall be
responsible for the adoption of an annual operating expense budget and a
capital expenditures budget for the Bank, and any subsequent amendments
thereto, consistent with the requirements of the Act, this section,
other regulations and policies of the Finance Board, and with the Bank's
responsibility to protect both its members and the public interest by
keeping its costs to an efficient and effective minimum.
(b) No delegation of budget authority. A Bank's board of directors
may not delegate the authority to approve the Bank's annual budgets, or
any subsequent amendments thereto, to Bank officers or other Bank
employees.
(c) Interest rate scenario. A Bank's annual budgets shall be
prepared based upon an interest rate scenario as determined by the Bank.
(d) Board approval for deviations. A Bank may not exceed its total
annual operating expense budget or its total annual capital expenditures
budget without prior approval by the Bank's board of directors of an
amendment to such budget.
Sec. 917.9 Dividends.
(a) A Bank's board of directors may declare and pay a dividend only
from previously retained earnings or current net earnings and only in
accordance
[[Page 40]]
with any other applicable limitations on dividends set forth in the Act
or this chapter. Dividends on such capital stock shall be computed
without preference.
(b) A Bank's board of directors may not declare or pay a dividend
based on projected or anticipated earnings and may not declare or pay a
dividend if the par value of the Bank's stock is impaired or is
projected to become impaired after paying such dividend.
(c) The requirement in paragraph (a) of this section that dividends
be computed without preference shall cease to apply to any Bank that has
established any dividend preferences for 1 or more classes or subclasses
of its capital stock as part of its approved capital plan, as of the
date on which the capital plan takes effect.
[71 FR 78051, Dec. 28, 2006]
Sec. 917.10 Bank bylaws.
A Bank's board of directors shall have in effect at all times bylaws
governing the manner in which the Bank administers its affairs and such
bylaws shall be consistent with applicable laws and regulations as
administered by the Finance Board.
SUBCHAPTER D_FEDERAL HOME LOAN BANK MEMBERS AND HOUSING ASSOCIATES
[RESERVED]
[[Page 41]]
SUBCHAPTER E_FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL
STANDARDS
PART 930_DEFINITIONS APPLYING TO RISK MANAGEMENT AND CAPITAL
REGULATIONS--Table of Contents
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1436(a), 1440,
1443, and 1446.
Sec. 930.1 Definitions.
As used in this subchapter:
Affiliated counterparty means a counterparty of a Bank that
controls, is controlled by or is under common control with another
counterparty of the Bank. For the purposes of this definition only,
direct or indirect ownership (including beneficial ownership) of more
than 50 percent of the voting securities or voting interests of an
entity constitutes control.
Certain drawdown means a legally binding agreement that commits the
Bank to make an advance or acquire a loan, at or by a specified future
date.
Charges against the capital of the Bank means an other than
temporary decline in the Bank's total equity that causes the value of
total equity to fall below the Bank's aggregate capital stock amount.
Class A stock means capital stock issued by a Bank, including
subclasses, that has the characteristics specified by Sec. 931.1(a) of
this subchapter.
Class B stock means capital stock issued by a Bank, including
subclasses, that has the characteristics specified by Sec. 931.1(b) of
this subchapter.
Contingency liquidity means the sources of cash a Bank may use to
meet its operational requirements when its access to the capital markets
is impeded, and includes:
(1) Marketable assets with a maturity of one year or less;
(2) Self-liquidating assets with a maturity of seven days or less;
(3) Assets that are generally accepted as collateral in the
repurchase agreement market; and
(4) Irrevocable lines of credit from financial institutions rated
not lower than the second highest credit rating category by an NRSRO.
Credit derivative contract means a derivative contract that
transfers credit risk.
Credit risk means the risk that the market value, or estimated fair
value if market value is not available, of an obligation will decline as
a result of deterioration in creditworthiness.
Derivative contract means generally a financial contract the value
of which is derived from the values of one or more underlying assets,
reference rates, or indices of asset values, or credit-related events.
Derivative contracts include interest rate, foreign exchange rate,
equity, precious metals, commodity, and credit contracts, and any other
instruments that pose similar risks.
Exchange rate contracts include cross-currency interest-rate swaps,
forward foreign exchange rate contracts, currency options purchased, and
any similar instruments that give rise to similar risks.
General allowance for losses means an allowance established by a
Bank in accordance with GAAP for losses, but which does not include any
amounts held against specific assets of the Bank.
Government Sponsored Enterprise, or GSE, means a United States
Government-sponsored agency or instrumentality originally established or
chartered to serve public purposes specified by the United States
Congress, but whose obligations are not obligations of the United States
and are not guaranteed by the United States.
Interest rate contracts include, single currency interest-rate
swaps, basis swaps, forward rate agreements, interest-rate options, and
any similar instrument that gives rise to similar risks, including when-
issued securities.
Investment grade means:
(1) A credit quality rating in one of the four highest credit rating
categories by an NRSRO and not below the fourth highest rating category
by any NRSRO; or
(2) If there is no credit quality rating by an NRSRO, a
determination by a
[[Page 42]]
Bank that the issuer, asset or instrument is the credit equivalent of
investment grade using credit rating standards available from an NRSRO
or other similar standards.
Market risk means the risk that the market value, or estimated fair
value if market value is not available, of a Bank's portfolio will
decline as a result of changes in interest rates, foreign exchange
rates, equity and commodity prices.
Marketable means, with respect to an asset, that the asset can be
sold with reasonable promptness at a price that corresponds reasonably
to its fair value.
Market value at risk is the loss in the market value of a Bank's
portfolio measured from a base line case, where the loss is estimated in
accordance with Sec. 932.5 of this chapter.
Minimum investment means the minimum amount of Class A and/or Class
B stock that a member is required to own in order to be a member of a
Bank and in order to obtain advances and to engage in other business
activities with the Bank in accordance with Sec. 931.3 of this chapter.
Operations risk means the risk of an unexpected loss to a Bank
resulting from human error, fraud, unenforceability of legal contracts,
or deficiencies in internal controls or information systems.
Permanent capital means the retained earnings of a Bank, determined
in accordance with GAAP, plus the amount paid-in for the Bank's Class B
stock.
Redeem or Redemption means the acquisition by a Bank of its
outstanding Class A or Class B stock at par value following the
expiration of the six-month or five-year statutory redemption period,
respectively, for the stock.
Regulatory risk-based capital requirement means the amount of
permanent capital that a Bank is required to maintain in accordance with
Sec. 932.3 of this chapter.
Regulatory total capital requirement means the amount of total
capital that a Bank is required to maintain in accordance with Sec.
932.2 of this chapter.
Repurchase means the acquisition by a Bank of excess stock prior to
the expiration of the six-month or five-year statutory redemption period
for the stock.
Repurchase agreement means an agreement between a seller and a buyer
whereby the seller agrees to repurchase a security or similar securities
at an agreed upon price, with or without a stated time for repurchase.
Sales of federal funds subject to a continuing contract means an
overnight federal funds loan that is automatically renewed each day
unless terminated by either the lender or the borrower.
Total assets means the total assets of a Bank, as determined in
accordance with GAAP.
Total capital of a Bank means the sum of permanent capital, the
amounts paid-in for Class A stock, the amount of any general allowance
for losses, and the amount of other instruments identified in a Bank's
capital plan that the Finance Board has determined to be available to
absorb losses incurred by such Bank.
Walkaway clause means a provision in a bilateral netting contract
that permits a nondefaulting counterparty to make a lower payment than
it would make otherwise under the bilateral netting contract, or no
payment at all, to a defaulter or the estate of a defaulter, even if the
defaulter or the estate of the defaulter is a net creditor under the
bilateral netting contract.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54107, Oct. 26, 2001; 66
FR 66728, Dec. 27, 2001; 67 FR 12849, Mar. 20, 2002; 71 FR 78051, Dec.
28, 2006]
PART 931_FEDERAL HOME LOAN BANK CAPITAL STOCK--Table of Contents
Sec.
931.1 Classes of capital stock.
931.2 Issuance of capital stock.
931.3 Minimum investment in capital stock.
931.4 Dividends.
931.5 Liquidation, merger, or consolidation.
931.6 Transfer of capital stock.
931.7 Redemption and repurchase of capital stock.
931.8 Other restrictions on the repurchase or redemption of Bank stock.
931.9 Transition provision.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443, 1446.
Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.
[[Page 43]]
Sec. 931.1 Classes of capital stock.
The authorized capital stock of a Bank shall consist of the
following instruments:
(a) Class A stock, which shall:
(1) Have a par value as determined by the board of directors of the
Bank and stated in the Bank's capital plan;
(2) Be issued, redeemed, and repurchased only at its stated par
value; and
(3) Be redeemable in cash only on six-months written notice to the
Bank.
(b) Class B stock, which shall:
(1) Have a par value as determined by the board of directors of the
Bank and stated in the Bank's capital plan;
(2) Be issued, redeemed, and repurchased only at its stated par
value;
(3) Be redeemable in cash only on five-years written notice to the
Bank; and
(4) Confer an ownership interest in the retained earnings, surplus,
undivided profits, and equity reserves of the Bank; and
(c) Any one or more subclasses of Class A or Class B stock, each of
which may have different rights, terms, conditions, or preferences as
may be authorized in the Bank's capital plan, provided, however, that
each subclass of stock shall have all of the characteristics of its
respective class, as specified in paragraph (a) or (b) of this section.
Sec. 931.2 Issuance of capital stock.
(a) In general. A Bank may issue either one or both classes of its
capital stock (including subclasses), as authorized by Sec. 931.1, and
shall not issue any other class of capital stock. A Bank shall issue its
stock only to its members and only in book-entry form, and the Bank
shall act as its own transfer agent. All capital stock shall be issued
in accordance with the Bank's capital plan.
(b) Initial issuance. In connection with the initial issuance of its
Class A and/or Class B stock (or any subclass of either), a Bank may
issue such stock in exchange for its existing stock, through a
conversion of its existing stock, or through any other fair and
equitable transaction or method of distribution. As part of its initial
stock issuance transaction, a Bank may distribute any portion of its
then-existing unrestricted retained earnings as shares of Class B stock.
Sec. 931.3 Minimum investment in capital stock.
(a) A Bank shall require each member to maintain a minimum
investment in the capital stock of the Bank, both as a condition to
becoming and remaining a member of the Bank and as a condition to
transacting business with the Bank or obtaining advances and other
services from the Bank. The amount of the required minimum investment
shall be determined in accordance with the Bank's capital plan and shall
be sufficient to ensure that the Bank remains in compliance with its
minimum capital requirements. A Bank shall require each member to
maintain its minimum investment for as long as the institution remains a
member of the Bank and for as long as the member engages in any activity
with the Bank against which the Bank is required to maintain capital.
(b) A Bank may establish the minimum investment required of each
member as a percentage of the total assets of the member, as a
percentage of the advances outstanding to the member, as a percentage of
any other business activity conducted with the member, on any other
basis that is approved by the Finance Board, or any combination thereof.
(c) A Bank may require each member to satisfy the minimum investment
requirement through the purchase of either Class A or Class B stock, or
through the purchase of one or more combinations of Class A and Class B
stock that have been authorized by the board of directors of the Bank in
its capital plan. A Bank, in its discretion, may establish a lower
minimum investment for members that invest in Class B stock than is
required for members that invest in Class A stock, provided that such
reduced investment provides sufficient capital for the Bank to remain in
compliance with its minimum capital requirements.
(d) Each member of a Bank shall at all times maintain an investment
in the capital stock of the Bank in an amount that is sufficient to
satisfy the minimum investment required for that
[[Page 44]]
member in accordance with the Bank's capital plan.
[66 FR 8310, Jan. 30, 2001, as amended at 70 FR 9510, Feb. 28, 2005]
Sec. 931.4 Dividends.
(a) In general. A Bank may pay dividends on Class A or Class B
stock, including any subclasses of such stock, only out of previously
retained earnings or current net earnings, and shall declare and pay
dividends only as provided by its capital plan. The capital plan may
establish different dividend rates or preferences for each class or
subclass of stock, which may include a dividend that tracks the economic
performance of certain Bank assets, such as Acquired Member Assets. A
member, including a member that has provided the Bank with a notice of
intent to withdraw from membership or one whose membership is otherwise
terminated, shall be entitled to receive any dividends that a Bank
declares on its capital stock while the member owns the stock.
(b) Limitation on payment of dividends. In no event shall a Bank
declare or pay any dividend on its capital stock if after doing so the
Bank would fail to meet any of its minimum capital requirements, nor
shall a Bank that is not in compliance with any of its minimum capital
requirements declare or pay any dividend on its capital stock.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 931.5 Liquidation, merger, or consolidation.
The respective rights of the Class A and Class B stockholders, in
the event that the Bank is liquidated, or is merged or otherwise
consolidated with another Bank, shall be determined in accordance with
the capital plan of the Bank.
Sec. 931.6 Transfer of capital stock.
A Bank in its capital plan may allow a member to transfer any excess
capital stock of the Bank to another member of that Bank or to an
institution that has been approved for membership in that Bank and that
has satisfied all conditions for becoming a member, other than the
purchase of the minimum amount of Bank stock that it is required to hold
as a condition of membership. Any such stock transfers shall be at par
value and shall be effective upon being recorded on the appropriate
books and records of the Bank. The Bank may, in its capital plan,
require a member to receive the approval of the Bank before a transfer
of the Bank's stock, as allowed under this section, is completed.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 931.7 Redemption and repurchase of capital stock.
(a) Redemption. A member may have its capital stock in a Bank
redeemed by providing written notice to the Bank in accordance with this
section. For Class A stock, a member shall provide six-months written
notice, and for Class B stock a member shall provide five-years written
notice. The notice shall indicate the number of shares of Bank stock
that are to be redeemed, and a member shall not have more than one
notice of redemption outstanding at one time for the same shares of Bank
stock. A member may cancel a notice of redemption by so informing the
Bank in writing, and the Bank may impose a fee (to be specified in its
capital plan) on any member that cancels a pending notice of redemption.
At the expiration of the applicable notice period, the Bank shall pay
the stated par value of that stock to the member in cash. A request by a
member (whose membership has not been terminated) to redeem specific
shares of stock shall automatically be cancelled if the Bank is
prevented from redeeming the member's stock by paragraph (c) of this
section within five business days from the end of the expiration of the
applicable redemption notice period because the member would fail to
maintain its minimum investment in the stock of the Bank after such
redemption. The automatic cancellation of a member's redemption request
shall have the same effect as if the member had cancelled its notice to
redeem stock prior to the end of the redemption notice period, and a
Bank may impose a fee (to be specified in its capital plan) for
automatic cancellation of a redemption request. A Bank
[[Page 45]]
shall not be obligated to redeem its capital stock other than in
accordance with this paragraph.
(b) Repurchase. A Bank, in its discretion and without regard to the
applicable redemption periods, may repurchase from a member any
outstanding Class A or Class B capital stock that is in excess of the
amount of that class of Bank stock that the member is required to hold
as a minimum investment, in accordance with the capital plan of that
Bank. A Bank undertaking such a stock repurchase at its own initiative
shall provide the member with reasonable notice prior to repurchasing
any excess stock, with the period of such notice to be specified in the
Bank's capital plan, and shall pay the stated par value of that stock to
the member in cash. For purposes of this section, any Bank stock owned
by a member shall be considered to be excess stock if the member is not
required to hold such stock either as a condition of remaining a member
of the Bank or as a condition of obtaining advances or transacting other
business with the Bank. A member's submission of a notice of intent to
withdraw from membership, or its termination of membership in any other
manner, shall not, in and of itself, cause any Bank stock to be deemed
excess stock for purposes of this section.
(c) Limitation. In no event may a Bank redeem or repurchase any
stock if, following the redemption or repurchase, the Bank would fail to
meet any minimum capital requirement, or if the member would fail to
maintain its minimum investment in the stock of the Bank, as required by
Sec. 931.3.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001; 70
FR 9510, Feb. 28, 2005]
Sec. 931.8 Other restrictions on the repurchase or redemption of Bank
stock.
(a) Capital impairment. A Bank may not redeem or repurchase any
capital stock without the prior written approval of the Finance Board if
the Finance Board or the board of directors of the Bank has determined
that the Bank has incurred or is likely to incur losses that result in
or are likely to result in charges against the capital of the Bank. This
prohibition shall apply even if a Bank is in compliance with its minimum
capital requirements, and shall remain in effect for however long the
Bank continues to incur such charges or until the Finance Board
determines that such charges are not expected to continue.
(b) Bank discretion to suspend redemption. A Bank, upon the approval
of its board of directors, or of a subcommittee thereof, may suspend
redemption of stock if the Bank reasonably believes that continued
redemption of stock would cause the Bank to fail to meet its minimum
capital requirements as set forth in Sec. Sec. 932.2 or 932.3 of this
chapter, would prevent the Bank from maintaining adequate capital
against a potential risk that may not be adequately reflected in its
minimum capital requirements, or would otherwise prevent the Bank from
operating in a safe and sound manner. A Bank shall notify the Finance
Board in writing within two business days of the date of the decision to
suspend the redemption of stock, informing the Finance Board of the
reasons for the suspension and of the Bank's strategies and time frames
for addressing the conditions that led to the suspension. The Finance
Board may require the Bank to re-institute the redemption of member
stock. A Bank shall not repurchase any stock without the written
permission of the Finance Board during any period in which the Bank has
suspended redemption of stock under this paragraph.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 931.9 Transition provision.
(a) In general. Each Bank shall comply with the minimum leverage and
risk-based capital requirements specified in Sec. 932.2 and Sec. 932.3
of this chapter, respectively, and each member shall comply with the
minimum investment established in the capital plan, as of the effective
date of that Bank's capital plan. The effective date of a Bank's capital
plan shall be the date on which the Bank first issues any Class A or
Class B stock. Prior to the effective date, the issuance and retention
of Bank stock shall be as provided in Sec. 925.20 and Sec. 925.22 of
this chapter.
[[Page 46]]
(b) Transition period--(1) Bank transition. A Bank that will not be
in compliance with the minimum leverage and risk-based capital
requirements specified in Sec. 932.2 and Sec. 932.3 of this chapter as
of the effective date of its capital plan shall maintain compliance with
the leverage limit requirements in Sec. 966.3(a) of this chapter and
shall include in its capital plan a description of the steps that the
Bank will take to achieve compliance with the minimum capital
requirements specified in Sec. 932.2 and Sec. 932.3 of this chapter.
The period of time for compliance with the minimum capital requirements
shall be stated in the plan and shall not exceed three years from the
effective date of the capital plan. When the Bank has achieved
compliance with the leverage requirement of Sec. 932.2 of this chapter,
the leverage limit requirements of Sec. 966.3(a) of this chapter shall
cease to apply to that Bank.
(2) Member transition. (i) Existing members. A Bank's capital plan
shall require any institution that was a member on November 12, 1999,
and whose investment in Bank stock as of the effective date of the
capital plan will be less than the minimum investment required by the
plan, to comply with the minimum investment by a date specified in the
Bank's capital plan. The length of the transition period shall be
specified in the capital plan and shall not exceed three years. The
capital plan shall describe the actions that the existing members are
required to take to achieve compliance with the minimum investment, and
may require such members to purchase additional Bank stock periodically
over the course of the transition period.
(ii) New members. A Bank's capital plan shall require any
institution that became a member after November 12, 1999, but prior to
the effective date of the capital plan, to comply with the minimum
investment specified in the Bank's capital plan as of the effective date
of the plan. A Bank's capital plan shall require any institution that
becomes a member after the effective date of the capital plan, to comply
with the minimum investment upon becoming a member.
(3) New business. A Bank's capital plan shall require any member
that obtains an advance or other services from the Bank, or that
initiates any other business activity with the Bank against which the
Bank is required to hold capital, after the effective date of the
capital plan to comply with the minimum investment specified in the
Bank's capital plan for such advance, services, or activity at the time
the transaction occurs.
PART 932_FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS--Table of Contents
Sec.
932.1 Risk management.
932.2 Total capital requirement.
932.3 Risk-based capital requirement.
932.4 Credit risk capital requirement.
932.5 Market risk capital requirement.
932.6 Operations risk capital requirement.
932.7 Reporting requirements.
932.8 Minimum liquidity requirements.
932.9 Limits on unsecured extensions of credit to one counterparty or
affiliated counterparties; reporting requirements for total
extensions of credit to one counterparty or affiliated
counterparties.
Authority: 12 U.S.C. 1426, 1440, 1443, 1446, 4513, 4526.
Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.
Sec. 932.1 Risk management.
Before its new capital plan may take effect, each Bank shall obtain
the approval of the Finance Board for the internal market risk model or
the internal cash flow model used to calculate the market risk component
of its risk-based capital requirement, and for the risk assessment
procedures and controls (whether established as part of its risk
management policy or otherwise) to be used to manage its credit, market,
and operations risks.
Sec. 932.2 Total capital requirement.
Each Bank shall maintain at all times:
(a) Total capital in an amount at least equal to 4.0 percent of the
Bank's total assets; and
(b) A leverage ratio of total capital to total assets of at least
5.0 percent of the Bank's total assets. For purposes of determining the
leverage ratio, total capital shall be computed by multiplying the
Bank's permanent capital
[[Page 47]]
by 1.5 and adding to this product all other components of total capital.
[76 FR 11674, Mar. 3, 2011]
Sec. 932.3 Risk-based capital requirement.
Each Bank shall maintain at all times permanent capital in an amount
at least equal to the sum of its credit risk capital requirement, its
market risk capital requirement, and its operations risk capital
requirement, calculated in accordance with Sec. Sec. 932.4, 932.5 and
932.6, respectively.
76 FR 11674, Mar. 3, 2011]
Sec. 932.4 Credit risk capital requirement.
(a) General requirement. Each Bank's credit risk capital requirement
shall be equal to the sum of the Bank's credit risk capital charges for
all assets, off-balance sheet items and derivative contracts.
(b) Credit risk capital charge for assets. Except as provided in
paragraph (i) of this section, each Bank's credit risk capital charge
for an asset shall be equal to the book value of the asset multiplied by
the credit risk percentage requirement assigned to that asset pursuant
to paragraph (e)(2) of this section.
(c) Credit risk capital charge for off-balance sheet items. Each
Bank's credit risk capital charge for an off-balance sheet item shall be
equal to the credit equivalent amount of such item, as determined
pursuant to paragraph (f) of this section multiplied by the credit risk
percentage requirement assigned to that item pursuant to paragraph
(e)(2) of this section, except that the credit risk percentage
requirement applied to the credit equivalent amount for a stand-by
letter of credit shall be that for an advance with the same remaining
maturity as that stand-by letter of credit.
(d) Credit risk capital charge for derivative contracts--(1)
Derivative contracts with non-member counterparties. Except as provided
in paragraph (j) of this section, each Bank's credit risk capital charge
for a specific derivative contract entered into between a Bank and a
non-member institution shall equal the sum of :
(i) The current credit exposure for the derivative contract,
calculated in accordance with paragraph (g) or (h) of this section, as
applicable, multiplied by the credit risk percentage requirement
assigned to that derivative contract pursuant to paragraph (e)(2) of
this section, provided that:
(A) The remaining maturity of the derivative contract shall be
deemed to be less than one year for the purpose of applying Table 1.1 or
1.3 of this part; and
(B) Any collateral held against an exposure from the derivative
contract shall be applied to reduce the portion of the credit risk
capital charge corresponding to the current credit exposure in
accordance with the requirements of paragraph (e)(2)(ii)(B) of this
section; plus
(ii) The potential future credit exposure for the derivative
contract calculated in accordance with paragraph (g) or (h) of this
section, as applicable, multiplied by the credit risk percentage
requirement assigned to that derivative contract pursuant to paragraph
(e)(2) of this section, where the actual remaining maturity of the
derivative contract is used to apply Table 1.1 or Table 1.3 of this
part.
(2) Derivative contracts with a member. Except as provided in
paragraph (j) of this section, the credit risk capital charge for any
derivative contract entered into between a Bank and one of its member
institutions shall be calculated in accordance with paragraph (d)(1) of
this section. However, the credit risk percentage requirements used in
the calculations shall be found in Table 1.1 of this part, which sets
forth the credit risk percentage requirements for advances.
(e) Determination of credit risk percentage requirements--(1)
Finance Board determination of credit risk percentage requirements. The
Finance Board shall determine, and update periodically, the credit risk
percentage requirements set forth in Tables 1.1 through 1.4 of this part
applicable to a Bank's assets, off-balance sheet items, and derivative
contracts.
(2) Bank determination of credit risk percentage requirements. (i)
Each Bank shall determine the credit risk percentage requirement
applicable to each
[[Page 48]]
asset, each off-balance sheet item and each derivative contract by
identifying the category set forth in Table 1.1, Table 1.2, Table 1.3 or
Table 1.4 of this part to which the asset, item or derivative belongs,
given, if applicable, its demonstrated credit rating and remaining
maturity (as determined in accordance with paragraphs (e)(2)(ii) and
(e)(2)(iii) of this section). The applicable credit risk percentage
requirement for an asset, off-balance sheet item or derivative contract
shall be used to calculate the credit risk capital charge for such
asset, item, or derivative contract in accordance with paragraphs (b),
(c) or (d) of this section respectively. The relevant categories and
credit risk percentage requirements are provided in the following Tables
1.1 through 1.4 of this part:
Table 1.1--Requirement for Advances
------------------------------------------------------------------------
Percentage
Type of advances applicable
to advances
------------------------------------------------------------------------
Advances with:
Remaining maturity <= 4 years............................ 0.07
Remaining maturity 4 years to 7 years........ 0.20
Remaining maturity 7 years to 10 years....... 0.30
Remaining maturity 10 years.................. 0.35
------------------------------------------------------------------------
Table 1.2--Requirement for Rated Residential Mortgage Assets
------------------------------------------------------------------------
Percentage
applicable
to
Type of residential mortgage asset residential
mortgage
assets
------------------------------------------------------------------------
Highest Investment Grade................................... 0.37
Second Highest Investment Grade............................ 0.60
Third Highest Investment Grade............................. 0.86
Fourth Highest Investment Grade............................ 1.20
If Downgraded to Below Investment Grade After Acquisition
By Bank:
Highest Below Investment Grade........................... 2.40
Second Highest Below Investment Grade.................... 4.80
All Other Below Investment Grade......................... 34.00
Subordinated Classes of Mortgage Assets:
Highest Investment Grade................................. 0.37
Second Highest Investment Grade.......................... 0.60
Third Highest Investment Grade........................... 1.60
Fourth Highest Investment Grade.......................... 4.45
If Downgraded to Below Investment Grade After Acquisition
By Bank:
Highest Below Investment Grade........................... 13.00
Second Highest Below Investment Grade.................... 34.00
All Other Below Investment Grade......................... 100.00
------------------------------------------------------------------------
Table 1.3--Requirement for rated Assets or Rated Items Other Than Advances or Residential Mortgage Assets
[Based on remaining maturity]
----------------------------------------------------------------------------------------------------------------
Applicable percentage
---------------------------------------------------------------------
7
<= 1 year 1 3 yrs to 10 10
yr to 3 yrs yrs to 7yrs yrs yrs
----------------------------------------------------------------------------------------------------------------
U.S. Government Securities................ 0.00 0.00 0.00 0.00 0.00
Highest Investment Grade.................. 0.15 0.40 0.90 1.40 2.20
Second Highest Investment Grade........... 0.20 0.45 1.00 1.45 2.30
Third Highest Investment Grade............ 0.70 1.10 1.60 2.05 2.95
Fourth Highest Investment Grade........... 2.50 3.70 4.45 5.50 7.05
If Downgraded Below Investment Grade After
Acquisition by Bank:
Highest Below Investment Grade........ 10.00 13.00 13.00 13.00 13.00
Second Highest Below Investment Grade. 26.00 34.00 34.00 34.00 34.00
All Other............................. 100.00 100.00 100.00 100.00 100.00
----------------------------------------------------------------------------------------------------------------
Table 1.4--Requirement for Unrated Assets
------------------------------------------------------------------------
Applicable
Type of unrated asset percentage
------------------------------------------------------------------------
Cash....................................................... 0.00
Premises, Plant, and Equipment............................. 8.00
Investments Under Sec. 940.3(e) & (f).................... 8.00
------------------------------------------------------------------------
(ii) When determining the applicable credit risk percentage
requirement from Tables 1.2 or 1.3 of this part, each Bank shall apply
the following criteria:
(A) For assets or items that are rated directly by an NRSRO, the
credit rating shall be the NRSRO's credit rating for the asset or item
as determined in accordance with paragraph (e)(2)(iii) of this section.
(B) When using Table 1.3 of this part, for an asset, off-balance
sheet item, or derivative contract that is not rated directly by an
NRSRO, but for which an NRSRO rating has been assigned to any
corresponding obligor
[[Page 49]]
counterparty, third party guarantor, or collateral backing the asset,
item, or derivative, the credit rating that shall apply to the asset,
item, or derivative, or portion of the asset, item, or derivative so
guaranteed or collateralized, shall be the credit rating corresponding
to such obligor counterparty, third party guarantor, or underlying
collateral, as determined in accordance with paragraph (e)(2)(iii) of
this section. If there are multiple obligor counterparties, third party
guarantors, or collateral instruments backing an asset, item, or
derivative not rated directly by an NRSRO, or any specific portion
thereof, then the credit rating that shall apply to that asset, item, or
derivative or specific portion thereof, shall be the highest credit
rating among such obligor counterparties, third party guarantors, or
collateral instruments, as determined in accordance with paragraph
(e)(2)(iii) of this section. Assets, items or derivatives shall be
deemed to be backed by collateral for purposes of this paragraph if the
collateral is:
(1) Actually held by the Bank or an independent, third-party
custodian, or, if permitted under the Bank's collateral agreement with
such party, by the Bank's member or an affiliate of that member where
the term ``affiliate'' has the same meaning as in Sec. 950.1 of this
chapter;
(2) Legally available to absorb losses;
(3) Of a readily determinable value at which it can be liquidated by
the Bank;
(4) Held in accordance with the provisions of the Bank's member
products policy established pursuant to Sec. 917.4 of this chapter; and
(5) Subject to an appropriate discount to protect against price
decline during the holding period, as well as the costs likely to be
incurred in the liquidation of the collateral.
(C) When using Table 1.3 of this part, for an asset with a short-
term credit rating from a given NRSRO, the credit risk percentage
requirement shall be based on the remaining maturity of the asset and
the long-term credit rating provided for the issuer of the asset by the
same NRSRO. Should the issuer of the short-term asset not have a long-
term credit rating, the long-term equivalent rating shall be determined
as follows:
(1) The highest short-term credit rating shall be equivalent to the
third highest long-term rating;
(2) The second highest short-term rating shall be equivalent to the
fourth highest long-term rating;
(3) The third highest short-term rating shall be equivalent to the
fourth highest long-term rating; and
(4) If the short-term rating is downgraded to below investment grade
after acquisition by the Bank, the short-term rating shall be equivalent
to the second highest below investment grade long-term rating.
(D) For residential mortgage assets and other assets or items, or
relevant portion of an asset or item, that do not meet the requirements
of paragraphs (e)(2)(ii)(A), (e)(2)(ii)(B) or (e)(2)(ii)(C) of this
section, and are not identified in Tables 1.1 or Table 1.4 of this part,
each Bank shall determine its own credit rating for such assets or
items, or relevant portion thereof, using credit rating standards
available from an NRSRO or other similar standards. This credit rating,
as determined by the Bank, shall be used to identify the applicable
credit risk percentage requirement under Table 1.2 of this part for
residential mortgage assets, or under Table 1.3 of this part for all
other assets or items.
(E) The credit risk percentage requirement for mortgage assets that
are acquired member assets described in Sec. 955.2 of this chapter
shall be assigned from Table 1.2 of this part based on the rating of
those assets after taking into account any credit enhancement required
by Sec. 955.3 of this chapter. Should a Bank further enhance a pool of
loans through the purchase of insurance or by some other means, the
credit risk percentage requirement shall be based on the rating of such
pool after the supplemental credit enhancement, except that the Finance
Board retains the right to adjust the credit capital charge to account
for any deficiencies with the supplemental enhancement on a case-by-case
basis.
(iii) In determining the credit ratings under paragraph
(e)(2)(ii)(A),
[[Page 50]]
(e)(2)(ii)(B) and (e)(2)(ii)(C) of this section, each Bank shall apply
the following criteria:
(A) The most recent credit rating from a given NRSRO shall be
considered. If only one NRSRO has rated an asset or item, that NRSRO's
rating shall be used. If an asset or item has received credit ratings
from more than one NRSRO, the lowest credit rating from among those
NRSROs shall be used.
(B) Where a credit rating has a modifier (e.g., A-1+ for short-term
ratings and A+ or A- for long-term ratings) the credit rating is deemed
to be the credit rating without the modifier (e.g., A-1+ = A-1 and A+ or
A-= A);
(f) Calculation of credit equivalent amount for off-balance sheet
items--(1) General requirement. The credit equivalent amount for an off-
balance sheet item shall be determined by a Finance Board approved model
or shall be equal to the face amount of the instrument multiplied by the
credit conversion factor assigned to such risk category of instruments,
subject to the exceptions in paragraph (f)(2) of this section, provided
in the following Table 2 of this part:
Table 2--Credit Conversion Factors for Off-Balance Sheet Items
------------------------------------------------------------------------
Credit
conversion
Instrument factor (In
percent)
------------------------------------------------------------------------
Asset sales with recourse where the credit risk remains 100
with the Bank..........................................
Commitments to make advances subject to certain drawdown
Commitments to acquire loans subject to certain drawdown
Standby letters of credit............................... 50
Other commitments with original maturity of over one
year...................................................
Other commitments with original maturity of one year or 20
less...................................................
------------------------------------------------------------------------
(2) Exceptions. The credit conversion factor shall be zero for Other
Commitments With Original Maturity of Over One Year and Other
Commitments With Original Maturity of One Year or Less, for which credit
conversion factors of 50 percent or 20 percent would otherwise apply,
that are unconditionally cancelable, or that effectively provide for
automatic cancellation, due to the deterioration in a borrower's
creditworthiness, at any time by the Bank without prior notice.
(g) Calculation of current and potential future credit exposures for
single derivative contracts--(1) Current credit exposure. The current
credit exposure for a derivative contract that is not subject to a
qualifying bilateral netting contract described in paragraph (h)(3) of
this section shall be:
(i) If the mark-to-market value of the contract is positive, the
mark-to-market value of the contract; or
(ii) If the mark-to-market value of the contract is zero or
negative, zero.
(2) Potential future credit exposure. (i) The potential future
credit exposure for a single derivative contract, including a derivative
contract with a negative mark-to-market value, shall be calculated using
an internal model approved by the Finance Board or, in the alternative,
by multiplying the effective notional amount of the derivative contract
by one of the assigned credit conversion factors, modified as may be
required by paragraph (g)(2)(ii) of this section, for the appropriate
category as provided in the following Table 3 of this part:
Table 3--Credit Conversion Factors for Potential Future Credit Exposure Derivative Contracts
[In percent]
----------------------------------------------------------------------------------------------------------------
Foreign Precious
Residual maturity Interest exchange and Equity metals Other
rate gold except gold commodities
----------------------------------------------------------------------------------------------------------------
One year or less............................. 0 1 6 7 10
Over 1 year to five years.................... .5 5 8 7 12
Over five years.............................. 1.5 7.5 10 8 15
----------------------------------------------------------------------------------------------------------------
[[Page 51]]
(ii) In applying the credit conversion factors in Table 3 of this
part the following modifications shall be made:
(A) For derivative contracts with multiple exchanges of principal,
the conversion factors are multiplied by the number of remaining
payments in the derivative contract; and
(B) For derivative contracts that automatically reset to zero value
following a payment, the residual maturity equals the time until the
next payment; however, interest rate contracts with remaining maturities
of greater than one year shall be subject to a minimum conversion factor
of 0.5 percent.
(iii) If a Bank uses an internal model to determine the potential
future credit exposure for a particular type of derivative contract, the
Bank shall use the same model for all other similar types of contracts.
However, the Bank may use an internal model for one type of derivative
contract and Table 3 of this part for another type of derivative
contract.
(iv) Forwards, swaps, purchased options and similar derivative
contracts not included in the Interest Rate, Foreign Exchange and Gold,
Equity, or Precious Metals Except Gold categories shall be treated as
other commodities contracts when determining potential future credit
exposures using Table 3 of this part.
(v) If a Bank uses Table 3 of this part to determine the potential
future credit exposures for credit derivative contracts, the credit
conversion factors provided in Table 3 for equity contracts shall also
apply to the credit derivative contracts entered into with investment
grade counterparties. If the counterparty is downgraded to below
investment grade, the credit conversion factor provided in Table 3 of
this part for other commodity contracts shall apply.
(h) Calculation of current and potential future credit exposures for
multiple derivative contracts subject to a qualifying bilateral netting
contract--(1) Current credit exposure. The current credit exposure for
multiple derivative contracts executed with a single counterparty and
subject to a qualifying bilateral netting contract described in
paragraph (h)(3) of this section, shall be calculated on a net basis and
shall equal:
(i) The net sum of all positive and negative mark-to-market values
of the individual derivative contracts subject to a qualifying bilateral
netting contract, if the net sum of the mark-to-market values is
positive; or
(ii) Zero, if the net sum of the mark-to-market values is zero or
negative.
(2) Potential future credit exposure. The potential future credit
exposure for each individual derivative contract from among a group of
derivative contracts that are executed with a single counterparty and
subject to a qualifying bilateral netting contract described in
paragraph (h)(3) of this section shall be calculated as follows:
Anet = 0.4 x Agross + (0.6 x NGR x
Agross),
where:
(i) Anet is the potential future credit exposure for an
individual derivative contract subject to the qualifying bilateral
netting contract;
(ii) Agross is the gross potential future credit
exposure, i.e., the potential future credit exposure for the individual
derivative contract, calculated in accordance with paragraph (g)(2) of
this section but without regard to the fact that the contract is subject
to the qualifying bilateral netting contract;
(iii) NGR is the net to gross ratio, i.e., the ratio of the net
current credit exposure of all the derivative contracts subject to the
qualifying bilateral netting contract, calculated in accordance with
paragraph (h)(1) of this section, to the gross current credit exposure;
and
(iv) The gross current credit exposure is the sum of the positive
current credit exposures of all the individual derivative contracts
subject to the qualifying bilateral netting contract, calculated in
accordance with paragraph (g)(1) of this section but without regard to
the fact that the contract is subject to the qualifying bilateral
netting contract.
(3) Qualifying bilateral netting contract. A bilateral netting
contract shall be considered a qualifying bilateral netting contract if
the following conditions are met:
(i) The netting contract is in writing;
(ii) The netting contract is not subject to a walkaway clause;
[[Page 52]]
(iii) The netting contract provides that the Bank would have a
single legal claim or obligation either to receive or to pay only the
net amount of the sum of the positive and negative mark-to-market values
on the individual derivative contracts covered by the netting contract
in the event that a counterparty, or a counterparty to whom the netting
contract has been assigned, fails to perform due to default, insolvency,
bankruptcy, or other similar circumstance;
(iv) The Bank obtains a written and reasoned legal opinion that
represents, with a high degree of certainty, that in the event of a
legal challenge, including one resulting from default, insolvency,
bankruptcy, or similar circumstances, the relevant court and
administrative authorities would find the Bank's exposure to be the net
amount under:
(A) The law of the jurisdiction by which the counterparty is
chartered or the equivalent location in the case of non-corporate
entities, and if a branch of the counterparty is involved, then also
under the law of the jurisdiction in which the branch is located;
(B) The law of the jurisdiction that governs the individual
derivative contracts covered by the netting contract; and
(C) The law of the jurisdiction that governs the netting contract;
(v) The Bank establishes and maintains procedures to monitor
possible changes in relevant law and to ensure that the netting contract
continues to satisfy the requirements of this section; and
(vi) The Bank maintains in its files documentation adequate to
support the netting of a derivative contract.
(i) Credit risk capital charge for assets hedged with credit
derivatives--(1) Credit derivatives with a remaining maturity of one
year or more. The credit risk capital charge for an asset that is hedged
with a credit derivative that has a remaining maturity of one year or
more may be reduced only in accordance with paragraph (i)(3) or (i)(4)
of this section and only if the credit derivative provides substantial
protection against credit losses.
(2) Credit derivatives with a remaining maturity of less than one
year. The credit risk capital charge for an asset that is hedged with a
credit derivative that has a remaining maturity of less than one year
may be reduced only in accordance with paragraph (i)(3) of this section
and only if the remaining maturity on the credit derivative is identical
to or exceeds the remaining maturity of the hedged asset and the credit
derivative provides substantial protection against credit losses.
(3) Capital charge reduced to zero. The credit risk capital charge
for an asset shall be zero if a credit derivative is used to hedge the
credit risk on that asset in accordance with paragraph (i)(1) or (i)(2)
of this section, provided that:
(i) The remaining maturity for the credit derivative used for the
hedge is identical to or exceeds the remaining maturity for the hedged
asset, and either:
(A) The asset referenced in the credit derivative is identical to
the hedged asset; or
(B) The asset referenced in the credit derivative is different from
the hedged asset, but only if the asset referenced in the credit
derivative and the hedged asset have been issued by the same obligor,
the asset referenced in the credit derivative ranks pari passu to or
more junior than the hedged asset and has the same maturity as the
hedged asset, and cross-default clauses apply; and
(ii) The credit risk capital charge for the credit derivative
contract calculated pursuant to paragraph (d) of this section is still
applied.
(4) Capital charge reduction in certain other cases. The credit risk
capital charge for an asset hedged with a credit derivative in
accordance with paragraph (i)(1) of this section shall equal the sum of
the credit risk capital charges for the hedged and unhedged portion of
the asset provided that:
(i) The remaining maturity for the credit derivative is less than
the remaining maturity for the hedged asset and either:
(A) The asset referenced in the credit derivative is identical to
the hedged asset; or
(B) The asset referenced in the credit derivative is different from
the hedged asset, but only if the asset referenced in the credit
derivative and the hedged
[[Page 53]]
asset have been issued by the same obligor, the asset referenced in the
credit derivative ranks pari passu to or more junior than the hedged
asset and has the same maturity as the hedged asset, and cross-default
clauses apply; and
(ii) The credit risk capital charge for the unhedged portion of the
asset equals:
(A) The credit risk capital charge for the hedged asset, calculated
as the book value of the hedged asset multiplied by the hedged asset's
credit risk percentage requirement assigned pursuant to paragraph (e)(2)
of this section where the appropriate credit rating is that for the
hedged asset and the appropriate maturity is the remaining maturity of
the hedged asset; minus
(B) The credit risk capital charge for the hedged asset, calculated
as the book value of the hedged asset multiplied by the hedged asset's
credit risk percentage requirement assigned pursuant to paragraph (e)(2)
of this section where the appropriate credit rating is that for the
hedged asset but the appropriate maturity is deemed to be the remaining
maturity of the credit derivative; and
(iii) The credit risk capital charge for the hedged portion of the
asset is equal to the credit risk capital charge for the credit
derivative, calculated in accordance with paragraph (d) of this section.
(j) Zero Credit risk capital charge for certain derivative
contracts. The credit risk capital charge for the following derivative
contracts shall be zero:
(1) A foreign exchange rate contract with an original maturity of 14
calendar days or less (gold contracts do not qualify for this
exception); and
(2) A derivative contract that is traded on an organized exchange
requiring the daily payment of any variations in the market value of the
contract.
(k) Date of calculations. Unless otherwise directed by the Finance
Board, each Bank shall perform all calculations required by this section
using the assets, off-balance sheet items, and derivative contracts held
by the Bank, and, if applicable, the values or credit ratings of such
assets, items, or derivatives as of the close of business of the last
business day of the month for which the credit risk capital charge is
being calculated.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 932.5 Market risk capital requirement.
(a) General requirement. (1) Each Bank's market risk capital
requirement shall equal the sum of:
(i) The market value of the Bank's portfolio at risk from movements
in interest rates, foreign exchange rates, commodity prices, and equity
prices that could occur during periods of market stress, where the
market value of the Bank's portfolio at risk is determined using an
internal market risk model that fulfills the requirements of paragraph
(b) of this section and that has been approved by the Finance Board; and
(ii) The amount, if any, by which the Bank's current market value of
total capital is less than 85 percent of the Bank's book value of total
capital, where:
(A) The current market value of the total capital is calculated by
the Bank using the internal market risk model approved by the Finance
Board under paragraph (d) of this section; and
(B) The book value of total capital is the same as the amount of
total capital reported by the Bank to the Finance Board under Sec.
932.7 of this part.
(2) A Bank may substitute an internal cash flow model to derive a
market risk capital requirement in place of that calculated using an
internal market risk model under paragraph (a)(1) of this section,
provided that:
(i) The Bank obtains Finance Board approval of the internal cash
flow model and of the assumptions to be applied to the model; and
(ii) The Bank demonstrates to the Finance Board that the internal
cash flow model subjects the Bank's assets and liabilities, off-balance
sheet items and derivative contracts, including related options, to a
comparable degree of stress for such factors as will be required for an
internal market risk model.
(b) Measurement of market value at risk under a Bank's internal
market risk model. (1) Except as provided under paragraph (a)(2) of this
section, each
[[Page 54]]
Bank shall use an internal market risk model that estimates the market
value of the Bank's assets and liabilities, off-balance sheet items, and
derivative contracts, including any related options, and measures the
market value of the Bank's portfolio at risk of its assets and
liabilities, off-balance sheet items, and derivative contracts,
including related options, from all sources of the Bank's market risks,
except that the Bank's model need only incorporate those risks that are
material.
(2) The Bank's internal market risk model may use any generally
accepted measurement technique, such as variance-covariance models,
historical simulations, or Monte Carlo simulations, for estimating the
market value of the Bank's portfolio at risk, provided that any
measurement technique used must cover the Bank's material risks.
(3) The measures of the market value of the Bank's portfolio at risk
shall include the risks arising from the non-linear price
characteristics of options and the sensitivity of the market value of
options to changes in the volatility of the options' underlying rates or
prices.
