[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Proposed Rules]
[Pages 60229-60237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29747]


=======================================================================
-----------------------------------------------------------------------

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 936

[No. 96-78]


Community Support Requirements

AGENCY: Federal Housing Finance Board.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Board (Finance Board) is proposing 
to amend its regulation on community support requirements. The proposed 
rule replaces the existing review process with uniform community 
support standards all Federal Home Loan Bank (FHLBank) members must 
meet in order to maintain access to long-term FHLBank advances, and 
review criteria the Finance Board must apply when determining a 
member's compliance with the statutory and regulatory standards. 
Consistent with the goals of the Regulatory Reinvention Initiative of 
the National Performance Review, the proposed rule streamlines the 
regulatory requirements to reduce the time spent by FHLBank members to 
prepare and submit, and the Finance Board to review and process, 
community support submissions.

DATES: The Finance Board will accept comments on this proposed rule in 
writing on or before January 27, 1997.

ADDRESSES: Mail comments to Elaine L. Baker, Executive Secretary, 
Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C. 
20006. Comments will be available for public inspection at this 
address.

FOR FURTHER INFORMATION CONTACT: Penny S. Bates, Program Analyst, 
Community Support Program, Office of Supervision, 202/408-2574, or 
Janice A. Kaye, Attorney-Advisor, Office of General Counsel, 202/408-
2505, Federal Housing Finance Board, 1777 F Street, N.W., Washington, 
D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

    Section 10(g)(1) of the Federal Home Loan Bank Act (Bank Act) 
requires the Finance Board to promulgate regulations establishing 
standards of community investment or service that FHLBank members must 
meet in order to maintain access to long-term advances. See 12 U.S.C. 
1430(g)(1). The regulations promulgated by the Finance Board must take 
into account factors such as the FHLBank member's performance under the 
Community Reinvestment Act of 1977 (CRA), 12 U.S.C. 2901, et seq., and 
record of lending to first-time homebuyers. See 12 U.S.C. 1430(g)(2). 
In accordance with section 10(g)(1) of the Bank Act, the Board of 
Directors of the Finance Board approved a final community support rule, 
which appears at part 936 of the Finance Board's regulations, in 
November 1991. See 56 FR 58639 (Nov. 21, 1991), codified at 12 CFR part 
936. The current rule establishes a process under which an FHLBank 
member submits a community support statement, and in some cases, a 
community support action plan or amended action plan, first to the 
member's FHLBank and then to the Finance Board for review.
    By its terms, the current rule applies to every FHLBank member, 
although in practice, the Finance Board has applied its requirements 
only to members that are subject to the CRA. In September 1993, the 
Finance Board sought public comments concerning application of the 
community support rule, particularly the CRA factor, to FHLBank members 
that are not subject to the CRA, that is, credit unions and insurance 
companies. See 58 FR 46569 (Sept. 2, 1993) (advance notice of proposed 
rulemaking). Notwithstanding that the Finance Board received 31 
comments in response to the advance notice of proposed rulemaking, it 
is again specifically seeking comments on how it may apply the CRA 
factor to FHLBank members that are not subject to the CRA. The Finance 
Board will consider all comments it receives before taking final 
action, including comments received in response to the advance notice 
of proposed rulemaking published in September 1993 and this notice of 
proposed rulemaking.
    Although the Bank Act requires the Finance Board to develop 
community support standards, see 12 U.S.C. 1430(g)(1), the current rule 
provides neither definitive standards an FHLBank member must meet in 
order to maintain access to long-term advances, nor review criteria the 
Finance Board must apply to decide whether a member has satisfied the 
statutory or regulatory community support requirements. See 12 CFR part 
936. Further, although the number of FHLBank members and community 
support submissions Finance Board staff must review has increased 
substantially (from approximately 2,970 to 6,000 members, and 370 to 
750 submissions per calendar quarter), the number of Finance Board 
staff available to review those submissions has not changed. In order 
to provide appropriate standards and review criteria for determining 
compliance with section 10(g) of the Bank Act and to ensure adequate 
review by Finance Board staff, the Finance Board has decided to 
streamline the regulatory requirements by replacing the existing review 
process with uniform community support standards and review criteria, 
thereby reducing the time spent by FHLBank members to prepare and 
submit, and the Finance Board to review and process, community support 
submissions. In addition, consistent with section 10(g) of the Bank 
Act, the proposed community support rule will apply to every FHLBank 
member regardless of whether the member is subject to the CRA.

II. Analysis of the Proposed Rule

A. Community Support Requirement

    Proposed Sec. 936.2 establishes the basic requirement that a 
FHLBank member selected for community support review must submit a 
community support statement (statement) to the Finance Board. The 
Finance Board anticipates selecting a FHLBank member for community 
support review about once every two years. Consistent with current 
practice, the Finance Board will select approximately one-eighth of the

