7990 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Proposed Rules 

E. National Impact Analysis 

The NIA estimates the national energy 

savings (NES) and the net present value 

(NPV) of total consumer costs and 

savings expected to result from new 

standards at specific efficiency levels. 

DOE calculated NES and NPV for each 

efficiency level as the difference 

between a base-case forecast (without 

new standards) and the standards case 

forecast (with standards). DOE 

determined national annual energy 

consumption by multiplying the 

number of units in use (by vintage) by 

the average unit energy consumption 

(also by vintage). Cumulative energy 

savings are the sum of the annual NES 

determined over a specified time period. 

The national NPV is the sum over time 

of the discounted net savings each year, 

which consists of the difference 

between total operating cost savings and 

increases in total installed costs. Critical 

inputs to this analysis include 

shipments projections, retirement rates 

(based on estimated product lifetimes), 

and estimates of changes in shipments 

and retirement rates in response to 

changes in product costs due to 

standards. Chapter 10 of the preliminary 

TSD discusses the NIA. 

DOE consulted with interested parties 

as part of its process for conducting all 

of the analyses and invites further input 

from the public on these topics. The 

preliminary analytical results are 

subject to revision following review and 

input from the public. The final rule 

will contain the final analysis results. 

The Department encourages those 

who wish to participate in the public 

meeting to obtain the preliminary TSD 

and to be prepared to discuss its 

contents. A copy of the preliminary TSD 

is available at the Web address given in 

the SUMMARY section of this notice. 

However, public meeting participants 

need not limit their comments to the 

topics identified in the preliminary 

TSD. The Department is also interested 

in receiving views concerning other 

relevant issues that participants believe 

would affect energy conservation 

standards for these products or that DOE 

should address in the NOPR. 

Furthermore, the Department 

welcomes all interested parties, 

regardless of whether they participate in 

the public meeting, to submit in writing 

by April 26, 2010, comments and 

information on matters addressed in the 

preliminary TSD and on other matters 

relevant to consideration of standards 

for residential clothes dryers and room 

air conditioners. 

The public meeting will be conducted 

in an informal, conference style. A court 

reporter will be present to record the 

minutes of the meeting. There shall be 

no discussion of proprietary 

information, costs or prices, market 

shares, or other commercial matters 

regulated by United States antitrust 

laws. 

After the public meeting and the 

expiration of the period for submitting 

written statements, the Department will 

consider all comments and additional 

information that is obtained from 

interested parties or through further 

analyses, and it will prepare a NOPR. 

The NOPR will include proposed energy 

conservation standards for the products 

covered by this rulemaking, and 

members of the public will be given an 

opportunity to submit written and oral 

comments on the proposed standards. 

Issued in Washington, DC, on February 12, 

2010. 

Cathy Zoi, 

Assistant Secretary, Energy Efficiency and 

Renewable Energy. 

[FR Doc. 2010–3479 Filed 2–22–10; 8:45 am] 

BILLING CODE 6450–01–P 

FEDERAL HOUSING FINANCE BOARD 

12 CFR Parts 950 and 980 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Parts 1266 and 1272 

RIN 2590–AA24 

Use of Community Development Loans 

by Community Financial Institutions 

To Secure Advances; Secured Lending 

by Federal Home Loan Banks to 

Members and Their Affiliates; Transfer 

of Advances and New Business 

Activity Regulations 

AGENCY: Federal Housing Finance 

Agency; Federal Housing Finance 

Board. 

ACTION: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: Section 1211 of the Housing 

and Economic Recovery Act of 2008 

(HERA) amended the Federal Home 

Loan Bank Act (Bank Act) to expand the 

types of eligible collateral that 

community financial institution (CFI) 

members may pledge to secure Federal 

Home Loan Bank (Bank) advances to 

include secured loans for community 

development activities and to allow 

Banks to make long-term advances to 

CFI members for purposes of financing 

community development activities. 

Section 1211 further provides that the 

Federal Housing Finance Agency 

(FHFA) shall define the term 

‘‘community development activities’’ by 

regulation. Consequently, FHFA is 

proposing to amend the advances 

regulations to allow CFI members to 

pledge secured loans for community 

development activities as eligible 

collateral for advances, to provide that 

CFI members may use long term 

advances to fund community 

development activities and to define 

‘‘community development,’’ ‘‘community 

development loan,’’ and other related 

terms necessary to implement these 

provisions. The proposal would also 

transfer the advances and new business 

activities regulations from the Federal 

Housing Finance Board (FHFB) 

regulations to the FHFA regulations, 

and make other conforming 

amendments. Finally, the proposed rule 

would also make a change to the 

advances regulation which would 

incorporate a long-standing policy 

previously established by the FHFB that 

any form of secured lending by a Bank 

to a member of the Federal Home Loan 

Bank System (Bank System) is deemed 

to be an advance. The proposed rule 

would extend that policy to cover 

secured lending transactions by a Bank 

to affiliates of members. 

DATES: Written comments must be 

received on or before April 26, 2010. For 

additional information, see 

SUPPLEMENTARY INFORMATION. 