(4) The Bank's internal market risk model shall use interest rate
and market price scenarios for estimating the market value of the Bank's
portfolio at risk, but at a minimum:
(i) The Bank's internal market risk model shall provide an estimate
of the market value of the Bank's portfolio at risk such that the
probability of a loss greater than that estimated shall be no more than
one percent;
(ii) The Bank's internal market risk model shall incorporate
scenarios that reflect changes in interest rates, interest rate
volatility, and shape of the yield curve, and changes in market prices,
equivalent to those that have been observed over 120-business day
periods of market stress. For interest rates, the relevant historical
observations should be drawn from the period that starts at the end of
the previous month and goes back to the beginning of 1978;
(iii) The total number of, and specific historical observations
identified by the Bank as, stress scenarios shall be:
(A) Satisfactory to the Finance Board;
(B) Representative of the periods of the greatest potential market
stress given the Bank's portfolio, and
(C) Comprehensive given the modeling capabilities available to the
Bank; and
(iv) The measure of the market value of the Bank's portfolio at risk
may incorporate empirical correlations among interest rates.
(5) For any consolidated obligations denominated in a currency other
than U.S. Dollars or linked to equity or commodity prices, each Bank
shall, in addition to fulfilling the criteria of paragraph (b)(4) of
this section, calculate an estimate of the market value of its portfolio
at risk due to the material foreign exchange, equity price or commodity
price risk, such that, at a minimum:
(i) The probability of a loss greater than that estimated shall not
exceed one percent;
(ii) The scenarios reflect changes in foreign exchange, equity, or
commodity market prices that have been observed over 120-business day
periods of market stress, as determined using historical data that is
from an appropriate period; and
(iii) The total number of, and specific historical observations
identified by the Bank as, stress scenarios shall be:
(A) Satisfactory to the Finance Board;
(B) Representative of the periods of greatest potential stress given
the Bank's portfolio; and
(C) Comprehensive given the modeling capabilities available to the
Bank; and
(iv) The measure of the market value of the Bank's portfolio at risk
may incorporate empirical correlations within or among foreign exchange
rates, equity prices, or commodity prices.
(c) Independent validation of Bank internal market risk model or
internal cash flow model. (1) Each Bank shall conduct an independent
validation of its internal market risk model or internal cash flow model
within the Bank that is carried out by personnel not reporting to the
business line responsible for conducting business transactions for the
[[Page 55]]
Bank. Alternatively, the Bank may obtain independent validation by an
outside party qualified to make such determinations. Validations shall
be done on an annual basis, or more frequently as required by the
Finance Board.
(2) The results of such independent validations shall be reviewed by
the Bank's board of directors and provided promptly to the Finance
Board.
(d) Finance Board approval of Bank internal market risk model or
internal cash flow model. Each Bank shall obtain Finance Board approval
of an internal market risk model or an internal cash flow model,
including subsequent material adjustments to the model made by the Bank,
prior to the use of any model. Each Bank shall make such adjustments to
its model as may be directed by the Finance Board.
(e) Date of calculations. Unless otherwise directed by the Finance
Board, each Bank shall perform any calculations or estimates required
under this section using the assets and liabilities, off-balance sheet
items, and derivative contracts held by the Bank, and if applicable, the
values of any such holdings, as of the close of business of the last
business day of the month for which the market risk capital requirement
is being calculated.
Sec. 932.6 Operations risk capital requirement.
(a) General requirement. Except as authorized under paragraph (b) of
this section, each Bank's operations risk capital requirement shall at
all times equal 30 percent of the sum of the Bank's credit risk capital
requirement and market risk capital requirement.
(b) Alternative requirements. With the approval of the Finance
Board, each Bank may have an operations risk capital requirement equal
to less than 30 percent but no less than 10 percent of the sum of the
Bank's credit risk capital requirement and market risk capital
requirement if:
(1) The Bank provides an alternative methodology for assessing and
quantifying an operations risk capital requirement; or
(2) The Bank obtains insurance to cover operations risk from an
insurer rated at least the second highest investment grade credit rating
by an NRSRO.
Sec. 932.7 Reporting requirements.
Each Bank shall report to the Finance Board by the 15th business day
of each month its risk-based capital requirement by component amounts,
and its actual total capital amount and permanent capital amount,
calculated as of the close of business of the last business day of the
preceding month, or more frequently, as may be required by the Finance
Board.
Sec. 932.8 Minimum liquidity requirements.
In addition to meeting the deposit liquidity requirements contained
in Sec. 965.3 of this chapter, each Bank shall hold contingency
liquidity in an amount sufficient to enable the Bank to meet its
liquidity needs, which shall, at a minimum, cover five business days of
inability to access the consolidated obligation debt markets. An asset
that has been pledged under a repurchase agreement cannot be used to
satisfy minimum liquidity requirements.
Sec. 932.9 Limits on unsecured extensions of credit to one counterparty
or affiliated counterparties; reporting requirements for total
extensions of credit to one counterparty or affiliated counterparties.
(a) Unsecured extensions of credit to a single counterparty. A Bank
shall not extend unsecured credit to any single counterparty (other than
a GSE) in an amount that would exceed the limits of this paragraph. A
Bank shall not extend unsecured credit to a GSE in an amount that would
exceed the limits set forth in paragraph (c) of this section. If a
third-party provides an irrevocable, unconditional guarantee of
repayment of a credit (or any part thereof), the third-party guarantor
shall be considered the counterparty for purposes of calculating and
applying the unsecured credit limits of this section with respect the to
guaranteed portion of the transaction.
(1) Term limits. All unsecured extensions of credit by a Bank to a
single counterparty that arise from the Bank's on- and off-balance sheet
and derivative transactions (but excluding
[[Page 56]]
the amount of sales of federal funds with a maturity of one day or less
and sales of federal funds subject to a continuing contract) shall not
exceed the product of the maximum capital exposure limit applicable to
such counterparty, as determined in accordance with paragraph (a)(4) of
this section and Table 4 of this part, multiplied by the lesser of:
(i) The Bank's total capital; or
(ii) The counterparty's Tier 1 capital, or if Tier 1 capital is not
available, total capital (as defined by the counterparty's principal
regulator) or some similar comparable measure identified by the Bank.
(2) Overall limits including sales of overnight federal funds. All
unsecured extensions of credit by a Bank to a single counterparty that
arise from the Bank's on- and off-balance sheet and derivative
transactions, including the amounts of sales of federal funds with a
maturity of one day or less and sales of federal funds subject to a
continuing contract, shall not exceed twice the limit calculated
pursuant to paragraph (a)(1) of this section.
(3) Limits for certain obligations issued by state, local or tribal
governmental agencies. The term limit set forth in paragraph (a)(1) of
this section when applied to the marketable direct obligations of state,
local or tribal government unit or agencies that are acquired member
assets identified in Sec. 955.2(a)(3) of this chapter or are otherwise
excluded from the prohibition against investments in whole mortgages or
whole loan or interests in such mortgages or loans by Sec.
956.3(a)(4)(iii) of this chapter shall be calculated based on the Bank's
total capital and the credit rating assigned to the particular
obligation as determined in accordance with paragraph (a)(5) of this
section. If a Bank owns series or classes of obligations issued by a
particular state, local or tribal government unit or agency or has
extended other forms of unsecured credit to such entity falling into
different rating categories, the total amount of unsecured credit
extended by the Bank to that government unit or agency shall not exceed
the term limit associated with the highest-rated obligation issued by
the entity and actually purchased by the Bank.
(4) Bank determination of applicable maximum capital exposure
limits. (i) Except as set forth in paragraph (a)(4)(ii) or (a)(4)(iii)
of this section, the applicable maximum capital exposure limits are
assigned to each counterparty based upon the long-term credit rating of
the counterparty, as determined in accordance with paragraph (a)(5) of
this section, and are provided in the following Table 4 of this part:
Table 4--Maximum Limits on Unsecured Extensions of Credit to a Single
Counterparty by Counterparty Long-Term Credit Rating Category
------------------------------------------------------------------------
Maximum
capital
Long-term credit rating of counterparty category exposure limit
(in percent)
------------------------------------------------------------------------
Highest Investment Grade................................ 15
Second Highest Investment Grade......................... 14
Third Highest Investment Grade.......................... 9
Fourth Highest Investment Grade......................... 3
Below Investment Grade or Other......................... 1
------------------------------------------------------------------------
(ii) If a counterparty does not have a long-term credit rating but
has received a short-term credit rating from an NRSRO, the maximum
capital exposure limit applicable to that counterparty shall be based
upon the short-term credit rating, as determined in accordance with
paragraph (a)(5) of this section, as follows:
(A) The highest short-term investment grade credit rating shall
correspond to the maximum capital exposure limit provided in Table 4 of
this part for the third highest long-term investment grade rating;
(B) The second highest short-term investment grade rating shall
correspond to the maximum capital exposure limit provided in Table 4 of
this part for the fourth highest long-term investment grade rating; and
(C) The third highest short-term investment grade rating shall
correspond to the maximum capital exposure limit provided in Table 4 of
this part for the fourth highest long-term investment grade rating.
(iii) If a specific debt obligation issued by a counterparty
receives a credit rating from an NRSRO that is lower than the
counterparty's long-term credit rating, the total amount of
[[Page 57]]
the lower-rated obligation held by the Bank may not exceed a sub-limit
calculated in accordance with paragraph (a)(1) of this section, except
that the Bank shall use the credit rating associated with the specific
obligation to determine the applicable maximum capital exposure limit.
For purposes of this paragraph, the credit rating of the debt obligation
shall be determined in accordance with paragraph (a)(5) of this section.
(5) Bank determination of applicable credit ratings. The following
criteria shall be applied to determine a counterparty's credit rating:
(i) The counterparty's most recent credit rating from a given NRSRO
shall be considered;
(ii) If only one NRSRO has rated the counterparty, that NRSRO's
rating shall be used. If a counterparty has received credit ratings from
more than one NRSRO, the lowest credit rating from among those NRSROs
shall be used;
(iii) Where a credit rating has a modifier, the credit rating is
deemed to be the credit rating without the modifier;
(iv) If a counterparty is placed on a credit watch for a potential
downgrade by an NRSRO, the credit rating from that NRSRO at the next
lower grade shall be used; and
(v) If a counterparty is not rated by an NRSRO, the Bank shall
determine the applicable credit rating by using credit rating standards
available from an NRSRO or other similar standards.
(b) Unsecured extensions of credit to affiliated counterparties--(1)
In general. The total amount of unsecured extensions of credit by a Bank
to a group of affiliated counterparties that arise from the Bank's on-
and off-balance sheet and derivative transactions, including sales of
federal funds with a maturity of one day or less and sales of federal
funds subject to a continuing contract, shall not exceed thirty percent
of the Bank's total capital.
(2) Relation to individual limits. The aggregate limits calculated
under this paragraph shall apply in addition to the limits on extensions
of unsecured credit to a single counterparty imposed by paragraph (a) of
this section.
(c) Special limits for GSEs--(1) In general. Unsecured extensions of
credit by a Bank to a GSE that arise from the Bank's on- and off-balance
sheet and derivative transactions, including from the purchase of any
subordinated debt subject to the sub-limit set forth in paragraph (c)(2)
of this section, from any sales of federal funds with a maturity of one
day or less and from sales of federal funds subject to a continuing
contract, shall not exceed the lesser of:
(i) The Bank's total capital; or
(ii) The GSE's total capital (as defined by the GSE's principal
regulator) or some similar comparable measure identified by the Bank.
(2) Sub-limit for subordinated debt. The maximum amount of
subordinated debt issued by a GSE and held by a Bank shall not exceed
the term limit calculated under paragraph (a)(1) of this section, except
that a Bank shall use the credit rating of the GSE's subordinated debt
to determine the applicable maximum capital exposure limit. The credit
rating of the subordinated debt shall be determined in accordance with
paragraph (a)(5) of this section.
(3) Limits applying to a GSE after a downgrade. If any NRSRO assigns
a credit rating to any senior debt obligation issued (or to be issued)
by a GSE that is below the highest investment grade or downgrades, or
places on a credit watch for a potential downgrade of the credit rating
on any senior unsecured obligation issued by a GSE to below the highest
investment grade, the special limits on unsecured extensions of credit
under paragraph (c)(1) of this section shall cease to apply, and
instead, the Bank shall calculate the maximum amount of its unsecured
extensions of credit to that GSE in accordance with paragraphs (a)(1)
and (a)(2) of this section.
(4) Extensions of unsecured credit to other Banks. The limits of
this section do not apply to unsecured credit extended by one Bank to
another Bank.
(d) Extensions of unsecured credit after downgrade or placement on
credit watch. If an NRSRO downgrades the credit rating applicable to any
counterparty or places any counterparty on a credit watch for a
potential downgrade, a Bank need not unwind or liquidate any existing
transaction or position with
[[Page 58]]
that counterparty that complied with the limits of this section at the
time it was entered. In such a case, however, a Bank may extend any
additional unsecured credit to such a counterparty only in compliance
with the limitations that are calculated using the lower maximum
exposure limits. For the purposes of this section, the renewal of an
existing unsecured extension of credit, including any decision not to
terminate any sales of federal funds subject to a continuing contract,
shall be considered an additional extension of unsecured credit that can
be undertaken only in accordance with the lower limit.
(e) Reporting requirements--(1) Total unsecured extensions of
credit. Each Bank shall report monthly to the Finance Board the amount
of the Bank's total unsecured extensions of credit arising from on- and
off-balance sheet and derivative transactions to any single counterparty
or group of affiliated counterparties that exceeds 5 percent of:
(i) The Bank's total capital; or
(ii) The counterparty's, or affiliated counterparties' combined,
Tier 1 capital, or if Tier 1 capital is not available, total capital (as
defined by each counterparty's principal regulator) or some similar
comparable measure identified by the Bank.
(2) Total secured and unsecured extensions of credit. Each Bank
shall report monthly to the Finance Board the amount of the Bank's total
secured and unsecured extensions of credit arising from on- and off-
balance sheet and derivative transactions to any single counterparty or
group of affiliated counterparties that exceeds 5 percent of the Bank's
total assets.
(3) Extensions of credit in excess of limits. A Bank shall report
promptly to the Finance Board any extensions of unsecured credit that
exceeds any limit set forth in paragraphs (a), (b) or (c) of this
section. In making this report, a Bank shall provide the name of the
counterparty or group of affiliated counterparties to which the excess
unsecured credit has been extended, the dollar amount of the applicable
limit which has been exceeded, the dollar amount by which the Bank's
extension of unsecured credit exceeds such limit, the dates for which
the Bank was not in compliance with the limit, and, if applicable, a
brief explanation of any extenuating circumstances which caused the
limit to be exceeded.
(f) Measurement of unsecured extensions of credit--(1) In general.
For purposes of this section, unsecured extensions of credit will be
measured as follows:
(i) For on-balance sheet transactions, an amount equal to the sum of
the book value of the item plus net payments due the Bank;
(ii) For off-balance sheet transactions, an amount equal to the
credit equivalent amount of such item, calculated in accordance with
Sec. 932.4(f) of this part; and
(iii) For derivative transactions, an amount equal to the sum of the
current and potential future credit exposures for the derivative
contract, where those values are calculated in accordance with
Sec. Sec. 932.4(g) or 932.4(h) of this part, as applicable, less the
amount of any collateral that is held in accordance with the
requirements of Sec. 932.4(e)(2)(ii)(B) of this part against the credit
exposure from the derivative contract.
(2) Status of debt obligations purchased by the Bank. Any debt
obligation or debt security (other than mortgage-backed securities or
acquired member assets that are identified in Sec. Sec. 955.2(a)(1) and
(2) of this chapter) purchased by a Bank shall be considered an
unsecured extension of credit for the purposes of this section, except:
(i) Any amount owed the Bank against which the Bank holds collateral
in accordance with Sec. 932.4(e)(2)(ii)(B) of this part; or
(ii) Any amount which the Finance Board has determined on a case-by-
case basis shall not be considered an unsecured extension of credit.
(g) Obligations of the United States. Obligations of, or guaranteed
by, the United States are not subject to the requirements of this
section.
[66728, Dec. 27, 2002]
PART 933_BANK CAPITAL STRUCTURE PLANS--Table of Contents
Sec.
933.1 Submission of plan.
[[Page 59]]
933.2 Contents of plan.
933.3 Independent review of capital plan.
933.4 Transition provisions.
933.5 Disclosure to members concerning capital plan and capital stock
conversion.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443, 1446.
Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.
Sec. 933.1 Submission of plan.
(a) In general. By no later than October 29, 2001, the board of
directors of each Bank shall submit to the Finance Board a plan to
establish and implement a new capital structure for that Bank, which
plan shall comply with part 931 of this chapter and under which, when
implemented, the Bank shall have sufficient total and permanent capital
to comply with the regulatory capital requirements established by part
932 of this chapter. The Finance Board, upon a demonstration of good
cause submitted by the board of directors of a Bank, may approve a
reasonable extension of the 270-day period for submission of the capital
plan. A Bank shall not implement its capital plan, or any amendment to
the plan, without Finance Board approval.
(b) Failure to submit a capital plan. If a Bank fails to submit a
capital plan to the Finance Board by October 29, 2001, including any
approved extension, the Finance Board may establish a capital plan for
that Bank, take any enforcement action against the Bank, its directors,
or its executive officers authorized by section 2B(a) of the Act (12
U.S.C. 1422b(a)), or merge the Bank pursuant to section 26 of the Act
(12 U.S.C. 1446) into any other Bank that has submitted a capital plan.
(c) Consideration of the plan. After receipt of a Bank's capital
plan, the Finance Board may return the plan to the Bank if it does not
comply with section 6 of the Act (12 U.S.C. 1426) or any regulatory
requirement or is otherwise incomplete or materially deficient. If the
Finance Board accepts a capital plan for review, it may require the Bank
to submit additional information regarding its plan or to amend the
plan, prior to determining whether to approve the plan. The Finance
Board may approve a capital plan as submitted or as amended, or may
condition its approval on the Bank's compliance with certain stated
conditions, and may require that the capital plans of all Banks take
effect on the same date.
Sec. 933.2 Contents of plan.
The capital plan for each Bank shall include, at a minimum,
provisions addressing the following matters:
(a) Minimum investment. (1) The capital plan shall require each
member to purchase and maintain a minimum investment in the capital
stock of the Bank, in accordance with Sec. 931.3, of this chapter and
shall prescribe the manner in which the minimum investment is to be
calculated. The plan shall require each member to maintain its minimum
investment in the Bank's stock for as long as it remains a member and,
with regard to Bank stock purchased to support an advance or other
business activity, for as long as the advance or business activity
remains outstanding.
(2) The capital plan shall specify the amount and class (or classes)
of Bank stock that an institution is required to own in order to become
and remain a member of the Bank, and shall specify the amount and class
(or classes) of Bank stock that a member is required to own in order to
obtain advances from, or to engage in other business transactions with,
the Bank. If a Bank requires its members to satisfy its minimum
investment through the purchase of one or more combinations of Class A
and Class B stock, the authorized combinations of stock shall be
specified in the capital plan, which shall afford the members the option
of satisfying the minimum investment through the purchase of any such
combination of stock.
(3) The capital plan may establish a minimum investment that is
calculated as a percentage of the total assets of the member, as a
percentage of the advances outstanding to the member, as a percentage of
the other business activities conducted with the member, on any other
basis approved by the Finance Board, or on any combination of the above.
(4) The minimum investment established by the capital plan shall be
set at a level that, when applied to all
[[Page 60]]
members, provides sufficient capital for the Bank to comply with its
minimum capital requirements, as specified in part 932 of this chapter.
The capital plan shall require the board of directors of the Bank to
monitor and, as necessary, to adjust, the minimum investment to ensure
that the stock required to be purchased and maintained by the members is
sufficient to allow the Bank to comply with its minimum capital
requirements. The plan shall require each member to comply promptly with
any adjusted minimum investment established by the board of directors of
the Bank, but may allow a member a reasonable time to do so and may
allow a member to reduce its outstanding business with the Bank as an
alternative to purchasing additional stock.
(b) Classes of capital stock. The capital plan shall specify the
class or classes of stock (including subclasses, if any) that the Bank
will issue, and shall establish the par value, rights, terms, and
preferences associated with each class (or subclass) of stock. A Bank
may establish preferences relating to, but not limited to, the dividend,
voting, or liquidation rights for each class or subclass of Bank stock.
Any voting preferences established by the Bank pursuant to Sec. 915.5
of this chapter shall expressly state the voting rights of each class of
stock with regard to the election of Bank directors. The capital plan
shall provide that the owners of the Class B stock own the retained
earnings, surplus, undivided profits, and equity reserves of the Bank,
but shall have no right to receive any portion of those items, except
through declaration of a dividend or capital distribution approved by
the board of directors or through the liquidation of the Bank.
(c) Dividends. The capital plan shall establish the manner in which
the Bank will pay dividends, if any, on each class or subclass of stock,
and shall provide that the Bank may not declare or pay any dividends if
it is not in compliance with any capital requirement or if after paying
the dividend it would not be in compliance with any capital requirement.
(d) Initial issuance. The capital plan shall specify the date on
which the Bank will implement the new capital structure, and shall
establish the manner in which the Bank will issue Class A and/or Class B
stock to its existing members, as well as to eligible institutions that
subsequently become members. The capital plan shall address how the Bank
will retire the stock that is outstanding as of the effective date,
including stock held by a member that does not affirmatively elect to
convert or exchange its existing stock to either Class A or Class B
stock, or some combination thereof.
(e) Members wishing not to convert existing stock. The capital plan
shall establish an opt-out date on or before which a member that does
not wish to convert its existing stock into Class A and/or Class B stock
must file a written notice to withdraw from membership with the Finance
Board. This opt-out date shall not be more than six months before the
effective date of the capital plan. (For purposes of applying this
provision, the membership of an institution that files its notice to
withdraw with the Finance Board on or before the opt-out date
established in a capital plan shall terminate six months from the date
that the notice of withdrawal was filed with the Finance Board or on the
effective date of the Bank's capital plan, whichever date is earlier.)
The capital plan shall further provide that any member that is in the
process of withdrawing on the effective date of the capital plan but did
not file its written notice to withdraw from membership with the Finance
Board on or before this opt-out date, shall have its existing stock
converted into Class A and/or Class B stock as required by the capital
plan, and that the effective date of withdrawal for such member shall be
established in accordance with Sec. Sec. 925.26(b) and (c) of this
chapter, provided, however, that the applicable stock redemption periods
calculated under Sec. 925.26(c) of this chapter shall commence on date
the member first submitted its written notice to withdraw to the Finance
Board.
(f) Stock transactions. The capital plan shall establish the
criteria for the issuance, redemption, repurchase, transfer, and
retirement of stock issued by the Bank. The capital plan also:
[[Page 61]]
(1) Shall provide that the Bank may not issue stock other than in
accordance with Sec. 931.2 of this chapter;
(2) Shall provide that the stock of the Bank may be issued only to
and held only by the members of that Bank;
(3) Shall specify whether the stock of the Bank may be transferred
among members, and, if such transfer is allowed, shall specify the
procedures that a member should follow to effect such transfer, and that
the transfer shall be undertaken only in accordance with Sec. 931.6 of
this chapter;
(4) Shall specify that the stock of the Bank may be traded only
between the Bank and its members;
(5) May provide for a minimum investment for members that purchase
Class B stock that is lower than the minimum investment for members that
purchase Class A stock, provided that the level of investment is
sufficient for the Bank to comply with its regulatory capital
requirements;
(6) Shall specify the fee, if any, to be imposed on a member that
cancels a request to redeem Bank stock; and
(7) Shall specify the period of notice that the Bank will provide to
a member before the Bank, on its own initiative, determines to
repurchase any excess Bank stock from a member.
(g) Termination of membership. The capital plan shall address the
manner in which the Bank will provide for the disposition of its capital
stock that is held by institutions that terminate their membership, and
the manner in which the Bank will liquidate claims against its members,
including claims resulting from prepayment of advances prior to their
stated maturity.
(h) Implementation. The capital plan shall demonstrate that the Bank
has made a good faith determination that the Bank will be able to
implement the plan as submitted and that the Bank will be in compliance
with its regulatory total capital requirement and its regulatory risk-
based capital requirement after the plan is implemented.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001; 70
FR 9510, Feb. 28, 2005]
Sec. 933.3 Independent review of capital plan.
Prior to submitting its capital plan, each Bank shall conduct a
review of the plan by an independent certified public accountant to
ensure, to the extent possible, that the implementation of the plan
would not result in any write-down of the redeemable stock owned by its
members, and shall conduct a separate review by at least one NRSRO to
determine, to the extent possible, whether the implementation of the
plan would have a material effect on the credit rating of the Bank. The
Bank shall submit a copy of each report to the Finance Board as part of
its proposed capital plan.
Sec. 933.4 Transition provisions.
(a) The capital plan of a Bank may include a transition provision
that would allow a period of time, not to exceed three years, during
which the Bank shall increase its total and permanent capital to levels
that are sufficient to comply with its minimum leverage capital
requirement and its minimum risk-based capital requirement. The capital
plan of a Bank may also include a transition provision that would allow
a period of time, not to exceed three years, during which institutions
that were members of the Bank on November 12, 1999, shall increase the
amount of Bank stock to a level that is sufficient to comply with the
minimum investment established by the capital plan. The length of the
transition periods need not be identical.
(b) Any transition provision shall comply with the requirements of
Sec. 931.9.
Sec. 933.5 Disclosure to members concerning capital plan and capital
stock conversion.
(a) No capital plan shall become effective until disclosure required
by paragraphs (b) and (c) of this section has been provided to members.
All disclosure required under this section shall be transmitted, sent or
given to members not less than 45 days and not more than 60 days prior
to the opt-out date established in the Bank's capital plan in accordance
with Sec. 933.2(e).
(b) The following information shall be provided to members about the
Class A and/or Class B stock that a
[[Page 62]]
Bank intends to issue on the effective date of its capital plan:
(1) With regard to each class or subclass of authorized stock, a
description of:
(i) Dividend rights;
(ii) The terms of conversion;
(iii) Redemption and repurchase rights;
(iv) Voting rights and preferences,
(v) Liquidation rights; and
(vi) Any liability to further calls or to assessments by the Banks;
(2) A description of any material differences between the securities
to be converted into Class A and/or Class B stock and the Class A and/or
Class B stock with regard to the rights addressed in paragraph (b)(1) of
this section.
(3) A statement of the reasons for the conversion to Class A and/or
Class B stock and of the general effect thereof upon the rights of
existing members; and
(4) A description of any other material features concerning the
Bank's initial issuance of Class A and/or Class B stock.
(c) In addition to the disclosure about Class A and/or Class B
stock, the following information shall be provided to members:
(1) The Bank shall disclose financial information as follows:
(i) Audited balance sheets as of the end of the two most recent
fiscal years, audited statements of income and cash flows for each of
the three fiscal years preceding the date of the most recent audited
balance sheet being presented, and unaudited interim balance sheets and
statements of income and cash flows as of and for appropriate interim
dates that in form and content meet the requirements of Sec. 989.4 of
this chapter;
(ii) A pro forma capitalization table that reflects the Bank's
projected new capital structure relative to its actual capitalization as
of the date of the latest balance sheet required to be provided to
members by paragraph (c)(1)(i) of this section. The Bank shall also
provide a description of any material assumptions underlying the pro
forma capitalization table and the basis for these assumptions, and
shall provide estimates of its risk-based capital requirement,
calculated in accordance with Sec. 932.3 of this chapter, and of its
total capital-to-asset ratio (both of which shall be based on the same
financial data used for the capitalization table), along with a
discussion of material assumptions underlying these estimates and the
basis for these assumptions; and
(iii) Any of the financial information required to be disclosed by
paragraph (c)(1) of this section may be incorporated by reference,
provided the information being incorporated is contained in an annual or
quarterly Bank report prepared in accordance with Sec. 989.4 of this
chapter or an annual or quarterly Bank System report, and the disclosure
identifies the information being incorporated by reference;
(2) A narrative discussion of anticipated developments that could
materially affect the liquidity, capital, earnings or continuing
operations of the Bank, including those affecting dividends, product
volumes, investment volumes, new business lines and risk profile.
(3) A description of any amendments anticipated to be made to the
Bank's by-laws, policies or other governance documents as a result of
the implementation of the capital plan;
(4) To the extent that such information has not been provided under
paragraph (b) of this section, the Bank shall disclose information
related to the capital plan as follows:
(i) A description of the minimum stock investment requirements set
forth in the capital plan;
(ii) A statement outlining the requirements for amending the capital
plan;
(iii) A description of any restrictions or limitations under a
Bank's capital plan on a member's rights to buy, or redeem its class A
or class B stock, to have such stock repurchased, or otherwise to make
use of such stock to fulfill the member's minimum stock investment
requirement;
(iv) A statement setting forth the opt-out date, on or before which
a member's written notice to withdraw must be filed with the Finance
Board (as established in accordance with Sec. 933.2(e) of this part)
for the member not to have its existing Bank stock
[[Page 63]]
converted to Class A or Class B stock on the effective date of the
Bank's capital plan and describing the effect on a member's effective
date of withdrawal of failing to file its notice to withdraw on or
before the opt-out date; and
(v) A description of a member's rights under the capital plan to
have its stock redeemed or repurchased upon voluntary or involuntary
termination of its membership;
(5) The Bank should state the name, address and telephone number
where members may direct written or oral requests for a copy of the
capital plan and any other instrument or document that defines the
rights of the member/stockholders. This information shall be provided to
the members without charge; and
(6) The Bank shall provide a statement as to the anticipated
accounting treatment for the transaction and the federal income tax
implications of the transaction that members should consider in
consultation with their own accounting and tax advisors.
(d) Nothing in this section shall create or be deemed to create any
rights in any third party.
[66 FR 54109, Oct. 26, 2001]
SUBCHAPTER F_FEDERAL HOME LOAN BANK MISSION [RESERVED]
[[Page 64]]
SUBCHAPTER G_FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS
PART 952_COMMUNITY INVESTMENT CASH ADVANCE PROGRAMS--Table of Contents
Sec.
952.1 Definitions.
952.2 Scope.
952.3 Purpose.
952.4 Targeted Community Lending Plan.
952.5 Community Investment Cash Advance Programs.
952.6 Reporting.
952.7 Documentation.
Authority: 12 U.S.C. 1422b(a)(1), 1430.
Source: 63 FR 65546, Nov. 27, 1998, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Sec. 952.1 Definitions.
As used in this part:
Champion Community means a community which developed a strategic
plan and applied for designation by either the Secretary of HUD or the
Secretary of the USDA as an Empowerment Zone or Enterprise Community,
but was designated a Champion Community.
CICA program or Community Investment Cash Advance program means:
(1) A Bank's AHP;
(2) A Bank's CIP;
(3) A Bank's RDF program or UDF program using any combination of the
targeted beneficiaries and targeted income levels specified in Sec.
952.1 of this part; and
(4) Any other advance or grant program offered by a Bank using
targeted beneficiaries and targeted income levels other than those
specified in Sec. 952.1 of this part, established by the Bank with the
prior approval of the Finance Board.
Economic development projects means:
(1) Commercial, industrial, manufacturing, social service, and
public facility projects and activities; and
(2) Public or private infrastructure projects, such as roads,
utilities, and sewers.
Family means one or more persons living in the same dwelling unit.
Housing projects means projects or activities that involve the
purchase, construction, rehabilitation or refinancing (subject to Sec.
952.5(c) of this part) of, or predevelopment financing for:
(1) Individual owner-occupied housing units, each of which is
purchased or owned by a family with an income at or below the targeted
income level;
(2) Projects involving multiple units of owner-occupied housing in
which at least 51% of the units are owned or are intended to be
purchased by families with incomes at or below the targeted income
level;
(3) Rental housing where at least 51% of the units in the project
are occupied by, or the rents are affordable to, families with incomes
at or below the targeted income level; or
(4) Manufactured housing parks where:
(i) At least 51% of the units in the project are occupied by, or the
rents are affordable to, families with incomes at or below the targeted
income level; or
(ii) The project is located in a neighborhood with a median income
at or below the targeted income level.
Median income for the area--(1) Owner-occupied housing projects and
economic development projects. For purposes of owner-occupied housing
projects and economic development projects, median income for the area
means one or more of the following, as determined by the Bank:
(i) The median income for the area, as published annually by HUD;
(ii) The median income for the area obtained from the Federal
Financial Institutions Examination Council;
(iii) The applicable median family income, as determined under 26
U.S.C. 143(f) (Mortgage Revenue Bonds) and published by a State agency
or instrumentality;
(iv) The median income for the area, as published by the USDA; or
(v) The median income for the area obtained from another public
entity or a private source and approved by the Board of Directors, at
the request of a Bank, for use under the Bank's CICA programs.
[[Page 65]]
(2) Rental housing projects. For purposes of rental housing
projects, median income for the area means one or more of the following,
as determined by the Bank:
(i) The median income for the area, as published annually by HUD; or
(ii) The median income for the area obtained from the Federal
Financial Institutions Examination Council;
(iii) The median income for the area obtained from another public
entity or a private source and approved by the Board of Directors, at
the request of a Bank, for use under the Bank's CICA programs.
MSA means a Metropolitan Statistical Area as designated by the
Office of Management and Budget.
Neighborhood means:
(1) A census tract or block numbering area;
(2) A unit of local government with a population of 25,000 or less;
(3) A rural county; or
(4) A geographic location designated in comprehensive plans,
ordinances, or other local documents as a neighborhood, village, or
similar geographic designation that is within the boundary of but does
not encompass the entire area of a unit of general local government.
Provide financing means:
(1) Originating loans;
(2) Purchasing a participation interest, or providing financing to
participate, in a loan consortium for CICA-eligible housing or economic
development projects;
(3) Making loans to entities that, in turn, make loans for CICA-
eligible housing or economic development projects;
(4) Purchasing mortgage revenue bonds or mortgage-backed securities,
where all of the loans financed by such bonds and all of the loans
backing such securities, respectively, meet the eligibility requirements
of the CICA program under which the member or housing associate borrower
receives funding;
(5) Creating or maintaining a secondary market for loans, where all
such loans are mortgage loans meeting the eligibility requirements of
the CICA program under which the member or housing associate borrower
receives funding;
(6) Originating CICA-eligible loans within 3 months prior to
receiving the CICA funding; and
(7) Purchasing low-income housing tax credits.
RDF or Rural Development Funding program means an advance or grant
program offered by a Bank for targeted community lending in rural areas.
Rural area means:
(1) A unit of general local government with a population of 25,000
or less;
(2) An unincorporated area outside an MSA; or
(3) An unincorporated area within an MSA that qualifies for housing
or economic development assistance from the USDA.
Small business means a ``small business concern,'' as that term is
defined by section 3(a) of the Small Business Act (15 U.S.C. 632(a)) and
implemented by the Small Business Administration under 13 CFR part 121,
or any successor provisions.
Targeted beneficiaries means beneficiaries determined by the
geographical area in which a project is located (Geographically Defined
Beneficiaries), by the individuals who benefit from a project as
employees or service recipients (Individual Beneficiaries), or by the
nature of the project itself (Activity Beneficiaries), as follows:
(1) Geographically Defined Beneficiaries:
(i) The project is located in a neighborhood with a median income at
or below the targeted income level;
(ii) The project is located in a rural Champion Community, or a
rural Empowerment Zone or rural Enterprise Community, as designated by
the Secretary of the USDA;
(iii) The project is located in an urban Champion Community, or an
urban Empowerment Zone or urban Enterprise Community, as designated by
the Secretary of HUD;
(iv) The project is located in an Indian area, as defined by the
Native American Housing Assistance and Self-Determination Act of 1996
(25 U.S.C. 4101 et seq.), Alaskan Native Village, or Native Hawaiian
Home Land;
[[Page 66]]
(v) The project is located in an area and involves a property
eligible for a Brownfield Tax Credit;
(vi) The project is located in an area affected by a military base
closing and is a ``community in the vicinity of the installation'' as
defined by the Department of Defense at 32 CFR part 176;
(vii) The project is located in a designated community under the
Community Adjustment and Investment Program as defined under 22 U.S.C.
290m-2;
(viii) The project is located in a Federally declared disaster area;
or
(ix) The project is located in a state declared disaster area, or
other area that qualifies for assistance under another Federal or State
targeted economic development program, approved by the Finance Board.
(2) Individual Beneficiaries:
(i) The annual salaries for at least 51% of the permanent full- and
part-time jobs, computed on a full-time equivalent basis, created or
retained by the project, other than construction jobs, are at or below
the targeted income level; or
(ii) At least 51% of the families who otherwise benefit from (other
than through employment), or are provided services by, the project have
incomes at or below the targeted income level.
(3) Activity Beneficiaries: Projects that qualify as small
businesses.
(4) Other Targeted Beneficiaries. A Bank may designate, with the
prior approval of the Finance Board, other targeted beneficiaries for
its targeted community lending.
(5) Only targeted beneficiaries identified in paragraphs (1)(i)
through (1)(iv), and (2)(i) and (2)(ii) of this definition are eligible
for CIP advances.
Targeted community lending means providing financing for economic
development projects for targeted beneficiaries.
Targeted income level means:
(1) For rural areas, incomes at or below 115 percent of the median
income for the area, as adjusted for family size in accordance with the
methodology of the applicable area median income standard or, at the
option of the Bank, for a family of four;
(2) For urban areas, incomes at or below 100 percent of the median
income for the area, as adjusted for family size in accordance with the
methodology of the applicable area median income standard or, at the
option of the Bank, for a family of four;
(3) For advances provided under CIP:
(i) For economic development projects, incomes at or below 80
percent of the median income for the area; or
(ii) For housing projects, incomes at or below 115 percent of the
median income for the area, both as adjusted for family size in
accordance with the methodology of the applicable area median income
standard or, at the option of the Bank, for a family of four; or
(4) For advances or grants provided under any other CICA program
offered by a Bank, a targeted income level established by the Bank with
the prior approval of the Finance Board.
UDF program or Urban Development Funding program means an advance or
grant program offered by a Bank for targeted community lending in urban
areas.
Urban area means:
(1) A unit of general local government with a population of more
than 25,000; or
(2) An unincorporated area within an MSA that does not qualify for
housing or economic development assistance from the USDA.
USDA means the United States Department of Agriculture.
[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65
FR 44431, July 18, 2000; 66 FR 50295, Oct. 3, 2001. Redesignated and
amended at 67 FR 12852, Mar. 20, 2002]
Sec. 952.2 Scope.
Section 10(j)(10) of the Act (12 U.S.C. 1430(j)(10) authorizes the
Banks to offer Community Investment Cash Advance (CICA) programs. This
part establishes requirements for all CICA programs offered by a Bank,
except for a Bank's Affordable Housing Program (AHP), which is governed
specifically by part 951 of this chapter.
[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000.
Redesignated and amended at 67 FR 12852, Mar. 20, 2002]
Sec. 952.3 Purpose.
The purpose of this part is to identify targeted community lending
projects that the Banks may support through
[[Page 67]]
the establishment of CICA programs under section 10(j)(10) of the Act
(12 U.S.C. 1430(j)(10)). Pursuant to this part, a Bank may offer Rural
Development Funding (RDF) or Urban Development Funding (UDF) programs,
or both, for targeted community lending using the targeted beneficiaries
or targeted income levels specified in Sec. 952.1, without prior
Finance Board approval. A Bank also may offer other CICA programs for
targeted community lending using targeted beneficiaries and targeted
income levels other than those specified in Sec. 952.1, established by
the Bank with the prior approval of the Finance Board. In addition, a
Bank shall offer CICA programs under section 10(i) of the Act (12 U.S.C.
1430(i)) (Community Investment Program (CIP)) and section 10(j) of the
Act (12 U.S.C. 1430(j)) (Affordable Housing Program (AHP)). A Bank may
provide advances or grants under its CICA programs except for CIP
programs, under which a Bank may only provide advances.
[67 FR 12852, Mar. 20, 2002]
Sec. 952.4 Targeted Community Lending Plan
Each Bank shall develop and adopt an annual Targeted Community
Lending Plan pursuant to Sec. 944.6 of this chapter.
[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65
FR 44431, July 18, 2000]
Sec. 952.5 Community Investment Cash Advance Programs.
(a) In general. (1) Each Bank shall offer an AHP in accordance with
part 951 of this chapter.
(2) Each Bank shall offer a CIP to provide financing for housing
projects and for eligible targeted community lending at the appropriate
targeted income levels.
(3) Each Bank may offer RDF programs or UDF programs, or both, for
targeted community lending using the targeted beneficiaries or targeted
income levels specified in Sec. 952.1 of this part, without prior
Finance Board approval.
(4) Each Bank may offer CICA programs for targeted community lending
using targeted beneficiaries and targeted income levels other than those
specified in Sec. 952.1 of this part, established by the Bank with the
prior approval of the Finance Board.
(b) Mixed-use projects. (1) For projects funded under CICA programs
other than CIP, involving a combination of housing projects and economic
development projects, only the economic development components of the
project must meet the appropriate targeted income level for the
respective CICA program.
(2) For projects funded under CIP, both the housing and economic
development components of the project must meet the appropriate targeted
income levels.
(c) Refinancing. CICA funding other than AHP may be used to
refinance economic development projects and housing projects, provided
that any equity proceeds of the refinancing of rental housing and
manufactured housing parks are used to rehabilitate the projects or to
preserve affordability for current residents.
(d) Pricing and Availability of advances--(1) Advances to members.
For CICA programs other than AHP and CIP, a Bank shall price advances to
members as provided in Sec. 950.5 of this chapter, and may price such
advances at rates below the price of advances of similar amounts,
maturities and terms made pursuant to section 10(a) of the Act. (12
U.S.C. 1430(a)).
(2) Pricing of CIP advances. The price of advances made under CIP
shall not exceed the Bank's cost of issuing consolidated obligations of
comparable maturity, taking into account reasonable administrative
costs.
(3) Pricing of AHP advances. A Bank shall price advances made under
AHP in accordance with parts 950 and 951 of this chapter.
(4) Advances to housing associate borrowers. (i) A Bank may offer
advances under CICA programs to housing associate borrowers at the
Bank's option, except for AHP and CIP, which are available only to
members.
(ii) A Bank shall price advances to housing associate borrowers as
provided in Sec. 950.17 of this chapter, and may price such advances at
rates below the price of advances of similar amounts, maturities and
terms made
[[Page 68]]
pursuant to section 10b of the Act. (12 U.S.C. 1430b).
(5) Pricing pass-through. A Bank may require that borrowers
receiving advances made under CICA programs pass through the benefit of
any price reduction from regular advance pricing to their borrowers.
(6) Discount Fund. (i) A Bank may establish a Discount Fund which
the Bank may use to reduce the price of CIP or other advances made under
CICA programs below the advance prices provided for by this part.
(ii) Price reductions made through the Discount Fund shall be made
in accordance with a fair distribution scheme.
[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65
FR 44431, July 18, 2000; 66 FR 50296, Oct. 3, 2001; 67 FR 12852, Mar.
20, 2002]
Sec. 952.6 Reporting.
(a) By July 1, 1999, each Bank shall provide to the Finance Board an
initial assessment of the credit needs and market opportunities in a
Bank's district for targeted community lending.
(b) Effective in 2000, each Bank annually shall provide to the
Finance Board, on or before January 31, a Targeted Community Lending
Plan.
(c) Each Bank shall provide such other reports concerning its CICA
programs as the Finance Board may request from time to time.
[63 FR 65546, Nov. 27, 1998. Redesignated at 65 FR 8256, Feb. 18, 2000,
as amended at 65 FR 44431, July 18, 2000]
Sec. 952.7 Documentation.
(a) A Bank shall require the borrower to certify to the Bank that
each project funded under a CICA program (other than AHP) meets the
respective targeting requirements of the CICA program. Such
certification shall include a description of how the project meets the
requirements, and where appropriate, a statistical summary or list of
incomes of the borrowers, rents for the project, or salaries of jobs
created or retained.
(b) For those CICA-funded projects that also receive funds from
another targeted Federal economic development program that has income
targeting requirements that are the same as, or more restrictive than,
the targeting requirements of the applicable CICA program, the Bank
shall permit the borrower to certify that compliance with the criteria
of such Federal economic development program will meet the requirements
of the respective CICA program.
(c) Such certifications shall satisfy the Bank's obligations to
document compliance with the CICA funding provisions of this part.
[63 FR 65546, Nov. 27, 1998. Redesignated at 65 FR 8256, Feb. 18, 2000,
as amended at 66 FR 50296, Oct. 3, 2001]
PART 955_ACQUIRED MEMBER ASSETS--Table of Contents
Sec.
955.1 Definitions.
955.2 Authorization to hold acquired member assets.
955.3 Required credit-risk sharing structure.
955.4 Reporting requirements for acquired member assets.
955.5 Administrative and investment transactions between Banks.
955.6 Risk-based capital requirement for acquired member assets.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, 1431.
Source: 65 FR 43981, July 17, 2000, unless otherwise noted.
Sec. 955.1 Definitions.
As used in this part:
Affiliate means any business entity that controls, is controlled by,
or is under common control with, a member.
Expected losses means the base loss scenario in the methodology of
an NRSRO applicable to that type of AMA asset.
Residential real property has the meaning set forth in Sec. 950.1
of this chapter.
[67 FR 12852, Mar. 20, 2002]
Sec. 955.2 Authorization to hold acquired member assets.
