Revision of Financing Corporation Operations Regulation

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 950

[No. 97-57]

RIN 3069-AA57

Revision of Financing Corporation Operations Regulation

AGENCY: Federal Housing Finance Board.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending

its regulation on Financing Corporation (FICO) operations to comply

with new statutory requirements, eliminate provisions that have been

rendered obsolete by statutory changes, and clarify the practices and

procedures of the Finance Board and FICO. The final rule is consistent

with the goals of the

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Regulatory Reinvention Initiative of the National Performance Review.

EFFECTIVE DATE: The final rule will become effective October 27, 1997.

FOR FURTHER INFORMATION CONTACT: Joseph A. McKenzie, Associate

Director, Financial Analysis and Reporting Division, Office of Policy,

202/408-2845, 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. Regulatory Background and Analysis of the Final Rule

In November 1996, the Finance Board approved an interim final rule

amending its FICO operations regulation, 12 CFR part 950, to comply

with new statutory requirements, eliminate provisions that were

rendered obsolete by statutory changes, and clarify the practices and

procedures of the Finance Board and FICO. See 61 FR 59311 (Nov. 22,

1996). The 30-day public comment period for the interim final rule,

which became effective upon publication in the Federal Register, closed

on December 23, 1996. See id. The Finance Board received no public

comments. Therefore, with the exception noted below, and for the

reasons set forth in detail in the interim final rulemaking, the

Finance Board is adopting the interim final rule as published.

In order to accommodate the terms of a memorandum of understanding

(MOU) signed by FICO and the Federal Deposit Insurance Corporation

(FDIC) after publication of the interim final rule in the Federal

Register, the Finance Board has amended Sec. 950.8(b)(2)(i) of the

interim final rule to require FICO to determine an assessment rate

formula rather than the actual assessment rate. Under the MOU, the FDIC

will handle administrative tasks, such as computing each insured

depository institution's assessment, issuing invoices notifying insured

depository institutions of the amount to be paid and the date of

payment, and arranging for the collection of the assessment through the

payments system. See FICO-FDIC MOU (Jan. 23, 1997). Among other things,

the MOU provides that the FDIC will compute the assessment rate in

accordance with an assessment rate formula adopted by FICO. See id.

para. 3. Section 950.8(b)(2)(i) of the interim final rule required FICO

to determine the assessment rate by considering historical data

regarding assessment collections and current information concerning the

Savings Association Insurance Fund and Bank Insurance Fund deposit

bases and the location of insured depository institutions that is

available only to the FDIC. For consistency with the terms of the MOU,

Sec. 950.8(b)(2)(i) of the final rule requires FICO to establish a

formula the FDIC will use to determine at least semiannually the rate

of the assessment FICO will assess against insured depository

institutions in order to pay its non-administrative expenses.

II. Paperwork Reduction Act

This rule does not contain any collections of information pursuant

to the Paperwork Reduction Act of 1995. See 44 U.S.C. 3501 et seq.

Consequently, the Finance Board has not submitted any information to

the Office of Management and Budget for review.

III. Regulatory Flexibility Act

The Finance Board adopted the changes to part 950 in the form of an

interim final rule and not as a proposed rule. Therefore, the

provisions of the Regulatory Flexibility Act did not apply. See 5

U.S.C. 601(2), 603(a).

List of Subjects in Part 950

Federal home loan banks, Securities.

Accordingly, the Federal Housing Finance Board hereby adopts the

interim final rule adding 12 CFR part 950 that was published at 61 FR

59311 on November 22, 1996, as a final rule and revises part 950 to

read as follows:

PART 950--OPERATIONS

Sec.

950.1 Definitions.

950.2 General authority.

950.3 Authority to establish investment policies and procedures.

950.4 Book-entry procedure for Financing Corporation obligations.

950.5 Bank and Office of Finance employees.

950.6 Budget and expenses.

950.7 Administrative expenses.

950.8 Non-administrative expenses; assessments.

950.9 Reports to the Finance Board.

950.10 Review of books and records.

Authority: 12 U.S.C. 1441(b)(8), (c), and (j).

Sec. 950.1 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) Administrative expenses:

(1) Include general office and operating expenses such as telephone

and photocopy charges, printing, legal, and professional fees, postage,

courier services, and office supplies; and

(2) Do not include any form of employee compensation, custodian

fees, issuance costs, or any interest on (and any redemption premium

with respect to) any Financing Corporation obligations.

(c) Bank or Banks means a Federal Home Loan Bank or the Federal

Home Loan Banks.

(d) BIF-assessable deposit means a deposit that is subject to

assessment for purposes of the Bank Insurance Fund under the Federal

Deposit Insurance Act (12 U.S.C. 1811 et seq.), including a deposit

that is treated as a deposit insured by the Bank Insurance Fund under

section 5(d)(3) of the Federal Deposit Insurance Act.

