[Federal Register Volume 59, Number 158 (Wednesday, August 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20128]


[[Page Unknown]]

[Federal Register: August 17, 1994]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 337

RIN 1505-AA52

 

Supplemental Regulations Governing Federal Housing Administration 
Debentures

AGENCY: Department of the Treasury, Fiscal Service, Bureau of the 
Public Debt.

ACTION: Final rule.

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SUMMARY: This rule implements provisions of the Housing and Community 
Development Act of 1992 that authorize the issuance of Federal Housing 
Administration debentures in book-entry form.

EFFECTIVE DATE: September 16, 1994.

FOR FURTHER INFORMATION CONTACT: Fred Pyatt, Director, Division of 
Special Investments, (304) 480-7752, or Cindy Reese, Deputy Chief 
Counsel, Office of the Chief Counsel, (202) 219-3320.

SUPPLEMENTARY INFORMATION: Federal Housing Administration (FHA) 
debentures have been issued since 1938 in registered certificated form 
in payment of certain insured mortgages in default. FHA debentures are 
fully guaranteed as to principal and interest by the United States. The 
Treasury acts as the fiscal agent of the Department of Housing and 
Urban Development (HUD) in administering its debenture issues. The 
general regulations of the Department of the Treasury governing U.S. 
securities (31 CFR Part 306) have been adopted by HUD to govern 
transactions in its debentures. The Treasury regulations at 31 CFR part 
337 supplement the general regulations, setting out provisions that 
apply specifically to the debentures.
    In 1986, the Department of the Treasury began issuing its 
marketable securities exclusively in book-entry form. This action was 
taken as book-entry technology was determined to be quicker, more 
efficient, and less costly than issuing certificated securities. To 
take advantage of this technology, HUD successfully secured 
legislation, i.e., the Housing and Community Development Act of 1992, 
Public Law 102-550, Sec. 516, 106 Stat. 3790 (1992), authorizing the 
issuance of FHA debentures in book-entry form.
    This rule revises and expands 31 CFR Part 337 to include provisions 
relating to book-entry debentures. Book-entry debentures will be 
governed by the rules for the TREASURY DIRECT Book-Entry Securities 
System (31 CFR part 357) with several exceptions which reflect the 
unique nature of the debentures. First, book-entry debentures, unlike 
Treasury's book-entry marketable securities, may not be transferred to, 
or held in, Treasury's commercial book-entry system; they may be 
transferred only between accounts in the FHA book-entry debenture 
system. Second, while debenture payments will be made by the direct 
deposit (electronic funds transfer) method, prenotification messages or 
test payment messages will not be used to verify payment instructions 
since accurate payment information will have entities seeking 
settlement of defaulted insured mortgages. Third, since debentures are 
issued in settlement of defaulted mortgages rather than through an 
auction process, no issue price information will be maintained for the 
debentures.
    Book-entry debentures will be maintained in the FHA book-entry 
debenture system operated for Treasury by the Federal Reserve Bank of 
Philadelphia acting as fiscal agent of the United States. Debentures in 
certificated form may be exchanged for similar debentures in book-entry 
form, but, once exchanged, may not be reissued in certificated form. 
Debentures issued in book-entry form may not be exchanged for 
debentures in certificated form.
    This rule also revises 31 CFR Part 337 to reflect the 
centralization of processing of debentures in both certificated and 
book-entry form at the Federal Reserve Bank of Philadelphia, and to 
eliminate the obsolete requirement that the registered owner or 
assignee must assign certificated debentures presented for redemption 
when payment is to be made to the registered owner or assignee.

Special Analysis

    It has been determined that the rule does not constitute a 
``significant regulatory action'' for purposes of Executive Order No. 
12866. It has also been determined that prior notice of proposed 
rulemaking is unnecessary and impracticable because the rule sets out 
procedures that merely implement legislation authorizing the issuance 
of debentures in book-entry form. Because no notice of proposed 
rulemaking is required, the provisions of the Regulatory Flexibility 
Act (5 U.S.C. 601, et seq.) do not apply to this rule.

