65822 Federal Register / Vol. 66, No. 246 / Friday, December 21, 2001 / Rules and Regulations

1See Lending and Investment Final Rule, 61 FR

50951 (Sept. 30, 1996); Subsidiaries and Equity

Investments, 61 FR 66561 (Dec. 18, 1996).

2Sections 5(c)(2)(A) and 10(m)(4)(E) specifically

authorize the Director to define the terms ‘‘small

business loans’’ and ‘‘small business’’ for purposes

of HOLA investment limits and the Qualified Thrift

Lender test, respectively.

PART 573—PRIVACY OF CONSUMER

FINANCIAL INFORMATION

47. The authority citation for part 573

continues to read as follows:

Authority: 12 U.S.C. 1462a, 1463, 1464,

1828; 15 U.S.C. 6801 et seq.

48. Revise § 573.15 (a)(7)(ii) to read as

follows:

§ 573.15 Other exceptions to notice and

opt out requirements.

(a) * * *

(7) * * *

(ii) To comply with a properly

authorized civil, criminal, or regulatory

investigation, or subpoena or summons

by Federal, State, or local authorities; or

* * * * *

PART 583—DEFINITIONS FOR

REGULATIONS AFFECTING SAVINGS

AND LOAN HOLDING COMPANIES

49. Revise the part heading for part

583 to read as shown above.

50. The authority citation for part 583

continues to read as follows:

Authority: 12 U.S.C. 1462, 1462a, 1463,

1464, 1467a, 1468.

PART 590—PREEMPTION OF STATE

USURY LAWS

51. The authority citation for part 590

continues to read as follows:

Authority: 12 U.S.C. 1735f–7a.

52. Revise 590.3(c) to read as follows:

§ 590.3 Operation.

* * * * *

(c) Nothing in this section preempts

limitations in state laws on prepayment

charges, attorneys’ fees, late charges or

other provisions designed to protect

borrowers.

Dated: December 11, 2001.

By the Office of Thrift Supervision.

James E. Gilleran,

Director.

[FR Doc. 01–31053 Filed 12–20–01; 8:45 am]

BILLING CODE 6720–01–P

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 559 and 560

[No. 2001–82]

RIN 1550–AB37

Lending and Investment

AGENCY: Office of Thrift Supervision,

Treasury.

ACTION: Final rule.

SUMMARY: The Office of Thrift

Supervision (‘‘OTS’’) is revising and

clarifying its lending and investment

regulations to give savings associations

greater flexibility in a changing

marketplace. Today’s regulatory

amendments are intended to help thrifts

take better advantage of the flexibility

available under the Home Owners’ Loan

Act (‘‘HOLA’’), to provide low-cost

credit to their customers, and to invest

in their communities while still

operating safely and soundly.

EFFECTIVE DATE: This rule is effective on

January 1, 2002.

FOR FURTHER INFORMATION CONTACT:

William J. Magrini, Senior Project

Manager, Supervision Policy, (202) 906–

5744; Karen Osterloh, Assistant Chief

Counsel, Regulations and Legislation

Division, (202) 906–6639, Office of

Thrift Supervision, 1700 G Street, NW.,

Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

OTS periodically reviews its lending

and investment regulations to ensure

that they enhance safe and sound

lending, implement statutory

requirements, protect consumers,

minimize regulatory burden, and are

clearly written. OTS lending and

investment regulations have been

considerably modified over time as

savings associations, their markets, their

competition, and the economy have

changed. For the most part, OTS has

taken a contract and market-based

approach to provide flexibility for thrifts

and their customers and to encourage

innovations in lending to help make

credit more available.

OTS last substantively revised its

lending regulations and subordinate

organizations regulations in 1996.1

Since that time, the markets in which

thrifts operate have changed

substantially. In the primary market,

savings associations now compete with

other mortgage lenders to offer potential

borrowers a wide variety of options

besides the traditional 30-year fixed-rate

purchase money mortgage. The

secondary market continues to narrow

the interest-rate spread on high quality

mortgages.