Subject to the requirements of part 980 of this chapter, each Bank
may hold assets acquired from or through Bank System members or housing
associates by means of either a purchase or a funding transaction (AMA),
subject to each of the following requirements:
[[Page 69]]
(a) Loan type requirement. The assets are either:
(1) Whole loans that are eligible to secure advances under
Sec. Sec. 950.7(a)(1)(i), (a)(2)(ii), (a)(4), or (b)(1) of this
chapter, excluding:
(i) Single-family mortgages where the loan amount exceeds the limits
established pursuant to 12 U.S.C. 1717(b)(2); and
(ii) Loans made to an entity, or secured by property, not located in
a state;
(2) Whole loans secured by manufactured housing, regardless of
whether such housing qualifies as residential real property; or
(3) State and local housing finance agency bonds;
(b) Member or housing associate nexus requirement. The assets are:
(1) Either:
(i) Originated or issued by, through, or on behalf of a Bank System
member or housing associate, or an affiliate thereof; or
(ii) Held for a valid business purpose by a Bank System member or
housing associate, or an affiliate thereof, prior to acquisition by a
Bank; and
(2) Acquired either:
(i) From a member or housing associate of the acquiring Bank;
(ii) From a member or housing associate of another Bank, pursuant to
an arrangement with that Bank, which, in the case of state and local
finance agency bonds only, may be reached in accordance with the
following process:
(A) The housing finance agency shall first offer the Bank in whose
district the agency is located (local Bank) a right of first refusal to
purchase, or negotiate the terms of, its proposed bond offering;
(B) If the local Bank indicates, within a three day period, that it
will negotiate in good faith to purchase the bonds, the agency may not
offer to sell or negotiate the terms of a purchase with another Bank;
and
(C) If the local Bank declines the offer, or has failed to respond
within the three day period, the acquiring Bank will be considered to
have an arrangement with the local Bank for purposes of this section and
may offer to buy or negotiate the terms of a bond sale with the agency;
(iii) From another Bank; and
(c) Credit risk-sharing requirement. The transactions through which
the Bank acquires the assets either:
(1) Meet the credit risk-sharing requirements of Sec. 955.3 of this
part; or
(2) Were authorized by the Finance Board under section II.B.12 of
the FMP and are within any total dollar cap established by the Finance
Board at the time of such authorization.
Sec. 955.3 Required credit risk-sharing structure.
(a) Determination of necessary credit enhancement. At the earlier of
270 days from the date of the Bank's acquisition of the first loan in a
pool, or the date at which the amount of a pool's assets reaches $100
million, a Bank shall determine the total credit enhancement necessary
to enhance the asset or pool of assets to a credit quality that is
equivalent to that of an instrument having at least the fourth highest
credit rating from an NRSRO, or such higher credit rating as the Bank
may require. The Bank shall make this determination for each AMA product
using a methodology that is confirmed in writing by an NRSRO to be
comparable to a methodology that the NRSRO would use in determining
credit enhancement levels when conducting a rating review of the asset
or pool of assets in a securitization transaction.
(b) Credit risk-sharing structure. A Bank acquiring AMA shall
implement, and have in place at all times, a credit risk-sharing
structure for each AMA product under which a member or housing associate
of the Bank or, with the approval of both Banks, a member or housing
associate of another Bank, provides a sufficient credit enhancement from
the first dollar of credit loss for each asset or pool of assets such
that the acquiring Bank's exposure to credit risk for the life of the
asset or pool of assets is no greater than that of an asset rated in the
fourth highest credit rating category, as determined pursuant to
paragraph (a) of this section, or such higher rating as the acquiring
Bank may require. This credit enhancement structure shall meet the
following requirements:
(1) A portion of the credit enhancement may be provided by:
[[Page 70]]
(i) Contracting with an insurance affiliate of that member or
housing associate to provide an enhancement or undertaking against
losses to the Bank, but only where such insurance is positioned in the
credit enhancement structure so as to cover only losses remaining after
the member or housing associate has borne losses as required under
paragraph (b)(2) of this section;
(ii) Purchasing loan-level insurance, which may include United
States government insurance or guarantee, but only where:
(A) The member or housing associate is legally obligated at all
times to maintain such insurance with an insurer rated not lower than
the second highest credit rating category; and
(B) Such insurance is positioned in the credit enhancement structure
so as to cover only losses remaining after the member or housing
associate has borne losses as required under paragraph (b)(2) of this
section;
(iii) Purchasing pool-level insurance, but only where such
insurance:
(A) Insures that portion of the required credit enhancement
attributable to the geographic concentration and size of the pool; and
(B) Is positioned last in the credit enhancement structure so as to
cover only those losses remaining after all other elements of the credit
enhancement structure have been exhausted; or
(iv) Contracting with another member or housing associate in the
Bank's district or in another Bank's district, pursuant to an
arrangement with that Bank, to provide an enhancement or undertaking
against losses to the Bank in return for some compensation;
(2) The member or housing associate that is providing the credit
enhancement required under paragraph (b)(1) of this section shall in all
cases bear the direct economic consequences of actual credit losses on
the asset or pool of assets:
(i) From the first dollar of loss up to the amount of expected
losses; or
(ii) Immediately following expected losses, but in an amount equal
to or exceeding the amount of expected losses;
(3) The portion of the credit enhancement that is an obligation of a
Bank System member or housing associate shall be fully secured; and
(4) The Bank shall obtain written verification from an NRSRO that
concludes to the satisfaction of the Finance Board, based on the
underlying economic terms of the credit enhancement structure as
represented by the Bank for each AMA product, that either:
(i) The level of credit enhancement provided by the member or
housing associate is generally sufficient to enhance the asset or pool
of assets to a credit quality that is equivalent to that of an
instrument having the fourth highest credit rating from an NRSRO, or
such higher rating as the Bank may require; or
(ii) The methodology used by the Bank for estimating the level of
credit enhancement provided by the member or housing associate is in
accordance with the practices established by the NRSRO.
(c) Timing of NRSRO opinions. For AMA programs already in operation
at the time of the effective date of this rule, a Bank shall have 90
days from the effective date of this rule to obtain the NRSRO
verifications required under paragraphs (a) and (b)(4) of this section.
[65 FR 43981, July 17, 2000, as amended at 67 FR 12852, Mar. 20, 2002]
Sec. 955.4 Reporting requirement for acquired member assets.
Each Bank shall report information related to AMA in accordance with
the instructions provided in the Data Reporting Manual issued by the
Finance Board, as amended from time to time.
[71 FR 35500, June 21, 2006]
Sec. 955.5 Administrative and investment transactions between Banks.
(a) Delegation of administrative duties. A Bank may delegate the
administration of an AMA program to another Bank whose administrative
office has been examined and approved by the Finance Board to process
AMA transactions. The existence of such a delegation, or the possibility
that such a delegation may be made, must be disclosed to any potential
participating member or housing associate as part of any AMA-related
agreements are
[[Page 71]]
signed with that member or housing associate.
(b) Terminability of Agreements. Any agreement made between two or
more Banks in connection with any AMA program shall be made terminable
by either party after a reasonable notice period.
(c) Delegation of Pricing Authority. A Bank that has delegated its
AMA pricing function to another Bank shall retain a right to refuse to
acquire AMA at prices it does not consider appropriate.
Sec. 955.6 Risk-based capital requirement for acquired member assets.
(a) General. Each Bank shall hold retained earnings plus general
allowance for losses as support for the credit risk of all AMA estimated
by the Bank to represent a credit risk that is greater than that of
comparable instruments that have received the second highest credit
rating from an NRSRO in an amount equal to or greater than the
outstanding balance of the assets or pools of assets times a factor
associated with the putative credit rating of the assets or pools of
assets as determined by the Finance Board on a case-by-case basis. For
single-family mortgage assets, the factors are as set forth in Table 1
of this part.
Table 1
------------------------------------------------------------------------
Percentage
applicable to on-
Putative rating of single-family mortgage assets balance sheet
equivalent value
of AMA
------------------------------------------------------------------------
Third Highest Investment Grade........................ 0.90
Fourth Highest Investment Grade....................... 1.50
If Downgraded to Below Investment Grade After
Acquisition By Bank:
Highest Below Investment Grade.................... 2.25
Second Highest Below Investment Grade............. 2.60
All Other Below Investment Grade.................. 100.00
------------------------------------------------------------------------
(b) Recalculation of credit enhancement. For risk-based capital
purposes, each Bank shall recalculate the estimated credit rating of a
pool of AMA if there is evidence that a decline in the credit quality of
that pool may have occurred.
SUBCHAPTER H_FEDERAL HOME LOAN BANK LIABILITIES [RESERVED]
[[Page 72]]
SUBCHAPTER I_MISCELLANEOUS FEDERAL HOME LOAN BANK OPERATIONS AND
AUTHORITIES
PART 975_COLLECTION, SETTLEMENT, AND PROCESSING OF PAYMENT
INSTRUMENTS--Table of Contents
Sec.
975.1 Definitions.
975.2 Authority and scope.
975.3 General provisions.
975.4 Incidental powers.
975.5 Operations.
975.6 Pricing of services.
975.7 Rights, powers, responsibilities, duties, and liabilities.
Authority: 12 U.S.C. 1430, 1431.
Source: 45 FR 64164, Sept. 29, 1980, unless otherwise noted.
Redesignated at 54 FR 36759, Sept. 5, 1989, and further redesignated at
65 FR 8256, Feb. 18, 2000.
Sec. 975.1 Definitions.
(a) Unless otherwise defined in this part, the terms used in this
part shall conform, in the following order, to: Regulations of the
Finance Board, the Uniform Commercial Code, regulations of the Federal
Reserve System, and general banking usage.
(b) As used in this part:
Account processing includes charging, crediting, and settling of
member or eligible institution accounts, excluding individual customer
accounts.
Assets includes furniture and equipment, leasehold improvements, and
capitalized start-up costs.
Data communication means transmitting and receiving of data to or
from Banks, Federal Reserve offices, clearinghouse associations,
depository institutions or their service bureaus, and other direct
sending entities, arrangement for delivery of information; and telephone
inquiry service.
Data processing includes capture, storage, and assembling of, and
computation of, data from payment instruments received from Federal
Reserve offices, Banks, clearinghouse associations, depository
institutions, and other direct lending entities.
Eligible institution means any institution that is eligible to make
application to become a member of a Bank under section 4 of the Act (12
U.S.C. 1424), including any building and loan association, savings and
loan association, cooperative bank, homestead association, insurance
company, savings bank, or any insured depository institution (as defined
in section 2(12) of the Act (12 U.S.C. 1422(12))), regardless of whether
the institution applies for or would be approved for membership.
Issuance of forms means the designation and distribution of
standardized forms for use in collection, processing, and settlement
services.
Presentment means a demand for acceptance or payment made upon the
maker, acceptor, drawee or other payor by or on behalf of the holder,
and may involve the use of electronic transmission of an instrument or
item or transmission of data from the instrument or item by electronic
or mechanical means.
Statement packaging includes receiving statement information from
members or eligible institutions or their service bureaus on respective
customer cycle dates; printing statements; matching customer account
statements; packaging the statements with appropriate items and
informational materials, as authorized by individual members and
eligible institutions, for distribution to their customers; sending the
packages to the members or eligible institutions or mailing the packages
directly to their customers.
Storage services includes filing, storage, and truncation of items.
Transportation of items includes transporting items from Federal
Reserve offices, other Banks' clearinghouse associations, depository
institutions, and other direct sending entities to a Bank; forwarding
items to financial institutions after sorting and forwarding cash items
or return items to Federal Reserve offices and other sending entities.
[67 FR 12854, Mar. 20, 2002]
Sec. 975.2 Authority and scope.
(a) Pursuant to section 11(e)(2) of the Act (12 U.S.C. 1431(e)(2)) ,
the Finance Board has promulgated this part governing the collection,
processing, and settlement, and services incidental
[[Page 73]]
thereto, of drafts, checks, and other negotiable and nonnegotiable items
and instruments by Banks. Settlement, collection, and processing include
the following activities as defined in this part: Account processing,
data processing, data communication, issuance of forms, transportation
of items, and storage services.
(b) Any activity authorized by section 11(e)(2) of the Act (12
U.S.C. 1431(e)(2)) shall be governed by the provisions of this part.
[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000.
Redesignated and amended at 67 FR 12854, Mar. 20, 2002]
Sec. 975.3 General provisions.
The Banks are authorized to:
(a) Engage in, be agents or intermediaries for, or otherwise
participate or assist in, the processing, collection, and settlement of
checks, drafts, or any other negotiable or nonnegotiable items and
instruments of payment drawn on eligible institutions or Bank members;
and
(b) Be drawees of checks, drafts, and other negotiable and
nonnegotiable items and instruments issued by eligible institutions or
Bank members.
[67 FR 12854, Mar. 20, 2002]
Sec. 975.4 Incidental powers.
In connection with the collection, processing, and settlement of
items and instruments drawn on or issued by eligible institutions or
Bank members, a Bank may also perform the following services:
(a) Statement packaging; and
(b) Any other activity that the Finance Board shall, from time to
time, after notice and comment, find necessary for the exercise of the
authority of this part.
[45 FR 64164, Sept. 29, 1980, as amended at 55 FR 2231, Jan. 23, 1990;
65 FR 8266, Feb. 18, 2000; 67 FR 12854, Mar. 20, 2002]
Sec. 975.5 Operations.
A Bank may utilize the services of a Federal Reserve Bank and may
become a member or use the services of a clearinghouse, public or
private financial institution, or agency in the exercise of any powers
or functions under this part.
[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]
Sec. 975.6 Pricing of services.
(a) General. Banks shall charge for services authorized in this part
in a manner consistent with the principles of section 11(A)(c) of the
Federal Reserve Act (12 U.S.C. 248a(c)), as interpreted by this part.
(b) Payment instrument account services. (1) In determining the fees
for services provided under this part, a Bank must take into account all
direct and indirect costs of providing the services.
(2) Prices must reflect the imputed rate of return that would have
been earned and the taxes that would have been paid if the Bank were a
private corporation, by using a cost of capital adjustment factor
applied to those assets used in providing services authorized under this
part.
(c) Review and publication. The Finance Board shall from time to
time and at least annually review the cost of capital adjustment factor
and review prices for services authorized in this part for compliance
with the principles set forth in paragraphs (a) and (b) of this section.
All prices for Bank services authorized in this part will be published
annually in the Federal Register, except those for fees charged to an
applicant for draws made by a beneficiary under a standby letter of
credit.
(12 U.S.C. 1431(e); Reorg. Plan No. 3 of 1947, 12 FR 4981, 3 CFR, 1943-
48 Comp., p. 1071)
[45 FR 64164, Sept. 29, 1980, as amended at 46 FR 38900, July 30, 1981.
Redesignated at 54 FR 36759, Sept. 5, 1989, and amended at 58 FR 59936,
Nov. 12, 1993; 60 FR 57682, Nov. 17, 1995; 63 FR 65700, Nov. 30, 1998;
65 FR 8266, Feb. 18, 2000]
Sec. 975.7 Rights, powers, responsibilities, duties, and liabilities.
To the extent it is not inconsistent with other provisions of this
part, the Uniform Commercial Code governs the rights, powers,
responsibilities, duties, and liabilities of Banks in the exercise of
their authority under this part. For purposes of this paragraph, the
term ``bank,'' as used in the Uniform Commercial Code and clearinghouse
rules,
[[Page 74]]
includes Banks and their members and eligible institutions.
[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]
PART 977_MISCELLANEOUS BANK AUTHORITIES--Table of Contents
Sec.
977.1 Definitions. [Reserved]
977.2 Transfer of funds between Banks.
977.3 Trustee powers.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1431(a), 1431(e),
1432(a).
Source: 65 FR 8266, Feb. 18, 2000, unless otherwise noted.
Sec. 977.1 Definitions. [Reserved]
Sec. 977.2 Transfer of funds between Banks.
Inter-Bank borrowing shall be through unsecured deposits bearing
interest at rates negotiated between Banks.
Sec. 977.3 Trustee powers.
A Bank may act, and make reasonable charges for doing so, as trustee
of any trust affecting the business of any member or any institution or
group applying for membership or for insurance of accounts, or any group
applying for a charter for a Federal Savings Association, if:
(a) Such trust is created or arises for the benefit of the
institution or its depositors, investors, or borrowers, or for the
promotion of sound and economical home financing; and
(b) In the case of applicants, the Bank ceases to act as trustee if
the application is withdrawn or rejected.
PART 978_BANK REQUESTS FOR INFORMATION--Table of Contents
Sec.
978.1 Definitions.
978.2 Scope.
978.3 Request for confidential information.
978.4 Form of request.
978.5 Storage of confidential information.
978.6 Access to confidential information.
978.7 Third party requests for confidential information.
978.8 Computer data.
Authority: 12 U.S.C. 1422b(a), 1442.
Source: 65 FR 8266, Feb. 18, 2000, unless otherwise noted.
Sec. 978.1 Definitions.
As used in this part:
Confidential information means any record, data, or report,
including but not limited to examination reports, or any part thereof,
that is non-public, privileged or otherwise not intended for public
disclosure which is in the possession or control of a financial
regulatory agency and which contains information regarding members of a
Bank or financial institutions with which a Bank has had or contemplates
having transactions under the Act.
Financial regulatory agency means any of the following:
(1) The Department of the Treasury, including either the OCC or the
OTS;
(2) The FRB;
(3) The NCUA; or
(4) The FDIC.
Third party means any person or entity except a director, officer,
employee or agent of either:
(1) A Bank in possession of any particular confidential information;
or
(2) The financial regulatory agency that supplied the particular
confidential information to such Bank.
[65 FR 8266, Feb. 18, 2000, as amended at 67 FR 12854, Mar. 20, 2002]
Sec. 978.2 Scope.
This part governs the procedure by which a Bank will request and
receive confidential information pursuant to section 22 of the Act (12
U.S.C. 1442).
[65 FR 8266, Feb. 18, 2000, as amended at 67 FR 12854, Mar. 20, 2002]
Sec. 978.3 Request for confidential information.
A Bank shall make all requests for confidential information to a
financial regulatory agency, or to a regional office of such agency if
mutually agreeable, in accordance with the procedures contained in this
part as well as any procedures of general applicability for requesting
information promulgated by such financial regulatory agency. This part
and its procedures may be supplemented by a confidentiality agreement
between a Bank and a financial regulatory agency.
[[Page 75]]
Sec. 978.4 Form of request.
A request by a Bank to a financial regulatory agency for
confidential information shall be made in writing or by such other means
as may be agreed upon between the Bank and the financial regulatory
agency. The request shall reference section 22 of the Act (12 U.S.C.
1442), as amended, and this regulation, and shall describe the
confidential information requested and identify its intended use
pursuant to the Act. The request shall be signed or otherwise made by
any duly authorized Bank officer or employee.
[65 FR 8266, Feb. 18, 2000, as amended at 67 FR 12854, Mar. 20, 2002]
Sec. 978.5 Storage of confidential information.
Each Bank shall:
(a) Store all identified confidential information in secure storage
areas or filing cabinets or other secured facilities generally used by
such Bank and limit access thereto in the same manner as it maintains
the confidentiality of its own members' privileged or non-public
information;
(b) Have in place a written set of procedures and policies designed
to ensure the confidentiality of confidential information in its
possession; and
(c) Establish an internal review of its procedures for storing
confidential information and maintaining its confidentiality, as a part
of its internal audit process.
Sec. 978.6 Access to confidential information.
Each Bank shall ensure that access to the confidential information
stored at its facility is limited to those with a need to know such
information and that employees with access maintain the confidentiality
of the confidential information in accordance with the Bank's own
procedures for maintaining the confidentiality of its members'
privileged or non-public information.
Sec. 978.7 Third party requests for confidential information.
(a) General. In the event a Bank receives a request for confidential
information in its possession from any third party, the Bank shall
forward such request to the financial regulatory agency from which the
confidential information was obtained.
(b) Subpoena. In the event a Bank receives a subpoena for
confidential information issued by a Federal, state or local government
department, agency, court or bureau, the Bank shall give timely written
notice of such subpoena to the financial regulatory agency from which
the confidential information was obtained, unless such notice is
prohibited by applicable law. Except as limited in this part, the Bank
may disclose confidential information pursuant to the subpoena, after
giving timely written notice, when:
(1) The financial regulatory agency gives written approval to the
disclosure; or
(2) A binding order to produce the confidential information has
become final with all rights of appeal either exhausted or lapsed.
(c) Nondisclosure to third parties. Except as provided in paragraph
(b) of this section, a Bank shall not disclose confidential information
to any third party. A Bank shall refer all third party requests for such
confidential information to the financial regulatory agency that
released the confidential information to the Bank.
(d) Disclosure to Finance Board. (1) Neither this part nor any
confidentiality agreement executed between a Bank and a financial
regulatory agency shall prevent a Bank from disclosing confidential
information in its possession to the Finance Board whenever disclosure
is necessary to accomplish the Finance Board's supervision of Bank
membership applications or Bank director eligibility issues, or
disclosing any confidential information in its possession if such
disclosure is made pursuant to an audit conducted pursuant to Sec.
978.5 or section 20 of the Act (12 U.S.C. 1440).
(2) The Finance Board shall keep all confidential information
received under paragraph (d) of this section in strict confidence.
[65 FR 8266, Feb. 18, 2000, as amended at 67 FR 12854, Mar. 20, 2002]
[[Page 76]]
Sec. 978.8 Computer data.
Nothing in this part shall preclude a Bank from arranging with any
financial regulatory agency to transmit or allow access to confidential
information with the consent of such agency by means of an electronic
computer system. Any such arrangement shall ensure the security of the
computerized data stored in a Bank's computer and restrict access to
such data in order to preserve confidentiality in a manner agreed upon
by the Bank and the financial regulatory agency.
SUBCHAPTER J_NEW FEDERAL HOME LOAN BANK ACTIVITIES [RESERVED]
SUBCHAPTER K_OFFICE OF FINANCE [RESERVED]
[[Page 77]]
SUBCHAPTER L_NON-BANK SYSTEM ENTITIES
PART 995_FINANCING CORPORATION OPERATIONS--Table of Contents
Sec.
995.1 Definitions.
995.2 General authority.
995.3 Authority to establish investment policies and procedures.
995.4 Book-entry procedure for Financing Corporation obligations.
995.5 Bank and Office of Finance employees.
995.6 Budget and expenses.
995.7 Administrative expenses.
995.8 Non-administrative expenses; assessments.
995.9 Reports to the Finance Board.
995.10 Review of books and records.
Authority: 12 U.S.C. 1441(b)(8), (c), (j).
Source: 62 FR 50248, Sept. 25, 1997, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Sec. 995.1 Definitions.
As used in this part:
Administrative expenses:
(1) Include general office and operating expenses such as telephone
and photocopy charges, printing, legal, and professional fees, postage,
courier services, and office supplies; and
(2) Do not include any form of employee compensation, custodian
fees, issuance costs, or any interest on (and any redemption premium
with respect to) any Financing Corporation obligations.
BIF-assessable deposit means a deposit that is subject to assessment
for purposes of the Bank Insurance Fund under the Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.), including a deposit that is
treated as a deposit insured by the Bank Insurance Fund under section
5(d)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)).
Custodian fees means any fee incurred by the Financing Corporation
in connection with the transfer of any security to, or maintenance of
any security in, the segregated account established under section
21(g)(2) of the Act (12 U.S.C. 1441(g)(2)), and any other expense
incurred by the Financing Corporation in connection with the
establishment or maintenance of such account.
Directorate means the board established under section 21(b) of the
Act (12 U.S.C. 1441(b)) to manage the Financing Corporation.
Exit fees means the amounts paid under sections 5(d)(2)(E) and (F)
of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(2)(E) and (F)),
and regulations promulgated thereunder (12 CFR part 312).
Insured depository institution has the same meaning as in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813).
Issuance costs means issuance fees and commissions incurred by the
Financing Corporation in connection with the issuance or servicing of
Financing Corporation obligations, including legal and accounting
expenses, trustee, fiscal, and paying agent charges, securities
processing charges, joint collection agent charges, advertising
expenses, and costs incurred in connection with preparing and printing
offering materials to the extent the Financing Corporation incurs such
costs in connection with issuing any obligations.
Non-administrative expenses means custodian fees, issuance costs,
and interest on Financing Corporation obligations.
Obligations means debentures, bonds, and similar debt securities
issued by the Financing Corporation under sections 21(c)(3) and (e) of
the Act (12 U.S.C. 1421(c)(3) and (e)).
Receivership proceeds means the liquidating dividends and payments
made on claims received by the Federal Savings and Loan Insurance
Corporation Resolution Fund established under section 11A of the Federal
Deposit Insurance Act (12 U.S.C. 1821a) from receiverships, that are not
required by the Resolution Funding Corporation to provide funds for the
Funding Corporation Principal Fund established under section 21B of the
Act (12 U.S.C. 1441b).
SAIF-assessable deposit means a deposit that is subject to
assessment for
[[Page 78]]
purposes of the Savings Association Insurance Fund under the Federal
Deposit Insurance Act, including a deposit that is treated as a deposit
insured by the Savings Association Insurance Fund under section 5(d)(3)
of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)).
[67 FR 12855, Mar. 20, 2002]
Sec. 995.2 General authority.
Subject to the limitations and interpretations in this part and such
orders and directions as the Finance Board may prescribe, the Financing
Corporation shall have authority to exercise all powers and authorities
granted to it by the Act and by its charter and bylaws regardless of
whether the powers and authorities are specifically implemented in
regulation.
Sec. 995.3 Authority to establish investment policies and procedures.
The Directorate shall have authority to establish investment
policies and procedures with respect to Financing Corporation funds
provided that the investment policies and procedures are consistent with
the requirements of section 21(g) of the Act (12 U.S.C. 1441(g)). The
Directorate shall promptly notify the Finance Board in writing of any
changes to the investment policies and procedures.
[62 FR 50248, Sept. 25, 1997. Redesignated at 65 FR 8256, Feb. 18, 2000,
as amended at 67 FR 12855, Mar. 20, 2002]
Sec. 995.4 Book-entry procedure for Financing Corporation obligations.
(a) Authority. Any Federal Reserve Bank shall have authority to
apply book-entry procedure to Financing Corporation obligations.
(b) Procedure. The book-entry procedure for Financing Corporation
obligations shall be governed by the book-entry procedure established
for Bank consolidated obligations, codified at part 987 of this chapter.
Wherever the terms ``Bank(s),'' ``consolidated obligation(s)'' or
``Book-entry consolidated obligation(s)'' appear in part 987, the terms
shall be construed also to mean ``Financing Corporation,'' ``Financing
Corporation obligation(s),'' or ``Book-entry Financing Corporation
obligation(s),'' respectively, if appropriate to accomplish the purposes
of this section.
[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, Feb. 18, 2000;
67 FR 12855, Mar. 20, 2002]
Sec. 995.5 Bank and Office of Finance employees.
Without further approval of the Finance Board, the Financing
Corporation shall have authority to utilize the officers, employees, or
agents of any Bank or the Office of Finance in such manner as may be
necessary to carry out its functions.
Sec. 995.6 Budget and expenses.
(a) Directorate approval. The Financing Corporation shall submit
annually to the Directorate for approval, a budget of proposed
expenditures for the next calendar year that includes administrative and
non-administrative expenses.
(b) Finance Board approval. The Directorate shall submit annually to
the Finance Board for approval, the budget of the Financing
Corporation's proposed expenditures it approved pursuant to paragraph
(a) of this section.
(c) Spending limitation. The Financing Corporation shall not exceed
the amount provided for in the annual budget approved by the Finance
Board pursuant to paragraph (b) of this section, or as it may be amended
by the Directorate within limits set by the Finance Board.
(d) Amended budgets. Whenever the Financing Corporation projects or
anticipates that it will incur expenditures, other than interest on
Financing Corporation obligations, that exceed the amount provided for
in the annual budget approved by the Finance Board or the Directorate
pursuant to paragraph (b) or (c) of this section, the Financing
Corporation shall submit an amended annual budget to the Directorate for
approval, and the Directorate shall submit such amended budget to the
Finance Board for approval.
Sec. 995.7 Administrative expenses.
(a) Payment by Banks. The Banks shall pay all administrative
expenses
[[Page 79]]
of the Financing Corporation approved pursuant to Sec. 995.6.
(b) Amount. The Financing Corporation shall determine the amount of
administrative expenses each Bank shall pay in the manner provided by
section 21(b)(7)(B) of the Act (12 U.S.C. 1441(b)(7)(B)). The Financing
Corporation shall bill each Bank for such amount periodically.
(c) Adjustments. The Financing Corporation shall adjust the amount
of administrative expenses the Banks are required to pay in any calendar
year pursuant to paragraphs (a) and (b) of this section, by deducting
any funds that remain from the amount paid by the Banks for
administrative expenses in the prior calendar year.
[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, Feb. 18, 2000;
67 FR 12856, Mar. 20, 2002]
Sec. 995.8 Non-administrative expenses; assessments.
(a) Interest expenses. The Financing Corporation shall determine
anticipated interest expenses on its obligations at least semiannually.
(b) Assessments on insured depository institutions--(1) Authority.
To provide sufficient funds to pay the non-administrative expenses of
the Financing Corporation approved under Sec. 995.6, the Financing
Corporation shall, with the approval of the board of directors of the
FDIC, assess against each insured depository institution an assessment
in the same manner as assessments are made by the FDIC under section 7
of the Federal Deposit Insurance Act.
(2) Assessment rate--(i) Determination. The Financing Corporation at
least semiannually shall establish an assessment rate formula, which may
include rounding methodology, to determine the rate or rates of the
assessment it will assess against insured depository institutions
pursuant to section 21(f)(2) of the Act (12 U.S.C. 1441(f)(2)) and
paragraph (b)(1) of this section.
(ii) Limitation. Until the earlier of December 31, 1999, or the date
as of which the last savings association ceases to exist, the rate of
the assessment imposed on an insured depository institution with respect
to any BIF-assessable deposit shall be a rate equal to \1/5\ of the rate
of the assessment imposed on an insured depository institution with
respect to any SAIF-assessable deposit.
(iii) Notice. The Financing Corporation shall notify the FDIC and
the collection agent, if any, of the formula established under paragraph
(b)(2)(i) of this section.
(3) Collecting assessments--(i) Collection agent. The Financing
Corporation shall have authority to collect assessments made under
section 21(f)(2) of the Act (12 U.S.C. 1441(f)(2)) and paragraph (b)(1)
of this section through a collection agent of its choosing.
(ii) Accounts. Each Bank shall permit any insured depository
institution whose principal place of business is in its district to
establish and maintain at least one demand deposit account to facilitate
collection of the assessments made under section 21(f)(2) of the Act (12
U.S.C. 1441(f)(2)) and paragraph (b)(1) of this section.
(c) Receivership proceeds--(1) Authority. To the extent the amounts
collected under paragraph (b) of this section are insufficient to pay
the non-administrative expenses of the Financing Corporation approved
under Sec. 995.6, the Financing Corporation shall have authority to
require the FDIC to transfer receivership proceeds to the Financing
Corporation in accordance with section 21(f)(3) of the Act (12 U.S.C.
1441(f)(3)).
(2) Procedure. The Directorate shall request in writing that the
FDIC transfer the receivership proceeds to the Financing Corporation.
Such request shall specify the estimated amount of funds required to pay
the non-administrative expenses of the Financing Corporation approved
under Sec. 995.6.
(d) Exit fees--(1) Authority. To the extent the amounts provided
under paragraphs (b) and (c) of this section are insufficient to pay the
interest due on Financing Corporation obligations, the Financing
Corporation shall have authority to request that the Secretary of the
Treasury order the transfer of exit fees to the Financing Corporation in
accordance with section 5(d)(2)(E) of the Federal Deposit Insurance Act
(12 U.S.C. 1815(d)(2)(E)) or as otherwise may be provided for by
statute.
(2) Procedure. The Directorate shall request in writing that the
Secretary of the Treasury order that exit fees be
[[Page 80]]
transferred to the Financing Corporation. Such request shall specify the
estimated amount of funds required to pay the interest due on Financing
Corporation obligations.
[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, 8269, Feb. 18,
2000; 67 FR 12856, Mar. 20, 2002]
Sec. 995.9 Reports to the Finance Board.
The Financing Corporation shall file such reports as the Finance
Board shall direct.
Sec. 995.10 Review of books and records.
The Finance Board shall examine the Financing Corporation at least
annually to determine whether the Financing Corporation is performing
its functions in accordance with the requirements of section 21 of the
Act (12 U.S.C. 1441) and this part.
[62 FR 50248, sept. 25, 1997. Redesignated at 65 FR 8256, Feb. 18, 2000,
as amended at 67 FR 12856, Mar. 20, 2002]
PART 996_AUTHORITY FOR BANK ASSISTANCE OF THE RESOLUTION FUNDING
CORPORATION--Table of Contents
Sec.
996.1 [Reserved]
996.2 Bank employees.
996.3 Demand deposit accounts.
Authority: 12 U.S.C. 1422a, 1422b.
Sec. 996.1 [Reserved]
Sec. 996.2 Bank employees.
Upon the request of the Directorate of the Resolution Funding
Corporation, established pursuant to section 21B(b) of the Act (12
U.S.C. 1441b(b)), officers, employees, or agents of the Banks are
authorized to act for and on behalf of the Resolution Funding
Corporation in such manner as may be necessary to carry out the
functions of the Resolution Funding Corporation as provided in section
21B(c)(6)(B) of the Act (12 U.S.C. 1441b(c)(6)(B)).
[54 FR 39729, Sept. 28, 1989, as amended at 65 FR 8269, Feb. 18, 2000.
Redesignated and amended at 67 FR 12856, Mar. 20, 2002]
Sec. 996.3 Demand deposit accounts.
Each Bank shall allow any Savings Association Insurance Fund member
whose principal place of business is in its district to establish and
maintain at least one demand deposit account for the purpose of
facilitating the Resolution Funding Corporation's assessments pursuant
to section 21B(e)(7) of the Act (12 U.S.C. 1441b(e)(7)).
[54 FR 39729, Sept. 28, 1989, as amended at 65 FR 8269, Feb. 18, 2000.
Redesignated and amended at 67 FR 12856, Mar. 20, 2002]
PART 997_RESOLUTION FUNDING CORPORATION OBLIGATIONS OF THE
BANKS--Table of Contents
Sec.
997.1 Definitions.
997.2 Reduction of the payment term.
997.3 Extension of the payment term.
997.4 Calculation of the quarterly present-value determination.
997.5 Termination of the obligation.
Authority: 12 U.S.C. 1422b(a) and 1441b(f).
Source: 65 FR 17438, Apr. 3, 2000, unless otherwise noted.
Effective Date Note: At 76 FR 74649, Dec. 1, 2011, part 997 was
removed, effective January 3, 2012.
Sec. 997.1 Definitions.
As used in this part:
Actual quarterly payment means the quarterly amount paid by the
Banks to fulfill the Banks' obligation to pay toward interest owed on
bonds issued by the REFCORP. The amount will equal the aggregate of 20
percent of the quarterly net earnings of each Bank, or such other amount
assessed in accordance with the Act and the regulations adopted
thereunder.
Benchmark quarterly payment means $75 million, or such amount that
may result from adjustments required by calculations made in accordance
with Sec. Sec. 997.2 and 997.3.
Current benchmark quarterly payment means the benchmark quarterly
payment that corresponds to the date of the actual quarterly payment.
Deficit quarterly payment means the amount by which the actual
quarterly payment falls short of the current benchmark quarterly
payment.
Estimated interest rate means the interest rate provided to the
Finance Board by the Department of the Treasury on a zero-coupon
Treasury bond, the maturity of which is the same as
[[Page 81]]
the date of the benchmark quarterly payment that is being defeased, or
if no bond matures on that date, then is the date closest to the date of
the payment being defeased.
Excess quarterly payment means the amount by which the actual
quarterly payment exceeds the current benchmark quarterly payment.
Quarterly present-value determination means the quarterly
calculation that will determine the extent to which an excess quarterly
payment or deficit quarterly payment alters the term of the Banks'
obligation to the REFCORP. This determination will fulfill the
requirements of 21B(f)(2)(C)(ii) of the Act (12 U.S.C
1441b(f)(2)(C)(ii), as amended by Pub. L. 106-102, sec. 607, 113
Stat.1456-57.
[65 FR 17438, Apr. 3, 2000, as amended at 67 FR 12856, Mar. 20, 2002]
Sec. 997.2 Reduction of the payment term.
(a) Generally. The Finance Board shall shorten the term of the
obligation of the Banks to make payments toward the interest owed on
bonds issued by the REFCORP for each quarter in which there is an excess
quarterly payment.
(b) Excess quarterly payment. Where there is an excess quarterly
payment, the quarterly present-value determination shall be as follows:
(1) The future value of the excess quarterly payment shall be
calculated using the estimated interest rate corresponding to the last
non-defeased benchmark quarterly payment.
(2) The future value calculated in paragraph (b)(1) of this section
shall be subtracted from the amount of the last non-defeased quarterly
benchmark payment.
(3) If the difference resulting from the calculation in paragraph
(b)(2) of this section is greater than zero, then the last non-defeased
quarterly benchmark payment is reduced by the future value of the excess
quarterly payment.
(4) If the difference resulting from the calculation in paragraph
(b)(2) of this section is less than zero, then the last non-defeased
quarterly benchmark payment shall be defeased and the payment term shall
be shortened.
(5) The amount of the excess quarterly payment that has not already
been applied to defeasing the payment under paragraph (b)(4) of this
section shall be applied toward defeasing the last non-defeased
quarterly benchmark payment using the applicable estimated interest
rate.
Sec. 997.3 Extension of the payment term.
(a) Generally. The Finance Board will extend the term of the
obligation of the Banks to make payments toward interest owed on bonds
issued by the REFCORP for each calendar quarter in which there is a
deficit quarterly payment.
(b) Deficit quarterly payment. Where there is a deficit quarterly
payment, the quarterly present-value determination shall be as follows:
(1) The future value of the deficit quarterly payment shall be
calculated using the estimated interest rate corresponding to the last
non-defeased benchmark quarterly payment, or to the first quarter
thereafter if the last non-defeased benchmark quarterly payment already
equals $75 million.
(2) The future value calculated in paragraph (b)(1) of this section
shall be added to the amount of the last non-defeased quarterly
benchmark payment if that sum is $75 million or less.
(3) If the sum calculated in paragraph (b)(2) of this section
exceeds $75 million, the last non-defeased quarterly benchmark payment
will become $75 million, and the quarterly benchmark payment term will
be extended.
(4) The extended payment will equal the future value of the amount
of the deficit quarterly payment that has not already been applied to
raising the quarterly benchmark payment to $75 million under paragraph
(b)(3) of this section, using the estimated interest rate corresponding
to the date of the extended benchmark quarterly payment.
(c) Term beyond maturity. The benchmark quarterly payment term may
be extended beyond April 15, 2030, if such extension is necessary to
ensure that the value of the aggregate amounts paid by the Banks exactly
equals the present value of an annuity of $300 million per year that
commences on the date on which the first obligation of the REFCORP was
issued and ends on April 15, 2030.
[[Page 82]]
Sec. 997.4 Calculation of the quarterly present-value determination.
(a) Applicable interest rates. The Finance Board shall obtain from
the Department of the Treasury the applicable estimated interest rates
and provide those rates to the REFCORP so that the REFCORP can perform
the calculations required under Sec. Sec. 997.2 and 997.3.
(b) Calculation by the Finance Board. If Sec. 997.3 requires that
the term for the Banks' actual quarterly payments extend beyond April
15, 2030 or if, for any reason, the REFCORP is unable to perform the
calculations or to provide the Finance Board with the results of the
calculations, the Finance Board shall make all calculations required
under this part.
(c) Records. The Finance Board will maintain the official record of
the results of all quarterly present-value determinations made under
this part.
Sec. 997.5 Termination of the obligation.
(a) Generally. The Banks' obligation to the REFCORP, or to the
Department of the Treasury if the term of that obligation extends beyond
April 15, 2030, will terminate when the aggregate actual quarterly
payments made by the Banks exactly equal the present value of an annuity
of $300 million per year that commences on the date on which the first
obligation of the REFCORP was issued and ends on April 15, 2030.
(b) Date of the final payment. The aggregate actual quarterly
payments made by the Banks exactly equal the present value of the
annuity described in paragraph (a) of this section when the value of any
remaining benchmark quarterly payment(s), after the benchmark quarterly
payments have been adjusted as required by Sec. Sec. 997.2 and 997.3,
exactly equals the actual quarterly payment.
[65 FR 17438, Apr. 3, 2000, as amended at 65 FR 40492, June 30, 2000]
[[Page 83]]
SUBCHAPTER M_FEDERAL HOME LOAN BANK DISCLOSURES
PART 998_REGISTRATION OF FEDERAL HOME LOAN BANK EQUITY
SECURITIES--Table of Contents
Sec.
998.1 Purpose.
998.2 Registration and periodic disclosures.
998.3 Reservation of authority.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1).
Source: 69 FR 38811, June 29, 2004, unless otherwise noted.
Sec. 998.1 Purpose.
The purposes of this part are to enhance the quality of the
financial disclosures provided by each Bank, to promote a greater degree
of consistency and uniformity of such disclosures from Bank to Bank, to
provide a greater degree of transparency regarding the financial
condition of each Bank, and to conform the disclosure practices of the
Banks to those of other financial institutions who raise funds in the
global debt markets.
Sec. 998.2 Registration and periodic disclosures.
(a) Registration. (1) Each Bank shall file a registration statement
by no later than June 30, 2005 to register a class of its equity
securities pursuant to the provisions of section 12(g)(1) of the 1934
Act. Each Bank shall ensure that its registration statement becomes
effective as provided in section 12 no later than August 29, 2005.
(2) Notwithstanding paragraph (a)(1) of this section, the Finance
Board may by order extend the registration date for one or more Banks if
it determines, based on factors presented in a written request to the
Finance Board, that good cause exists to do so.
(b) Periodic disclosures. Consistent with the registration required
pursuant to paragraph (a) of this section, each Bank, after registering
a class of equity securities with the SEC, shall comply with the
periodic disclosure requirements of the 1934 Act by preparing and filing
with the SEC such annual, quarterly, and current reports, as well as any
other materials required pursuant to SEC rules, regulations, or
interpretations, including those related to audited financial
statements, as may be required by the SEC under the 1934 Act.
(c) Submission to Finance Board. Unless otherwise directed by the
Finance Board, each Bank shall provide to the Finance Board on a
concurrent basis copies of all disclosure documents filed with the SEC.
Sec. 998.3 Reservation of authority.
The requirements of this part do not diminish, or otherwise restrict
the ability of the Finance Board to exercise, any and all authority
conferred by the Bank Act to ensure that the Banks operate in a
financially safe and sound manner, that they carry out their housing
finance mission, and that they remain adequately capitalized and able to
raise funds in the capital markets. Nor do the requirements of part 998
diminish or otherwise restrict the Finance Board's authority to
supervise the Banks, to conduct examinations, to require reports and
other disclosures, and to enforce compliance with applicable laws,
rules, orders or agreements.
[[Page 85]]
CHAPTER X--BUREAU OF CONSUMER FINANCIAL PROTECTION
--------------------------------------------------------------------
Part Page
1002 Equal Credit Opportunity Act (Regulation B). 87
1003 Home mortgage disclosure (Regulation C)..... 142
1004 Alternative mortgage transaction parity
(Regulation D).......................... 165
1005 Electronic fund transfers (Regulation E).... 169
1006 Fair Debt Collection Practices Act
(Regulation F).......................... 232
1007 S.A.F.E. Mortgage Licensing Act--Federal
registration of residential mortgage
loan originators (Regulation G)......... 235
1008 S.A.F.E. Mortgage Licensing Act--State
compliance and bureau registration
system (Regulation H)................... 243
1009 Disclosure requirements for depository
institutions lacking Federal deposit
insurance (Regulation I)................ 257
1010 Land registration (Regulation J)............ 259
1011 Purchasers' revocation rights, sales
practices and standards (Regulation K).. 317
1012 Special rules of practice (Regulation J).... 321
1013 Consumer leasing (Regulation M)............. 325
1014 Mortgage acts and practices--Advertising
(Regulation N).......................... 351
1015 Mortgage assistance relief services
(Regulation O).......................... 354
1016 Privacy of consumer financial information
(Regulation P).......................... 360
1022 Fair credit reporting (Regulation V)........ 394
1024 Real Estate Settlement Procedures Act
(Regulation X).......................... 484
1026 Truth in lending (Regulation Z)............. 541
1030 Truth in savings (Regulation DD)............ 1020
1070 Disclosure of records and information....... 1059
1080 Rules relating to investigations............ 1089
1081 Rules of practice for adjudication
proceedings............................. 1095
1082 State official notification rules........... 1126
[[Page 87]]
PART 1002_EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)--Table of Contents
Sec.
1002.1 Authority, scope and purpose.
1002.2 Definitions.
1002.3 Limited exceptions for certain classes of transactions.
1002.4 General rules.
1002.5 Rules concerning requests for information.
1002.6 Rules concerning evaluation of applications.
1002.7 Rules concerning extensions of credit.
1002.8 Special purpose credit programs.
1002.9 Notifications.
1002.10 Furnishing of credit information.
1002.11 Relation to state law.
1002.12 Record retention.
1002.13 Information for monitoring purposes.
1002.14 Rules on providing appraisal reports.
1002.15 Incentives for self-testing and self-correction.
1002.16 Enforcement, penalties and liabilities.
Appendix A to Part 1002--Federal Agencies to be Listed in Adverse Action
Notices
Appendix B to Part 1002--Model Application Forms
Appendix C to Part 1002--Sample Notification Forms
Appendix D to Part 1002--Issuance of Official Interpretations
Supplement I to Part 1002--Official Interpretations
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.
Source: 76 FR 79445, Dec. 21, 2011, unless otherwise noted.
Sec. 1002.1 Authority, scope and purpose.
(a) Authority and scope. This part, known as Regulation B, is issued
by the Bureau of Consumer Financial Protection (Bureau) pursuant to
Title VII (Equal Credit Opportunity Act) of the Consumer Credit
Protection Act, as amended (15 U.S.C. 1601 et seq.). Except as otherwise
provided herein, this part applies to all persons who are creditors, as
defined in Sec. 1002.2(l), other than a person excluded from coverage
of this part by section 1029 of the Consumer Financial Protection Act of
2010, Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111-203, 124 Stat. 1376. Information
collection requirements contained in this part have been approved by the
Office of Management and Budget under the provisions of 44 U.S.C. 3501
et seq. and have been assigned OMB No. 3170-0013.
