Removal of Transferred OTS Regulations Regarding Lending and Investment; and Conforming Amendments to Other Regulation

Published date01 July 2019
Citation84 FR 31171
Record Number2019-13449
SectionRules and Regulations
CourtFederal Deposit Insurance Corporation
Federal Register, Volume 84 Issue 126 (Monday, July 1, 2019)
[Federal Register Volume 84, Number 126 (Monday, July 1, 2019)]
                [Rules and Regulations]
                [Pages 31171-31174]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-13449]
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                Rules and Regulations
                 Federal Register
                ________________________________________________________________________
                This section of the FEDERAL REGISTER contains regulatory documents
                having general applicability and legal effect, most of which are keyed
                to and codified in the Code of Federal Regulations, which is published
                under 50 titles pursuant to 44 U.S.C. 1510.
                The Code of Federal Regulations is sold by the Superintendent of Documents.
                ========================================================================
                Federal Register / Vol. 84, No. 126 / Monday, July 1, 2019 / Rules
                and Regulations
                [[Page 31171]]
                FEDERAL DEPOSIT INSURANCE CORPORATION
                12 CFR Parts 365 and 390
                RIN 3064-AE22
                Removal of Transferred OTS Regulations Regarding Lending and
                Investment; and Conforming Amendments to Other Regulation
                AGENCY: Federal Deposit Insurance Corporation.
                ACTION: Final rule.
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                SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is adopting a
                final rule (final rule) to rescind and remove the ``Lending and
                Investment'' regulations because they are unnecessary, redundant, or
                duplicative of existing FDIC regulations; to amend certain sections of
                existing FDIC regulations governing real estate lending standards to
                make them applicable to all insured depository institutions for which
                the FDIC is the appropriate Federal banking agency; and to rescind and
                remove ``Registration of Residential Mortgage Loan Originators''
                regulations because supervision and rulemaking authority in this area
                was transferred to the Consumer Financial Protection Bureau (Bureau) by
                the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
                Frank Act).
                DATES: The Final Rule is effective on July 31, 2019.
                FOR FURTHER INFORMATION CONTACT: Karen J. Currie, Senior Examination
                Specialist, (202) 898-3981, [email protected], Division of Risk
                Management Supervision; Cassandra Duhaney, Senior Policy Analyst, (202)
                898-6804, Division of Depositor and Consumer Protection; Rodney D. Ray,
                Counsel, Legal Division, (202) 898-3556; Linda Hubble Ku, Counsel,
                Legal Division, (202) 898-6634; or Gregory S. Feder, Counsel, Legal
                Division, (202) 898-8724.
                SUPPLEMENTARY INFORMATION:
                I. Background
                 Beginning July 21, 2011, the transfer date established by section
                311 of the Dodd-Frank Act,\1\ the powers, duties and functions of the
                former Office of Thrift Supervision (OTS) were divided among the FDIC
                for State savings associations and the Office of the Comptroller of the
                Currency (OCC) for Federal savings associations, and the Board of
                Governors of the Federal Reserve System (FRB) for savings and loan
                holding companies. Section 316(b) of the Dodd-Frank Act provides the
                manner of treatment of all orders, resolutions, determinations,
                regulations, and advisory materials that had been issued, made,
                prescribed, or allowed to become effective by the OTS.\2\ The section
                provides that if such regulatory issuances were in effect on the day
                before the transfer date, they continue in effect and are enforceable
                by or against the appropriate successor agency until they are modified,
                terminated, set aside, or superseded in accordance with applicable law
                by such successor agency, by any court of competent jurisdiction, or by
                operation of law.
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                 \1\ 12 U.S.C. 5411.
                 \2\ 12 U.S.C. 5414(b).
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                 The Dodd-Frank Act directed the FDIC and the OCC to consult with
                one another and to publish a list of continued OTS regulations to be
                enforced by each respective agency that would continue to remain in
                effect until the appropriate Federal banking agency modified or removed
                the regulations in accordance with the applicable laws. The list was
                published by the FDIC and OCC as a Joint Rule in the Federal Register
                on July 6, 2011,\3\ and shortly thereafter, the FDIC published its
                transferred OTS regulations as new FDIC regulations in 12 CFR parts 390
                and 391.\4\ When it republished the transferred OTS regulations, the
                FDIC noted that its staff would evaluate the transferred OTS
                regulations and might later recommend incorporating the transferred OTS
                rules into other FDIC rules, amending them or rescinding them, as
                appropriate.