As the residential mortgage market

has evolved, thrifts have increasingly

begun to explore offering other types of

credit needed in their communities,

including consumer lending and small

business lending. A variety of

community-related investment

opportunities offer thrifts new ways to

serve and to participate in the economic

development of their communities.

Thrifts have asked whether and how

such loans and investments may be

made by either the thrift itself or

through an operating subsidiary or

service corporation.

This evolving environment made it

appropriate for OTS to again re-examine

and update its lending and investment

and subordinate organizations

regulations. Accordingly, on November

1, 2001, OTS published a proposed rule

intended to help thrifts take better

advantage of the flexibility available

under the Home Owners’ Loan Act

(‘‘HOLA’’), to provide low-cost credit to

their customers, and to invest in their

communities while still operating safely

and soundly. 66 FR 55131 (Nov. 1,

2001).

II. Analysis of Comments

OTS received eight public comments

from three Federal savings associations,

three trade associations, a community

group, and an individual. Seven

commenters supported the rule, but

recommended modifications. The

commenter opposing the rule

incorrectly believed that the rule

applied to institutions with a common

bond (i.e., credit unions), rather than

thrifts. The remaining comments are

summarized below.

Small Business Loans

Existing § 560.3 provides two

alternatives for determining whether a

particular loan qualifies as a small

business loan.2 First, a loan of any size

qualifies if the loan is made to a

business that meets the size standards

established by the Small Business

Administration. Second, a loan qualifies

if a savings association makes a loan to

a business and the amount of the loan

is less than $1 million, or makes a loan

to a farm and the amount of the loan is

less than $500,000. OTS proposed to

raise this safe harbor amount to $2

million for both small business and farm

loans.

Most commenters supported the

increase. One commenter, however,

noted that the existing definition is

more consistent with an emphasis on

serving the smallest businesses and

farms and with the Community

Reinvestment Act (CRA) definition of

small business and farm loan. This

commenter feared that the proposed

increase could cause thrifts to neglect

the smallest businesses.

Federal Register / Vol. 66, No. 246 / Friday, December 21, 2001 / Rules and Regulations 65823

3Another commenter asked OTS to conform the

definitions of ‘‘small business loan’’ set out in the

CRA regulations and in the Thrift Financial Report

(TFR) to include the $2 million safe harbor

threshold. Revisions to the CRA regulations are

beyond the scope of this rulemaking. However, OTS

is working on an interagency basis to update and

amend the CRA regulations. See Advance Notice of

Proposed Regulations published July 19, 2001 (66

FR 37602). The agencies may consider revisions to

the CRA definition of ‘‘small business loan’’ in that

rulemaking. In addition, OTS continually

reevaluates the TFR and the instructions to the TFR

to ensure that the terms used appropriately reflect

OTS regulations, and will review these documents

in light of the changes made in today’s final rule.

4The HOLA does not contain a provision

paralleling the authority of 12 U.S.C. 24 (Eleventh).

However, OTS has long recognized that a Federal

savings association may make community

development related investments to raise its profile

in its market as a form of advertising. 5 In the proposed rule, OTS revised the service

corporation regulation at § 559.4(h) to clarify that

these service corporation investments include those

that ‘‘designed primarily to promote the public

welfare, including the welfare of low- and

moderate-income communities or families (such as

by providing housing, services, or jobs.)’’ This

modification clarified that Federal savings

association service corporations have the same

authority as national banks and state member banks

to make investments to promote the public welfare

(see 12 U.S.C. 24 (Eleventh) and 12 U.S.C. 338a,

respectively). One commenter noted that the

amount that national banks may invest in public

welfare investments is limited to five percent of

capital stock paid in plus five percent of

unimpaired surplus. The commenter asked OTS to

clarify whether these national bank limits also

restrict the amount of the service corporation public

welfare investment. The proposed modification to

§ 559.4 was intended to define the scope of

permissible investments, not the limits on the

amount of the investment. OTS existing regulations

define the limits on the amount of a thrift’s

investment in service corporations at 12 CFR 559.5.

