81 FR 91690 - Federal Home Loan Bank New Business Activities
FEDERAL HOUSING FINANCE AGENCY Federal Register Volume 81, Issue 243 (December 19, 2016)
Federal Register Volume 81, Issue 243 (December 19, 2016)
| Page Range | 91690-91694 | |
| FR Document | 2016-30245 |
[Federal Register Volume 81, Number 243 (Monday, December 19, 2016)] [Rules and Regulations] [Pages 91690-91694] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-30245] ----------------------------------------------------------------------- FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1272 RIN 2590-AA84 Federal Home Loan Bank New Business Activities AGENCY: Federal Housing Finance Agency. ACTION: Final rule. ----------------------------------------------------------------------- [[Page 91691]] SUMMARY: The Federal Housing Finance Agency (FHFA) is amending its regulations addressing requirements for the Federal Home Loan Banks' (Banks) new business activity (NBA) notices. The final rule reduces the scope of activities requiring submission of an NBA notice, modifies the submission requirements, and establishes new timelines for agency review and approval of such notices. The final rule also reorganizes a part of the regulations to clarify the protocol for FHFA review of NBA notices. DATES: The final rule is effective on January 18, 2017. FOR FURTHER INFORMATION CONTACT: Lara Worley, Principal Financial Analyst, [email protected], 202-649-3324, Division of Federal Home Loan Bank Regulation; or Winston Sale, Assistant General Counsel, [email protected], 202-649-3081 (these are not toll-free numbers), Office of General Counsel, Federal Housing Finance Agency, Constitution Center, 400 Seventh Street SW., Washington, DC 20219. The telephone number for the Telecommunications Device for the Hearing Impaired is 800-877-8339. SUPPLEMENTARY INFORMATION: I. Background On August 23, 2016, FHFA published a proposed rule that would have modified FHFA's regulation establishing the process for the submission, review, and agency approval of Bank NBA notices. The proposed rule would have narrowed the scope of activities requiring submission of an NBA notice to those that entail ``material risks not previously managed by the Bank'' and would have excluded from the definition of ``new business activity'' the acceptance of new types of advance collateral. The proposed rule would have streamlined the NBA notice content requirements, thereby providing the Banks with greater flexibility to tailor their notices to the nature of the particular activity in which they seek to engage. The proposed rule also would have established new 30 and 80 business-day review timelines, under which FHFA would approve or deny notices. Those time periods could be tolled while FHFA awaited responses from the Banks for additional information, or in the event that the FHFA Director (Director) determined that the notice raised significant policy, supervisory, or legal issues that require additional time to resolve. The proposed rule generally provided that if FHFA were to fail to respond to, approve, or deny the notice, as applicable, within the appropriate timeline, then the notice would be deemed to have been approved as of the end of the applicable time period. The proposed rule also included an exception to the deemed to be approved concept for those notices for which the Director has elected to extend the review timeline by an additional 60 business days. For such notices, FHFA's affirmative approval would be required before the requesting Bank could commence the proposed activity. The proposed rule also would have delegated to the Deputy Director for Federal Home Loan Bank Regulation (Deputy Director) the authority to approve NBA notices, which delegation is in substance identical to the similar delegations of authority set forth in FHFA's procedures regulations, under which the Deputy Director can grant approvals and issue non-objection letters on behalf of the Director.\1\ --------------------------------------------------------------------------- \1\ See 12 CFR 1211.3 and 1211.4. --------------------------------------------------------------------------- II. Consideration of Differences Between the Banks and the Enterprises When promulgating regulations relating to the Banks, section 1313(f) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 requires the Director to consider the differences among the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (together, the Enterprises) and the Banks with respect to the Banks' cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; and joint and several liability.\2\ The changes in this rulemaking apply exclusively to the Banks and generally affect the scope and timing of their NBA notifications. Apart from those changes, the substance of this final rule is substantially similar to that of the existing NBA regulation. In preparing the proposed and final rules the Director has considered the differences between the Banks and the Enterprises as they relate to the above factors and has determined that none of the statutory factors would be implicated by the final rule. The proposed rule requested public comments on the extent to which the rule would implicate any of the statutory factors, but none of the comment letters addressed this requirement. --------------------------------------------------------------------------- \2\ See 12 U.S.C. 4513(f). --------------------------------------------------------------------------- III. Response to Comment Letters In response to the proposed rule, FHFA received four substantive comment letters, a joint letter from the Banks and one letter each from the National Association of Home Builders (NAHB), the Independent Community Bankers of America, and a private citizen. Most of the letters generally supported the proposed rule, but also recommended different ways in which FHFA should revise certain aspects of the rule. In response to these recommendations, FHFA has incorporated two revisions into the final rule, which are discussed below. The following sections of this document describe the issues raised by the commenters, along with FHFA's responses, which are included as part of FHFA's descriptions of the particular provisions of the final rule for which the commenters had suggested revisions. For other provisions of the proposed rule about which the commenters raised no issues, FHFA has adopted them without change. IV. Final Rule FHFA has made two revisions to the regulatory text of the final rule in response to comments received on the proposed rule, each of which is discussed below. Apart from those revisions, the regulatory text of the final rule is unchanged from that of the proposed rule. FHFA has declined to make certain revisions recommended by the commenters, which also are discussed below. A. Comments Incorporated Into the Final Rule 1. Submission Requirements (1272.3) Section 1272.3 of the rule describes the types of information that a Bank must include as part of its NBA notice. The proposed rule had required that a Bank indicate in its NBA notice whether the contemplated activity had been previously approved by FHFA for any other Bank. FHFA had included this requirement in the proposed rule to help expedite its review of NBA notices in cases in which a Bank is seeking approval of an activity it knows to have been approved for another Bank, and thus should raise no new legal or policy issues. The Banks commented that this requirement should be limited to instances where the requesting Bank actually has knowledge that FHFA has approved the same activity for another Bank. The Banks explained