[[Page 60230]]

members in each FHLBank district for community support review each 
calendar quarter. To the extent practicable, the Finance Board will 
select members that are subject to the CRA based on the chronological 
sequence of their CRA evaluations, and members that are not subject to 
the CRA based on the chronological sequence of their admittance to 
membership in the FHLBank System. In any case, the Finance Board will 
review an institution only after it has been a FHLBank member for one 
year.
1. Notice Provisions
    Proposed Sec. 936.2(b) sets out the notice requirements and the 
deadline by which members must submit statements to the Finance Board 
for review. Consistent with current practice, Sec. 936.2(b)(1)(i) of 
the proposed rule requires the Finance Board to notify each FHLBank of 
the members within its district that must submit a statement during the 
calendar quarter. At the same time, the Finance Board must publish a 
notice in the Federal Register that includes the name and address of 
each member required to submit a statement during the calendar quarter, 
and the deadline for submission of the statement to the Finance Board. 
To provide sufficient time for the member to prepare the required 
statement, the deadline for submission to the Finance Board must be no 
less than 45 calendar days from the date of publication of the Federal 
Register notice. Section 936.2(b)(2)(ii) then requires each FHLBank to 
provide written notice to its members of their selection for community 
support review and of the requirement to submit a statement to the 
Finance Board by the deadline stated in the Federal Register notice.
2. Required Documents
    Proposed Sec. 936.2(c) describes the information a member must 
include in a statement. As noted above, section 10(g)(2) of the Bank 
Act requires the Finance Board to take into account a FHLBank member's 
performance under the CRA. See 12 U.S.C. 1430(g)(2); supra part I. 
Changes to the regulations implementing the CRA that took effect on 
January 1, 1996 generally shift the focus of CRA review and evaluation 
from process to performance.\1\ As of January 1, 1996, the primary 
federal bank and thrift regulators began conducting revised CRA 
examinations for small banks (defined in the CRA regulation as insured 
depository institutions with less than $250 million in assets) that 
focus on lending, investment, and service to the community. This review 
process now more closely resembles the statutory review required for 
purposes of community support. Approximately 80 percent of FHLBank 
members are small banks reviewed currently under the revised CRA 
examination procedures. The revised CRA procedures will become 
applicable to the remainder of the FHLBank members that are subject to 
the CRA on July 1, 1997. To accommodate these changes, eliminate 
duplicative documentation, and reduce the amount of time spent by 
FHLBank members in preparing and the Finance Board in reviewing and 
processing community support submissions, the Finance Board intends to 
place greater reliance on a member's CRA evaluation. To streamline the 
review process, proposed Sec. 936.2(c)(1) requires a member subject to 
the CRA to submit the portion of the public disclosure section of the 
most recent CRA evaluation provided by the member's appropriate federal 
financial supervisory agency that contains its CRA rating and the date 
of the CRA evaluation. For consistency, under Sec. 936.1(j) of the 
proposed rule, the term ``appropriate federal financial supervisory 
agency'' has the same meaning as in the CRA. See 12 U.S.C. 2902(1).
---------------------------------------------------------------------------

    \1\ See 12 CFR parts 25 (Office of the Comptroller of the 
Currency), 228 (Board of Governors of the Federal Reserve System), 
391 (Federal Deposit Insurance Corporation), and 563e (Office of 
Thrift Supervision).
---------------------------------------------------------------------------

    Under section 10(g)(2) of the Bank Act, the Finance Board also must 
consider a FHLBank member's record of lending to first-time homebuyers. 
See 12 U.S.C. 1430(g)(2); supra part I. This statutory factor will be 
applied to every FHLBank member under the proposed rule. The Finance 
Board is revising the meaning of ``first-time homebuyer'' in 
Sec. 936.1(m) of the proposed rule to make it consistent with the 
definition of that term in affordable housing statutes.\2\ To minimize 
the burden on FHLBank members and the Finance Board, proposed 
Sec. 936.2(c)(2) requires a member to provide a brief description of 
its record of lending, or of the assistance it provides, to first-time 
homebuyers on a Finance Board Community Support Statement Form executed 
by the member's board of directors or by an individual duly authorized 
to act on behalf of the member. The information required by the 
Community Support Statement Form, which is included at Appendix A, is 
discussed in detail below.
---------------------------------------------------------------------------

    \2\ See, e.g., 42 U.S.C. 12713(b)(2), (3) (standards established 
by the Cranston-Gonzalez National Affordable Housing Act that must 
be used to determine eligibility under any federal program to assist 
first-time homebuyers); 12 U.S.C. 1701x(d)(10)(H), (M) (U.S. 
Department of Housing and Urban Development's assistance to low- and 
moderate-income housing program); 42 U.S.C. 1472(h)(12)(B), (C) 
(U.S. Department of Agriculture's program to provide loans for 
housing and buildings on adequate farms).
---------------------------------------------------------------------------

3. Public Comment Process
    Unlike the current rule, which imposes a limited comment acceptance 
period, Sec. 936.2(d) of the proposed rule permits members of the 
public to submit comments concerning a member's community support 
performance to the Finance Board at any time. To encourage the 
submission of comments, proposed Sec. 936.2(d)(1) retains the current 
regulatory requirement that the FHLBanks notify interested parties of 
the members selected for community support review. The Finance Board 
will consider all public comments it has received concerning a selected 
member in conducting its community support review of that member.