This regulation does not incorporate the national

bank limitation on public welfare investments.

6See generally Thrift Bulletin 78 ‘‘Classifying

Commercial and Other Loans under the Home

Owners’ Loan Act’’ (October 5, 2001). 7 12 U.S.C. 1464(c)(2)(D).

The proposed changes were designed

to define the scope of a Federal savings

association’s lending and investment

powers, rather than to assess the

adequacy of its CRA performance. OTS

believes that the additional flexibility

afforded by the proposed modification

will enable more savings associations to

provide a broader range of small

business customers with credit products

tailored to their needs, particularly in

higher price geographic areas. OTS will

continue to assess an institution’s

record of meeting the credit needs of the

local communities, including small

business lending, under the CRA and

CRA implementing regulations at 12

CFR part 563e.3

To satisfy the safe harbor under the

current and proposed rules, a savings

association must make the loan to ‘‘a

business or farm.’’ Several commenters

noted that commercial loans are often

made to individuals who use the

proceeds for their own small businesses.

To accommodate this lending,

commenters suggested that OTS should

apply the $2 million safe harbor if loan

proceeds are used for business or

commercial purposes. OTS has always

believed that such loans fall within the

definition, but has modified the safe

harbor in the final rule to make clear

that it applies to loans that are for

‘‘commercial, corporate, business, or

agricultural purposes.’’ See 12 U.S.C.

1464(c)(2)(A).

De Minimis Investments

Existing § 560.36 permits a Federal

savings association to invest the greater

of one-fourth of one percent of its total

capital or $100,000 in community

development investments of the type

permitted under 12 CFR part 24. OTS

proposed to increase these limits to the

greater of one percent of an association’s

total capital or $250,000. One

commenter urged OTS to increase this

limit to the national bank limit (five

percent of capital stock paid in and five

percent of unimpaired surplus). See 12

U.S.C. 24 (Eleventh) and 12 CFR part 24.

The proposed increase to the

community development investment

limits attempts to give thrifts authority

as comparable to that of banks as

possible, given the different statutory

authority.4 Because Federal thrifts have

other community development

investment options that are not

available to national banks, OTS is not

inclined to increase the de minimis

authority beyond the proposed amount

at this time.

In addition to the de minimis

authority, Federal savings associations

are permitted to invest in certain

community development and charitable

activities through service corporations.5

One commenter requested clarification

that the authority to invest in public

welfare investments under the de

minimis authority in § 560.36 is not

contingent on the balance of public

welfare investments made under the

service corporation authority. OTS has

consistently stated that if a loan or

investment is authorized under more

than investment authority, a Federal

savings association may designate the

section under which the loan or

investment is made. See 12 CFR

560.31.6 Section 559.3(i) also

specifically provides that investments

made at the service corporation level are

not aggregated with those made at the

thrift level when calculating HOLA

investment limitations. Compare

§ 559.3(i)(1) (operating subsidiaries)

with § 559.3(i)(2) (service corporations).

Thus, the amount a savings association

may invest directly in public welfare

investments under § 560.36 is not

contingent on the balance of public

welfare investments made through a

service corporation.

Commercial Paper and Corporate Debt

Securities

Existing § 560.40 reiterates HOLA’s

grant of statutory authority to Federal

thrifts to invest in commercial paper

and corporate debt securities and sets

out limitations on that authority.7

Recently, some Federal savings

associations have purchased complex

investment securities with nonstandard

ratings, ratings that only apply to the

principal amount rather than both the

principal and interest, or payment

features such as residuals. These

investments tend to be speculative in

nature, and their likelihood of

producing a particular rate of return is

difficult to assess even where they may

be partially guaranteed or rated

investment grade. These investments are

clearly not intended to hedge interest

rate risk or credit risk. Rather, their

potential purchase creates risks that

highlight the need for savings

associations to perform thorough

underwriting analyses. To address

issues raised by these types of

investments, OTS proposed changes to

§ 560.40 to codify the agency’s existing

expectations about the circumstances

under which these investments may be

made.

