Modification of Approval for the Federal Home Loan Bank of New York's Community Mortgage Asset Activities Program

FEDERAL HOUSING FINANCE BOARD

[99-N-11]

Modification of Approval for the Federal Home Loan Bank of New

York's Community Mortgage Asset Activities Program

AGENCY: Federal Housing Finance Board.

ACTION: Notice.

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SUMMARY: On August 18, 1999, the Federal Housing Finance Board (Finance

Board) adopted Finance Board Resolution No. 99-43 authorizing

modifications to the Federal Home Loan Bank of New York's (FHLBank of

New York) Community Mortgage Asset Activities Program (CMAA). The

Finance Board originally approved CMAA on July 3, 1996 (Finance Board

Resolution No. 96-44). While not obligated to publish notice for these

modifications of the previously approved CMAA Pilot Program, the

Finance Board, in the spirit of full disclosure, hereby provides notice

of the CMAA modifications described herein. Further, the FHLBank of New

York will not implement modifications to CMAA until the staff of the

Office of Supervision (OS) conducts a pre-implementation examination of

the modified CMAA Pilot Program and confirms that appropriate program

policies, procedures and controls have been established. In no case

shall implementation occur prior to the end of this 30-day notice

period.

DATES: Comments must be received in writing on or before October 12,

1999.

ADDRESSES: Individuals wishing to submit comments should provide

written comments by mail to: Elaine L. Baker, Secretary to the Board,

Federal Housing Finance Board, 1777 F Street, NW, Washington, DC 20006.

Comments will be available for public inspection at this address.

Background

On July 3, 1996, the Finance Board approved a request by the

FHLBank of New York to establish a pilot program (CMAA) under which the

FHLBank of New York proposed to fund up to $250 million in

participation interests in housing and community development loans

originated by members and eligible non-member borrowers and meeting the

income targets established for the Community Investment Program (CIP).

Finance Board approval was subject to certain conditions set forth in

Finance Board Resolution No. 96-44.

The FHLBank of New York requested that Finance Board Resolution No.

96-44 be modified to lift the CIP restrictions, define member to

include affiliates and subsidiaries of members and allow the FHLBank of

New York to purchase mortgages originated by its members (including

subsidiaries and affiliates of such members) from that member, pool the

mortgages, participate back to the originating member the credit

support tranche of the pool, and sell to the originating member or any

other member any other tranches of the pool. The Finance Board approved

those modifications in Finance Board Resolution No. 99-43.

As modified, the CMAA resolution would authorize the FHLBank of New

York to operate a Sequential

[[Page 49187]]

Participation Program under which the FHLBank of New York would (i)

acquire whole residential mortgage loans, originated by its members

(including subsidiaries and affiliates of such members) and eligible

non-member borrowers that have an original balance falling within the

conforming loan limits established pursuant to 12 U.S.C. 1717(b)(2),

(ii) pool those mortgages and divide the mortgage pool into three

tranches, consisting of a short cashflow tranche, a longer cashflow

tranche, and a credit support tranche that would be sufficient to

enhance the pool at least to the level of subordination afforded

double-A rated mortgage-backed securities and which would act as first

loss coverage for the life of the pool or until the position is

exhausted, (iii) sell the credit support tranche of the pool back to

the member or eligible non-member borrower that originated (or whose

subsidiary or affiliate originated) the loans, and (iv) sell either of

the non-credit support tranches to any member or eligible non-member

borrower of the FHLBank of New York.

As indicated, while the Finance Board has formally revised Finance

Board Resolution No. 96-44 to make the modifications requested, CMAA as

modified will not be implemented by the FHLBank of New York until the

end of the 30-day notice period, and even then not until the completion

of a pre-implementation examination.

FOR FURTHER INFORMATION CONTACT: Christina K. Muradian, Senior

Financial Analyst, Office of Policy, Research and Analysis (202) 408-

2584, Federal Housing Finance Board, 1777 F Street, NW, Washington, DC.

Bruce A. Morrison,

Chairman.

[FR Doc. 99-23568 Filed 9-9-99; 8:45 am]

BILLING CODE 6725-01-P