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FHFA Publishes Final Rule on State-Chartered Credit Union Membership
On June 5, the Federal Housing Finance Agency (FHFA) issued a final rule amending its regulations to allow certain state-chartered credit unions without Federal share insurance to obtain Federal Home Loan Bank memberships. The final rule is substantially the same as the proposed rule issued by the FHFA in September 2016 with the exception of an added revision intended to help streamline credit union Bank membership applications. The amendment was adopted in order to implement a provision of the Fixing America's Surface Transportation Act and goes into effect July 5, 2017.
FHFA Includes New Classifications for Reporting Adverse Examination Findings; Amends FOIA Regulations
On March 14, the Federal Housing Finance Agency (“FHFA”) issued an Advisory Bulletin establishing classifications of adverse examination findings for Fannie Mae, Freddie Mac, Federal Home Loan Banks (“FHLBs”), and the FHLB’s Office of Finance (AB 2017-01). Effective for the 2017 examination cycle, the bulletin establishes three designated “classifications,” which can be used by examination staff to communicate adverse examination findings more effectively. The three classifications are meant both to identify priorities for remediation and also to guide FHFA in the development of supervisory strategies. These supervisory strategies include: (i) Matters Requiring Attention—both high-priority critical supervisory matters that pose substantial risk to safety and soundness and deficiencies that, if not corrected, have the potential to escalate and negatively affect a regulated entity or the Office of Finance; (ii) Recommendations—advisory suggestions regarding changes to a policy, procedure, practice, or control; and (iii) Violations—non-compliance with laws, regulations, or orders that requires action by a regulated entity or the Office of Finance to correct, if possible.
On March 15, FHFA issued an interim final rule, amending its FOIA regulations (12 CFR Part 1202) in an effort to bring its internal policies into accord with guidelines established through the FOIA Improvement Act of 2016 (Pub. L. No. 114-185) and the “OPEN FOIA Act of 2009” (Pub. L. No. 111-83, 123 Stat. 2142, 2184 (2009)). The new FOIA rules – which are effective as of March 15—require agencies to, among other things, provide a minimum of 90 days (rather than 30 days) for requesters to file an administrative appeal; and provide notification to requesters about the availability of dispute resolution services.
Fannie, Freddie and FHLBs Ordered to Report Results of Annual Stress Tests
On March 3, FHFA Director Melvin Watt issued orders directing FHFA regulated government-sponsored enterprises (GSEs)—Fannie Mae (Order No. 2017-OR-FNMA-01), Freddie Mac (Order No. 2017-OR-FHLMC-01), and the 11 Federal Home Loan Banks collectively (Order No. 2017-OR-B-01)—to report the results of their stress tests so that the financial regulators may determine whether the GSEs “have the capital necessary to absorb losses as a result of adverse economic conditions.” The orders were issued pursuant to the requirement under the Dodd-Frank Act that covered financial institutions with total consolidated assets of more than $10 billion conduct an annual stress test to determine whether they have sufficient capital to support operations in adverse economic conditions. Accompanying each order was a copy of the “2017 Report Cycle Dodd-Frank Stress Tests Summary Instructions and Guidance.”
On April 14, the FHFA order was officially published in the Federal Register.
FHFA Seeks Public Comment on Criteria for Evaluating Banks Subject to Review Under FHLB Community Support Program
In connection with its 2017 biennial review of all FHLB members under FHFA’s community support requirements regulation, FHFA is seeking public comment on the community support requirements regulation that establishes standards a FHLB member must meet in order to maintain access to long-term advances. The regulation also establishes review criteria that the FHFA must apply in evaluating a member’s’ Community Reinvestment Act performance and their record of lending to first-time homebuyers. Comments must be submitted to the agency by March 31.
