[Federal Register Volume 80, Number 120 (Tuesday, June 23, 2015)]
[Notices]
[Pages 35953-35956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15412]


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FEDERAL RESERVE SYSTEM


Proposed Agency Information Collection Activities; Comment 
Request

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board of Governors of the Federal Reserve System 
(Board) its approval authority under the Paperwork Reduction Act (PRA), 
to approve of and assign OMB numbers to collection of information 
requests and requirements conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official 
OMB inventory of currently approved collections of information. Copies 
of the PRA Submission, supporting statements and approved collection of 
information instruments are placed into OMB's public docket files. The 
Federal Reserve may not conduct or sponsor, and the respondent is not 
required to respond to, an information collection that has been 
extended, revised, or implemented on or after October 1, 1995, unless 
it displays a currently valid OMB number.

DATES: Comments must be submitted on or before August 24, 2015.

ADDRESSES: You may submit comments, identified by FR 4027 or FR 4029, 
by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include OMB 
number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/apps/foia/proposedregs.aspx as submitted, 
unless modified for technical reasons. Accordingly, your comments will 
not be edited to remove any identifying or contact information. Public 
comments may also be viewed electronically or in paper form in Room 
3515, 1801 K Street (between 18th and 19th Streets NW) Washington, DC 
20006 between 9:00 a.m. and 5:00 p.m. on weekdays.

[[Page 35954]]

    Additionally, commenters may send a copy of their comments to the 
OMB Desk Officer--Shagufta Ahmed--Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 10235, 725 17th Street NW., Washington, DC 20503 or by 
fax to (202) 395-6974.

FOR FURTHER INFORMATION CONTACT: A copy of the PRA OMB submission, 
including the proposed reporting form and instructions, supporting 
statement, and other documentation will be placed into OMB's public 
docket files, once approved. These documents will also be made 
available on the Federal Reserve Board's public Web site at: http://www.federalreserve.gov/apps/reportforms/review.aspx or may be requested 
from the agency clearance officer, whose name appears below.
    Federal Reserve Board Clearance Officer--Nuha Elmaghrabi--Office of 
the Chief Data Officer, Board of Governors of the Federal Reserve 
System, Washington, DC 20551, (202) 452-3829. Telecommunications Device 
for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors 
of the Federal Reserve System, Washington, DC 20551.

SUPPLEMENTARY INFORMATION: 

Request for Comment on Information Collection Proposals

    The following information collections, which are being handled 
under this delegated authority, have received initial Board approval 
and are hereby published for comment. At the end of the comment period, 
the proposed information collections, along with an analysis of 
comments and recommendations received, will be submitted to the Board 
for final approval under OMB delegated authority. Comments are invited 
on the following:
    a. Whether the proposed collection of information is necessary for 
the proper performance of the Federal Reserve's functions; including 
whether the information has practical utility;
    b. The accuracy of the Federal Reserve's estimate of the burden of 
the proposed information collection, including the validity of the 
methodology and assumptions used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or start up costs and costs of operation, 
maintenance, and purchase of services to provide information.

Proposal To Approve Under OMB Delegated Authority the Extension for 
Three Years, Without Revision, of the Following Reports