B. Community Support Standards

    Proposed Sec. 936.3 establishes the community support standards a 
FHLBank member must meet in order to maintain access to long-term 
advances, and the review criteria the Finance Board must apply in 
evaluating a member's community support performance. The Finance Board 
proposes to include standards and criteria for the two mandatory 
statutory factors--a CRA factor and a first-time homebuyer factor. The 
Finance Board requests comments on whether the regulation should 
establish standards and criteria for factors other than those required 
by statute, such as violations of fair housing, equal credit 
opportunity, or other laws that prohibit discrimination in lending. 
Under the current rule, members must submit information concerning such 
violations as part of their statements.
    Under the proposed rule, a FHLBank member that is subject to the 
CRA will satisfy the statutory and regulatory community support 
requirements if it meets the performance standards for both the CRA and 
first-time homebuyer factors, and a FHLBank member that is not subject 
to the CRA will satisfy the statutory and regulatory community support 
requirements if it meets the performance standard for the first-time 
homebuyer factor.
1. CRA Factor
    Section 936.3(b) establishes CRA performance standards for FHLBank 
members that are subject to the requirements of the CRA. Under the 
proposed rule, a member will be deemed to meet the CRA performance

[[Page 60231]]

standard if the rating in the member's most recent federal CRA 
evaluation is ``Outstanding'' or ``Satisfactory.'' If the rating in a 
member's most recent federal CRA evaluation is ``Needs to Improve,'' 
the Finance Board will place the member on probation for a one-year 
period. During the probationary period, the member will be eligible to 
receive long-term advances. If the member's federal CRA rating does not 
improve before the probationary period ends, the Finance Board will 
restrict the member's access to long term advances. If the rating in a 
member's most recent federal CRA evaluation is ``Substantial 
Noncompliance,'' the Finance Board will immediately restrict the 
member's access to long-term advances.
2. First-Time Homebuyer Factor
    Section 936.3(c) establishes first-time homebuyer standards for all 
FHLBank members. This is consistent with the goals of the National 
Homeownership Strategy and the Finance Board's commitments under its 
National Partners For Homeownership Partnership Agreement. Under the 
proposed rule, a member may demonstrate compliance with the first-time 
homebuyer standards in several ways. First, a member that demonstrates 
to the satisfaction of the Finance Board that it has an established 
record of lending to first-time homebuyers will be deemed to meet the 
first-time homebuyer standard. In order to demonstrate this aspect of 
first-time homebuyer performance, part II(A) of the Community Support 
Statement Form asks a member to provide the following information: (1) 
the number of mortgage loans it has made to first-time homebuyers; (2) 
the dollar amount of the mortgage loans it has made to first-time 
homebuyers; (3) loans made to first-time homebuyers as a percentage of 
all mortgage loans it has made; and (4) dollars loaned to first-time 
homebuyers as a percentage of all mortgage dollars it has loaned. The 
Finance Board considered establishing bright-line numerical thresholds 
for first-time homebuyer lending. However, due to the great variety of 
FHLBank members in terms of size, location, and mission, application of 
such thresholds might be too harsh in many instances. To take into 
account the diversity of FHLBank System membership, the Finance Board 
is proposing to evaluate a member's record of lending to first-time 
homebuyers on a case-by-case basis. The Finance Board requests comments 
as to whether the regulation should include specific numerical review 
criteria or other criteria to evaluate a member's record of lending to 
first-time homebuyers.
    Alternatively, a member may satisfy the first-time homebuyer 
standard by demonstrating to the satisfaction of the Finance Board that 
it has a program under which it actively seeks to lend to first-time 
homebuyers or to assist potential first-time homebuyers to qualify for 
mortgage loans. In order to demonstrate this alternative, part II(B) of 
the Community Support Statement Form asks a member to indicate whether 
it offers, or participates in, special loan products, financial 
services, programs, or activities that benefit, serve, or are targeted 
to, first-time homebuyers. Qualifying activities include special credit 
products that provide flexible underwriting or qualifying criteria; 
participation in loan consortia for first-time homebuyer loans; 
participation in federal, state, or local government homeownership or 
other related programs like Federal Housing Administration or Veterans 
Administration mortgage loan programs; cooperation with community or 
nonprofit groups or national organizations like the Federal National 
Mortgage Association (also known as Fannie Mae) or the Federal Home 
Loan Mortgage Corporation (also known as Freddie Mac); counseling 
programs or other homeownership education activities; marketing plans 
and related outreach programs; or technical assistance to organizations 
that assist first-time homebuyers. A member may, but is not required 
to, attach to the Community Support Statement Form a one-page 
description of other first-time homebuyer programs or activities in 
which it is involved. In the one-page attachment, a member may also 
describe factors that affect its ability to assist first-time 
homebuyers. The Finance Board solicits comments on whether the 
regulation or Community Support Statement Form should include any 
additional or different criteria for evaluating the assistance a member 
provides to first-time homebuyers or potential first-time homebuyers.
    Finally, a member may satisfy the first-time homebuyer standard if 
it demonstrates to the satisfaction of the Finance Board that it meets 
a combination of the elements discussed above.
     If the Finance Board deems the evidence of first-time homebuyer 
performance provided by the member to be unsatisfactory, the Finance 
Board will place the member on probation for a one-year period. During 
the probationary period, the member will be eligible to receive long-
term advances. If the member does not satisfy the first-time homebuyer 
performance standard before the probationary period ends, the Finance 
Board will restrict the member's access to long-term advances. The 
Finance Board will immediately restrict a member's access to long-term 
advances if the member fails to provide any evidence of its record of 
lending to first-time homebuyers.

C. Decisions on Community Support Statements

    Proposed Sec. 936.4 sets forth the procedures for review of 
statements by the Finance Board. To ensure expeditious action on 
statements, proposed Sec. 936.4(a) requires the Finance Board to act on 
a statement within 75 calendar days of the date it deems the statement 
complete. To make certain that the time period provided for review is 
not unduly restrictive, the proposed rule deems a statement complete, 
thus triggering the 75-day time period, only after the Finance Board 
has obtained all of the information required by this part and any other 
information it considers necessary to process the statement. The 
proposed rule also permits the Finance Board to stop the 75-day time 
period if it determines during the review process and notifies the 
member in writing that additional information is necessary to process 
the statement. The Finance Board must restart the 75-day time period 
where it stopped upon receiving the additional required information. 
The Finance Board will have an additional 10 calendar days to process a 
statement if it receives additional information on or after the 
seventieth day of the 75-day time period.
    Proposed Sec. 936.4(b) requires the Finance Board to notify a 
member and the appropriate FHLBank in writing of its determination 
regarding the member's statement. The notice will identify specifically 
the reasons for the Finance Board's determination.

