38618 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 

the referral will be provided to 

respondents in the same manner as an 

internal referral. However, where 

immediate notification to a respondent 

of an external referral is deemed 

inappropriate, OGC will notify the 

Commission of the referral within 5 

days of receipt of the referral from the 

governmental agency. In cases where, 

due to law enforcement purposes, the 

referral document may not be provided 

to a respondent, OGC will provide the 

respondent with a letter containing 

sufficient information regarding the 

facts and allegations to afford the 

respondent an opportunity to 

demonstrate that no action should be 

taken. Absent exercise of the 

Commission’s discretion (by the 

affirmative vote of four Commissioners), 

OGC will not proceed with an 

enforcement proceeding based on an 

external referral until the referral or 

substitute informational letter is 

provided to the respondent. 

III. Conclusion 

This notice establishes agency 

practices or procedures. This notice 

does not constitute an agency regulation 

requiring notice of proposed 

rulemaking, opportunities for public 

participation, prior publication, and 

delay effective under 5 U.S.C. 553 of the 

Administrative Procedures Act 

(‘‘APA’’). The provisions of the 

Regulatory Flexibility Act, 5 U.S.C. 

605(b), which apply when notice and 

comment are required by the APA or 

another statute, are not applicable. The 

above provides general guidance 

concerning notice to respondents in 

non-complaint generated matters and 

announces the general course of action 

that the Commission intends to follow. 

This notice sets forth the Commission’s 

intentions concerning the exercise of its 

discretion in its enforcement program. 

However, the Commission retains that 

discretion and will exercise it as 

appropriate with respect to the facts and 

circumstances of each matter it 

considers. Consequently, this notice 

does not bind the Commission or any 

member of the general public. 

On behalf of the Commission. 

Dated: July 29, 2009. 

Steven T. Walther, 

Chairman, Federal Election Commission. 

[FR Doc. E9–18542 Filed 8–3–09; 8:45 am] 

BILLING CODE 6715–01–P 

FEDERAL HOUSING FINANCE 

AGENCY 

[No. 2009–N–10] 

Federal Home Loan Bank Collateral for 

Advances and Interagency Guidance 

on Nontraditional Mortgage Products 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Notice of study and 

recommendations and request for 

comment. 

SUMMARY: Section 1217 of the Housing 

and Economic Recovery Act of 2008 

(HERA) requires the Director of the 

Federal Housing Finance Agency 

(FHFA) to conduct a study on the extent 

to which loans and securities used as 

collateral to support Federal Home Loan 

Bank (FHLBank) advances are 

consistent with the interagency 

guidance on nontraditional mortgage 

products. The study must be submitted 

to the Committee on Banking, Housing 

and Urban Affairs of the Senate and the 

Committee on Financial Services of the 

House of Representatives no later than 

July 30, 2009, one year after the date of 

the HERA enactment. Further, the study 

(the HERA Section 1217 Study) must 

consider and recommend any additional 

regulations, guidance, advisory 

bulletins, or other administrative 

actions necessary to ensure that the 

FHLBanks are not supporting loans with 

predatory characteristics. Section 1217 

of HERA also requires that the public 

have an opportunity to comment on any 

recommendations made as a result of 

the study. This Federal Register Notice 

is intended to inform the public about 

the HERA Section 1217 Study and 

provide the public with the requisite 

opportunity to comment. 

DATES: Comments must be received on 

or before October 2, 2009. 

ADDRESSES: You may submit your 

comments on the HERA Section 1217 

Study, identified by a subject line of 

‘‘HERA Section 1217 Study,’’ by any of 

the following methods: 

• U.S. Mail, United Parcel Post, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Alfred M. Pollard, General Counsel, 

Attention: Comments/HERA Section 

1217 Study, 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/ 

HERA Section 1217 Study, 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 at RegComments@fhfa.gov. 

Please include ‘‘HERA Section 1217 

Study’’ 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 

timely receipt by the agency. Please 

include ‘‘HERA Section 1217 Study’’ in 

the subject line of the message. 

FOR FURTHER INFORMATION CONTACT: 

Louis M. Scalza, Associate Director, 

(202) 408–2953 or Linda L. Campbell, 

Senior Bank Examiner, (202) 408–2586, 

Division of Federal Home Loan Bank 

Regulation; or Neil R. Crowley, Deputy 

General Counsel, Office of General 

Counsel, (202) 343–1316, Federal 

Housing Finance Agency, 1625 Eye 

Street, NW., Washington, DC 20006. The 

telephone number for the 

Telecommunications Device for the Deaf 

is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: Section I 

of this Notice provides background on 

FHFA, the FHLBank System, and the 

collateral securing FHLBank advances. 

Section II summarizes the provisions of 

the interagency guidance and three 

Federal Housing Finance Board (FHFB) 

advisory bulletins relating to 

nontraditional, subprime, and antipredatory lending. Section III describes 

the resources used to complete the 

HERA Section 1217 Study, including a 

collateral data survey that FHFA 

conducts annually, in-depth secured 

credit reviews performed during recent 

examinations, and a specific 

questionnaire related to the HERA 

Section 1217 issues that FHFA sent to 

the FHLBanks. Sections IV and V of this 

report present FHFA’s analysis and 

conclusions from the HERA Section 

1217 Study and Section VI requests 

comments on specific related questions. 

The HERA Section 1217 Study reports 

that FHLBanks’ reliance on collateral 

described as nontraditional, subprime or 

Alt-A declined during 2008, accounting 

for about one-fifth of collateral securing 

advances as of December 31, 2008. 

Some portion of this collateral predates 

the issuance of the interagency 

guidance, but the FHLBanks need to 

manage and mitigate the risks associated 

with all of the collateral supporting 

advances. 

FHFA, through advisory bulletins 

issued by the prior regulator of the 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 38619 

FHLBanks, the FHFB, has issued 

explicit written guidance to the 

FHLBanks on anti-predatory, 

nontraditional, and subprime lending. 

The FHLBanks have adopted policies 

which address nontraditional and 

subprime collateral, although in-depth 

secured credit reviews found some 

weaknesses in those policies and 

practices. The FHLBanks’ responses to 

an FHFA questionnaire indicate that 

they have adopted policies, procedures 

and practices that would require that 

loans and MBS used as collateral to 

support advances be consistent with the 

interagency guidance. FHFA will 

continue to assess the adequacy of the 

FHLBank’s policies and procedures and 

monitor the FHLBank’s remediation 

efforts. FHFA determines the 

appropriateness of issuing additional 

guidance based on examination results 

and its assessment of legislative 

developments. 

