[Federal Register Volume 74, Number 120 (Wednesday, June 24, 2009)]
[Rules and Regulations]
[Pages 29933-29934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-14759]



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  Federal Register / Vol. 74, No. 120 / Wednesday, June 24, 2009 / 
Rules and Regulations  

[[Page 29933]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AD64


Exception to the Maturity Limit on Second Mortgages

AGENCY: National Credit Union Administration (NCUA).

ACTION: Interim final rule with request for comments.

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SUMMARY: NCUA is amending its lending rules to create a limited 
exception to the 20-year maturity limit on second mortgage loans. The 
amendment will permit federal credit unions participating in the 
Department of the Treasury's Making Home Affordable Program to modify a 
second mortgage loan, beyond 20 years, to match the term of a modified 
first mortgage loan.

DATES: This rule is effective June 24, 2009. Written comments must be 
received on or before August 24, 2009.

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 Exception to the Maturity Limit on Second Mortgages'' 
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: Pamela Yu, Staff Attorney, at the 
above address, or telephone: (703) 518-6593.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Financial Stability Plan

    The Emergency Economic Stabilization Act of 2008 (EESA) granted the 
Secretary of the Treasury emergency authorities and facilities to help 
restore liquidity and stability to the U.S. financial system. To 
address the ongoing financial crisis, the Department of the Treasury 
(Treasury) established the Financial Stability Plan, a comprehensive 
plan designed to address the credit crisis on multiple fronts. As part 
of this plan, Treasury has launched a series of initiatives toward 
financial recovery, including the Making Home Affordable (MHA) Program.

B. Making Home Affordable Program

    In February 2009, Treasury introduced the MHA Program to stabilize 
the American housing market and help struggling homeowners reduce their 
monthly mortgage payments to more affordable levels. The MHA Program 
aims to help millions of homeowners by providing new access to low-cost 
refinancing and by creating an affordable loan modification program to 
help families stay in their homes.
    Treasury estimates up to 50 percent of at-risk mortgages currently 
have second liens. In these cases, even if the first lien is modified 
to improve affordability, a second lien can put a homeowner at risk of 
foreclosure. To address this problem, Treasury recently launched a 
Second Lien Program in an effort to reach more troubled homeowners, and 
to maximize the effectiveness of the first lien modification program. 
The MHA Second Lien Program coordinates with the first lien program to 
help create a sustainable mortgage payment for those homeowners 
whoqualify for a first mortgage modification, yet are still faced with 
the difficulty of affording their housing payments due to a second 
lien.
    Highlights of the MHA Second Lien Program:
     In general, MHA will share the cost with lenders of 
reducing payments for homeowners on second mortgages by:
    [cir] Reducing the interest rate;
    [cir] Extending the term of the modified second mortgage to match 
the term of the modified first mortgage;
    [cir] Forbearing principal in the same proportion as any principal 
forbearance on the first lien, with the option of extinguishing 
principal under a set extinguishment schedule;
    [cir] After five years, the interest rate on the second lien will 
step up to the then current interest rate on the modified first 
mortgage, subject to certain conditions; and
    [cir] Investors will receive an incentive payment from Treasury.
    The MHA Second Lien Program includes pay-for-success incentives and 
guidelines for servicers modifying amortizing and interest-only second 
liens. Full details about the MHA Second Lien Program are available 
online at http://makinghomeaffordable.gov and http://www.financialstability.gov/docs/042809SecondLienFactSheet.pdf.