(b) Purpose. The purpose of this part is to promote the availability
of credit to all creditworthy applicants without regard to race, color,
religion, national origin, sex, marital status, or age (provided the
applicant has the capacity to contract); to the fact that all or part of
the applicant's income derives from a public assistance program; or to
the fact that the applicant has in good faith exercised any right under
the Consumer Credit Protection Act. The regulation prohibits creditor
practices that discriminate on the basis of any of these factors. The
regulation also requires creditors to notify applicants of action taken
on their applications; to report credit history in the names of both
spouses on an account; to retain records of credit applications; to
collect information about the applicant's race and other personal
characteristics in applications for certain dwelling-related loans; and
to provide applicants with copies of appraisal reports used in
connection with credit transactions.
Sec. 1002.2 Definitions.
For the purposes of this part, unless the context indicates
otherwise, the following definitions apply.
(a) Account means an extension of credit. When employed in relation
to an account, the word use refers only to open-end credit.
(b) Act means the Equal Credit Opportunity Act (Title VII of the
Consumer Credit Protection Act).
(c) Adverse action. (1) The term means:
(i) A refusal to grant credit in substantially the amount or on
substantially the terms requested in an application unless the creditor
makes a counteroffer (to grant credit in a different amount or on other
terms) and the applicant uses or expressly accepts the credit offered;
(ii) A termination of an account or an unfavorable change in the
terms of an account that does not affect all or substantially all of a
class of the creditor's accounts; or
(iii) A refusal to increase the amount of credit available to an
applicant who
[[Page 88]]
has made an application for an increase.
(2) The term does not include:
(i) A change in the terms of an account expressly agreed to by an
applicant;
(ii) Any action or forbearance relating to an account taken in
connection with inactivity, default, or delinquency as to that account;
(iii) A refusal or failure to authorize an account transaction at
point of sale or loan, except when the refusal is a termination or an
unfavorable change in the terms of an account that does not affect all
or substantially all of a class of the creditor's accounts, or when the
refusal is a denial of an application for an increase in the amount of
credit available under the account;
(iv) A refusal to extend credit because applicable law prohibits the
creditor from extending the credit requested; or
(v) A refusal to extend credit because the creditor does not offer
the type of credit or credit plan requested.
(3) An action that falls within the definition of both paragraphs
(c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of
this section.
(d) Age refers only to the age of natural persons and means the
number of fully elapsed years from the date of an applicant's birth.
(e) Applicant means any person who requests or who has received an
extension of credit from a creditor, and includes any person who is or
may become contractually liable regarding an extension of credit. For
purposes of Sec. 1002.7(d), the term includes guarantors, sureties,
endorsers, and similar parties.
(f) Application means an oral or written request for an extension of
credit that is made in accordance with procedures used by a creditor for
the type of credit requested. The term application does not include the
use of an account or line of credit to obtain an amount of credit that
is within a previously established credit limit. A completed application
means an application in connection with which a creditor has received
all the information that the creditor regularly obtains and considers in
evaluating applications for the amount and type of credit requested
(including, but not limited to, credit reports, any additional
information requested from the applicant, and any approvals or reports
by governmental agencies or other persons that are necessary to
guarantee, insure, or provide security for the credit or collateral).
The creditor shall exercise reasonable diligence in obtaining such
information.
(g) Business credit refers to extensions of credit primarily for
business or commercial (including agricultural) purposes, but excluding
extensions of credit of the types described in Sec. Sec. 1002.3(a)-(d).
(h) Consumer credit means credit extended to a natural person
primarily for personal, family, or household purposes.
(i) Contractually liable means expressly obligated to repay all
debts arising on an account by reason of an agreement to that effect.
(j) Credit means the right granted by a creditor to an applicant to
defer payment of a debt, incur debt and defer its payment, or purchase
property or services and defer payment therefor.
(k) Credit card means any card, plate, coupon book, or other single
credit device that may be used from time to time to obtain money,
property, or services on credit.
(l) Creditor means a person who, in the ordinary course of business,
regularly participates in a credit decision, including setting the terms
of the credit. The term creditor includes a creditor's assignee,
transferee, or subrogee who so participates. For purposes of Sec. Sec.
1002.4(a) and (b), the term creditor also includes a person who, in the
ordinary course of business, regularly refers applicants or prospective
applicants to creditors, or selects or offers to select creditors to
whom requests for credit may be made. A person is not a creditor
regarding any violation of the Act or this part committed by another
creditor unless the person knew or had reasonable notice of the act,
policy, or practice that constituted the violation before becoming
involved in the credit transaction. The term does not include a person
whose only participation in a credit transaction involves honoring a
credit card.
[[Page 89]]
(m) Credit transaction means every aspect of an applicant's dealings
with a creditor regarding an application for credit or an existing
extension of credit (including, but not limited to, information
requirements; investigation procedures; standards of creditworthiness;
terms of credit; furnishing of credit information; revocation,
alteration, or termination of credit; and collection procedures).
(n) Discriminate against an applicant means to treat an applicant
less favorably than other applicants.
(o) Elderly means age 62 or older.
(p) Empirically derived and other credit scoring systems. (1) A
credit scoring system is a system that evaluates an applicant's
creditworthiness mechanically, based on key attributes of the applicant
and aspects of the transaction, and that determines, alone or in
conjunction with an evaluation of additional information about the
applicant, whether an applicant is deemed creditworthy. To qualify as an
empirically derived, demonstrably and statistically sound, credit
scoring system, the system must be:
(i) Based on data that are derived from an empirical comparison of
sample groups or the population of creditworthy and non-creditworthy
applicants who applied for credit within a reasonable preceding period
of time;
(ii) Developed for the purpose of evaluating the creditworthiness of
applicants with respect to the legitimate business interests of the
creditor utilizing the system (including, but not limited to, minimizing
bad debt losses and operating expenses in accordance with the creditor's
business judgment);
(iii) Developed and validated using accepted statistical principles
and methodology; and
(iv) Periodically revalidated by the use of appropriate statistical
principles and methodology and adjusted as necessary to maintain
predictive ability.
(2) A creditor may use an empirically derived, demonstrably and
statistically sound, credit scoring system obtained from another person
or may obtain credit experience from which to develop such a system. Any
such system must satisfy the criteria set forth in paragraph (p)(1)(i)
through (iv) of this section; if the creditor is unable during the
development process to validate the system based on its own credit
experience in accordance with paragraph (p)(1) of this section, the
system must be validated when sufficient credit experience becomes
available. A system that fails this validity test is no longer an
empirically derived, demonstrably and statistically sound, credit
scoring system for that creditor.
(q) Extend credit and extension of credit mean the granting of
credit in any form (including, but not limited to, credit granted in
addition to any existing credit or credit limit; credit granted pursuant
to an open-end credit plan; the refinancing or other renewal of credit,
including the issuance of a new credit card in place of an expiring
credit card or in substitution for an existing credit card; the
consolidation of two or more obligations; or the continuance of existing
credit without any special effort to collect at or after maturity).
(r) Good faith means honesty in fact in the conduct or transaction.
(s) Inadvertent error means a mechanical, electronic, or clerical
error that a creditor demonstrates was not intentional and occurred
notwithstanding the maintenance of procedures reasonably adapted to
avoid such errors.
(t) Judgmental system of evaluating applicants means any system for
evaluating the creditworthiness of an applicant other than an
empirically derived, demonstrably and statistically sound, credit
scoring system.
(u) Marital status means the state of being unmarried, married, or
separated, as defined by applicable state law. The term ``unmarried''
includes persons who are single, divorced, or widowed.
(v) Negative factor or value, in relation to the age of elderly
applicants, means utilizing a factor, value, or weight that is less
favorable regarding elderly applicants than the creditor's experience
warrants or is less favorable than the factor, value, or weight assigned
to the class of applicants that are not classified as elderly and are
most favored by a creditor on the basis of age.
(w) Open-end credit means credit extended under a plan in which a
creditor may permit an applicant to make purchases or obtain loans from
time to
[[Page 90]]
time directly from the creditor or indirectly by use of a credit card,
check, or other device.
(x) Person means a natural person, corporation, government or
governmental subdivision or agency, trust, estate, partnership,
cooperative, or association.
(y) Pertinent element of creditworthiness, in relation to a
judgmental system of evaluating applicants, means any information about
applicants that a creditor obtains and considers and that has a
demonstrable relationship to a determination of creditworthiness.
(z) Prohibited basis means race, color, religion, national origin,
sex, marital status, or age (provided that the applicant has the
capacity to enter into a binding contract); the fact that all or part of
the applicant's income derives from any public assistance program; or
the fact that the applicant has in good faith exercised any right under
the Consumer Credit Protection Act or any state law upon which an
exemption has been granted by the Bureau.
(aa) State means any state, the District of Columbia, the
Commonwealth of Puerto Rico, or any territory or possession of the
United States.
Sec. 1002.3 Limited exceptions for certain classes of transactions.
(a) Public utilities credit--(1) Definition. Public utilities credit
refers to extensions of credit that involve public utility services
provided through pipe, wire, or other connected facilities, or radio or
similar transmission (including extensions of such facilities), if the
charges for service, delayed payment, and any discount for prompt
payment are filed with or regulated by a government unit.
(2) Exceptions. The following provisions of this part do not apply
to public utilities credit:
(i) Section 1002.5(d)(1) concerning information about marital
status; and
(ii) Section 1002.12(b) relating to record retention.
(b) Securities credit--(1) Definition. Securities credit refers to
extensions of credit subject to regulation under section 7 of the
Securities Exchange Act of 1934 or extensions of credit by a broker or
dealer subject to regulation as a broker or dealer under the Securities
Exchange Act of 1934.
(2) Exceptions. The following provisions of this part do not apply
to securities credit:
(i) Section 1002.5(b) concerning information about the sex of an
applicant;
(ii) Section 1002.5(c) concerning information about a spouse or
former spouse;
(iii) Section 1002.5(d)(1) concerning information about marital
status;
(iv) Section 1002.7(b) relating to designation of name to the extent
necessary to comply with rules regarding an account in which a broker or
dealer has an interest, or rules regarding the aggregation of accounts
of spouses to determine controlling interests, beneficial interests,
beneficial ownership, or purchase limitations and restrictions;
(v) Section 1002.7(c) relating to action concerning open-end
accounts, to the extent the action taken is on the basis of a change of
name or marital status;
(vi) Section 1002.7(d) relating to the signature of a spouse or
other person;
(vii) Section 1002.10 relating to furnishing of credit information;
and
(viii) Section 1002.12(b) relating to record retention.
(c) Incidental credit--(1) Definition. Incidental credit refers to
extensions of consumer credit other than the types described in
paragraphs (a) and (b) of this section:
(i) That are not made pursuant to the terms of a credit card
account;
(ii) That are not subject to a finance charge (as defined in
Regulation Z, 12 CFR 1026.4); and
(iii) That are not payable by agreement in more than four
installments.
(2) Exceptions. The following provisions of this part do not apply
to incidental credit:
(i) Section 1002.5(b) concerning information about the sex of an
applicant, but only to the extent necessary for medical records or
similar purposes;
(ii) Section 1002.5(c) concerning information about a spouse or
former spouse;
(iii) Section 1002.5(d)(1) concerning information about marital
status;
(iv) Section 1002.5(d)(2) concerning information about income
derived from
[[Page 91]]
alimony, child support, or separate maintenance payments;
(v) Section 1002.7(d) relating to the signature of a spouse or other
person;
(vi) Section 1002.9 relating to notifications;
(vii) Section 1002.10 relating to furnishing of credit information;
and
(viii) Section 1002.12(b) relating to record retention.
(d) Government credit--(1) Definition. Government credit refers to
extensions of credit made to governments or governmental subdivisions,
agencies, or instrumentalities.
(2) Applicability of regulation. Except for Sec. 1002.4(a), the
general rule against discrimination on a prohibited basis, the
requirements of this part do not apply to government credit.
Sec. 1002.4 General rules.
(a) Discrimination. A creditor shall not discriminate against an
applicant on a prohibited basis regarding any aspect of a credit
transaction.
(b) Discouragement. A creditor shall not make any oral or written
statement, in advertising or otherwise, to applicants or prospective
applicants that would discourage on a prohibited basis a reasonable
person from making or pursuing an application.
(c) Written applications. A creditor shall take written applications
for the dwelling-related types of credit covered by Sec. 1002.13(a).
(d) Form of disclosures--(1) General rule. A creditor that provides
in writing any disclosures or information required by this part must
provide the disclosures in a clear and conspicuous manner and, except
for the disclosures required by Sec. Sec. 1002.5 and 1002.13, in a form
the applicant may retain.
(2) Disclosures in electronic form. The disclosures required by this
part that are required to be given in writing may be provided to the
applicant in electronic form, subject to compliance with the consumer
consent and other applicable provisions of the Electronic Signatures in
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
Where the disclosures under Sec. Sec. 1002.5(b)(1), 1002.5(b)(2),
1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2)(i) accompany an
application accessed by the applicant in electronic form, these
disclosures may be provided to the applicant in electronic form on or
with the application form, without regard to the consumer consent or
other provisions of the E-Sign Act.
(e) Foreign-language disclosures. Disclosures may be made in
languages other than English, provided they are available in English
upon request.
Sec. 1002.5 Rules concerning requests for information.
(a) General rules--(1) Requests for information. Except as provided
in paragraphs (b) through (d) of this section, a creditor may request
any information in connection with a credit transaction. This paragraph
does not limit or abrogate any Federal or state law regarding privacy,
privileged information, credit reporting limitations, or similar
restrictions on obtainable information.
(2) Required collection of information. Notwithstanding paragraphs
(b) through (d) of this section, a creditor shall request information
for monitoring purposes as required by Sec. 1002.13 for credit secured
by the applicant's dwelling. In addition, a creditor may obtain
information required by a regulation, order, or agreement issued by, or
entered into with, a court or an enforcement agency (including the
Attorney General of the United States or a similar state official) to
monitor or enforce compliance with the Act, this part, or other Federal
or state statutes or regulations.
(3) Special-purpose credit. A creditor may obtain information that
is otherwise restricted to determine eligibility for a special purpose
credit program, as provided in Sec. Sec. 1002.8(b), (c), and (d).
(b) Limitation on information about race, color, religion, national
origin, or sex. A creditor shall not inquire about the race, color,
religion, national origin, or sex of an applicant or any other person in
connection with a credit transaction, except as provided in paragraphs
(b)(1) and (b)(2) of this section.
(1) Self-test. A creditor may inquire about the race, color,
religion, national origin, or sex of an applicant or any
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other person in connection with a credit transaction for the purpose of
conducting a self-test that meets the requirements of Sec. 1002.15. A
creditor that makes such an inquiry shall disclose orally or in writing,
at the time the information is requested, that:
(i) The applicant will not be required to provide the information;
(ii) The creditor is requesting the information to monitor its
compliance with the Federal Equal Credit Opportunity Act;
(iii) Federal law prohibits the creditor from discriminating on the
basis of this information, or on the basis of an applicant's decision
not to furnish the information; and
(iv) If applicable, certain information will be collected based on
visual observation or surname if not provided by the applicant or other
person.
(2) Sex. An applicant may be requested to designate a title on an
application form (such as Ms., Miss, Mr., or Mrs.) if the form discloses
that the designation of a title is optional. An application form shall
otherwise use only terms that are neutral as to sex.
(c) Information about a spouse or former spouse--(1) General rule.
Except as permitted in this paragraph, a creditor may not request any
information concerning the spouse or former spouse of an applicant.
(2) Permissible inquiries. A creditor may request any information
concerning an applicant's spouse (or former spouse under paragraph
(c)(2)(v) of this section) that may be requested about the applicant if:
(i) The spouse will be permitted to use the account;
(ii) The spouse will be contractually liable on the account;
(iii) The applicant is relying on the spouse's income as a basis for
repayment of the credit requested;
(iv) The applicant resides in a community property state or is
relying on property located in such a state as a basis for repayment of
the credit requested; or
(v) The applicant is relying on alimony, child support, or separate
maintenance payments from a spouse or former spouse as a basis for
repayment of the credit requested.
(3) Other accounts of the applicant. A creditor may request that an
applicant list any account on which the applicant is contractually
liable and to provide the name and address of the person in whose name
the account is held. A creditor may also ask an applicant to list the
names in which the applicant has previously received credit.
(d) Other limitations on information requests--(1) Marital status.
If an applicant applies for individual unsecured credit, a creditor
shall not inquire about the applicant's marital status unless the
applicant resides in a community property state or is relying on
property located in such a state as a basis for repayment of the credit
requested. If an application is for other than individual unsecured
credit, a creditor may inquire about the applicant's marital status, but
shall use only the terms married, unmarried, and separated. A creditor
may explain that the category unmarried includes single, divorced, and
widowed persons.
(2) Disclosure about income from alimony, child support, or separate
maintenance. A creditor shall not inquire whether income stated in an
application is derived from alimony, child support, or separate
maintenance payments unless the creditor discloses to the applicant that
such income need not be revealed if the applicant does not want the
creditor to consider it in determining the applicant's creditworthiness.
(3) Childbearing, childrearing. A creditor shall not inquire about
birth control practices, intentions concerning the bearing or rearing of
children, or capability to bear children. A creditor may inquire about
the number and ages of an applicant's dependents or about dependent-
related financial obligations or expenditures, provided such information
is requested without regard to sex, marital status, or any other
prohibited basis.
(e) Permanent residency and immigration status. A creditor may
inquire about the permanent residency and immigration status of an
applicant or any other person in connection with a credit transaction.
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Sec. 1002.6 Rules concerning evaluation of applications.
(a) General rule concerning use of information. Except as otherwise
provided in the Act and this part, a creditor may consider any
information obtained, so long as the information is not used to
discriminate against an applicant on a prohibited basis. The legislative
history of the Act indicates that the Congress intended an ``effects
test'' concept, as outlined in the employment field by the Supreme Court
in the cases of Griggs v. Duke Power Co., 401 U.S. 424 (1971), and
Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975), to be applicable to a
creditor's determination of creditworthiness.
(b) Specific rules concerning use of information. (1) Except as
provided in the Act and this part, a creditor shall not take a
prohibited basis into account in any system of evaluating the
creditworthiness of applicants.
(2) Age, receipt of public assistance. (i) Except as permitted in
this paragraph, a creditor shall not take into account an applicant's
age (provided that the applicant has the capacity to enter into a
binding contract) or whether an applicant's income derives from any
public assistance program.
(ii) In an empirically derived, demonstrably and statistically
sound, credit scoring system, a creditor may use an applicant's age as a
predictive variable, provided that the age of an elderly applicant is
not assigned a negative factor or value.
(iii) In a judgmental system of evaluating creditworthiness, a
creditor may consider an applicant's age or whether an applicant's
income derives from any public assistance program only for the purpose
of determining a pertinent element of creditworthiness.
(iv) In any system of evaluating creditworthiness, a creditor may
consider the age of an elderly applicant when such age is used to favor
the elderly applicant in extending credit.
(3) Childbearing, childrearing. In evaluating creditworthiness, a
creditor shall not make assumptions or use aggregate statistics relating
to the likelihood that any category of persons will bear or rear
children or will, for that reason, receive diminished or interrupted
income in the future.
(4) Telephone listing. A creditor shall not take into account
whether there is a telephone listing in the name of an applicant for
consumer credit but may take into account whether there is a telephone
in the applicant's residence.
(5) Income. A creditor shall not discount or exclude from
consideration the income of an applicant or the spouse of an applicant
because of a prohibited basis or because the income is derived from
part-time employment or is an annuity, pension, or other retirement
benefit; a creditor may consider the amount and probable continuance of
any income in evaluating an applicant's creditworthiness. When an
applicant relies on alimony, child support, or separate maintenance
payments in applying for credit, the creditor shall consider such
payments as income to the extent that they are likely to be consistently
made.
(6) Credit history. To the extent that a creditor considers credit
history in evaluating the creditworthiness of similarly qualified
applicants for a similar type and amount of credit, in evaluating an
applicant's creditworthiness a creditor shall consider:
(i) The credit history, when available, of accounts designated as
accounts that the applicant and the applicant's spouse are permitted to
use or for which both are contractually liable;
(ii) On the applicant's request, any information the applicant may
present that tends to indicate the credit history being considered by
the creditor does not accurately reflect the applicant's
creditworthiness; and
(iii) On the applicant's request, the credit history, when
available, of any account reported in the name of the applicant's spouse
or former spouse that the applicant can demonstrate accurately reflects
the applicant's creditworthiness.
(7) Immigration status. A creditor may consider the applicant's
immigration status or status as a permanent resident of the United
States, and any additional information that may be necessary to
ascertain the creditor's rights and remedies regarding repayment.
[[Page 94]]
(8) Marital status. Except as otherwise permitted or required by
law, a creditor shall evaluate married and unmarried applicants by the
same standards; and in evaluating joint applicants, a creditor shall not
treat applicants differently based on the existence, absence, or
likelihood of a marital relationship between the parties.
(9) Race, color, religion, national origin, sex. Except as otherwise
permitted or required by law, a creditor shall not consider race, color,
religion, national origin, or sex (or an applicant's or other person's
decision not to provide the information) in any aspect of a credit
transaction.
(c) State property laws. A creditor's consideration or application
of state property laws directly or indirectly affecting creditworthiness
does not constitute unlawful discrimination for the purposes of the Act
or this part.
Sec. 1002.7 Rules concerning extensions of credit.
(a) Individual accounts. A creditor shall not refuse to grant an
individual account to a creditworthy applicant on the basis of sex,
marital status, or any other prohibited basis.
(b) Designation of name. A creditor shall not refuse to allow an
applicant to open or maintain an account in a birth-given first name and
a surname that is the applicant's birth-given surname, the spouse's
surname, or a combined surname.
(c) Action concerning existing open-end accounts--(1) Limitations.
In the absence of evidence of the applicant's inability or unwillingness
to repay, a creditor shall not take any of the following actions
regarding an applicant who is contractually liable on an existing open-
end account on the basis of the applicant's reaching a certain age or
retiring or on the basis of a change in the applicant's name or marital
status:
(i) Require a reapplication, except as provided in paragraph (c)(2)
of this section;
(ii) Change the terms of the account; or
(iii) Terminate the account.
(2) Requiring reapplication. A creditor may require a reapplication
for an open-end account on the basis of a change in the marital status
of an applicant who is contractually liable if the credit granted was
based in whole or in part on income of the applicant's spouse and if
information available to the creditor indicates that the applicant's
income may not support the amount of credit currently available.
(d) Signature of spouse or other person--(1) Rule for qualified
applicant. Except as provided in this paragraph, a creditor shall not
require the signature of an applicant's spouse or other person, other
than a joint applicant, on any credit instrument if the applicant
qualifies under the creditor's standards of creditworthiness for the
amount and terms of the credit requested. A creditor shall not deem the
submission of a joint financial statement or other evidence of jointly
held assets as an application for joint credit.
(2) Unsecured credit. If an applicant requests unsecured credit and
relies in part upon property that the applicant owns jointly with
another person to satisfy the creditor's standards of creditworthiness,
the creditor may require the signature of the other person only on the
instrument(s) necessary, or reasonably believed by the creditor to be
necessary, under the law of the state in which the property is located,
to enable the creditor to reach the property being relied upon in the
event of the death or default of the applicant.
(3) Unsecured credit--community property states. If a married
applicant requests unsecured credit and resides in a community property
state, or if the applicant is relying on property located in such a
state, a creditor may require the signature of the spouse on any
instrument necessary, or reasonably believed by the creditor to be
necessary, under applicable state law to make the community property
available to satisfy the debt in the event of default if:
(i) Applicable state law denies the applicant power to manage or
control sufficient community property to qualify for the credit
requested under the creditor's standards of creditworthiness; and
(ii) The applicant does not have sufficient separate property to
qualify for the credit requested without regard to community property.
(4) Secured credit. If an applicant requests secured credit, a
creditor may
[[Page 95]]
require the signature of the applicant's spouse or other person on any
instrument necessary, or reasonably believed by the creditor to be
necessary, under applicable state law to make the property being offered
as security available to satisfy the debt in the event of default, for
example, an instrument to create a valid lien, pass clear title, waive
inchoate rights, or assign earnings.
(5) Additional parties. If, under a creditor's standards of
creditworthiness, the personal liability of an additional party is
necessary to support the credit requested, a creditor may request a
cosigner, guarantor, endorser, or similar party. The applicant's spouse
may serve as an additional party, but the creditor shall not require
that the spouse be the additional party.
(6) Rights of additional parties. A creditor shall not impose
requirements upon an additional party that the creditor is prohibited
from imposing upon an applicant under this section.
(e) Insurance. A creditor shall not refuse to extend credit and
shall not terminate an account because credit life, health, accident,
disability, or other credit-related insurance is not available on the
basis of the applicant's age.
Sec. 1002.8 Special purpose credit programs.
(a) Standards for programs. Subject to the provisions of paragraph
(b) of this section, the Act and this part permit a creditor to extend
special purpose credit to applicants who meet eligibility requirements
under the following types of credit programs:
(1) Any credit assistance program expressly authorized by Federal or
state law for the benefit of an economically disadvantaged class of
persons;
(2) Any credit assistance program offered by a not-for-profit
organization, as defined under section 501(c) of the Internal Revenue
Code of 1954, as amended, for the benefit of its members or for the
benefit of an economically disadvantaged class of persons; or
(3) Any special purpose credit program offered by a for-profit
organization, or in which such an organization participates to meet
special social needs, if:
(i) The program is established and administered pursuant to a
written plan that identifies the class of persons that the program is
designed to benefit and sets forth the procedures and standards for
extending credit pursuant to the program; and
(ii) The program is established and administered to extend credit to
a class of persons who, under the organization's customary standards of
creditworthiness, probably would not receive such credit or would
receive it on less favorable terms than are ordinarily available to
other applicants applying to the organization for a similar type and
amount of credit.
(b) Rules in other sections--(1) General applicability. All the
provisions of this part apply to each of the special purpose credit
programs described in paragraph (a) of this section except as modified
by this section.
(2) Common characteristics. A program described in paragraph (a)(2)
or (a)(3) of this section qualifies as a special purpose credit program
only if it was established and is administered so as not to discriminate
against an applicant on any prohibited basis; however, all program
participants may be required to share one or more common characteristics
(for example, race, national origin, or sex) so long as the program was
not established and is not administered with the purpose of evading the
requirements of the Act or this part.
(c) Special rule concerning requests and use of information. If
participants in a special purpose credit program described in paragraph
(a) of this section are required to possess one or more common
characteristics (for example, race, national origin, or sex) and if the
program otherwise satisfies the requirements of paragraph (a) of this
section, a creditor may request and consider information regarding the
common characteristic(s) in determining the applicant's eligibility for
the program.
(d) Special rule in the case of financial need. If financial need is
one of the criteria under a special purpose credit program described in
paragraph (a) of this section, the creditor may request
[[Page 96]]
and consider, in determining an applicant's eligibility for the program,
information regarding the applicant's marital status; alimony, child
support, and separate maintenance income; and the spouse's financial
resources. In addition, a creditor may obtain the signature of an
applicant's spouse or other person on an application or credit
instrument relating to a special purpose credit program if the signature
is required by Federal or state law.
Sec. 1002.9 Notifications.
(a) Notification of action taken, ECOA notice, and statement of
specific reasons--(1) When notification is required. A creditor shall
notify an applicant of action taken within:
(i) 30 days after receiving a completed application concerning the
creditor's approval of, counteroffer to, or adverse action on the
application;
(ii) 30 days after taking adverse action on an incomplete
application, unless notice is provided in accordance with paragraph (c)
of this section;
(iii) 30 days after taking adverse action on an existing account; or
(iv) 90 days after notifying the applicant of a counteroffer if the
applicant does not expressly accept or use the credit offered.
(2) Content of notification when adverse action is taken. A
notification given to an applicant when adverse action is taken shall be
in writing and shall contain a statement of the action taken; the name
and address of the creditor; a statement of the provisions of section
701(a) of the Act; the name and address of the Federal agency that
administers compliance with respect to the creditor; and either:
(i) A statement of specific reasons for the action taken; or
(ii) A disclosure of the applicant's right to a statement of
specific reasons within 30 days, if the statement is requested within 60
days of the creditor's notification. The disclosure shall include the
name, address, and telephone number of the person or office from which
the statement of reasons can be obtained. If the creditor chooses to
provide the reasons orally, the creditor shall also disclose the
applicant's right to have them confirmed in writing within 30 days of
receiving the applicant's written request for confirmation.
(3) Notification to business credit applicants. For business credit,
a creditor shall comply with the notification requirements of this
section in the following manner:
(i) With regard to a business that had gross revenues of $1 million
or less in its preceding fiscal year (other than an extension of trade
credit, credit incident to a factoring agreement, or other similar types
of business credit), a creditor shall comply with paragraphs (a)(1) and
(2) of this section, except that:
(A) The statement of the action taken may be given orally or in
writing, when adverse action is taken;
(B) Disclosure of an applicant's right to a statement of reasons may
be given at the time of application, instead of when adverse action is
taken, provided the disclosure contains the information required by
paragraph (a)(2)(ii) of this section and the ECOA notice specified in
paragraph (b)(1) of this section;
(C) For an application made entirely by telephone, a creditor
satisfies the requirements of paragraph (a)(3)(i) of this section by an
oral statement of the action taken and of the applicant's right to a
statement of reasons for adverse action.
(ii) With regard to a business that had gross revenues in excess of
$1 million in its preceding fiscal year or an extension of trade credit,
credit incident to a factoring agreement, or other similar types of
business credit, a creditor shall:
(A) Notify the applicant, within a reasonable time, orally or in
writing, of the action taken; and
(B) Provide a written statement of the reasons for adverse action
and the ECOA notice specified in paragraph (b)(1) of this section if the
applicant makes a written request for the reasons within 60 days of the
creditor's notification.
(b) Form of ECOA notice and statement of specific reasons--(1) ECOA
notice. To satisfy the disclosure requirements of paragraph (a)(2) of
this section regarding section 701(a) of the Act, the creditor shall
provide a notice that is substantially similar to the following: The
Federal Equal Credit Opportunity Act
[[Page 97]]
prohibits creditors from discriminating against credit applicants on the
basis of race, color, religion, national origin, sex, marital status,
age (provided the applicant has the capacity to enter into a binding
contract); because all or part of the applicant's income derives from
any public assistance program; or because the applicant has in good
faith exercised any right under the Consumer Credit Protection Act. The
Federal agency that administers compliance with this law concerning this
creditor is [name and address as specified by the appropriate agency or
agencies listed in appendix A of this part]. Until January 1, 2013, a
creditor may comply with this paragraph (b)(1) and paragraph (a)(2) of
this section by including in the notice the name and address as
specified by the appropriate agency in appendix A to 12 CFR part 202, as
in effect on October 1, 2011.
(2) Statement of specific reasons. The statement of reasons for
adverse action required by paragraph (a)(2)(i) of this section must be
specific and indicate the principal reason(s) for the adverse action.
Statements that the adverse action was based on the creditor's internal
standards or policies or that the applicant, joint applicant, or similar
party failed to achieve a qualifying score on the creditor's credit
scoring system are insufficient.
(c) Incomplete applications--(1) Notice alternatives. Within 30 days
after receiving an application that is incomplete regarding matters that
an applicant can complete, the creditor shall notify the applicant
either:
(i) Of action taken, in accordance with paragraph (a) of this
section; or
(ii) Of the incompleteness, in accordance with paragraph (c)(2) of
this section.
(2) Notice of incompleteness. If additional information is needed
from an applicant, the creditor shall send a written notice to the
applicant specifying the information needed, designating a reasonable
period of time for the applicant to provide the information, and
informing the applicant that failure to provide the information
requested will result in no further consideration being given to the
application. The creditor shall have no further obligation under this
section if the applicant fails to respond within the designated time
period. If the applicant supplies the requested information within the
designated time period, the creditor shall take action on the
application and notify the applicant in accordance with paragraph (a) of
this section.
(3) Oral request for information. At its option, a creditor may
inform the applicant orally of the need for additional information. If
the application remains incomplete the creditor shall send a notice in
accordance with paragraph (c)(1) of this section.
(d) Oral notifications by small-volume creditors. In the case of a
creditor that did not receive more than 150 applications during the
preceding calendar year, the requirements of this section (including
statements of specific reasons) are satisfied by oral notifications.
(e) Withdrawal of approved application. When an applicant submits an
application and the parties contemplate that the applicant will inquire
about its status, if the creditor approves the application and the
applicant has not inquired within 30 days after applying, the creditor
may treat the application as withdrawn and need not comply with
paragraph (a)(1) of this section.
(f) Multiple applicants. When an application involves more than one
applicant, notification need only be given to one of them but must be
given to the primary applicant where one is readily apparent.
(g) Applications submitted through a third party. When an
application is made on behalf of an applicant to more than one creditor
and the applicant expressly accepts or uses credit offered by one of the
creditors, notification of action taken by any of the other creditors is
not required. If no credit is offered or if the applicant does not
expressly accept or use the credit offered, each creditor taking adverse
action must comply with this section, directly or through a third party.
A notice given by a third party shall disclose the identity of each
creditor on whose behalf the notice is given.
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Sec. 1002.10 Furnishing of credit information.
(a) Designation of accounts. A creditor that furnishes credit
information shall designate:
(1) Any new account to reflect the participation of both spouses if
the applicant's spouse is permitted to use or is contractually liable on
the account (other than as a guarantor, surety, endorser, or similar
party); and
(2) Any existing account to reflect such participation, within 90
days after receiving a written request to do so from one of the spouses.
(b) Routine reports to consumer reporting agency. If a creditor
furnishes credit information to a consumer reporting agency concerning
an account designated to reflect the participation of both spouses, the
creditor shall furnish the information in a manner that will enable the
agency to provide access to the information in the name of each spouse.
(c) Reporting in response to inquiry. If a creditor furnishes credit
information in response to an inquiry, concerning an account designated
to reflect the participation of both spouses, the creditor shall furnish
the information in the name of the spouse about whom the information is
requested.
Sec. 1002.11 Relation to state law.
(a) Inconsistent state laws. Except as otherwise provided in this
section, this part alters, affects, or preempts only those state laws
that are inconsistent with the Act and this part and then only to the
extent of the inconsistency. A state law is not inconsistent if it is
more protective of an applicant.
(b) Preempted provisions of state law. (1) A state law is deemed to
be inconsistent with the requirements of the Act and this part and less
protective of an applicant within the meaning of section 705(f) of the
Act to the extent that the law:
(i) Requires or permits a practice or act prohibited by the Act or
this part;
(ii) Prohibits the individual extension of consumer credit to both
parties to a marriage if each spouse individually and voluntarily
applies for such credit;
(iii) Prohibits inquiries or collection of data required to comply
with the Act or this part;
(iv) Prohibits asking about or considering age in an empirically
derived, demonstrably and statistically sound, credit scoring system to
determine a pertinent element of creditworthiness, or to favor an
elderly applicant; or
(v) Prohibits inquiries necessary to establish or administer a
special purpose credit program as defined by Sec. 1002.8.
(2) A creditor, state, or other interested party may request that
the Bureau determine whether a state law is inconsistent with the
requirements of the Act and this part.
(c) Laws on finance charges, loan ceilings. If married applicants
voluntarily apply for and obtain individual accounts with the same
creditor, the accounts shall not be aggregated or otherwise combined for
purposes of determining permissible finance charges or loan ceilings
under any Federal or state law. Permissible loan ceiling laws shall be
construed to permit each spouse to become individually liable up to the
amount of the loan ceilings, less the amount for which the applicant is
jointly liable.
(d) State and Federal laws not affected. This section does not alter
or annul any provision of state property laws, laws relating to the
disposition of decedents' estates, or Federal or state banking
regulations directed only toward insuring the solvency of financial
institutions.
(e) Exemption for state-regulated transactions--(1) Applications. A
state may apply to the Bureau for an exemption from the requirements of
the Act and this part for any class of credit transactions within the
state. The Bureau will grant such an exemption if the Bureau determines
that:
(i) The class of credit transactions is subject to state law
requirements substantially similar to those of the Act and this part or
that applicants are afforded greater protection under state law; and
(ii) There is adequate provision for state enforcement.
(2) Liability and enforcement. (i) No exemption will extend to the
civil liability provisions of section 706 of the Act
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or the administrative enforcement provisions of section 704 of the Act.
(ii) After an exemption has been granted, the requirements of the
applicable state law (except for additional requirements not imposed by
Federal law) will constitute the requirements of the Act and this part.
Sec. 1002.12 Record retention.
(a) Retention of prohibited information. A creditor may retain in
its files information that is prohibited by the Act or this part for use
in evaluating applications, without violating the Act or this part, if
the information was obtained:
(1) From any source prior to March 23, 1977;
(2) From consumer reporting agencies, an applicant, or others
without the specific request of the creditor; or
(3) As required to monitor compliance with the Act and this part or
other Federal or state statutes or regulations.
(b) Preservation of records--(1) Applications. For 25 months (12
months for business credit, except as provided in paragraph (b)(5) of
this section) after the date that a creditor notifies an applicant of
action taken on an application or of incompleteness, the creditor shall
retain in original form or a copy thereof:
(i) Any application that it receives, any information required to be
obtained concerning characteristics of the applicant to monitor
compliance with the Act and this part or other similar law, and any
other written or recorded information used in evaluating the application
and not returned to the applicant at the applicant's request;
(ii) A copy of the following documents if furnished to the applicant
in written form (or, if furnished orally, any notation or memorandum
made by the creditor):
(A) The notification of action taken; and
(B) The statement of specific reasons for adverse action; and
(iii) Any written statement submitted by the applicant alleging a
violation of the Act or this part.
(2) Existing accounts. For 25 months (12 months for business credit,
except as provided in paragraph (b)(5) of this section) after the date
that a creditor notifies an applicant of adverse action regarding an
existing account, the creditor shall retain as to that account, in
original form or a copy thereof:
(i) Any written or recorded information concerning the adverse
action; and
(ii) Any written statement submitted by the applicant alleging a
violation of the Act or this part.
(3) Other applications. For 25 months (12 months for business
credit, except as provided in paragraph (b)(5) of this section) after
the date that a creditor receives an application for which the creditor
is not required to comply with the notification requirements of Sec.
1002.9, the creditor shall retain all written or recorded information in
its possession concerning the applicant, including any notation of
action taken.
(4) Enforcement proceedings and investigations. A creditor shall
retain the information beyond 25 months (12 months for business credit,
except as provided in paragraph (b)(5) of this section) if the creditor
has actual notice that it is under investigation or is subject to an
enforcement proceeding for an alleged violation of the Act or this part,
by the Attorney General of the United States or by an enforcement agency
charged with monitoring that creditor's compliance with the Act and this
part, or if it has been served with notice of an action filed pursuant
to section 706 of the Act and Sec. 1002.16 of this part. The creditor
shall retain the information until final disposition of the matter,
unless an earlier time is allowed by order of the agency or court.
(5) Special rule for certain business credit applications. With
regard to a business that had gross revenues in excess of $1 million in
its preceding fiscal year, or an extension of trade credit, credit
incident to a factoring agreement, or other similar types of business
credit, the creditor shall retain records for at least 60 days after
notifying the applicant of the action taken. If within that time period
the applicant requests in writing the reasons for adverse action or that
records be retained, the creditor shall retain records for 12 months.
(6) Self-tests. For 25 months after a self-test (as defined in Sec.
1002.15) has
[[Page 100]]
been completed, the creditor shall retain all written or recorded
information about the self-test. A creditor shall retain information
beyond 25 months if it has actual notice that it is under investigation
or is subject to an enforcement proceeding for an alleged violation, or
if it has been served with notice of a civil action. In such cases, the
creditor shall retain the information until final disposition of the
matter, unless an earlier time is allowed by the appropriate agency or
court order.
(7) Prescreened solicitations. For 25 months after the date on which
an offer of credit is made to potential customers (12 months for
business credit, except as provided in paragraph (b)(5) of this
section), the creditor shall retain in original form or a copy thereof:
(i) The text of any prescreened solicitation;
(ii) The list of criteria the creditor used to select potential
recipients of the solicitation; and
(iii) Any correspondence related to complaints (formal or informal)
about the solicitation.
Sec. 1002.13 Information for monitoring purposes.
(a) Information to be requested. (1) A creditor that receives an
application for credit primarily for the purchase or refinancing of a
dwelling occupied or to be occupied by the applicant as a principal
residence, where the extension of credit will be secured by the
dwelling, shall request as part of the application the following
information regarding the applicant(s):
(i) Ethnicity, using the categories Hispanic or Latino, and not
Hispanic or Latino; and race, using the categories American Indian or
Alaska Native, Asian, Black or African American, Native Hawaiian or
Other Pacific Islander, and White;
(ii) Sex;
(iii) Marital status, using the categories married, unmarried, and
separated; and
(iv) Age.
(2) Dwelling means a residential structure that contains one to four
units, whether or not that structure is attached to real property. The
term includes, but is not limited to, an individual condominium or
cooperative unit and a mobile or other manufactured home.
(b) Obtaining information. Questions regarding ethnicity, race, sex,
marital status, and age may be listed, at the creditor's option, on the
application form or on a separate form that refers to the application.
The applicant(s) shall be asked but not required to supply the requested
information. If the applicant(s) chooses not to provide the information
or any part of it, that fact shall be noted on the form. The creditor
shall then also note on the form, to the extent possible, the ethnicity,
race, and sex of the applicant(s) on the basis of visual observation or
surname.
(c) Disclosure to applicant(s). The creditor shall inform the
applicant(s) that the information regarding ethnicity, race, sex,
marital status, and age is being requested by the Federal Government for
the purpose of monitoring compliance with Federal statutes that prohibit
creditors from discriminating against applicants on those bases. The
creditor shall also inform the applicant(s) that if the applicant(s)
chooses not to provide the information, the creditor is required to note
the ethnicity, race and sex on the basis of visual observation or
surname.
(d) Substitute monitoring program. A monitoring program required by
an agency charged with administrative enforcement under section 704 of
the Act may be substituted for the requirements contained in paragraphs
(a), (b), and (c) of this section.
Sec. 1002.14 Rules on providing appraisal reports.
(a) Providing appraisals. A creditor shall provide a copy of an
appraisal report used in connection with an application for credit that
is to be secured by a lien on a dwelling. A creditor shall comply with
either paragraph (a)(1) or (a)(2) of this section.
(1) Routine delivery. A creditor may routinely provide a copy of an
appraisal report to an applicant (whether credit is granted or denied or
the application is withdrawn).
(2) Upon request. A creditor that does not routinely provide
appraisal reports shall provide a copy upon an applicant's written
request.
[[Page 101]]
(i) Notice. A creditor that provides appraisal reports only upon
request shall notify an applicant in writing of the right to receive a
copy of an appraisal report. The notice may be given at any time during
the application process but no later than when the creditor provides
notice of action taken under Sec. 1002.9 of this part. The notice shall
specify that the applicant's request must be in writing, give the
creditor's mailing address, and state the time for making the request as
provided in paragraph (a)(2)(ii) of this section.
(ii) Delivery. A creditor shall mail or deliver a copy of the
appraisal report promptly (generally within 30 days) after the creditor
receives an applicant's request, receives the report, or receives
reimbursement from the applicant for the report, whichever is last to
occur. A creditor need not provide a copy when the applicant's request
is received more than 90 days after the creditor has provided notice of
action taken on the application under Sec. 1002.9 of this part or 90
days after the application is withdrawn.
(b) Credit unions. A creditor that is subject to the regulations of
the National Credit Union Administration on making copies of appraisal
reports available is not subject to this section.
(c) Definitions. For purposes of paragraph (a) of this section, the
term dwelling means a residential structure that contains one to four
units whether or not that structure is attached to real property. The
term includes, but is not limited to, an individual condominium or
cooperative unit, and a mobile or other manufactured home. The term
appraisal report means the document(s) relied upon by a creditor in
evaluating the value of the dwelling.
Sec. 1002.15 Incentives for self-testing and self-correction.
(a) General rules--(1) Voluntary self-testing and correction. The
report or results of a self-test that a creditor voluntarily conducts
(or authorizes) are privileged as provided in this section. Data
collection required by law or by any governmental authority is not a
voluntary self-test.
(2) Corrective action required. The privilege in this section
applies only if the creditor has taken or is taking appropriate
corrective action.
(3) Other privileges. The privilege created by this section does not
preclude the assertion of any other privilege that may also apply.
(b) Self-test defined--(1) Definition. A self-test is any program,
practice, or study that:
(i) Is designed and used specifically to determine the extent or
effectiveness of a creditor's compliance with the Act or this part; and
(ii) Creates data or factual information that is not available and
cannot be derived from loan or application files or other records
related to credit transactions.
(2) Types of information privileged. The privilege under this
section applies to the report or results of the self-test, data or
factual information created by the self-test, and any analysis,
opinions, and conclusions pertaining to the self-test report or results.
The privilege covers workpapers or draft documents as well as final
documents.
(3) Types of information not privileged. The privilege under this
section does not apply to:
(i) Information about whether a creditor conducted a self-test, the
methodology used or the scope of the self-test, the time period covered
by the self-test, or the dates it was conducted; or
(ii) Loan and application files or other business records related to
credit transactions, and information derived from such files and
records, even if the information has been aggregated, summarized, or
reorganized to facilitate analysis.
(c) Appropriate corrective action--(1) General requirement. For the
privilege in this section to apply, appropriate corrective action is
required when the self-test shows that it is more likely than not that a
violation occurred, even though no violation has been formally
adjudicated.
(2) Determining the scope of appropriate corrective action. A
creditor must take corrective action that is reasonably likely to remedy
the cause and effect of a likely violation by:
(i) Identifying the policies or practices that are the likely cause
of the violation; and
[[Page 102]]
(ii) Assessing the extent and scope of any violation.
(3) Types of relief. Appropriate corrective action may include both
prospective and remedial relief, except that to establish a privilege
under this section:
(i) A creditor is not required to provide remedial relief to a
tester used in a self-test;
(ii) A creditor is only required to provide remedial relief to an
applicant identified by the self-test as one whose rights were more
likely than not violated; and
(iii) A creditor is not required to provide remedial relief to a
particular applicant if the statute of limitations applicable to the
violation expired before the creditor obtained the results of the self-
test or the applicant is otherwise ineligible for such relief.