I. Background 

A. Federal Housing Finance Agency 

Effective July 30, 2008, HERA, Public 

Law 110–289, 122 Stat. 2654 (2008), 

transferred the supervisory and 

oversight responsibilities of the Office of 

Federal Housing Enterprise Oversight 

(OFHEO) over the Federal National 

Mortgage Association (Fannie Mae) and 

the Federal Home Loan Mortgage 

Corporation (Freddie Mac) (collectively, 

Enterprises), and the oversight 

responsibilities of the FHFB over the 

FHLBanks and the Office of Finance 

(which acts as the FHLBanks’ fiscal 

agent) to FHFA, a new independent 

agency of the Federal Government. 

FHFA is responsible for ensuring that 

the Enterprises and the FHLBanks 

operate in a safe and sound manner, 

maintain adequate capital and internal 

controls, foster liquid, efficient, 

competitive and resilient national 

housing finance markets, and carry out 

their public policy missions through 

authorized activities. See § 1102, Public 

Law 110–289, 122 Stat. 2663–64. The 

Enterprises and the FHLBanks continue 

to operate under regulations 

promulgated by OFHEO and the FHFB 

until FHFA issues its own regulations. 

See id. at §§ 1302, 1312, 122 Stat. 2795, 

2798. The Division of Federal Home 

Loan Bank Regulation is the principal 

organizational unit within FHFA 

responsible for supervision of the 

FHLBanks. 

B. The FHLBank System 

The twelve FHLBanks are 

instrumentalities of the United States 

organized under the Federal Home Loan 

Bank Act (Bank Act). See 12 U.S.C. 

1423, 1432(a). The FHLBanks are 

cooperatives; only members of an 

FHLBank may own the capital stock of 

an FHLBank and only members or 

certain eligible housing associates (such 

as state housing finance agencies) may 

obtain access to the products provided 

by an FHLBank. See 12 U.S.C. 1426, 

1430(a), 1430b. Each FHLBank is 

managed by its own board of directors 

and serves the public by enhancing the 

availability of residential mortgage and 

community lending credit through its 

member institutions. See 12 U.S.C. 

1427. Any eligible institution 

(principally, federally-insured 

depository institutions or state-regulated 

insurance companies) may become a 

member of an FHLBank by satisfying 

certain criteria and by purchasing a 

specified amount of the FHLBank’s 

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

12 CFR part 931. 

As government sponsored enterprises 

(GSEs), the FHLBanks are normally able 

to borrow funds in the capital markets 

on terms more favorable than could be 

obtained by most private entities. Until 

recently, the FHLBank System could 

borrow funds at a modest spread over 

the rates on U.S. Treasury securities of 

comparable maturity, across a wide 

range of maturities. In 2008, market 

conditions contributed to substantially 

wider spreads between FHLBank 

consolidated obligations and U.S. 

Treasuries, particularly at longer 

maturities. Although the wider spreads 

may have contributed to a decline in 

advances that began in the fourth 

quarter of 2008, the FHLBanks continue 

to serve as a source of liquidity to their 

members. 

The FHLBanks pass along their GSE 

funding advantage to their members— 

and ultimately to consumers—by 

providing advances (secured loans) and 

other financial services at rates that 

would not otherwise be available to 

their members. Some of the FHLBanks 

also have Acquired Member Asset 

(AMA) programs whereby they acquire 

fixed-rate, single-family mortgage loans 

from participating member institutions. 

The FHLBanks raise funds in the 

capital markets by issuing consolidated 

obligations consisting of bonds and 

discount notes. Consolidated obligations 

are issued by the Office of Finance on 

behalf of the twelve FHLBanks and are 

the principal source of funding not only 

for FHLBank advances, but also for 

AMA programs, and investments. 

Although an FHLBank is primarily 

liable for the portion of the consolidated 

obligations corresponding to the 

proceeds received by that FHLBank, 

each FHLBank is also jointly and 

severally liable with the other eleven 

FHLBanks for the payment of principal 

of, and interest on, all consolidated 

obligations. See 12 U.S.C. 1431; 12 CFR 

966.9. 

C. Collateral Securing FHLBank 

Advances 

The United States Government 

established the Federal Home Loan 

Bank System in 1932 to stimulate 

mortgage finance by providing liquidity 

from the FHLBanks to its member 

financial institutions. Members, 

generally financial institutions, increase 

liquidity by obtaining advances from the 

FHLBanks. Those advances are secured 

by eligible collateral, typically 

government securities, residential 

mortgages, or other real estate related 

collateral (e.g., commercial real estate 

loans, home equity lines of credit and 

second mortgage loans). Total advances 

at the end of June 2009 were $721 

billion, down from a peak exceeding $1 

trillion in October 2008. 

All advances are collateralized, which 

protects the FHLBank should the 

member default. The FHLBanks secure 

member advances in several ways: a 

blanket lien on all or specific categories 

of a member’s assets, a lien on specific 

member assets for which the member 

provides a listing of collateral 

characteristics to the FHLBank, a lien on 

assets that a member delivers to the 

FHLBank, or some combination thereof. 

The level of collateralization depends 

on the level of risk associated with the 

collateral. To date, the FHLBanks have 

never incurred a credit loss on an 

advance. 

A member may pledge only the 

following types of collateral for an 

advance: (a) Fully disbursed, whole first 

mortgages on improved residential 

property not more than 90 days 

delinquent; (b) securities issued, 

insured, or guaranteed by the U.S. 

Government or any agency thereof; (c) 

cash or deposits of an FHLBank; (d) 

other real estate related collateral 

acceptable to the FHLBank, provided 

the value of such collateral is readily 

ascertainable and the FHLBank can 

perfect its interest in the collateral; and 

(e) for institutions that qualify as 

‘‘community financial institutions’’ 

(CFIs), secured loans for small business, 

agriculture, or community development 

activities, or securities representing a 

whole interest in such secured loans. 

See 12 U.S.C. 1430(a)(3) as amended. 

Whole first mortgage loans on 

residential real property represent the 

largest source of member-provided 

collateral to the System. As of December 

31, 2008, whole residential mortgage 

loans pledged as collateral for advances 

mstockstill on DSKH9S0YB1PROD with NOTICES

38620 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 

1Advisory bulletins provide guidance to the 

FHLBanks regarding particular supervisory issues. 

Although an advisory bulletin does not have the 

force of a regulation or an order, it is integrated into 

the examination programs. Advisory bulletins are 

effective upon issuance and remain in effect until 

rescinded. 

2Although HERA specifically refers to the 

interagency guidance on nontraditional mortgage 

products, the FHFA believes that the issue of 

subprime mortgage lending is closely related. 

Therefore, the FHFA has expanded the scope of the 

study to include subprime lending. 

were $859 billion or 59.7 percent of the 

total collateral securing advances. 