Among other requirements, OTS

proposed that a Federal savings

association must determine whether an

investment security is safe and sound

and suitable for the association before

committing to acquire the security. The

proposed rule indicated that a Federal

savings association must consider, as

appropriate, the interest rate, credit,

liquidity, price, transaction, and other

risks associated with the investment

activity. One commenter supported this

provision, but requested confirmation

that an investment need not be

reasonable under each separate

criterion. The risks of each investment

should be evaluated on an overall basis.

Individual risk factors may impact the

overall safety and soundness of a

particular investment so significantly

that they may not be offset by other

strengths of the investment. On the

other hand, a slight deviation in one

area may not have such an impact on

the overall safety and soundness of an

investment. These determinations are

inherently case-by-case. As a result,

OTS cannot provide the requested

confirmation.

The preamble to the proposed rule

indicated that a savings association has

65824 Federal Register / Vol. 66, No. 246 / Friday, December 21, 2001 / Rules and Regulations

8E.g., Memorandum for Chief Executives 130

dated October 23, 2000. This memorandum

indicates that management has an ongoing

responsibility to monitor the investment, including

cash flows, collateral quality, and the performance

of the underlying assets of the security at least

quarterly to determine the effect of any changes on

the association’s investment. Thrift Bulletin 13a

also provides guidance on the fundamental

underwriting standards thrifts should use in this

area.

an ongoing responsibility to monitor its

investments in commercial paper and

debt securities. One commenter

observed that the rule text does not

incorporate a review requirement or

indicate what factors should be

addressed in this analysis. OTS believes

that the ongoing review responsibilities

should be left to each institution based

on the level and complexity of its

investment activity. OTS has issued

guidance concerning appropriate initial

and continuing underwriting criteria.8

The commenter also noted that the

rule does not address the actions

required of an institution if an

investment fails to meet the original

assumptions or suitability requirements

subsequent to its acquisition. Depending

on the circumstances of each case, OTS

may, as a part of its ongoing supervision

and oversight, criticize an institution’s

investments, its investment activities, or

its investment policies, and will require

appropriate remedial action as

necessary.

Loan Purchases

One commenter asked OTS to add a

new provision requiring savings

associations to screen loan purchases for

abusive and predatory features. This

request addresses important issues

beyond the scope of the proposal and is

not an area OTS believes appropriate to

address in this final rule without further

public input and analysis. Nonetheless,

a Federal savings association must

determine the safety, soundness, and

suitability of any investment or

purchase, and should consider the

reputation of the seller and the quality

and underwriting standards of the loans

it purchases.

III. Effective Date

In the proposed rule, OTS stated that

it intended to publish a final rule that

will be effective on January 1, 2002. See

66 FR 55131, at 55135 (Nov. 1, 2001).

Section 553 of the Administrative

Procedure Act (APA), however,

provides that a final rule must not be

made effective before 30 days after its

publication, 5 U.S.C. 553(b)(B), unless

the rule grants or recognizes an

exemption or relieves a restriction.

Today’s final rule relieves restrictions

by enhancing savings associations’

flexibility to offer a greater range of

products, to invest in activities that

support their local communities, and to

compete more effectively with other

financial institutions. It also relieves

restrictions by permitting savings

associations to make a greater amount of

community development investments.

Finally, the final rule rewrites certain

provisions using plain language drafting

techniques, which will make it easier

for all savings associations to comply

with OTS regulations. Accordingly, OTS

has concluded that the final rule

relieves restrictions and that the APA

does not require OTS to delay its

effective date for 30 days.

This rule is effective on January 1,

2002. This date is consistent with

section 302 of the Riegle Community

Development and Regulatory

Improvement Act of 1994 (CDRIA),

which requires final rules to take effect

on the first day of a calendar quarter

that begins on or after the date of

publication of the rule. 12 U.S.C. 4802.

IV. Executive Order 12866

The Director of OTS has determined

that this final rule does not constitute a

‘‘significant regulatory action’’ for

purposes of Executive Order 12866.