C. Loans to Members

    Absent this rulemaking, federal credit union participation in the 
MHA Second Lien Program would be limited because NCUA's lending rules 
impose a 20-year maturity limit on second mortgage loans that are 
secured by the member-borrower's primary residence. 12 CFR 
701.21(f)(1)(ii). First mortgages, however, may be made with maturities 
of up to 40 years, or longer if permitted by the NCUA Board. 12 CFR 
701.21(g).
    The MHA Secondary Lien Program guidelines require that, for 
amortizing loans, mortgage servicers ``[e]xtend the term of the 
modified second mortgage to match the term of the modified first 
mortgage, by amortizing the unpaid principal balance of the second lien 
over a term that matches the term of the

[[Page 29934]]

modified first mortgage.'' For interest-only loans, ``[t]he second lien 
will amortize over the longer of the remaining term of the modified 
first lien or the originally scheduled amortization term, with 
amortization to begin at the time specified in the original contract.'' 
Without an amendment to Sec.  701.21(f), federal credit unions cannot 
participate in the MHA Second Lien Program if the first mortgage is for 
a term longer than 20 years.
    This interim final rule creates a limited exception to the 20-year 
maturity limit on second mortgage loans. The new provision, Sec.  
701.21(f)(3), will permit federal credit unions participating in 
Treasury's MHA Program to modify a second mortgage to match the term of 
a modified first mortgage, beyond 20 years. Credit unions that are not 
participating in the MHA Second Lien Program will still be subject to 
the current 20-year maturity limitation on second liens.

II. Interim Rule and Immediate Effective Date

    NCUA is issuing this rulemaking as an interim final rule, effective 
upon publication. The Administrative Procedure Act (APA), 5 U.S.C. 553, 
requires that, before a rulemaking can be finalized, it must first be 
published as a notice of proposed rulemaking with the opportunity for 
public comment, unless the agency for good cause finds that notice and 
public comment are impracticable, unnecessary, or contrary to the 
public interest. Additionally, the APA requires that, once finalized, a 
rulemaking must have a delayed effective date of 30 days from the date 
of publication, except for good cause.
    In this regard, NCUA invokes the good cause exception to the 
requirements of the APA. NCUA believes good cause exists for issuing 
these amendments as an interim rule effective immediately. Due to the 
deep contraction in the American economy and, in particular, the 
housing market, millions of homeowners are struggling with unaffordable 
housing payments and are at risk of foreclosure. The interim rule 
provides credit unions with the ability to participate in the MHA 
Second Lien Program and, thus, to better assist struggling homeowners 
unable to afford their housing payments. The interim rule is limited in 
scope and does not impose any regulatory burden; rather, the rule 
provides greater flexibility for credit unions to assist their members 
in these turbulent economic times.
    For these reasons, NCUA has determined that the public notice and 
participation that the APA ordinarily requires before a regulation may 
take effect would, in this case, be contrary to the public interest 
and, further, that good cause exists for waiving the customary 30-day 
delayed effective date. Nevertheless, NCUA would like 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 in light of the comments received on the interim rule, if 
appropriate.

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 does not impose any 
regulatory burden but provides flexibility to all federal credit unions 
to allow for participation in the MHA Second Lien Program. Accordingly, 
it will not have a significant economic impact on a substantial number 
of small credit 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 in 12 CFR Part 701

    Credit, Credit unions, Mortgages.

    By the National Credit Union Administration Board, this 18th day 
of June 2009.
Mary F. Rupp,
Secretary of the Board.

0
For the reasons discussed above, NCUA amends 12 CFR Part 701 as 
follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority citation for Part 701 continues to read as follows:

    Authority:  12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, and 1789.

    Section 701.6 is also authorized by 15 U.S.C. 3717.
    Section 701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 
U.S.C. 1981 and 3601-3610.
    Section 701.35 is also authorized by 42 U.S.C. 4311-4312.


0
2. Section 701.21 is amended by adding new paragraph (f)(3) to read as 
follows:


Sec.  701.21  Loans to members and lines of credit to members.

* * * * *
    (f) * * *
    (3) Notwithstanding the general 20-year maturity limit on second 
mortgage loans, a federal credit union participating in the Department 
of the Treasury's Making Home Affordable Program may extend the term of 
a modified second mortgage to match the term of a modified first 
mortgage, in accordance with applicable program guidelines.
* * * * *
[FR Doc. E9-14759 Filed 6-23-09; 8:45 am]
BILLING CODE 7535-01-P