II. HERA Section 1217 Study 

Regulatory Guidance 

HERA Section 1217, which mandated 

this study, specifically refers to 

interagency guidance on nontraditional 

mortgage products. This section 

provides a summary of the interagency 

guidance on nontraditional mortgage 

products along with the related 

statement on subprime residential 

mortgage lending. It then summarizes 

the advisory bulletins issued by the 

FHFB to apply the principles of the 

interagency guidance to the supervision 

of the FHLBanks, as well as an advisory 

bulletin on anti-predatory lending.1

A. Interagency Guidance 

The term ‘‘interagency guidance’’ is 

not specifically defined in the HERA 

legislation. For purposes of this report, 

FHFA uses the term ‘‘interagency 

guidance’’ to mean the guidance issued 

jointly by five federal financial 

institution regulatory agencies—the 

Office of the Comptroller of the 

Currency, the Board of Governors of the 

Federal Reserve System, the Federal 

Deposit Insurance Corporation, the 

Office of Thrift Supervision, and the 

National Credit Union Administration— 

concerning nontraditional mortgage 

products and subprime lending.2 The 

principal interagency guidance on 

nontraditional and subprime residential 

mortgage loans can be summarized as 

follows. 

Interagency Guidance on Nontraditional 

Mortgage Product Risks (2006) 

The federal financial institution 

regulatory agencies issued the 

Interagency Guidance on Nontraditional 

Mortgage Product Risks on October 4, 

2006. This notice instructs financial 

institutions on how to offer 

nontraditional mortgage products in a 

safe and sound manner and in a way 

that clearly discloses the benefits and 

risks to borrowers. The guidance focuses 

on nontraditional residential mortgage 

products that permit borrowers to defer 

payment of principal or interest, 

including interest-only residential 

mortgage loans, payment option 

adjustable-rate residential mortgage 

loans, and negative amortization 

residential mortgage loans. It also covers 

other higher-risk practices often 

associated with nontraditional 

residential mortgage loans, such as 

simultaneous second-lien residential 

mortgage loans, variable interest rates 

with below-market introductory rates, 

and the use of reduced documentation 

in the evaluation of an applicant’s 

creditworthiness. The guidance 

establishes that financial institutions 

should recognize and mitigate the risks 

inherent in these products by ensuring 

that loan terms and underwriting 

standards are clearly disclosed and 

consistent with prudent lending 

practices, including credible 

consideration of a borrower’s repayment 

capacity. 

Statement on Subprime Mortgage 

Lending (2007) 

The federal financial institution 

regulatory agencies subsequently issued 

the Statement on Subprime Mortgage 

Lending on July 10, 2007. The Statement 

addresses issues relating to certain 

adjustable-rate mortgage products that 

can cause the borrower’s monthly 

payment to increase significantly and 

potentially become unaffordable. The 

Statement establishes prudent safety 

and soundness and consumer protection 

standards that should be followed to 

ensure that consumers, especially 

subprime borrowers, obtain loans they 

can afford to repay and receive 

information that adequately describes 

product features. These standards 

include qualifying the borrower using a 

fully-indexed interest rate (i.e., the 

interest rate after any lower, 

introductory interest rate in the early 

period of a loan) and a fully-amortizing 

repayment schedule. The standards also 

convey the regulators’ expectation that 

stated income and reduced 

documentation should be accepted by 

the lender only if there are documented 

mitigating factors that clearly minimize 

the need for verification of a borrower’s 

repayment capacity. The Statement 

reiterates that institutions should 

develop strong control systems to 

monitor compliance with risk 

management and consumer protection 

policies and practices, including clear 

disclosures to customers and limits on 

prepayment penalties. 

B. FHFB Guidance 

FHFA—like its predecessor agencies 

the Federal Housing Finance Board and 

the Office of Federal Housing Enterprise 

Oversight—is mindful of the potential 

risk to the FHLBanks and the impact on 

the public if the FHLBanks were to 

provide liquidity to support predatory 

loans or inappropriately underwritten 

nontraditional and subprime residential 

mortgage loans. Accepting such loans as 

collateral for advances could pose a 

safety and soundness risk to the 

FHLBanks and would also be 

inconsistent with the overarching 

housing finance mission of the 

FHLBanks. 

As a result of concerns about 

predatory lending, in 2005 the former 

FHFB issued an advisory bulletin to the 

FHLBanks requiring each FHLBank to 

establish and communicate to its 

member institutions its anti-predatory 

lending policies. The FHLBanks were 

required to establish those policies to 

avoid accepting loans with predatory 

characteristics as collateral for 

advances. In 2007 and 2008, the FHFB 

also issued advisory bulletins on 

nontraditional and subprime residential 

mortgage loans as a complement to the 

interagency guidance. The FHFB 

guidance established that any 

nontraditional or subprime mortgage 

loans originated or acquired by the 

member after July 10, 2007 could serve 

as eligible collateral only if those loans 

were underwritten consistent with the 

interagency guidance. The 2007 and 

2008 guidance expanded the reach of 

the interagency guidance by establishing 

that the standards in the interagency 

guidance would apply not just to loans 

purchased by the FHLBanks, but also to 

whole loans collateralizing advances 

and to loans underlying MBS that serve 

as collateral for advances or that the 

FHLBanks purchase as investment 

securities. Further, the FHFB instructed 

the FHLBanks to apply the interagency 

standards to loans and MBS accepted as 

collateral from FHLBank member 

institutions that were not otherwise 

directly subject to the interagency 

guidance, e.g., insurance companies. 

The following provides a summary of 

the three advisory bulletins. 

Advisory Bulletin 2005–AB–08 

In August of 2005, the FHFB issued 

Advisory Bulletin 2005–AB–08, 

Guidance on FHLBank Anti-Predatory 

Lending Policies. This Bulletin 

establishes that each FHLBank must 

have in place comprehensive antipredatory lending policies to govern the 

purchases of residential mortgage loans 

and the level of advances that can be 

made to its members. Although the 

advisory bulletin acknowledged that 

there is no single definition of predatory 

lending in federal, state, and local laws 

and regulations, it noted that over the 

preceding several years, federal, state, 

and local jurisdictions had adopted antimstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 38621 

3Statement on Subprime Mortgage Lending, 72 

FR 37569 (July 10, 2007). 

predatory lending measures to combat 

abusive practices in the mortgage 

market. 

The 2005 advisory bulletin requires 

that the FHLBanks’ policies preclude 

purchasing residential mortgage loans or 

accepting as eligible collateral for 

advances loans that violate applicable 

federal, state, or local anti-predatory 

lending laws. The FHLBanks’ antipredatory lending policies must also, at 

a minimum, address: residential 

mortgage loans subject to the Home 

Ownership and Equity Protection Act 

(HOEPA), prepaid single-premium 

credit life or similar insurance, 

prepayment penalties beyond the early 

years of the loan, and mandatory 

arbitration. In addition, the FHLBanks 

must require each member to certify that 

it is aware of the FHLBanks’ antipredatory lending policies and will 

comply with those policies in the sale 

of residential mortgage loans to the 

FHLBank or when obtaining advances 

from the FHLBank. Each FHLBank must 

also develop written procedures and 

standards for verifying member 

compliance with its anti-predatory 

lending mortgage purchase and advance 

policies, paying particular attention to 

any loans that are otherwise not subject 

to review by a federal financial 

institution supervisory agency. Finally, 

each FHLBank must have agreements in 

place with its members to provide for 

replacement or indemnity for any loan 

or collateral that is found to be in 

noncompliance with the FHLBanks’ 

policies. See http://www.fhfb.gov/ 

webfiles/4201/2005-AB-08.pdf. 

