Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Proposed Rules 53251

Another purpose of the generic severe

accident rulemaking, i.e., facilitation of

design certification rulemaking, has

been rendered moot by the experience

gained in design certification

rulemakings. The design certification

rulemakings are completed for the

General Electric Advanced Boiling

Water Reactor and ABB–CE System 80+

and the only design currently under

review is the Westinghouse AP600. The

resolution of severe accident design

specific requirements would be set forth

in the AP600 design control document

and approved in the AP600 design

certification rulemaking.

While certain arguments in favor of

generic rulemaking (i.e., promoting

consistency and standardization in the

resolution of severe accident issues and

providing guidance to future LWR

designers and applicants) continue to

apply in varying degrees, practical

aspects limit the need for such an

activity. At this point, given the lack of

any new potential plant or design

applicants, the Commission believes

that the benefits of generic rulemaking

do not justify the allocation of resources

to proceed with the development of new

regulations addressing severe accidents.

Upon consideration of the potential

value of a generic rule, the status of the

review and design certification of future

reactors, and the potential resource

requirements, the Commission believes

that the value in pursuing generic severe

accident rulemaking does not warrant

the resource expenditure. While the

Commission does not perceive the need

for generic rulemaking in the

foreseeable future, should conditions

change regarding potential applicants,

the Commission would reassess the

merits of rulemaking at that time.

For the reasons discussed, the

Commission is withdrawing the

ANPRM.

Dated at Rockville, Md. this 7th day of

October, 1997.

For the Nuclear Regulatory Commission.

John C. Hoyle,

Secretary of the Commission.

[FR Doc. 97–27082 Filed 10–10–97; 8:45 am]

BILLING CODE 7590–01–P

FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 933 and 935

[No. 97–60]

RIN 3069–AA69

Eligibility for Membership and

Advances

AGENCY: Federal Housing Finance

Board.

ACTION: Proposed rule.

SUMMARY: The Federal Housing Finance

Board (Finance Board) is proposing to

amend certain of its regulations relating

to combination business or farm

properties on which a residence is

located. The amendments would

eliminate the requirement that at least

50 percent of the value of such

properties be attributable to the

residential portion of the property (50

percent test). The amendments are

intended to assist smaller depository

institutions, particularly those located

in rural areas, to qualify for Federal

Home Loan Bank (Bank) membership

and, once admitted, to provide the

collateral necessary to obtain advances.

DATES: The Finance Board will accept

comments on this proposed rule in

writing on or before November 13, 1997.

ADDRESSES: Mail comments to Elaine L.

Baker, Executive Secretary, Federal

Housing Finance Board, 1777 F Street,

N.W., Washington DC 20006. Comments

will be available for public inspection at

this address.

FOR FURTHER INFORMATION CONTACT: Julie

Paller, Senior Financial Analyst, Office

of Policy, (202) 408–2842, or Neil R.

Crowley, Associate General Counsel,

Office of General Counsel, (202) 408–

2990, Federal Housing Finance Board,

1777 F Street, N.W., Washington DC

20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

Section 4(a) of the Federal Home Loan

Bank Act (Bank Act), 12 U.S.C. 1424(a),

establishes the eligibility criteria for

depository institutions to become

members of the Federal Home Loan

Bank System (Bank System). Section

10(a) of the Bank Act, id. 1430(a),

authorizes a Bank to make secured

advances to its members and specifies

the types of collateral that a Bank may

accept when originating or renewing an

advance. With respect to both

membership criteria and eligible

collateral, the regulations of the Finance

Board permit the use of loans that are

secured by business or farm properties

on which there is a residence, but only

if the value of the residential portion

equals or exceeds 50 percent of the

value of the entire parcel. The Finance

Board is concerned that those

regulations may be overly restrictive

and therefore is proposing to amend

them, as described below.

A. Membership

Section 4(a)(2) of the Bank Act

requires, in part, that an insured

depository institution have ‘‘at least 10

percent of its total assets in residential

mortgage loans’’ in order to be eligible

for membership. Id. 1424(a)(2). The

Finance Board has defined ‘‘residential

mortgage loan’’ to include, among other

things, a ‘‘home mortgage loan.’’ 12 CFR

933.1(bb). The Finance Board has

defined ‘‘home mortgage loan’’ to

include, in part, a loan secured by a first

lien on ‘‘combination business or farm

property where at least 50 percent of the

total appraised value of the combined

property is attributable to the residential

portion of the property.’’ Id.

§ 933.1(n)(1)(iii). The term

‘‘combination business or farm

property’’ means real property for which

the value is attributable to residential,

and business or farm uses. Id. § 933.1(i).