D. Restrictions On Access to Long-Term Advances

1. Imposing Restrictions
    Proposed Sec. 936.5 sets forth the procedures by which the Finance 
Board may restrict a FHLBank member's access to long-term advances. 
Consistent with the current rule, for purposes of this part the term 
``long-term advance'' means an advance with a term to maturity greater 
than one year. Under Sec. 936.5(a) of the proposed rule, the Finance 
Board will restrict a FHLBank member's access to long-term advances if 
it determines that the member:
    (1) has not complied with the requirements of part 936;

[[Page 60232]]

    (2) has submitted a statement that was not approved by the Finance 
Board;
    (3) has not received a CRA rating of ``Outstanding'' or 
``Satisfactory'' before the end of the one-year probationary period 
described in Sec. 936.3(b)(2) of the proposed rule; or
    (4) has not provided first-time homebuyer evidence satisfactory to 
the Finance Board before the end of the one-year probationary period 
described in Sec. 936.3(c)(2) of the proposed rule.
    Under proposed Sec. 936.5(b), the Finance Board must promptly 
notify a member and the appropriate FHLBank of its determination to 
restrict the member's access to long-term advances. The Finance Board 
must send the notice to the member by certified mail, return receipt 
requested, and to the FHLBank by regular mail. Proposed Sec. 936.5(c) 
provides that a restriction on access to long-term advances will become 
effective automatically on the date the decision notices are mailed.
2. Removing Restrictions
    Section 936.5(d) of the proposed rule sets forth the bases for 
removing restrictions on access to long-term advances imposed by the 
Finance Board under this part. The Finance Board, in its sole 
discretion, may remove a restriction on a member's access to long-term 
advances under two circumstances. First, the Finance Board may remove a 
restriction if it determines that application of the restriction may 
adversely affect the safety and soundness of the member. Second, the 
Finance Board may remove a restriction if it determines that the member 
subsequently has complied with the requirements of part 936. Since the 
primary purpose for imposing a restriction on access to long-term 
advances is to encourage FHLBank members to comply with the community 
support regulation, the Finance Board believes it should remove such 
restrictions as soon as the member can demonstrate that it is in full 
compliance with the regulatory requirements. Therefore, the Finance 
Board proposes to eliminate the mandatory 180-day waiting period 
provided in the current rule.
    Under the proposed rule, a member may submit a detailed written 
request to the Finance Board to remove a restriction on access to long-
term advances. If a reinstatement request is based on safety and 
soundness concerns, the request must include a statement from the 
member's primary federal regulator that application of the restriction 
may adversely affect the safety and soundness of the member. Proposed 
Sec. 936.5(d)(3) requires the Finance Board to notify a member and the 
appropriate FHLBank of its decision to remove a restriction within 30 
calendar days of receipt of the member's request. The Finance Board 
must send the notice to the member by certified mail, return receipt 
requested, and to the FHLBank by regular mail. The Finance Board's 
decision to remove a restriction will become effective automatically on 
the date the decision notices are mailed.
3. Effect of Restrictions on the Affordable Housing and Community 
Investment Programs
    Under proposed Sec. 936.5(e), if the Finance Board has restricted a 
member's access to long-term advances under this part, the member will 
not be eligible to participate in either the Affordable Housing Program 
(AHP) or the Community Investment Program (CIP). The Finance Board 
believes that it should not offer a member the opportunity to 
participate in community lending programs subsidized by the FHLBanks 
until the member has demonstrated a willingness to use its own 
resources to meet community lending needs. Accordingly, unlike the 
current rule, the Finance Board is proposing to limit participation in 
the AHP and CIP only to members that have met the statutory and 
regulatory community support requirements. The Finance Board 
specifically asks for comments on this proposed change.

E. FHLBank Community Support Programs

    Under proposed Sec. 936.6(a) and (b), each FHLBank must consult 
with its Advisory Council to develop and implement initiatives to 
increase community-oriented mortgage lending and affordable housing 
finance activities. For purposes of the proposed regulation, the term 
``community-oriented mortgage lending'' has the same meaning as in 
section 10(i)(2) of the Bank Act. See 12 U.S.C. 1430(i)(2). Consistent 
with current practice, the proposed rule also requires each FHLBank to 
establish and maintain a community support program that: (1) provides 
technical assistance to members; (2) promotes and expands community-
oriented mortgage lending and affordable housing finance; (3) 
identifies opportunities for members to expand financial and credit 
services in underserved neighborhoods and communities; and (4) 
encourages members to increase their community-oriented mortgage 
lending and affordable housing finance activities through the use of 
monetary and nonmonetary incentives. Examples of appropriate incentives 
include discounts or preferred terms on advances to members or awards 
or technical assistance to nonprofit housing developers or community 
groups that have outstanding records of participation in community-
oriented mortgage lending and affordable housing finance activities. 
These examples are meant to be illustrative, not exclusive.
    To motivate FHLBank members to meet the community support 
requirements, Sec. 936.5(c) of the proposed rule requires each FHLBank 
to provide a yearly report to its members that identifies AHP, CIP, and 
other FHLBank activities, and summarizes community-oriented mortgage 
lending and affordable housing finance activities undertaken by 
members, nonprofit housing developers, community groups, or other 
entities in the FHLBank district, that may provide opportunities for a 
member to meet the community support requirements. To reduce the 
regulatory burden imposed on the FHLBanks, the Finance Board has 
decided to cut the reporting frequency in half.