Advisory Bulletin 2007–AB–01 

Issued in April 2007, Advisory 

Bulletin 2007–AB–01, Nontraditional 

and Subprime Residential Mortgage 

Loans, requires the FHLBanks to 

implement policies and risk 

management practices that establish risk 

limits for, and mitigation of, credit 

exposure on nontraditional and 

subprime mortgage loans. The advisory 

bulletin requires that an FHLBank’s 

policies and procedures must address 

how the FHLBank measures, monitors 

and controls risks arising from 

exposures to nontraditional and 

subprime mortgage loans. The advisory 

bulletin further requires that an 

FHLBank’s policies must be discussed 

with and approved by its board of 

directors and must identify the 

attributes of nontraditional and 

subprime residential mortgage loans 

that have the potential for increased 

risk. The policies should establish limits 

and require regular monitoring of 

exposure to nontraditional and 

subprime residential mortgage loans, 

including limits and acceptable 

adjustments to collateral coverage 

requirements or ‘‘haircuts.’’ The 

procedures for monitoring collateral 

securing advances should allow an 

FHLBank to identify the volume of 

nontraditional and subprime residential 

mortgage loans pledged to secure 

advances. Finally, the collateral review 

procedures should also include 

assessments and testing of member 

underwriting and monitoring of 

nontraditional and subprime loans and 

address the acceptance of MBS with 

nontraditional and subprime collateral. 

See http://www.fhfb.gov/webfiles/6372/ 

2007-AB-01.pdf. 

Advisory Bulletin 2008–AB–02 

Issued in July 2008, Advisory Bulletin 

2008–AB–02, Application of Guidance 

on Nontraditional and Subprime 

Residential Mortgage Loans to Specific 

FHLBank Assets, provides written 

guidance regarding residential mortgage 

loans purchased under the FHLBank’s 

Acquired Member Assets programs, 

investments in private-label MBS, and 

collateral securing advances. The 

advisory bulletin states that residential 

mortgage loans that were originated or 

acquired by the member after July 10, 

2007 may be included in calculating the 

amount of advances that can be made to 

a member only if those loans were 

underwritten consistent with all aspects 

of the interagency guidance. The 

guidance in the advisory bulletin 

applies to whole mortgage loans and to 

the residential mortgage loans that 

underlie private-label MBS used as 

collateral for advances. 

Further, the advisory bulletin requires 

the FHLBanks to take the quality control 

steps necessary to ensure compliance 

with the 2006 and 2007 interagency 

guidance on nontraditional and 

subprime mortgage loans. Those quality 

controls include requiring the adoption 

of business practices including, but not 

limited to: conducting due diligence on 

the mortgages or assets it acquires or 

collateralizes itself, relying on an 

independent third party to assess 

compliance, or relying on certifications, 

representations or warranties provided 

by the member. The FHLBanks may rely 

on representations and warranties and 

third-party assurances only if the 

FHLBank has a credible plan to test and 

verify their dependability. See http:// 

www.fhfb.gov/webfiles/6906/2008-AB02.pdf. 

Coverage and Applicability of FHFB 

Guidance 

According to Advisory Bulletin 2008– 

AB–02, in order to be eligible collateral 

for advances, nontraditional and 

subprime residential mortgage loans 

originated or acquired by a member after 

July 10, 2007—and such loans backing 

private-label MBS issued after that 

date—must conform to the interagency 

guidance. By adopting the effective date 

of the interagency guidance,3 the FHFB 

chose not to apply the advance 

collateral guidance retroactively. To 

have done so might have reduced access 

to liquidity and potentially added to the 

financial stress of some FHLBank 

member institutions at a time of 

increasing uncertainty in financial and 

housing markets. 

Recap of the Three FHFB Advisory 

Bulletins 

FHFB advisory bulletins 2005–AB–08 2007–AB–01 2008–AB–02 

Anti-predatory lending policies and procedures .......................................................................... X 

Home Ownership and Equity Protection Act ........................................................................ X 

Single-premium credit life or similar insurance .................................................................... X 

Prepayment penalties beyond the early loan years ............................................................. X 

Mandatory arbitration ............................................................................................................ X 

Nontraditional and subprime mortgage loan risk management .................................................. ........................ X 

Mitigation of nontraditional and subprime credit exposure .................................................. ........................ X 

Nontraditional and subprime collateral limitations ................................................................ ........................ X 

Compliance with interagency guidance on nontraditional and subprime mortgage lending ...... ........................ ........................ X 

Whole loans securing advances .......................................................................................... ........................ ........................ X 

MBS with underlying applicable loans securing advances .................................................. ........................ ........................ X 

mstockstill on DSKH9S0YB1PROD with NOTICES

38622 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 

4An industry standard definition of Alt-A does 

not exist. Alt-A MBS have traditionally been 

considered to be those backed by mortgage loans to 

borrowers with prime credit scores but with 

features that included, for example, low or no 

borrower income or asset verification. Subprime 

private-label MBS are those backed by residential 

mortgage loans to subprime borrowers. Since there 

is no industry standard for a credit score threshold 

under which a borrower is considered subprime, 

the FHLBanks may use different credit score 

thresholds in reporting subprime residential 

mortgage loans in the survey. 

5The FHFA only evaluates or examines the 

collateral under compelling circumstances such as 

might be presented by large member institutions 

experiencing known financial stress. 

III. HERA Section 1217 Study 

Resources 

For purposes of the HERA Section 

1217 Study, FHFA primarily relied on 

three resources: a collateral data survey 

that FHFA conducts annually, in-depth 

secured credit reviews performed 

during recent examinations, and a 

questionnaire related to the HERA 

Section 1217 issues that FHFA sent to 

the FHLBanks. This section describes 

each of these information resources. 

A. Collateral Data Survey 

Each year FHFA surveys the 

FHLBanks and prepares a report on the 

levels and trends in collateral securing 

advances by type and FHLBank. The 

collateral data survey collects 

information on the minimum levels of 

collateral required by the FHLBanks’ 

policies to secure outstanding advances. 

The survey focuses on the minimum 

levels of collateral required by FHLBank 

policies because most FHLBanks file a 

blanket lien on the assets of most of 

their borrowing members. The volume 

of collateral under blanket lien, 

however, is generally not the most 

meaningful indicator of collateral 

protection because it does not indicate 

the quality or liquidity of the collateral. 