B. Collateral for Advances

Section 10(a)(1) of the Bank Act

requires a Bank making or renewing an

advance to its members to maintain a

security interest in certain specified

types of collateral, among which are

‘‘first mortgages on improved residential

property.’’ 12 U.S.C. 1430(a)(1). The

Finance Board has defined ‘‘improved

residential real property’’ to mean

‘‘residential real property excluding real

property to be improved, or in the

process of being improved, by the

construction of dwelling units.’’ 12 CFR

935.1. The Finance Board has defined

‘‘residential real property’’ to include,

among other things, ‘‘combination

business or farm property, provided that

at least 50 percent of the total appraised

value of the combined property is

attributable to the residential portion of

the property.’’ Id. The term

‘‘combination business or farm

property’’ means ‘‘real property for

which the total appraised value is

attributable to the combination of

residential, and business or farm uses.’’

Id.

II. Analysis of the Proposed Rule

The Finance Board believes that

community depository institutions,

particularly those located in rural areas,

often are essential to the housing

finance activities and the broader

economic well-being of the

communities they serve. Such

institutions may have less demand for

conventional single and multi-family

mortgage credit and their service areas

may be characterized by low population

density and a low level of economic

activity. In such circumstances, those

institutions may not be able to originate

a substantial number of residential first

mortgage loans. Moreover, many loans

originated by rural banks may be made

on the security of family farms, which
53252 Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Proposed Rules

are in part residential but which often

cannot meet the 50 percent test.

The existing regulations preclude a

Bank from recognizing or accepting a

first mortgage loan on combination

property unless the value of the

residential portion equals or exceeds 50

percent of the total value of the

property. That requirement may hinder

the ability of community depository

institutions, particularly those in rural

areas, to become members of the Bank

System or, for those that are able to join,

to take full advantage of the opportunity

to obtain advances. The Finance Board

believes that the membership and

advances regulations should recognize

the unique aspects of the lending

practices of such institutions, and has

determined that it is appropriate to

reconsider whether to retain the 50

percent test in either the membership or

collateral regulation.

There is nothing in the Bank Act that

mandates that the residential portion of

such combination properties constitute

a specified percentage of the property’s

total appraised value. With respect to

eligibility for membership, the only

statutory mandate is that the loan must

be secured by real estate on which there

is a residence. 12 U.S.C. 1422 (5), (6).

With respect to the use of whole first

mortgages as collateral for advances, the

only statutory mandate is that they

attach to real property that previously

has been improved. Id. 1430(a)(1).

Subject to those requirements, the

Finance Board has the authority to

determine what types of combination

property may be considered to be

‘‘residential’’ for purposes of the

‘‘residential mortgage loan’’ aspect of

the eligibility requirements and for the

‘‘residential real property’’ aspect of the

collateral requirements. Because the 50

percent test is more restrictive than the

Bank Act requires, and may well

exclude from consideration a significant

number of loans that are secured, at

least in part, by a home, the Finance

Board is proposing to eliminate the ‘‘50

percent’’ requirement in both

regulations.

The proposed rule would amend the

definition of ‘‘home mortgage loan’’ in

the membership regulations to allow a

loan secured by a combination property

to be considered a ‘‘home mortgage

loan’’ if a permanent structure is located

on the property and it actually is used

as a residence. See 12 CFR

933.1(n)(1)(iii). The proposed rule

would make the same changes to the

definition of ‘‘residential real property’’

in the collateral provisions of the

advances regulation. See id. § 935.1.

Eliminating the 50 percent requirement

should allow a greater number of loans

secured by combined use assets to be

considered ‘‘residential mortgage loans’’

or ‘‘improved residential property,’’

thus easing the membership eligibility

and collateral requirements,

respectively. The definitions would

exclude any farm or business property

that only occasionally is used for

residential purposes, such as temporary,

migrant, or seasonal housing, because

such properties lack the characteristics

of permanence and regular residential

use generally associated with typical

combination properties, such as a family

farm or a family business.

The Finance Board believes that any

additional risks that might arise if such

mortgage loans are used as collateral for

advances should be adequately managed

in accordance with the current

provisions of the advances regulation.

Among other things, the advances

regulation requires the Banks to

establish written procedures for

determining the value of collateral, and

to follow those procedures in

ascertaining the value of a particular

asset offered as collateral. The

regulation also permits the Banks to

require a member to support the

valuation of any collateral with an

appraisal or other investigation of the

collateral as the Bank deems necessary.

Id. § 935.12. Rural lending often

requires collateral valuation practices

that may differ significantly from those

typically employed in lending on the

security of one-to-four family homes.