that FHFA should have the most comprehensive information on which Banks have previously been approved for particular activities, and that because NBA notices, and any corresponding FHFA approvals, are not public documents, a Bank would not necessarily know whether FHFA has previously approved a given activity for another Bank. The [[Page 91692]] Banks offered specific revisions to the regulatory text to address their concern. FHFA agrees with this recommendation and has revised the final rule by adding the language suggested by the Banks to limit the applicability of this provision to instances where the requesting Bank has actual knowledge that FHFA has previously approved the activity for another Bank. 2. Approval Standard (1272.4) Section 1272.4(e) of the proposed rule would have added a new, explicit standard under which FHFA would approve NBA notices. In substance, that standard would have provided that FHFA would approve an NBA notice only if it determined that the Bank could conduct the proposed activities in a safe and sound manner, and that the activity would be consistent with the housing finance and community investment mission of the Banks, and with the cooperative nature of the Federal Home Loan Bank System (Bank System). The Banks commented that the proposed approval standard failed to reference that portion of the Banks' statutory mission that requires them to be a source of liquidity for their members, and did not encompass certain other services that they are legally authorized to provide to their members. The Banks also objected to the use of the phrase ``cooperative nature of the Bank System'' as part of the approval standard, contending that it is vague and is not supported by statutory language. FHFA agrees that the Banks' overall mission includes serving as a source of liquidity for their members and has incorporated language into the final rule's approval standard reflecting the same.\3\ The final rule, however, retains the language referring to the ``cooperative nature of the Bank System'' as part of the approval standard. By statutory design, the Banks are cooperative institutions, meaning that they provide products and services to their member institutions, and only to their members, and those members collectively own the Bank. Moreover, the very provision of the statute that the Banks cited in support of their request to include a liquidity element as part of the approval standard also refers to the ``cooperative ownership structure'' of the Banks.\4\ --------------------------------------------------------------------------- \3\ See 12 U.S.C. 4513(f)(1)(B). \4\ See 12 U.S.C. 4513(f)(1)(A). --------------------------------------------------------------------------- FHFA's intent in including this language in the standard was to ensure that before approving a Bank's request to engage in any new type of activity FHFA would confirm that the proposed activity would in some manner benefit the members of the Bank. Examples of activities that would be consistent with the cooperative nature of the Bank System, and which have been the subject of prior NBA notice approvals, would include proposals to purchase mortgage loans from Bank members or otherwise facilitate the members' sale of such loans, as well as proposals to allow members to pledge new types of collateral to support their borrowing from the Banks, which would no longer require an NBA notice under the final rule. With respect to the Banks' comment that the proposed standard also should consider certain services the Banks are legally authorized to provide to their members, the intent of this provision of the rule is to articulate a general standard against which FHFA can assess a proposed activity in deciding whether to approve the notice. It is not intended to be a list of all products or services that a Bank may provide to its members or of all investments and activities in which the Banks now engage. B. Comments Not Incorporated Into the Final Rule 1. Definition of NBA (1272.1) The proposed rule would have narrowed the scope of the NBA regulation in two ways: (1) By limiting it to activities that introduce new material risks to the Bank; and (2) By eliminating the need to file an NBA notice prior to accepting new types of collateral. The final rule retains both of those provisions. In explaining the rationale for excluding new collateral types from the NBA definition, the supplementary information for the proposed rule stated that ``the remaining universe of new types of collateral that might potentially fall into the [other real estate related collateral] category is small.'' \5\ The Banks commented that this language could be interpreted either to limit the types of assets that qualify as other real estate related collateral to the specific items already approved by FHFA, or to limit the proposed exclusion from the NBA filing requirement to those types of collateral that FHFA has previously approved for other Banks. The Banks asked that FHFA confirm in the final rule that FHFA did not intend the statement in the proposed rule to have either of those effects. The intent of the statement in the proposed rule was simply to acknowledge that, as a practical matter, the Banks and their members likely have already identified most of the types of assets held by the members that could qualify as ``other real estate related collateral,'' and thus any new types of such collateral would likely not present any materially different risks beyond those that the Banks currently manage with their existing collateral. The language of the final rule is unqualified, meaning that all types of new collateral are excluded from the term ``new business activity'' and thus would not trigger the requirement to file an NBA notice. --------------------------------------------------------------------------- \5\ See 81 FR 57501 (August 23, 2016). --------------------------------------------------------------------------- The proposed rule did not specifically address the extent to which the NBA regulations would apply to the Banks' mortgage programs or products, including Acquired Member Asset (AMA) programs or products. Nonetheless, commenters requested that FHFA revise the definition of ``new business activity'' to exclude: (1) Any new AMA product involving federally-insured or guaranteed loans; (2) any modifications that a Bank proposed to make to its existing AMA programs or products, and; (3) any proposals by one Bank to begin offering a new AMA program or product that FHFA has previously approved for another Bank. The three areas commenters identified for exclusion would likely encompass all activities related to mortgage programs and products. The Banks had raised similar comments in response to a separate proposed rulemaking to amend and relocate the current AMA regulations.