[Federal Register Volume 73, Number 205 (Wednesday, October 22, 2008)]
[Rules and Regulations]
[Pages 62856-62858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25124]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 740 and 745

RIN 3133-AD55


Display of Official Sign; Temporary Increase in Standard Maximum 
Share Insurance Amount; Coverage for Custodial Loan Accounts

AGENCY: National Credit Union Administration (NCUA).

ACTION: Interim final rule with request for comments.

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SUMMARY: NCUA is amending its share insurance rules to reflect 
Congress's recent action to increase temporarily the standard maximum 
share insurance amount (SMSIA) from $100,000 to $250,000 and increase 
coverage for custodial loan accounts. NCUA also is providing insured 
credit unions with additional options for displaying NCUA's official 
sign.

DATES: This rule is effective October 22, 2008. Written comments must 
be received on or before December 22, 2008.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on Share Insurance Coverage and Official Sign'' in the 
e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: All public comments are available on the 
agency's Web site at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical 
reasons. Public comments will not be edited to remove any identifying 
or contact information. Paper copies of comments may be inspected in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Staff Attorney, at the 
above address, or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Background

A. Temporary Increase in Share Insurance Coverage

    The Emergency Economic Stabilization Act of 2008 temporarily 
increases the standard maximum share insurance amount (SMSIA) from 
$100,000 to $250,000, effective October 3, 2008 and ending December 31, 
2009. Pub. L. No. 110-343 (October 3, 2008). After that period, the 
SMSIA will, by law, return to $100,000. The interim final rule amends 
NCUA's share insurance regulations to reflect the temporary increase in 
the SMSIA.

[[Page 62857]]

B. Custodial Loan Accounts

    Until this rulemaking, NCUA insured custodial loan accounts 
somewhat differently from how the Federal Deposit Insurance Corporation 
(FDIC) insured these kinds of accounts, which FDIC refers to as 
mortgage servicing accounts. This interim final rule changes the topic 
heading for the provision currently titled custodial loan accounts, 
Sec.  745.3(a)(3), so it will read ``mortgage servicing accounts.'' 
Also, the rule expands share insurance coverage for this type of 
account by insuring the principal and interest portion of a mortgagor's 
payment separately from the mortgagor's individual accounts. As in the 
current regulations, the taxes and insurance premiums portion of a 
mortgagor's payment will continue to be added together with the 
mortgagor's individual accounts and insured in the aggregate. This 
provision will be uniform with the coverage provided by FDIC.
    In brief, NCUA has considered all portions of a payment, including 
principal, interest, taxes, and insurance premiums, in such an account 
as the individually owned funds of the mortgagor/borrower. NCUA would 
aggregate payments with the owner's other individual accounts and 
insure them on a pass-through basis up to the SMSIA as a single 
ownership account. 12 CFR 745.3(a)(3). By contrast, FDIC considered the 
principal and interest portion of a payment in a mortgage servicing 
account as owned by and insured on a pass-through basis for the 
interest of the mortgagee/investor or security holder. FDIC considered 
the taxes and insurance premiums portion of a payment as owned by and 
insured on a pass-through basis for the interest of the mortgagor. FDIC 
added deposits for taxes and insurance premiums with other agency or 
nominee accounts where the mortgagor was the principal and insured them 
up to the standard insurance amount for single ownership accounts. 12 
CFR 330.7(d).
    FDIC has recently simplified the manner in which it insures 
mortgage servicing accounts because securitization methods and vehicles 
for mortgages have become more layered and complex, making it more 
difficult and time-consuming for a servicer to identify and determine 
the share of any investor in a securitization and in the principal and 
interest funds on deposit at an insured depository institution. FDIC 
believes this simplification will also prevent unexpected losses to 
investors who have far in excess of the current $250,000 per-depositor 
insurance limit.
    Specifically, as a result of its recent interim final rule, FDIC 
will provide insurance coverage on a per-mortgagor/borrower basis for 
both principal and interest payments and payments for taxes and 
insurance premiums. This is how NCUA currently insures mortgage 
servicing accounts. FDIC will insure a mortgagor's payment of principal 
and interest in a mortgage servicing account on a pass-through basis up 
to the current temporary $250,000 limit separate from any other 
accounts of that mortgagor. NCUA believes this treatment of principal 
and interest payments would provide greater and fairer coverage for 
credit union members and will take the same approach in its share 
insurance rules. FDIC also will insure a mortgagor's payment of taxes 
and insurance premiums in a mortgage servicing account on a pass-
through basis but will add these funds to other individually owned 
funds held by that mortgagor at the same insured institution up to the 
current temporary $250,000 limit. This is how NCUA currently addresses 
this situation.

C. Official Sign

    The temporary increase in the SMSIA from $100,000 to $250,000 until 
December 31, 2009 calls into question the usefulness of NCUA's official 
sign, as depicted in Part 740 of NCUA's rules, which includes a 
statement that member shares are insured to at least $100,000. 
Obviously, that understates the actual temporary coverage limit of 
$250,000. NCUA knows from recent experience in revising the official 
sign that requiring credit unions to replace the current sign with a 
revised sign would be an expensive and burdensome process. NCUA 
recognizes the need to balance this burden, which is especially heavy 
given the insurance increase is only temporary, with the need and 
desire to inform members they have increased insurance coverage to 
$250,000. In this regard, NCUA will revise its rules to provide insured 
credit unions with maximum flexibility. Specifically, insured credit 
unions will have the option to: (1) Continue to display the current 
official sign in Part 740, reflecting the $100,000 limit, without 
penalty; (2) display any other version of the official sign distributed 
or approved by NCUA and appearing on NCUA's official Web site through 
December 31, 2009 that reflects the temporary increase to $250,000; or 
(3) alter by hand or otherwise the current official sign to make it 
reflect the increase to $250,000 provided the altered sign is legible 
and otherwise complies with Part 740. An example of how an insured 
credit union could alter the sign by hand is to affix a sticker that 
reads ``$250,000'' over the portion of the current sign that reads 
``$100,000.'' Also, insured credit unions that do not change or alter 
the official sign can inform members about the temporary increase in 
account insurance through additional signage, for example, posting a 
sign in their lobbies or a notice on their Web sites that for the 
period October 3, 2008 through December 31, 2009, accounts are insured 
for $250,000 per account.