    1. Report title: Recordkeeping Requirements Associated with the 
Guidance on Sound Incentive Compensation Policies.
    Agency form number: FR 4027.
    OMB control number: 7100-0327.
    Frequency: On occasion.
    Reporters: State member banks, U.S. bank holding companies, savings 
and loan holding companies, Edge Act and agreement corporations, and 
the U.S. operations of foreign banks with a branch, agency, or 
commercial lending company in the United States.
    Estimated annual reporting hours: One-time implementation: Large 
institutions--2,400 hours and small institutions--400 hours; Ongoing 
maintenance--228,400 hours.
    Estimated average hours per response: One-time implementation: 
Large institutions--480 hours and small institutions--80 hours; Ongoing 
maintenance--40 hours.
    Number of respondents: One-time implementation: Large 
institutions--5 respondents and small institutions--5 respondents; 
Ongoing maintenance--5,710 respondents.
    General description of report: This information collection is 
authorized pursuant to sections 9, 11(a), 11(i), 25, and 25A of the 
Federal Reserve Act (12 U.S.C. 248(a), 248(i), 324, 602, and 625), 
section 5 of the Bank Holding Company Act (12 U.S.C. 1844), section 
10(b)(2) of the Home Owners' Loan Act (12 U.S.C. 1467a(b)(2)), and 
section 7(c) of the International Banking Act (12 U.S.C. 3105(c)). 
Because the recordkeeping requirements are contained within guidance 
(and not a statute or regulation) they are voluntary. Because the 
records will be maintained by each banking institution, the Freedom of 
Information Act (FOIA) would only be implicated if the Board's 
examiners retained a copy of the records as part of an examination or 
supervision of the banking institution. To the extent the Board 
collects this information during the course of an examination or 
supervision of a banking institution, the information is considered 
confidential under exemption 8 of the FOIA (5 U.S.C. 552(b)(8)). In 
addition, the information may also be kept confidential under exemption 
4 of the FOIA which protects commercial or financial information 
obtained from a person that is privileged or confidential (5 U.S.C. 
552(b)(4)).
    Abstract: Incentive compensation practices in the financial 
services industry were one of many factors contributing to the 
financial crisis that began in 2007. Banking organizations too often 
rewarded employees for increasing the firm's short-term revenue or 
profit without adequate recognition of the risks the employees' 
activities posed for the firm. More importantly, problematic 
compensation practices were not limited to the most senior executives 
at financial firms. Compensation practices can encourage employees at 
various levels of a banking organization, either individually or as a 
group, to undertake imprudent risks that can significantly and 
adversely affect the risk profile of the firm.
    The Sound Incentive Compensation Policies (the Guidance) was 
developed to help protect the safety and soundness of banking 
organizations and promote the prompt improvement of incentive 
compensation practices throughout the banking industry. In addition, 
the guidance is consistent with the Principles for Sound Compensation 
Practices adopted by the Financial Stability Board (FSB) in April 2009, 
as well as the Implementation Standards for those principles issued by 
the FSB in September 2009.

Compatibility With Effective Controls and Risk Management

    Principle 2 of the Guidance states that a banking organization 
should have strong controls governing its process for designing, 
implementing, and monitoring incentive compensation arrangements. An 
organization's policies and procedures should:
     Identify and describe the role(s) of the personnel, 
business units, and control units authorized to be involved in the 
design, implementation, and monitoring of incentive compensation 
arrangements;
     identify the source of significant risk-related inputs 
into these processes and establish appropriate controls governing the 
development and approval of these inputs to help ensure their 
integrity; and
     identify the individual(s) and control unit(s) whose 
approval is necessary for the establishment of new incentive 
compensation arrangements or modification of existing arrangements. 
Banking organizations also should create and maintain sufficient 
documentation to permit an audit of the organization's processes for 
establishing, modifying, and monitoring incentive compensation 
arrangements.
    The Guidance also states that a banking organization should conduct 
regular internal reviews to ensure that

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its processes for achieving and maintaining balanced incentive 
compensation arrangements are consistently followed. Such reviews 
should be conducted by audit, compliance, or other personnel in a 
manner consistent with the organization's overall framework for 
compliance monitoring. An organization's internal audit department also 
should separately conduct regular audits of the organization's 
compliance with its established policies and controls relating to 
incentive compensation arrangements. The results should be reported to 
appropriate levels of management and, where appropriate, the 
organization's board of directors.