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                 \3\ 76 FR 39246 (Jul. 6, 2011).
                 \4\ 76 FR 47652 (Aug. 5, 2011).
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                 Further, section 312(c) of the Dodd-Frank Act amended the
                definition of ``appropriate Federal banking agency'' contained in
                section 3(q) of the Federal Deposit Insurance Act (FDI Act) \5\ to add
                State savings associations to the list of entities for which the FDIC
                is designated the ``appropriate Federal banking agency.'' As a result,
                when the FDIC acts as the ``appropriate Federal banking agency'' for
                State savings associations, as it does today, it has the authority to
                issue, modify, and rescind regulations involving such associations as
                well as for State nonmember banks and insured U.S. branches of foreign
                banks.\6\
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                 \5\ 12 U.S.C. 1813(q).
                 \6\ See also 12 U.S.C. 5412(b)(2)(C)(ii) (``the Corporation
                shall succeed to all powers, authorities, rights, and duties that
                were vested in the Office of Thrift Supervision and the Director of
                the Office of Thrift Supervision on the day before the transfer date
                relating to the functions transferred under clause (i).'' [relating
                to State savings associations]).
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                 Finally, the Dodd-Frank Act amended the Secure and Fair Enforcement
                for Mortgage Licensing Act of 2008 (S.A.F.E. Act),\7\ transferring the
                mortgage loan originator registration authority of the FDIC and certain
                other Federal agencies (the S.A.F.E. Act Agencies) to the Bureau.\8\ On
                December 10, 2011, the Bureau published its Regulation G \9\ which
                substantially duplicated the FDIC's S.A.F.E. Act regulation at part
                365, subpart B of the FDIC's regulations.
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                 \7\ 12 U.S.C. 5101, et seq.
                 \8\ See section 1100 of the Dodd-Frank Act.
                 \9\ See 12 CFR part 1007.
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                II. Proposed Rule
                A. Removal of Part 390, Subpart P, Lending and Investment
                 On February 5, 2019, the FDIC published an NPR regarding the
                removal of part 390, subpart P (formerly OTS part 560), which addressed
                lending and investments by State savings associations.\10\ The former
                OTS rule was transferred to the FDIC with only nominal changes. The NPR
                proposed removing part 390, subpart P from the Code of Federal
                Regulations (CFR) because, after careful review and consideration, the
                FDIC believed it was largely unnecessary, redundant, or duplicative of
                existing FDIC regulations.\11\
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                 \10\ 84 FR 1653 (Feb. 5, 2019).
                 \11\ See 84 FR 1655-58.
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                B. Amendments to Part 365, Subpart A, Real Estate Lending Standards
                 In the NPR, the FDIC also proposed to further effectuate the
                transfer of
                [[Page 31172]]
                supervisory authority for State savings associations from the former
                OTS to the FDIC by amending certain parts of part 365 of the FDIC's
                regulations to clarify that part 365, subpart A applies to all insured
                depository institutions, including State savings associations, for
                which the FDIC is the appropriate Federal banking agency.\12\
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                 \12\ See id. at 1658.
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                C. Removal of Part 365, Subpart B, Registration of Residential Mortgage
                Loan Originators
                 Finally, the FDIC proposed to rescind subpart B of part 365, which
                relates to registration requirements for residential mortgage loan
                originators, due to the Bureau's issuance of its \13\ regulation,
                Regulation G, pursuant to the Bureau's authority under the Dodd-Frank
                Act. In light of the Bureau's action, the FDIC considered the
                provisions contained in part 365, subpart B to be unnecessary,
                redundant, or otherwise duplicative of the Bureau regulation governing
                this area.\14\
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                 \13\ The S.A.F.E. Act was enacted as part of the Housing and
                Economic Recovery Act of 2008, Public Law 110-289, 122 Stat. 2654,
                sections 1501-17 (codified at 12 U.S.C. 5101-16) as amended by Title
                X of the Dodd-Frank Wall Street Reform and Consumer Protection Act
                (Dodd-Frank Act) (Pub. L. 111-203, 124 Stat. 1376). The S.A.F.E. Act
                requires residential mortgage loan originators employed by
                depository institutions, subsidiaries that are owned and controlled
                by a depository institution and regulated by a Federal banking
                agency, institutions regulated by the National Credit Union
                Administration, and institutions regulated by the Farm Credit
                Administration to register with the Nationwide Mortgage Licensing
                System and Registry, obtain a unique identifier, and maintain such
                registration.