V. Unfunded Mandates Reform Act of

1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, Pub. L.

104–4 (‘‘Unfunded Mandates Act’’),

requires that an agency prepare a

budgetary impact statement before

promulgating a rule that includes a

Federal mandate that may result in

expenditure by state, local, and tribal

governments, or by the private sector, of

$100 million or more in any one year.

If a budgetary impact statement is

required, section 205 of the Unfunded

Mandates Act also requires an agency to

identify and consider a reasonable

number of regulatory alternatives before

promulgating a rule. OTS has

determined that the final rule will not

result in expenditures by state, local, or

tribal governments or by the private

sector of $100 million or more.

Accordingly, a budgetary impact

statement is not required under section

202 of the Unfunded Mandates Act of

1995.

VI. Regulatory Flexibility Act Analysis

Pursuant to section 605(b) of the

Regulatory Flexibility Act, OTS certifies

that this final rule will not have a

significant economic impact on a

substantial number of small entities.

The final rule makes certain changes

that reduce burden on all savings

associations, including small

institutions. The final rule reduces

burden on all savings associations by

enhancing thrifts’ flexibility to offer a

greater range of products, to invest in

activities that support their local

communities, and to compete more

effectively with other financial

institutions. The final rule allows small

savings associations to make a greater

amount of community development

investments. Finally, the final rule

revises § 560.42 into plain language,

which will make it easier for all savings

associations to comply with the

regulation. Accordingly, OTS concludes

that this final rule will not have a

significant economic impact on a

substantial number of small entities.

List of Subjects

12 CFR Part 559

Reporting and recordkeeping

requirements, Savings associations,

Subsidiaries.

12 CFR Part 560

Consumer protection, Investments,

Manufactured homes, Mortgages,

Reporting and recordkeeping

requirements, Savings associations,

Securities.

Accordingly, the Office of Thrift

Supervision amends 12 CFR chapter V,

as follows.

PART 559—SUBORDINATE

ORGANIZATIONS

1. The authority citation for part 559

continues to read as follows:

Authority: 12 U.S.C. 1462, 1462a, 1463,

1464, 1828.

2. Section 559.4 introductory text, and

paragraphs (g)(3), (h)(2) and (3), and (i)

are revised; and § 559.4(j) is added to

read as follows:

§ 559.4 What activities are preapproved for

service corporations?

This section sets forth the activities

that have been preapproved for service

corporations. Section 559.3(e)(2) of this

part sets forth the procedures for

engaging in a broader scope of activities

on a case-by-case basis. You should read

these two sections together to determine

whether you must file a notice with

OTS under § 559.11 of this part, or

whether you must file an application

under part 516 of this chapter and

receive prior written OTS approval for

your service corporation to engage in a

particular activity. To the extent

permitted by § 559.3(e)(2) of this part, a

service corporation may engage in the

following activities:

* * * * *

(g) * * *

Federal Register / Vol. 66, No. 246 / Friday, December 21, 2001 / Rules and Regulations 65825

(3) Small business investment

companies and new markets venture

capital companies licensed by the U.S.

Small Business Administration; and

* * * * *

(h) * * *

(2) Investments designed primarily to

promote the public welfare, including

the welfare of low- and moderateincome communities or families (such

as providing housing, services, or jobs);

(3) Investments in low-income

housing tax credit and new markets tax

credit projects and entities authorized

by statute (e.g., community

development financial institutions) to

promote community, inner city, and

community development purposes; and

* * * * *

(i) Activities conducted on behalf of a

customer on an other than ‘‘as

principal’’ basis.

(j) Activities reasonably incident to

those listed in paragraphs (a) through (i)

of this section if the service corporation

engages in those activities.

PART 560—LENDING AND

INVESTMENT

3. The authority citation for part 560

continues to read as follows:

Authority: 12 U.S.C. 1462, 1462a, 1463,

1464, 1467a, 1701j-3, 1828, 3803, 3806; 42

U.S.C. 4106.