F. Reports

    Section 10(j)(11) of the Bank Act requires each FHLBank Advisory 
Council to submit annually a report to the Finance Board analyzing the 
low-income housing activity of its FHLBank. See 12 U.S.C. 1430(j)(11). 
Since the concept of community support includes initiatives related to 
affordable housing, the Finance Board believes that the annual report 
each Advisory Council submits should include an analysis of the 
community support program and activities of its FHLBank. The Finance 
Board has included this requirement in Sec. 936.7 of the proposed rule.
    Pursuant to section 10(j)(12) of the Bank Act, the Finance Board 
annually must prepare and submit to Congress a report on FHLBank 
support of, and use of advances for, low-income housing and community 
development. See 12 U.S.C. 1430(j)(12)(A). The Finance Board's annual 
report to Congress must include the annual Advisory Council reports to 
the Finance Board on the low income housing activity of the FHLBanks. 
Id. 1430(j)(12)(B). The Finance Board intends to include also in its 
annual report to Congress an analysis of the FHLBanks community support 
programs and activities.

III. Regulatory Flexibility Act

    The proposed rule implements statutory requirements binding on all 
FHLBank members, regardless of their size. The Finance Board is not at 
liberty to make adjustments in those

[[Page 60233]]

requirements to accommodate small entities. The Finance Board has not 
imposed any additional regulatory requirements that will have a 
disproportionate impact on small entities. By streamlining the 
regulatory requirements, the Finance Board has, to the maximum extent 
possible, reduced the costs FHLBank members, the FHLBanks, and Finance 
Board will incur to produce, review, and process the submissions the 
Finance Board requires in determining whether a FHLBank member has 
complied with the statutory and regulatory community support 
requirements. Thus, in accordance with the provisions of the Regulatory 
Flexibility Act, the Finance Board hereby certifies that this proposed 
rule, if promulgated as a final rule, will not have a significant 
economic impact on a substantial number of small entities. See 5 U.S.C. 
605(b).

IV. Paperwork Reduction Act

    The Finance Board has submitted to the Office of Management and 
Budget (OMB) an analysis of the collection of information contained in 
Secs. 936.2 through 936.7 of the proposed rule, described more fully in 
part II of the Supplementary Information. The Finance Board uses the 
information collection to determine whether FHLBank members satisfy the 
statutory and regulatory community support requirements. See 12 U.S.C. 
1430(g); 12 CFR part 936. Only FHLBank members that meet these 
standards may maintain access to long-term FHLBank advances. See 12 
U.S.C. 1430(g). Responses are required to obtain or retain a benefit. 
See id. The Finance Board will maintain the confidentiality of 
information obtained from respondents pursuant to the collection of 
information as required by applicable statute, regulation, and agency 
policy. Books or records relating to this collection of information 
must be retained as provided in the regulation.
    Likely respondents and/or recordkeepers will be institutions that 
are members of a FHLBank and the Finance Board. Potential respondents 
are not required to respond to the collection of information unless the 
regulation collecting the information displays a currently valid 
control number assigned by OMB. See 44 U.S.C. 3512(a).
    The estimated annual reporting and recordkeeping hour burden is:

a. Number of respondents...........................................3000
b. Total annual responses..........................................3000
Percentage of these responses collected electronically................0
c. Total annual hours requested....................................4010
d. Current OMB inventory..........................................20475
e. Difference.....................................................16465

    The estimated annual reporting and recordkeeping cost burden is:

a. Total annualized capital/startup costs.............................0
b. Total annual costs (O&M)...........................................0
c. Total annualized cost
   requested................................................$155,800.62
d. Current OMB inventory..............................................0
e. Difference...............................................$155,800.62
    The Finance Board will accept written comments concerning the 
accuracy of the burden estimates and suggestions for reducing the 
burden at the address listed above.
    The Finance Board has submitted the collection of information to 
OMB for review in accordance with section 3507(d) of the Paperwork 
Reduction Act of 1995, codified at 44 U.S.C. 3507(d). Comments 
regarding the proposed collection of information may be submitted in 
writing to the Office of Information and Regulatory Affairs of OMB, 
Attention: Desk Officer for Federal Housing Finance Board, Washington, 
D.C. 20503 by January 27, 1997.

List of Subjects in 12 CFR Part 936

    Credit, Federal home loan banks, Housing, Reporting and 
recordkeeping requirements.

    Accordingly, the Finance Board hereby proposes to revise title 12, 
chapter IX, part 936, of the Code of Federal Regulations, to read as 
follows:

PART 936--COMMUNITY SUPPORT REQUIREMENTS

Sec.
936.1  Definitions.
936.2  Community support requirement.
936.3  Community support standards.
936.4  Decision on community support statements.
936.5  Restrictions on access to long-term advances.
936.6  Bank community support programs.
936.7  Reports.

Appendix A to Part 936--Community Support Statement Form

    Authority: 12 U.S.C. 1422a(a)(3)(B), 1422b(a)(1), 1429, and 
1430.


Sec. 936.1  Definitions.