Strong Corporate Governance

    Principle 3 of the Guidance states that the board of directors 
should review and approve the overall goals and purposes of the firm's 
incentive compensation system. The board of directors should provide 
clear direction to management to ensure that its policies and 
procedures are carried out in a manner that achieves balance and is 
consistent with safety and soundness.
    The board of directors should approve and document any material 
exceptions or adjustments to the incentive compensation arrangements 
established for senior executives and should carefully consider and 
monitor the effects of any approved exceptions or adjustments on the 
balance of the arrangement, the risk-taking incentives of the senior 
executive, and the safety and soundness of the organization.
    The board of directors should receive and review, on an annual or 
more frequent basis, an assessment by management, with appropriate 
input from risk management personnel, of the effectiveness of the 
design and operation of the organization's incentive compensation 
system in providing risk taking incentives that are consistent with the 
organization's safety and soundness. These reports should include an 
evaluation of whether or how incentive compensation practices may be 
encouraging excessive risk taking. These reviews and reports should be 
appropriately scoped to reflect the size and complexity of the banking 
organization's activities and the prevalence and scope of its incentive 
compensation arrangements. In addition, at banking organizations that 
are significant users of incentive compensation arrangements, the board 
should receive periodic reports that review incentive compensation 
awards and payments relative to risk outcomes on a backward-looking 
basis to determine whether the organization's incentive compensation 
arrangements may be promoting excessive risk-taking.
    2. Report title: Interagency Guidance on Managing Compliance and 
Reputation Risks for Reverse Mortgage Products.
    Agency form number: FR 4029.
    OMB control number: 7100-0330.
    Frequency: On occasion.
    Reporters: State member banks that originate proprietary and Home 
Equity Conversion Program (HECM) reverse mortgages.
    Estimated annual reporting hours: Implementation of policies and 
procedures, 680 hours; Review and maintenance of policies and 
procedures, 136 hours.
    Estimated average hours per response: Implementation of policies 
and procedures, 40 hours; Review and maintenance of policies and 
procedures, 8 hours.
    Number of respondents: Implementation of policies and procedures, 
17 respondents; Review and maintenance of policies and procedures, 17 
respondents.
    General description of report: Previously, the Board's Legal 
Division determined that the Board was authorized to issue this 
guidance pursuant to its authority under section 18(f) of the Federal 
Trade Commission Act, which authorized the Board to prescribe 
regulations regarding unfair or deceptive acts or practice by banks (15 
U.S.C. 57a(f)) and section 105 of the Truth in Lending Act, which 
authorized the Board to prescribe regulations to carry out the purposes 
of the Truth in Lending Act (TILA) (15 U.S.C. 1604). However, under the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act) much of the Board's authority under these laws was transferred to 
the Consumer Financial Protection Bureau. Nonetheless, we continue to 
believe that the Board has the authority to issue this guidance 
pursuant to its authority under section 39 of the Federal Deposit 
Insurance Act (FDI Act), which generally authorizes the Board to 
establish safety and soundness standards for depository institutions 
supervised by the Board (12 U.S.C. 1381p-1(a)). Financial institutions' 
obligation under this guidance is voluntary. Because the documentation 
required by the guidance is maintained by each institution, the Freedom 
of Information Act (FOIA) would only be implicated if the Board's 
examiners retained a copy of this information as part of an examination 
or supervision of a bank. However, records obtained as a part of an 
examination or supervision of a bank are exempt from disclosure under 
FOIA exemption (b)(8), for examination material (5 U.S.C. 552(b)(8)). 
In addition, the information may also be kept confidential under 
exemption 4 of the FOIA which protects commercial or financial 
information obtained from a person that is privileged or confidential 
(5 U.S.C. 552(b)(4)).
    Abstract: Reverse mortgages are home-secured loans typically 
offered to elderly consumers. Financial institutions currently provide 
two types of reverse mortgage products: The lenders' own proprietary 
reverse mortgage products and reverse mortgages insured by the 
Department of Housing and Urban Development's Federal Housing 
Administration (FHA). Reverse mortgage loans insured by the FHA are 
made pursuant to the guidelines and rules established by HUD's HECM 
program. HECM loans and proprietary reverse mortgages are also subject 
to the rules that implement consumer protection laws such as the Real 
Estate Settlement Procedures Act (RESPA) and TILA.
    In August 2010, the Federal Financial Institutions Examination 
Council, on behalf of its member agencies,\1\ published a Federal 
Register notice adopting supervisory guidance titled ``Reverse Mortgage 
Products: Guidance for Managing Compliance and Reputation Risks.'' \2\ 
The guidance is designed to help financial institutions with risk 
management and assist financial institutions' efforts to ensure that 
their reverse mortgage lending practices adequately address consumer 
compliance and reputation risks.
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    \1\ The Board, the Federal Deposit Insurance Corporation, the 
National Credit Union Administration, the Office of the Comptroller 
of the Currency, and the Office of Thrift Supervision.
    \2\ 75 FR 50801.
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    The guidance describes reporting, recordkeeping, and disclosures 
for both proprietary and HECM reverse mortgages. A number of these 
disclosures are ``usual and customary'' business practices for 
proprietary and HECM reverse mortgages, and these would not meet the 
PRA's definition of ``paperwork.'' Other included disclosure 
requirements are currently mandated by RESPA or TILA for all reverse 
mortgage loans and information collections required by HUD's rules for 
HECM loans.\3\ Discussion of these requirements in the guidance is also 
not considered additional paperwork burden imposed by the guidance.
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    \3\ OMB Control No. 2502-0524.
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    Proprietary reverse mortgage products, however, are not subject to 
HUD's rules for HECM loans. To the extent that the interagency guidance 
applies HECM requirements to