ADDRESSES: You may submit your 

comments, identified by regulatory 

information number (RIN) 2590–AA24, 

by one of the following methods: 

• U.S. Mail, United Postal Service, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Alfred M. Pollard, General Counsel, 

Attention: Comments/RIN 2590–AA24, 

Federal Housing Finance Agency, 

Fourth Floor, 1700 G Street, NW., 

Washington, DC 20552. 

• Hand Delivered/Courier: The hand 

delivery address is: Alfred M. Pollard, 

General Counsel, Attention: Comments/ 

RIN 2590–AA24, Federal Housing 

Finance Agency, Fourth Floor, 1700 G 

Street, NW., Washington, DC 20552. The 

package should be logged at the Guard 

Desk, First Floor, on business days 

between 9 a.m. and 5 p.m. 

• E-mail: Comments to Alfred M. 

Pollard, General Counsel may be sent by 

e-mail to RegComments@fhfa.gov. 

Please include ‘‘RIN 2590–AA24’’ in the 

subject line of the message. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by e-mail to FHFA at 

RegComments@fhfa.gov to ensure 

mstockstill on DSKH9S0YB1PROD with PROPOSALS

Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Proposed Rules 7991 

1See section 1302 of HERA. 

2Effective February 4, 2010, FHFA relocates the 

part 925 regulations to part 1263 of the FHFA’s 

regulations. See 74 FR 22848, 22857 (May 15, 2009); 

75 FR 678, 691 (Jan. 5, 2010). 

3 In addition, the Banks under their Community 

Investment Cash Advance programs (CICA) may 

provide advances to support economic 

development that benefit persons based on defined 

targeted income levels or targeted geographic areas. 

See 12 CFR part 952. 

4See section 1211 of HERA (amending 12 U.S.C. 

1430(a)(3)(E)). 

5Applicable regulations define a long term 

advance as one ‘‘with an original term to maturity 

of greater than five years.’’ 12 CFR 950.1. 

6See section 1211 of HERA (amending 12 U.S.C. 

1430(a)(2)(B)). 

timely receipt by FHFA. Please include 

‘‘RIN 2590–AA24’’ in the subject line of 

the message. 

FOR FURTHER INFORMATION CONTACT: 

Thomas E. Joseph, Senior Attorney 

Advisor, Office of General Counsel, 

thomas.joseph@fhfa.gov, (202) 414– 

3095, Federal Housing Finance Agency, 

Fourth Floor, 1700 G Street, NW., 

Washington, DC 20552; Louis Scalza, 

Associate Director, Policy and Program 

Development, louis.scalza@fhfa.gov, 

(202) 408–2953; or Julie Paller, Senior 

Financial Analyst, julie.paller@fhfa.gov 

(202) 408–2842, (not toll-free numbers), 

Division of Federal Home Loan Bank 

Regulation, Federal Housing Finance 

Agency, 1625 Eye Street, NW., 

Washington, DC 20006. The telephone 

number for the Telecommunications 

Device for the Hearing Impaired is (800) 

877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Comments 

FHFA invites comments on this 

proposed rule, and will consider all 

comments before adopting final 

amendments to its regulations. Copies of 

all comments will be posted on the 

FHFA Internet Web site at http:// 

www.fhfa.gov. In addition, copies of all 

comments received will be available for 

examination by the public on business 

days between the hours of 10 a.m. and 

3 p.m., at the Federal Housing Finance 

Agency, Fourth Floor, 1700 G Street, 

NW., Washington, DC 20552. To make 

an appointment to inspect comments, 

please call the Office of General Counsel 

at (202) 414–6924. 

II. Background 

A. Establishment of FHFA 

Effective July 30, 2008, Division A of 

HERA, Public Law No. 110–289, 122 

Stat. 2654 (2008), created FHFA as an 

independent agency of the Federal 

government. HERA transferred the 

supervisory and oversight 

responsibilities over the Federal 

National Mortgage Association (Fannie 

Mae), the Federal Home Loan Mortgage 

Corporation (Freddie Mac) (collectively, 

Enterprises), the Banks, and the Bank 

System’s Office of Finance, from the 

Office of Federal Housing Enterprise 

Oversight (OFHEO) and the FHFB to 

FHFA. HERA provided for the 

abolishment of OFHEO and FHFB one 

year after the date of enactment. FHFA 

is responsible for ensuring that the 

Enterprises and the Banks operate in a 

safe and sound manner, including being 

capitalized adequately, and that they 

carry out their public policy missions, 

including fostering liquid, efficient, 

competitive, and resilient national 

housing finance markets. The 

Enterprises and the Banks continue to 

operate under regulations promulgated 

by OFHEO and FHFB until FHFA issues 

its own regulations.1

B. Statutory and Regulatory Background 

Each Bank is a cooperative institution 

that is owned by its members. Any 

eligible institution (generally a federally 

insured depository institution or stateregulated insurance company) may 

become a member of a Bank if it satisfies 

certain criteria and purchases a 

specified amount of the Bank’s capital 

stock. See 12 U.S.C. 1424, 1426; 12 CFR 

part 925. Only members or certain 

eligible housing associates (such as state 

housing finance agencies) may obtain 

access to secured loans, known as 

advances, or other products provided by 

a Bank. See 12 U.S.C. 1426(a)(4), 

1430(a), 1430b. 