FHFA Finalizes Amendments to Regulations Governing FHLBs' Acquired Member Asset Programs
On December 19, the FHFA published a final rule modifying, reorganizing and relocating the current regulation governing the Federal Home Loan Banks’ (FHLBs) Acquired Member Asset (AMA) programs. As required by the Dodd-Frank Act, the final rule removes and replaces references in the current regulation to ratings issued by a Nationally Recognized Statistical Ratings Organization. The rule also provides the FHLBs with greater flexibility in choosing a model for estimating the credit enhancement required for AMA loans. The final rule adds a provision allowing an FHLB to authorize the transfer of mortgage servicing rights on AMA loans to any institution, including a non-member of the FHLB System. The new rule also allows FHLBs to acquire mortgage loans that exceed the conforming loan limits where such loans are guaranteed or insured by a department or agency of the U.S. government. The final rule excludes a proposed provision that would have eliminated the use of private, loan-level, supplemental mortgage insurance in the member credit enhancement structure required for the AMA programs, but the final version does require FHLBs to establish financial and operational standards that insurers must meet before offering insurance on AMA loans. The new final rule goes into effect on January 18, 2017.
Also on December 19, FHFA issued another final rule (i) limiting the scope of “business activities” that would trigger an FHLB’s obligation to file a “new business activity” notice, (ii) modifying the submission requirements, and (iii) establishing new timelines for agency review and approval of such notices. The rule “narrows the scope of the [new business activity] regulation in two ways: (1) By limiting it to activities that introduce new material risks to the [FHLB]; and (2) By eliminating the need to file an NBA notice prior to accepting new types of collateral.” This new rule similarly goes into effect on January 18, 2017.
FHFA Issues Final Rule Amending Regulations Governing Eligibility for FHLBank Membership
On January 12, the FHFA issued a final rule amending membership eligibility in the Federal Home Loan Bank (FHLBank) system. The final rule, which follows the FHFA’s September 2014 proposal to revise the requirements for financial institutions applying for and retaining membership in the FHLBank system, removes two provisions from the proposal “that would have required FHLBank members to maintain ongoing minimum levels of investment in specified residential mortgage assets as a condition of remaining eligible for membership.” In addition, the final rule defines “insurance company” to exclude captive insurers, rendering such entities ineligible for FHLBank membership. According to the FHFA, a captive insurer’s primary business is to underwrite insurance for its “parent company or for other affiliates, rather than for the public at large.” According to the FHFA, “REITs and other entities have been forming captives solely for the purpose of providing ineligible institutions access to Bank advances,” and the FHFA’s final rule is “intended to prevent further use of captives to circumvent the membership eligibility of the Bank Act.” The final rule allows current captive insurer members who joined prior to the 2014 proposal up to five years to terminate their membership, and captive insurers who joined after the issuance of the 2014 proposal have one year to terminate. The final rule becomes effective 30 days from publication in the Federal Register.
FHFA Extends Comment Period For Proposed FHLB Membership Rule
On October 6, the FHFA announced that it would extend the comment period for its proposed rule on Federal Home Loan Bank membership. The proposed rule is intended to revise the requirements for financial institutions to apply for and retain membership in the FHLB. Comments are now being accepted until January 12, 2015.
FHFA Proposes Revised Eligibility Requirements for FHLB Membership
On September 2, the Federal Housing Finance Agency (FHFA) issued a proposed rule that would revise the requirements for financial institutions to apply for and retain membership in the Federal Home Loan Banks (FHLB). The proposed rule would change existing membership requirements primarily to: (i) require each applicant and member institution to hold one percent of its assets in “home mortgage loans” in order to satisfy the statutory requirement that an institution make long-term home mortgage loans; (ii) require each member to comply with the foregoing requirement on an ongoing basis, and where applicable, with the requirement that it have at least 10 percent of its assets in “residential mortgage loans”; (iii) define the term “insurance company” to mean a company that underwrites insurance for nonaffiliated persons as its primary business, effectively excluding from Bank membership captive insurers, but permit existing captive members to remain members for five years with certain restrictions on their ability to obtain advances; (iv) require a Bank to obtain and review an insurance company’s audited financial statements when considering it for membership; and (v) clarify the standards by which an insurance company’s “principal place of business” is to be identified in determining the appropriate Bank district for membership. The comment period will be open for 60 days following publication of the proposed rule in the Federal Register.
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