                 \14\ See 84 FR 1658-59.
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                III. Comments
                 The FDIC issued the NPR with a 60-day comment period, which closed
                on April 8, 2019. The FDIC received no comments on the NPR, and
                consequently the final rule is adopted without change.
                IV. Explanation of the Final Rule
                 As discussed in the NPR, 12 CFR part 390, subpart P is being
                rescinded in its entirety because other existing FDIC regulations
                concerning permissible activities, safety and soundness standards, and
                real estate lending standards replicate the current requirements of
                part 390, subpart P.
                 To clarify that part 365 applies to all institutions for which the
                FDIC is the appropriate Federal banking agency, the FDIC is amending
                sections 365.1 and 365.2 of part 365 to replace the phrases ``insured
                state nonmember banks (including state-licensed insured branches of
                foreign banks)'' and ``state nonmember bank'' throughout subpart A with
                the phrase ``FDIC-supervised institution.'' In addition, section 365.1
                is being revised to add the definition of the term ``FDIC-supervised
                institution'' to mean any insured depository institution for which the
                FDIC is the appropriate Federal banking agency pursuant to section 3(q)
                of the FDI Act.\15\
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                 \15\ 12 U.S.C. 1813(q).
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                 Finally, because the Dodd-Frank Act amended the S.A.F.E. Act,
                transferring Federal registration requirements for mortgage loan
                originators from the S.A.F.E. Act Agencies (including the FDIC) to the
                Bureau, and the Bureau has finalized its Regulation G, the FDIC is
                rescinding part 365, subpart B, in its entirety, because it is outdated
                and no longer necessary.
                V. Administrative Law Matters
                A. Paperwork Reduction Act
                 In accordance with the requirements of the Paperwork Reduction Act
                of 1995 (PRA),\16\ the FDIC may not conduct or sponsor, and the
                respondent is not required to respond to, an information collection
                unless it displays a currently valid Office of Management and Budget
                (OMB) control number.
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                 \16\ 44 U.S.C. 3501-3521.
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                 The final rule rescinds and removes from FDIC regulations part 390,
                subpart P. With regard to part 365, subpart A, the final rule amends
                sections 365.1 and 365.2 to clarify that State savings associations as
                well as State nonmember banks and foreign banks having insured branches
                are all subject to part 365. It also rescinds and removes from the
                FDIC's regulations part 365, subpart B. The final rule will not create
                any new or revise any existing collections of information under the
                PRA. Therefore, no information collection request has been submitted to
                the OMB for review.
                B. The Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA), requires that, in connection
                with a final rule, an agency prepare a final regulatory flexibility
                analysis that describes the impact of the proposed rule on small
                entities.\17\ However, a regulatory flexibility analysis is not
                required if the agency certifies that the rule will not have a
                significant economic impact on a substantial number of small entities,
                and publishes its certification and a short explanatory statement in
                the Federal Register together with the rule. The Small Business
                Administration (SBA) has defined ``small entities'' to include banking
                organizations with total assets of less than or equal to $550
                million.\18\ For the reasons provided below, the FDIC certifies that
                the rule would not have a significant economic impact on a substantial
                number of small banking organizations. Accordingly, a regulatory
                flexibility analysis is not required.
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                 \17\ 5 U.S.C. 601, et seq.
                 \18\ The SBA defines a small banking organization as having $550
                million or less in assets, where ``a financial institution's assets
                are determined by averaging the assets reported on its four
                quarterly financial statements for the preceding year.'' See 13 CFR
                121.201 (as amended, effective December 2, 2014). ``SBA counts the
                receipts, employees, or other measure of size of the concern whose
                size is at issue and all of its domestic and foreign affiliates. . .
                .'' See 13 CFR 121.103. Following these regulations, the FDIC uses a
                covered entity's affiliated and acquired assets, averaged over the
                preceding four quarters, to determine whether the FDIC-supervised
                institution is ``small'' for the purposes of the RFA.