In general, the FHLBanks that utilize a 

blanket lien establish a ‘‘collateral 

hierarchy’’ in which they first consider 

the highest quality and most liquid 

collateral when calculating collateral 

coverage before they look to other types 

of collateral. Thus, for the collateral data 

survey, the FHLBanks report the 

collateral that they would rely upon first 

to cover any repayment shortfall 

resulting from member default on an 

outstanding advance. The FHLBanks 

report in the collateral data survey the 

levels of collateral that consists of 

subprime and nontraditional residential 

mortgage loans, and Alt-A and subprime 

private-label MBS.4 The FHLBanks may 

use estimates for subprime and 

nontraditional mortgage loan amounts 

when the actual data are not available 

for all members, such as members to 

which an FHLBank lends by using a 

blanket lien on the members’ assets. 

B. Secured Credit Reviews 

FHFA evaluates the policies, 

procedures and practices of each 

FHLBank as part of its examination and 

supervision program. FHFA regulates 

the FHLBanks and does not, in the 

normal course of an examination, 

examine the individual loans or MBS 

pledged by the FHLBanks’ member 

institutions.5 During examinations of 

the FHLBanks, FHFA evaluates the 

FHLBanks’ collateral policies, how the 

FHLBank manages and secures its 

collateral positions, and the measures 

the FHLBank takes to protect itself from 

risk. The FHLBanks are required to have 

appropriate controls in place to protect 

their financial safety and soundness, to 

adhere to regulatory guidance, and to 

carry out their housing finance mission. 

In recognition of the rapid and serious 

deterioration in the residential mortgage 

market, as part of its examination 

process, FHFA conducted in-depth 

secured credit reviews in 2008–2009, 

which focused on the advances and 

collateral policies and practices of the 

FHLBanks. FHFA examiners 

commenced the in-depth reviews with 

FHLBank examinations opening the 

second quarter of 2008, prior to the 

passage of HERA. The review process 

was designed to closely evaluate 

whether the FHLBanks have taken 

appropriate steps to control and value 

collateral, secure advances, and plan for 

the potential for member failures. The 

review work program covered collateral 

risk management in seven areas: 

collateral control, haircut and valuation 

methodologies, risk limits, member 

failure plans, member monitoring, 

insurance company members, and 

nontraditional and subprime mortgage 

loan products. The last of the in-depth 

secured credit reviews was completed 

in the second quarter of 2009. 

C. HERA Section 1217 Questionnaire 

To complement the existing 

information on FHLBank collateral and 

in response to Section 1217 of HERA, 

FHFA’s Division of Federal Home Loan 

Bank Regulation developed the HERA 

Section 1217 Questionnaire and 

delivered it to the FHLBanks in March 

2009. The Section 1217 questionnaire 

was used to obtain consistent 

information regarding the FHLBanks’ 

policies, procedures, and practices on 

nontraditional and subprime residential 

mortgage loans acceptable as collateral 

for advances, either directly or through 

MBS that are backed by such loans. The 

questionnaire also requested 

information on anti-predatory lending 

policies, procedures, and practices. The 

questionnaire focused on whether the 

loans and securities used as collateral to 

support FHLBank advances are 

consistent with the requirements of the 

advisory bulletins and the interagency 

guidance on nontraditional and 

subprime mortgage products and antipredatory lending. The questionnaire 

was also designed to complement the 

in-depth secured credit reviews, 

particularly to gauge the extent to which 

the FHLBanks are addressing concerns 

raised in the secured credit reviews 

regarding the acceptance of 

nontraditional and subprime residential 

mortgage loans as collateral for 

advances. 

IV. HERA Section 1217 Study Results 

This section presents an analysis of 

the information obtained for the HERA 

Section 1217 Study through the 

collateral data survey, the secured credit 

reviews, and the follow-up 

questionnaire to the FHLBanks. The 

analysis focuses on the extent to which 

loans and securities used as collateral 

supporting FHLBank advances are 

consistent with the interagency 

guidance on nontraditional and 

subprime mortgage products. 

A. FHLBank Collateral 

The tables below summarize 

information from the collateral surveys 

for year-ends 2007 and 2008 showing 

the types and amounts of collateral 

upon which the FHLBanks rely to 

secure advances. As of December 31, 

2007, the par value of FHLBank 

advances outstanding totaled $867 

billion and the FHLBanks reported that 

the collateral on which they were 

relying to secure those advances totaled 

$1.3 trillion. As of December 31, 2008, 

the par value of FHLBank advances 

outstanding increased to $900 billion, 

secured by collateral totaling $1.4 

trillion. 

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Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 38623 

6Percentages from the table may not sum to the 

exact figures reported in the text due to rounding. 

From 2007 to 2008, whole loan 

collateral declined from $890 billion to 

$859 billion, a decrease of $31 billion or 

8 percentage points, yet whole loans 

continue to comprise the majority of the 

collateral securing advances at the 

FHLBanks. During this period, MBS and 

other real estate related collateral grew 

as a component of total collateral 

securing advances. 

Collateral type 2007 collateral 

($ billions) 2007 (%) 2008 collateral ($ billions) 2008 (%) 

Whole Loans .................................................................................................... $890 67.7 $859 59.7 

Mortgage-backed Securities ............................................................................ 195 14.8 218 15.1 

Other Securities ............................................................................................... 6 0.5 17 1.2 

Other Real Estate Related Collateral .............................................................. 213 16.2 329 22.8 

Community Financial Institutions ..................................................................... 10 0.8 17 1.2 

Total Collateral ......................................................................................... 1,314 100.0 1,440 100.0 

The collateral surveys for year-ends 

2007 and 2008 show nontraditional and 

subprime residential mortgage loans 

declined as a proportion of the collateral 

on which the FHLBanks rely to secure 

advances. As of December 31, 2007, 

nontraditional and subprime residential 

mortgage loans represented $410 billion 

or 31.2 percent of total advance 

collateral of $1.3 trillion. Subprime 

MBS and Alt-A MBS accounted for 3.3 

percent of reported collateral. As of 

December 31, 2008, nontraditional and 

subprime residential mortgage loans 

represented $267 billion or 18.5 percent 

of total advance collateral of $1.4 

trillion, a decline of 12.7 percentage 

points from 2007. Additionally, 

subprime MBS and Alt-A MBS 

represented 2.0 percent of reported 

collateral, a decline of 1.3 percentage 

points from the previous year-end.6

Based on the totals reported, the 

FHLBanks relied on higher levels of 

nontraditional mortgage loan collateral 

than subprime mortgage loan collateral 

and higher levels of Alt-A MBS 

collateral than subprime MBS collateral. 