4. Section 560.3 is amended by

revising the first sentence in the

definition of ‘‘Real estate loan’’ and by

revising the definition of ‘‘Small

business loans and loans to small

businesses’’ as follows:

§ 560.3 Definitions.

* * * * *

Real estate loan, for purposes of this

part, is a loan for which the savings

association substantially relies upon a

security interest in real estate given by

the borrower as a condition of making

the loan. * * *

* * * * *

Small business loans and loans to

small businesses include any loan to a

small business as defined in this

section; or a loan that does not exceed

$2 million (including a group of loans

to one borrower) and is for commercial,

corporate, business, or agricultural

purposes.

5. Section 560.30 is revised to read as

follows:

§ 560.30 General lending and investment

powers of Federal savings associations.

Pursuant to section 5(c) of the Home

Owners’ Loan Act (‘‘HOLA’’), 12 U.S.C.

1464(c), a Federal savings association

may make, invest in, purchase, sell,

participate in, or otherwise deal in

(including brokerage or warehousing) all

loans and investments allowed under

section 5(c) of the HOLA including,

without limitation, the following loans,

extensions of credit, and investments,

subject to the limitations indicated and

any such terms, conditions, or

limitations as may be prescribed from

time to time by OTS by policy directive,

order, or regulation:

LENDING AND INVESTMENT POWERS CHART

Category Statutory authorization 1 Statutory investment limitations (Endnotes contain

applicable regulatory limitations)

Bankers’ bank stock ......................................................... 5(c)(4)(E) ............................ Same terms as applicable to national banks.

Business development credit corporations ....................... 5(c)(4)(A) ............................ The lesser of .5% of total outstanding loans or

$250,000.

Commercial loans ............................................................. 5(c)(2)(A) ............................ 20% of total assets, provided that amounts in excess of

10% of total assets may be used only for small business loans.

Commercial paper and corporate debt securities ............ 5(c)(2)(D) ............................ Up to 35% of total assets.2 3

Community development loans and equity equity investments.5(c)(3)(A) ............................ 5% of total assets, provided equity investments do not

exceed 2% of total assets.4

Construction loans without security .................................. 5(c)(3)(C) ............................ In the aggregate, the greater of total capital or 5% of

total assets.

Consumer loans ................................................................ 5(c)(2)(D) ............................ Up to 35% of total assets.2 5

Credit card loans or loans made through credit card accounts.5(c)(1)(T) ............................ None.6

Deposits in insured depository institutions ....................... 5(c)(1)(G) ............................ None.6

Education loans ................................................................ 5(c)(1)(U) ............................ None.6

Federal government and government-sponsored enterprise securities and instruments.5(c)(1)(C), 5(c)(1)(D),

5(c)(1)(E), 5(c)(1)(F).

None.6

Finance leasing ................................................................. 5(c)(1)(B), 5(c)(2)(A),

5(c)(2)(B), 5(c)(2)(D).

Based on purpose and property financed.7

Foreign assistance investments ....................................... 5(c)(4)(C) ............................ 1% of total assets.8

General leasing ................................................................. 5(c)(2)(C) ............................ 10% of assets.7

Home improvement loans ................................................. 5(c)(1)(J) ............................. None.6

Home (residential) loans 9 ................................................. 5(c)(1)(B) ............................ None.6 10

HUD-insured or guaranteed investments ......................... 5(c)(1)(O) ............................ None.6

Insured loans .................................................................... 5(c)(1)(I), 5(c)(1)(K) ............ None6

Liquidity investments ........................................................ 5(c)(1)(M) ........................... None.6

Loans secured by deposit accounts ................................. 5(c)(1)(A) ............................ None.6 11

Loans to financial institutions, brokers, and dealers ........ 5(c)(1)(L) ............................ None.6 12

Manufactured home loans ................................................ 5(c)(1)(J) ............................. None.6 13

Mortgage-backed securities .............................................. 5(c)(1)(R) ............................ None.6

National Housing Partnership Corporation and related

partnerships and joint ventures.