\6\ FHFA has not included any of these revisions in the final rule. As noted above, under the final rule any new activity will require the submission of an NBA notice if it entails new material risks to the Bank. To the extent that modifications to a Bank's existing mortgage program or product, or the establishment of new products involving federally-insured or guaranteed loans, would present new material risks to the requesting Bank, they would require the submission of an NBA notice. Similarly, while a request to offer a mortgage program or product that FHFA has already approved for another Bank would not raise new legal or policy issues, it could raise supervisory issues with respect to the requesting Bank, such as with respect to its ability to manage the particular risks associated with the program or product. FHFA believes that a Bank should apply the new material risk standard equally to all types of new activities in which it might engage. FHFA does not believe that it should grant a blanket exclusion from its review of any particular area of the Banks' business. --------------------------------------------------------------------------- \6\ See 80 FR 78689 (December 17, 2015). --------------------------------------------------------------------------- FHFA expects that there may be instances in which a Bank is unsure [[Page 91693]] whether the risks associated with a particular new activity or modification to an existing activity are material, for purposes of the new business activity regulation. As is the case under the current regulation, FHFA is available to consult with the Banks regarding the need to file an NBA notice with respect to a proposed activity, and will make every effort to promptly advise a Bank whether a filing is required. With respect to new activities that the Banks commence after determining that they do not present new material risks, FHFA will assess those the risks associated with those activities as part of its regular supervisory process, including examinations. 2. Review Process (1272.4) The proposed rule had used ``business days'' for calculating the length of the FHFA review periods. The Banks recommended that replacing that term with ``calendar days'' would be more convenient and consistent with other regulations. Doing so, however, also would have the effect of reducing the period of time available for FHFA to review and act on an NBA notice. FHFA had proposed the 30 and 80 business-day review periods based on its experience in considering prior NBA notices, some of which are straightforward and others of which present significant policy or legal issues, which require more time to assess. Accordingly, FHFA has decided to retain these time periods in the final rule, and does not believe that either it or the Banks would face any undue difficulty in determining the length of the review period based on business days. In the Supplementary Information to the proposed rule, FHFA stated that the 30 business-day review period established in Sec. 1272.4(a) would be ``generally intended for activities already approved for other Banks[.]'' \7\ The NAHB requested that the final rule explicitly provide that all NBA notices pertaining to activities that FHFA has previously approved for other Banks be required to be reviewed under the 30 business-day timeline. Although FHFA believes that in many cases it will in fact process such NBA notices within 30 business days, it declines to incorporate this request into the regulation because of the possibility that Bank-specific conditions could raise supervisory issues necessitating review under the 80 business-day timeline. --------------------------------------------------------------------------- \7\ 81 FR 57502 (August 23, 2016). --------------------------------------------------------------------------- The proposed rule included provisions that would deem any NBA notice to be approved if FHFA did not respond within the applicable 30 or 80 business-day timeline. The proposed rule, however, did not include such an automatic approval provision for those notices for which the Director extended the review period for an additional 60 business days, beyond the 80 business-day period. For those notices, the Banks could commence the activities only upon affirmative approval from FHFA. The Banks requested that FHFA revise the final rule so that even those notices that were subject to the Director's 60 business-day extended review period would also be subject to a deemed approved provision if the Director did not act by the end of the extended period. The Banks commented that the 80-day review period offers sufficient time for FHFA to act on a notice without the Director's 60- day extension and that it is unclear what regulatory or public policy benefit would be served by extending the proposed time frame. FHFA declines to accept the Banks' suggestion, principally because notices for which the Director has extended the review period will most likely involve significant policy or legal issues, in which the Director will be directly involved. Such matters may present issues of first impression for the agency that require an extended period to fully vet, and thus do not lend themselves to being approved automatically by the passage of time. Moreover, such an automatic approval provision could inappropriately conflict with the Director's statutory oversight authority, which provides the Director with broad latitude to exercise such incidental powers necessary in the supervision and regulation of the Banks.\8\ --------------------------------------------------------------------------- \8\ See 12 U.S.C. 4513(a)(2)(B). --------------------------------------------------------------------------- 3. Approval of Notices (1272.7) The proposed rule included a provision delegating authority to the Deputy Director to approve NBA notices for the agency. That provision mirrored existing regulatory delegations of authority to the Deputy Director for determining whether to grant ``approvals'' and to issue ``non-objection letters'' under FHFA's procedures regulations.\9\ The delegation in the proposed rule, like those in the other regulations, included language to the effect that the Director reserved the right to modify, rescind, or supersede any approval granted by the Deputy Director under the delegation of authority. Commenters expressed concern that this reservation of authority to the Director would create uncertainty for Banks, which may have committed substantial resources to implement approved activities, as to the possibility that the Director might rescind the delegated approval well after the fact. To eliminate this uncertainty, commenters requested that the final rule require that the Director grant all NBA approvals. FHFA declines to accept the commenters' requests and has adopted the delegation of authority provision as proposed. FHFA included the delegation of authority provision within the proposed rule in large part to expedite the approval process for those NBA notices that do not raise significant policy, supervisory, or legal issues. This delegation of authority for the NBA notices is nearly identical to the existing delegations under which the Deputy Director has granted approvals for other transactions or issued non-objection letters to the Banks, and thus should create no greater uncertainty for the Banks than already exists with respect to approvals and non-objections letters. Further, as a matter of agency practice, the Deputy Director generally consults with the Director before granting any delegated authority approvals, particularly those raising significant supervisory, policy, or legal issues, and should continue to do so under the final rule. --------------------------------------------------------------------------- \9\ See 12 CFR 1211.3(a) and 1211.4(a). --------------------------------------------------------------------------- V. Paperwork Reduction Act The Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.) requires that regulations involving the collection of information receive clearance from the Office of Management and Budget (OMB). The final rule contains no such collection of information requiring OMB approval under the PRA. Consequently, no information has been submitted to OMB for review. VI. Regulatory Flexibility Act The final rule applies only to the Banks, which do not come within the meaning of small entities as defined in the Regulatory Flexibility Act (RFA). See 5 U.S.C. 601(6). Therefore, in accordance with section 605(b) of the RFA, FHFA certifies that this final rule is not likely to have a significant economic impact on a substantial number of small entities. List of Subjects in 12 CFR Part 1272 Federal home loan banks, Reporting and recordkeeping requirements. Authority and Issuance 0 Accordingly, for reasons stated in the preamble and under the authority of 12 U.S.C. 1431(a), 1432(a), 4511(b), 4513, 4526(a), FHFA hereby amends subchapter D of chapter XII of title 12 of the Code of Federal Regulations by revising part 1272 to read as follows: [[Page 91694]] PART 1272--NEW BUSINESS ACTIVITIES Sec. 1272.1 Definitions. 