Collateral type 2007 collateral 

($ billions) 

2007 

(%) 

2008 collateral 

($ billions) 

2008 

(%) 

Subprime Mortgage Loans .............................................................................. $80 6.1 $56 3.9 

Nontraditional Mortgage Loans ....................................................................... 297 22.6 186 12.9 

Mortgage Loans that are both Subprime and Nontraditional .......................... 34 2.6 24 1.7 

Private-label Subprime MBS ............................................................................ 2 0.2 10 0.7 

Private-label Alt-A MBS ................................................................................... 41 3.1 19 1.3 

Subtotal: Subprime/Nontraditional/Alt-A ................................................... 454 34.6 295 20.5 

Other Collateral ................................................................................................ 860 65.4 1,145 79.5 

Total Collateral .................................................................................. 1,314 100.0 1,440 100.0 

As of December 31, 2008, collateral 

described as nontraditional, subprime or 

Alt-A accounted for about one-fifth of 

the collateral securing advances at 

FHLBanks. This number is best 

understood as an approximation, given 

the varying definitions of these terms in 

the financial industry in recent years. 

For example, purchasers of private-label 


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38624 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 

7FHFA established that for purposes of 

determining collateral eligibility the interagency 

guidance should apply regardless of whether a 

member has a subprime lending program. FHFA is 

addressing this matter with the FHLBank. 

MBS, including FHLBank member 

institutions, relied on rating agency 

characterization of the securities at the 

time of issuance. However, these 

designations might not capture all the 

variation in underlying loans within a 

given security nor would they reflect 

any subsequent deterioration in the 

quality of the underlying collateral. 

Some portion of collateral described 

as nontraditional, subprime or Alt-A 

was originated or purchased prior to 

July 10, 2007, and therefore, under the 

guidance in FHFB’s advisory bulletins, 

is not required to conform to the 

interagency guidance. The collateral 

survey does not contain information 

sufficient to allow FHFA to determine 

how much of the collateral would be 

subject to the interagency guidance. 

However, the FHFB guidance does 

require the FHLBanks to have policies 

in place to ensure that subprime and 

nontraditional loans that were 

originated or acquired by the FHLBank 

member subsequent to the issuance of 

the interagency guidance and certain 

effective dates in the FHFB advisory 

bulletins may not be pledged as 

collateral for advances if they do not 

conform to the guidance. 

B. FHLBank Policies and Procedures 

Regarding Nontraditional and Subprime 

Collateral—Findings From the Secured 

Credit Reviews 

As part of its examination process, 

FHFA conducted in-depth reviews of 

the FHLBanks’ policies and procedures 

regarding secured credit. One part of 

FHFA’s in-depth reviews of secured 

credit focused directly on subprime 

lending and nontraditional loan 

products. Other aspects of the secured 

credit reviews that are relevant for this 

study included collateral control, 

member monitoring, and haircut and 

valuation methodologies. 

Although the reviews found that the 

FHLBanks had policies regarding the 

acceptance of subprime and 

nontraditional loans as collateral for 

advances, examiners questioned, in 

some cases, the appropriateness of the 

policies and implementing procedures 

and practices. In addition, a number of 

FHLBanks had difficulty determining 

their exposure to nontraditional and 

subprime residential mortgage loan 

collateral used to support FHLBank 

advances. Examiners identified 

weaknesses in FHLBanks’ assessments 

and testing of member underwriting and 

monitoring of nontraditional and 

subprime loans, haircuts and discounts 

for nontraditional and subprime 

collateral, risk limits on the acceptance 

of these types of collateral, and board 

reporting of exposures to the collateral. 

Specifically, examiners noted the 

following: 

• Five FHLBanks did not require an 

assessment of member underwriting of 

nontraditional or subprime loans to 

ensure consistency with interagency 

guidance as part of their onsite 

collateral review procedures. Of the 

remaining FHLBanks, three did not 

consistently document their review of 

member underwriting of nontraditional 

or subprime loans. 

• Three FHLBanks lacked analytical 

support or validation for haircuts used 

for subprime and nontraditional 

mortgage products. Two FHLBanks did 

not have differentiated haircuts for 

conventional mortgage loan collateral 

and nontraditional and subprime 

mortgage loan collateral. 

• Four FHLBanks did not have risk 

limits on the volume of nontraditional 

and subprime mortgage loan collateral 

that members may pledge to support 

FHLBank advances. 

• Three FHLBanks did not regularly 

report exposures of nontraditional and 

subprime collateral to their boards of 

directors. 

FHFA examination staff 

communicated these weaknesses and 

expectations for corrective action to 

executive management and the boards 

of directors of the individual FHLBanks. 

Each FHLBank receiving regulatory 

criticisms of its policies committed to 

correct the weaknesses, and the 

examination staff has begun evaluating 

the FHLBanks’ corrective actions 

through follow-up visitations and 

examinations. FHLBanks that have not 

adequately addressed the weaknesses 

identified during the secured credit 

reviews will be subject to a 

commensurately stricter supervisory 

response. Unsatisfactory remediation of 

adverse examination findings would be 

a factor that FHFA considers when 

determining whether formal supervisory 

enforcement actions would be 

warranted in the future. 

C. Responses to the HERA Section 1217 

Questionnaire 

The Section 1217 Questionnaire 

complements and in some cases updates 

the information from the in-depth 

secured credit reviews. The responses 

provide the FHLBanks’ perspectives on 

a consistent set of questions. During onsite examinations, FHFA will review 

documents and independently evaluate 

the FHLBanks’ policies, procedures and 

practices. FHFA will draw final 

conclusions about the FHLBanks’ 

progress in addressing criticisms from 

the secured credit reviews and in 

adhering to the advisory bulletins 

related to the interagency guidance after 

completion of the next annual 

examinations of the FHLBanks. 

1. Do the FHLBanks have policies that 

exclude from eligible collateral for 

advances residential mortgage loans and 

MBS backed by such loans that do not 

conform to the interagency guidance? 

Nine of the twelve FHLBanks have 

board-approved policies to exclude from 

eligible collateral for advances 

nontraditional and subprime residential 

mortgage loans originated or acquired 

by the member after July 10, 2007 that 

do not conform to the interagency 

guidance, as well as private-label MBS 

issued after July 10, 2007, with 

underlying nontraditional or subprime 

residential mortgage loans that do not 

conform to the interagency guidance. 

The other three FHLBanks have adopted 

policies addressing, but not specifically 

excluding, the acceptance of applicable 

nontraditional and subprime residential 

mortgage loans or private-label MBS 

used as collateral for advances. 

2. Do the FHLBanks require members to 

certify that residential mortgage loans 

used to calculate eligible collateral 

comply with the interagency guidance 

and obtain and provide to the FHLBank 

certifications from securities issuers that 

loans underlying private-label MBS 

serving as collateral conform to the 

interagency guidance? 