II. Effective Date of the Interim Rule

    This interim rule is effective on October 22, 2008 In this regard, 
NCUA invokes the good cause exception to the requirements in the 
Administrative Procedure Act (APA), 5 U.S.C. 553, that provides, before 
a rulemaking can be finalized, it must first be issued for public 
comment and, once finalized, must have a delayed effective date of 
thirty days from the publication date. NCUA believes good cause exists 
for making the interim rule effective immediately. The interim rule 
complies with a statutory mandate raising the SMSIA, provides more 
share insurance coverage to credit union members, provides additional 
flexibility to credit unions in displaying the official sign, and helps 
to maintain parity between NCUA's share insurance program and FDIC's 
deposit insurance program.
    For these reasons, NCUA has determined that the public notice and 
participation that ordinarily are required by the APA before a 
regulation may take effect would, in this case, be contrary to the 
public interest and that good cause exists for waiving the customary 
30-day delayed effective date. Nevertheless, NCUA desires to have the 
benefit of public comment before adopting a permanent final rule and, 
thus, invites interested parties to submit comments during a 60-day 
comment period. In adopting the final regulation, NCUA will revise the 
interim rule, if appropriate, in light of the comments received on the 
interim rule.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a rule may have on a 
substantial number of small entities (primarily those under ten million 
dollars in assets). This interim final rule implements enhanced share 
insurance coverage and provides flexibility to credit unions. 
Accordingly, it will not have a significant economic impact on a 
substantial number of small credit

[[Page 62858]]

unions, and therefore, no regulatory flexibility analysis is required.

Paperwork Reduction Act

    NCUA has determined that this rule will not increase paperwork 
requirements under the Paperwork Reduction Act of 1995 and regulations 
of the Office of Management and Budget.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this rule will not affect family well-
being within the meaning of section 654 of the Treasury and General 
Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 
(1998).

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) provides generally for congressional review 
of agency rules. A reporting requirement is triggered in instances 
where NCUA issues a final rule as defined by Section 551 of the APA. 5 
U.S.C. 551. NCUA does not believe this interim final rule is a ``major 
rule'' within the meaning of the relevant sections of SBREFA. NCUA has 
submitted the rule to the Office of Management and Budget for its 
determination in that regard.

List of Subjects

12 CFR Part 740

    Advertisements, Credit unions, Signs and symbols.

12 CFR Part 745

    Credit unions, Share insurance.

    By the National Credit Union Administration Board, this 15th day 
of October 2008.
Mary F. Rupp,
Secretary of the Board.

0
For the reasons discussed above, NCUA amends 12 CFR parts 740 and 745 
as follows:

PART 740--ACCURACY OF ADVERTISING AND NOTICE OF INSURED STATUS

0
1. The authority citation for part 740 continues to read as follows:


    Authority: 12 U.S.C. 1766, 1781, 1789.


0
2. Section 740.4(b)(1) is amended by adding a new sentence to the end 
to read as follows:


Sec.  740.4  Requirements for the official sign.

* * * * *
    (b) * * *
    (1) * * * To address the temporary increase through December 31, 
2009 in the standard maximum share insurance amount as defined in Sec.  
745.1(e) of this chapter, insured credit unions may continue to display 
the official sign depicted in paragraph (b) of this section but should 
inform members of the increased coverage through additional signage 
indicating the temporary increase in coverage, display other versions 
of the official sign distributed or approved by NCUA and appearing on 
NCUA's official Web site, or alter by hand or otherwise the official 
sign depicted in paragraph (b) of this section for that purpose 
provided the altered sign is legible and otherwise complies with this 
part.
* * * * *

PART 745--SHARE INSURANCE AND APPENDIX

0
3. The authority citation for part 745 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782, 
1787, 1789.


0
4. Section 745.1(e) is revised to read as follows:


Sec.  745.1  Definitions.

* * * * *
    (e) The term ``standard maximum share insurance amount,'' referred 
to as the ``SMSIA'' hereafter, means $250,000 from October 3, 2008, 
until December 31, 2009. Effective January 1, 2010, the SMSIA means 
$100,000 adjusted pursuant to subparagraph (F) of section 11(a)(1) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)(F)). All 
examples in this part use $100,000 as the SMSIA.

0
5. Section 745.3(a)(3) is revised to read as follows:


Sec.  745.3  Single ownership accounts.

    (a) * * *
    (3) Mortgage servicing accounts. Accounts maintained by a mortgage 
servicer, in a custodial or other fiduciary capacity, which are 
comprised of payments by mortgagors of principal and interest, shall be 
insured for the cumulative amount paid into the account by the 
mortgagors, up to a limit of the SMSIA per mortgagor. Accounts 
maintained by a mortgage servicer, in a custodial or other fiduciary 
capacity, which are comprised of payments by mortgagors of taxes and 
insurance premiums shall be added together and insured in accordance 
with paragraph (a)(2) of this section for the ownership interest of 
each mortgagor in such accounts. This provision is effective as of 
October 22, 2008 for all existing and future mortgage servicing 
accounts.
* * * * *
[FR Doc. E8-25124 Filed 10-21-08; 8:45 am]
BILLING CODE 7535-01-P