1272.2 Limitation on Bank authority to undertake new business activities. 1272.3 New business activity notice requirement. 1272.4 Review process. 1272.5 Additional information. 1272.6 Examinations. 1272.7 Approval of notices. Authority: 12 U.S.C. 1431(a), 1432(a), 4511(b), 4513, 4526(a). Sec. 1272.1 Definitions. As used in this part: Business Day means any calendar day other than a Saturday, Sunday, or legal public holiday listed in 5 U.S.C. 6103. NBA Notice Date means the date on which FHFA receives a new business activity notice. New business activity (NBA) means any business activity undertaken, transacted, conducted, or engaged in by a Bank that entails material risks not previously managed by the Bank. A Bank's acceptance of a new type of advance collateral does not constitute an NBA. Sec. 1272.2 Limitation on Bank authority to undertake new business activities. No Bank shall undertake an NBA except in accordance with the procedures set forth in this part. Sec. 1272.3 New business activity notice requirement. Prior to undertaking an NBA, a Bank shall submit a written notice of the proposed NBA that provides a thorough, meaningful, complete, and specific description of the activity such that FHFA will be able to make an informed decision regarding the proposed activity. At a minimum, the notice should include the following information: (a) A written opinion of counsel identifying the specific statutory, regulatory, or other legal authorities under which the NBA is authorized and, for submissions raising legal questions of first impression, a reasoned analysis explaining how the cited authorities can be construed to authorize the new activity; (b) A full description of the proposed activity, including, when applicable, infographics and definitions of key terms. In addition, the Bank shall indicate whether the proposed activity represents a modification to a previously approved activity in which the Bank is engaged or is an activity that FHFA has approved for any other Banks, if known to the requesting Bank, and if applicable; (c) A discussion of why the Bank proposes to engage in the new activity and how the activity supports the housing finance and community investment mission of the Bank; (d) A discussion of the risks presented by the new activity and how the Bank will manage these risks; and (e) A good faith estimate of the anticipated dollar volume of the activity, and the income and expenses associated with implementing and operating the new activity, over the initial three years of operation. Sec. 1272.4 Review process. (a) Within 30 business days of the NBA Notice Date, FHFA will take one of the following actions: (1) Approve the proposed NBA; (2) Deny the proposed activity; or (3) Inform the Bank that the activity raises policy, legal, or supervisory issues that require further evaluation. If FHFA fails to take any of those actions by the 30th business day following the NBA Notice Date, the NBA notice shall be deemed to have been approved and the Bank may commence the activity for which the notice was submitted. (b) In the case of any notice that FHFA has determined requires further evaluation, FHFA will approve or deny the notice by no later than the 80th business day following the NBA Notice Date. If FHFA fails to approve or deny a NBA notice by that date, and the Director has not extended the review period, the NBA notice shall be deemed to have been approved and the Bank may commence the activity for which the notice was submitted. (c) For purposes of calculating the review period, no days will be counted between the date that FHFA has requested additional information from the Bank pursuant to Sec. 1272.5 and the date that the Bank responds to all questions communicated. (d) Notwithstanding anything contained in this part, the Director may extend the 80 business-day review period by an additional 60 business days if the Director determines that additional time is required to consider the notice. In such a case, FHFA will inform the Bank of any such extension before the 80th business day following the NBA Notice Date, and the Bank may not commence the NBA until FHFA has affirmatively approved the notice. (e) In considering any NBA notice, FHFA will assess whether the proposed activity will be conducted in a safe and sound manner and is consistent with the housing finance, community investment, and liquidity missions of the Banks and the cooperative nature of the Bank System. FHFA may deny an NBA notice or may approve the notice, which approval may be made subject to the Bank's compliance with any conditions that FHFA determines are appropriate to ensure that the Bank conducts the new activity in a safe and sound manner and in compliance with applicable laws or regulations and the Bank's mission. Sec. 1272.5 Additional information. FHFA may request additional information from a Bank necessary to issue a determination regarding an NBA. After an initial request for information, FHFA may make subsequent requests for information only to the extent that the information provided by the Bank does not fully respond to a previous request, the subsequent request seeks information needed to clarify the Bank's previous response, or the information provided by the Bank raises new legal, policy, or supervisory issues not evident based on the Bank's NBA notice or responses to previous requests for information. Nothing contained in this paragraph shall limit the Director's authority to request additional information from a Bank regarding an NBA for which the Director has extended the review period. Sec. 1272.6 Examinations. Nothing in this part shall limit in any manner the right of FHFA to conduct any examination of any Bank relating to its implementation of an NBA, including pre- or post-implementation safety and soundness examinations, or review of contracts or other agreements between the Bank and any other party. Sec. 1272.7 Approval of notices. The Deputy Director for Federal Home Loan Bank Regulation may approve requests from a Bank seeking approval of any NBA notice submitted in accordance with this part. The Director reserves the right to modify, rescind, or supersede any such approval granted by the Deputy Director, with such action being effective only on a prospective basis. Dated: December 12, 2016. Melvin L. Watt, Director, Federal Housing Finance Agency. [FR Doc. 2016-30245 Filed 12-16-16; 8:45 am] BILLING CODE 8070-01-P
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participating financial institution has shall use a model and methodology for delegated administrative responsibility,
borne losses as required under estimating the amount of credit without the necessity for further
paragraph (c)(1)(i) of this section; enhancement for an asset or pool. A disclosure to the participating financial
(iii) Purchasing pool-level insurance Bank shall provide to FHFA upon institutions.