Prior to HERA, CFIs were defined 

under the Bank Act as depository 

institutions insured under the Federal 

Deposit Insurance Act (12 U.S.C. 1811 et 

seq.) with average total assets of less 

than $500 million, as adjusted annually 

for inflation thereafter. 12 U.S.C. 

1422(13) (2008). Section 1211 of HERA 

raised the $500 million average total 

assets cap to $1 billion. See section 1211 

Public Law 110–289, 122 Stat. 2790 

(amending 12 U.S.C. 1422(10)). 

By Notice published in the Federal 

Register in February 2009, FHFA 

adjusted the $1 billion figure for 

inflation to $1.011 billion. See 74 FR 

7438 (Feb. 17, 2009). As part of FHFA’s 

separate rulemaking addressing Bank 

membership for community 

development financial institutions, 

FHFA included a technical amendment 

to the definition of ‘‘CFI’’ in existing 

§ 925.1 of the FHFB regulations to 

implement the average total asset cap 

increase to $1 billion made by HERA.2

Under the Bank Act, any member, 

including a CFI, that wishes to borrow 

from its Bank must pledge certain types 

of collateral to secure its repayment 

obligation on advances, and must 

otherwise demonstrate to the Bank that 

it is creditworthy. See 12 U.S.C. 1430(a). 

Each Bank sets its own lending and 

collateral policies, which may vary from 

Bank to Bank and will apply to all 

borrowing members of that Bank. Prior 

to HERA, section 10(a)(3) of the Bank 

Act specified that a member may pledge 

the following types of collateral to 

secure an advance: (i) Fully disbursed, 

whole first mortgages on improved 

residential property not more than 90 

days delinquent, or securities 

representing a whole interest in such 

mortgages; (ii) securities issued, insured 

or guaranteed by the U.S. Government 

or any agency thereof; (iii) cash or 

deposits of a Bank; (iv) other real estaterelated collateral acceptable to the Bank, 

provided the value of such collateral is 

readily ascertainable and the Bank can 

perfect its security interest in the 

collateral; and (v) for institutions that 

qualify as CFIs, secured loans for small 

business or agriculture, or securities 

representing a whole interest in such 

secured loans.3 See 12 U.S.C. 1430(a)(3). 

Section 1211 of HERA amended section 

10(a)(3)(E) to broaden the collateral that 

may be pledged by CFI members to 

include secured loans for community 

development activities.4

In addition, prior to HERA, section 

10(a)(2) of the Bank Act provided that 

a Bank could make a long-term advance 

to a member only for the purposes of 

providing funds to the member for 

residential housing finance; it also 

allowed long term advances to CFI 

members for purposes of funding small 

business, small farm, and small agribusiness lending.5 See 12 U.S.C. 

1430(a)(2). Section 1211 of HERA 

amended section 10(a)(2)(B) of the Bank 

Act so that a Bank also may make long 

term advances to a CFI member to fund 

community development activities.6

Section 1211 of HERA also amended 

section 10(a)(6) of the Bank Act to 

provide that the term ‘‘community 

development activities’’ shall have the 

meaning given such term by regulation 

by the Director of FHFA. See id. 

(amending 12 U.S.C. 1430(a)(6)). The 

legislative history of HERA does not 

further illuminate Congress’ intent in 

making these amendments. 

C. Considerations of Differences 

Between the Banks and the Enterprises 

Section 1201 of HERA requires the 

Director, when promulgating regulations 

relating to the Banks, to consider the 

following differences between the Banks 

and the Enterprises: Cooperative 

ownership structure; mission of 

providing liquidity to members; 

affordable housing and community 

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7992 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Proposed Rules 

7See section 1201 of HERA (amending 12 U.S.C. 

4513). 

8The definitions in part 900 of the FHFB rules 

apply only to regulations contained in chapter 9 of 

Title 12 of the Combined Federal Regulations. Thus, 

definitions in part 900 would no longer be 

applicable to the advances or the new business 

activities regulations once they transferred to new 

parts 1266 and 1272. 

9See 12 CFR 25.12, 228.12, 345.12, and 563e.12. 

10See 60 FR 22156 (May 4, 1995); 61 FR 21363 

(May 10, 1996); 70 FR 44266 (Aug. 2, 2005); 71 FR 

18618 (Apr. 12, 2006). 

11See 12 CFR 25.12, 228.12, 345.12, 563e.12. 

12As part of the proposed transfer of the advances 

regulation to part 1266, this provision would be 

redesignated as § 1266.7(a). 

development mission; capital structure; 

and joint and several liability.7 The 

Director also may consider any other 

differences that are deemed appropriate. 