5(c)(1)(N) ............................ None.6

New markets venture capital companies .......................... 5(c)(4)(F) ............................ 5% of total capital.

Nonconforming loans ........................................................ 5(c)(3)(B) ............................ 5% of total assets.

Nonresidential real property loans .................................... 5(c)(2)(B) ............................ 400% of total capital.14

Open-end management investment companies 15 ........... 5(c)(1)(Q) ............................ None.6

Service corporations ......................................................... 5(c)(4)(B) ............................ 3% of total assets, as long as any amounts in excess

of 2% of total assets further community, inner city, or

community development purposes.16

Small business investment companies ............................ 15 U.S.C. 682(b)(2) ............ 5% of total capital.

65826 Federal Register / Vol. 66, No. 246 / Friday, December 21, 2001 / Rules and Regulations

LENDING AND INVESTMENT POWERS CHART—Continued

Category Statutory authorization 1 Statutory investment limitations (Endnotes contain

applicable regulatory limitations)

Small-business-related securities ..................................... 5(c)(1)(S) ............................ None.6

State and local government obligations ........................... 5(c)(1)(H) ............................ None for general obligations. Per issuer limitation of

10% of capital for other obligations.6 17

State housing corporations ............................................... 5(c)(1)(P) ............................ None.6 18

Transaction account loans, including overdrafts .............. 5(c)(1)(A) ............................ None.6 19

Endnotes

1. All references are to section 5 of the

Home Owners’ Loan Act (12 U.S.C. 1464)

unless otherwise indicated.

2. For purposes of determining a Federal

savings association’s percentage of assets

limitation, investment in commercial paper

and corporate debt securities must be

aggregated with the Federal savings

association’s investment in consumer loans.

3. A Federal savings association may invest

in commercial paper and corporate debt

securities, which includes corporate debt

securities convertible into stock, subject to

the provisions of § 560.40 of this part.

Amounts in excess of 30% of assets, in the

aggregate, may be invested only in

obligations purchased by the association

directly from the original obligor and for

which no finder’s or referral fees have been

paid.

4. The 2% of assets limitation is a sublimit

for investments within the overall 5% of

assets limitation on community development

loans and investments. The qualitative

standards for such loans and investments are

set forth in HOLA section 5(c)(3)(A) (formerly

5(c)(3)(B), as explained in an opinion of the

OTS Chief Counsel dated May 10, 1995

(available at www.ots.treas.gov)).

5. Amounts in excess of 30% of assets, in

the aggregate, may be invested only in loans

made by the association directly to the

original obligor and for which no finder’s or

referral fees have been paid. A Federal

savings association may include loans to

dealers in consumer goods to finance

inventory and floor planning in the total

investment made under this section.

6. While there is no statutory limit on

certain categories of loans and investments,

including credit card loans, home

improvement loans, education loans, and

deposit account loans, OTS may establish an

individual limit on such loans or investments

if the association’s concentration in such

loans or investments presents a safety and

soundness concern.

7. A Federal savings association may

engage in leasing activities subject to the

provisions of § 560.41 of this part.

8. This 1% of assets limitation applies to

the aggregate outstanding investments made

under the Foreign Assistance Act and in the

capital of the Inter-American Savings and

Loan Bank. Such investments may be made

subject to the provisions of § 560.43 of this

part.

9. A home (or residential) loan includes

loans secured by one-to-four family

dwellings, multi-family residential property,

and loans secured by a unit or units of a

condominium or housing cooperative.

10. A Federal savings association may

make home loans subject to the provisions of

§§ 560.33, 560.34, and 560.35 of this part.

11. Loans secured by savings accounts and

other time deposits may be made without

limitation, provided the Federal savings

association obtains a lien on, or a pledge of,

such accounts. Such loans may not exceed

the withdrawable amount of the account.

12. A Federal savings association may only

invest in these loans if they are secured by

obligations of, or by obligations fully

guaranteed as to principal and interest by,

the United States or any of its agencies or

instrumentalities, the borrower is a financial

institution insured by the Federal Deposit

Insurance Corporation or is a broker or dealer

registered with the Securities and Exchange

Commission, and the market value of the

securities for each loan at least equals the

amount of the loan at the time it is made.

