[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]
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FEDERAL HOUSING FINANCE BOARD
12 CFR Part 936
[No. 96-78]
Community Support Requirements
AGENCY: Federal Housing Finance Board.
ACTION: Proposed rule.
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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).
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\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).
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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.
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\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).
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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