(4) No admission of violation. Taking corrective action is not an
admission that a violation occurred.
(d) Scope of privilege--(1) General rule. The report or results of a
privileged self-test may not be obtained or used:
(i) By a government agency in any examination or investigation
relating to compliance with the Act or this part; or
(ii) By a government agency or an applicant (including a prospective
applicant who alleges a violation of Sec. 1002.4(b)) in any proceeding
or civil action in which a violation of the Act or this part is alleged.
(2) Loss of privilege. The report or results of a self-test are not
privileged under paragraph (d)(1) of this section if the creditor or a
person with lawful access to the report or results:
(i) Voluntarily discloses any part of the report or results, or any
other information privileged under this section, to an applicant or
government agency or to the public;
(ii) Discloses any part of the report or results, or any other
information privileged under this section, as a defense to charges that
the creditor has violated the Act or regulation; or
(iii) Fails or is unable to produce written or recorded information
about the self-test that is required to be retained under Sec.
1002.12(b)(6) when the information is needed to determine whether the
privilege applies. This paragraph does not limit any other penalty or
remedy that may be available for a violation of Sec. 1002.12.
(3) Limited use of privileged information. Notwithstanding paragraph
(d)(1) of this section, the self-test report or results and any other
information privileged under this section may be obtained and used by an
applicant or government agency solely to determine a penalty or remedy
after a violation of the Act or this part has been adjudicated or
admitted. Disclosures for this limited purpose may be used only for the
particular proceeding in which the adjudication or admission was made.
Information disclosed under this paragraph (d)(3) remains privileged
under paragraph (d)(1) of this section.
Sec. 1002.16 Enforcement, penalties and liabilities.
(a) Administrative enforcement. (1) As set forth more fully in
section 704 of the Act, administrative enforcement of the Act and this
part regarding certain creditors is assigned to the Comptroller of the
Currency, Board of Governors of the Federal Reserve System, Board of
Directors of the Federal Deposit Insurance Corporation, National Credit
Union Administration, Surface Transportation Board, Civil Aeronautics
Board, Secretary of Agriculture, Farm Credit Administration, Securities
and Exchange Commission, Small Business Administration, Secretary of
Transportation, and Bureau of Consumer Financial Protection.
(2) Except to the extent that administrative enforcement is
specifically assigned to some government agency other than the Bureau,
and subject to subtitle B of the Consumer Financial Protection Act of
2010, the Federal Trade Commission is authorized to enforce the
requirements imposed under the Act and this part.
(b) Penalties and liabilities. (1) Sections 702(g) and 706(a) and
(b) of the Act provide that any creditor that fails to comply with a
requirement imposed by the Act or this part is subject to civil
liability for actual and punitive damages in individual or class
actions. Pursuant to sections 702(g) and 704(b), (c), and (d) of the
Act, violations of the Act or this part also constitute violations
[[Page 103]]
of other Federal laws. Liability for punitive damages can apply only to
nongovernmental entities and is limited to $10,000 in individual actions
and the lesser of $500,000 or 1 percent of the creditor's net worth in
class actions. Section 706(c) provides for equitable and declaratory
relief and section 706(d) authorizes the awarding of costs and
reasonable attorney's fees to an aggrieved applicant in a successful
action.
(2) As provided in section 706(f) of the Act, a civil action under
the Act or this part may be brought in the appropriate United States
district court without regard to the amount in controversy or in any
other court of competent jurisdiction within five years after the date
of the occurrence of the violation, or within one year after the
commencement of an administrative enforcement proceeding or of a civil
action brought by the Attorney General of the United States within five
years after the alleged violation.
(3) If an agency responsible for administrative enforcement is
unable to obtain compliance with the Act or this part, it may refer the
matter to the Attorney General of the United States. If the Bureau, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
the Board of Governors of the Federal Reserve System, or the National
Credit Union Administration has reason to believe that one or more
creditors have engaged in a pattern or practice of discouraging or
denying applications in violation of the Act or this part, the agency
shall refer the matter to the Attorney General. If the agency has reason
to believe that one or more creditors violated section 701(a) of the
Act, the agency may refer a matter to the Attorney General.
(4) On referral, or whenever the Attorney General has reason to
believe that one or more creditors have engaged in a pattern or practice
in violation of the Act or this part, the Attorney General may bring a
civil action for such relief as may be appropriate, including actual and
punitive damages and injunctive relief.
(5) If the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal Reserve
System, or the National Credit Union Administration has reason to
believe (as a result of a consumer complaint, a consumer compliance
examination, or some other basis) that a violation of the Act or this
part has occurred which is also a violation of the Fair Housing Act, and
the matter is not referred to the Attorney General, the agency shall:
(i) Notify the Secretary of Housing and Urban Development; and
(ii) Inform the applicant that the Secretary of Housing and Urban
Development has been notified and that remedies may be available under
the Fair Housing Act.
(c) Failure of compliance. A creditor's failure to comply with
Sec. Sec. 1002.6(b)(6), 1002.9, 1002.10, 1002.12 or 1002.13 is not a
violation if it results from an inadvertent error. On discovering an
error under Sec. Sec. 1002.9 and 1002.10, the creditor shall correct it
as soon as possible. If a creditor inadvertently obtains the monitoring
information regarding the ethnicity, race, and sex of the applicant in a
dwelling-related transaction not covered by Sec. 1002.13, the creditor
may retain information and act on the application without violating the
regulation.
Sec. Appendix A to Part 1002--Federal Agencies to be Listed in Adverse
Action Notices
The following list indicates the Federal agency or agencies that
should be listed in notices provided by creditors pursuant to Sec.
1002.9(b)(1). Any questions concerning a particular creditor may be
directed to such agencies. This list is not intended to describe
agencies' enforcement authority for ECOA and Regulation B. Terms that
are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s))
shall have the meaning given to them in the International Banking Act of
1978 (12 U.S.C. 3101).
1. Banks, savings associations, and credit unions with total assets
of over $10 billion and their affiliates: Bureau of Consumer Financial
Protection, 1700 G Street NW., Washington DC 20006. Such affiliates that
are not banks, savings associations, or credit unions also should list,
in addition to the Bureau: FTC Regional Office for region in which the
creditor operates or Federal Trade Commission, Equal Credit Opportunity,
Washington, DC 20580.
2. To the extent not included in item 1 above:
[[Page 104]]
a. National banks, Federal savings associations, and Federal
branches and Federal agencies of foreign banks: Office of the
Comptroller of the Currency, Customer Assistance Group, 1301 McKinney
Street, Suite 3450, Houston, TX 77010-9050
b. State member banks, branches and agencies of foreign banks (other
than Federal branches, Federal agencies, and insured state branches of
foreign banks), commercial lending companies owned or controlled by
foreign banks, and organizations operating under section 25 or 25A of
the Federal Reserve Act: Federal Reserve Consumer Help Center, P.O. Box
1200, Minneapolis, MN 55480.
c. Nonmember Insured Banks, Insured State Branches of Foreign Banks,
and Insured State Savings Associations: FDIC Consumer Response Center,
1100 Walnut Street, Box 11, Kansas City, MO 64106.
d. Federal Credit Unions: National Credit Union Administration,
Office of Consumer Protection (OCP), Division of Consumer Compliance and
Outreach (DCCO), 1775 Duke Street, Alexandria, VA 22314.
3. Air carriers: Assistant General Counsel for Aviation Enforcement
and Proceedings, Department of Transportation, 400 Seventh Street SW.,
Washington, DC 20590.
4. Creditors Subject to Surface Transportation Board: Office of
Proceedings, Surface Transportation Board, Department of Transportation,
1925 K Street NW., Washington, DC 20423.
5. Creditors Subject to Packers and Stockyards Act: Nearest Packers
and Stockyards Administration area supervisor.
6. Small Business Investment Companies: Associate Deputy
Administrator for Capital Access, United States Small Business
Administration, 409 Third Street SW., 8th Floor, Washington, DC 20416.
7. Brokers and Dealers: Securities and Exchange Commission,
Washington, DC 20549.
8. Federal Land Banks, Federal Land Bank Associations, Federal
Intermediate Credit Banks, and Production Credit Associations: Farm
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
9. Retailers, Finance Companies, and All Other Creditors Not Listed
Above: FTC Regional Office for region in which the creditor operates or
Federal Trade Commission, Equal Credit Opportunity, Washington, DC
20580.
Sec. Appendix B to Part 1002--Model Application Forms
1. This Appendix contains five model credit application forms, each
designated for use in a particular type of consumer credit transaction
as indicated by the bracketed caption on each form. The first sample
form is intended for use in open-end, unsecured transactions; the second
for closed-end, secured transactions; the third for closed-end
transactions, whether unsecured or secured; the fourth in transactions
involving community property or occurring in community property states;
and the fifth in residential mortgage transactions which contains a
model disclosure for use in complying with Sec. 1002.13 for certain
dwelling-related loans. All forms contained in this Appendix are models;
their use by creditors is optional.
2. The use or modification of these forms is governed by the
following instructions. A creditor may change the forms: by asking for
additional information not prohibited by Sec. 1002.5; by deleting any
information request; or by rearranging the format without modifying the
substance of the inquiries. In any of these three instances, however,
the appropriate notices regarding the optional nature of courtesy
titles, the option to disclose alimony, child support, or separate
maintenance, and the limitation concerning marital status inquiries must
be included in the appropriate places if the items to which they relate
appear on the creditor's form.
3. If a creditor uses an appropriate Appendix B model form, or
modifies a form in accordance with the above instructions, that creditor
shall be deemed to be acting in compliance with the provisions of
paragraphs (b), (c) and (d) of Sec. 1002.5 of this part.
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Sec. Appendix C to Part 1002--Sample Notification Forms
1. This Appendix contains ten sample notification forms. Forms C-1
through C-4 are intended for use in notifying an applicant that adverse
action has been taken on an application or account under Sec. Sec.
1002.9(a)(1) and (2)(i) of this part. Form C-5 is a notice of disclosure
of the right to request specific reasons for adverse action under
Sec. Sec. 1002.9(a)(1) and (2)(ii). Form C-6 is designed for use in
notifying an applicant, under Sec. 1002.9(c)(2), that an application is
incomplete. Forms C-7 and C-8 are intended for use in connection with
applications for business credit under Sec. 1002.9(a)(3). Form C-9 is
designed for use in notifying an applicant of the right to receive a
copy of an appraisal under Sec. 1002.14. Form C-10 is designed for use
in notifying an applicant for nonmortgage credit that the creditor is
requesting applicant characteristic information.
2. Form C-1 contains the Fair Credit Reporting Act disclosure as
required by sections 615(a) and (b) of that act. Forms C-2 through C-5
contain only the section 615(a) disclosure (that a creditor obtained
information from a consumer reporting agency that was considered in the
credit decision). A creditor must provide the section 615(a) disclosure
when adverse action is taken against a consumer based on information
from a consumer reporting agency. A creditor must provide the section
615(b) disclosure when adverse action is taken based on information from
an outside source other than a consumer reporting agency. In addition, a
creditor must provide the section 615(b) disclosure if the creditor
obtained information from an affiliate other than information in a
consumer report or other than information concerning the affiliate's own
transactions or experiences with the consumer. Creditors may comply with
the disclosure requirements for adverse action based on information in a
consumer report obtained from an affiliate by providing either the
section 615(a) or section 615(b) disclosure. Optional language in Forms
C-1 through C-5 may be used to direct the consumer to the entity that
provided the credit score for any questions about the credit score,
along with the entity's contact information. Creditors may use or not
use this additional language without losing the safe harbor, since the
language is optional.
3. The sample forms are illustrative and may not be appropriate for
all creditors. They were designed to include some of the factors that
creditors most commonly consider. If a creditor chooses to use the
checklist of reasons provided in one of the sample forms in this
Appendix and if reasons commonly used by the creditor are not provided
on the form, the creditor should modify the checklist by substituting or
adding other reasons. For example, if ``inadequate down payment'' or
``no deposit relationship with us'' are common reasons for taking
adverse action on an application, the creditor ought to add or
substitute such reasons for those presently contained on the sample
forms.
4. If the reasons listed on the forms are not the factors actually
used, a creditor will not satisfy the notice requirement by simply
checking the closest identifiable factor listed. For example, some
creditors consider only references from banks or other depository
institutions and disregard finance company references altogether; their
statement of reasons should disclose ``insufficient bank references,''
not ``insufficient credit references.'' Similarly, a creditor that
considers bank references and other credit references as distinct
factors should treat the two factors separately and disclose them as
appropriate. The creditor should either add such other factors to the
form or check ``other'' and include the appropriate explanation. The
creditor need not, however, describe how or why a factor adversely
affected the application. For example, the notice may say ``length of
residence'' rather than ``too short a period of residence.''
5. A creditor may design its own notification forms or use all or a
portion of the forms contained in this Appendix. Proper use of Forms C-1
through C-4 will satisfy the requirement of Sec. 1002.9(a)(2)(i).
Proper use of Forms C-5 and C-6 constitutes full compliance with
Sec. Sec. 1002.9(a)(2)(ii) and 1002.9(c)(2), respectively. Proper use
of Forms C-7 and C-8 will satisfy the requirements of Sec. Sec.
1002.9(a)(2)(i) and (ii), respectively, for applications for business
credit. Proper use of Form C-9 will satisfy the requirements of Sec.
1002.14 of this part. Proper use of Form C-10 will satisfy the
requirements of Sec. 1002.5(b)(1).
Form C-1--Sample Notice of Action Taken and Statement of Reasons
Statement of Credit Denial, Termination or Change
Date:__________________________________________________________________
Applicant's Name:______________________________________________________
Applicant's Address:___________________________________________________
Description of Account, Transaction, or Requested Credit:______________
Description of Action Taken:___________________________________________
Part I--Principal Reason(s) for Credit Denial, Termination, or Other
Action Taken Concerning Credit
This section must be completed in all instances.
----Credit application incomplete
----Insufficient number of credit references provided
----Unacceptable type of credit references provided
[[Page 118]]
----Unable to verify credit references
----Temporary or irregular employment
----Unable to verify employment
----Length of employment
----Income insufficient for amount of credit requested
----Excessive obligations in relation to income
----Unable to verify income
----Length of residence
----Temporary residence
----Unable to verify residence
----No credit file
----Limited credit experience
----Poor credit performance with us
----Delinquent past or present credit obligations with others
----Collection action or judgment
----Garnishment or attachment
----Foreclosure or repossession
----Bankruptcy
----Number of recent inquiries on credit bureau report
----Value or type of collateral not sufficient
----Other, specify: ------
Part II--Disclosure of Use of Information Obtained From an Outside
Source
This section should be completed if the credit decision was based in
whole or in part on information that has been obtained from an outside
source.
----Our credit decision was based in whole or in part on information
obtained in a report from the consumer reporting agency listed below.
You have a right under the Fair Credit Reporting Act to know the
information contained in your credit file at the consumer reporting
agency. The reporting agency played no part in our decision and is
unable to supply specific reasons why we have denied credit to you. You
also have a right to a free copy of your report from the reporting
agency, if you request it no later than 60 days after you receive this
notice. In addition, if you find that any information contained in the
report you receive is inaccurate or incomplete, you have the right to
dispute the matter with the reporting agency.
Name:__________________________________________________________________
Address:_______________________________________________________________
[Toll-free] Telephone number:__________________________________________
[We also obtained your credit score from the consumer reporting
agency and used it in making our credit decision. Your credit score is a
number that reflects the information in your consumer report. Your
credit score can change, depending on how the information in your
consumer report changes.
Your credit score:_____________________________________________________
Date:__________________________________________________________________
Scores range from a low of -------- to a high of --------.
Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your credit score, you should
contact [entity that provided the credit score] at:
Address:_______________________________________________________________
[[Toll-free] Telephone number: --------]
----Our credit decision was based in whole or in part on information
obtained from an affiliate or from an outside source other than a
consumer reporting agency. Under the Fair Credit Reporting Act, you have
the right to make a written request, no later than 60 days after you
receive this notice, for disclosure of the nature of this information.
If you have any questions regarding this notice, you should contact:
Creditor's name:_______________________________________________________
Creditor's address:____________________________________________________
Creditor's telephone number:___________________________________________
Notice: The Federal Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex, marital status, age (provided the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income derives from any public assistance
program; or because the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The Federal agency that
administers compliance with this law concerning this creditor is (name
and address as specified by the appropriate agency listed in Appendix
A).
Form C-2--Sample Notice of Action Taken and Statement of Reasons
Date
Dear Applicant: Thank you for your recent application. Your request
for [a loan/a credit card/an increase in your credit limit] was
carefully considered, and we regret that we are unable to approve your
application at this time, for the following reason(s):
Your Income:
----is below our minimum requirement.
----is insufficient to sustain payments on the amount of credit
requested.
----could not be verified.
Your Employment:
----is not of sufficient length to qualify.
----could not be verified.
Your Credit History:
----of making payments on time was not satisfactory.
----could not be verified.
Your Application:
----lacks a sufficient number of credit references.
[[Page 119]]
----lacks acceptable types of credit references.
----reveals that current obligations are excessive in relation to
income.
Other:_________________________________________________________________
The consumer reporting agency contacted that provided information
that influenced our decision in whole or in part was [name, address and
[toll-free] telephone number of the reporting agency]. The reporting
agency played no part in our decision and is unable to supply specific
reasons why we have denied credit to you. You have a right under the
Fair Credit Reporting Act to know the information contained in your
credit file at the consumer reporting agency. You also have a right to a
free copy of your report from the reporting agency, if you request it no
later than 60 days after you receive this notice. In addition, if you
find that any information contained in the report you receive is
inaccurate or incomplete, you have the right to dispute the matter with
the reporting agency. Any questions regarding such information should be
directed to [consumer reporting agency]. If you have any questions
regarding this letter, you should contact us at [creditor's name,
address and telephone number].
[We also obtained your credit score from the consumer reporting
agency and used it in making our credit decision. Your credit score is a
number that reflects the information in your consumer report. Your
credit score can change, depending on how the information in your
consumer report changes.
Your credit score:_____________________________________________________
Date:__________________________________________________________________
Scores range from a low of -------- to a high of --------.
Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your credit score, you should
contact [entity that provided the credit score] at:
Address:_______________________________________________________________
[[Toll-free] Telephone number: --------]
Notice: The Federal Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex, marital status, age (provided the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income derives from any public assistance
program; or because the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The Federal agency that
administers compliance with this law concerning this creditor is (name
and address as specified by the appropriate agency listed in Appendix
A).
Form C-3--Sample Notice of Action Taken and Statement of Reasons (Credit
Scoring)
Date
Dear Applicant: Thank you for your recent application for --------
--. We regret that we are unable to approve your request.
[Reasons for Denial of Credit]
Your application was processed by a [credit scoring] system that
assigns a numerical value to the various items of information we
consider in evaluating an application. These numerical values are based
upon the results of analyses of repayment histories of large numbers of
customers.
The information you provided in your application did not score a
sufficient number of points for approval of the application. The reasons
you did not score well compared with other applicants were:
Insufficient bank references
Type of occupation
Insufficient credit experience
Number of recent inquiries on credit bureau report
[Your Right to Get Your Consumer Report]
In evaluating your application the consumer reporting agency listed
below provided us with information that in whole or in part influenced
our decision. The consumer reporting agency played no part in our
decision and is unable to supply specific reasons why we have denied
credit to you. You have a right under the Fair Credit Reporting Act to
know the information contained in your credit file at the consumer
reporting agency. It can be obtained by contacting: [Name, address, and
[toll-free] telephone number of the consumer reporting agency]. You also
have a right to a free copy of your report from the reporting agency, if
you request it no later than 60 days after you receive this notice. In
addition, if you find that any information contained in the report you
receive is inaccurate or incomplete, you have the right to dispute the
matter with the reporting agency.
[Information about Your Credit Score]
[Information about Your Credit Score]
We also obtained your credit score from the consumer reporting
agency and used it in making our credit decision. Your credit score is a
number that reflects the information in your consumer report. Your
credit score can change, depending on how the information in your
consumer report changes.
Your credit score:_____________________________________________________
Date:__________________________________________________________________
Scores range from a low of -------- to a high of --------.
Key factors that adversely affected your credit score:
[[Page 120]]
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your credit score, you should
contact [entity that provided the credit score] at:
Address:_______________________________________________________________
[Toll-free] Telephone number: --------]
If you have any questions regarding this letter, you should contact
us at
Creditor's Name:_______________________________________________________
Address:_______________________________________________________________
Telephone:_____________________________________________________________
Sincerely,
Notice: The Federal Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex, marital status, age (with certain
limited exceptions); because all or part of the applicant's income
derives from any public assistance program; or because the applicant has
in good faith exercised any right under the Consumer Credit Protection
Act. The Federal agency that administers compliance with this law
concerning this creditor is (name and address as specified by the
appropriate agency listed in Appendix A).
Form C-4--Sample Notice of Action Taken, Statement of Reasons and
Counteroffer
Date
Dear Applicant: Thank you for your application for ----------. We
are unable to offer you credit on the terms that you requested for the
following reason(s):----------
We can, however, offer you credit on the following terms: ----------
If this offer is acceptable to you, please notify us within [amount
of time] at the following address: ----------.
Our credit decision on your application was based in whole or in
part on information obtained in a report from [name, address and [toll-
free] telephone number of the consumer reporting agency]. You have a
right under the Fair Credit Reporting Act to know the information
contained in your credit file at the consumer reporting agency. The
reporting agency played no part in our decision and is unable to supply
specific reasons why we have denied credit to you. You also have a right
to a free copy of your report from the reporting agency, if you request
it no later than 60 days after you receive this notice. In addition, if
you find that any information contained in the report you receive is
inaccurate or incomplete, you have the right to dispute the matter with
the reporting agency.
[We also obtained your credit score from the consumer reporting
agency and used it in making our credit decision. Your credit score is a
number that reflects the information in your consumer report. Your
credit score can change, depending on how the information in your
consumer report changes.
Your credit score:_____________________________________________________
Date:__________________________________________________________________
Scores range from a low of -------- to a high of --------.
Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your credit score, you should
contact [entity that provided the credit score] at:
Address:_______________________________________________________________
[Toll-free] Telephone number:--------]
You should know that the Federal Equal Credit Opportunity Act
prohibits creditors, such as ourselves, from discriminating against
credit applicants on the basis of their race, color, religion, national
origin, sex, marital status, age (provided the applicant has the
capacity to enter into a binding contract), because they receive income
from a public assistance program, or because they may have exercised
their rights under the Consumer Credit Protection Act. If you believe
there has been discrimination in handling your application you should
contact the [name and address of the appropriate Federal enforcement
agency listed in Appendix A].
Sincerely,
Form C-5--Sample Disclosure of Right To Request Specific Reasons for
Credit Denial
Date
Dear Applicant: Thank you for applying to us for ----------.
After carefully reviewing your application, we are sorry to advise
you that we cannot [open an account for you/grant a loan to you/increase
your credit limit] at this time. If you would like a statement of
specific reasons why your application was denied, please contact [our
credit service manager] shown below within 60 days of the date of this
letter. We will provide you with the statement of reasons within 30 days
after receiving your request.
Creditor's name
Address
Telephone number
If we obtained information from a consumer reporting agency as part
of our consideration of your application, its name, address, and [toll-
free] telephone number is shown below. The reporting agency played
[[Page 121]]
no part in our decision and is unable to supply specific reasons why we
have denied credit to you. [You have a right under the Fair Credit
Reporting Act to know the information contained in your credit file at
the consumer reporting agency.] You have a right to a free copy of your
report from the reporting agency, if you request it no later than 60
days after you receive this notice. In addition, if you find that any
information contained in the report you received is inaccurate or
incomplete, you have the right to dispute the matter with the reporting
agency. You can find out about the information contained in your file
(if one was used) by contacting:
Consumer reporting agency's name
Address
[Toll-free] Telephone number
[We also obtained your credit score from the consumer reporting
agency and used it in making our credit decision. Your credit score is a
number that reflects the information in your consumer report. Your
credit score can change, depending on how the information in your
consumer report changes.
Your credit score:_____________________________________________________
Date:__________________________________________________________________
Scores range from a low of -------- to a high of --------.
Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your credit score, you should
contact [entity that provided the credit score] at:
Address:_______________________________________________________________
[Toll-free] Telephone number: --------]
Sincerely,
Notice: The Federal Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex, marital status, age (provided the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income derives from any public assistance
program; or because the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The Federal agency that
administers compliance with this law concerning this creditor is (name
and address as specified by the appropriate agency listed in Appendix
A).
Form C-6--Sample Notice of Incomplete Application and Request for
Additional Information
Creditor's name
Address
Telephone number
Date
Dear Applicant: Thank you for your application for credit. The
following information is needed to make a decision on your application:
----------
We need to receive this information by ---------- (date). If we do
not receive it by that date, we will regrettably be unable to give
further consideration to your credit request.
Sincerely,
Form C-7--Sample Notice of Action Taken and Statement of Reasons
(Business Credit)
Creditor's name
Creditor's address
Date
Dear Applicant: Thank you for applying to us for credit. We have
given your request careful consideration, and regret that we are unable
to extend credit to you at this time for the following reasons:
(Insert appropriate reason, such as: Value or type of collateral not
sufficient; Lack of established earnings record; Slow or past due in
trade or loan payments)
Sincerely,
Notice: The Federal Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex, marital status, age (provided the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income derives from any public assistance
program; or because the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The Federal agency that
administers compliance with this law concerning this creditor is [name
and address as specified by the appropriate agency listed in Appendix
A].
Form C-8--Sample Disclosure of Right To Request Specific Reasons for
Credit Denial Given at Time of Application (Business Credit)
Creditor's name
Creditor's address
If your application for business credit is denied, you have the
right to a written statement of the specific reasons for the denial. To
obtain the statement, please contact [name, address and telephone number
of the person or office from which the statement of reasons can be
obtained] within 60 days from the date you are notified of our decision.
We will send you a written statement of reasons for the denial within 30
days of receiving your request for the statement.
Notice: The Federal Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex,
[[Page 122]]
marital status, age (provided the applicant has the capacity to enter
into a binding contract); because all or part of the applicant's income
derives from any public assistance program; or because the applicant has
in good faith exercised any right under the Consumer Credit Protection
Act. The Federal agency that administers compliance with this law
concerning this creditor is [name and address as specified by the
appropriate agency listed in Appendix A].
Form C-9--Sample Disclosure of Right To Receive a Copy of an Appraisal
You have the right to a copy of the appraisal report used in
connection with your application for credit. If you wish a copy, please
write to us at the mailing address we have provided. We must hear from
you no later than 90 days after we notify you about the action taken on
your credit application or you withdraw your application.
[In your letter, give us the following information:]
Form C-10--Sample Disclosure About Voluntary Data Notation
We are requesting the following information to monitor our
compliance with the Federal Equal Credit Opportunity Act, which
prohibits unlawful discrimination. You are not required to provide this
information. We will not take this information (or your decision not to
provide this information) into account in connection with your
application or credit transaction. The law provides that a creditor may
not discriminate based on this information, or based on whether or not
you choose to provide it. [If you choose not to provide the information,
we will note it by visual observation or surname].
Sec. Appendix D to Part 1002--Issuance of Official Interpretations
1.Official Interpretations. Interpretations of this part issued by
officials of the Bureau provide the protection afforded under section
706(e) of the Act. Except in unusual circumstances, such interpretations
will not be issued separately but will be incorporated in an official
commentary to the regulation, which will be amended periodically.
2. Requests for Issuance of Official Interpretations. A request for
an official interpretation should be in writing and addressed to the
Assistant Director, Office of Regulations, Division of Research,
Markets, and Regulations, Bureau of Consumer Financial Protection, 1700
G Street, NW., Washington, DC 20006. The request should contain a
complete statement of all relevant facts concerning the issue, including
copies of all pertinent documents.
3. Scope of Interpretations. No interpretations will be issued
approving creditors' forms or statements. This restriction does not
apply to forms or statements whose use is required or sanctioned by a
government agency.
Sec. Supplement I to Part 1002--Official Interpretations
Following is an official interpretation of Regulation B (12 CFR Part
1002) issued by the Bureau of Consumer Financial Protection. References
are to sections of the regulation or the Equal Credit Opportunity Act
(15 U.S.C. 1601 et seq.).
Introduction
1.Official status. Section 706(e) of the Equal Credit Opportunity
Act protects a creditor from civil liability for any act done or omitted
in good faith in conformity with an interpretation issued by a duly
authorized official of the Bureau. This commentary is the means by which
the Bureau of Consumer Financial Protection issues official
interpretations of Regulation B. Good-faith compliance with this
commentary affords a creditor protection under section 706(e) of the
Act.
2. Issuance of interpretations. Under Appendix D to the regulation,
any person may request an official interpretation. Interpretations will
be issued at the discretion of designated officials and incorporated in
this commentary following publication for comment in the Federal
Register. Except in unusual circumstances, official interpretations will
be issued only by means of this commentary.
3. Comment designations. The comments are designated with as much
specificity as possible according to the particular regulatory provision
addressed. Each comment in the commentary is identified by a number and
the regulatory section or paragraph that it interprets. For example,
comments to Sec. 1002.2(c) are further divided by subparagraph, such as
comment 2(c)(1)(ii)-1 and comment 2(c)(2)(ii-1.
Section 1002.1--Authority, Scope, and Purpose
1(a) Authority and scope.
1. Scope. The Equal Credit Opportunity Act and Regulation B apply to
all credit--commercial as well as personal--without regard to the nature
or type of the credit or the creditor, except for an entity excluded
from coverage of this part (but not the Act) by section 1029 of the
Consumer Financial Protection Act of 2010 (12 U.S.C. 5519). If a
transaction provides for the deferral of the payment of a debt, it is
credit covered by Regulation B even though it may not be a credit
transaction covered by Regulation Z (Truth in Lending) (12 CFR Part
1026). Further, the definition of creditor is not restricted to the
party or person to whom the obligation is
[[Page 123]]
initially payable, as is the case under Regulation Z. Moreover, the Act
and regulation apply to all methods of credit evaluation, whether
performed judgmentally or by use of a credit scoring system.
2. Foreign applicability. Regulation B generally does not apply to
lending activities that occur outside the United States. The regulation
does apply to lending activities that take place within the United
States (as well as the Commonwealth of Puerto Rico and any territory or
possession of the United States), whether or not the applicant is a
citizen.
3. Bureau. The term Bureau, as used in this part, means the Bureau
of Consumer Financial Protection.
Section 1002.2--Definitions
2(c) Adverse action.
Paragraph 2(c)(1)(i).
1. Application for credit. If the applicant applied in accordance
with the creditor's procedures, a refusal to refinance or extend the
term of a business or other loan is adverse action.
Paragraph 2(c)(1)(ii).
1. Move from service area. If a credit card issuer terminates the
open-end account of a customer because the customer has moved out of the
card issuer's service area, the termination is adverse action unless
termination on this ground was explicitly provided for in the credit
agreement between the parties. In cases where termination is adverse
action, notification is required under Sec. 1002.9.
2. Termination based on credit limit. If a creditor terminates
credit accounts that have low credit limits (for example, under $400)
but keeps open accounts with higher credit limits, the termination is
adverse action and notification is required under Sec. 1002.9.
Paragraph 2(c)(2)(ii).
1. Default--exercise of due-on-sale clause. If a mortgagor sells or
transfers mortgaged property without the consent of the mortgagee, and
the mortgagee exercises its contractual right to accelerate the mortgage
loan, the mortgagee may treat the mortgagor as being in default. An
adverse action notice need not be given to the mortgagor or the
transferee. (See comment 2(e)-1 for treatment of a purchaser who
requests to assume the loan.)
2. Current delinquency or default. The term adverse action does not
include a creditor's termination of an account when the accountholder is
currently in default or delinquent on that account. Notification in
accordance with Sec. 1002.9 of the regulation generally is required,
however, if the creditor's action is based on a past delinquency or
default on the account.
Paragraph 2(c)(2)(iii).
1. Point-of-sale transactions. Denial of credit at point of sale is
not adverse action except under those circumstances specified in the
regulation. For example, denial at point of sale is not adverse action
in the following situations:
i. A credit cardholder presents an expired card or a card that has
been reported to the card issuer as lost or stolen.
ii. The amount of a transaction exceeds a cash advance or credit
limit.
iii. The circumstances (such as excessive use of a credit card in a
short period of time) suggest that fraud is involved.
iv. The authorization facilities are not functioning.
v. Billing statements have been returned to the creditor for lack of
a forwarding address.
2. Application for increase in available credit. A refusal or
failure to authorize an account transaction at the point of sale or loan
is not adverse action except when the refusal is a denial of an
application, submitted in accordance with the creditor's procedures, for
an increase in the amount of credit.
Paragraph 2(c)(2)(v).
1. Terms of credit versus type of credit offered. When an applicant
applies for credit and the creditor does not offer the credit terms
requested by the applicant (for example, the interest rate, length of
maturity, collateral, or amount of downpayment), a denial of the
application for that reason is adverse action (unless the creditor makes
a counteroffer that is accepted by the applicant) and the applicant is
entitled to notification under Sec. 1002.9.
2(e) Applicant.
1. Request to assume loan. If a mortgagor sells or transfers the
mortgaged property and the buyer makes an application to the creditor to
assume the mortgage loan, the mortgagee must treat the buyer as an
applicant unless its policy is not to permit assumptions.
2(f) Application.
1. General. A creditor has the latitude under the regulation to
establish its own application process and to decide the type and amount
of information it will require from credit applicants.
2. Procedures used. The term ``procedures'' refers to the actual
practices followed by a creditor for making credit decisions as well as
its stated application procedures. For example, if a creditor's stated
policy is to require all applications to be in writing on the creditor's
application form, but the creditor also makes credit decisions based on
oral requests, the creditor's procedures are to accept both oral and
written applications.
3. When an inquiry or prequalification request becomes an
application. A creditor is encouraged to provide consumers with
information about loan terms. However, if in giving information to the
consumer the creditor also evaluates information about the consumer,
decides to decline the request, and communicates this to the consumer,
the creditor
[[Page 124]]
has treated the inquiry or prequalification request as an application
and must then comply with the notification requirements under Sec.
1002.9. Whether the inquiry or prequalification request becomes an
application depends on how the creditor responds to the consumer, not on
what the consumer says or asks. (See comment 9-5 for further discussion
of prequalification requests; see comment 2(f)-5 for a discussion of
preapproval requests.)
4. Examples of inquiries that are not applications. The following
examples illustrate situations in which only an inquiry has taken place:
i. A consumer calls to ask about loan terms and an employee explains
the creditor's basic loan terms, such as interest rates, loan-to-value
ratio, and debt-to-income ratio.
ii. A consumer calls to ask about interest rates for car loans, and,
in order to quote the appropriate rate, the loan officer asks for the
make and sales price of the car and the amount of the downpayment, then
gives the consumer the rate.
iii. A consumer asks about terms for a loan to purchase a home and
tells the loan officer her income and intended downpayment, but the loan
officer only explains the creditor's loan-to-value ratio policy and
other basic lending policies, without telling the consumer whether she
qualifies for the loan.
iv. A consumer calls to ask about terms for a loan to purchase
vacant land and states his income and the sales price of the property to
be financed, and asks whether he qualifies for a loan; the employee
responds by describing the general lending policies, explaining that he
would need to look at all of the consumer's qualifications before making
a decision, and offering to send an application form to the consumer.
5. Examples of an application. An application for credit includes
the following situations:
i. A person asks a financial institution to ``preapprove'' her for a
loan (for example, to finance a house or a vehicle she plans to buy) and
the institution reviews the request under a program in which the
institution, after a comprehensive analysis of her creditworthiness,
issues a written commitment valid for a designated period of time to
extend a loan up to a specified amount. The written commitment may not
be subject to conditions other than conditions that require the
identification of adequate collateral, conditions that require no
material change in the applicant's financial condition or
creditworthiness prior to funding the loan, and limited conditions that
are not related to the financial condition or creditworthiness of the
applicant that the lender ordinarily attaches to a traditional
application (such as certification of a clear termite inspection for a
home purchase loan, or a maximum mileage requirement for a used car
loan). But if the creditor's program does not provide for giving written
commitments, requests for preapprovals are treated as prequalification
requests for purposes of the regulation.
ii. Under the same facts as above, the financial institution
evaluates the person's creditworthiness and determines that she does not
qualify for a preapproval.
6. Completed application--diligence requirement. The regulation
defines a completed application in terms that give a creditor the
latitude to establish its own information requirements. Nevertheless,
the creditor must act with reasonable diligence to collect information
needed to complete the application. For example, the creditor should
request information from third parties, such as a credit report,
promptly after receiving the application. If additional information is
needed from the applicant, such as an address or a telephone number to
verify employment, the creditor should contact the applicant promptly.
(But see comment 9(a)(1)-3, which discusses the creditor's option to
deny an application on the basis of incompleteness.)
2(g) Business credit.
1. Definition. The test for deciding whether a transaction qualifies
as business credit is one of primary purpose. For example, an open-end
credit account used for both personal and business purposes is not
business credit unless the primary purpose of the account is business-
related. A creditor may rely on an applicant's statement of the purpose
for the credit requested.
2(j) Credit.
1. General. Regulation B covers a wider range of credit transactions
than Regulation Z (Truth in Lending). Under Regulation B, a transaction
is credit if there is a right to defer payment of a debt--regardless of
whether the credit is for personal or commercial purposes, the number of
installments required for repayment, or whether the transaction is
subject to a finance charge.
2(l) Creditor.
1. Assignees. The term creditor includes all persons participating
in the credit decision. This may include an assignee or a potential
purchaser of the obligation who influences the credit decision by
indicating whether or not it will purchase the obligation if the
transaction is consummated.
2. Referrals to creditors. For certain purposes, the term creditor
includes persons such as real estate brokers, automobile dealers, home
builders, and home-improvement contractors who do not participate in
credit decisions but who only accept applications and refer applicants
to creditors, or select or offer to select creditors to whom credit
requests can be made. These persons must
[[Page 125]]
comply with Sec. 1002.4(a), the general rule prohibiting
discrimination, and with Sec. 1002.4(b), the general rule against
discouraging applications.
2(p) Empirically derived and other credit scoring systems.
1. Purpose of definition. The definition under Sec. Sec.
1002.2(p)(1)(i) through (iv) sets the criteria that a credit system must
meet in order to use age as a predictive factor. Credit systems that do
not meet these criteria are judgmental systems and may consider age only
for the purpose of determining a ``pertinent element of
creditworthiness.'' (Both types of systems may favor an elderly
applicant. See Sec. 1002.6(b)(2).)
2. Periodic revalidation. The regulation does not specify how often
credit scoring systems must be revalidated. The credit scoring system
must be revalidated frequently enough to ensure that it continues to
meet recognized professional statistical standards for statistical
soundness. To ensure that predictive ability is being maintained, the
creditor must periodically review the performance of the system. This
could be done, for example, by analyzing the loan portfolio to determine
the delinquency rate for each score interval, or by analyzing population
stability over time to detect deviations of recent applications from the
applicant population used to validate the system. If this analysis
indicates that the system no longer predicts risk with statistical
soundness, the system must be adjusted as necessary to reestablish its
predictive ability. A creditor is responsible for ensuring its system is
validated and revalidated based on the creditor's own data.
3. Pooled data scoring systems. A scoring system or the data from
which to develop such a system may be obtained from either a single
credit grantor or multiple credit grantors. The resulting system will
qualify as an empirically derived, demonstrably and statistically sound,
credit scoring system provided the criteria set forth in paragraph
(p)(1)(i) through (iv) of this section are met. A creditor is
responsible for ensuring its system is validated and revalidated based
on the creditor's own data when it becomes available.
4. Effects test and disparate treatment. An empirically derived,
demonstrably and statistically sound, credit scoring system may include
age as a predictive factor (provided that the age of an elderly
applicant is not assigned a negative factor or value). Besides age, no
other prohibited basis may be used as a variable. Generally, credit
scoring systems treat all applicants objectively and thus avoid problems
of disparate treatment. In cases where a credit scoring system is used
in conjunction with individual discretion, disparate treatment could
conceivably occur in the evaluation process. In addition, neutral
factors used in credit scoring systems could nonetheless be subject to
challenge under the effects test. (See comment 6(a)-2 for a discussion
of the effects test).
2(w) Open-end credit.
1. Open-end real estate mortgages. The term ``open-end credit'' does
not include negotiated advances under an open-end real estate mortgage
or a letter of credit.
2(z) Prohibited basis.
1. Persons associated with applicant. As used in this part,
prohibited basis refers not only to characteristics--the race, color,
religion, national origin, sex, marital status, or age--of an applicant
(or officers of an applicant in the case of a corporation) but also to
the characteristics of individuals with whom an applicant is affiliated
or with whom the applicant associates. This means, for example, that
under the general rule stated in Sec. 1002.4(a), a creditor may not
discriminate against an applicant because of that person's personal or
business dealings with members of a certain religion, because of the
national origin of any persons associated with the extension of credit
(such as the tenants in the apartment complex being financed), or
because of the race of other residents in the neighborhood where the
property offered as collateral is located.
2. National origin. A creditor may not refuse to grant credit
because an applicant comes from a particular country but may take the
applicant's immigration status into account. A creditor may also take
into account any applicable law, regulation, or executive order
restricting dealings with citizens (or the government) of a particular
country or imposing limitations regarding credit extended for their use.
3. Public assistance program. Any Federal, state, or local
governmental assistance program that provides a continuing, periodic
income supplement, whether premised on entitlement or need, is ``public
assistance'' for purposes of the regulation. The term includes (but is
not limited to) Temporary Aid to Needy Families, food stamps, rent and
mortgage supplement or assistance programs, social security and
supplemental security income, and unemployment compensation. Only
physicians, hospitals, and others to whom the benefits are payable need
consider Medicare and Medicaid as public assistance.
Section 1002.3--Limited Exceptions for Certain Classes of Transactions
1. Scope. Under this section, procedural requirements of the
regulation do not apply to certain types of credit. All classes of
transactions remain subject to Sec. 1002.4(a), the general rule barring
discrimination on a prohibited basis, and to any other provision not
specifically excepted.
3(a) Public-utilities credit.
1. Definition. This definition applies only to credit for the
purchase of a utility service,
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such as electricity, gas, or telephone service. Credit provided or
offered by a public utility for some other purpose--such as for
financing the purchase of a gas dryer, telephone equipment, or other
durable goods, or for insulation or other home improvements--is not
excepted.
2. Security deposits. A utility company is a creditor when it
supplies utility service and bills the user after the service has been
provided. Thus, any credit term (such as a requirement for a security
deposit) is subject to the regulation's bar against discrimination on a
prohibited basis.
3. Telephone companies. A telephone company's credit transactions
qualify for the exceptions provided in Sec. 1002.3(a)(2) only if the
company is regulated by a government unit or files the charges for
service, delayed payment, or any discount for prompt payment with a
government unit.
3(c) Incidental credit.
1. Examples. If a service provider (such as a hospital, doctor,
lawyer, or merchant) allows the client or customer to defer the payment
of a bill, this deferral of debt is credit for purposes of the
regulation, even though there is no finance charge and no agreement for
payment in installments. Because of the exceptions provided by this
section, however, these particular credit extensions are excepted from
compliance with certain procedural requirements as specified in Sec.
1002.3(c).
3(d) Government credit.
1. Credit to governments. The exception relates to credit extended
to (not by) governmental entities. For example, credit extended to a
local government is covered by this exception, but credit extended to
consumers by a Federal or state housing agency does not qualify for
special treatment under this category.
Section 1002.4--General Rules
Paragraph 4(a).
1. Scope of rule. The general rule stated in Sec. 1002.4(a) covers
all dealings, without exception, between an applicant and a creditor,
whether or not addressed by other provisions of the regulation. Other
provisions of the regulation identify specific practices that the Bureau
has decided are impermissible because they could result in credit
discrimination on a basis prohibited by the Act. The general rule
covers, for example, application procedures, criteria used to evaluate
creditworthiness, administration of accounts, and treatment of
delinquent or slow accounts. Thus, whether or not specifically
prohibited elsewhere in the regulation, a credit practice that treats
applicants differently on a prohibited basis violates the law because it
violates the general rule. Disparate treatment on a prohibited basis is
illegal whether or not it results from a conscious intent to
discriminate.
2. Examples.
i. Disparate treatment would exist, for example, in the following
situations:
A. A creditor provides information only on ``subprime'' and similar
products to minority applicants who request information about the
creditor's mortgage products, but provides information on a wider
variety of mortgage products to similarly situated nonminority
applicants.
B. A creditor provides more comprehensive information to men than to
similarly situated women.
C. A creditor requires a minority applicant to provide greater
documentation to obtain a loan than a similarly situated nonminority
applicant.
D. A creditor waives or relaxes credit standards for a nonminority
applicant but not for a similarly situated minority applicant.
ii. Treating applicants differently on a prohibited basis is
unlawful if the creditor lacks a legitimate nondiscriminatory reason for
its action, or if the asserted reason is found to be a pretext for
discrimination.
Paragraph 4(b).
1. Prospective applicants. Generally, the regulation's protections
apply only to persons who have requested or received an extension of
credit. In keeping with the purpose of the Act--to promote the
availability of credit on a nondiscriminatory basis--Sec. 1002.4(b)
covers acts or practices directed at prospective applicants that could
discourage a reasonable person, on a prohibited basis, from applying for
credit. Practices prohibited by this section include:
i. A statement that the applicant should not bother to apply, after
the applicant states that he is retired.
ii. The use of words, symbols, models or other forms of
communication in advertising that express, imply, or suggest a
discriminatory preference or a policy of exclusion in violation of the
Act.
iii. The use of interview scripts that discourage applications on a
prohibited basis.
2. Affirmative advertising. A creditor may affirmatively solicit or
encourage members of traditionally disadvantaged groups to apply for
credit, especially groups that might not normally seek credit from that
creditor.
Paragraph 4(c).
1. Requirement for written applications. Model application forms are
provided in Appendix B to the regulation, although use of a printed form
is not required. A creditor will satisfy the requirement by writing down
the information that it normally considers in making a credit decision.