In preparing this proposed regulation, 

the FHFA considered the differences 

between the Banks and the Enterprises 

as they relate to the above factors. The 

FHFA requests comments from the 

public about whether differences related 

to these factors should result in any 

revisions to the proposal. 

III. The Proposed Regulation 

The FHFA is proposing definitions for 

community development, community 

development loans, and other terms as 

needed, to implement the new CFI 

collateral provisions adopted by HERA. 

The FHFA also proposes to amend the 

regulations addressing the purposes for 

which a Bank may make long term 

advances to include community 

development loans made by CFI 

members. The proposed rule also would 

make a change to the advances 

regulation which would incorporate a 

long standing policy previously 

established by the FHFB that any form 

of secured lending by a Bank to a 

member of the Bank System is deemed 

to be an advance and extend that policy 

to cover secured lending transactions by 

a Bank to affiliates of members. Finally, 

the FHFA is proposing to transfer the 

existing advances regulations from part 

950 and the existing new business 

activity regulation from part 980 of the 

FHFB’s regulations (12 CFR parts 950 

and 980) to new parts 1266 and 1272 of 

the FHFA’s regulations, incorporate 

certain definitions that had been in part 

900 of the FHFB rules into new 

proposed parts 1266 and 1272, and 

make additional conforming changes to 

these rules.8

A. Proposed Definitions 

Under the proposed transfer of the 

current part 950 advances regulation, 

the definition section of that regulation 

would be redesignated as § 1266.1. 

FHFA is proposing to amend 

redesignated § 1266.1 to make changes 

necessary to implement the CFI 

collateral amendments adopted by 

HERA, as described above, and to make 

other conforming changes. 

First, FHFA is proposing to define 

‘‘community development’’ with 

reference to the definition for this term 

adopted by CFI members’ primary 

federal regulators under Community 

Reinvestment Act (CRA) regulations.9

The definitions were jointly adopted by 

the Office of the Comptroller of the 

Currency (OCC), Federal Deposit 

Insurance Corporation (FDIC), Federal 

Reserve Board (FRB), and Office of 

Thrift Supervision (OTS) and are 

substantively the same.10 Under the 

definitions, ‘‘community development’’ 

encompasses affordable housing, 

community services targeted to low- and 

moderate-income individuals, economic 

development activities through 

financing of businesses and farms that 

meet size eligibility standards of the 

Small Business Administration’s 

Development Company or Small 

Business Investment Company Programs 

or have gross annual revenues of $1 

million or less, and activities that 

revitalize or stabilize low- or moderateincome geographies, designated disaster 

areas, or certain designated, distressed, 

or underserved non-metropolitan 

middle-income geographies.11 Basing 

the new definition on the current CRA 

regulations should strengthen the CFI 

members’ ability to use advances in 

financing the development needs of 

their local communities as embodied by 

their CRA obligations. 

In turn, FHFA is proposing to define 

‘‘community development loan’’ as a 

loan that has community development 

as its primary purpose. FHFA 

recognizes, however, that many loans 

that are extended to support community 

development, as that term is defined in 

the referenced CRA regulations, would 

already be acceptable collateral for 

advances under existing FHFA 

regulations. For example, all loans for 

affordable housing likely would qualify 

as eligible security for advances as 

mortgages or other real estate-related 

collateral. Because FHFA does not 

intend the proposed definition to call 

into question the validity of any security 

pledged (or to be pledged) under the 

categories of eligible collateral already 

identified in the advances regulation for 

all members, the proposed definition of 

‘‘community development loan’’ would 

exclude categories of eligible collateral 

now identified in § 950.7(a) of the 

advances rule 12 from its scope. FHFA 

recognizes that there would also likely 

be overlap between ‘‘community 

development loans’’ and other types of 

collateral that may be pledged 

exclusively by CFI members. For 

example, loans that promote economic 

development by financing small 

businesses and farms could already 

qualify for use by CFI members as 

advances collateral, as small business 

loans, small farm loans, or small agribusiness loans, as currently defined in 

the advances regulation. However, these 

types of collateral including the new 

community development loans can be 

pledged only by CFI members, so there 

appears to be no need to carve out the 

existing categories of eligible CFI 

collateral from the proposed definition. 

The proposed definition of 

‘‘community development loan’’ also 

specifically excludes consumer loans or 

credit extended to one or more 

individuals for household, family, or 

other personal expenditures. This 

exclusion is intended to make clear that 

FHFA is not proposing that consumer 

loans, such as auto loans, even if made 

to low- or moderate-income individuals 

or households, would be considered 

eligible collateral for advances as a 

‘‘community development loan.’’ This 

proposed provision, however, would 

not change the status of any loan that 

qualifies as eligible collateral for 

advances under existing categories of 

collateral in the current regulations. For 

example, the proposed language would 

not affect the status of home equity 

loans as other real estate-related 

collateral eligible to secure advances. 