only where: request information about the model (b) Termination of agreements. Any
(A) The participating financial and methodology, including and agreement made between two or more
institution is legally obligated at all without limitation results of any model Banks in connection with the
times to maintain such insurance with runs and the results of any tests of the administration of any AMA program
a qualified insurer; model performed by the Bank. FHFA may be terminated by any party after a
(B) Such insurance insures that reserves the right to direct a Bank to reasonable notice period.
portion of the required credit make changes to its model and (c) Delegation of pricing authority. A
enhancement attributable to the methodology, and a Bank promptly Bank that has delegated its AMA pricing
geographic concentration and size of the shall institute any such FHFA-directed function to another Bank shall retain a
pool; and changes. right to refuse to acquire AMA at prices
(C) Such insurance is positioned last it does not consider appropriate,
in the credit enhancement structure so § 1268.6 Servicing of AMA loans. pursuant to contractual provisions
as to cover only those losses remaining (a) Servicing of AMA loans may be among the parties.
after all other elements of the credit performed by or transferred to any
enhancement structure have been institution, including an institution that Subchapter E—Housing Goals and Mission
exhausted; is not a member of the Bank System,
(iv) Contracting with another PART 1281—FEDERAL HOME LOAN
provided that the loans, after such BANK HOUSING GOALS
participating financial institution in the transfer, continue to meet all
Bank’s district to provide a credit requirements to qualify as AMA under ■ 7. The authority citation for part 1281
enhancement consistent with this §§ 1268.3, 1268.4, and 1268.5. continues to read as follows:
section, in return for compensation; or (b) The transfer of mortgage servicing
(v) Contracting with a participating Authority: 12 U.S.C. 1430c.
rights and responsibilities must be
financial institution in another Bank’s approved by the Bank or Banks that own ■ 8. Amend § 1281.1 by revising the
district, pursuant to an arrangement the loan or a participation interest in the definitions of ‘‘Acquired Member Assets
between the two Banks, to provide a loan. (AMA) program’’ and ‘‘AMA-approved
credit enhancement consistent with this (c) A Bank shall have in place policies mortgage’’ to read as follows:
section, in return for compensation. and procedures to ensure that the
(d) Loans guaranteed or insured by a § 1281.1 Definitions.
transfer of mortgage servicing rights
department or agency of the U.S. * * * * *
does not negatively affect the credit
government. Instead of the structure set Acquired Member Assets (AMA)
enhancement on the loans in question
forth in paragraph (c) of this section, a program means a program that
or substantially increase the Bank’s
participating financial institution also authorizes a Bank to hold assets
exposure to the credit risk for the asset
may provide the required credit acquired from or through Bank members
or pool.
enhancement through loan-level or housing associates by means of either
insurance that is issued by an agency or § 1268.7 Reporting requirements for a purchase or funding transaction,
department of the U.S. government or is acquired member assets. subject to the requirements of parts 1268
a guarantee from an agency or Each Bank shall report information and 1272 of this chapter.
department of the U.S. government, related to AMA in accordance with the AMA-approved mortgage means a
provided that the government insurance instructions provided in the Data mortgage that meets the requirements of
or guarantee remains in place for as long Reporting Manual issued by FHFA, as an AMA program at part 1268 of this
as the Bank owns the loan. amended from time to time. chapter, which program has been
(e) Qualified insurers. (1) Within one approved to be implemented under part
year of January 18, 2017, each Bank § 1268.8 Administrative transactions and 1272 of this chapter.
must develop, and subsequently agreements between Banks.
* * * * *
maintain, written financial and (a) Delegation of administrative
duties. A Bank may delegate the Dated: December 9, 2016.
operational standards that an insurer
administration of an AMA program to Melvin L. Watt,
must meet for the Bank to approve it as
a qualified insurer. A Bank shall review another Bank whose administrative Director, Federal Housing Finance Agency.
qualified insurers at least once every office has been examined and approved [FR Doc. 2016–30161 Filed 12–16–16; 8:45 am]
two years to determine whether they by FHFA, or previously examined and BILLING CODE 8070–01–P
still meet the financial and operational approved by the Federal Housing
standards set by the Bank. A Bank may Finance Board, to process AMA
delegate responsibility for development transactions. The existence of such a FEDERAL HOUSING FINANCE
of these standards and approval of delegation, or the possibility that such AGENCY
qualified insurers to another Bank or a delegation may be made, must be
disclosed to any potential participating 12 CFR Part 1272
group of Banks pursuant to § 1268.8.
(2) Only qualified insurers may financial institution as part of any
provide private loan insurance on AMA AMA-related agreements signed with RIN 2590–AA84
srobinson on DSK5SPTVN1PROD with RULES
eligible assets or the loan or pool that participating financial institution.
insurance allowed as part of the credit A Bank may contract with one or more Federal Home Loan Bank New
enhancement structure for AMA parties, including without limitation Business Activities
products under paragraphs (c)(2)(ii) or another Bank, to provide services AGENCY: Federal Housing Finance
(iii) of this section. related to the administration of its own Agency.
(f) Appropriate methodology for AMA program or the AMA program of
ACTION: Final rule.
calculating credit enhancement. A Bank another Bank for which it has been
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Banks offered specific revisions to the the members of the Bank. Examples of could qualify as ‘‘other real estate
regulatory text to address their concern. activities that would be consistent with related collateral,’’ and thus any new
FHFA agrees with this recommendation the cooperative nature of the Bank types of such collateral would likely not
and has revised the final rule by adding System, and which have been the present any materially different risks
the language suggested by the Banks to subject of prior NBA notice approvals, beyond those that the Banks currently
limit the applicability of this provision would include proposals to purchase manage with their existing collateral.
to instances where the requesting Bank mortgage loans from Bank members or The language of the final rule is
has actual knowledge that FHFA has otherwise facilitate the members’ sale of unqualified, meaning that all types of
previously approved the activity for such loans, as well as proposals to allow new collateral are excluded from the
another Bank. members to pledge new types of term ‘‘new business activity’’ and thus
collateral to support their borrowing would not trigger the requirement to file
2. Approval Standard (1272.4)
from the Banks, which would no longer an NBA notice.
