[Federal Register Volume 59, Number 158 (Wednesday, August 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20128]
[[Page Unknown]]
[Federal Register: August 17, 1994]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 337
RIN 1505-AA52
Supplemental Regulations Governing Federal Housing Administration
Debentures
AGENCY: Department of the Treasury, Fiscal Service, Bureau of the
Public Debt.
ACTION: Final rule.
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SUMMARY: This rule implements provisions of the Housing and Community
Development Act of 1992 that authorize the issuance of Federal Housing
Administration debentures in book-entry form.
EFFECTIVE DATE: September 16, 1994.
FOR FURTHER INFORMATION CONTACT: Fred Pyatt, Director, Division of
Special Investments, (304) 480-7752, or Cindy Reese, Deputy Chief
Counsel, Office of the Chief Counsel, (202) 219-3320.
SUPPLEMENTARY INFORMATION: Federal Housing Administration (FHA)
debentures have been issued since 1938 in registered certificated form
in payment of certain insured mortgages in default. FHA debentures are
fully guaranteed as to principal and interest by the United States. The
Treasury acts as the fiscal agent of the Department of Housing and
Urban Development (HUD) in administering its debenture issues. The
general regulations of the Department of the Treasury governing U.S.
securities (31 CFR Part 306) have been adopted by HUD to govern
transactions in its debentures. The Treasury regulations at 31 CFR part
337 supplement the general regulations, setting out provisions that
apply specifically to the debentures.
In 1986, the Department of the Treasury began issuing its
marketable securities exclusively in book-entry form. This action was
taken as book-entry technology was determined to be quicker, more
efficient, and less costly than issuing certificated securities. To
take advantage of this technology, HUD successfully secured
legislation, i.e., the Housing and Community Development Act of 1992,
Public Law 102-550, Sec. 516, 106 Stat. 3790 (1992), authorizing the
issuance of FHA debentures in book-entry form.
This rule revises and expands 31 CFR Part 337 to include provisions
relating to book-entry debentures. Book-entry debentures will be
governed by the rules for the TREASURY DIRECT Book-Entry Securities
System (31 CFR part 357) with several exceptions which reflect the
unique nature of the debentures. First, book-entry debentures, unlike
Treasury's book-entry marketable securities, may not be transferred to,
or held in, Treasury's commercial book-entry system; they may be
transferred only between accounts in the FHA book-entry debenture
system. Second, while debenture payments will be made by the direct
deposit (electronic funds transfer) method, prenotification messages or
test payment messages will not be used to verify payment instructions
since accurate payment information will have entities seeking
settlement of defaulted insured mortgages. Third, since debentures are
issued in settlement of defaulted mortgages rather than through an
auction process, no issue price information will be maintained for the
debentures.
Book-entry debentures will be maintained in the FHA book-entry
debenture system operated for Treasury by the Federal Reserve Bank of
Philadelphia acting as fiscal agent of the United States. Debentures in
certificated form may be exchanged for similar debentures in book-entry
form, but, once exchanged, may not be reissued in certificated form.
Debentures issued in book-entry form may not be exchanged for
debentures in certificated form.
This rule also revises 31 CFR Part 337 to reflect the
centralization of processing of debentures in both certificated and
book-entry form at the Federal Reserve Bank of Philadelphia, and to
eliminate the obsolete requirement that the registered owner or
assignee must assign certificated debentures presented for redemption
when payment is to be made to the registered owner or assignee.
Special Analysis
It has been determined that the rule does not constitute a
``significant regulatory action'' for purposes of Executive Order No.
12866. It has also been determined that prior notice of proposed
rulemaking is unnecessary and impracticable because the rule sets out
procedures that merely implement legislation authorizing the issuance
of debentures in book-entry form. Because no notice of proposed
rulemaking is required, the provisions of the Regulatory Flexibility
Act (5 U.S.C. 601, et seq.) do not apply to this rule.
List of Subjects in 31 CFR Part 337
Banks, Banking, Electronic funds transfers, Government Securities,
Federal Reserve System, Housing.
For the reasons set out in the preamble, 31 CFR Part 337 is revised
to read as follows:
PART 337--SUPPLEMENTAL REGULATIONS GOVERNING FEDERAL HOUSING
ADMINISTRATION DEBENTURES
Sec.
337.0 Scope of regulations.
Subpart A--Certificated Debentures
337.1 Applicability of Treasury regulations.
337.2 Transportation charges and risks.
337.3 Termination of transfers and denominational exchange
transactions.
337.4 Presentation and surrender.
337.5 Assignments.
337.6 Conversions to book-entry.
337.7 Servicing transactions.
337.8 Payment of mortgage insurance premiums.
337.9 Payment of final interest.
337.10 Payments.
Subpart B--Book-Entry Debentures
337.11 Original issue and conversions.
337.12 Applicability of TREASURY DIRECT regulations.
337.13 Payment of mortgage insurance premiums.
Subpart C--Additional Information
337.14 Address for further information.
337.15 General provisions.
Authority: 5 U.S.C. 301; 31 U.S.C. 321; Sec. 516, Pub. L. 102-
550, 106 Stat. 3790.