(e) Custodian fees means any fee incurred by the Financing

Corporation in connection with the transfer of any security to, or

maintenance of any security in, the segregated account established

under section 21(g)(2) of the Act, and any other expense incurred by

the Financing Corporation in connection with the establishment or

maintenance of such account.

(f) Directorate means the board established under section 21(b) of

the Act to manage the Financing Corporation.

(g) Exit fees means the amounts paid under sections 5(d)(2)(E) and

(F) of the Federal Deposit Insurance Act, and regulations promulgated

thereunder (12 CFR part 312).

(h) FDIC means the agency established as the Federal Deposit

Insurance Corporation.

(i) Finance Board means the agency established as the Federal

Housing Finance Board.

(j) Insured depository institution has the same meaning as in

section 3 of the Federal Deposit Insurance Act.

(k) Issuance costs means issuance fees and commissions incurred by

the Financing Corporation in connection with the issuance or servicing

of Financing Corporation obligations, including legal and accounting

expenses, trustee, fiscal, and paying agent charges, securities

processing charges, joint collection agent charges, advertising

expenses, and costs incurred in connection with preparing and printing

offering materials to the extent the Financing Corporation incurs such

costs in connection with issuing any obligations.

(l) Non-administrative expenses means custodian fees, issuance

costs, and interest on Financing Corporation obligations.

(m) Obligations means debentures, bonds, and similar debt

securities issued by the Financing Corporation under sections 21(c)(3)

and (e) of the Act.

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(n) Office of Finance means the joint office of the Banks

established under part 941 of this chapter.

(o) Receivership proceeds means the liquidating dividends and

payments made on claims received by the Federal Savings and Loan

Insurance Corporation Resolution Fund established under section 11A of

the Federal Deposit Insurance Act from receiverships, that are not

required by the Resolution Funding Corporation to provide funds for the

Funding Corporation Principal Fund established under section 21B of the

Act.

(p) SAIF-assessable deposit means a deposit that is subject to

assessment for purposes of the Savings Association Insurance Fund under

the Federal Deposit Insurance Act, including a deposit that is treated

as a deposit insured by the Savings Association Insurance Fund under

section 5(d)(3) of the Federal Deposit Insurance Act.

Sec. 950.2 General authority.

Subject to the limitations and interpretations in this part and

such orders and directions as the Finance Board may prescribe, the

Financing Corporation shall have authority to exercise all powers and

authorities granted to it by the Act and by its charter and bylaws

regardless of whether the powers and authorities are specifically

implemented in regulation.

Sec. 950.3 Authority to establish investment policies and procedures.

The Directorate shall have authority to establish investment

policies and procedures with respect to Financing Corporation funds

provided that the investment policies and procedures are consistent

with the requirements of section 21(g) of the Act. The Directorate

shall promptly notify the Finance Board in writing of any changes to

the investment policies and procedures.

Sec. 950.4 Book-entry procedure for Financing Corporation obligations.

(a) Authority. Any Federal Reserve Bank shall have authority to

apply book-entry procedure to Financing Corporation obligations.

(b) Procedure. The book-entry procedure for Financing Corporation

obligations shall be governed by the book-entry procedure established

for Bank securities, codified at part 912 of this chapter. Wherever the

terms ``Federal Home Loan Bank(s),'' ``Federal Home Loan Bank

security(ies),'' or ``Book-entry Federal Home Loan Bank security(ies)''

appear in part 912, the terms shall be construed also to mean

``Financing Corporation,'' ``Financing Corporation obligation(s),'' or

``Book-entry Financing Corporation obligation(s),'' respectively, if

appropriate to accomplish the purposes of this section.

Sec. 950.5 Bank and Office of Finance employees.

Without further approval of the Finance Board, the Financing

Corporation shall have authority to utilize the officers, employees, or

agents of any Bank or the Office of Finance in such manner as may be

necessary to carry out its functions.

Sec. 950.6 Budget and expenses.

(a) Directorate approval. The Financing Corporation shall submit

annually to the Directorate for approval, a budget of proposed

expenditures for the next calendar year that includes administrative

and non-administrative expenses.

(b) Finance Board approval. The Directorate shall submit annually

to the Finance Board for approval, the budget of the Financing

Corporation's proposed expenditures it approved pursuant to paragraph

(a) of this section.

(c) Spending limitation. The Financing Corporation shall not exceed

the amount provided for in the annual budget approved by the Finance

Board pursuant to paragraph (b) of this section, or as it may be

amended by the Directorate within limits set by the Finance Board.