Section 1272.4(e) of the proposed rule require an NBA notice under the final The proposed rule did not specifically
would have added a new, explicit rule. With respect to the Banks’ address the extent to which the NBA
standard under which FHFA would comment that the proposed standard regulations would apply to the Banks’
approve NBA notices. In substance, that also should consider certain services the mortgage programs or products,
standard would have provided that Banks are legally authorized to provide including Acquired Member Asset
FHFA would approve an NBA notice to their members, the intent of this (AMA) programs or products.
only if it determined that the Bank provision of the rule is to articulate a Nonetheless, commenters requested that
could conduct the proposed activities in general standard against which FHFA FHFA revise the definition of ‘‘new
a safe and sound manner, and that the can assess a proposed activity in business activity’’ to exclude: (1) Any
activity would be consistent with the deciding whether to approve the notice. new AMA product involving federally-
housing finance and community It is not intended to be a list of all insured or guaranteed loans; (2) any
investment mission of the Banks, and products or services that a Bank may modifications that a Bank proposed to
with the cooperative nature of the provide to its members or of all make to its existing AMA programs or
Federal Home Loan Bank System (Bank investments and activities in which the products, and; (3) any proposals by one
System). The Banks commented that the Banks now engage. Bank to begin offering a new AMA
proposed approval standard failed to program or product that FHFA has
reference that portion of the Banks’ B. Comments Not Incorporated Into the previously approved for another Bank.
statutory mission that requires them to Final Rule The three areas commenters identified
be a source of liquidity for their 1. Definition of NBA (1272.1) for exclusion would likely encompass
members, and did not encompass all activities related to mortgage
certain other services that they are The proposed rule would have programs and products. The Banks had
legally authorized to provide to their narrowed the scope of the NBA raised similar comments in response to
members. The Banks also objected to the regulation in two ways: (1) By limiting a separate proposed rulemaking to
use of the phrase ‘‘cooperative nature of it to activities that introduce new amend and relocate the current AMA
the Bank System’’ as part of the material risks to the Bank; and (2) By regulations.6 FHFA has not included
approval standard, contending that it is eliminating the need to file an NBA any of these revisions in the final rule.
vague and is not supported by statutory notice prior to accepting new types of As noted above, under the final rule any
language. FHFA agrees that the Banks’ collateral. The final rule retains both of new activity will require the submission
overall mission includes serving as a those provisions. In explaining the of an NBA notice if it entails new
source of liquidity for their members rationale for excluding new collateral material risks to the Bank. To the extent
and has incorporated language into the types from the NBA definition, the that modifications to a Bank’s existing
final rule’s approval standard reflecting supplementary information for the mortgage program or product, or the
the same.3 The final rule, however, proposed rule stated that ‘‘the remaining establishment of new products
retains the language referring to the universe of new types of collateral that involving federally-insured or
‘‘cooperative nature of the Bank might potentially fall into the [other real guaranteed loans, would present new
System’’ as part of the approval estate related collateral] category is material risks to the requesting Bank,
standard. By statutory design, the Banks small.’’ 5 The Banks commented that they would require the submission of an
are cooperative institutions, meaning this language could be interpreted either NBA notice. Similarly, while a request
that they provide products and services to limit the types of assets that qualify to offer a mortgage program or product
to their member institutions, and only to as other real estate related collateral to that FHFA has already approved for
their members, and those members the specific items already approved by another Bank would not raise new legal
collectively own the Bank. Moreover, FHFA, or to limit the proposed or policy issues, it could raise
the very provision of the statute that the exclusion from the NBA filing supervisory issues with respect to the
Banks cited in support of their request requirement to those types of collateral requesting Bank, such as with respect to
to include a liquidity element as part of that FHFA has previously approved for its ability to manage the particular risks
the approval standard also refers to the other Banks. The Banks asked that associated with the program or product.
‘‘cooperative ownership structure’’ of FHFA confirm in the final rule that FHFA believes that a Bank should apply
the Banks.4 FHFA did not intend the statement in the new material risk standard equally
FHFA’s intent in including this the proposed rule to have either of those to all types of new activities in which
language in the standard was to ensure effects. The intent of the statement in it might engage. FHFA does not believe
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that before approving a Bank’s request the proposed rule was simply to that it should grant a blanket exclusion
to engage in any new type of activity acknowledge that, as a practical matter, from its review of any particular area of
FHFA would confirm that the proposed the Banks and their members likely the Banks’ business.
activity would in some manner benefit have already identified most of the FHFA expects that there may be
types of assets held by the members that instances in which a Bank is unsure
3 See 12 U.S.C. 4513(f)(1)(B).
4 See 12 U.S.C. 4513(f)(1)(A). 5 See 81 FR 57501 (August 23, 2016). 6 See 80 FR 78689 (December 17, 2015).
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![Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Rules and Regulations 91693
whether the risks associated with a respond within the applicable 30 or 80 activities, as to the possibility that the
particular new activity or modification business-day timeline. The proposed Director might rescind the delegated
to an existing activity are material, for rule, however, did not include such an approval well after the fact. To
purposes of the new business activity automatic approval provision for those eliminate this uncertainty, commenters
regulation. As is the case under the notices for which the Director extended requested that the final rule require that
current regulation, FHFA is available to the review period for an additional 60 the Director grant all NBA approvals.