Although many community 

development loans would be eligible 

collateral for CFI members under preHERA statutory and regulatory 

provisions, FHFA believes that the 

proposed definitions of ‘‘community 

development’’ and ‘‘community 

development loan’’ would allow for at 

least marginal expansion in the types of 

loans that CFI members can pledge as 

security for advances. For example, the 

proposed definition could allow CFI 

members to accept certain types of loans 

that are meant to revitalize or stabilize 

certain designated, distressed, or 

underserved non-metropolitan middle 

income geographies that would qualify 

as community development loans under 

the referenced definitions adopted by 

federal banking regulators but would 

not necessarily qualify as collateral 

under existing advances regulations. 

FHFA specifically requests comments 

on whether, and how, these proposed 

definitions might be altered to better 

help CFI members fund community 

development activities while continuing 

to assure that advances be secured only 

by high quality collateral. 

mstockstill on DSKH9S0YB1PROD with PROPOSALS

Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Proposed Rules 7993 

13The current definition of ‘‘residential housing 

finance assets’’ incorrectly states that ‘‘community 

lending’’ is defined in § 900.1 rather than in § 900.2. 

14See n.8, supra. 

15As already noted, this rulemaking would also 

relocate the part 980 rules in their entirety to 12 

CFR part 1272. 

16An ‘‘affiliate’’ is currently defined in the 

advances regulation as ‘‘any business entity that 

controls, is controlled by, or is under common 

control with, a member.’’ See § 950.1. 

FHFA is also proposing a new 

definition of ‘‘residential housing 

finance assets’’ that would incorporate 

community development loans and 

thereby implement the HERA 

amendment that allows CFIs to rely on 

long-term advances to fund this type of 

loan. To avoid confusion with the term 

‘‘community development loan’’, FHFA 

is also proposing to remove the 

reference to ‘‘community lending’’ from 

the current definition and incorporate 

each element of ‘‘community lending’’, 

as defined in § 900.2,13 into the 

definition of ‘‘residential housing 

finance assets’’. Thus, the proposed new 

definition of ‘‘residential housing 

finance assets’’ would specifically refer 

to ‘‘loans or investments providing 

financing for economic development 

projects for targeted beneficiaries’’ and 

for CFI members, to the extent not 

already included, ‘‘small business loans, 

small farm loans, small agri-business 

loans, or community development 

loans.’’ Other than adding ‘‘community 

development loans’’, the proposed 

changes are editorial in nature and 

would not alter the scope of the current 

definition for ‘‘residential housing 

finance assets’’. 

FHFA is also proposing to add to 

newly designated § 1266.1 definitions 

for ‘‘Bank Act’’, ‘‘advances’’, ‘‘Bank’’, and 

‘‘targeted beneficiaries’’. These 

definitions are contained in § 900.1 or 

§ 900.2 of the FHFB rules, and FHFA is 

proposing to carry them over to newly 

designated part 1266 without 

substantive change.14

B. Long-Term Advances 

Current § 950.3 implements section 

10(a)(2) of the Bank Act by providing 

that a Bank shall make long-term 

advances only for the purpose of 

enabling a member to purchase or fund 

new or existing residential housing 

finance assets, which include, for CFI 

members, small business loans, small 

farm loans, and small agri-business 

loans. This provision would be 

redesignated as § 1266.3 by the 

proposed rule. Because, as already 

noted, FHFA is proposing to add 

specific references to small business 

loans, small farm loans, small agribusiness loans, and community 

development loans in the definition of 

‘‘residential housing finance assets’’, 

FHFA also is proposing to remove 

references to such CFI-specific collateral 

from the redesignated § 1266.3(a) as 

redundant. No other changes are being 

proposed for this section. 

C. Collateral 

Current § 950.7(b) implements section 

10(a)(3)(E) of the Bank Act, which sets 

forth additional eligible collateral that 

can be pledged by CFI members only to 

secure advances from a Bank. Section 

950.7 would be redesignated as § 1266.7 

under this proposed rule. The FHFA is 

proposing to implement the HERA 

provision allowing CFI members to 

pledge loans for community 

development activities as collateral for 

advances by adding ‘‘community 

development loans’’ to the list of CFIspecific collateral set forth in the 

redesignated § 1266.7(b)(1). No other 

changes are being proposed to this 

provision. 

A Bank’s acceptance of ‘‘community 

development loans’’ would need to meet 

the same requirements as its acceptance 

of other types of CFI collateral. Thus, 

community development loans pledged 

by CFI members to secure advances 

would need to be fully secured by 

collateral other than real estate. In 

addition, any eligible community 

development loan would have to have a 

readily ascertainable value, be able to be 

reliably discounted to account for 

liquidation or other risk, and be able to 

be liquidated in due course, and the 

Bank would have to be able to perfect 

a security interest in such loan. A 

Bank’s acceptance of specific types of 

‘‘community development loans’’ to 

secure an advance would also be subject 

to its first meeting the requirements of 

the new business activities rule, 

currently set forth in 12 CFR part 980.15

The proposed changes would also allow 

a Bank to accept as collateral for 

advances, a security representing a 

whole interest in community 

development loans, subject to the 

Bank’s first fulfilling any obligations 

under the new business activities rule. 