    For purposes of this part:
    (a) Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 
1421, et seq.).
    (b) 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 
935 of this chapter.
    (c) Advisory Council means the Advisory Council each Bank is 
required to establish pursuant to section 10(j)(11) of the Act and part 
960 of this chapter.
    (d) Affordable Housing Program or AHP means the program each Bank 
is required to establish pursuant to section 10(j) of the Act and part 
960 of this chapter.
    (e) Appropriate federal financial supervisory agency means the 
Office of the Comptroller of the Currency for national banks; the Board 
of Governors of the Federal Reserve System for state chartered banks 
that are members of the Federal Reserve System and bank holding 
companies; the Federal Deposit Insurance Corporation for state 
chartered banks and savings banks that are not members of the Federal 
Reserve System and the deposits of which are insured by the Federal 
Deposit Insurance Corporation; and the Office of Thrift Supervision for 
savings associations the deposits of which are insured by the Federal 
Deposit Insurance Corporation and savings and loan holding companies.
    (f) Bank or Banks means a Federal Home Loan Bank or the Federal 
Home Loan Banks.
    (g) Community Investment Program or CIP means the program each Bank 
is required to establish pursuant to section 10(i) of the Act.
    (h) Community-oriented mortgage lending has the same meaning as in 
section 10(i)(2) of the Act.
    (i) CRA means the Community Reinvestment Act of 1977, as amended 
(12 U.S.C. 2901, et seq.).
    (j) CRA evaluation means the public disclosure portion of the CRA 
performance evaluation provided by a member's appropriate Federal 
financial supervisory agency.
    (k) Finance Board means the agency established as the Federal 
Housing Finance Board.
    (l) First-time homebuyer means:
    (1) An individual and his or her spouse, if any, who has had no 
present ownership interest in a principal residence during the three-
year period prior to purchase of a principal residence.
    (2) A displaced homemaker who, except for owning a residence with 
his or her spouse or residing in a residence owned by his or her 
spouse, meets the requirements of paragraph (l)(1) of this section. For 
purposes of this paragraph (l)(2), the term displaced homemaker means 
an adult who has not worked full-time, full-year in the labor force for 
a number of years and, during that period, worked primarily without 
remuneration to care for a home and family, and currently is unemployed 
or

[[Page 60234]]

underemployed and is experiencing difficulty in obtaining or upgrading 
employment.
    (3) A single parent who, except for owning a residence with his or 
her spouse or residing in a residence owned by his or her spouse, meets 
the requirements of paragraph (l)(1) of this section. For purposes of 
this paragraph (l)(3), the term single parent means an individual who 
is unmarried or legally separated from a spouse and has custody or 
joint custody of one or more minor children or is pregnant.
    (m) Long-term advance means an advance with a term to maturity 
greater than one year.
    (n) Member means an institution admitted to membership and owning 
capital stock in a Bank.


Sec. 936.2   Community support requirement.

    (a) Selection for community support review. The Finance Board shall 
select a member for community support review approximately once every 
two years.
    (b) Notice.--(1) By the Finance Board. The Finance Board 
concurrently shall:
    (i) Notify each Bank of the members within its district that are 
required to submit community support statements during the calendar 
quarter; and
    (ii) Publish a notice in the Federal Register that includes the 
name and address of each member required to submit a community support 
statement during the calendar quarter, and the deadline for submission 
of the community support statement to the Finance Board. The deadline 
for submission of a community support statement shall be no earlier 
than 45 calendar days after the date of publication of the Federal 
Register notice.
    (2) By the Banks. Within 15 calendar days of the date of 
publication of the Federal Register notice required by paragraph 
(b)(1)(ii) of this section, a Bank shall provide written notice to each 
member within its district that is named in the Federal Register 
notice, that the member is required to submit a community support 
statement to the Finance Board by the deadline stated in the Federal 
Register notice.
    (c) Required documents. Each member selected for community support 
review shall submit a community support statement to the Finance Board 
that includes the following:
    (1) CRA evaluation. For members subject to the CRA, the page or 
pages of the most recent CRA evaluation that contain the member's CRA 
rating and the date of the CRA evaluation.
    (2) First-time homebuyer certification. For all members, a 
completed Community Support Statement Form executed by the member's 
board of directors or by an individual duly authorized to act on behalf 
of the member's board of directors.
    (d) Public comments.--(1) Notice. Within 15 calendar days of the 
date of publication of the Federal Register notice required by 
paragraph (b)(1)(ii) of this section, a Bank shall provide written 
notice to its Advisory Council and nonprofit housing developers, 
community groups, and other interested parties in its district of the 
name and address of each member within its district that is required to 
submit a community support statement during the calendar quarter.
    (2) Review. In reviewing a member for community support, the 
Finance Board shall take into consideration any public comments it has 
received concerning the member.


Sec. 936.3   Community support standards.