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proprietary loans, this would meet the PRA's definition of paperwork 
burden.
    There are also additional provisions in the guidance that apply to 
both proprietary and HECM reverse mortgages that do not meet the 
``usual and customary'' standard, are not covered by already approved 
information collections and, therefore, likewise meet the PRA's 
definition of paperwork burden.

Proprietary Reverse Mortgages

    Financial institutions offering proprietary reverse mortgages are 
encouraged under the guidance to follow or adopt relevant HECM 
requirements for mandatory counseling, disclosures, affordable 
origination fees, restrictions on cross-selling of ancillary products, 
and reliable appraisals.

Proprietary and HECM Reverse Mortgages

    Financial institutions offering either proprietary or HECM reverse 
mortgages are encouraged to develop clear and balanced product 
descriptions and make them available to consumers shopping for a 
mortgage. They should set forth a description of how disbursements can 
be received and include timely information to supplement disclosures 
mandated by TILA and other disclosures. Promotional materials and 
product descriptions should include information about the costs, terms, 
features, and risks of reverse mortgage products.
    Financial institutions should adopt policies and procedures that 
prohibit directing a consumer to a particular counseling agency or 
contacting a counselor on the consumer's behalf. They should adopt 
clear written policies and establish internal controls specifying that 
neither the lender nor any broker will require the borrower to purchase 
any other product from the lender in order to obtain the mortgage. 
Policies should be clear so that originators do not have an 
inappropriate incentive to sell other products that appear linked to 
the granting of a mortgage. Legal and compliance reviews should include 
oversight of compensation programs so that lending personnel are not 
improperly encouraged to direct consumers to particular products.
    Financial institutions making, purchasing, or servicing reverse 
mortgages through a third party should conduct due diligence and 
establish criteria for third-party relationships and compensation. They 
should set requirements for agreements and establish systems to monitor 
compliance with the agreement and applicable laws and regulations. They 
should also take corrective action if a third party fails to comply. 
Third-party relationships should be structured in a way that does not 
conflict with RESPA.

    Board of Governors of the Federal Reserve System, June 18, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-15412 Filed 6-22-15; 8:45 am]
 BILLING CODE 6210-01-P