Sec. 337.0 Scope of regulations.
The United States Department of the Treasury is the agent of the
Federal Housing Administration for transactions in any debentures which
have been or may be issued pursuant to the authority conferred by the
National Housing Act (48 Stat. 1246), as amended; (12 U.S.C. 1701 et
seq.), as amended from time to time, including Mutual Mortgage
Insurance Fund Debentures, Housing Insurance Fund Debentures, War
Housing Insurance Fund Debentures, Military Housing Insurance Fund
Debentures, and National Defense Housing Insurance Fund Debentures. In
accordance with the regulations adopted by the Federal Housing
Commissioner and approved by the Secretary of the Treasury, such
transactions are governed by regulations of the Department of the
Treasury, so far as applicable.
Subpart A--Certificated Debentures
Sec. 337.1 Applicability of Treasury regulations.
The general regulations governing United States securities, part
306 of this chapter, apply, as the regulations for similar transactions
and operations in certificated debentures. To the extent that the
provisions in this part differ from the provisions in part 306, the
provisions in this part shall prevail.
Sec. 337.2 Transportation charges and risks.
Debentures presented for redemption at call or maturity, or for
authorized prior purchase, or for conversion to book-entry form, must
be delivered at the expense and risk of the holder. Debentures bearing
restricted assignments may be forwarded by registered mail, but for the
owner's protection debentures bearing unrestricted assignments should
be forwarded by insured registered mail. Debentures should be delivered
to the Federal Reserve Bank of Philadelphia, Securities Division, Ten
Independence Mall, P.O. Box 90, Philadelphia, Pennsylvania 19105-0090.
Debentures delivered to any other Federal Reserve Bank or Branch, to
the Department of Housing and Urban Development (HUD), or to the Bureau
of the Public Debt will be forwarded to the Federal Reserve Bank of
Philadelphia for processing.
Sec. 337.3 Termination of transfers and denominational exchange
transactions.
Debentures, which by their terms are subject to call, may be called
for redemption, in whole or in part, at par and accrued interest, on
any interest date on three months' notice. No transfers or
denominational exchanges in certificated debentures covered by a given
call will be made on the books of the Department of the Treasury on or
after the announcement of such call. However, this does not affect the
right of a holder of such debenture to sell and assign it on or after
the announcement of the call date.
Sec. 337.4 Presentation and surrender.
(a) For redemption. To facilitate the redemption of called or
maturing debentures, they may be presented and surrendered in the
manner prescribed in this section in advance of the call or maturity
date, as the case may be. Early presentation by holders will insure
prompt payment of principal and interest when due. The debentures must
first be assigned by the registered payee or his assignee, or by his
duly constituted representative, if required, in the form and manner
indicated in Sec. 337.5, and should then be submitted to the Federal
Reserve Bank of Philadelphia, accompanied by appropriate written
advice. A transmittal advice for this purpose will accompany the notice
of call.
(b) For purchase. Debentures, the purchase of which has been
authorized prior to call or maturity, may be assigned as instructed in
paragraph (a) of this section and immediately submitted in accordance
with procedures prescribed by HUD for this purpose.
Sec. 337.5 Assignments.
(a) If the registered payee, or an assignee holding a certificated
debenture under proper assignment from the registered payee, desires
that payment be made to such payee or assignee, the debenture need not
be assigned. If the owner desires for any reason that payment be made
to another, without intermediate assignment, the debentures should be
assigned to ``The Federal Housing Commissioner for redemption (or,
purchase) for the account of ________,'' inserting the name and address
of the person to whom payment is to be made. Proof of the authority of
the individual assigning on behalf of an owner will be required in
accordance with part 306 of this chapter.
(b) An assignment in blank or other assignment having similar
effect will be recognized, but in that event the debenture would be, in
effect, payable to bearer, and payment will be made in accordance with
the instructions received from the person surrendering the debenture
for redemption or purchase. For the owner's protection, such
assignments should be avoided unless the owner is willing to lose the
protection afforded by registration.
(c) Debentures submitted for conversion to book-entry form should
be assigned to ``The Federal Housing Commissioner for conversion to
book-entry debentures for the account of ________.'' The registration
on the book-entry account and/or the account number in which the
debentures should be deposited should be indicated.
(d) All assignments must be made on the debentures themselves
unless otherwise authorized by the Department of Treasury.
Sec. 337.6 Conversions to book-entry.
Upon implementation of the book-entry debenture system, to be
announced in advance by separate public notice, all new debentures will
be issued only in book-entry form, and may not thereafter be converted
to certificated form.
Certificated debentures may, upon the owner's request in accordance
with Sec. 337.5(c), be converted to book-entry. If such action is
taken, the owner shall be deemed to have irrevocably waived the right
to hold such debenture in certificated form.
Sec. 337.7 Servicing transactions.