    (a) Standards. In reviewing a community support statement, the 
Finance Board shall take into account a member's performance under the 
CRA if the member is subject to the requirements of the CRA, and the 
member's record of lending to first-time homebuyers.
    (b) CRA factor.--(1) Adequate performance. A member that is subject 
to the requirements of the CRA shall be deemed to meet the CRA standard 
if the rating in the member's most recent CRA evaluation is 
``Outstanding'' or ``Satisfactory.''
    (2) Probationary performance. A member that is subject to the 
requirements of the CRA shall be subject to a one-year probationary 
period if the rating in the member's most recent CRA evaluation is 
``Needs to Improve.'' During the probationary period, the member will 
be eligible to receive long-term advances. If the member does not meet 
the CRA standard before the probationary period ends, the Finance Board 
shall restrict the member's access to long-term advances in accordance 
with Sec. 936.5.
    (3) Inadequate performance. A member's access to long-term advances 
shall be restricted in accordance with Sec. 936.5 if the rating in the 
member's most recent CRA evaluation is ``Substantial Noncompliance.''
    (c) First-time homebuyer factor. (1) Adequate performance. In 
determining whether a member meets the first-time homebuyer standard, 
the Finance Board shall consider a member's description of its efforts 
to assist first-time or potential first-time homebuyers or its 
explanation of factors that affect its ability to assist first-time or 
potential first-time homebuyers. A member shall be deemed to meet the 
first-time homebuyer standard if the member demonstrates to the 
satisfaction of the Finance Board that it:
    (i) Has an established record of lending to first-time homebuyers;
    (ii) Has a program whereby it actively seeks to lend to first-time 
homebuyers, including, but not limited to, the following:
    (A) Flexible underwriting standards for first-time homebuyers;
    (B) Participation in federal, state, or local government, or 
nationwide homeownership lending programs that serve first-time 
homebuyers; or
    (C) Participation in loan consortia for first-time homebuyer loans; 
or
    (iii) Has a program whereby it actively seeks to assist potential 
first-time homebuyers to qualify for mortgage loans, including, but not 
limited to, the following:
    (A) Special counseling programs or other homeownership education 
activities that benefit first-time homebuyers;
    (B) Marketing plans and related outreach programs targeted to 
first-time homebuyers; or
    (C) Technical assistance to organizations that assist first-time 
homebuyers; or
    (D) Participation with community or nonprofit groups that assist 
first-time homebuyers; or
    (iv) Has any combination of the elements described in paragraphs 
(c)(1) (i), (ii), or (iii) of this section.
    (2) Probationary performance. If the evidence of first-time 
homebuyer performance is deemed to be unsatisfactory by the Finance 
Board, the member shall be subject to a one-year probationary period. 
During the probationary period, the member will be eligible to receive 
long-term advances. If the member does not meet the first-time 
homebuyer standard before the probationary period ends, the Finance 
Board shall restrict the member's access to long-term advances in 
accordance with Sec. 936.5.
    (3) Inadequate performance. A member's access to long-term advances 
shall be restricted in accordance with Sec. 936.5 if the member 
provides no evidence of first-time homebuyer performance.


Sec. 936.4   Decision on community support statements.

    (a) Action on community support statements. The Finance Board shall 
act on each community support statement in accordance with the 
requirements of Sec. 936.3 within 75 calendar days of the date the 
Finance Board deems the

[[Page 60235]]

community support statement to be complete. The Finance Board shall 
deem a community support statement complete when it has obtained all of 
the information required by this part and any other information it 
deems necessary to process the community support statement. If the 
Finance Board determines during the review process that additional 
information is necessary to process the community support statement, 
the Finance Board may deem the community support statement incomplete 
and stop the 75-day time period by providing written notice to the 
member. When the Finance Board receives the additional information, it 
shall again deem the community support statement complete and resume 
the 75-day time period where it stopped. The Finance Board shall have 
10 calendar days in addition to the 75-day time period to act on a 
community support statement if the Finance Board receives the 
additional information on or after the seventieth day of the 75-day 
time period.
    (b) Decision on community support statements. The Finance Board 
shall provide written notice to the member and the member's Bank of its 
determination regarding the community support statement submitted by 
the member. The notice shall identify the reasons for the Finance 
Board's determination.


Sec. 936.5  Restrictions on access to long-term advances.

    (a) Requirement. The Finance Board shall restrict a member's access 
to long-term advances if the member:
    (1) Failed to comply with the requirements of this part;
    (2) Submitted a community support statement that was not approved 
by the Finance Board;
    (3) Did not receive a rating in a CRA evaluation of ``Outstanding'' 
or ``Satisfactory'' before the end of the one-year probationary period 
described in Sec. 936.3(b)(2); or
    (4) Failed to provide evidence satisfactory to the Finance Board of 
its first-time homebuyer performance before the end of the one-year 
probationary period described in Sec. 936.3(c)(2).
    (b) Notice. The Finance Board shall provide written notice to a 
member and the member's Bank of its determination to restrict the 
member's access to long-term advances, the member by certified mail, 
return receipt requested, and the member's Bank by regular mail.
    (c) Effective date. Restrictions on access to long-term advances 
shall take effect on the date the notices required under paragraph (b) 
of this section are mailed.
    (d) Removing restrictions. The Finance Board may remove 
restrictions on a member's access to long-term advances imposed under 
this section:
    (1) If the Finance Board determines that application of the 
restriction may adversely affect the safety and soundness of the 
member. A member may submit a written request to the Finance Board to 
remove a restriction on access to long-term advances under this 
paragraph (d)(1). A written request submitted under this paragraph 
(d)(1) shall contain a clear and concise statement of the basis for the 
request and a statement from the member's appropriate federal financial 
supervisory agency that application of the restriction may adversely 
affect the safety and soundness of the member.
    (2) If the Finance Board determines that the member subsequently 
has complied with the requirements of this part. A member may submit a 
written request to the Finance Board to remove a restriction on access 
to long-term advances under this paragraph (d)(2). A written request 
submitted under this paragraph (d)(2) shall state with specificity how 
the member has complied with the requirements of this part.
    (3) Within 30 calendar days of receipt of a request submitted by a 
member under paragraph (d)(1) or (d)(2) of this section, the Finance 
Board shall provide written notice to the member and the member's Bank 
of its determination, the member by certified mail, return receipt 
requested, and the member's Bank by regular mail. The Finance Board's 
determination shall take effect on the date the notices are mailed.
    (e) AHP and CIP. A member that is subject to a restriction on 
access to long-term advances under this part shall not be eligible to 
participate in the Affordable Housing Program or the Community 
Investment Program.