A Bank’s acceptance of ‘‘community 

development loans’’ would also be 

subject to all relevant FHFA policies 

and guidance that apply to acceptance 

of other types of collateral to secure 

advances, such as the guidance on antipredatory lending policies contained in 

Advisory Bulletin 2005–AB–08. 

D. Status of Secured Lending Under the 

Advances Regulation 

FHFA is also proposing to amend 

newly designated § 1266.2 of the 

advances regulation to incorporate a 

long-standing position that any secured 

lending by a Bank to members is 

deemed an advance subject to all 

requirements related to advances. This 

position was first taken by the FHFB in 

1995 by resolution; this resolution has 

not been rescinded and is still in effect. 

See Fin. Brd. Res. No. 95–13 (Aug. 9, 

1995). The purpose of the resolution 

was to prevent Banks from using other 

forms of secured lending to members, 

such as reverse repurchase transactions, 

to avoid specific requirements and 

obligations associated with making 

advances to members. 

This remains a concern, even if, 

because of amendments to the Bank Act, 

the specific issue which motivated the 

original resolution is no longer relevant. 

FHFA is proposing to codify the 

position taken in the old FHFB 

resolution as new § 1266.2(e) to make 

clear that it intends this restriction to 

continue to apply and that it does not 

believe that members, or the Banks, 

should be able to avoid requirements 

applied to advances, including stock 

purchase requirements, by allowing 

members to borrow from the Banks 

using other forms of secured 

transactions. Further, to assure that the 

proposed provision cannot be 

circumvented by a Bank extending 

secured credit to an affiliate of a 

member, the proposed provision also 

would be applied to any affiliate of a 

member.16 Members and their affiliates 

are able to enter transactions with each 

other to provide funding and liquidity, 

and thereby, can extend the benefits of 

borrowing from the Bank among 

affiliated parties. In fact, the advances 

regulation has long recognized that 

affiliates of a member can play a role in 

helping the member secure financing 

from a Bank, and has allowed affiliates 

to pledge collateral for advances subject 

to certain specific requirements. See 

§ 950.7(g). Given this link, FHFA 

believes that it is appropriate to close 

what could be another means for 

members to avoid regulatory 

requirements associated with advances 

by incorporating into the regulations a 

provision providing that, because 

secured extensions of credit are deemed 

to be advances, they are not to be made 

to member affiliates. 

E. New Business Activities 

FHFA is proposing to transfer the new 

business activities rule from part 980 of 

the FHFB regulations to part 1272 of 

FHFA regulations. FHFA is also 

proposing to make conforming changes 

mstockstill on DSKH9S0YB1PROD with PROPOSALS

7994 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Proposed Rules 

to part 1272, including adding 

definitions for ‘‘Bank’’ and ‘‘FHFA’’. The 

proposed definitions are the same as 

those being proposed in part 1266. No 

substantive changes to the new business 

activities regulation are being proposed. 

IV. Paperwork Reduction Act 

The information collection contained 

in the Data Reporting Manual, entitled 

‘‘Advances to Housing Associates,’’ has 

been assigned control number 2590– 

0001 by the Office of Management and 

Budget (OMB). The proposed 

amendments to the advances regulations 

do not substantively or materially 

modify the approved information 

collection. The proposed changes to the 

new business activity regulation do not 

contain any collections of information 

pursuant to the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). 

Therefore, FHFA has not submitted any 

information to the OMB for review. 

V. Regulatory Flexibility Act 

The proposed amendments apply 

only to the Banks, which do not come 

within the meaning of small entities as 

defined in the Regulatory Flexibility Act 

(RFA). See 5 U.S.C. 601(6). Therefore in 

accordance with section 605(b) of the 

RFA, FHFA certifies this proposed 

regulation, if promulgated as a final 

regulation, will not have significant 

economic impact on a substantial 

number of small entities. 

List of Subjects in 12 CFR Parts 950, 

980, 1266 and 1272 

Community development, Credit, 

Federal home loan banks, Housing, 

Reporting and recordkeeping 

requirements. 

For the reasons stated in the 

preamble, the Federal Housing Finance 

Agency proposes to amend chapters IX 

and XII of title 12 of the Code of Federal 

Regulations as follows: 

CHAPTER IX—FEDERAL HOUSING 

FINANCE BOARD 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

PART 950—[REDESIGNATED AS PART 

1266] 

1. Transfer 12 CFR part 950 from 

chapter IX, subchapter G, to chapter XII, 

subchapter D, and redesignate as 12 CFR 

part 1266. 

PART 980—[REDESIGNATED AS PART 

1272] 

2. Transfer 12 CFR part 980 from 

chapter IX, subchapter J, to chapter XII, 

subchapter D, and redesignate as 12 CFR 

part 1272. 

PART 1266—ADVANCES 

3. The authority citation for newly 

redesignated part 1266 is revised to read 

as follows: 

Authority: 12 U.S.C. 1426, 1429, 1430, 

1430b, 1431, 4511(b), 4513, 4526(a). 