The Finance Board expects that if the

proposed amendments are adopted as a

final rule each Bank will review its

collateral valuation procedures, and will

amend them as necessary to reflect the

changes made by the amendments,

before accepting as collateral any newly

authorized combination properties. The

Finance Board also expects that the

Banks, as a matter of practice, will

conduct careful review and, if

necessary, require an appraisal of such

collateral, taking into account the

additional risks inherent in rural

lending and each Bank’s own capability

to evaluate those risks.

With respect to the advances

regulation, the Finance Board requests

comments on whether elimination of

the percentage requirement might

expose the Banks to any undue risk of

loss should a Bank need to liquidate the

mortgage loans it holds as collateral. For

example, the value of a mortgage on a

farm property, even one on which there

is a residence, may be more volatile

than the value of a mortgage on a oneto-four family home, reflecting the

greater volatility of the value of the

underlying property. In addition, a

mortgage on a combination property

may be less liquid than a mortgage on

a one-to-four family home. The Finance

Board solicits comments on whether it

should address these issues through

regulation, such as by retaining a

percentage of value requirement for

collateral purposes, albeit at a level less

than the 50 percent test. The Finance

Board also solicits comments on

whether there are apt to be any practical

difficulties in implementing the

proposed definitions. For example, will

a member’s loan files for a loan secured

by farm property necessarily indicate

whether the farm property also includes

a residential structure and, if so,

whether it actually is used as a

residence?

The proposed rule also would amend

§ 933.1(bb) by adding a new paragraph

(8) that would include as ‘‘residential

mortgage loans’’ for membership

purposes any loans that, if made by a

member, would satisfy the statutory and

regulatory requirements for loans made

under the Community Investment

Program (CIP) or under the community

investment cash advance provisions of

the Bank Act. The community

investment cash advance program is a

cash advance program that may be

established by the Banks under section

10(j)(10) of the Bank Act, and includes

the CIP, a program of ‘‘communityoriented mortgage lending’’ required by

section 10(i) of the Bank Act. 12 U.S.C.

1430 (i), (j)(10). ‘‘Community-oriented

mortgage lending’’ is defined as lending

for homeownership, multifamily

housing and commercial and economic

development that benefits certain

targeted populations or neighborhoods.

Id. 1430(i). Under this provision, if the

purpose of a loan were to meet the

statutory standards, including any

future regulatory standards, for these

loan programs, the loan could be

considered for purposes of the

membership criteria. The amendment

would not require that the transaction

also result in a loan that is eligible for

collateral under the advances

regulation. The effect of this provision

would be to allow such assets to be

considered as residential mortgage loans

for purposes of eligibility for

membership, and would conform the

membership regulation more closely to

the advances regulation, which already

includes loans financed by CIP

advances within the definition of

‘‘residential housing finance assets.’’

See 12 CFR 935.1.

III. Regulatory Flexibility Act

The proposed rule would not impose

any additional reporting, recordkeeping,

or compliance requirements on

prospective or current Bank members.
Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Proposed Rules 53253

Although the Finance Board anticipates

that the proposed rule will be of benefit

primarily to small depository

institutions, it will not have a

disproportionate impact on small

entities. Therefore, in accordance with

the Regulatory Flexibility Act, the

Finance Board hereby certifies that this

proposed rule, if promulgated as a final

rule, will not have a significant

economic impact on a substantial

number of small entities. 5 U.S.C.

605(b).

IV. Paperwork Reduction Act

The proposed rule does not contain

any collections of information, as

defined by the Paperwork Reduction

Act of 1995. See 44 U.S.C. 3501 et seq.

Consequently, the Finance Board has

not submitted any information to the

Office of Management and Budget for

review.

List of Subjects

12 CFR Part 933

Federal home loan banks, Reporting

and recordkeeping requirements.

12 CFR Part 935

Credit, Federal home loan banks,

Reporting and recordkeeping

requirements.

Accordingly, the Federal Housing

Finance Board hereby proposes to

amend title 12, chapter IX, parts 933

and 935 of the Code of Federal

Regulations as follows:

PART 933—MEMBERS OF THE BANKS

1. The authority citation for part 933

continues to read as follows:

Authority: 12 U.S.C. 1422a, 1422b, 1424,

1426, 1430, 1442.

2. Amend § 933.1 by revising

paragraph (n)(1)(iii), removing ‘‘or’’ at

the end of paragraph (bb)(6)(iii),

removing the period at the end of

paragraph (bb)(7) and adding ‘‘; or’’ in

its place, and adding paragraph (bb)(8)

to read as follows:

§ 933.1 Definitions.