List of Subjects in 31 CFR Part 337

    Banks, Banking, Electronic funds transfers, Government Securities, 
Federal Reserve System, Housing.

    For the reasons set out in the preamble, 31 CFR Part 337 is revised 
to read as follows:

PART 337--SUPPLEMENTAL REGULATIONS GOVERNING FEDERAL HOUSING 
ADMINISTRATION DEBENTURES

Sec.
337.0  Scope of regulations.

Subpart A--Certificated Debentures

337.1  Applicability of Treasury regulations.
337.2  Transportation charges and risks.
337.3  Termination of transfers and denominational exchange 
transactions.
337.4  Presentation and surrender.
337.5  Assignments.
337.6  Conversions to book-entry.
337.7  Servicing transactions.
337.8  Payment of mortgage insurance premiums.
337.9  Payment of final interest.
337.10  Payments.

Subpart B--Book-Entry Debentures


337.11  Original issue and conversions.
337.12  Applicability of TREASURY DIRECT regulations.
337.13  Payment of mortgage insurance premiums.

Subpart C--Additional Information

337.14  Address for further information.
337.15  General provisions.

    Authority: 5 U.S.C. 301; 31 U.S.C. 321; Sec. 516, Pub. L. 102-
550, 106 Stat. 3790.


Sec. 337.0   Scope of regulations.

    The United States Department of the Treasury is the agent of the 
Federal Housing Administration for transactions in any debentures which 
have been or may be issued pursuant to the authority conferred by the 
National Housing Act (48 Stat. 1246), as amended; (12 U.S.C. 1701 et 
seq.), as amended from time to time, including Mutual Mortgage 
Insurance Fund Debentures, Housing Insurance Fund Debentures, War 
Housing Insurance Fund Debentures, Military Housing Insurance Fund 
Debentures, and National Defense Housing Insurance Fund Debentures. In 
accordance with the regulations adopted by the Federal Housing 
Commissioner and approved by the Secretary of the Treasury, such 
transactions are governed by regulations of the Department of the 
Treasury, so far as applicable.

Subpart A--Certificated Debentures


Sec. 337.1   Applicability of Treasury regulations.

    The general regulations governing United States securities, part 
306 of this chapter, apply, as the regulations for similar transactions 
and operations in certificated debentures. To the extent that the 
provisions in this part differ from the provisions in part 306, the 
provisions in this part shall prevail.


Sec. 337.2   Transportation charges and risks.

    Debentures presented for redemption at call or maturity, or for 
authorized prior purchase, or for conversion to book-entry form, must 
be delivered at the expense and risk of the holder. Debentures bearing 
restricted assignments may be forwarded by registered mail, but for the 
owner's protection debentures bearing unrestricted assignments should 
be forwarded by insured registered mail. Debentures should be delivered 
to the Federal Reserve Bank of Philadelphia, Securities Division, Ten 
Independence Mall, P.O. Box 90, Philadelphia, Pennsylvania 19105-0090. 
Debentures delivered to any other Federal Reserve Bank or Branch, to 
the Department of Housing and Urban Development (HUD), or to the Bureau 
of the Public Debt will be forwarded to the Federal Reserve Bank of 
Philadelphia for processing.


Sec. 337.3   Termination of transfers and denominational exchange 
transactions.

    Debentures, which by their terms are subject to call, may be called 
for redemption, in whole or in part, at par and accrued interest, on 
any interest date on three months' notice. No transfers or 
denominational exchanges in certificated debentures covered by a given 
call will be made on the books of the Department of the Treasury on or 
after the announcement of such call. However, this does not affect the 
right of a holder of such debenture to sell and assign it on or after 
the announcement of the call date.


Sec. 337.4   Presentation and surrender.