The creditor may complete an application on behalf of an applicant and
need not require the applicant to sign the application.
2. Telephone applications. A creditor that accepts applications by
telephone for dwelling-related credit covered by Sec. 1002.13 can
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meet the requirement for written applications by writing down pertinent
information that is provided by the applicant.
3. Computerized entry. Information entered directly into and
retained by a computerized system qualifies as a written application
under this paragraph. (See the commentary to Sec. 1002.13(b),
Applications through electronic media and Applications through video.)
Paragraph 4(d).
1. Clear and conspicuous. This standard requires that disclosures be
presented in a reasonably understandable format in a way that does not
obscure the required information. No minimum type size is mandated, but
the disclosures must be legible, whether typewritten, handwritten, or
printed by computer.
2. Form of disclosures. Whether the disclosures required to be on or
with an application must be in electronic form depends upon the
following:
i. If an applicant accesses a credit application electronically
(other than as described under ii below), such as online at a home
computer, the creditor must provide the disclosures in electronic form
(such as with the application form on its Web site) in order to meet the
requirement to provide disclosures in a timely manner on or with the
application. If the creditor instead mailed paper disclosures to the
applicant, this requirement would not be met.
ii. In contrast, if an applicant is physically present in the
creditor's office, and accesses a credit application electronically,
such as via a terminal or kiosk (or if the applicant uses a terminal or
kiosk located on the premises of an affiliate or third party that has
arranged with the creditor to provide applications to consumers), the
creditor may provide disclosures in either electronic or paper form,
provided the creditor complies with the timing, delivery, and
retainability requirements of the regulation.
Section 1002.5--Rules Concerning Requests for Information
5(a) General rules.
Paragraph 5(a)(1).
1. Requests for information. This section governs the types of
information that a creditor may gather. Section1002.6 governs how
information may be used.
Paragraph 5(a)(2).
1. Local laws. Information that a creditor is allowed to collect
pursuant to a ``state'' statute or regulation includes information
required by a local statute, regulation, or ordinance.
2. Information required by Regulation C. Regulation C generally
requires creditors covered by the Home Mortgage Disclosure Act (HMDA) to
collect and report information about the race, ethnicity, and sex of
applicants for home-improvement loans and home-purchase loans, including
some types of loans not covered by Sec. 1002.13.
3. Collecting information on behalf of creditors. Persons such as
loan brokers and correspondents do not violate the ECOA or Regulation B
if they collect information that they are otherwise prohibited from
collecting, where the purpose of collecting the information is to
provide it to a creditor that is subject to the Home Mortgage Disclosure
Act or another Federal or state statute or regulation requiring data
collection.
5(d) Other limitations on information requests.
Paragraph 5(d)(1).
1. Indirect disclosure of prohibited information. The fact that
certain credit-related information may indirectly disclose marital
status does not bar a creditor from seeking such information. For
example, the creditor may ask about:
i. The applicant's obligation to pay alimony, child support, or
separate maintenance income.
ii. The source of income to be used as the basis for repaying the
credit requested, which could disclose that it is the income of a
spouse.
iii. Whether any obligation disclosed by the applicant has a co-
obligor, which could disclose that the co-obligor is a spouse or former
spouse.
iv. The ownership of assets, which could disclose the interest of a
spouse.
Paragraph 5(d)(2).
1. Disclosure about income. The sample application forms in Appendix
B to the regulation illustrate how a creditor may inform an applicant of
the right not to disclose alimony, child support, or separate
maintenance income.
2. General inquiry about source of income. Since a general inquiry
about the source of income may lead an applicant to disclose alimony,
child support, or separate maintenance income, a creditor making such an
inquiry on an application form should preface the request with the
disclosure required by this paragraph.
3. Specific inquiry about sources of income. A creditor need not
give the disclosure if the inquiry about income is specific and worded
in a way that is unlikely to lead the applicant to disclose the fact
that income is derived from alimony, child support, or separate
maintenance payments. For example, an application form that asks about
specific types of income such as salary, wages, or investment income
need not include the disclosure.
Section 1002.6--Rules Concerning Evaluation of Applications
6(a) General rule concerning use of information.
1. General. When evaluating an application for credit, a creditor
generally may consider
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any information obtained. However, a creditor may not consider in its
evaluation of creditworthiness any information that it is barred by
Sec. 1002.5 from obtaining or from using for any purpose other than to
conduct a self-test under Sec. 1002.15.
2. Effects test. The effects test is a judicial doctrine that was
developed in a series of employment cases decided by the U.S. Supreme
Court under Title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e
et seq.), and the burdens of proof for such employment cases were
codified by Congress in the Civil Rights Act of 1991 (42 U.S.C. 2000e-
2). Congressional intent that this doctrine apply to the credit area is
documented in the Senate Report that accompanied H.R. 6516, No. 94-589,
pp. 4-5; and in the House Report that accompanied H.R. 6516, No. 94-210,
p.5. The Act and regulation may prohibit a creditor practice that is
discriminatory in effect because it has a disproportionately negative
impact on a prohibited basis, even though the creditor has no intent to
discriminate and the practice appears neutral on its face, unless the
creditor practice meets a legitimate business need that cannot
reasonably be achieved as well by means that are less disparate in their
impact. For example, requiring that applicants have income in excess of
a certain amount to qualify for an overdraft line of credit could mean
that women and minority applicants will be rejected at a higher rate
than men and nonminority applicants. If there is a demonstrable
relationship between the income requirement and creditworthiness for the
level of credit involved, however, use of the income standard would
likely be permissible.
6(b) Specific rules concerning use of information.
Paragraph 6(b)(1).
1. Prohibited basis--special purpose credit. In a special purpose
credit program, a creditor may consider a prohibited basis to determine
whether the applicant possesses a characteristic needed for eligibility.
(See Sec. 1002.8.)
Paragraph 6(b)(2).
1. Favoring the elderly. Any system of evaluating creditworthiness
may favor a credit applicant who is age 62 or older. A credit program
that offers more favorable credit terms to applicants age 62 or older is
also permissible; a program that offers more favorable credit terms to
applicants at an age lower than 62 is permissible only if it meets the
special-purpose credit requirements of Sec. 1002.8.
2. Consideration of age in a credit scoring system. Age may be taken
directly into account in a credit scoring system that is ``demonstrably
and statistically sound,'' as defined in Sec. 1002.2(p), with one
limitation: Applicants age 62 years or older must be treated at least as
favorably as applicants who are under age 62. If age is scored by
assigning points to an applicant's age category, elderly applicants must
receive the same or a greater number of points as the most favored class
of nonelderly applicants.
i. Age-split scorecards. Some credit systems segment the population
and use different scorecards based on the age of an applicant. In such a
system, one card may cover a narrow age range (for example, applicants
in their twenties or younger) who are evaluated under attributes
predictive for that age group. A second card may cover all other
applicants, who are evaluated under the attributes predictive for that
broader class. When a system uses a card covering a wide age range that
encompasses elderly applicants, the credit scoring system is not deemed
to score age. Thus, the system does not raise the issue of assigning a
negative factor or value to the age of elderly applicants. But if a
system segments the population by age into multiple scorecards, and
includes elderly applicants in a narrower age range, the credit scoring
system does score age. To comply with the Act and regulation in such a
case, the creditor must ensure that the system does not assign a
negative factor or value to the age of elderly applicants as a class.
3. Consideration of age in a judgmental system. In a judgmental
system, defined in Sec. 1002.2(t), a creditor may not decide whether to
extend credit or set the terms and conditions of credit based on age or
information related exclusively to age. Age or age-related information
may be considered only in evaluating other ``pertinent elements of
creditworthiness'' that are drawn from the particular facts and
circumstances concerning the applicant. For example, a creditor may not
reject an application or terminate an account because the applicant is
60 years old. But a creditor that uses a judgmental system may relate
the applicant's age to other information about the applicant that the
creditor considers in evaluating creditworthiness. As the following
examples illustrate, the evaluation must be made in an individualized,
case-by-case manner:
i. A creditor may consider the applicant's occupation and length of
time to retirement to ascertain whether the applicant's income
(including retirement income) will support the extension of credit to
its maturity.
ii. A creditor may consider the adequacy of any security offered
when the term of the credit extension exceeds the life expectancy of the
applicant and the cost of realizing on the collateral could exceed the
applicant's equity. An elderly applicant might not qualify for a 5
percent down, 30-year mortgage loan but might qualify with a larger
downpayment or a shorter loan maturity.
iii. A creditor may consider the applicant's age to assess the
significance of length of employment (a young applicant may have just
entered the job market) or length of time at an address (an elderly
applicant may
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recently have retired and moved from a long-term residence).
4. Consideration of age in a reverse mortgage. A reverse mortgage is
a home-secured loan in which the borrower receives payments from the
creditor, and does not become obligated to repay these amounts (other
than in the case of default) until the borrower dies, moves permanently
from the home, or transfers title to the home, or upon a specified
maturity date. Disbursements to the borrower under a reverse mortgage
typically are determined by considering the value of the borrower's
home, the current interest rate, and the borrower's life expectancy. A
reverse mortgage program that requires borrowers to be age 62 or older
is permissible under Sec. 1002.6(b)(2)(iv). In addition, under Sec.
1002.6(b)(2)(iii), a creditor may consider a borrower's age to evaluate
a pertinent element of creditworthiness, such as the amount of the
credit or monthly payments that the borrower will receive, or the
estimated repayment date.
5. Consideration of age in a combined system. A creditor using a
credit scoring system that qualifies as ``empirically derived'' under
Sec. 1002.2(p) may consider other factors (such as a credit report or
the applicant's cash flow) on a judgmental basis. Doing so will not
negate the classification of the credit scoring component of the
combined system as ``demonstrably and statistically sound.'' While age
could be used in the credit scoring portion, however, in the judgmental
portion age may not be considered directly. It may be used only for the
purpose of determining a ``pertinent element of creditworthiness.'' (See
comment 6(b)(2)-3.)
6. Consideration of public assistance. When considering income
derived from a public assistance program, a creditor may take into
account, for example:
i. The length of time an applicant will likely remain eligible to
receive such income.
ii. Whether the applicant will continue to qualify for benefits
based on the status of the applicant's dependents (as in the case of
Temporary Aid to Needy Families, or social security payments to a
minor).
iii. Whether the creditor can attach or garnish the income to assure
payment of the debt in the event of default.
Paragraph 6(b)(5).
1. Consideration of an individual applicant. A creditor must
evaluate income derived from part-time employment, alimony, child
support, separate maintenance payments, retirement benefits, or public
assistance on an individual basis, not on the basis of aggregate
statistics; and must assess its reliability or unreliability by
analyzing the applicant's actual circumstances, not by analyzing
statistical measures derived from a group.
2. Payments consistently made. In determining the likelihood of
consistent payments of alimony, child support, or separate maintenance,
a creditor may consider factors such as whether payments are received
pursuant to a written agreement or court decree; the length of time that
the payments have been received; whether the payments are regularly
received by the applicant; the availability of court or other procedures
to compel payment; and the creditworthiness of the payor, including the
credit history of the payor when it is available to the creditor.
3. Consideration of income.
i. A creditor need not consider income at all in evaluating
creditworthiness. If a creditor does consider income, there are several
acceptable methods, whether in a credit scoring or a judgmental system:
A. A creditor may score or take into account the total sum of all
income stated by the applicant without taking steps to evaluate the
income for reliability.
B. A creditor may evaluate each component of the applicant's income,
and then score or take into account income determined to be reliable
separately from other income; or the creditor may disregard that portion
of income that is not reliable when it aggregates reliable income.
C. A creditor that does not evaluate all income components for
reliability must treat as reliable any component of protected income
that is not evaluated.
ii. In considering the separate components of an applicant's income,
the creditor may not automatically discount or exclude from
consideration any protected income. Any discounting or exclusion must be
based on the applicant's actual circumstances.
4. Part-time employment, sources of income. A creditor may score or
take into account the fact that an applicant has more than one source of
earned income--a full-time and a part-time job or two part-time jobs. A
creditor may also score or treat earned income from a secondary source
differently than earned income from a primary source. The creditor may
not, however, score or otherwise take into account the number of sources
for income such as retirement income, social security, supplemental
security income, and alimony. Nor may the creditor treat negatively the
fact that an applicant's only earned income is derived from, for
example, a part-time job.
Paragraph 6(b)(6).
1. Types of credit references. A creditor may restrict the types of
credit history and credit references that it will consider, provided
that the restrictions are applied to all credit applicants without
regard to sex, marital status, or any other prohibited basis. On the
applicant's request, however, a creditor must consider credit
information not reported
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through a credit bureau when the information relates to the same types
of credit references and history that the creditor would consider if
reported through a credit bureau.
Paragraph 6(b)(7).
1. National origin--immigration status. The applicant's immigration
status and ties to the community (such as employment and continued
residence in the area) could have a bearing on a creditor's ability to
obtain repayment. Accordingly, the creditor may consider immigration
status and differentiate, for example, between a noncitizen who is a
long-time resident with permanent resident status and a noncitizen who
is temporarily in this country on a student visa.
2. National origin--citizenship. A denial of credit on the ground
that an applicant is not a United States citizen is not per se
discrimination based on national origin.
Paragraph 6(b)(8).
1. Prohibited basis--marital status. A creditor may consider the
marital status of an applicant or joint applicant for the purpose of
ascertaining the creditor's rights and remedies applicable to the
particular extension of credit. For example, in a secured transaction
involving real property, a creditor could take into account whether
state law gives the applicant's spouse an interest in the property being
offered as collateral.
Section 1002.7--Rules Concerning Extensions of Credit
7(a) Individual accounts.
1. Open-end credit--authorized user. A creditor may not require a
creditworthy applicant seeking an individual credit account to provide
additional signatures. But the creditor may condition the designation of
an authorized user by the account holder on the authorized user's
becoming contractually liable for the account, as long as the creditor
does not differentiate on any prohibited basis in imposing this
requirement.
2. Open-end credit--choice of authorized user. A creditor that
permits an account holder to designate an authorized user may not
restrict this designation on a prohibited basis. For example, if the
creditor allows the designation of spouses as authorized users, the
creditor may not refuse to accept a non-spouse as an authorized user.
3. Overdraft authority on transaction accounts. If a transaction
account (such as a checking account or NOW account) includes an
overdraft line of credit, the creditor may require that all persons
authorized to draw on the transaction account assume liability for any
overdraft.
7(b) Designation of name.
1. Single name on account. A creditor may require that joint
applicants on an account designate a single name for purposes of
administering the account and that a single name be embossed on any
credit cards issued on the account. But the creditor may not require
that the name be the husband's name. (See Sec. 1002.10 for rules
governing the furnishing of credit history on accounts held by spouses.)
7(c) Action concerning existing open-end accounts.
Paragraph 7(c)(1).
1. Termination coincidental with marital status change. When an
account holder's marital status changes, a creditor generally may not
terminate the account unless it has evidence that the account holder is
now unable or unwilling to repay. But the creditor may terminate an
account on which both spouses are jointly liable, even if the action
coincides with a change in marital status, when one or both spouses:
i. Repudiate responsibility for future charges on the joint account.
ii. Request separate accounts in their own names.
iii. Request that the joint account be closed.
2. Updating information. A creditor may periodically request updated
information from applicants but may not use events related to a
prohibited basis--such as an applicant's retirement or reaching a
particular age, or a change in name or marital status--to trigger such a
request.
Paragraph 7(c)(2).
1. Procedure pending reapplication. A creditor may require a
reapplication from an account holder, even when there is no evidence of
unwillingness or inability to repay, if (1) the credit was based on the
qualifications of a person who is no longer available to support the
credit and (2) the creditor has information indicating that the account
holder's income may be insufficient to support the credit. While a
reapplication is pending, the creditor must allow the account holder
full access to the account under the existing contract terms. The
creditor may specify a reasonable time period within which the account
holder must submit the required information.
7(d) Signature of spouse or other person.
1. Qualified applicant. The signature rules ensure that qualified
applicants are able to obtain credit in their own names. Thus, when an
applicant requests individual credit, a creditor generally may not
require the signature of another person unless the creditor has first
determined that the applicant alone does not qualify for the credit
requested.
2. Unqualified applicant. When an applicant requests individual
credit but does not meet a creditor's standards, the creditor may
require a cosigner, guarantor, endorser, or similar party--but cannot
require that it be the spouse. (See commentary to Sec. Sec.
1002.7(d)(5) and (6).)
Paragraph 7(d)(1).
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1. Signature of another person. It is impermissible for a creditor
to require an applicant who is individually creditworthy to provide a
cosigner-even if the creditor applies the requirement without regard to
sex, marital status, or any other prohibited basis. (But see comment
7(d)(6)-1 concerning guarantors of closely held corporations.)
2. Joint applicant. The term ``joint applicant'' refers to someone
who applies contemporaneously with the applicant for shared or joint
credit. It does not refer to someone whose signature is required by the
creditor as a condition for granting the credit requested.
3. Evidence of joint application. A person's intent to be a joint
applicant must be evidenced at the time of application. Signatures on a
promissory note may not be used to show intent to apply for joint
credit. On the other hand, signatures or initials on a credit
application affirming applicants' intent to apply for joint credit may
be used to establish intent to apply for joint credit. (See Appendix B.)
The method used to establish intent must be distinct from the means used
by individuals to affirm the accuracy of information. For example,
signatures on a joint financial statement affirming the veracity of
information are not sufficient to establish intent to apply for joint
credit.
Paragraph 7(d)(2).
1. Jointly owned property. If an applicant requests unsecured
credit, does not own sufficient separate property, and relies on joint
property to establish creditworthiness, the creditor must value the
applicant's interest in the jointly owned property. A creditor may not
request that a nonapplicant joint owner sign any instrument as a
condition of the credit extension unless the applicant's interest does
not support the amount and terms of the credit sought.
i. Valuation of applicant's interest. In determining the value of an
applicant's interest in jointly owned property, a creditor may consider
factors such as the form of ownership and the property's susceptibility
to attachment, execution, severance, or partition; the value of the
applicant's interest after such action; and the cost associated with the
action. This determination must be based on the existing form of
ownership, and not on the possibility of a subsequent change. For
example, in determining whether a married applicant's interest in
jointly owned property is sufficient to satisfy the creditor's standards
of creditworthiness for individual credit, a creditor may not consider
that the applicant's separate property could be transferred into tenancy
by the entirety after consummation. Similarly, a creditor may not
consider the possibility that the couple may divorce. Accordingly, a
creditor may not require the signature of the non-applicant spouse in
these or similar circumstances.
ii. Other options to support credit. If the applicant's interest in
jointly owned property does not support the amount and terms of credit
sought, the creditor may offer the applicant other options to qualify
for the extension of credit. For example:
A. Providing a co-signer or other party (Sec. 1002.7(d)(5));
B. Requesting that the credit be granted on a secured basis (Sec.
1002.7(d)(4)); or
C. Providing the signature of the joint owner on an instrument that
ensures access to the property in the event of the applicant's death or
default, but does not impose personal liability unless necessary under
state law (such as a limited guarantee). A creditor may not routinely
require, however, that a joint owner sign an instrument (such as a
quitclaim deed) that would result in the forfeiture of the joint owner's
interest in the property.
2. Need for signature--reasonable belief. A creditor's reasonable
belief as to what instruments need to be signed by a person other than
the applicant should be supported by a thorough review of pertinent
statutory and decisional law or an opinion of the state attorney
general.
Paragraph 7(d)(3).
1. Residency. In assessing the creditworthiness of a person who
applies for credit in a community property state, a creditor may assume
that the applicant is a resident of the state unless the applicant
indicates otherwise.
Paragraph 7(d)(4).
1. Creation of enforceable lien. Some state laws require that both
spouses join in executing any instrument by which real property is
encumbered. If an applicant offers such property as security for credit,
a creditor may require the applicant's spouse to sign the instruments
necessary to create a valid security interest in the property. The
creditor may not require the spouse to sign the note evidencing the
credit obligation if signing only the mortgage or other security
agreement is sufficient to make the property available to satisfy the
debt in the event of default. However, if under state law both spouses
must sign the note to create an enforceable lien, the creditor may
require the signatures.
2. Need for signature--reasonable belief. Generally, a signature to
make the secured property available will only be needed on a security
agreement. A creditor's reasonable belief that, to ensure access to the
property, the spouse's signature is needed on an instrument that imposes
personal liability should be supported by a thorough review of pertinent
statutory and decisional law or an opinion of the state attorney
general.
3. Integrated instruments. When a creditor uses an integrated
instrument that combines the note and the security agreement, the
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spouse cannot be asked to sign the integrated instrument if the
signature is only needed to grant a security interest. But the spouse
could be asked to sign an integrated instrument that makes clear--for
example, by a legend placed next to the spouse's signature--that the
spouse's signature is only to grant a security interest and that signing
the instrument does not impose personal liability.
Paragraph 7(d)(5).
1. Qualifications of additional parties. In establishing guidelines
for eligibility of guarantors, cosigners, or similar additional parties,
a creditor may restrict the applicant's choice of additional parties but
may not discriminate on the basis of sex, marital status, or any other
prohibited basis. For example, the creditor could require that the
additional party live in the creditor's market area.
2. Reliance on income of another person--individual credit. An
applicant who requests individual credit relying on the income of
another person (including a spouse in a non-community property state)
may be required to provide the signature of the other person to make the
income available to pay the debt. In community property states, the
signature of a spouse may be required if the applicant relies on the
spouse's separate income. If the applicant relies on the spouse's future
earnings that as a matter of state law cannot be characterized as
community property until earned, the creditor may require the spouse's
signature, but need not do so--even if it is the creditor's practice to
require the signature when an applicant relies on the future earnings of
a person other than a spouse. (See Sec. 1002.6(c) on consideration of
state property laws.)
3. Renewals. If the borrower's creditworthiness is reevaluated when
a credit obligation is renewed, the creditor must determine whether an
additional party is still warranted and, if not warranted, release the
additional party.
Paragraph 7(d)(6).
1. Guarantees. A guarantee on an extension of credit is part of a
credit transaction and therefore subject to the regulation. A creditor
may require the personal guarantee of the partners, directors, or
officers of a business, and the shareholders of a closely held
corporation, even if the business or corporation is creditworthy. The
requirement must be based on the guarantor's relationship with the
business or corporation, however, and not on a prohibited basis. For
example, a creditor may not require guarantees only for women-owned or
minority-owned businesses. Similarly, a creditor may not require
guarantees only of the married officers of a business or the married
shareholders of a closely held corporation.
2. Spousal guarantees. The rules in Sec. 1002.7(d) bar a creditor
from requiring the signature of a guarantor's spouse just as they bar
the creditor from requiring the signature of an applicant's spouse. For
example, although a creditor may require all officers of a closely held
corporation to personally guarantee a corporate loan, the creditor may
not automatically require that spouses of married officers also sign the
guarantee. If an evaluation of the financial circumstances of an officer
indicates that an additional signature is necessary, however, the
creditor may require the signature of another person in appropriate
circumstances in accordance with Sec. 1002.7(d)(2).
7(e) Insurance.
1. Differences in terms. Differences in the availability, rates, and
other terms on which credit-related casualty insurance or credit life,
health, accident, or disability insurance is offered or provided to an
applicant does not violate Regulation B.
2. Insurance information. A creditor may obtain information about an
applicant's age, sex, or marital status for insurance purposes. The
information may only be used for determining eligibility and premium
rates for insurance, however, and not in making the credit decision.
Section 1002.8--Special Purpose Credit Programs
8(a) Standards for programs.
1. Determining qualified programs. The Bureau does not determine
whether individual programs qualify for special purpose credit status,
or whether a particular program benefits an ``economically disadvantaged
class of persons.'' The agency or creditor administering or offering the
loan program must make these decisions regarding the status of its
program.
2. Compliance with a program authorized by Federal or state law. A
creditor does not violate Regulation B when it complies in good faith
with a regulation promulgated by a government agency implementing a
special purpose credit program under Sec. 1002.8(a)(1). It is the
agency's responsibility to promulgate a regulation that is consistent
with Federal and state law.
3. Expressly authorized. Credit programs authorized by Federal or
state law include programs offered pursuant to Federal, state, or local
statute, regulation or ordinance, or pursuant to judicial or
administrative order.
4. Creditor liability. A refusal to grant credit to an applicant is
not a violation of the Act or regulation if the applicant does not meet
the eligibility requirements under a special purpose credit program.
5. Determining need. In designing a special purpose credit program
under Sec. 1002.8(a), a for-profit organization must determine that the
program will benefit a class of people who would otherwise be denied
credit or would receive it on less favorable terms. This determination
can be based on a broad analysis using the organization's own research
or
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data from outside sources, including governmental reports and studies.
For example, a creditor might design new products to reach consumers who
would not meet, or have not met, its traditional standards of
creditworthiness due to such factors as credit inexperience or the use
of credit sources that may not report to consumer reporting agencies.
Or, a bank could review Home Mortgage Disclosure Act data along with
demographic data for its assessment area and conclude that there is a
need for a special purpose credit program for low-income minority
borrowers.
6. Elements of the program. The written plan must contain
information that supports the need for the particular program. The plan
also must either state a specific period of time for which the program
will last, or contain a statement regarding when the program will be
reevaluated to determine if there is a continuing need for it.
8(b) Rules in other sections.
1. Applicability of rules. A creditor that rejects an application
because the applicant does not meet the eligibility requirements (common
characteristic or financial need, for example) must nevertheless notify
the applicant of action taken as required by Sec. 1002.9.
8(c) Special rule concerning requests and use of information.
1. Request of prohibited basis information. This section permits a
creditor to request and consider certain information that would
otherwise be prohibited by Sec. Sec. 1002.5 and 1002.6 to determine an
applicant's eligibility for a particular program.
2. Examples. Examples of programs under which the creditor can ask
for and consider information about a prohibited basis are:
i. Energy conservation programs to assist the elderly, for which the
creditor must consider the applicant's age.
ii. Programs under a Minority Enterprise Small Business Investment
Corporation, for which a creditor must consider the applicant's minority
status.
8(d) Special rule in the case of financial need.
1. Request of prohibited basis information. This section permits a
creditor to request and consider certain information that would
otherwise be prohibited by Sec. Sec. 1002.5 and 1002.6, and to require
signatures that would otherwise be prohibited by Sec. 1002.7(d).
2. Examples. Examples of programs in which financial need is a
criterion are:
i. Subsidized housing programs for low-to moderate-income
households, for which a creditor may have to consider the applicant's
receipt of alimony or child support, the spouse's or parents' income,
etc.
ii. Student loan programs based on the family's financial need, for
which a creditor may have to consider the spouse's or parents' financial
resources.
3. Student loans. In a guaranteed student loan program, a creditor
may obtain the signature of a parent as a guarantor when required by
Federal or state law or agency regulation, or when the student does not
meet the creditor's standards of creditworthiness. (See Sec. Sec.
1002.7(d)(1) and (5).) The creditor may not require an additional
signature when a student has a work or credit history that satisfies the
creditor's standards.
Section 1002.9--Notifications
1. Use of the term adverse action. The regulation does not require
that a creditor use the term adverse action in communicating to an
applicant that a request for an extension of credit has not been
approved. In notifying an applicant of adverse action as defined by
Sec. 1002.2(c)(1), a creditor may use any words or phrases that
describe the action taken on the application.
2. Expressly withdrawn applications. When an applicant expressly
withdraws a credit application, the creditor is not required to comply
with the notification requirements under Sec. 1002.9. (The creditor
must comply, however, with the record retention requirements of the
regulation. See Sec. 1002.12(b)(3).)
3. When notification occurs. Notification occurs when a creditor
delivers or mails a notice to the applicant's last known address or, in
the case of an oral notification, when the creditor communicates the
credit decision to the applicant.
4. Location of notice. The notifications required under Sec. 1002.9
may appear on either or both sides of a form or letter.
5. Prequalification requests. Whether a creditor must provide a
notice of action taken for a prequalification request depends on the
creditor's response to the request, as discussed in comment 2(f)-3. For
instance, a creditor may treat the request as an inquiry if the creditor
evaluates specific information about the consumer and tells the consumer
the loan amount, rate, and other terms of credit the consumer could
qualify for under various loan programs, explaining the process the
consumer must follow to submit a mortgage application and the
information the creditor will analyze in reaching a credit decision. On
the other hand, a creditor has treated a request as an application, and
is subject to the adverse action notice requirements of Sec. 1002.9 if,
after evaluating information, the creditor decides that it will not
approve the request and communicates that decision to the consumer. For
example, if the creditor tells the consumer that it would not approve an
application for a mortgage because of a bankruptcy in the consumer's
record, the creditor has denied an application for credit.
9(a) Notification of action taken, ECOA notice, and statement of
specific reasons.
Paragraph 9(a)(1).
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1. Timing of notice--when an application is complete. Once a
creditor has obtained all the information it normally considers in
making a credit decision, the application is complete and the creditor
has 30 days in which to notify the applicant of the credit decision.
(See also comment 2(f)-6.)
2. Notification of approval. Notification of approval may be express
or by implication. For example, the creditor will satisfy the
notification requirement when it gives the applicant the credit card,
money, property, or services requested.
3. Incomplete application--denial for incompleteness. When an
application is incomplete regarding information that the applicant can
provide and the creditor lacks sufficient data for a credit decision,
the creditor may deny the application giving as the reason for denial
that the application is incomplete. The creditor has the option,
alternatively, of providing a notice of incompleteness under Sec.
1002.9(c).
4. Incomplete application--denial for reasons other than
incompleteness. When an application is missing information but provides
sufficient data for a credit decision, the creditor may evaluate the
application, make its credit decision, and notify the applicant
accordingly. If credit is denied, the applicant must be given the
specific reasons for the credit denial (or notice of the right to
receive the reasons); in this instance missing information or
``incomplete application'' cannot be given as the reason for the denial.
5. Length of counteroffer. Section 1002.9(a)(1)(iv) does not require
a creditor to hold a counteroffer open for 90 days or any other
particular length of time.
6. Counteroffer combined with adverse action notice. A creditor that
gives the applicant a combined counteroffer and adverse action notice
that complies with Sec. 1002.9(a)(2) need not send a second adverse
action notice if the applicant does not accept the counteroffer. A
sample of a combined notice is contained in form C-4 of Appendix C to
the regulation.
7. Denial of a telephone application. When an application is made by
telephone and adverse action is taken, the creditor must request the
applicant's name and address in order to provide written notification
under this section. If the applicant declines to provide that
information, then the creditor has no further notification
responsibility.
Paragraph 9(a)(3).
1. Coverage. In determining which rules in this paragraph apply to a
given business credit application, a creditor may rely on the
applicant's assertion about the revenue size of the business.
(Applications to start a business are governed by the rules in Sec.
1002.9(a)(3)(i).) If an applicant applies for credit as a sole
proprietor, the revenues of the sole proprietorship will determine which
rules govern the application. However, if an applicant applies for
business credit as an individual, the rules in Sec. 1002.9(a)(3)(i)
apply unless the application is for trade or similar credit.
2. Trade credit. The term trade credit generally is limited to a
financing arrangement that involves a buyer and a seller--such as a
supplier who finances the sale of equipment, supplies, or inventory; it
does not apply to an extension of credit by a bank or other financial
institution for the financing of such items.
3. Factoring. Factoring refers to a purchase of accounts receivable,
and thus is not subject to the Act or regulation. If there is a credit
extension incident to the factoring arrangement, the notification rules
in Sec. 1002.9(a)(3)(ii) apply, as do other relevant sections of the
Act and regulation.
4. Manner of compliance. In complying with the notice provisions of
the Act and regulation, creditors offering business credit may follow
the rules governing consumer credit. Similarly, creditors may elect to
treat all business credit the same (irrespective of revenue size) by
providing notice in accordance with Sec. 1002.9(a)(3)(i).
5. Timing of notification. A creditor subject to Sec.
1002.9(a)(3)(ii)(A) is required to notify a business credit applicant,
orally or in writing, of action taken on an application within a
reasonable time of receiving a completed application. Notice provided in
accordance with the timing requirements of Sec. 1002.9(a)(1) is deemed
reasonable in all instances.
9(b) Form of ECOA notice and statement of specific reasons.
Paragraph 9(b)(1).
1. Substantially similar notice. The ECOA notice sent with a
notification of a credit denial or other adverse action will comply with
the regulation if it is ``substantially similar'' to the notice
contained in Sec. 1002.9(b)(1). For example, a creditor may add a
reference to the fact that the ECOA permits age to be considered in
certain credit scoring systems, or add a reference to a similar state
statute or regulation and to a state enforcement agency.
Paragraph 9(b)(2).
1. Number of specific reasons. A creditor must disclose the
principal reasons for denying an application or taking other adverse
action. The regulation does not mandate that a specific number of
reasons be disclosed, but disclosure of more than four reasons is not
likely to be helpful to the applicant.
2. Source of specific reasons. The specific reasons disclosed under
Sec. Sec. 1002.9(a)(2) and (b)(2) must relate to and accurately
describe the factors actually considered or scored by a creditor.
3. Description of reasons. A creditor need not describe how or why a
factor adversely
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affected an applicant. For example, the notice may say ``length of
residence'' rather than ``too short a period of residence.''
4. Credit scoring system. If a creditor bases the denial or other
adverse action on a credit scoring system, the reasons disclosed must
relate only to those factors actually scored in the system. Moreover, no
factor that was a principal reason for adverse action may be excluded
from disclosure. The creditor must disclose the actual reasons for
denial (for example, ``age of automobile'') even if the relationship of
that factor to predicting creditworthiness may not be clear to the
applicant.
5. Credit scoring--method for selecting reasons. The regulation does
not require that any one method be used for selecting reasons for a
credit denial or other adverse action that is based on a credit scoring
system. Various methods will meet the requirements of the regulation.
One method is to identify the factors for which the applicant's score
fell furthest below the average score for each of those factors achieved
by applicants whose total score was at or slightly above the minimum
passing score. Another method is to identify the factors for which the
applicant's score fell furthest below the average score for each of
those factors achieved by all applicants. These average scores could be
calculated during the development or use of the system. Any other method
that produces results substantially similar to either of these methods
is also acceptable under the regulation.
6. Judgmental system. If a creditor uses a judgmental system, the
reasons for the denial or other adverse action must relate to those
factors in the applicant's record actually reviewed by the person making
the decision.
7. Combined credit scoring and judgmental system. If a creditor
denies an application based on a credit evaluation system that employs
both credit scoring and judgmental components, the reasons for the
denial must come from the component of the system that the applicant
failed. For example, if a creditor initially credit scores an
application and denies the credit request as a result of that scoring,
the reasons disclosed to the applicant must relate to the factors scored
in the system. If the application passes the credit scoring stage but
the creditor then denies the credit request based on a judgmental
assessment of the applicant's record, the reasons disclosed must relate
to the factors reviewed judgmentally, even if the factors were also
considered in the credit scoring component. If the application is not
approved or denied as a result of the credit scoring, but falls into a
gray band, and the creditor performs a judgmental assessment and denies
the credit after that assessment, the reasons disclosed must come from
both components of the system. The same result applies where a
judgmental assessment is the first component of the combined system. As
provided in comment 9(b)(2)-1, disclosure of more than a combined total
of four reasons is not likely to be helpful to the applicant.
8. Automatic denial. Some credit decision methods contain features
that call for automatic denial because of one or more negative factors
in the applicant's record (such as the applicant's previous bad credit
history with that creditor, the applicant's declaration of bankruptcy,
or the fact that the applicant is a minor). When a creditor denies the
credit request because of an automatic-denial factor, the creditor must
disclose that specific factor.
9. Combined ECOA-FCRA disclosures. The ECOA requires disclosure of
the principal reasons for denying or taking other adverse action on an
application for an extension of credit. The Fair Credit Reporting Act
(FCRA) requires a creditor to disclose when it has based its decision in
whole or in part on information from a source other than the applicant
or its own files. Disclosing that a credit report was obtained and used
in the denial of the application, as the FCRA requires, does not satisfy
the ECOA requirement to disclose specific reasons. For example, if the
applicant's credit history reveals delinquent credit obligations and the
application is denied for that reason, to satisfy Sec. 1002.9(b)(2) the
creditor must disclose that the application was denied because of the
applicant's delinquent credit obligations. The FCRA also requires a
creditor to disclose, as applicable, a credit score it used in taking
adverse action along with related information, including up to four key
factors that adversely affected the consumer's credit score (or up to
five factors if the number of inquiries made with respect to that
consumer report is a key factor). Disclosing the key factors that
adversely affected the consumer's credit score does not satisfy the ECOA
requirement to disclose specific reasons for denying or taking other
adverse action on an application or extension of credit. Sample forms C-
1 through C-5 of Appendix C of the regulation provide for both the ECOA
and FCRA disclosures. See also comment 9(b)(2)-1.
9(c) Incomplete applications.
Paragraph 9(c)(1).
1. Exception for preapprovals. The requirement to provide a notice
of incompleteness does not apply to preapprovals that constitute
applications under Sec. 1002.2(f).
Paragraph 9(c)(2).
1. Reapplication. If information requested by a creditor is
submitted by an applicant after the expiration of the time period
designated by the creditor, the creditor may require the applicant to
make a new application.
Paragraph 9(c)(3).
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1. Oral inquiries for additional information. If an applicant fails
to provide the information in response to an oral request, a creditor
must send a written notice to the applicant within the 30-day period
specified in Sec. Sec. 1002.9(c)(1) and (2). If the applicant provides
the information, the creditor must take action on the application and
notify the applicant in accordance with Sec. 1002.9(a).
9(g) Applications submitted through a third party.
1. Third parties. The notification of adverse action may be given by
one of the creditors to whom an application was submitted, or by a
noncreditor third party. If one notification is provided on behalf of
multiple creditors, the notice must contain the name and address of each
creditor. The notice must either disclose the applicant's right to a
statement of specific reasons within 30 days, or give the primary
reasons each creditor relied upon in taking the adverse action--clearly
indicating which reasons relate to which creditor.
2. Third party notice--enforcement agency. If a single adverse
action notice is being provided to an applicant on behalf of several
creditors and they are under the jurisdiction of different Federal
enforcement agencies, the notice need not name each agency; disclosure
of any one of them will suffice.
3. Third-party notice--liability. When a notice is to be provided
through a third party, a creditor is not liable for an act or omission
of the third party that constitutes a violation of the regulation if the
creditor accurately and in a timely manner provided the third party with
the information necessary for the notification and maintains reasonable
procedures adapted to prevent such violations.
Section 1002.10--Furnishing of Credit Information
1. Scope. The requirements of Sec. 1002.10 for designating and
reporting credit information apply only to consumer credit transactions.
Moreover, they apply only to creditors that opt to furnish credit
information to credit bureaus or to other creditors; there is no
requirement that a creditor furnish credit information on its accounts.
2. Reporting on all accounts. The requirements of Sec. 1002.10
apply only to accounts held or used by spouses. However, a creditor has
the option to designate all joint accounts (or all accounts with an
authorized user) to reflect the participation of both parties, whether
or not the accounts are held by persons married to each other.
3. Designating accounts. In designating accounts and reporting
credit information, a creditor need not distinguish between accounts on
which the spouse is an authorized user and accounts on which the spouse
is a contractually liable party.
4. File and index systems. The regulation does not require the
creation or maintenance of separate files in the name of each
participant on a joint or user account, or require any other particular
system of recordkeeping or indexing. It requires only that a creditor be
able to report information in the name of each spouse on accounts
covered by Sec. 1002.10. Thus, if a creditor receives a credit inquiry
about the wife, it should be able to locate her credit file without
asking the husband's name.
10(a) Designation of accounts.
1. New parties. When new parties who are spouses undertake a legal
obligation on an account, as in the case of a mortgage loan assumption,
the creditor must change the designation on the account to reflect the
new parties and must furnish subsequent credit information on the
account in the new names.
2. Request to change designation of account. A request to change the
manner in which information concerning an account is furnished does not
alter the legal liability of either spouse on the account and does not
require a creditor to change the name in which the account is
maintained.
Section 1002.11--Relation to State Law
11(a) Inconsistent state laws.
1. Preemption determination--New York. The Bureau recognizes state
law preemption determinations made by the Board of Governors of the
Federal Reserve System prior to July 21, 2011, until and unless the
Bureau makes and publishes any contrary determination. The Board of
Governors determined that the following provisions in the state law of
New York are preempted by the Federal law, effective November 11, 1988:
i. Article 15, section 296a(1)(b). Unlawful discriminatory practices
in relation to credit on the basis of race, creed, color, national
origin, age, sex, marital status, or disability. This provision is
preempted to the extent that it bars taking a prohibited basis into
account when establishing eligibility for certain special-purpose credit
programs.
ii. Article 15, section 296a(1)(c). Unlawful discriminatory practice
to make any record or inquiry based on race, creed, color, national
origin, age, sex, marital status, or disability. This provision is
preempted to the extent that it bars a creditor from requesting and
considering information regarding the particular characteristics (for
example, race, national origin, or sex) required for eligibility for
special-purpose credit programs.
2. Preemption determination--Ohio. The Bureau recognizes state law
preemption determinations made by the Board of Governors of the Federal
Reserve System prior to July 21, 2011, until and unless the Bureau makes
and publishes any contrary determination. The Board of Governors
determined that the following provision in the state law of Ohio
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is preempted by the Federal law, effective July 23, 1990:
i. Section 4112.021(B)(1)--Unlawful discriminatory practices in
credit transactions. This provision is preempted to the extent that it
bars asking or favorably considering the age of an elderly applicant;
prohibits the consideration of age in a credit scoring system; permits
without limitation the consideration of age in real estate transactions;
and limits the consideration of age in special-purpose credit programs
to certain government-sponsored programs identified in the state law.
Section 1002.12--Record Retention
12(a) Retention of prohibited information.
1. Receipt of prohibited information. Unless the creditor
specifically requested such information, a creditor does not violate
this section when it receives prohibited information from a consumer
reporting agency.
2. Use of retained information. Although a creditor may keep in its
files prohibited information as provided in Sec. 1002.12(a), the
creditor may use the information in evaluating credit applications only
if permitted to do so by Sec. 1002.6.
12(b) Preservation of records.
1. Copies. Copies of the original record include carbon copies,
photocopies, microfilm or microfiche copies, or copies produced by any
other accurate retrieval system, such as documents stored and reproduced
by computer. A creditor that uses a computerized or mechanized system
need not keep a paper copy of a document (for example, of an adverse
action notice) if it can regenerate all pertinent information in a
timely manner for examination or other purposes.
2. Computerized decisions. A creditor that enters information items
from a written application into a computerized or mechanized system and
makes the credit decision mechanically, based only on the items of
information entered into the system, may comply with Sec. 1002.12(b) by
retaining the information actually entered. It is not required to store
the complete written application, nor is it required to enter the
remaining items of information into the system. If the transaction is
subject to Sec. 1002.13, however, the creditor is required to enter and
retain the data on personal characteristics in order to comply with the
requirements of that section.
Paragraph 12(b)(3).
1. Withdrawn and brokered applications. In most cases, the 25-month
retention period for applications runs from the date a notification is
sent to the applicant granting or denying the credit requested. In
certain transactions, a creditor is not obligated to provide a notice of
the action taken. (See, for example, comment 9-2.) In such cases, the
25-month requirement runs from the date of application, as when:
i. An application is withdrawn by the applicant.
ii. An application is submitted to more than one creditor on behalf
of the applicant, and the application is approved by one of the other
creditors.
12(b)(6) Self-tests.
1. The rule requires all written or recorded information about a
self-test to be retained for 25 months after a self-test has been
completed. For this purpose, a self-test is completed after the creditor
has obtained the results and made a determination about what corrective
action, if any, is appropriate. Creditors are required to retain
information about the scope of the self-test, the methodology used and
time period covered by the self-test, the report or results of the self-
test including any analysis or conclusions, and any corrective action
taken in response to the self-test.
12(b)(7) Preapplication marketing information.
1. Prescreened credit solicitations. The rule requires creditors to
retain copies of prescreened credit solicitations. For purposes of this
part, a prescreened solicitation is an ``offer of credit'' as described
in 15 U.S.C. 1681a(1) of the Fair Credit Reporting Act. A creditor
complies with this rule if it retains a copy of each solicitation
mailing that contains different terms, such as the amount of credit
offered, annual percentage rate, or annual fee.
2. List of criteria. A creditor must retain the list of criteria
used to select potential recipients. This includes the criteria used by
the creditor both to determine the potential recipients of the
particular solicitation and to determine who will actually be offered
credit.
3. Correspondence. A creditor may retain correspondence relating to
consumers' complaints about prescreened solicitations in any manner that
is reasonably accessible and is understandable to examiners. There is no
requirement to establish a separate database or set of files for such
correspondence, or to match consumer complaints with specific
solicitation programs.
Section 1002.13--Information for Monitoring Purposes
13(a) Information to be requested.
1. Natural person. Section1002.13 applies only to applications from
natural persons.
2. Principal residence. The requirements of Sec. 1002.13 apply only
if an application relates to a dwelling that is or will be occupied by
the applicant as the principal residence. A credit application related
to a vacation home or a rental unit is not covered. In the case of a
two-to four-unit dwelling, the application is covered if the applicant
intends to occupy one of the units as a principal residence.
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3. Temporary financing. An application for temporary financing to
construct a dwelling is not subject to Sec. 1002.13. But an application
for both a temporary loan to finance construction of a dwelling and a
permanent mortgage loan to take effect upon the completion of
construction is subject to Sec. 1002.13.
4. New principal residence. A person can have only one principal
residence at a time. However, if a person buys or builds a new dwelling
that will become that person's principal residence within a year or upon
completion of construction, the new dwelling is considered the principal
residence for purposes of Sec. 1002.13.
5. Transactions not covered. The information-collection requirements
of this section apply to applications for credit primarily for the
purchase or refinancing of a dwelling that is or will become the
applicant's principal residence. Therefore, applications for credit
secured by the applicant's principal residence but made primarily for a
purpose other than the purchase or refinancing of the principal
residence (such as loans for home improvement and debt consolidation)
are not subject to the information-collection requirements. An
application for an open-end home equity line of credit is not subject to
this section unless it is readily apparent to the creditor when the
application is taken that the primary purpose of the line is for the
purchase or refinancing of a principal dwelling.