All of the FHLBanks’ policies require 

members to certify that the 

nontraditional and subprime residential 

mortgage loans used to calculate eligible 

collateral comply with the interagency 

guidance. One FHLBank, however, 

requires the certification regarding 

subprime residential mortgage loans 

only from members with established 

subprime lending programs.7 Nine 

FHLBanks require that members 

pledging private-label MBS certify or 

deliver to the FHLBank enforceable 

representations and warranties from the 

issuer or other credible evidence 

indicating that the loans backing the 

MBS comply with the interagency 

guidance. The remaining FHLBanks do 

not accept as eligible collateral for 

advances private-label MBS issued after 

July 10, 2007 that is collateralized by 

nontraditional and subprime residential 

mortgage loans. 

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Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 38625 

8The results of the secured credit reviews 

indicate that the quality of the FHLBanks’ 

evaluations of member underwriting and 

certifications is uneven. FHFA examination staff is 

addressing identified issues with the FHLBanks. 

3. Do the FHLBanks evaluate, test, and 

validate member and issuer 

certifications? 

To evaluate and test member 

certifications regarding the conformance 

of nontraditional and subprime 

residential mortgage loan collateral to 

the interagency guidance, the FHLBanks 

review members’ underwriting policies, 

verify loan documentation on-site at 

members, or review members’ internal 

or external examination reports.8

Regarding validation of certifications 

from securities issuers that loans 

underlying private-label MBS originated 

after July 10, 2007 conform to the 

interagency guidance, the FHLBanks 

commonly responded that although they 

adopted policies to require such 

certifications, members have not been 

able to obtain and provide them. 

Therefore, as a practical matter, the 

FHLBanks have not accepted privatelabel MBS originated after July 10, 2007 

as collateral for advances. 

4. Do the FHLBanks have in place 

policies and procedures that preclude 

the acceptance of residential mortgage 

loans with predatory characteristics as 

collateral for advances? 

All FHLBanks have anti-predatory 

lending policies or procedures that 

preclude acceptance as eligible 

collateral for advances residential 

mortgage loans that violate applicable 

federal, state, or local predatory lending 

laws and other similar credit-related 

consumer protection laws. In addition, 

each of the FHLBanks specifically 

excludes from eligible collateral loans 

which: have an annual percentage rate 

or charge points or fees which exceed 

the thresholds established by HOEPA; 

include requirements for prepaid, 

single-premium credit life insurance; 

include a fee or charge for prepayment 

beyond the early years of a loan; or 

require mandatory arbitration to resolve 

disputes. Seven of the FHLBanks define 

‘‘early years’’ for permissible 

prepayments as a period of five years. 

Five FHLBanks qualify their collateral 

ineligibility standard related to 

mandatory arbitration as a loan 

requiring mandatory arbitration that is 

prohibited by any applicable antipredatory lending laws. One FHLBank 

qualifies its collateral ineligibility 

standard related to prepayment 

penalties as a loan including 

prepayment fees beyond the early years 

of the loan to the extent prohibited or 

limited by any applicable anti-predatory 

lending laws. The FHLBanks perform 

procedures to evaluate and test member 

underwriting of collateral that are 

similar to those outlined above for 

nontraditional and subprime residential 

mortgage loans. 

V. Conclusions and Recommendations 

Approximately one-fifth of the 

collateral supporting FHLBank advances 

consists of subprime or nontraditional 

loans or Alt-A or subprime private-label 

MBS. Although a significant share of the 

loans or MBS in these categories may 

have been originated or issued prior to 

July 10, 2007, and thus not technically 

subject to the interagency guidance, the 

FHLBanks still need to manage and 

mitigate the risks associated with all of 

the collateral underlying advances. 

Going forward, the FHLBanks will need 

to ensure that the collateral supporting 

advances remains consistent with safety 

and soundness as well as the 

overarching housing finance mission of 

the FHLBanks. 

Although all FHLBanks had policies 

addressing nontraditional and subprime 

collateral, findings from the in-depth 

secured credit reviews revealed some 

weaknesses in policies and practices, 

particularly in regard to the 

management of the risks of this type of 

collateral. The FHLBanks’ responses to 

the HERA Section 1217 Questionnaire 

indicate that they have adopted policies, 

procedures, and practices that would 

require that the loans and MBS used as 

collateral to support advances be 

consistent with the interagency 

guidance. The next cycle of 

examinations will evaluate whether 

weaknesses that examiners previously 

identified in the FHLBanks’ policies and 

practices for subprime and 

nontraditional residential mortgage 

loans have been corrected and verify 

their responses to the HERA Section 

1217 Questionnaire regarding 

application of the principles of the 

interagency guidance to the acceptance 

of collateral used to support advances. 

Through its supervisory programs, 

FHFA will continue to assess the 

adequacy of the FHLBank’s policies and 

procedures, determine weaknesses or 

deficiencies, and monitor the 

FHLBanks’ remediation efforts. 

The advisory bulletins issued by 

FHFB on the subjects of nontraditional 

and subprime mortgage loans and 

predatory lending between 2005 and 

2008 provide explicit guidance for the 

FHLBanks. Adoption of the policies and 

practices expected by the guidance has 

received and will continue to receive 

focused attention through supervisory 

programs and particularly as part of 

FHFA’s examinations of the FHLBanks. 

FHFA uses the information obtained 

through its supervisory program of 

examinations, targeted reviews and 

surveys, and off-site monitoring to 

develop appropriate guidance to 

facilitate the FHLBanks’ mission of 

providing liquidity to its members. For 

example, FHFA’s Division of Federal 

Home Loan Bank Regulation has 

recently prepared guidance for 

examiners to address questions that the 

FHLBanks have asked when developing 

policies and procedures to implement 

the guidance contained in the advisory 

bulletins. 

FHFA intends to reevaluate whether 

additional guidance or rules are 

necessary for the FHLBanks regarding 

anti-predatory lending or the acceptance 

of nontraditional or subprime 

residential mortgages as collateral for 

advances after the completion of the 

next cycle of examinations, which will 

determine if the FHLBanks have 

appropriately addressed attendant 

weaknesses identified by the in-depth 

secured credit reviews that began in 

2008. At a minimum, FHFA expects to 

clarify one point made in Advisory 

Bulletin 2008–AB–02. The advisory 

bulletin states that residential mortgage 

loans underlying private-label MBS 

issued after July 10, 2007, must conform 

to the interagency guidance, but it is 

silent about MBS issued before that date 

that a member may acquire after that 

date. FHFA intends to clarify that MBS 

purchased by a member after July 10, 

2007, is also subject to the guidance 

contained in Advisory Bulletin 2008– 

AB–02. 

Since the passage of HERA, there have 

been several legislative developments 

addressing mortgage lending reform. 

FHFA is following these developments 

and intends to update its regulations 

and guidance, as appropriate, as issues 

surface in the legislative discussion. 