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                 As of December 31, 2018, the FDIC supervised 3,489 insured
                financial institutions, of which 2,674 are considered small banking
                organizations for the purposes of the RFA. The rule primarily affects
                regulations that govern State savings associations. There are 36 State
                savings associations considered to be small banking organizations for
                the purposes of the RFA.\19\
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                 \19\ FDIC Call Report, December 31, 2018.
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                 As explained previously, the rule would remove sections 390.260,
                390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268,
                390.269, 390.270, 390.271, and 390.272 of part 390, subpart P because
                these sections are unnecessary, redundant of, or otherwise duplicative
                of other FDIC regulations for safety and soundness standards. Because
                these regulations are redundant to existing regulations, rescinding
                them would not have any substantive effects on small FDIC-supervised
                institutions.
                 As explained previously, part 364 covers State savings associations
                in section 364.101 and in appendix A. Because the lending documentation
                practices and standards in part 364, appendix A are substantively
                similar to existing regulations for State savings associations found in
                section 390.271, rescinding section 390.271 and the rest of part 390,
                subpart P would not have any substantive effects on small FDIC-
                supervised institutions.
                 As stated previously, the rule would amend part 365, subpart A so
                that it would expressly apply to State savings associations. Because
                the real estate lending requirements in sections 365.1 and 365.2 and
                part 364, appendix A are substantively identical to currently
                applicable regulations for State savings associations found in 390.264
                and 390.265 (including the appendix to section 390.265), amending part
                365, subpart A so that it would apply to all
                [[Page 31173]]
                FDIC-supervised institutions would not have any substantive effects on
                small FDIC-supervised institutions.
                 As explained previously, the rule would rescind part 365, subpart B
                because the authority to implement Federal registration requirements
                for mortgage loan originators has been transferred by statute to the
                Bureau. Because rulemaking authority for the S.A.F.E. Act was
                transferred to the Bureau in December 2011, the removal of the FDIC's
                S.A.F.E. Act regulations would not have any substantive effects on
                small FDIC-supervised covered institutions.
                 Based on the information above, the FDIC certifies that the final
                rule would not have a significant economic impact on a substantial
                number of small entities.
                C. Small Business Regulatory Enforcement Fairness Act, Congressional
                Review Act
                 The OMB has determined that the Final Rule is not a ``major rule''
                within the meaning of the Small Business Regulatory Enforcement
                Fairness Act of 1996 (SBREFA).\20\ As required by SBREFA, the FDIC will
                submit the Final Rule and other appropriate reports to Congress and the
                Government Accountability Office for review.
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                 \20\ 5 U.S.C. 801 et seq.
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                D. Plain Language
                 Section 722 of the Gramm-Leach-Bliley Act \21\ requires each
                Federal banking agency to use plain language in all of its proposed and
                final rules published after January 1, 2000. In the NPR, the FDIC
                invited comments on whether the NPR was clearly stated and effectively
                organized, and how the FDIC might make it easier to understand. No
                comments on this issue were received. Although the FDIC did not receive
                any comments, the FDIC sought to present the Final Rule in a simple and
                straightforward manner.
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                 \21\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
                (1999), codified at 12 U.S.C. 241 nt.
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                E. The Economic Growth and Regulatory Paperwork Reduction Act
                 Under section 2222 of the Economic Growth and Regulatory Paperwork
                Reduction Act of 1996 (EGRPRA),\22\ the FDIC is required to review all
                of its regulations at least once every 10 years in order to identify
                any outdated or otherwise unnecessary regulations imposed on insured
                institutions.\23\ The FDIC, along with the other Federal banking
                agencies, submitted a Joint Report to Congress on March 21, 2017
                (EGRPRA Report), discussing how the review was conducted, what has been
                done to date to address regulatory burden, and further measures the
                agency will take to address issues that were identified. As noted in
                the EGRPRA Report, the FDIC is continuing to streamline and clarify its
                regulations through the OTS rule integration process. By removing
                outdated or unnecessary regulations, such as part 390, subpart P, and
                modifying part 365, this rule complements other actions the FDIC has
                taken, separately and with the other Federal banking agencies, to
                further the EGRPRA mandate.
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                 \22\ 12 U.S.C. 3311.
                 \23\ Public Law 104-208, 110 Stat. 3900 (1996).