consult with the Banks regarding the business days, beyond the 80 business- FHFA declines to accept the
need to file an NBA notice with respect day period. For those notices, the Banks commenters’ requests and has adopted
to a proposed activity, and will make could commence the activities only the delegation of authority provision as
every effort to promptly advise a Bank upon affirmative approval from FHFA. proposed. FHFA included the
whether a filing is required. With The Banks requested that FHFA revise delegation of authority provision within
respect to new activities that the Banks the final rule so that even those notices the proposed rule in large part to
commence after determining that they that were subject to the Director’s 60 expedite the approval process for those
do not present new material risks, FHFA business-day extended review period NBA notices that do not raise significant
will assess those the risks associated would also be subject to a deemed policy, supervisory, or legal issues. This
with those activities as part of its regular approved provision if the Director did delegation of authority for the NBA
supervisory process, including not act by the end of the extended notices is nearly identical to the existing
examinations. period. The Banks commented that the delegations under which the Deputy
80-day review period offers sufficient Director has granted approvals for other
2. Review Process (1272.4)
time for FHFA to act on a notice without transactions or issued non-objection
The proposed rule had used ‘‘business the Director’s 60-day extension and that letters to the Banks, and thus should
days’’ for calculating the length of the it is unclear what regulatory or public create no greater uncertainty for the
FHFA review periods. The Banks policy benefit would be served by Banks than already exists with respect
recommended that replacing that term extending the proposed time frame. to approvals and non-objections letters.
with ‘‘calendar days’’ would be more FHFA declines to accept the Banks’ Further, as a matter of agency practice,
convenient and consistent with other suggestion, principally because notices the Deputy Director generally consults
regulations. Doing so, however, also for which the Director has extended the with the Director before granting any
would have the effect of reducing the review period will most likely involve delegated authority approvals,
period of time available for FHFA to significant policy or legal issues, in particularly those raising significant
review and act on an NBA notice. FHFA which the Director will be directly supervisory, policy, or legal issues, and
had proposed the 30 and 80 business- involved. Such matters may present should continue to do so under the final
day review periods based on its issues of first impression for the agency rule.
experience in considering prior NBA that require an extended period to fully
notices, some of which are vet, and thus do not lend themselves to V. Paperwork Reduction Act
straightforward and others of which being approved automatically by the The Paperwork Reduction Act (PRA)
present significant policy or legal issues, passage of time. Moreover, such an (44 U.S.C. 3501 et seq.) requires that
which require more time to assess. automatic approval provision could regulations involving the collection of
Accordingly, FHFA has decided to inappropriately conflict with the information receive clearance from the
retain these time periods in the final Director’s statutory oversight authority, Office of Management and Budget
rule, and does not believe that either it which provides the Director with broad (OMB). The final rule contains no such
or the Banks would face any undue latitude to exercise such incidental collection of information requiring OMB
difficulty in determining the length of powers necessary in the supervision and approval under the PRA. Consequently,
the review period based on business regulation of the Banks.8 no information has been submitted to
days. OMB for review.
In the Supplementary Information to 3. Approval of Notices (1272.7)
the proposed rule, FHFA stated that the The proposed rule included a VI. Regulatory Flexibility Act
30 business-day review period provision delegating authority to the The final rule applies only to the
established in § 1272.4(a) would be Deputy Director to approve NBA notices Banks, which do not come within the
‘‘generally intended for activities for the agency. That provision mirrored meaning of small entities as defined in
already approved for other Banks[.]’’ 7 existing regulatory delegations of the Regulatory Flexibility Act (RFA).
The NAHB requested that the final rule authority to the Deputy Director for See 5 U.S.C. 601(6). Therefore, in
explicitly provide that all NBA notices determining whether to grant accordance with section 605(b) of the
pertaining to activities that FHFA has ‘‘approvals’’ and to issue ‘‘non-objection RFA, FHFA certifies that this final rule
previously approved for other Banks be letters’’ under FHFA’s procedures is not likely to have a significant
required to be reviewed under the 30 regulations.9 The delegation in the economic impact on a substantial
business-day timeline. Although FHFA proposed rule, like those in the other number of small entities.
believes that in many cases it will in regulations, included language to the
List of Subjects in 12 CFR Part 1272
fact process such NBA notices within 30 effect that the Director reserved the right
business days, it declines to incorporate to modify, rescind, or supersede any Federal home loan banks, Reporting
this request into the regulation because approval granted by the Deputy Director and recordkeeping requirements.
of the possibility that Bank-specific under the delegation of authority. Authority and Issuance
conditions could raise supervisory Commenters expressed concern that this
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issues necessitating review under the 80 reservation of authority to the Director ■ Accordingly, for reasons stated in the
business-day timeline. would create uncertainty for Banks, preamble and under the authority of 12
The proposed rule included which may have committed substantial U.S.C. 1431(a), 1432(a), 4511(b), 4513,
provisions that would deem any NBA resources to implement approved 4526(a), FHFA hereby amends
notice to be approved if FHFA did not subchapter D of chapter XII of title 12
8 See 12 U.S.C. 4513(a)(2)(B). of the Code of Federal Regulations by
7 81 FR 57502 (August 23, 2016). 9 See 12 CFR 1211.3(a) and 1211.4(a). revising part 1272 to read as follows:
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![91694 Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Rules and Regulations
PART 1272—NEW BUSINESS (c) A discussion of why the Bank NBA notice or may approve the notice,
ACTIVITIES proposes to engage in the new activity which approval may be made subject to
and how the activity supports the the Bank’s compliance with any
Sec. housing finance and community
1272.1 Definitions.
conditions that FHFA determines are
1272.2 Limitation on Bank authority to
investment mission of the Bank; appropriate to ensure that the Bank
undertake new business activities. (d) A discussion of the risks presented conducts the new activity in a safe and
1272.3 New business activity notice by the new activity and how the Bank sound manner and in compliance with
requirement. will manage these risks; and applicable laws or regulations and the
1272.4 Review process. (e) A good faith estimate of the Bank’s mission.
1272.5 Additional information. anticipated dollar volume of the
1272.6 Examinations. activity, and the income and expenses § 1272.5 Additional information.
1272.7 Approval of notices. associated with implementing and
Authority: 12 U.S.C. 1431(a), 1432(a), operating the new activity, over the FHFA may request additional
4511(b), 4513, 4526(a). initial three years of operation. information from a Bank necessary to
issue a determination regarding an NBA.