4. Revise the heading in the newly 

redesignated part 1266 to read as set 

forth above. 

5. Amend the newly redesignated part 

1266 as indicated in the table below: 

Amend: By removing the reference to: And adding in its place: 

§ 1266.1, Definition of CFI member .................................. § 925.1, each place that it appears .................................. § 1263.1. 

§ 1261.1, Definition of State housing finance agency ....... § 926.1 of this chapter ...................................................... § 926.1 of this title. 

§ 1266.4(g)(2)(i) ................................................................. § 950.2(b)(2) ..................................................................... § 1266.2(b)(2). 

§ 1266.4(g)(2)(ii) ................................................................ § 950.2(a) .......................................................................... § 1266.2(a). 

§ 1266.6(a) ......................................................................... § 917.4 of this chapter ...................................................... § 917.4 of this title. 

§ 1266.9(a) ......................................................................... § 950.2(c) .......................................................................... § 1266.2(c). 

§ 1266.10(a) ....................................................................... § 917.4 of this chapter ...................................................... § 917.4 of this title. 

§ 1266.16 ........................................................................... §§ 950.14 and 950.17 ....................................................... §§ 1266.14 and 1266.17. 

§ 1266.17(a) ....................................................................... part 925 ............................................................................ part 1263. 

§ 1266.17(b)(2)(i) ............................................................... § 926.3(b) .......................................................................... § 926.3(b) of this title. 

§ 1266.17(b)(2)(i)(A) .......................................................... § 950.7(a)(1) or (2) ........................................................... § 1266.7(a)(1) or (2). 

§ 1266.17(b)(2)(i)(B) .......................................................... § 950.7(a)(3) ..................................................................... § 1266.7(a)(3). 

§ 1266.17(b)(2)(i)(C) .......................................................... § 950.7(a)(4) ..................................................................... § 1266.7(a)(4). 

§ 1266.17(c)(2)(i) ............................................................... § 950.3(b), each time it appears ....................................... § 1266.3(b). 

§ 1266.17(c)(2)(ii) .............................................................. § 950.5(b)(2) ..................................................................... § 1266.5(b)(2). 

§ 1266.17(e)(2) .................................................................. part 926 of this chapter .................................................... part 926 of this title. 

§ 1266.17(e)(3) .................................................................. part 926 of this chapter .................................................... part 926 of this title. 

6. In newly redesignated part 1266, 

revise all references to ‘‘Finance Board’’ 

to read ‘‘FHFA’’ and revise all references 

to ‘‘Act’’ to read ‘‘Bank Act’’. 

7. In newly redesignated § 1266.1, add 

in correct alphabetical order definitions 

for ‘‘Advance’’, ‘‘Bank’’, ‘‘Bank Act’’, 

‘‘Community development’’, 

‘‘Community development loan’’, 

‘‘FHFA’’, and ‘‘Targeted beneficiaries’’, 

and revise the definition of ‘‘Residential 

housing finance assets’’ to read as 

follows: 

§ 1266.1 Definitions. 

* * * * * 

Advance means a loan from a Bank 

that is: 

(1) Provided pursuant to a written 

agreement; 

(2) Supported by a note or other 

written evidence of the borrower’s 

obligation; and 

(3) Fully secured by collateral in 

accordance with the Bank Act and this 

part. 

* * * * * 

Bank, written in title case, means a 

Federal Home Loan Bank established 

under section 12 of the Bank Act, as 

amended (12 U.S.C. 1432). 

Bank Act means the Federal Home 

Loan Bank Act, as amended (12 U.S.C. 

1421 through 1449). 

* * * * * 

Community development has the 

same meaning as under the definition 

set forth in the Community 

Reinvestment rule for the Federal 

Reserve System (12 CFR part 228), 

Federal Deposit Insurance Corporation 

(12 CFR part 345), the Office of Thrift 

Supervision (12 CFR part 563e) or the 

Office of the Comptroller of the 

Currency (12 CFR part 25), whichever is 

the CFI member’s primary federal 

regulator. 

Community development loan means 

a loan that has as its primary purpose 

community development, but such 

loans shall not include: 

(1) Any loan or instrument that 

qualifies as eligible security for an 

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Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Proposed Rules 7995 

advance under § 1266.7(a) of this part; 

or 

(2) Consumer loans or credit extended 

to one or more individuals for 

household, family or other personal 

expenditures. 

* * * * * 

FHFA means the Federal Housing 

Finance Agency. 

* * * * * 

Residential housing finance assets 

means any of the following: 

(1) Loans secured by residential real 

property; 

(2) Mortgage-backed securities; 

(3) Participations in loans secured by 

residential real property; 

(4) Loans or investments providing 

financing for economic development 

projects for targeted beneficiaries; 

(5) Loans secured by manufactured 

housing, regardless of whether such 

housing qualifies as residential real 

property; 

(6) Any loans or investments which 

the FHFA, in its discretion, otherwise 

determines to be residential housing 

finance assets; and 

(7) For CFI members, and to the extent 

not already included in categories (1) 

through (6), small business loans, small 

farm loans, small agri-business loans, or 

community development loans. 

