FOIA Appeal: Monitoring Report of Co-Insurance Lender

Legal Opinion: GMP-0072

Index: 7.380

Subject: FOIA Appeal: Monitoring Report of Co-Insurance Lender

April 8, 1992

Nancy E. Richman, Esq.

Senior Staff Counsel

Newsday

780 Third Avenue

New York, New York 10017

Dear Ms. Richman:

This is in response to your Freedom of Information Act

(FOIA) appeal dated December 6, 1990. You appeal the November 7,

1990 denial by Gail L. Lively, former Director, Executive

Secretariat, of your request for access to an April 1988

monitoring report concerning Carnegie Evans Corporation, a

coinsurance lender. The information you requested was withheld

pursuant to Exemption 8 of the FOIA, 5 U.S.C. 552(b)(8).

I have determined to reverse the initial denial with respect

to Exemption 8. However, three paragraphs were withheld as

confidential business information under Exemption 4.

Exemption 8 of the FOIA exempts from disclosure information

\"contained in or related to examination, operating, or condition

reports prepared by, on behalf of, or for the use of an agency

responsible for the regulation or supervision of financial

institutions.\" All records concerning a financial institution\'s

condition and operations and in the possession of a Federal

agency responsible for the regulation or supervision of the

financial institution are exempt from disclosure. McCullough v.

FDIC, 1 GDS 80,194 at 80,495 (D.D.C. 1980).

HUD\'s Coinsurance Program functions as a joint venture

between the private and public sectors, in which lenders and HUD

share mortgage insurance risk, thereby providing an alternative

to traditional HUD full insurance financing. An approved lender

is subject to on-going monitoring and periodic on-site post

commitment review by HUD to assure adherence to statutory and

regulatory requirements. Due to such oversight responsibilities,

the Department may invoke Exemption 8 to withhold information

about, or related to, the condition and operations of financial

institutions1 involved in the Coinsurance Program.

1You assert that Carnegie Evans Corporation is not a

\"financial institution\" for purposes of Exemption 8 because

institutions protected under that exemption are those whose

deposits could all be demanded for payment should the public

learn of an adverse financial report. However, the term

\"financial institution\" under Exemption 8 is not limited to

depository institutions. See Public Citizen v. Farm Credit

2

While HUD has terminated the making of new loans under the

Coinsurance Program,2 the oversight and monitoring

responsibilities continue with respect to existing portfolios.

There are existing coinsuring lenders in the program with

coinsurance responsibilities and, consequently, the Department

must continue to exercise oversight authority. Because these

responsibilities are on-going, the Department ordinarily

withholds monitoring reports between HUD and existing coinsuring

lenders under FOIA\'s Exemption 8 to protect the Department\'s

oversight and monitoring operations.

However, in response to your appeal, I have determined to

reverse the initial denial and release a copy of the monitoring

report concerning Carnegie Evans Corporation. This decision is

based on the fact that Carnegie Evans no longer participates in

the coinsurance business and disclosure would not interfere with

the Department\'s future activities regarding Carnegie Evans and

other Coinsurance Program participants. We have redacted three

sections of the monitoring report at MF 7, MF 11 and MF 19

because this material contains confidential commercial or

financial business information, protected from disclosure under

Exemption 4. I have determined that release of this information

would impede the Agency\'s on-going monitoring process and cause

unfair competitive harm to the parties involved. The monitoring

report, as redacted, is enclosed.

Very sincerely yours,

C.H. Albright, Jr.

Principal Deputy General Counsel

Enclosure

Administration, 938 F.2d 290 (D.C. Cir. 1991). Mortgage lenders

participating in the Government National Mortgage Association\'s

Mortgage-Backed Securities Program are \"financial institutions\"

under Exemption 8. Barron Financial Group v. HUD, C.A. No. SA CV

91-95-GLT (RWRx) (C.D. Calif. 1991).

2 See 55 F.R. 41312 (Oct. 10, 1990)