6. Refinancings. A refinancing occurs when an existing obligation is
satisfied and replaced by a new obligation undertaken by the same
borrower. A creditor that receives an application to refinance an
existing extension of credit made by that creditor for the purchase of
the applicant's dwelling may request the monitoring information again
but is not required to do so if it was obtained in the earlier
transaction.
7. Data collection under Regulation C. See comment 5(a)(2)-2.
13(b) Obtaining of information.
1. Forms for collecting data. A creditor may collect the information
specified in Sec. 1002.13(a) either on an application form or on a
separate form referring to the application. The applicant must be
offered the option to select more than one racial designation.
2. Written applications. The regulation requires written
applications for the types of credit covered by Sec. 1002.13. A
creditor can satisfy this requirement by recording on paper or by means
of computer the information that the applicant provides orally and that
the creditor normally considers in a credit decision.
3. Telephone, mail applications.
i. A creditor that accepts an application by telephone or mail must
request the monitoring information.
ii. A creditor that accepts an application by mail need not make a
special request for the monitoring information if the applicant has
failed to provide it on the application form returned to the creditor.
iii. If it is not evident on the face of an application that it was
received by mail, telephone, or via an electronic medium, the creditor
should indicate on the form or other application record how the
application was received.
4. Video and other electronic-application processes.
i. If a creditor takes an application through an electronic medium
that allows the creditor to see the applicant, the creditor must treat
the application as taken in person. The creditor must note the
monitoring information on the basis of visual observation or surname, if
the applicant chooses not to provide the information.
ii. If an applicant applies through an electronic medium without
video capability, the creditor treats the application as if it were
received by mail.
5. Applications through loan-shopping services. When a creditor
receives an application through an unaffiliated loan-shopping service,
it does not have to request the monitoring information for purposes of
the ECOA or Regulation B. Creditors subject to the Home Mortgage
Disclosure Act should be aware, however, that data collection may be
called for under Regulation C (12 CFR part 1003), which generally
requires creditors to report, among other things, the sex and race of an
applicant on brokered applications or applications received through a
correspondent.
6. Inadvertent notation. If a creditor inadvertently obtains the
monitoring information in a dwelling-related transaction not covered by
Sec. 1002.13, the creditor may process and retain the application
without violating the regulation.
13(c) Disclosure to applicants.
1. Procedures for providing disclosures. The disclosure to an
applicant regarding the monitoring information may be provided in
writing. Appendix B contains a sample disclosure. A creditor may devise
its own disclosure so long as it is substantially similar. The creditor
need not orally request the monitoring information if it is requested in
writing.
13(d) Substitute monitoring program.
1. Substitute program. An enforcement agency may adopt, under its
established rulemaking or enforcement procedures, a program requiring
creditors under its jurisdiction to collect information in addition to
information required by this section.
Section 1002.14--Rules on Providing Appraisal Reports
14(a) Providing appraisals.
[[Page 139]]
1. Coverage. This section covers applications for credit to be
secured by a lien on a dwelling, as that term is defined in Sec.
1002.14(c), whether the credit is for a business purpose (for example, a
loan to start a business) or a consumer purpose (for example, a loan to
finance a child's education).
2. Renewals. This section applies when an applicant requests the
renewal of an existing extension of credit and the creditor obtains a
new appraisal report. This section does not apply when a creditor uses
the appraisal report previously obtained to evaluate the renewal
request.
14(a)(2)(i) Notice.
1. Multiple applicants. When an application that is subject to this
section involves more than one applicant, the notice about the appraisal
report need only be given to one applicant, but it must be given to the
primary applicant where one is readily apparent.
14(a)(2)(ii) Delivery.
1. Reimbursement. Creditors may charge for photocopy and postage
costs incurred in providing a copy of the appraisal report, unless
prohibited by state or other law. If the consumer has already paid for
the report--for example, as part of an application fee--the creditor may
not require additional fees for the appraisal (other than photocopy and
postage costs).
14(c) Definitions.
1. Appraisal reports. Examples of appraisal reports are:
i. A report prepared by an appraiser (whether or not licensed or
certified), including written comments and other documents submitted to
the creditor in support of the appraiser's estimate or opinion of the
property's value.
ii. A document prepared by the creditor's staff that assigns value
to the property, if a third-party appraisal report has not been used.
iii. An internal review document reflecting that the creditor's
valuation is different from a valuation in a third party's appraisal
report (or different from valuations that are publicly available or
valuations such as manufacturers' invoices for mobile homes).
2. Other reports. The term ``appraisal report'' does not cover all
documents relating to the value of the applicant's property. Examples of
reports not covered are:
i. Internal documents, if a third-party appraisal report was used to
establish the value of the property.
ii. Governmental agency statements of appraised value.
iii. Valuations lists that are publicly available (such as published
sales prices or mortgage amounts, tax assessments, and retail price
ranges) and valuations such as manufacturers' invoices for mobile homes.
Section 1002.15--Incentives for Self-Testing and Self-Correction
15(a) General rules.
15(a)(1) Voluntary self-testing and correction.
1. Activities required by any governmental authority are not
voluntary self-tests. A governmental authority includes both
administrative and judicial authorities for Federal, State, and local
governments.
15(a)(2) Corrective action required.
1. To qualify for the privilege, appropriate corrective action is
required when the results of a self-test show that it is more likely
than not that there has been a violation of the ECOA or this part. A
self-test is also privileged when it identifies no violations.
2. In some cases, the issue of whether certain information is
privileged may arise before the self-test is complete or corrective
actions are fully under way. This would not necessarily prevent a
creditor from asserting the privilege. In situations where the self-test
is not complete, for the privilege to apply the lender must satisfy the
regulation's requirements within a reasonable period of time. To assert
the privilege where the self-test shows a likely violation, the rule
requires, at a minimum, that the creditor establish a plan for
corrective action and a method to demonstrate progress in implementing
the plan. Creditors must take appropriate corrective action on a timely
basis after the results of the self-test are known.
3. A creditor's determination about the type of corrective action
needed, or a finding that no corrective action is required, is not
conclusive in determining whether the requirements of this paragraph
have been satisfied. If a creditor's claim of privilege is challenged,
an assessment of the need for corrective action or the type of
corrective action that is appropriate must be based on a review of the
self-testing results, which may require an in camera inspection of the
privileged documents.
15(a)(3) Other privileges.
1. A creditor may assert the privilege established under this
section in addition to asserting any other privilege that may apply,
such as the attorney-client privilege or the work-product privilege.
Self-testing data may be privileged under this section whether or not
the creditor's assertion of another privilege is upheld.
15(b) Self-test defined.
15(b)(1) Definition.
Paragraph 15(b)(1)(i).
1. To qualify for the privilege, a self-test must be sufficient to
constitute a determination of the extent or effectiveness of the
creditor's compliance with the Act and Regulation B. Accordingly, a
self-test is only privileged if it was designed and used for that
purpose. A self-test that is designed or used to determine compliance
with other laws or regulations or for other purposes is
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not privileged under this rule. For example, a self-test designed to
evaluate employee efficiency or customers' satisfaction with the level
of service provided by the creditor is not privileged even if evidence
of discrimination is uncovered incidentally. If a self-test is designed
for multiple purposes, only the portion designed to determine compliance
with the ECOA is eligible for the privilege.
Paragraph 15(b)(1)(ii).
1. The principal attribute of self-testing is that it constitutes a
voluntary undertaking by the creditor to produce new data or factual
information that otherwise would not be available and could not be
derived from loan or application files or other records related to
credit transactions. Self-testing includes, but is not limited to, the
practice of using fictitious applicants for credit (testers), either
with or without the use of matched pairs. A creditor may elect to test a
defined segment of its business, for example, loan applications
processed by a specific branch or loan officer, or applications made for
a particular type of credit or loan program. A creditor also may use
other methods of generating information that is not available in loan
and application files, such as surveying mortgage loan applicants. To
the extent permitted by law, creditors might also develop new methods
that go beyond traditional pre-application testing, such as hiring
testers to submit fictitious loan applications for processing.
2. The privilege does not protect a creditor's analysis performed as
part of processing or underwriting a credit application. A creditor's
evaluation or analysis of its loan files, Home Mortgage Disclosure Act
data, or similar types of records (such as broker or loan officer
compensation records) does not produce new information about a
creditor's compliance and is not a self-test for purposes of this
section. Similarly, a statistical analysis of data derived from existing
loan files is not privileged.
15(b)(3) Types of information not privileged.
Paragraph 15(b)(3)(i).
1. The information listed in this paragraph is not privileged and
may be used to determine whether the prerequisites for the privilege
have been satisfied. Accordingly, a creditor might be asked to identify
the self-testing method, for example, whether preapplication testers
were used or data were compiled by surveying loan applicants.
Information about the scope of the self-test (such as the types of
credit transactions examined, or the geographic area covered by the
test) also is not privileged.
Paragraph 15(b)(3)(ii).
1. Property appraisal reports, minutes of loan committee meetings or
other documents reflecting the basis for a decision to approve or deny
an application, loan policies or procedures, underwriting standards, and
broker compensation records are examples of the types of records that
are not privileged. If a creditor arranges for testers to submit loan
applications for processing, the records are not related to actual
credit transactions for purposes of this paragraph and may be privileged
self-testing records.
15(c) Appropriate corrective action.
1. The rule only addresses the corrective actions required for a
creditor to take advantage of the privilege in this section. A creditor
may be required to take other actions or provide additional relief if a
formal finding of discrimination is made.
15(c)(1) General requirement.
1. Appropriate corrective action is required even though no
violation has been formally adjudicated or admitted by the creditor. In
determining whether it is more likely than not that a violation
occurred, a creditor must treat testers as if they are actual applicants
for credit. A creditor may not refuse to take appropriate corrective
action under this section because the self-test used fictitious loan
applicants. The fact that a tester's agreement with the creditor waives
the tester's legal right to assert a violation does not eliminate the
requirement for the creditor to take corrective action, although no
remedial relief for the tester is required under paragraph 15(c)(3).
15(c)(2) Determining the scope of appropriate corrective action.
1. Whether a creditor has taken or is taking corrective action that
is appropriate will be determined on a case-by-case basis. Generally,
the scope of the corrective action that is needed to preserve the
privilege is governed by the scope of the self-test. For example, a
creditor that self-tests mortgage loans and discovers evidence of
discrimination may focus its corrective actions on mortgage loans, and
is not required to expand its testing to other types of loans.
2. In identifying the policies or practices that are a likely cause
of the violation, a creditor might identify inadequate or improper
lending policies, failure to implement established policies, employee
conduct, or other causes. The extent and scope of a likely violation may
be assessed by determining which areas of operations are likely to be
affected by those policies and practices, for example, by determining
the types of loans and stages of the application process involved and
the branches or offices where the violations may have occurred.
3. Depending on the method and scope of the self-test and the
results of the test, appropriate corrective action may include one or
more of the following:
i. If the self-test identifies individuals whose applications were
inappropriately processed, offering to extend credit if the application
was improperly denied and compensating such persons for out-of-pocket
costs and other compensatory damages;
[[Page 141]]
ii. Correcting institutional policies or procedures that may have
contributed to the likely violation, and adopting new policies as
appropriate;
iii. Identifying and then training and/or disciplining the employees
involved;
iv. Developing outreach programs, marketing strategies, or loan
products to serve more effectively segments of the lender's markets that
may have been affected by the likely discrimination; and
v. Improving audit and oversight systems to avoid a recurrence of
the likely violations.
15(c)(3) Types of relief.
Paragraph 15(c)(3)(ii).
1. The use of pre-application testers to identify policies and
practices that illegally discriminate does not require creditors to
review existing loan files for the purpose of identifying and
compensating applicants who might have been adversely affected.
2. If a self-test identifies a specific applicant who was
discriminated against on a prohibited basis, to qualify for the
privilege in this section the creditor must provide appropriate remedial
relief to that applicant; the creditor is not required to identify other
applicants who might also have been adversely affected.
Paragraph 15(c)(3)(iii).
1. A creditor is not required to provide remedial relief to an
applicant that would not be available by law. An applicant might also be
ineligible for certain types of relief due to changed circumstances. For
example, a creditor is not required to offer credit to a denied
applicant if the applicant no longer qualifies for the credit due to a
change in financial circumstances, although some other type of relief
might be appropriate.
15(d)(1) Scope of privilege.
1. The privilege applies with respect to any examination,
investigation or proceeding by Federal, State, or local government
agencies relating to compliance with the Act or this part. Accordingly,
in a case brought under the ECOA, the privilege established under this
section preempts any inconsistent laws or court rules to the extent they
might require disclosure of privileged self-testing data. The privilege
does not apply in other cases (such as in litigation filed solely under
a State's fair lending statute). In such cases, if a court orders a
creditor to disclose self-test results, the disclosure is not a
voluntary disclosure or waiver of the privilege for purposes of
paragraph 15(d)(2); a creditor may protect the information by seeking a
protective order to limit availability and use of the self-testing data
and prevent dissemination beyond what is necessary in that case.
Paragraph 15(d)(1) precludes a party who has obtained privileged
information from using it in a case brought under the ECOA, provided the
creditor has not lost the privilege through voluntary disclosure under
paragraph 15(d)(2).
15(d)(2) Loss of privilege.
Paragraph 15(d)(2)(i).
1. A creditor's corrective action, by itself, is not considered a
voluntary disclosure of the self-test report or results. For example, a
creditor does not disclose the results of a self-test merely by offering
to extend credit to a denied applicant or by inviting the applicant to
reapply for credit. Voluntary disclosure could occur under this
paragraph, however, if the creditor disclosed the self-test results in
connection with a new offer of credit.
2. The disclosure of self-testing results to an independent
contractor acting as an auditor or consultant for the creditor on
compliance matters does not result in loss of the privilege.
Paragraph 15(d)(2)(ii).
1. The privilege is lost if the creditor discloses privileged
information, such as the results of the self-test. The privilege is not
lost if the creditor merely reveals or refers to the existence of the
self-test.
Paragraph 15(d)(2)(iii).
1. A creditor's claim of privilege may be challenged in a court or
administrative law proceeding with appropriate jurisdiction. In
resolving the issue, the presiding officer may require the creditor to
produce privileged information about the self-test.
Paragraph 15(d)(3) Limited use of privileged information.
1. A creditor may be required to produce privileged documents for
the purpose of determining a penalty or remedy after a violation of the
ECOA or Regulation B has been formally adjudicated or admitted. A
creditor's compliance with such a requirement does not evidence the
creditor's intent to forfeit the privilege.
Section 1002.16--Enforcement, Penalties, and Liabilities
16(c) Failure of compliance.
1. Inadvertent errors. Inadvertent errors include, but are not
limited to, clerical mistake, calculation error, computer malfunction,
and printing error. An error of legal judgment is not an inadvertent
error under the regulation.
2. Correction of error. For inadvertent errors that occur under
Sec. Sec. 1002.12 and 1002.13, this section requires that they be
corrected prospectively.
Appendix B--Model Application Forms
1. Freddie Mac/Fannie Mae form--residential loan application. The
uniform residential loan application form (Freddie Mac 65/Fannie Mae
1003), including supplemental form (Freddie Mac 65A/Fannie Mae 1003A),
prepared by the Federal Home Loan Mortgage Corporation
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and the Federal National Mortgage Association and dated October 1992 may
be used by creditors without violating this part. Creditors that are
governed by the monitoring requirements of this part (which limits
collection to applications primarily for the purchase or refinancing of
the applicant's principal residence) should delete, strike, or modify
the data-collection section on the form when using it for transactions
not covered by Sec. 1002.13(a) to ensure that they do not collect the
information. Creditors that are subject to more extensive collection
requirements by a substitute monitoring program under Sec. 1002.13(d)
or by the Home Mortgage Disclosure Act (HMDA) may use the form as
issued, in compliance with the substitute program or HMDA.
2. FHLMC/FNMA form--home improvement loan application. The home-
improvement and energy loan application form (FHLMC 703/FNMA 1012),
prepared by the Federal Home Loan Mortgage Corporation and the Federal
National Mortgage Association and dated October 1986, complies with the
requirements of the regulation for some creditors but not others because
of the form's section ``Information for Government Monitoring
Purposes.'' Creditors that are governed by Sec. 1002.13(a) of the
regulation (which limits collection to applications primarily for the
purchase or refinancing of the applicant's principal residence) should
delete, strike, or modify the data-collection section on the form when
using it for transactions not covered by Sec. 1002.13(a) to ensure that
they do not collect the information. Creditors that are subject to more
extensive collection requirements by a substitute monitoring program
under Sec. 1002.13(d) may use the form as issued, in compliance with
that substitute program.
Appendix C--Sample Notification Forms
1. Form C-9. Creditors may design their own form, add to, or modify
the model form to reflect their individual policies and procedures. For
example, a creditor may want to add:
i. A telephone number that applicants may call to leave their name
and the address to which an appraisal report should be sent.
ii. A notice of the cost the applicant will be required to pay the
creditor for the appraisal or a copy of the report.
PART 1003_HOME MORTGAGE DISCLOSURE (REGULATION C)--Table of Contents
Sec.
1003.1 Authority, purpose, and scope.
1003.2 Definitions.
1003.3 Exempt institutions.
1003.4 Compilation of loan data.
1003.5 Disclosure and reporting.
1003.6 Enforcement.
Appendix A to Part 1003--Form and Instructions for Completion of HMDA
Loan/Application Register
Appendix B to Part 1003--Form and Instructions for Data Collection on
Ethnicity, Race, and Sex
Supplement I to Part 1003--Staff Commentary
Authority: 12 U.S.C. 2803, 2804, 2805, 5512, 5581.
Source: 76 FR 78468, Dec. 19, 2011, unless otherwise noted.
Sec. 1003.1 Authority, purpose, and scope.
(a) Authority. This part, known as Regulation C, is issued by the
Bureau of Consumer Financial Protection (Bureau) pursuant to the Home
Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et seq.), as amended. The
information-collection requirements have been approved by the U.S.
Office of Management and Budget (OMB) under 44 U.S.C. 3501 et seq. and
have been assigned OMB numbers for institutions reporting data to the
Office of the Comptroller of the Currency (1557-0159), the Federal
Deposit Insurance Corporation (3064-0046), the Federal Reserve System
(7100-0247), the Department of Housing and Urban Development (HUD)
(2502-0529), the National Credit Union Administration (3133-0166), and
the Bureau of Consumer Financial Protection (3170-0008).
(b) Purpose. (1) This part implements the Home Mortgage Disclosure
Act, which is intended to provide the public with loan data that can be
used:
(i) To help determine whether financial institutions are serving the
housing needs of their communities;
(ii) To assist public officials in distributing public-sector
investment so as to attract private investment to areas where it is
needed; and
(iii) To assist in identifying possible discriminatory lending
patterns and enforcing antidiscrimination statutes.
(2) Neither the act nor this part is intended to encourage unsound
lending practices or the allocation of credit.
(c) Scope. This part applies to certain financial institutions,
including banks, savings associations, credit unions, and other mortgage
lending institutions, as defined in Sec. 1003.2. The regulation
requires an institution to report data to the appropriate Federal agency
about
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home purchase loans, home improvement loans, and refinancings that it
originates or purchases, or for which it receives applications; and to
disclose certain data to the public.
Sec. 1003.2 Definitions.
In this part:
Act means the Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et
seq.), as amended.
Application--(1) In general. Application means an oral or written
request for a home purchase loan, a home improvement loan, or a
refinancing that is made in accordance with procedures used by a
financial institution for the type of credit requested.
(2) Preapproval programs. A request for preapproval for a home
purchase loan is an application under this section if the request is
reviewed under a program in which the financial institution, after a
comprehensive analysis of the creditworthiness of the applicant, issues
a written commitment to the applicant valid for a designated period of
time to extend a home purchase loan up to a specified amount. The
written commitment may not be subject to conditions other than:
(i) Conditions that require the identification of a suitable
property;
(ii) Conditions that require that no material change has occurred in
the applicant's financial condition or creditworthiness prior to
closing; and
(iii) Limited conditions that are not related to the financial
condition or creditworthiness of the applicant that the lender
ordinarily attaches to a traditional home mortgage application (such as
certification of a clear termite inspection).
Branch office means:
(1) Any office of a bank, savings association, or credit union that
is approved as a branch by a Federal or state supervisory agency, but
excludes free-standing electronic terminals such as automated teller
machines; and
(2) Any office of a for-profit mortgage-lending institution (other
than a bank, savings association, or credit union) that takes
applications from the public for home purchase loans, home improvement
loans, or refinancings. A for-profit mortgage-lending institution is
also deemed to have a branch office in an MSA or in a Metropolitan
Division, if, in the preceding calendar year, it received applications
for, originated, or purchased five or more home purchase loans, home
improvement loans, or refinancings related to property located in that
MSA or Metropolitan Division, respectively.
Dwelling means a residential structure (whether or not attached to
real property) located in a state of the United States of America, the
District of Columbia, or the Commonwealth of Puerto Rico. The term
includes an individual condominium unit, cooperative unit, or mobile or
manufactured home.
Financial institution means:
(1) A bank, savings association, or credit union that:
(i) On the preceding December 31 had assets in excess of the asset
threshold established and published annually by the Bureau for coverage
by the act, based on the year-to-year change in the average of the
Consumer Price Index for Urban Wage Earners and Clerical Workers, not
seasonally adjusted, for each twelve month period ending in November,
with rounding to the nearest million;
(ii) On the preceding December 31, had a home or branch office in an
MSA;
(iii) In the preceding calendar year, originated at least one home
purchase loan (excluding temporary financing such as a construction
loan) or refinancing of a home purchase loan, secured by a first lien on
a one-to four-family dwelling; and
(iv) Meets one or more of the following three criteria:
(A) The institution is Federally insured or regulated;
(B) The mortgage loan referred to in paragraph (1)(iii) of this
definition was insured, guaranteed, or supplemented by a Federal agency;
or
(C) The mortgage loan referred to in paragraph (1)(iii) of this
definition was intended by the institution for sale to Fannie Mae or
Freddie Mac; and
(2) A for-profit mortgage-lending institution (other than a bank,
savings association, or credit union) that:
(i) In the preceding calendar year, either:
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(A) Originated home purchase loans, including refinancings of home
purchase loans, that equaled at least 10 percent of its loan-origination
volume, measured in dollars; or
(B) Originated home purchase loans, including refinancings of home
purchase loans, that equaled at least $25 million; and
(ii) On the preceding December 31, had a home or branch office in an
MSA; and
(iii) Either:
(A) On the preceding December 31, had total assets of more than $10
million, counting the assets of any parent corporation; or
(B) In the preceding calendar year, originated at least 100 home
purchase loans, including refinancings of home purchase loans.
Home-equity line of credit means an open-end credit plan secured by
a dwelling as defined in Regulation Z (Truth in Lending), 12 CFR part
1026.
Home improvement loan means:
(1) A loan secured by a lien on a dwelling that is for the purpose,
in whole or in part, of repairing, rehabilitating, remodeling, or
improving a dwelling or the real property on which it is located; and
(2) A non-dwelling secured loan that is for the purpose, in whole or
in part, of repairing, rehabilitating, remodeling, or improving a
dwelling or the real property on which it is located, and that is
classified by the financial institution as a home improvement loan.
Home purchase loan means a loan secured by and made for the purpose
of purchasing a dwelling.
Manufactured home means any residential structure as defined under
regulations of the Department of Housing and Urban Development
establishing manufactured home construction and safety standards (24 CFR
3280.2).
Metropolitan Statistical Area or MSA and Metropolitan Division or
MD. (1) Metropolitan Statistical Area or MSA means a metropolitan
statistical area as defined by the U.S. Office of Management and Budget.
(2) Metropolitan Division or MD means a metropolitan division of an
MSA, as defined by the U.S. Office of Management and Budget.
Refinancing means a new obligation that satisfies and replaces an
existing obligation by the same borrower, in which:
(1) For coverage purposes, the existing obligation is a home
purchase loan (as determined by the lender, for example, by reference to
available documents; or as stated by the applicant), and both the
existing obligation and the new obligation are secured by first liens on
dwellings; and
(2) For reporting purposes, both the existing obligation and the new
obligation are secured by liens on dwellings.
Sec. 1003.3 Exempt institutions.
(a) Exemption based on state law. (1) A state-chartered or state-
licensed financial institution is exempt from the requirements of this
part if the Bureau determines that the institution is subject to a state
disclosure law that contains requirements substantially similar to those
imposed by this part and that contains adequate provisions for
enforcement.
(2) Any state, state-chartered or state-licensed financial
institution, or association of such institutions, may apply to the
Bureau for an exemption under paragraph (a) of this section.
(3) An institution that is exempt under paragraph (a) of this
section shall use the disclosure form required by its state law and
shall submit the data required by that law to its state supervisory
agency for purposes of aggregation.
(b) Loss of exemption. An institution losing a state-law exemption
under paragraph (a) of this section shall comply with this part
beginning with the calendar year following the year for which it last
reported loan data under the state disclosure law.
Sec. 1003.4 Compilation of loan data.
(a) Data format and itemization. A financial institution shall
collect data regarding applications for, and originations and purchases
of, home purchase loans, home improvement loans, and refinancings for
each calendar year. An institution is required to collect data regarding
requests under a preapproval program (as defined in Sec. 1003.2) only
if
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the preapproval request is denied or results in the origination of a
home purchase loan. All reportable transactions shall be recorded,
within thirty calendar days after the end of the calendar quarter in
which final action is taken (such as origination or purchase of a loan,
or denial or withdrawal of an application), on a register in the format
prescribed in appendix A of this part. The data recorded shall include
the following items:
(1) An identifying number for the loan or loan application, and the
date the application was received.
(2) The type of loan or application.
(3) The purpose of the loan or application.
(4) Whether the application is a request for preapproval and whether
it resulted in a denial or in an origination.
(5) The property type to which the loan or application relates.
(6) The owner-occupancy status of the property to which the loan or
application relates.
(7) The amount of the loan or the amount applied for.
(8) The type of action taken, and the date.
(9) The location of the property to which the loan or application
relates, by MSA or by Metropolitan Division, by state, by county, and by
census tract, if the institution has a home or branch office in that MSA
or Metropolitan Division.
(10) The ethnicity, race, and sex of the applicant or borrower, and
the gross annual income relied on in processing the application.
(11) The type of entity purchasing a loan that the institution
originates or purchases and then sells within the same calendar year
(this information need not be included in quarterly updates).
(12)(i) For originated loans subject to Regulation Z, 12 CFR part
1026, the difference between the loan's annual percentage rate (APR) and
the average prime offer rate for a comparable transaction as of the date
the interest rate is set, if that difference is equal to or greater than
1.5 percentage points for loans secured by a first lien on a dwelling,
or equal to or greater than 3.5 percentage points for loans secured by a
subordinate lien on a dwelling.
(ii) ``Average prime offer rate'' means an annual percentage rate
that is derived from average interest rates, points, and other loan
pricing terms currently offered to consumers by a representative sample
of creditors for mortgage loans that have low-risk pricing
characteristics. The Bureau publishes average prime offer rates for a
broad range of types of transactions in tables updated at least weekly,
as well as the methodology the Bureau uses to derive these rates.
(13) Whether the loan is subject to the Home Ownership and Equity
Protection Act of 1994, as implemented in Regulation Z (12 CFR 1026.32).
(14) The lien status of the loan or application (first lien,
subordinate lien, or not secured by a lien on a dwelling).
(b) Collection of data on ethnicity, race, sex, and income. (1) A
financial institution shall collect data about the ethnicity, race, and
sex of the applicant or borrower as prescribed in Appendix B of this
part.
(2) Ethnicity, race, sex, and income data may but need not be
collected for loans purchased by the financial institution.
(c) Optional data. A financial institution may report:
(1) The reasons it denied a loan application;
(2) Requests for preapproval that are approved by the institution
but not accepted by the applicant; and
(3) Home-equity lines of credit made in whole or in part for the
purpose of home improvement or home purchase.
(d) Excluded data. A financial institution shall not report:
(1) Loans originated or purchased by the financial institution
acting in a fiduciary capacity (such as trustee);
(2) Loans on unimproved land;
(3) Temporary financing (such as bridge or construction loans);
(4) The purchase of an interest in a pool of loans (such as
mortgage-participation certificates, mortgage-backed securities, or real
estate mortgage investment conduits);
(5) The purchase solely of the right to service loans; or
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(6) Loans acquired as part of a merger or acquisition, or as part of
the acquisition of all of the assets and liabilities of a branch office
as defined in Sec. 1003.2.
(e) Data reporting for banks and savings associations that are
required to report data on small business, small farm, and community
development lending under CRA. Banks and savings associations that are
required to report data on small business, small farm, and community
development lending under regulations that implement the Community
Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) shall also collect the
location of property located outside MSAs and Metropolitan Divisions in
which the institution has a home or branch office, or outside any MSA.
Sec. 1003.5 Disclosure and reporting.
(a) Reporting to agency. (1) By March 1 following the calendar year
for which the loan data are compiled, a financial institution shall send
its complete loan/application register to the agency office specified in
appendix A of this part. The institution shall retain a copy for its
records for at least three years.
(2) A subsidiary of a bank or savings association shall complete a
separate loan/application register. The subsidiary shall submit the
register, directly or through its parent, to the same agency as its
parent.
(b) Public disclosure of statement. (1) The Federal Financial
Institutions Examination Council (FFIEC) will prepare a disclosure
statement from the data each financial institution submits.
(2) An institution shall make its disclosure statement (prepared by
the FFIEC) available to the public at the institution's home office no
later than three business days after receiving the disclosure statement
from the FFIEC.
(3) In addition, an institution shall either:
(i) Make its disclosure statement available to the public, within
ten business days of receiving it, in at least one branch office in each
other MSA and each other Metropolitan Division where the institution has
offices (the disclosure statement need only contain data relating to the
MSA or Metropolitan Division where the branch is located); or
(ii) Post the address for sending written requests in the lobby of
each branch office in other MSAs and Metropolitan Divisions where the
institution has offices; and mail or deliver a copy of the disclosure
statement within fifteen calendar days of receiving a written request
(the disclosure statement need only contain data relating to the MSA or
Metropolitan Division for which the request is made). Including the
address in the general notice required under paragraph (e) of this
section satisfies this requirement.
(c) Public disclosure of modified loan/application register. A
financial institution shall make its loan/application register available
to the public after removing the following information regarding each
entry: The application or loan number, the date that the application was
received, and the date action was taken. An institution shall make its
modified register available following the calendar year for which the
data are compiled, by March 31 for a request received on or before March
1, and within thirty calendar days for a request received after March 1.
The modified register need only contain data relating to the MSA or
Metropolitan Division for which the request is made.
(d) Availability of data. A financial institution shall make its
modified register available to the public for a period of three years
and its disclosure statement available for a period of five years. An
institution shall make the data available for inspection and copying
during the hours the office is normally open to the public for business.
It may impose a reasonable fee for any cost incurred in providing or
reproducing the data.
(e) Notice of availability. A financial institution shall post a
general notice about the availability of its HMDA data in the lobby of
its home office and of each branch office located in an MSA and
Metropolitan Division. An institution shall provide promptly upon
request the location of the institution's offices where the statement is
available for inspection and copying, or it may include the location in
the lobby notice.
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(f) Loan aggregation and central data depositories. Using the loan
data submitted by financial institutions, the FFIEC will produce reports
for individual institutions and reports of aggregate data for each MSA
and Metropolitan Division, showing lending patterns by property
location, age of housing stock, and income level, sex, ethnicity, and
race. These reports will be available to the public at central data
depositories located in each MSA and Metropolitan Division. A listing of
central data depositories can be obtained from the Federal Financial
Institutions Examination Council, Washington, DC 20006.
Sec. 1003.6 Enforcement.
(a) Administrative enforcement. A violation of the Act or this part
is subject to administrative sanctions as provided in section 305 of the
Act, including the imposition of civil money penalties, where
applicable. Compliance is enforced by the agencies listed in section 305
of the Act (12 U.S.C. 2804).
(b) Bona fide errors. (1) An error in compiling or recording loan
data is not a violation of the act or this part if the error was
unintentional and occurred despite the maintenance of procedures
reasonably adapted to avoid such errors.
(2) An incorrect entry for a census tract number is deemed a bona
fide error, and is not a violation of the act or this part, provided
that the institution maintains procedures reasonably adapted to avoid
such errors.
(3) If an institution makes a good-faith effort to record all data
concerning covered transactions fully and accurately within thirty
calendar days after the end of each calendar quarter, and some data are
nevertheless inaccurate or incomplete, the error or omission is not a
violation of the act or this part provided that the institution corrects
or completes the information prior to submitting the loan/application
register to its regulatory agency.
Sec. Appendix A to Part 1003--Form and Instructions for Completion of
HMDA Loan/Application Register
Paperwork Reduction Act Notice
This report is required by law (12 U.S.C. 2801-2810 and 12 CFR
1003). An agency may not conduct or sponsor, and an organization is not
required to respond to, a collection of information unless it displays a
valid Office of Management and Budget (OMB) Control Number. See 12 CFR
1003.1(a) for the valid OMB Control Numbers applicable to this
information collection. Send comments regarding this burden estimate or
any other aspect of this collection of information, including
suggestions for reducing the burden, to the respective agencies and to
OMB, Office of Information and Regulatory Affairs, Paperwork Reduction
Project, Washington, DC 20503. Be sure to reference the applicable
agency and the OMB Control Number, as found in 12 CFR 1003.1(a), when
submitting comments to OMB.
I. Instructions for Completion of Loan/Application Register
A. Application or Loan Information
1. Application or Loan Number. Enter an identifying loan number that
can be used later to retrieve the loan or application file. It can be
any number of your institution's choosing (not exceeding 25 characters).
You may use letters, numerals, or a combination of both.
2. Date Application Received. Enter the date the loan application
was received by your institution by month, day, and year. If your
institution normally records the date shown on the application form you
may use that date instead. Enter ``NA'' for loans purchased by your
institution. For paper submissions only, use numerals in the form MM/DD/
YYYY (for example, 01/15/2003). For submissions in electronic form, the
proper format is YYYYMMDD.
3. Type of Loan or Application. Indicate the type of loan or
application by entering the applicable Code from the following:
Code 1--Conventional (any loan other than FHA, VA, FSA, or RHS loans)
Code 2--FHA-insured (Federal Housing Administration)
Code 3--VA-guaranteed (Veterans Administration)
Code 4--FSA/RHS-guaranteed (Farm Service Agency or Rural Housing
Service)
4. Property Type. Indicate the property type by entering the
applicable Code from the following:
Code 1--One-to four-family dwelling (other than manufactured housing)
Code 2--Manufactured housing
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Code 3--Multifamily dwelling
a. Use Code 1, not Code 3, for loans on individual condominium or
cooperative units.
b. If you cannot determine (despite reasonable efforts to find out)
whether the loan or application relates to a manufactured home, use Code
1.
5. Purpose of Loan or Application. Indicate the purpose of the loan
or application by entering the applicable Code from the following:
Code 1--Home purchase
Code 2--Home improvement
Code 3--Refinancing
a. Do not report a refinancing if, under the loan agreement, you
were unconditionally obligated to refinance the obligation, or you were
obligated to refinance the obligation subject to conditions within the
borrower's control.
6. Owner Occupancy. Indicate whether the property to which the loan
or loan application relates is to be owner-occupied as a principal
residence by entering the applicable Code from the following:
Code 1--Owner-occupied as a principal dwelling
Code 2--Not owner-occupied as a principal dwelling
Code 3--Not applicable
a. For purchased loans, use Code 1 unless the loan documents or
application indicate that the property will not be owner-occupied as a
principal residence.
b. Use Code 2 for second homes or vacation homes, as well as for
rental properties.
c. Use Code 3 if the property to which the loan relates is a
multifamily dwelling; is not located in an MSA; or is located in an MSA
or an MD in which your institution has neither a home nor a branch
office. Alternatively, at your institution's option, you may report the
actual occupancy status, using Code 1 or 2 as applicable.
7. Loan Amount. Enter the amount of the loan or application. Do not
report loans below $500. Show the amount in thousands, rounding to the
nearest thousand (round $500 up to the next $1,000). For example, a loan
for $167,300 should be entered as 167 and one for $15,500 as 16.
a. For a home purchase loan that you originated, enter the principal
amount of the loan.
b. For a home purchase loan that you purchased, enter the unpaid
principal balance of the loan at the time of purchase.
c. For a home improvement loan, enter the entire amount of the
loan--including unpaid finance charges if that is how such loans are
recorded on your books--even if only a part of the proceeds is intended
for home improvement.
d. If you opt to report home-equity lines of credit, report only the
portion of the line intended for home improvement or home purchase.
e. For a refinancing, indicate the total amount of the refinancing,
including both the amount outstanding on the original loan and any
amount of ``new money.''
f. For a loan application that was denied or withdrawn, enter the
amount for which the applicant applied.
8. Request for Preapproval of a Home Purchase Loan. Indicate whether
the application or loan involved a request for preapproval of a home
purchase loan by entering the applicable Code from the following:
Code 1--Preapproval requested
Code 2--Preapproval not requested
Code 3--Not applicable
a. Enter Code 2 if your institution has a covered preapproval
program but the applicant does not request a preapproval.
b. Enter Code 3 if your institution does not have a preapproval
program as defined in Sec. 1003.2.
c. Enter Code 3 for applications or loans for home improvement or
refinancing, and for purchased loans.
B. Action Taken
1. Type of Action. Indicate the type of action taken on the
application or loan by using one of the following Codes.
Code 1--Loan originated
Code 2--Application approved but not accepted
Code 3--Application denied
Code 4--Application withdrawn
Code 5--File closed for incompleteness
Code 6--Loan purchased by your institution
Code 7--Preapproval request denied
Code 8--Preapproval request approved but not accepted (optional
reporting)
a. Use Code 1 for a loan that is originated, including one resulting
from a request for preapproval.
b. For a counteroffer (your offer to the applicant to make the loan
on different terms or in a different amount from the terms or amount
applied for), use Code 1 if the applicant accepts. Use Code 3 if the
applicant turns down the counteroffer or does not respond.
c. Use Code 2 when the application is approved but the applicant (or
the loan broker or correspondent) fails to respond to your notification
of approval or your commitment letter within the specified time. Do not
use this Code for a preapproval request.
d. Use Code 4 only when the application is expressly withdrawn by
the applicant before a credit decision is made. Do not use Code 4 if a
request for preapproval is withdrawn; preapproval requests that are
withdrawn are not reported under HMDA.
e. Use Code 5 if you sent a written notice of incompleteness under
Sec. 1002.9(c)(2) of Regulation B (Equal Credit Opportunity) and the
[[Page 149]]
applicant did not respond to your request for additional information
within the period of time specified in your notice. Do not use this Code
for requests for preapproval that are incomplete; these preapproval
requests are not reported under HMDA.
2. Date of Action. For paper submissions only, enter the date by
month, day, and year, using numerals in the form MM/DD/YYYY (for
example, 02/22/2003). For submissions in electronic form, the proper
format is YYYYMMDD.
a. For loans originated, enter the settlement or closing date.
b. For loans purchased, enter the date of purchase by your
institution.
c. For applications and preapprovals denied, applications and
preapprovals approved but not accepted by the applicant, and files
closed for incompleteness, enter the date that the action was taken by
your institution or the date the notice was sent to the applicant.
d. For applications withdrawn, enter the date you received the
applicant's express withdrawal, or enter the date shown on the
notification from the applicant, in the case of a written withdrawal.
e. For preapprovals that lead to a loan origination, enter the date
of the origination.
C. Property Location
Except as otherwise provided, enter in these columns the applicable
Codes for the MSA, or the MD if the MSA is divided into MDs, state,
county, and census tract to indicate the location of the property to
which a loan relates.
1. MSA or Metropolitan Division.--For each loan or loan application,
enter the MSA, or the MD number if the MSA is divided into MDs. MSA and
MD boundaries are defined by OMB; use the boundaries that were in effect
on January 1 of the calendar year for which you are reporting. A listing
of MSAs and MDs is available from the appropriate Federal agency to
which you report data or the FFIEC.
2. State and County. Use the Federal Information Processing Standard
(FIPS) two-digit numerical code for the state and the three-digit
numerical code for the county. These codes are available from the
appropriate Federal agency to which you report data or the FFIEC.
3. Census Tract.--Indicate the census tract where the property is
located. Notwithstanding paragraph 6, if the property is located in a
county with a population of 30,000 or less in the 2000 Census, enter
``NA'' (even if the population has increased above 30,000 since 2000),
or enter the census tract number. County population data can be obtained
from the U.S. Census Bureau.
4. Census Tract Number.--For the census tract number, consult the
resources provided by the U.S. Census Bureau or the FFIEC.
5. Property Located Outside MSAs or Metropolitan Divisions.--For
loans on property located outside the MSAs and MDs in which an
institution has a home or branch office, or for property located outside
of any MSA or MD, the institution may choose one of the following two
options. Under option one, the institution may enter the MSA or MD,
state and county codes and the census tract number; and if the property
is not located in any MSA or MD, the institution may enter ``NA'' in the
MSA or MD column. (Codes exist for all states and counties and numbers
exist for all census tracts.) Under this first option, the codes and
census tract number must accurately identify the property location.
Under the second option, which is not available if paragraph 6 applies,
an institution may enter ``NA'' in all four columns, whether or not the
codes or numbers exist for the property location.
6. Data Reporting for Banks and Savings Associations Required To
Report Data on Small Business, Small Farm, and Community Development
Lending Under the CRA Regulations.--If your institution is a bank or
savings association that is required to report data under the
regulations that implement the CRA, you must enter the property location
on your HMDA/LAR even if the property is outside the MSAs or MDs in
which you have a home or branch office, or is not located in any MSA.
7. Requests for Preapproval. Notwithstanding paragraphs 1 through 6,
if the application is a request for preapproval that is denied or that
is approved but not accepted by the applicant, you may enter ``NA'' in
all four columns.
D. Applicant Information--Ethnicity, Race, Sex, and Income
Appendix B contains instructions for the collection of data on
ethnicity, race, and sex, and also contains a sample form for data
collection.
1. Applicability. Report this information for loans that you
originate as well as for applications that do not result in an
origination.
a. You need not collect or report this information for loans
purchased. If you choose not to report this information, use the Codes
for ``not applicable.''
b. If the borrower or applicant is not a natural person (a
corporation or partnership, for example), use the Codes for ``not
applicable.''
2. Mail, Internet, or Telephone Applications.--All loan
applications, including applications taken by mail, internet, or
telephone must use a collection form similar to that shown in Appendix B
regarding ethnicity, race, and sex. For applications taken
[[Page 150]]
by telephone, the information in the collection form must be stated
orally by the lender, except for information that pertains uniquely to
applications taken in writing. If the applicant does not provide these
data in an application taken by mail or telephone or on the internet,
enter the Code for ``information not provided by applicant in mail,
internet, or telephone application'' specified in paragraphs I.D.3., 4.,
and 5. of this appendix. (See Appendix B for complete information on the
collection of these data in mail, Internet, or telephone applications.)
3. Ethnicity of Borrower or Applicant. Use the following Codes to
indicate the ethnicity of the applicant or borrower under column ``A''
and of any co-applicant or co-borrower under column ``CA.''
Code 1--Hispanic or Latino
Code 2--Not Hispanic or Latino
Code 3--Information not provided by applicant in mail, internet, or
telephone application
Code 4--Not applicable
Code 5--No co-applicant
4. Race of Borrower or Applicant. Use the following Codes to
indicate the race of the applicant or borrower under column ``A'' and of
any co-applicant or co-borrower under column ``CA.''
Code 1--American Indian or Alaska Native
Code 2--Asian
Code 3--Black or African American
Code 4--Native Hawaiian or Other Pacific Islander
Code 5--White
Code 6--Information not provided by applicant in mail, internet, or
telephone application
Code 7--Not applicable
Code 8--No co-applicant
a. If an applicant selects more than one racial designation, enter
all Codes corresponding to the applicant's selections.
b. Use Code 4 (for ethnicity) and Code 7 (for race) for ``not
applicable'' only when the applicant or co-applicant is not a natural
person or when applicant or co-applicant information is unavailable
because the loan has been purchased by your institution.
c. If there is more than one co-applicant, provide the required
information only for the first co-applicant listed on the application
form. If there are no co-applicants or co-borrowers, use Code 5 (for
ethnicity) and Code 8 (for race) for ``no co-applicant'' in the co-
applicant column.
5. Sex of Borrower or Applicant. Use the following Codes to indicate
the sex of the applicant or borrower under column ``A'' and of any co-
applicant or co-borrower under column ``CA.''
Code 1--Male
Code 2--Female
Code 3--Information not provided by applicant in mail, internet, or
telephone application
Code 4--Not applicable
Code 5--No co-applicant or co-borrower
a. Use Code 4 for ``not applicable'' only when the applicant or co-
applicant is not a natural person or when applicant or co-applicant
information is unavailable because the loan has been purchased by your
institution.
b. If there is more than one co-applicant, provide the required
information only for the first co-applicant listed on the application
form. If there are no co-applicants or co-borrowers, use Code 5 for ``no
co-applicant'' in the co-applicant column.
6. Income. Enter the gross annual income that your institution
relied on in making the credit decision.
a. Round all dollar amounts to the nearest thousand (round $500 up
to the next $1,000), and show in thousands. For example, report $35,500
as 36.
b. For loans on multifamily dwellings, enter ``NA.''
c. If no income information is asked for or relied on in the credit
decision, enter ``NA.''
d. If the applicant or co-applicant is not a natural person or the
applicant or co-applicant information is unavailable because the loan
has been purchased by your institution, enter ``NA.''