§ 1272.1 Definitions. § 1272.4 Review process. After an initial request for information,
As used in this part: (a) Within 30 business days of the FHFA may make subsequent requests
Business Day means any calendar day NBA Notice Date, FHFA will take one for information only to the extent that
other than a Saturday, Sunday, or legal of the following actions: the information provided by the Bank
public holiday listed in 5 U.S.C. 6103. (1) Approve the proposed NBA; does not fully respond to a previous
NBA Notice Date means the date on (2) Deny the proposed activity; or
which FHFA receives a new business request, the subsequent request seeks
(3) Inform the Bank that the activity information needed to clarify the Bank’s
activity notice. raises policy, legal, or supervisory
New business activity (NBA) means previous response, or the information
issues that require further evaluation. If
any business activity undertaken, provided by the Bank raises new legal,
FHFA fails to take any of those actions
transacted, conducted, or engaged in by by the 30th business day following the policy, or supervisory issues not evident
a Bank that entails material risks not NBA Notice Date, the NBA notice shall based on the Bank’s NBA notice or
previously managed by the Bank. A be deemed to have been approved and responses to previous requests for
Bank’s acceptance of a new type of the Bank may commence the activity for information. Nothing contained in this
advance collateral does not constitute which the notice was submitted. paragraph shall limit the Director’s
an NBA. (b) In the case of any notice that authority to request additional
FHFA has determined requires further information from a Bank regarding an
§ 1272.2 Limitation on Bank authority to
undertake new business activities. evaluation, FHFA will approve or deny NBA for which the Director has
No Bank shall undertake an NBA the notice by no later than the 80th extended the review period.
except in accordance with the business day following the NBA Notice
Date. If FHFA fails to approve or deny § 1272.6 Examinations.
procedures set forth in this part.
a NBA notice by that date, and the Nothing in this part shall limit in any
§ 1272.3 New business activity notice Director has not extended the review manner the right of FHFA to conduct
requirement. period, the NBA notice shall be deemed any examination of any Bank relating to
Prior to undertaking an NBA, a Bank to have been approved and the Bank its implementation of an NBA,
shall submit a written notice of the may commence the activity for which including pre- or post-implementation
proposed NBA that provides a thorough, the notice was submitted. safety and soundness examinations, or
meaningful, complete, and specific (c) For purposes of calculating the review of contracts or other agreements
description of the activity such that review period, no days will be counted
between the Bank and any other party.
FHFA will be able to make an informed between the date that FHFA has
decision regarding the proposed requested additional information from § 1272.7 Approval of notices.
activity. At a minimum, the notice the Bank pursuant to § 1272.5 and the
should include the following date that the Bank responds to all The Deputy Director for Federal Home
information: questions communicated. Loan Bank Regulation may approve
(a) A written opinion of counsel (d) Notwithstanding anything requests from a Bank seeking approval
identifying the specific statutory, contained in this part, the Director may of any NBA notice submitted in
regulatory, or other legal authorities extend the 80 business-day review accordance with this part. The Director
under which the NBA is authorized and, period by an additional 60 business reserves the right to modify, rescind, or
for submissions raising legal questions days if the Director determines that supersede any such approval granted by
of first impression, a reasoned analysis additional time is required to consider the Deputy Director, with such action
explaining how the cited authorities can the notice. In such a case, FHFA will being effective only on a prospective
be construed to authorize the new inform the Bank of any such extension basis.
activity; before the 80th business day following
Dated: December 12, 2016.
(b) A full description of the proposed the NBA Notice Date, and the Bank may
activity, including, when applicable, not commence the NBA until FHFA has Melvin L. Watt,
infographics and definitions of key affirmatively approved the notice. Director, Federal Housing Finance Agency.
terms. In addition, the Bank shall (e) In considering any NBA notice, [FR Doc. 2016–30245 Filed 12–16–16; 8:45 am]
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indicate whether the proposed activity FHFA will assess whether the proposed BILLING CODE 8070–01–P
represents a modification to a activity will be conducted in a safe and
previously approved activity in which sound manner and is consistent with
the Bank is engaged or is an activity that the housing finance, community
FHFA has approved for any other investment, and liquidity missions of
Banks, if known to the requesting Bank, the Banks and the cooperative nature of
and if applicable; the Bank System. FHFA may deny an
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Document Created: 2016-12-17 03:15:28
Document Modified: 2016-12-17 03:15:28
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Dates | The final rule is effective on January 18, 2017. | |
| Contact | Lara Worley, Principal Financial Analyst, [email protected], 202-649-3324, Division of Federal Home Loan Bank Regulation; or Winston Sale, Assistant General Counsel, [email protected], 202-649-3081 (these are not toll-free numbers), Office of General Counsel, Federal Housing Finance Agency, Constitution Center, 400 Seventh Street SW., Washington, DC 20219. The telephone number for the Telecommunications Device for the Hearing Impaired is 800-877-8339. | |
| FR Citation | 81 FR 91690 | |
| RIN Number | 2590-AA84 | |
| CFR Associated | Federal Home Loan Banks and Reporting and Recordkeeping Requirements |
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