Sec. 936.6  Bank community support programs.

    (a) Requirement. Consistent with the safe and sound operation of 
the Bank, each Bank shall establish and maintain a community support 
program. A Bank's community support program should:
    (1) Provide technical assistance to members;
    (2) Promote and expand community-oriented mortgage lending and 
affordable housing finance;
    (3) Identify opportunities for members to expand financial and 
credit services in underserved neighborhoods and communities; and
    (4) Encourage members to increase their community-oriented mortgage 
lending and affordable housing finance activities by providing 
incentives such as awards or technical assistance to nonprofit housing 
developers or community groups with outstanding records of 
participation in community-oriented lending or affordable housing 
finance partnerships with members.
    (b) Advisory Councils. A Bank shall consult with its Advisory 
Council to develop and implement initiatives to increase community-
oriented mortgage lending and affordable housing finance activities in 
the Bank district.
    (c) Notice. A Bank shall provide annually to each of its members a 
written notice:
    (1) Identifying AHP, CIP, and other Bank activities that may 
provide opportunities for a member to meet the community support 
requirements; and
    (2) Summarizing community-oriented mortgage lending and affordable 
housing finance activities undertaken by members, nonprofit housing 
developers, community groups, or other entities in the Bank's district, 
that may provide opportunities for a member to meet the community 
support requirements.


Sec. 936.7  Reports.

    The annual report Advisory Councils are required to submit to the 
Finance Board pursuant to section 10(j)(11) of the Act shall include an 
analysis of the appropriate Bank's community support program and 
activities.
BILLING CODE 6725-01-U-AA

[[Page 60236]]

Appendix A to Part 936--Community Support Statement Form
[GRAPHIC] [TIFF OMITTED] TP27NO96.015


BILLING CODE 6725-01-C


[[Page 60237]]



Community Support Statement Instructions

    Purpose: To maintain continued access to long-term advances, 
section 10(g) of the Federal Home Loan Bank Act [12 U.S.C. 
Sec. 1430(g)] requires the Federal Housing Finance Board (Finance 
Board) to take into account a Federal Home Loan Bank member's 
performance under the Company Reinvestment Act of 1977 [12 U.S.C. 
Sec. 2901 et seq.] (CRA) and its record of lending to first-time 
homebuyers.
    Part I (CRA Factor): All members subject to CRA must complete this 
section. Indicate your institution's most recent federal CRA evaluation 
rating and date, and attach to this form the page(s) of that evaluation 
showing the rating and date. Do not attach the entire CRA evaluation. 
[If your institution is not subject to CRA, indicate this in the CRA 
evaluation field on this form.]
    If a member's most recent federal CRA evaluation is rated ``Needs 
to Improve,'' the Finance Board will place that member on a one-year 
probation, during which it will retain access to long-term advances. If 
the member does not receive an improved CRA rating before the end of 
the one-year probation period, its access to long-term advances will be 
restricted.
    If a member's most recent federal CRA rating is ``Substantial Non-
compliance,'' the Finance Board immediately will take action to 
restrict that member's access to long term advances. The restriction 
will remain in effect until the member's rating improves. (For purposes 
of Community Support review, the term ``long-term advances'' means 
advances with a term to maturity greater than one year).
    Part II (First-time Homebuyer Factor): All members must complete 
this section. An institution may demonstrate assistance to first-time 
homebuyers in many ways, but the Finance Board is particularly 
interested in actual loans, products, and services to first-time 
homebuyers. Although completion of both Section A and Section B is 
requested, you may satisfy the first-time homebuyer factor by 
demonstrating adequate lending performance (Section A), by 
demonstrating participation in programs that assist first-time 
homebuyers (Section B), or by a combination of both factors. If the 
information requested in Part II is inadequate to reflect your 
institution's compliance with the first-time homebuyer factor, you may 
attach a one-page description of your efforts to assist first-time 
homebuyers and/or an explanation of factors affecting your 
institution's ability to assist first-time homebuyers. No other 
information beyond this one-page description will be considered.
    If a member does not submit evidence of assistance to first-time 
homebuyers, the Finance Board immediately will take action to restrict 
that member's access to long term advances. The restriction will remain 
in effect until the member submits information satisfactory to the 
Finance Board. (For purposes of Community Support review, the term 
``long-term advances'' means advances with a maturity greater than one 
year).
    Part III (Certification): All members must complete this section. 
Your institution's board of directors, or an individual duly authorized 
to act on behalf of the board of directors, must certify that the 
information in this Community Support Statement and the attachments is 
correct to the best of its knowledge.
    Assistance: Your Federal Home Loan Bank has a Community Support 
Program that can assist you in preparing your Community Support 
Statement.
    Once you have completed this form, please submit it, along with all 
attachments, to the Federal Housing Finance Board, Office of 
Supervision, 1777 F Street, N.W., Washington, D.C. 2006.

    By the Board of Directors of the Federal Housing Finance Board.
Bruce A. Morrison,
Chairperson.
[FR Doc. 96-29747 Filed 11-26-96; 8:45 am]
BILLING CODE 6725-01-U