    (a) For redemption. To facilitate the redemption of called or 
maturing debentures, they may be presented and surrendered in the 
manner prescribed in this section in advance of the call or maturity 
date, as the case may be. Early presentation by holders will insure 
prompt payment of principal and interest when due. The debentures must 
first be assigned by the registered payee or his assignee, or by his 
duly constituted representative, if required, in the form and manner 
indicated in Sec. 337.5, and should then be submitted to the Federal 
Reserve Bank of Philadelphia, accompanied by appropriate written 
advice. A transmittal advice for this purpose will accompany the notice 
of call.
    (b) For purchase. Debentures, the purchase of which has been 
authorized prior to call or maturity, may be assigned as instructed in 
paragraph (a) of this section and immediately submitted in accordance 
with procedures prescribed by HUD for this purpose.


Sec. 337.5   Assignments.

    (a) If the registered payee, or an assignee holding a certificated 
debenture under proper assignment from the registered payee, desires 
that payment be made to such payee or assignee, the debenture need not 
be assigned. If the owner desires for any reason that payment be made 
to another, without intermediate assignment, the debentures should be 
assigned to ``The Federal Housing Commissioner for redemption (or, 
purchase) for the account of ________,'' inserting the name and address 
of the person to whom payment is to be made. Proof of the authority of 
the individual assigning on behalf of an owner will be required in 
accordance with part 306 of this chapter.
    (b) An assignment in blank or other assignment having similar 
effect will be recognized, but in that event the debenture would be, in 
effect, payable to bearer, and payment will be made in accordance with 
the instructions received from the person surrendering the debenture 
for redemption or purchase. For the owner's protection, such 
assignments should be avoided unless the owner is willing to lose the 
protection afforded by registration.
    (c) Debentures submitted for conversion to book-entry form should 
be assigned to ``The Federal Housing Commissioner for conversion to 
book-entry debentures for the account of ________.'' The registration 
on the book-entry account and/or the account number in which the 
debentures should be deposited should be indicated.
    (d) All assignments must be made on the debentures themselves 
unless otherwise authorized by the Department of Treasury.


Sec. 337.6  Conversions to book-entry.

    Upon implementation of the book-entry debenture system, to be 
announced in advance by separate public notice, all new debentures will 
be issued only in book-entry form, and may not thereafter be converted 
to certificated form.
    Certificated debentures may, upon the owner's request in accordance 
with Sec. 337.5(c), be converted to book-entry. If such action is 
taken, the owner shall be deemed to have irrevocably waived the right 
to hold such debenture in certificated form.


Sec. 337.7  Servicing transactions.

    Upon implementation of the book-entry debenture system, to be 
announced in advance by separate public notice, any transfer or 
denominational exchange of certificated debentures generally will be 
made in book-entry form. If certificated debentures are desired, the 
owner should so request in writing, before the book-entry debentures 
are issued.


Sec. 337.8  Payment of mortgage insurance premiums.

    When certificated debentures are tendered for purchase prior to 
maturity in order that the proceeds thereof be applied to pay for 
mortgage insurance premiums, any difference between the amount of the 
debentures purchased and the amount of the mortgage insurance premium 
will generally be issued to the owner in the form of a book-entry 
debenture in the exact amount of such difference, provided it is one 
dollar ($1.00) or more. However, if the owner so requests, such 
difference will be settled with certificated debenture(s), together 
with a cash adjustment, if any. Such request should be made in writing, 
before the book-entry debenture in the amount of the difference is 
issued.


Sec. 337.9  Payment of final interest.

    Final interest on any debenture, whether purchased prior to or 
redeemed on or after the call or the maturity date, will be paid with 
the principal. In all cases the payment of principal and final interest 
will be mailed or directed to the payment address given in the form of 
advice accompanying the debenture surrendered.


Sec. 337.10  Payments.

    Payments on certificated debentures will be made by fiscal agency 
check in accordance with part 355 of this chapter, or, upon request, by 
direct deposit (electronic funds transfer) in accordance with part 370 
of this chapter. Information as to the deposit account at the financial 
institution designated to receive a direct deposit payment shall be 
provided on the appropriate form(s) designated by the Department.

