[Federal Register Volume 74, Number 246 (Thursday, December 24, 2009)]
[Rules and Regulations]
[Pages 68369-68370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-30435]



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  Federal Register / Vol. 74, No. 246 / Thursday, December 24, 2009 / 
Rules and Regulations  

[[Page 68369]]



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: Final rule.

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SUMMARY: On June 24, 2009, the NCUA published an interim final rule 
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. This 
rule confirms those amendments as final without change.

DATES: Effective December 24, 2009, the inteim final rule amending 12 
CFR Parts 701 published on June 24, 2009 (74 FR 29933) which was 
effective June 24, 2009 is confirmed as final.

FOR FURTHER INFORMATION CONTACT: Pamela Yu, Staff Attorney, at 1775 
Duke Street, Alexandria, Virginia 22314-3428, or telephone: (703) 518-
6540.

SUPPLEMENTARY INFORMATION: 

I. Background

    In June 2009, NCUA issued an interim final rule, with request for 
comments, to create a limited exception to the 20-year maturity limit 
on second mortgage loans. 74 FR 29933 (June 24, 2009). In this final 
rule, NCUA is finalizing the amendments to its lending rules to 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.

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 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 who qualify 
for a first mortgage modification, yet are still faced with the 
difficulty of affording their housing payments due to a second lien. 
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

    The interim rule sought to provide 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. 
Absent a 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 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.

II. Summary of Public Comments

    NCUA received six comments on the interim final rule: Three from 
Federal credit unions, two from credit union trade associations, and 
one from a State credit union league. All the commenters were 
supportive of the interim final rule but urged NCUA to permit Federal 
credit unions to extend the term of second mortgages to be coextensive 
with the term of existing first mortgages without participating in the 
MHA Second Lien Program. Some commenters stated the MHA Second Lien 
Program was cumbersome for some credit unions because of reporting 
requirements and others stated some credit unions are not interested in 
the government payment but simply wanted additional flexibility in 
modifying member loans. A couple of the commenters believed the 20-year 
maturity limit for second liens should be eliminated entirely, 
contending it would make Federal credit unions more competitive with 
other lenders. These comments are beyond the scope of the interim final 
rule and, therefore, the Board is constrained by the provisions of the 
Administrative Procedure Act

[[Page 68370]]

from making such changes in a final rule. The Board, however, may take 
these comments into consideration if it considers other changes to 
NCUA's lending regulation in the future.

III. Final Rule

    This final regulation adopts the amendments made in the interim 
final rule without change. The final rule creates a limited exception 
to the 20-year maturity limit on second mortgage loans. The new 
provision, Sec.  701.21(f)(3), permits 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 are 
still subject to the current 20-year maturity limitation on second 
liens. The final rule is intended to create a narrow exception to 
NCUA's lending rules to enable Federal credit unions to fully 
participate in the MHA Second Lien Program.

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 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. The Office of Information and Regulatory Affairs, an office 
within the Office of Management and Budget, has determined that this is 
not a major rule for purposes of SBREFA.

List of Subjects in 12 CFR Part 701

    Credit, Credit Unions, Mortgages.

0
For the reasons discussed above, NCUA confirms as final without change, 
the interim final rule amending 12 CFR Parts 701 published on June 24, 
2009, 74 FR 29933.

    By the National Credit Union Administration Board, this 17th day 
of December 2009.
Mary F. Rupp,
Secretary of the Board.
[FR Doc. E9-30435 Filed 12-23-09; 8:45 am]
BILLING CODE 7535-01-P