(d) Amended budgets. Whenever the Financing Corporation projects or

anticipates that it will incur expenditures, other than interest on

Financing Corporation obligations, that exceed the amount provided for

in the annual budget approved by the Finance Board or the Directorate

pursuant to paragraph (b) or (c) of this section, the Financing

Corporation shall submit an amended annual budget to the Directorate

for approval, and the Directorate shall submit such amended budget to

the Finance Board for approval.

Sec. 950.7 Administrative expenses.

(a) Payment by Banks. The Banks shall pay all administrative

expenses of the Financing Corporation approved pursuant to Sec. 950.6.

(b) Amount. The Financing Corporation shall determine the amount of

administrative expenses each Bank shall pay in the manner provided by

section 21(b)(7)(B) of the Act. The Financing Corporation shall bill

each Bank for such amount periodically.

(c) Adjustments. The Financing Corporation shall adjust the amount

of administrative expenses the Banks are required to pay in any

calendar year pursuant to paragraphs (a) and (b) of this section, by

deducting any funds that remain from the amount paid by the Banks for

administrative expenses in the prior calendar year.

Sec. 950.8 Non-administrative expenses; assessments.

(a) Interest expenses. The Financing Corporation shall determine

anticipated interest expenses on its obligations at least semiannually.

(b) Assessments on insured depository institutions--(1) Authority.

To provide sufficient funds to pay the non-administrative expenses of

the Financing Corporation approved under Sec. 950.6, the Financing

Corporation shall, with the approval of the Board of Directors of the

FDIC, assess against each insured depository institution an assessment

in the same manner as assessments are made by the FDIC under section 7

of the Federal Deposit Insurance Act.

(2) Assessment rate--(i) Determination. The Financing Corporation

at least semiannually shall establish an assessment rate formula, which

may include rounding methodology, to determine the rate or rates of the

assessment it will assess against insured depository institutions

pursuant to section 21(f)(2) of the Act and paragraph (b)(1) of this

section.

(ii) Limitation. Until the earlier of December 31, 1999, or the

date as of which the last savings association ceases to exist, the rate

of the assessment imposed on an insured depository institution with

respect to any BIF-assessable deposit shall be a rate equal to \1/5\ of

the rate of the assessment imposed on an insured depository institution

with respect to any SAIF-assessable deposit.

(iii) Notice. The Financing Corporation shall notify the FDIC and

the collection agent, if any, of the formula established under

paragraph (b)(2)(i) of this section.

(3) Collecting assessments--(i) Collection agent. The Financing

Corporation shall have authority to collect assessments made under

section 21(f)(2) of the Act and paragraph (b)(1) of this section

through a collection agent of its choosing.

(ii) Accounts. Each Bank shall permit any insured depository

institution whose principal place of business is in its district to

establish and maintain at least one demand deposit account to

facilitate collection of the assessments made under section 21(f)(2) of

the Act and paragraph (b)(1) of this section.

(c) Receivership proceeds--(1) Authority. To the extent the amounts

collected under paragraph (b) of this

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section are insufficient to pay the non-administrative expenses of the

Financing Corporation approved under Sec. 950.6, the Financing

Corporation shall have authority to require the FDIC to transfer

receivership proceeds to the Financing Corporation in accordance with

section 21(f)(3) of the Act.

(2) Procedure. The Directorate shall request in writing that the

FDIC transfer the receivership proceeds to the Financing Corporation.

Such request shall specify the estimated amount of funds required to

pay the non-administrative expenses of the Financing Corporation

approved under Sec. 950.6.

(d) Exit fees--(1) Authority. To the extent the amounts provided

under paragraphs (b) and (c) of this section are insufficient to pay

the interest due on Financing Corporation obligations, the Financing

Corporation shall have authority to request that the Secretary of the

Treasury order the transfer of exit fees to the Financing Corporation

in accordance with section 5(d)(2)(E) of the Federal Deposit Insurance

Act or as otherwise may be provided for by statute.

(2) Procedure. The Directorate shall request in writing that the

Secretary of the Treasury order that exit fees be transferred to the

Financing Corporation. Such request shall specify the estimated amount

of funds required to pay the interest due on Financing Corporation

obligations.

Sec. 950.9 Reports to the Finance Board.

The Financing Corporation shall file such reports as the Finance

Board shall direct.

Sec. 950.10 Review of books and records.

The Finance Board shall examine the Financing Corporation at least

annually to determine whether the Financing Corporation is performing

its functions in accordance with the requirements of section 21 of the

Act and this part.

By the Board of Directors of the Federal Housing Finance Board.

Bruce A. Morrison,

Chairperson.

[FR Doc. 97-25305 Filed 9-24-97; 8:45 am]

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