Subpart B--Book-Entry Debentures


Sec. 337.11  Original issue and conversions.

    Upon implementation of the book-entry debenture system, to be 
announced in advance by separate public notice, all new debentures will 
be issued only in book-entry form in the exact amount payable to the 
owner. Once issued in book-entry form, a debenture may not be converted 
to certificated form.


Sec. 337.12  Applicability of TREASURY DIRECT regulations.

    The regulations governing the TREASURY DIRECT Book-Entry Securities 
System (TREASURY DIRECT) (part 357 of this chapter) apply to govern 
transactions in FHA book-entry debentures, with the following 
exceptions:
    (a) Securities account. (See Sec. 357.20 of this chapter.) An 
account in the book-entry debenture system may be established by the 
Department of the Treasury upon receipt of the request that a new 
debenture be issued or that a certificated debenture be converted to 
book-entry form. The statement of account shall contain information 
regarding the account as of the date of such statement. It will include 
a unique account number, but will not include price information.
    (b) Transfers. (See Sec. 357.22 of this chapter.) A book-entry 
debenture may be transferred only between accounts established in the 
FHA book-entry debenture system.
    (c) Debentures announced for call. Debentures, which by their terms 
are subject to call, may be called for redemption, in whole or in part, 
at par and accrued interest, on any interest date on three months' 
notice. For purposes of a transaction request affecting ownership and/
or payment instructions with respect to a debenture announced for call, 
a proper request must be received not less than twenty (20) calendar 
days preceding the next payment date. If the twentieth day preceding a 
payment date falls on a Saturday, Sunday, or a Federal holiday, the 
last day set for the receipt of a transaction request will be the last 
business day preceding that date. If a transaction request is received 
less than twenty (20) calendar days preceding a payment date, the 
Department may, in its discretion, act on such request if sufficient 
time remains for processing. If a transaction request is received too 
late for completion of the requested transaction, principal and final 
interest on the called debentures will be paid to the owner of record 
and sent to the payment address of record.
    (d) Payments. (See Sec. 357.26 of this chapter.) Direct deposit 
(electronic funds transfer) payments with respect to debentures, e.g., 
principal, interest and cash adjustments, will be made without 
prenotification messages.


Sec. 337.13  Payment of mortgage insurance premiums.

    When book-entry debentures are being purchased prior to maturity to 
pay for mortgage insurance premiums, the difference between the amount 
of the debentures purchased and the mortgage insurance premiums shall 
be issued to the owner in the form of a book-entry debenture in the 
exact amount of such difference, provided it is one dollar ($1.00) or 
more.

Subpart C--Additional Information


Sec. 337.14  Address for further information.

    Further information regarding the issuance of, transactions in, and 
redemption of, FHA debentures may be obtained from the Federal Reserve 
Bank of Philadelphia, Securities Division, Ten Independence Mall, P.O. 
Box 90, Philadelphia, Pennsylvania 19105-0090, or from the Bureau of 
the Public Debt, Division of Special Investments, 200 Third Street, 
P.O. Box 396, Parkersburg, West Virginia 26102-0396.


Sec. 337.15  General Provisions.

    As fiscal agents of the United States, Federal Reserve Banks are 
authorized and requested to perform any necessary acts under this Part. 
The Federal Reserve Bank of Philadelphia is specifically authorized to 
operate the FHA debenture computer system and to perform day-to-day 
operations and transactions relating to the debentures. The Secretary 
of the Treasury may at any time or from time to time prescribe 
supplemental and amendatory regulations governing the matters covered 
by this part, notice of which shall be communicated promptly to the 
registered owners of the debentures.

    Dated: August 9, 1994.
Gerald Murphy,
Fiscal Assistant Secretary.
[FR Doc. 94-20128 Filed 8-16-94; 8:45 am]
BILLING CODE 4810-39-P