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                F. Riegle Community Development and Regulatory Improvement Act of 1994
                 The Riegle Community Development and Regulatory Improvement Act of
                1994 (RCDRIA) requires that each Federal banking agency, in determining
                the effective date and administrative compliance requirements for new
                regulations that impose additional reporting, disclosure, or other
                requirements on insured depository institutions, consider, consistent
                with principles of safety and soundness and the public interest, any
                administrative burdens that such regulations would place on depository
                institutions, including small depository institutions, and customers of
                depository institutions, as well as the benefits of such regulations.
                In addition, new regulations and amendments to regulations that impose
                additional reporting, disclosures, or other new requirements on insured
                depository institutions generally must take effect on the first day of
                a calendar quarter that begins on or after the date on which the
                regulations are published in final form.\24\ The FDIC has determined
                that the final rule would not impose additional reporting, disclosure,
                or other requirements; therefore, the requirements of the RCDRIA do not
                apply.
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                 \24\ 12 U.S.C. 4802.
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                List of Subjects
                12 CFR Part 365
                 Banks, banking, Mortgages, Savings associations.
                12 CFR Part 390
                 Administrative practice and procedure, Advertising, Aged, Civil
                rights, Conflict of interests, Credit, Crime, Equal employment
                opportunity, Fair housing, Government employees, Individuals with
                disabilities, Reporting and recordkeeping requirements, Savings
                associations.
                Authority and Issuance
                 For the reasons stated in the preamble, the Federal Deposit
                Insurance Corporation amends 12 CFR parts 365 and 390 as follows:
                PART 365--REAL ESTATE LENDING STANDARDS
                Subpart A--Real Estate Lending Standards [Amended]
                0
                1. Revise the authority citation for part 365 to read as follows:
                 Authority: 12 U.S.C. 1828(o), 5412.
                0
                2. Revise Sec. 365.1 to read as follows:
                Sec. 365.1 Purpose and scope.
                 This subpart, issued pursuant to section 304 of the Federal Deposit
                Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o),
                prescribes standards for real estate lending to be used by FDIC-
                supervised institutions in adopting internal real estate lending
                policies. For purposes of this subpart, the term ``FDIC-supervised
                institution'' means any insured depository institution for which the
                Federal Deposit Insurance Corporation is the appropriate Federal
                banking agency pursuant to section 3(q) of the Federal Deposit
                Insurance Act, 12 U.S.C. 1813(q).
                0
                3. In Sec. 365.2, revise paragraphs (a), (b)(1)(iii), (b)(2)(iii) and
                (iv), and (c) to read as follows:
                Sec. 365.2 Real estate lending standards.
                 (a) Each FDIC-supervised institution shall adopt and maintain
                written policies that establish appropriate limits and standards for
                extensions of credit that are secured by liens on or interests in real
                estate, or that are made for the purpose of financing permanent
                improvements to real estate.
                 (b)(1) * * *
                 (iii) Be reviewed and approved by the FDIC-supervised institution's
                board of directors at least annually.
                 (2) * * *
                 (iii) Loan administration procedures for the FDIC-supervised
                institution's real estate portfolio; and
                 (iv) Documentation, approval, and reporting requirements to monitor
                compliance with the FDIC-supervised institution's real estate lending
                policies.
                 (c) Each FDIC-supervised institution must monitor conditions in the
                real estate market in its lending area to ensure that its real estate
                lending policies continue to be appropriate for current market
                conditions.
                * * * * *
                [[Page 31174]]
                Subpart B--[Removed and Reserved]
                0
                4. Remove and reserve subpart B, consisting of Sec. Sec. 365.101
                through 365.105, and appendix A to subpart B.
                PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT
                SUPERVISION
                0
                5. The authority citation for part 390 continues to read as follows:
                 Authority: 12 U.S.C. 1819.
                Subpart P--[Removed and Reserved]
                0
                6. Remove and reserve Subpart P, consisting of Sec. Sec. 390.260
                through 390.272.
                Federal Deposit Insurance Corporation.
                 By order of the Board of Directors.
                 Dated at Washington, DC, on June 18, 2019.
                Valerie Best,
                Assistant Executive Secretary.
                [FR Doc. 2019-13449 Filed 6-28-19; 8:45 am]
                BILLING CODE 6714-01-P
                

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