* * * * *

(n) Home mortgage loan * * *

(1) * * *

(iii) Combination business or farm

property, on which is located a

permanent structure actually used as a

residence, other than for temporary or

seasonal housing; or

* * * * *

(bb) Residential mortgage loan * * *

(8) Loans that finance properties or

activities that, if made by a member,

would satisfy the statutory requirements

for the Community Investment Program

established under section 10(i) of the

Bank Act, or the regulatory

requirements established for any

community investment cash advance

program authorized by section 10(j)(10)

of the Bank Act.

* * * * *

PART 935—ADVANCES

1. The authority citation for part 935

continues to read as follows:

Authority: 12 U.S.C. 1422a(a)(3),

1422b(a)(1), 1426, 1429, 1430, 1430b, and

1431.

2. Amend § 935.1 by revising

paragraph (1)(v) in the definition of

‘‘Residential real property’’ to read as

follows:

§ 935.1 Definitions.

* * * * *

Residential real property * * *

(1) * * *

(v) Combination business or farm

property, on which is located a

permanent structure actually used as a

residence, other than for temporary or

seasonal housing.

* * * * *

Dated: September 10, 1997.

By the Board of Directors of the Federal

Housing Finance Board.

Bruce A. Morrison,

Chairperson.

[FR Doc. 97–26893 Filed 10–10–97; 8:45 am]

BILLING CODE 6725–01–U

SMALL BUSINESS ADMINISTRATION

13 CFR Part 107

Small Business Investment Companies

AGENCY: Small Business Administration.

ACTION: Proposed rule.

SUMMARY: Title II of Public Law 104–208

(September 30, 1996), entitled the

‘‘Small Business Programs Improvement

Act of 1996’’, made a number of changes

to the Small Business Investment Act of

1958, as amended. For the Small

Business Investment Company program,

these changes include provisions

affecting capital requirements, Leverage

eligibility and fees, and the status of

Section 301(d) Licensees. This proposed

rule would implement the statutory

provisions; in addition, it would make

various technical corrections and

clarifications, as well as changes

intended to improve the fairness and

flexibility of the regulations.

DATES: Comments must be submitted on

or before November 13, 1997.

ADDRESSES: Written comments should

be addressed to Don A. Christensen,

Associate Administrator for Investment,

U.S. Small Business Administration,

409 3rd Street, S.W., Suite 6300,

Washington, D.C. 20416.

FOR FURTHER INFORMATION CONTACT:

Leonard W. Fagan, Investment Division,

at (202) 205–7583.

SUPPLEMENTARY INFORMATION: This

proposed rule would implement the

provisions of Title II of Public Law 104–

208 (September 30, 1996) which relate

to small businesses investment

companies (SBICs). This rule would also

make certain other substantive changes,

clarifications and technical corrections

to the regulations governing SBICs,

including those concerning portfolio

diversification, Cost of Money, and the

computation of distributions to be made

by SBICs that have issued Participating

Securities.

Section 301(d) Licensees

Prior to October 1, 1996, an SBIC

program applicant could be licensed

under either section 301(c) or section

301(d) of the Small Business Investment

Act of 1958, as amended (Act). A

Section 301(d) Licensee, also known as

a ‘‘specialized SBIC’’ or ‘‘SSBIC’’, agreed

to invest only in businesses owned and

controlled by socially or economically

disadvantaged individuals. In return, a

Section 301(d) Licensee received certain

benefits not available to other SBICs,

such as eligibility for certain types of

subsidized Leverage (as defined in

§ 107.50).

Effective October 1, 1996, section

208(b)(3) of Public Law 104–208

repealed section 301(d) of the Act.

However, the repeal provision was

accompanied by the following language:

‘‘The repeal * * * shall not be

construed to require the Administrator

to cancel, revoke, withdraw, or modify

any license issued under section 301(d)

of the Small Business Investment Act of

1958 before the date of enactment of this

Act.’’

This proposed rule would revise

several sections in part 107 to

implement this statutory change. The

revisions would eliminate provisions

relating to the licensing of new SSBICs

while retaining rules governing the

operations of existing SSBICs.

Thus, in § 107.50, a ‘‘Section 301(d)

Licensee’’ would be defined as ‘‘a

company licensed prior to October 1,

1996 under section 301(d) of the Act as

in effect on the date of licensing, that

may provide Assistance only to

Disadvantaged Businesses.’’ Current

§ 107.110, which deals with

organization of a section 301(d) license

applicant, would be removed. Similarly,

§ 107.120 would be revised by