* * * * * 

Targeted beneficiaries has the 

meaning set forth in § 952.1 of this title. 

8. Revise newly designated § 1226.2 

by adding new paragraph (e) to read as 

follows: 

§ 1266.2 Authorization and application for 

advances; obligation to repay advances. 

* * * * * 

(e) Status of secured lending. All 

secured extensions of credit by a Bank 

to a member of any Bank, regardless of 

the form of the transaction, shall be 

considered an advance subject to the 

requirements of this part. Because 

advances to an affiliate of a member are 

not permitted under the Bank Act, or 

this part, secured extensions of credit 

also cannot be made by a Bank to an 

affiliate of any member. 

9. Revise newly redesignated § 1266.3 

to read as follows: 

§ 1266.3 Purpose of long-term advances; 

Proxy test. 

(a) A Bank shall make long-term 

advances only for the purpose of 

enabling any member to purchase or 

fund new or existing residential housing 

finance assets. 

(b)(1) Prior to approving an 

application for a long-term advance, a 

Bank shall determine that the principal 

amount of all long-term advances 

currently held by the member does not 

exceed the total book value of 

residential housing finance assets held 

by such member. The Bank shall 

determine the total book value of such 

residential housing finance assets, using 

the most recent Thrift Financial Report, 

Report of Condition and Income, 

financial statement or other reliable 

documentation made available by the 

member. 

(2) Applications for CICA advances 

are exempt from the requirements of 

paragraph (b)(1) of this section. 

10. Amend newly redesignated 

§ 1266.7 by revising paragraph (b)(1) to 

read as follows: 

§ 1266.7 Collateral. 

* * * * * 

(b) * * * 

(1) General. Subject to the 

requirements set forth in part 1272 of 

this chapter, a Bank is authorized to 

accept from CFI members or their 

affiliates as security for advances small 

business loans, small farm loans, small 

agri-business loans, or community 

development loans, in each case fully 

secured by collateral other than real 

estate, or securities representing a whole 

interest in such loans, provided that: 

(i) Such collateral has a readily 

ascertainable value, can be reliably 

discounted to account for liquidation 

and other risks, and can be liquidated in 

due course; and 

(ii) The Bank can perfect a security 

interest in such collateral. 

* * * * * 

PART 1272—NEW BUSINESS 

ACTIVITIES 

11. The authority citation for newly 

redesignated part 1272 is revised to read 

as follows: 

Authority: 12 U.S.C. 1431(a), 1432(a), 

4511(b), 4513, 4526(a). 

12. Revise the heading in the newly 

redesignated part 1272 to read as set 

forth above. 

13. Amend the references in the 

newly redesignated part 1272 as 

indicated in the table below: 

Amend: By removing the reference to: And adding in its place: 

§ 1272.1, Definition of new business activity .................... § 950.7(a)(4) ..................................................................... § 1266.7(a)(4). 

§ 1272.1, Definition of new business activity .................... § 950.7(b) .......................................................................... § 1266.7(b). 

§ 1272.3, Introductory text ................................................. § 980.4(b) .......................................................................... § 1272.4(b). 

§ 1272.3(b), Introductory text ............................................ § 950.7 .............................................................................. § 1266.7. 

§ 1272.3(b)(3) .................................................................... § 950.10 ............................................................................ § 1266.10. 

§ 1272.4(a) ......................................................................... § 980.3 .............................................................................. § 1272.3. 

§ 1272.4(a) ......................................................................... § 980.5(a)(1) through (4) .................................................. § 1272.5(a)(1) through (4). 

§ 1272.4(b) ......................................................................... § 950.7(a)(4) ..................................................................... § 1266.7(a)(4). 

§ 1272.4(b) ......................................................................... § 980.3 .............................................................................. § 1272.3. 

§ 1272.4(c) ......................................................................... § 980.6 .............................................................................. § 1272.6. 

§ 1272.5(a), Introductory text ............................................ § 980.3 .............................................................................. § 1272.3. 

§ 1272.5(a)(4) .................................................................... § 980.7 .............................................................................. § 1272.7. 

§ 1272.5(a)(5) .................................................................... § 980.7 .............................................................................. § 1272.7. 

§ 1272.5(b) ......................................................................... § 980.6 .............................................................................. § 1272.6. 

14. Amend newly redesignated part 

1272 by revising all references to 

‘‘Finance Board’’ to read ‘‘FHFA’’. 

15. Amend newly redesignated 

§ 1272.1 by adding in correct 

alphabetical order definitions for ‘‘Bank’’ 

and ‘‘FHFA’’ to read as follows: 

§ 1272.1 Definitions. 

* * * * * 

Bank, written in title case, means a 

Federal Home Loan Bank established 

under section 12 of the Bank Act, as 

amended (12 U.S.C. 1432). 

FHFA means the Federal Housing 

Finance Agency. 

* * * * * 

Dated: February 16, 2010. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2010–3407 Filed 2–22–10; 8:45 am] 

BILLING CODE P 

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