Upon implementation of the book-entry debenture system, to be
announced in advance by separate public notice, any transfer or
denominational exchange of certificated debentures generally will be
made in book-entry form. If certificated debentures are desired, the
owner should so request in writing, before the book-entry debentures
are issued.
Sec. 337.8 Payment of mortgage insurance premiums.
When certificated debentures are tendered for purchase prior to
maturity in order that the proceeds thereof be applied to pay for
mortgage insurance premiums, any difference between the amount of the
debentures purchased and the amount of the mortgage insurance premium
will generally be issued to the owner in the form of a book-entry
debenture in the exact amount of such difference, provided it is one
dollar ($1.00) or more. However, if the owner so requests, such
difference will be settled with certificated debenture(s), together
with a cash adjustment, if any. Such request should be made in writing,
before the book-entry debenture in the amount of the difference is
issued.
Sec. 337.9 Payment of final interest.
Final interest on any debenture, whether purchased prior to or
redeemed on or after the call or the maturity date, will be paid with
the principal. In all cases the payment of principal and final interest
will be mailed or directed to the payment address given in the form of
advice accompanying the debenture surrendered.
Sec. 337.10 Payments.
Payments on certificated debentures will be made by fiscal agency
check in accordance with part 355 of this chapter, or, upon request, by
direct deposit (electronic funds transfer) in accordance with part 370
of this chapter. Information as to the deposit account at the financial
institution designated to receive a direct deposit payment shall be
provided on the appropriate form(s) designated by the Department.
Subpart B--Book-Entry Debentures
Sec. 337.11 Original issue and conversions.
Upon implementation of the book-entry debenture system, to be
announced in advance by separate public notice, all new debentures will
be issued only in book-entry form in the exact amount payable to the
owner. Once issued in book-entry form, a debenture may not be converted
to certificated form.
Sec. 337.12 Applicability of TREASURY DIRECT regulations.
The regulations governing the TREASURY DIRECT Book-Entry Securities
System (TREASURY DIRECT) (part 357 of this chapter) apply to govern
transactions in FHA book-entry debentures, with the following
exceptions:
(a) Securities account. (See Sec. 357.20 of this chapter.) An
account in the book-entry debenture system may be established by the
Department of the Treasury upon receipt of the request that a new
debenture be issued or that a certificated debenture be converted to
book-entry form. The statement of account shall contain information
regarding the account as of the date of such statement. It will include
a unique account number, but will not include price information.
(b) Transfers. (See Sec. 357.22 of this chapter.) A book-entry
debenture may be transferred only between accounts established in the
FHA book-entry debenture system.
(c) Debentures announced for call. Debentures, which by their terms
are subject to call, may be called for redemption, in whole or in part,
at par and accrued interest, on any interest date on three months'
notice. For purposes of a transaction request affecting ownership and/
or payment instructions with respect to a debenture announced for call,
a proper request must be received not less than twenty (20) calendar
days preceding the next payment date. If the twentieth day preceding a
payment date falls on a Saturday, Sunday, or a Federal holiday, the
last day set for the receipt of a transaction request will be the last
business day preceding that date. If a transaction request is received
less than twenty (20) calendar days preceding a payment date, the
Department may, in its discretion, act on such request if sufficient
time remains for processing. If a transaction request is received too
late for completion of the requested transaction, principal and final
interest on the called debentures will be paid to the owner of record
and sent to the payment address of record.
(d) Payments. (See Sec. 357.26 of this chapter.) Direct deposit
(electronic funds transfer) payments with respect to debentures, e.g.,
principal, interest and cash adjustments, will be made without
prenotification messages.
Sec. 337.13 Payment of mortgage insurance premiums.
When book-entry debentures are being purchased prior to maturity to
pay for mortgage insurance premiums, the difference between the amount
of the debentures purchased and the mortgage insurance premiums shall
be issued to the owner in the form of a book-entry debenture in the
exact amount of such difference, provided it is one dollar ($1.00) or
more.
Subpart C--Additional Information
Sec. 337.14 Address for further information.
Further information regarding the issuance of, transactions in, and
redemption of, FHA debentures may be obtained from the Federal Reserve
Bank of Philadelphia, Securities Division, Ten Independence Mall, P.O.
Box 90, Philadelphia, Pennsylvania 19105-0090, or from the Bureau of
the Public Debt, Division of Special Investments, 200 Third Street,
P.O. Box 396, Parkersburg, West Virginia 26102-0396.
Sec. 337.15 General Provisions.
As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to perform any necessary acts under this Part.
The Federal Reserve Bank of Philadelphia is specifically authorized to
operate the FHA debenture computer system and to perform day-to-day
operations and transactions relating to the debentures. The Secretary
of the Treasury may at any time or from time to time prescribe
supplemental and amendatory regulations governing the matters covered
by this part, notice of which shall be communicated promptly to the
registered owners of the debentures.
Dated: August 9, 1994.
Gerald Murphy,
Fiscal Assistant Secretary.
[FR Doc. 94-20128 Filed 8-16-94; 8:45 am]
BILLING CODE 4810-39-P