FHFA especially notes the provision in 

the Mortgage Reform and Anti-Predatory 

Lending Act recently passed by the 

House of Representatives that adopts a 

borrower’s ability to repay as a 

minimum standard defined in the law; 

comments are invited on a question 

related to the concept of a borrower’s 

ability to repay in the request for 

comments below. 

VI. Request for Comments 

FHFA welcomes comments on all 

aspects of the HERA Section 1217 Study 

presented in this Notice. FHFA invites 

comments on the following questions, 

in particular: 

• Should FHFA replace its existing 

guidance on nontraditional, subprime, 

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38626 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Notices 

or anti-predatory lending with formal 

regulatory standards? 

• Does any guidance contained in 

Advisory Bulletins 2005–AB–08, 2007– 

AB–01, and 2008–AB–02 need 

additional emphasis or clarification? 

• Should FHFA explicitly address 

other mortgage loan features as a control 

against predatory lending, or is it 

sufficient that Advisory Bulletin 2008– 

AB–02 requires an FHLBank to only 

accept residential mortgage loans (and 

such loans backing private-label MBS) 

as eligible collateral for advances when 

they conform to the interagency 

guidance? Some loan features that may 

be associated with either high risk or 

potentially predatory loans are 

addressed in the Federal Reserve 

Board’s Amendments to Regulation Z 

(Truth in Lending) which will go into 

effect later in 2009 and 2010. For 

‘‘higher-priced mortgages,’’ the 

amended regulation addresses a 

borrower’s ability to repay the loan, 

prepayment penalties, income 

verification, and escrow accounts. 

• Should FHFA seek any additional 

statutory authority to support its ability 

to prohibit an FHLBank from accepting 

loans with predatory characteristics as 

collateral for advances? 

• As the federal financial institution 

regulatory agencies, such as through the 

Federal Financial Institutions 

Examination Council, look to modify or 

enhance guidance with respect to 

nontraditional or subprime mortgage 

products, should FHFA be formally and 

directly involved? 

Copies of all comments will be posted 

without change, including any personal 

information you provide, such as your 

name and address, 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) 414–3751. 

Dated: July 29, 2009. 

James B. Lockhart III, 

Director, Federal Housing Finance Agency. 

[FR Doc. E9–18545 Filed 8–3–09; 8:45 am] 

BILLING CODE 8070–01–P 

FEDERAL MEDIATION AND 

CONCILIATION SERVICE 

Arbitration Services; Proposed Agency 

Information Collection Activities; 

Comment Request 

AGENCY: Federal Mediation and 

Conciliation Service. 

ACTION: Notice to Mediation Agencies 

(Form F–7) Proposed Modifications. 

SUMMARY: This notice announces that 

the Federal Mediation and Conciliation 

Service (FMCS) agency form F–7 is 

being revised. Following publication of 

this Notice and any responsive 

comments, FMCS will submit to the 

Office of Management and Budget 

(OMB) a request for review of this 

Notice to Mediation Agencies (Agency 

Form F–7) form. The request will seek 

OMB approval of a modified Form F–7 

and new expiration date of 

approximately October 1, 2012. FMCS is 

soliciting comments on specific aspects 

of the collection as described below. 

DATES: Comments must be submitted on 

or before September 3, 2009. 

ADDRESSES: Submit written comments 

by mail to the Office of Arbitration 

Services, Federal Mediation and 

Conciliation Service, 2100 K Street, 

NW., Washington, DC 20427 or by 

contacting the person whose name 

appears under the section headed FOR

FURTHER INFORMATION CONTACT. 

Comments may be submitted also by fax 

at (202) 606–3749 or electronic mail (email) to arbitration@fmcs.gov. All 

comments must be identified by the 

appropriate agency form number. No 

confidential business information (CBI) 

should be submitted through e-mail. 

Information submitted as a comment 

concerning this document may be 

claimed confidential by marking any 

part or all of the information as ‘‘CBI.’’ 

Information so marked will not be 

disclosed but a copy of the comment 

that does contain CBI must be submitted 

for inclusion in the public record. FMCS 

may disclose information not marked 

confidential publicly without prior 

notice. All written comments will be 

available for inspection in Room 704 at 

the Washington, DC address above from 

8:30 a.m. to 4:30 p.m., Monday through 

Friday, excluding legal holidays. 

FOR FURTHER INFORMATION CONTACT: 

Vella M. Traynham, Director of 

Arbitration Services, FMCS, 2100 K 

Street, NW., Washington, DC 20427. 

Telephone (202) 606–5111; Fax (202) 

606–3749. 

SUPPLEMENTARY INFORMATION: Copies of 

the modified Form F–7 are available 

from the Office of Arbitration Services 

by calling, faxing or writing Vella M. 

Traynham at the address above. Please 

ask for the form by title and agency form 

number. 

I. Information Collection Requests 

FMCS is seeking comments on the 

following Information Collection 

Request (ICR). 

Title: Notice to Mediation Agencies; 

Form F–7; OMB No. 3076–0004; 

Expiration Date: January 31, 2006. 

Type of Request: Reinstatement of a 

previously approved notice with 

changes in the substance of the form. 

Affected Entities: Parties affected by 

this information collection are private 

sector employers and labor unions 

involved in interstate commerce that file 

notices for mediation services to the 

FMCS. 

Frequency: Parties complete this form 

once, which is at the time of an 

impending expiration of a collective 

bargaining agreement. 

Abstract: Under the Labor 

Management Relations Act of 1947, 29 

U.S.C. 158(d), Congress listed specific 

notice provisions so that no party to a 

collective bargaining agreement can 

terminate or modify that contract, 

unless the party wishing to terminate or 

modify the contract sends a written 

notice to the other party sixty days prior 

to the expiration date (29 U.S.C. 

158(d)(1)), and offers to meet and confer 

with the other party for the purpose of 

negotiating a new or modified contract 

(29 U.S.C. 158(d)(2)). Furthermore, the 

Act requires that parties notify the 

Federal Mediation and Conciliation 

Service within thirty days after such 

notice of the existence of a bargaining 

dispute (29 U.S.C. 158(d)(3)). The 1974 

amendments to the National Labor 

Relations Act, which extended coverage 

to nonprofit health care institutions, 

also created a notification procedure in 

the health care industry requiring 

parties to notify each other 90 days in 

advance of termination and 60 days in 

advance to FMCS (29 U.S.C. 158(d)). 

This amendment also requires 30-day 

notification of bargaining for an initial 

agreement to the FMCS. To facilitate 

handling of more than 18,000 such 

notices a year, FMCS created a specific 

information collection form. The 

purpose of this information collection 

activity is for FMCS to comply with its 

statutory duty to receive these notices, 

to facilitate assignment of mediators to 

assist in labor disputes, and to assist the 

parties in knowing whether or not 

proper notice was given. The 

information from these notices is sent 

electronically to the appropriate field 

manager who assigns the cases to a 

mediator so that the mediator may 

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