E. Type of Purchaser
Enter the applicable Code to indicate whether a loan that your
institution originated or purchased was then sold to a secondary market
entity within the same calendar year:
Code 0--Loan was not originated or was not sold in calendar year covered
by register
Code 1--Fannie Mae
Code 2--Ginnie Mae
Code 3--Freddie Mac
Code 4--Farmer Mac
Code 5--Private securitization
Code 6--Commercial bank, savings bank, or savings association
Code 7--Life insurance company, credit union, mortgage bank, or finance
company
Code 8--Affiliate institution
Code 9--Other type of purchaser
a. Use Code 0 for applications that were denied, withdrawn, or
approved but not accepted by the applicant; and for files closed for
incompleteness.
b. Use Code 0 if you originated or purchased a loan and did not sell
it during that same calendar year. If you sell the loan in a succeeding
year, you need not report the sale.
c. Use Code 2 if you conditionally assign a loan to Ginnie Mae in
connection with a mortgage-backed security transaction.
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d. Use Code 8 for loans sold to an institution affiliated with you,
such as your subsidiary or a subsidiary of your parent corporation.
F. Reasons for Denial
1. You may report the reason for denial, and you may indicate up to
three reasons, using the following Codes. Leave this column blank if the
``action taken'' on the application is not a denial. For example, do not
complete this column if the application was withdrawn or the file was
closed for incompleteness.
Code 1--Debt-to-income ratio
Code 2--Employment history
Code 3--Credit history
Code 4--Collateral
Code 5--Insufficient cash (downpayment, closing costs)
Code 6--Unverifiable information
Code 7--Credit application incomplete
Code 8--Mortgage insurance denied
Code 9--Other
2. If your institution uses the model form for adverse action
contained in Appendix C to Regulation B (Form C-1, Sample Notification
Form), use the foregoing Codes as follows:
a. Code 1 for: Income insufficient for amount of credit requested,
and Excessive obligations in relation to income.
b. Code 2 for: Temporary or irregular employment, and Length of
employment.
c. Code 3 for: Insufficient number of credit references provided;
Unacceptable type of credit references provided; No credit file; Limited
credit experience; Poor credit performance with us; Delinquent past or
present credit obligations with others; Garnishment, attachment,
foreclosure, repossession, collection action, or judgment; and
Bankruptcy.
d. Code 4 for: Value or type of collateral not sufficient.
e. Code 6 for: Unable to verify credit references; Unable to verify
employment; Unable to verify income; and Unable to verify residence.
f. Code 7 for: Credit application incomplete.
g. Code 9 for: Length of residence; Temporary residence; and Other
reasons specified on notice.
G. Pricing-Related Data
1. Rate Spread. a. For a home-purchase loan, a refinancing, or a
dwelling-secured home improvement loan that you originated, report the
spread between the annual percentage rate (APR) and the average prime
offer rate for a comparable transaction if the spread is equal to or
greater than 1.5 percentage points for first-lien loans or 3.5
percentage points for subordinate-lien loans. To determine whether the
rate spread meets this threshold, use the average prime offer rate in
effect for the type of transaction as of the date the interest rate was
set, and use the APR for the loan, as calculated and disclosed to the
consumer under Sec. Sec. 1026.6 or 1026.18, as applicable, of
Regulation Z (12 CFR part 1026). Current and historic average prime
offer rates are set forth in the tables published on the FFIEC's Web
site (http://www.ffiec.gov/hmda) entitled ``Average Prime Offer Rates-
Fixed'' and ``Average Prime Offer Rates-Adjustable.'' Use the most
recently available average prime offer rate. ``Most recently available''
means the average prime offer rate set forth in the applicable table
with the most recent effective date as of the date the interest rate was
set. Do not use an average prime offer rate before its effective date.
b. If the loan is not subject to Regulation Z, or is a home
improvement loan that is not dwelling-secured, or is a loan that you
purchased, enter ``NA.''
c. Enter ``NA'' in the case of an application that does not result
in a loan origination.
d. Enter the rate spread to two decimal places, and use a leading
zero. For example, enter 03.29. If the difference between the APR and
the average prime offer rate is a figure with more than two decimal
places, round the figure or truncate the digits beyond two decimal
places.
e. If the difference between the APR and the average prime offer
rate is less than 1.5 percentage points for a first-lien loan and less
than 3.5 percentage points for a subordinate-lien loan, enter ``NA.''
2. Date the interest rate was set. The relevant date to use to
determine the average prime offer rate for a comparable transaction is
the date on which the loan's interest rate was set by the financial
institution for the final time before closing. If an interest rate is
set pursuant to a ``lock-in'' agreement between the lender and the
borrower, then the date on which the agreement fixes the interest rate
is the date the rate was set. If a rate is re-set after a lock-in
agreement is executed (for example, because the borrower exercises a
float-down option or the agreement expires), then the relevant date is
the date the rate is re-set for the final time before closing. If no
lock-in agreement is executed, then the relevant date is the date on
which the institution sets the rate for the final time before closing.
3. HOEPA Status. a. For a loan that you originated or purchased that
is subject to the Home Ownership and Equity Protection Act of 1994
(HOEPA), as implemented in Regulation Z (12 CFR 1026.32), because the
APR or the points and fees on the loan exceed the HOEPA triggers, enter
Code 1.
b. Enter Code 2 in all other cases. For example, enter Code 2 for a
loan that you originated or purchased that is not subject to the
requirements of HOEPA for any reason; also
[[Page 152]]
enter Code 2 in the case of an application that does not result in a
loan origination.
H. Lien Status
Use the following Codes for loans that you originate and for
applications that do not result in an origination:
Code 1--Secured by a first lien.
Code 2--Secured by a subordinate lien.
Code 3--Not secured by a lien.
Code 4--Not applicable (purchased loan).
a. Use Codes 1 through 3 for loans that you originate, as well as
for applications that do not result in an origination (applications that
are approved but not accepted, denied, withdrawn, or closed for
incompleteness).
b. Use Code 4 for loans that you purchase.
II. Appropriate Federal Agencies for HMDA Reporting
A. You are strongly encouraged to submit your loan/application
register via email. If you elect to use this method of transmission and
the appropriate Federal agency for your institution is the Bureau of
Consumer Financial Protection, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, or the National
Credit Union Administration, then you should submit your institution's
files to the email address dedicated to that purpose by the Bureau,
which can be found on the Web site of the FFIEC. If one of the foregoing
agencies is the appropriate Federal agency for your institution and you
elect to submit your data by regular mail, then use the following
address: HMDA, Federal Reserve Board, Attention: HMDA Processing,
(insert name of the appropriate Federal agency for your institution),
20th & Constitution Ave NW., MS N502, Washington, DC 20551-0001.
B. If the Federal Reserve System (but not the Bureau of Consumer
Financial Protection) is the appropriate Federal agency for your
institution, you should use the email or regular mail address of your
district bank indicated on the Web site of the FFIEC. If the Department
of Housing and Urban Development is the appropriate Federal agency for
your institution, then you should use the email or regular mail address
indicated on the Web site of the FFIEC.
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[[Page 156]]
Sec. Appendix B to Part 1003--Form and Instructions for Data Collection
on Ethnicity, Race, and Sex
I. Instructions on Collection of Data on Ethnicity, Race, and Sex
You may list questions regarding the ethnicity, race, and sex of the
applicant on your loan application form, or on a separate form that
refers to the application. (See the sample form below for model
language.)
II. Procedures
A. You must ask the applicant for this information (but you cannot
require the applicant to provide it) whether the application is taken in
person, by mail or telephone, or on the internet. For applications taken
by telephone, the information in the collection form must be stated
orally by the lender, except for that information which pertains
uniquely to applications taken in writing.
B. Inform the applicant that the Federal government requests this
information in order to monitor compliance with Federal statutes that
prohibit lenders from discriminating against applicants on these bases.
Inform the applicant that if the information is not provided where the
application is taken in person, you are required to note the data on the
basis of visual observation or surname.
C. You must offer the applicant the option of selecting one or more
racial designations.
D. If the applicant chooses not to provide the information for an
application taken in person, note this fact on the form and then note
the applicant's ethnicity, race, and sex on the basis of visual
observation and surname, to the extent possible.
E. If the applicant declines to answer these questions or fails to
provide the information on an application taken by mail or telephone or
on the internet, the data need not be provided. In such a case, indicate
that the application was received by mail, telephone, or Internet, if it
is not otherwise evident on the face of the application.
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Sec. Supplement I to Part 1003--Staff Commentary
Introduction
1. Status. The commentary in this supplement is the vehicle by which
the Bureau of Consumer Financial Protection issues formal staff
interpretations of Regulation C (12 CFR part 1003).
Section 1003.1--Authority, Purpose, and Scope
1(c) Scope.
1. General. The comments in this section address issues affecting
coverage of institutions and exemptions from coverage.
2. The broker rule and the meaning of ``broker'' and ``investor.''
For the purposes of the guidance given in this commentary, an
institution that takes and processes a loan application and arranges for
another institution to acquire the loan at or after closing is
[[Page 158]]
acting as a ``broker,'' and an institution that acquires a loan from a
broker at or after closing is acting as an ``investor.'' (The terms used
in this commentary may have different meanings in certain parts of the
mortgage lending industry, and other terms may be used in place of these
terms, for example in the Federal Housing Administration mortgage
insurance programs.) Depending on the facts, a broker may or may not
make a credit decision on an application (and thus it may or may not
have reporting responsibilities). If the broker makes a credit decision,
it reports that decision; if it does not make a credit decision, it does
not report. If an investor reviews an application and makes a credit
decision prior to closing, the investor reports that decision. If the
investor does not review the application prior to closing, it reports
only the loans that it purchases; it does not report the loans it does
not purchase. An institution that makes a credit decision on an
application prior to closing reports that decision regardless of whose
name the loan closes in.
3. Illustrations of the broker rule. Assume that, prior to closing,
four investors receive the same application from a broker; two deny it,
one approves it, and one approves it and acquires the loan. In these
circumstances, the first two report denials, the third reports the
transaction as approved but not accepted, and the fourth reports an
origination (whether the loan closes in the name of the broker or the
investor). Alternatively, assume that the broker denies a loan before
sending it to an investor; in this situation, the broker reports a
denial.
4. Broker's use of investor's underwriting criteria. If a broker
makes a credit decision based on underwriting criteria set by an
investor, but without the investor's review prior to closing, the broker
has made the credit decision. The broker reports as an origination a
loan that it approves and closes, and reports as a denial an application
that it turns down (either because the application does not meet the
investor's underwriting guidelines or for some other reason). The
investor reports as purchases only those loans it purchases.
5. Insurance and other criteria. If an institution evaluates an
application based on the criteria or actions of a third party other than
an investor (such as a government or private insurer or guarantor), the
institution must report the action taken on the application (loan
originated, approved but not accepted, or denied, for example).
6. Credit decision of agent is decision of principal. If an
institution approves loans through the actions of an agent, the
institution must report the action taken on the application (loan
originated, approved but not accepted, or denied, for example). State
law determines whether one party is the agent of another.
7. Affiliate bank underwriting (250.250 review). If an institution
makes an independent evaluation of the creditworthiness of an applicant
(for example, as part of a preclosing review by an affiliate bank under
12 CFR 250.250, a regulation of the Board of Governors of the Federal
Reserve System that interprets section 23A of the Federal Reserve Act),
the institution is making a credit decision. If the institution then
acquires the loan, it reports the loan as an origination whether the
loan closes in the name of the institution or its affiliate. An
institution that does not acquire the loan but takes some other action
reports that action.
8. Participation loan. An institution that originates a loan and
then sells partial interests to other institutions reports the loan as
an origination. An institution that acquires only a partial interest in
such a loan does not report the transaction even if it has participated
in the underwriting and origination of the loan.
9. Assumptions. An assumption occurs when an institution enters into
a written agreement accepting a new borrower as the obligor on an
existing obligation. An institution reports an assumption (or an
application for an assumption) as a home purchase loan in the amount of
the outstanding principal. If a transaction does not involve a written
agreement between a new borrower and the institution, it is not an
assumption for HMDA purposes and is not reported.
Section 1003.2--Definitions
Application.
1. Consistency With Regulation B. Bureau interpretations that appear
in the official staff commentary to Regulation B (Equal Credit
Opportunity, 12 CFR part 1002, Supplement I) are generally applicable to
the definition of an application under Regulation C. However, under
Regulation C the definition of an application does not include
prequalification requests.
2. Prequalification. A prequalification request is a request by a
prospective loan applicant (other than a request for preapproval) for a
preliminary determination on whether the prospective applicant would
likely qualify for credit under an institution's standards, or for a
determination on the amount of credit for which the prospective
applicant would likely qualify. Some institutions evaluate
prequalification requests through a procedure that is separate from the
institution's normal loan application process; others use the same
process. In either case, Regulation C does not require an institution to
report prequalification requests on the HMDA/LAR, even though these
requests may constitute applications under Regulation B for purposes of
adverse action notices.
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3. Requests for preapproval. To be a covered preapproval program,
the written commitment issued under the program must result from a full
review of the creditworthiness of the applicant, including such
verification of income, resources and other matters as is typically done
by the institution as part of its normal credit evaluation program. In
addition to conditions involving the identification of a suitable
property and verification that no material change has occurred in the
applicant's financial condition or creditworthiness, the written
commitment may be subject only to other conditions (unrelated to the
financial condition or creditworthiness of the applicant) that the
lender ordinarily attaches to a traditional home mortgage application
approval. These conditions are limited to conditions such as requiring
an acceptable title insurance binder or a certificate indicating clear
termite inspection, and, in the case where the applicant plans to use
the proceeds from the sale of the applicant's present home to purchase a
new home, a settlement statement showing adequate proceeds from the sale
of the present home.
Branch office.
1. Credit union. For purposes of Regulation C, a ``branch'' of a
credit union is any office where member accounts are established or
loans are made, whether or not the office has been approved as a branch
by a Federal or state agency. (See 12 U.S.C. 1752.)
2. Depository institution. A branch of a depository institution does
not include a loan-production office, the office of an affiliate, or the
office of a third party such as a loan broker. (But see Appendix A,
paragraph I.C.6, which requires certain depository institutions to
report property location even for properties located outside those MSAs
or Metropolitan Divisions in which the institution has a home or branch
office.)
3. Nondepository institution. For a nondepository institution,
``branch office'' does not include the office of an affiliate or other
third party such as a loan broker. (But note that certain nondepository
institutions must report property location even in MSAs or Metropolitan
Divisions where they do not have a physical location.)
Dwelling.
1. Coverage. The definition of ``dwelling'' is not limited to the
principal or other residence of the applicant or borrower, and thus
includes vacation or second homes and rental properties. A dwelling also
includes a multifamily structure such as an apartment building.
2. Exclusions. Recreational vehicles such as boats or campers are
not dwellings for purposes of HMDA. Also excluded are transitory
residences such as hotels, hospitals, and college dormitories, whose
occupants have principal residences elsewhere.
Financial institution.
1. General. An institution that met the test for coverage under HMDA
in year 1, and then ceases to meet the test (for example, because its
assets fall below the threshold on December 31 of year 2) stops
collecting HMDA data beginning with year 3. Similarly, an institution
that did not meet the coverage test for a given year, and then meets the
test in the succeeding year, begins collecting HMDA data in the calendar
year following the year in which it meets the test for coverage. For
example, a for-profit mortgage lending institution (other than a bank,
savings association, or credit union) that, in year 1, falls below the
thresholds specified in the definition of Financial institution in Sec.
1003.2, but meets one of them in year 2, need not collect data in year
2, but begins collecting data in year 3.
2. Adjustment of exemption threshold for depository institutions.
For data collection in 2011, the asset-size exemption threshold is $40
million. Depository institutions with assets at or below $40 million as
of December 31, 2010 are exempt from collecting data for 2011.
3. Coverage after a merger. Several scenarios of data-collection
responsibilities for the calendar year of a merger are described below.
Under all the scenarios, if the merger results in a covered institution,
that institution must begin data collection January 1 of the following
calendar year.
i. Two institutions are not covered by Regulation C because of asset
size. The institutions merge. No data collection is required for the
year of the merger (even if the merger results in a covered
institution).
ii. A covered institution and an exempt institution merge. The
covered institution is the surviving institution. For the year of the
merger, data collection is required for the covered institution's
transactions. Data collection is optional for transactions handled in
offices of the previously exempt institution.
iii. A covered institution and an exempt institution merge. The
exempt institution is the surviving institution, or a new institution is
formed. Data collection is required for transactions of the covered
institution that take place prior to the merger. Data collection is
optional for transactions taking place after the merger date.
iv. Two covered institutions merge. Data collection is required for
the entire year. The surviving or resulting institution files either a
consolidated submission or separate submissions for that year.
4. Originations. HMDA coverage depends in part on whether an
institution has originated home purchase loans. To determine whether
activities with respect to a particular loan constitute an origination,
institutions should consult, among other parts of the staff commentary,
the discussion of the broker rule under Sec. Sec. 1003.1(c) and
1003.4(a).
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5. Branches of foreign banks--treated as banks. A Federal branch or
a state-licensed insured branch of a foreign bank is a ``bank'' under
section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1813(a)), and is covered by HMDA if it meets the tests for a depository
institution found in Sec. 1003.2 of Regulation C.
6. Branches and offices of foreign banks--treated as for-profit
mortgage lending institutions. Federal agencies, state-licensed
agencies, state-licensed uninsured branches of foreign banks, commercial
lending companies owned or controlled by foreign banks, and entities
operating under section 25 or 25A of the Federal Reserve Act, 12 U.S.C.
601 and 611 (Edge Act and agreement corporations) are not ``banks''
under the Federal Deposit Insurance Act. These entities are nonetheless
covered by HMDA if they meet the tests for a for-profit nondepository
mortgage lending institution found in Sec. 1003.2 of Regulation C.
Home improvement loan.
1. Classification requirement for loans not secured by a lien on a
dwelling. An institution has ``classified'' a loan that is not secured
by a lien on a dwelling as a home improvement loan if it has entered the
loan on its books as a home improvement loan, or has otherwise coded or
identified the loan as a home improvement loan. For example, an
institution that has booked a loan or reported it on a ``call report''
as a home improvement loan has classified it as a home improvement loan.
An institution may also classify loans as home improvement loans in
other ways (for example, by color-coding loan files).
2. Improvements to real property. Home improvements include
improvements both to a dwelling and to the real property on which the
dwelling is located (for example, installation of a swimming pool,
construction of a garage, or landscaping).
3. Commercial and other loans. A home improvement loan may include a
loan originated outside an institution's residential mortgage lending
division (such as a loan to improve an apartment building made through
the commercial loan department).
4. Mixed-use property. A loan to improve property used for
residential and commercial purposes (for example, a building containing
apartment units and retail space) is a home improvement loan if the loan
proceeds are used primarily to improve the residential portion of the
property. If the loan proceeds are used to improve the entire property
(for example, to replace the heating system), the loan is a home
improvement loan if the property itself is primarily residential. An
institution may use any reasonable standard to determine the primary use
of the property, such as by square footage or by the income generated.
An institution may select the standard to apply on a case-by-case basis.
If the loan is unsecured, to report the loan as a home improvement loan
the institution must also have classified it as such.
5. Multiple-category loans. If a loan is a home improvement loan as
well as a refinancing, an institution reports the loan as a home
improvement loan.
Home purchase loan.
1. Multiple properties. A home purchase loan includes a loan secured
by one dwelling and used to purchase another dwelling.
2. Mixed-use property. A dwelling-secured loan to purchase property
used primarily for residential purposes (for example, an apartment
building containing a convenience store) is a home purchase loan. An
institution may use any reasonable standard to determine the primary use
of the property, such as by square footage or by the income generated.
An institution may select the standard to apply on a case-by-case basis.
3. Farm loan. A loan to purchase property used primarily for
agricultural purposes is not a home purchase loan even if the property
includes a dwelling. An institution may use any reasonable standard to
determine the primary use of the property, such as by reference to the
exemption from Regulation X (Real Estate Settlement Procedures, 12 CFR
1024.5(b)(1)) for a loan on property of 25 acres or more. An institution
may select the standard to apply on a case-by-case basis.
4. Commercial and other loans. A home purchase loan may include a
loan originated outside an institution's residential mortgage lending
division (such as a loan for the purchase of an apartment building made
through the commercial loan department).
5. Construction and permanent financing. A home purchase loan
includes both a combined construction/permanent loan and the permanent
financing that replaces a construction-only loan. It does not include a
construction-only loan, which is considered ``temporary financing''
under Regulation C and is not reported.
6. Second mortgages that finance the downpayments on first
mortgages. If an institution making a first mortgage loan to a home
purchaser also makes a second mortgage loan to the same purchaser to
finance part or all of the home purchaser's downpayment, the institution
reports each loan separately as a home purchase loan.
7. Multiple-category loans. If a loan is a home purchase loan as
well as a home improvement loan, or a refinancing, an institution
reports the loan as a home purchase loan.
Manufactured home.
1. Definition of a manufactured home. The definition in Sec. 1003.2
refers to the Federal building code for factory-built housing
established by the Department of Housing and Urban Development (HUD).
The HUD code requires generally that housing be essentially ready for
occupancy upon leaving the
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factory and being transported to a building site. Modular homes that
meet all of the HUD code standards are included in the definition
because they are ready for occupancy upon leaving the factory. Other
factory-built homes, such as panelized and pre-cut homes, generally do
not meet the HUD code because they require a significant amount of
construction on site before they are ready for occupancy. Loans and
applications relating to manufactured homes that do not meet the HUD
code should not be identified as manufactured housing under HMDA.
Metropolitan Statistical Areas and Metropolitan Divisions.
1. Use of terms ``Metropolitan Statistical Area'' and ``Metropolitan
Division.'' The U.S. Office of Management and Budget defines
Metropolitan Statistical Areas and Metropolitan Divisions to provide
nationally consistent definitions for collecting, tabulating, and
publishing Federal statistics for a set of geographic areas. OMB divides
every Metropolitan Statistical Area (MSA) with a population of 2.5
million or more into Metropolitan Divisions (MDs); MSAs with populations
under 2.5 million population are not so divided. 67 FR 82228 (December
27, 2000). For all purposes under Regulation C, if an MSA is divided by
OMB into MDs, the appropriate geographic unit to be used is the MD; if
an MSA is not so divided by OMB into MDs, the appropriate geographic
unit to be used is the MSA.
Section 1003.4--Compilation of Loan Data
4(a) Data format and itemization.
1. Reporting requirements. i. An institution reports data on loans
that it originated and loans that it purchased during the calendar year
described in the report. An institution reports these data even if the
loans were subsequently sold by the institution.
ii. An institution reports the data for loan applications that did
not result in originations--for example, applications that the
institution denied or that the applicant withdrew during the calendar
year covered by the report.
iii. In the case of brokered loan applications or applications
forwarded through a correspondent, the institution reports as
originations the loans that it approved and subsequently acquired per a
pre-closing arrangement (whether or not they closed in the institution's
name). Additionally, the institution reports the data for all
applications that did not result in originations--for example,
applications that the institution denied or that the applicant withdrew
during the calendar year covered by the report (whether or not they
would have closed in the institution's name). For all of these loans and
applications, the institution reports the required data regarding the
borrower's or applicant's ethnicity, race, sex, and income.
iv. Loan originations are to be reported only once. If the
institution is the loan broker or correspondent, it does not report as
originations the loans that it forwarded to another lender for approval
prior to closing, and that were approved and subsequently acquired by
that lender (whether or not they closed in the institution's name).
v. An institution reports applications that were received in the
previous calendar year but were acted upon during the calendar year
covered by the current register.
vi. A financial institution submits all required data to the
appropriate Federal agency in one package, with the prescribed
transmittal sheet. An officer of the institution certifies to the
accuracy of the data.
vii. The transmittal sheet states the total number of line entries
contained in the accompanying data transmission.
2. Updating--agency requirements. Certain state or Federal
regulations, such as the Federal Deposit Insurance Corporation's
regulations, may require an institution to update its data more
frequently than is required under Regulation C.
3. Form of quarterly updating. An institution may maintain the
quarterly updates of the HMDA/LAR in electronic or any other format,
provided the institution can make the information available to its
regulatory agency in a timely manner upon request.
Paragraph 4(a)(1).
1. Application date--consistency. In reporting the date of
application, an institution reports the date the application was
received or the date shown on the application. Although an institution
need not choose the same approach for its entire HMDA submission, it
should be generally consistent (such as by routinely using one approach
within a particular division of the institution or for a category of
loans).
2. Application date--application forwarded by a broker. For an
application forwarded by a broker, an institution reports the date the
application was received by the broker, the date the application was
received by the institution, or the date shown on the application.
Although an institution need not choose the same approach for its entire
HMDA submission, it should be generally consistent (such as by routinely
using one approach within a particular division of the institution or
for a category of loans).
3. Application date--reinstated application. If, within the same
calendar year, an applicant asks an institution to reinstate a
counteroffer that the applicant previously did not accept (or asks the
institution to reconsider an application that was denied, withdrawn, or
closed for incompleteness), the institution may treat that request as
the continuation of the earlier transaction or as a new transaction. If
the institution treats
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the request for reinstatement or reconsideration as a new transaction,
it reports the date of the request as the application date.
4. Application or loan number. An institution must ensure that each
identifying number is unique within the institution. If an institution's
register contains data for branch offices, for example, the institution
could use a letter or a numerical code to identify the loans or
applications of different branches, or could assign a certain series of
numbers to particular branches to avoid duplicate numbers. Institutions
are strongly encouraged not to use the applicant's or borrower's name or
social security number, for privacy reasons.
5. Application--year action taken. An institution must report an
application in the calendar year in which the institution takes final
action on the application.
Paragraph 4(a)(3).
1. Purpose--statement of applicant. An institution may rely on the
oral or written statement of an applicant regarding the proposed use of
loan proceeds. For example, a lender could use a check-box, or a purpose
line, on a loan application to determine whether or not the applicant
intends to use loan proceeds for home improvement purposes.
2. Purpose--multiple-purpose loan. If a loan is a home purchase loan
as well as a home improvement loan, or a refinancing, an institution
reports the loan as a home purchase loan. If a loan is a home
improvement loan as well as a refinancing, an institution reports the
loan as a home improvement loan.
Paragraph 4(a)(6).
1. Occupancy--multiple properties. If a loan relates to multiple
properties, the institution reports the owner occupancy status of the
property for which property location is being reported. (See the
comments to paragraph 4(a)(9)).
Paragraph 4(a)(7).
1. Loan amount--counteroffer. If an applicant accepts a counteroffer
for an amount different from the amount initially requested, the
institution reports the loan amount granted. If an applicant does not
accept a counteroffer or fails to respond, the institution reports the
loan amount initially requested.
2. Loan amount--multiple-purpose loan. Except in the case of a home-
equity line of credit, an institution reports the entire amount of the
loan, even if only a part of the proceeds is intended for home purchase
or home improvement.
3. Loan amount--home-equity line. An institution that has chosen to
report home-equity lines of credit reports only the part that is
intended for home-improvement or home-purchase purposes.
4. Loan amount--assumption. An institution that enters into a
written agreement accepting a new party as the obligor on a loan reports
the amount of the outstanding principal on the assumption as the loan
amount.
Paragraph 4(a)(8).
1. Action taken--counteroffers. If an institution makes a
counteroffer to lend on terms different from the applicant's initial
request (for example, for a shorter loan maturity or in a different
amount) and the applicant does not accept the counteroffer or fails to
respond, the institution reports the action taken as a denial on the
original terms requested by the applicant.
2. Action taken--rescinded transactions. If a borrower rescinds a
transaction after closing, the institution may report the transaction
either as an origination or as an application that was approved but not
accepted.
3. Action taken--purchased loans. An institution reports the loans
that it purchased during the calendar year, and does not report the
loans that it declined to purchase.
4. Action taken--conditional approvals. If an institution issues a
loan approval subject to the applicant's meeting underwriting conditions
(other than customary loan commitment or loan-closing conditions, such
as a clear-title requirement or an acceptable property survey) and the
applicant does not meet them, the institution reports the action taken
as a denial.
5. Action taken date--approved but not accepted. For a loan approved
by an institution but not accepted by the applicant, the institution
reports any reasonable date, such as the approval date, the deadline for
accepting the offer, or the date the file was closed. Although an
institution need not choose the same approach for its entire HMDA
submission, it should be generally consistent (such as by routinely
using one approach within a particular division of the institution or
for a category of loans).
6. Action taken date--originations. For loan originations, an
institution generally reports the settlement or closing date. For loan
originations that an institution acquires through a broker, the
institution reports either the settlement or closing date, or the date
the institution acquired the loan from the broker. If the disbursement
of funds takes place on a date later than the settlement or closing
date, the institution may use the date of disbursement. For a
construction/permanent loan, the institution reports either the
settlement or closing date, or the date the loan converts to the
permanent financing. Although an institution need not choose the same
approach for its entire HMDA submission, it should be generally
consistent (such as by routinely using one approach within a particular
division of the institution or for a category of loans). Notwithstanding
this flexibility regarding the use of the closing date in connection
with reporting the date action was taken, the year in which an
origination goes to closing is the
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year in which the institution must report the origination.
7. Action taken--pending applications. An institution does not
report any loan application still pending at the end of the calendar
year; it reports that application on its register for the year in which
final action is taken.
Paragraph 4(a)(9).
1. Property location--multiple properties (home improvement/
refinance of home improvement). For a home improvement loan, an
institution reports the property being improved. If more than one
property is being improved, the institution reports the location of one
of the properties or reports the loan using multiple entries on its
HMDA/LAR (with unique identifiers) and allocating the loan amount among
the properties.
2. Property location--multiple properties (home purchase/refinance
of home purchase). For a home purchase loan, an institution reports the
property taken as security. If an institution takes more than one
property as security, the institution reports the location of the
property being purchased if there is just one. If the loan is to
purchase multiple properties and is secured by multiple properties, the
institution reports the location of one of the properties or reports the
loan using multiple entries on its HMDA/LAR (with unique identifiers)
and allocating the loan amount among the properties.
3. Property location--loans purchased from another institution. The
requirement to report the property location by census tract in an MSA or
Metropolitan Division where the institution has a home or branch office
applies not only to loan applications and originations but also to loans
purchased from another institution. This includes loans purchased from
an institution that did not have a home or branch office in that MSA or
Metropolitan Division and did not collect the property-location
information.
4. Property location--mobile or manufactured home. If information
about the potential site of a mobile or manufactured home is not
available, an institution reports using the Code for ``not applicable.''
Paragraph 4(a)(10).
1. Applicant data--completion by applicant. An institution reports
the monitoring information as provided by the applicant. For example, if
an applicant checks the ``Asian'' box the institution reports using the
``Asian'' Code.
2. Applicant data--completion by lender. If an applicant fails to
provide the requested information for an application taken in person,
the institution reports the data on the basis of visual observation or
surname.
3. Applicant data--application completed in person. When an
applicant meets in person with a lender to complete an application that
was begun by mail, internet, or telephone, the institution must request
the monitoring information. If the meeting occurs after the application
process is complete, for example, at closing, the institution is not
required to obtain monitoring information.
4. Applicant data--joint applicant. A joint applicant may enter the
government monitoring information on behalf of an absent joint
applicant. If the information is not provided, the institution reports
using the Code for ``information not provided by applicant in mail,
internet, or telephone application.''
5. Applicant data--video and other electronic-application processes.
An institution that accepts applications through electronic media with a
video component treats the applications as taken in person and collects
the information about the ethnicity, race, and sex of applicants. An
institution that accepts applications through electronic media without a
video component (for example, the internet or facsimile) treats the
applications as accepted by mail.
6. Income data--income relied on. An institution reports the gross
annual income relied on in evaluating the creditworthiness of
applicants. For example, if an institution relies on an applicant's
salary to compute a debt-to-income ratio but also relies on the
applicant's annual bonus to evaluate creditworthiness, the institution
reports the salary and the bonus to the extent relied upon. Similarly,
if an institution relies on the income of a cosigner to evaluate
creditworthiness, the institution includes this income to the extent
relied upon. But an institution does not include the income of a
guarantor who is only secondarily liable.
7. Income data--co-applicant. If two persons jointly apply for a
loan and both list income on the application, but the institution relies
only on the income of one applicant in computing ratios and in
evaluating creditworthiness, the institution reports only the income
relied on.
8. Income data--loan to employee. An institution may report ``NA''
in the income field for loans to its employees to protect their privacy,
even though the institution relied on their income in making its credit
decisions.
Paragraph 4(a)(11).
1. Type of purchaser--loan-participation interests sold to more than
one entity. An institution that originates a loan, and then sells it to
more than one entity, reports the ``type of purchaser'' based on the
entity purchasing the greatest interest, if any. If an institution
retains a majority interest, it does not report the sale.
2. Type of purchaser--swapped loans. Loans ``swapped'' for mortgage-
backed securities are to be treated as sales; the purchaser is the type
of entity receiving the loans that are swapped.
Paragraph 4(a)(12)(ii).
1. Average prime offer rate. Average prime offer rates are annual
percentage rates derived from average interest rates, points, and
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other loan pricing terms offered to borrowers by a representative sample
of lenders for mortgage loans that have low-risk pricing
characteristics. Other pricing terms include commonly used indices,
margins, and initial fixed-rate periods for variable-rate transactions.
Relevant pricing characteristics include a consumer's credit history and
transaction characteristics such as the loan-to-value ratio, owner-
occupant status, and purpose of the transaction. To obtain average prime
offer rates, the Bureau uses a survey of lenders that both meets the
criteria of Sec. 1003.4(a)(12)(ii) and provides pricing terms for at
least two types of variable-rate transactions and at least two types of
non-variable-rate transactions. An example of such a survey is the
Freddie Mac Primary Mortgage Market Survey[supreg].
2. Comparable transaction. The rate spread reporting requirement
applies to a reportable loan with an annual percentage rate that exceeds
by the specified margin (or more) the average prime offer rate for a
comparable transaction as of the date the interest rate is set. The
tables of average prime offer rates published by the Bureau (see comment
4(a)(12)(ii)-3) indicate how to identify the comparable transaction.
3. Bureau tables. The Bureau publishes on the FFIEC's Web site
(http://www.ffiec.gov/hmda), in table form, average prime offer rates
for a wide variety of transaction types. The Bureau calculates an annual
percentage rate, consistent with Regulation Z (see 12 CFR 1026.22 and
Part 1026, Appendix J), for each transaction type for which pricing
terms are available from the survey described in comment 4(a)(12)(ii)-1.
The Bureau estimates annual percentage rates for other types of
transactions for which direct survey data are not available based on the
loan pricing terms available in the survey and other information. The
Bureau publishes on the FFIEC's Web site the methodology it uses to
arrive at these estimates.
Paragraph 4(a)(14).
1. Determining lien status for applications and loans originated. i.
Lenders are required to report lien status for loans they originate and
applications that do not result in originations. Lien status is
determined by reference to the best information readily available to the
lender at the time final action is taken and to the lender's own
procedures. Thus, lenders may rely on the title search they routinely
perform as part of their underwriting procedures--for example, for home
purchase loans. Regulation C does not require lenders to perform title
searches solely to comply with HMDA reporting requirements. Lenders may
rely on other information that is readily available to them at the time
final action is taken and that they reasonably believe is accurate, such
as the applicant's statement on the application or the applicant's
credit report. For example, where the applicant indicates on the
application that there is a mortgage on the property or where the
applicant's credit report shows that the applicant has a mortgage--and
that mortgage is not going to be paid off as part of the transaction--
the lender may assume that the loan it originates is secured by a
subordinate lien. If the same application did not result in an
origination--for example, because the application is denied or
withdrawn--the lender would report the application as an application for
a subordinate-lien loan.
ii. Lenders may also consider their established procedures when
determining lien status for applications that do not result in
originations. For example, a consumer applies to a lender to refinance a
$100,000 first mortgage; the consumer also has a home equity line of
credit for $20,000. If the lender's practice in such a case is to ensure
that it will have first-lien position--through a subordination agreement
with the holder of the mortgage on the home equity line--then the lender
should report the application as an application for a first-lien loan.
Paragraph 4(c)(3).
1. An institution that opts to report home-equity lines reports the
disposition of all applications, not just originations.
4(d) Excluded data.
1. Mergers, purchases in bulk, and branch acquisitions. If a covered
institution acquires loans in bulk from another institution (for
example, from the receiver for a failed institution) but no merger or
acquisition of the institution, or acquisition of a branch, is involved,
the institution reports the loans as purchased loans.
Section 1003.5(a)--Disclosure and Reporting
5(a) Reporting to agency.
1. Submission of data. Institutions submit data to the appropriate
Federal agencies in an automated, machine-readable form. The format must
conform to that of the HMDA/LAR. An institution should contact the
appropriate Federal agency for information regarding procedures and
technical specifications for automated data submission; in some cases,
agencies also make software available for automated data submission. The
data are edited before submission, using the edits included in the
agency-supplied software or equivalent edits in software available from
vendors or developed in-house.
2. Submission in paper form. Institutions that report twenty-five or
fewer entries on their HMDA/LAR may collect and report the data in paper
form. An institution that submits its register in non-automated form
sends two copies that are typed or computer printed and must use the
format of the HMDA/LAR (but need not use the form itself). Each page
must be numbered along
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with the total number of pages (for example, ``Page 1 of 3'').
3. Procedures for entering data. The required data are entered in
the register for each loan origination, each application acted on, and
each loan purchased during the calendar year. The institution should
decide on the procedure it wants to follow--for example, whether to
begin entering the required data, when an application is received, or to
wait until final action is taken (such as when a loan goes to closing or
an application is denied).
4. Options for collection. An institution may collect data on
separate registers at different branches, or on separate registers for
different loan types (such as for home purchase or home improvement
loans, or for loans on multifamily dwellings). Entries need not be
grouped on the register by MSA or Metropolitan Division, or
chronologically, or by census tract numbers, or in any other particular
order.
5. Change in appropriate Federal agency. If the appropriate Federal
agency for a covered institution changes (as a consequence of a merger
or a change in the institution's charter, for example), the institution
must report data to the new appropriate Federal agency beginning with
the year of the change.
6. Subsidiaries. An institution is a subsidiary of a bank or savings
association (for purposes of reporting HMDA data to the same agency as
the parent) if the bank or savings association holds or controls an
ownership interest that is greater than 50 percent of the institution.
7. Transmittal sheet--additional data submissions. If an additional
data submission becomes necessary (for example, because the institution
discovers that data were omitted from the initial submission, or because
revisions are called for), that submission must be accompanied by a
transmittal sheet.
8. Transmittal sheet--revisions or deletions. If a data submission
involves revisions or deletions of previously submitted data, it must
state the total of all line entries contained in that submission,
including both those representing revisions or deletions of previously
submitted entries, and those that are being resubmitted unchanged or are
being submitted for the first time. Depository institutions must provide
a list of the MSAs or Metropolitan Divisions in which they have home or
branch offices.
5(b) Public disclosure of statement.
1. Business day. For purposes of Sec. 1003.5, a business day is any
calendar day other than a Saturday, Sunday, or legal public holiday.
2. Format. An institution may make the disclosure statement
available in paper form or, if the person requesting the data agrees, in
electronic form.
5(c) Public disclosure of modified loan/application register.
1. Format. An institution may make the modified register available
in paper or electronic form. Although institutions are not required to
make the modified register available in census tract order, they are
strongly encouraged to do so in order to enhance its utility to users.
5(e) Notice of availability.
1. Poster--suggested text. An institution may use any text that
meets the requirements of the regulation. Some of the Federal agencies
that receive HMDA data provide HMDA posters that an institution can use
to inform the public of the availability of its HMDA data, or the
institution may create its own posters. If an institution prints its
own, the following language is suggested but is not required:
Home Mortgage Disclosure Act Notice
The HMDA data about our residential mortgage lending are available
for review. The data show geographic distribution of loans and
applications; ethnicity, race, sex, and income of applicants and
borrowers; and information about loan approvals and denials. Inquire at
this office regarding the locations where HMDA data may be inspected.
2. Additional language for institutions making the disclosure
statement available on request. An institution that posts a notice
informing the public of the address to which a request should be sent
could include the following sentence, for example, in its general
notice: ``To receive a copy of these data send a written request to
[address].''
Section 1003.6--Enforcement
6(b) Bona fide errors.
1. Bona fide error--information from third parties. An institution
that obtains the property-location information for applications and
loans from third parties (such as appraisers or vendors of ``geocoding''
services) is responsible for ensuring that the information reported on
its HMDA/LAR is correct.
PART 1004_ALTERNATIVE MORTGAGE TRANSACTION PARITY (REGULATION D)--Table
of Contents
Sec.
1004.1 Authority, purpose, and scope.
1004.2 Definitions.
1004.3 Preemption of State law.
1004.4 Requirements for alternative mortgage transactions.
Appendix A to Part 1004--Official Commentary on Regulation D
Authority: 12 U.S.C. 3802, 3803; 15 U.S.C. 1604, 1639b; Pub. L. No.
111-203, 124 Stat. 1376.
Source: 76 FR 44242, July 22, 2011, unless otherwise noted.
[[Page 166]]
Sec. 1004.1 Authority, purpose, and scope.
(a) Authority. This regulation, known as Regulation D, is issued by
the Bureau of Consumer Financial Protection to implement the Alternative
Mortgage Transaction Parity Act, 12 U.S.C. 3801 et seq., as amended by
title X, Section 1083 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. 111-203, 124 Stat. 1376). Section 1004.4 is
issued pursuant to the Alternative Mortgage Transaction Parity Act (as
amended) and the Truth in Lending Act, 15 U.S.C. 1601 et seq.
(b) Purpose. Consistent with the Alternative Mortgage Transaction
Parity Act, the Truth in Lending Act, and the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the purpose of this regulation is to
balance access to responsible credit and enhanced parity between State
and federal housing creditors regarding the making, purchase, and
enforcement of alternative mortgage transactions with consumer
protection and the interests of the States in regulating mortgage
transactions generally.
(c) Scope. This regulation applies to an alternative mortgage
transaction if the creditor received an application for that transaction
on or after July 22, 2011. This regulation does not apply to a
transaction if the creditor received the application for that
transaction before July 22, 2011.
Sec. 1004.2 Definitions.
For purposes of this part:
Alternative mortgage transaction means a loan, credit sale, or
account:
(1) That is secured by an interest in a residential structure that
contains one to four units, whether or not that structure is attached to
real property, including an individual condominium unit, cooperative
unit, mobile home, or trailer, if it is used as a residence;
(2) That is made primarily for personal, family, or household
purposes; and
(3) In which the interest rate or finance charge may be adjusted or
renegotiated.
Creditor shall have the same meaning as in 12 CFR 226.2.
Housing creditor means:
(1) A depository institution, as defined in section 501(a)(2) of the
Depository Institutions Deregulation and Monetary Control Act of 1980;
(2) A lender approved by the Secretary of Housing and Urban
Development for participation in any mortgage insurance program under
the National Housing Act;
(3) Any person who regularly makes loans, credit sales, or advances
on an account secured by an interest in a residential structure that
contains one to four units, whether or not the structure is attached to
real property, including an individual condominium unit, cooperative
unit, mobile home, or trailer, if it is used as a residence; and
(4) Any transferee of a party listed in paragraph (c)(1), (2), or
(3) of this section.
State means any State of the United States of America, the District
of Columbia, Puerto Rico, the Virgin Islands, the Northern Mariana
Islands, American Samoa, Guam, and any other territory or possession of
the United States.
State law means a State constitution, statute, or regulation or any
provision thereof.
Sec. 1004.3 Preemption of State law.
Pursuant to 12 U.S.C. 3803, a State-chartered or -licensed housing
creditor may make, purchase, and enforce alternative mortgage
transactions in accordance with Sec. 1004.4(a) through (c) of this part
(as applicable), notwithstanding any provision of State law that
restricts the ability of the housing creditor to adjust or renegotiate
an interest rate or finance charge with respect to the transaction or to
change the amount of interest or finance charges included in a regular
periodic payment as a result of such an adjustment or renegotiation.
Sec. 1004.4 Requirements for alternative mortgage transactions.
(a) Mortgages with adjustable rates or finance charges and home
equity lines of credit. A creditor that makes an alternative mortgage
transaction with an adjustable rate or finance charge may only increase
the interest rate or finance charge as follows:
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(1) If the transaction is subject to 12 CFR 226.5b, the creditor
must comply with 12 CFR 226.5b(f)(1).
(2) For all other transactions, the creditor must use either:
(i) An index to which changes in the interest rate are tied that is
readily available to and verifiable by the borrower and beyond the
control of the creditor; or
(ii) A formula or schedule identifying the amount that the interest
rate or finance charge may increase and the times at which, or
circumstances under which, a change may be made.
(b) Renegotiable rates for renewable balloon-payment mortgages. A
creditor that makes an alternative mortgage transaction with payments
based on an amortization period and a large final payment due after a
shorter term may negotiate an increase or decrease in the interest rate
when the transaction is renewed only if the creditor makes a written
commitment to renew the transaction at specified intervals throughout
the amortization period. However, the creditor is not required to renew
the transaction if:
(1) Any action or inaction by the consumer materially and adversely
affects the creditor's security for the transaction or any right of the
creditor in such security;
(2) There is a material failure by the consumer to meet the
repayment terms of the transaction;
(3) There is fraud or a willful or knowing material
misrepresentation by the consumer in connection with the transaction; or
(4) Federal law dealing with credit extended by a depository
institution to its executive officers specifically requires that as a
condition of the extension the credit shall become due and payable on
demand, provided that the creditor includes such a provision in the
initial agreement.
(c) Requirements for high-cost and higher-priced mortgage loans. (1)
If an alternative mortgage transaction is subject to 12 CFR 226.32, the
creditor must comply with 12 CFR 226.32 and 12 CFR 226.34.
(2) If an alternative mortgage transaction is subject to 12 CFR
226.35, the creditor must comply with 12 CFR 226.35.
(d) Other applicable law. Notwithstanding paragraphs (a) through (c)
of this section, a housing creditor that is not making an alternative
mortgage transaction pursuant to Sec. 1004.3 of this part may make that
transaction consistent with applicable State or Federal law other than
this section.
(e) Reductions in interest rate or finance charge. Nothing in this
section prohibits a creditor from decreasing the interest rate or
finance charge on an alternative mortgage transaction.