13. If the wheels and axles of the

manufactured home have been removed and

it is permanently affixed to a foundation, a

loan secured by a combination of a

manufactured home and developed

residential lot on which it sits may be treated

as a home loan.

14. Without regard to any limitations of

this part, a Federal savings association may

make or invest in the fully insured or

guaranteed portion of nonresidential real

estate loans insured or guaranteed by the

Economic Development Administration, the

Farmers Home Administration, or the Small

Business Administration. Unguaranteed

portions of guaranteed loans must be

aggregated with uninsured loans when

determining an association’s compliance

with the 400% of capital limitation for other

real estate loans.

15. This authority is limited to investments

in open-end management investment

companies that are registered with the

Securities and Exchange Commission under

the Investment Company Act of 1940. The

portfolio of the investment company must be

restricted by the company’s investment

policy (changeable only if authorized by

shareholder vote) solely to investments that

a Federal savings association may, without

limitation as to percentage of assets, invest

in, sell, redeem, hold, or otherwise deal in.

Separate and apart from this authority, a

Federal savings association may make passthrough investments to the extent authorized

by § 560.32 of this part.

16. A Federal savings association may

invest in service corporations subject to the

provisions of part 559 of this chapter.

17. This category includes obligations

issued by any state, territory, or possession

of the United States or political subdivision

thereof (including any agency, corporation,

or instrumentality of a state or political

subdivision), subject to § 560.42 of this part.

18. A Federal savings association may

invest in state housing corporations subject

to the provisions of § 560.121 of this part.

19. Payments on accounts in excess of the

account balance (overdrafts) on commercial

deposit or transaction accounts shall be

considered commercial loans for purposes of

determining the association’s percentage of

assets limitation.

6. Revise 560.36 to read as follows:

§ 560.36 De minimis investments.

A Federal savings association may

invest in the aggregate up to the greater

of 1% of its total capital or $250,000 in

community development investments of

the type permitted for a national bank

under 12 CFR part 24.

7. Amend § 560.40 by adding the

words ‘‘as to the portion of the security

in which the association is investing’’

after ‘‘categories’’ in § 560.40(a)(2)(ii)

and by adding § 560.40(c) to read as

follows:

§ 560.40 Commercial paper and corporate

debt securities.

* * * * *

(c) Underwriting. Before committing

to acquire any investment security, a

Federal savings association must

determine whether the investment is

safe and sound and suitable for the

association. The Federal savings

association must consider, as

appropriate, the interest rate, credit,

liquidity, price, transaction, and other

risks associated with the investment

activity. The Federal savings association

must also determine that the issuer has

adequate resources and the willingness

to provide for all required payments on

its obligations in a timely manner.

8. Revise 560.42 to read as follows:

§ 560.42 State and local government

obligations.

(a) What limitations apply? Pursuant

to HOLA section 5(c)(1)(H), a Federal

savings association (‘‘you’’) may invest

in obligations issued by any state,

territory, possession, or political

subdivision thereof (‘‘governmental

entity’’), subject to appropriate

underwriting and the following

conditions:

Federal Register / Vol. 66, No. 246 / Friday, December 21, 2001 / Rules and Regulations 65827

Aggregate limitation Per-issuer limitation

(1) General obligations ............................................................................ None .............................................. None.

(2) Other obligations of a governmental entity (e.g., revenue bonds)

that hold one of the four highest investment grade ratings by a nationally recognized rating agency or that are nonrated but of investment quality.

None .............................................. 10% of total capital.

(3) Obligations of a governmental entity that do not qualify under any

other paragraph but are approved by your Regional Director.

As approved by your Regional Director10% of total capital.

(b) What is a political subdivision?

Political subdivision means a county,

city, town, or other municipal

corporation, a public authority, or a

publicly-owned entity that is an

instrumentality of a state or a municipal

corporation.

(c) What is a general obligation of a

state or political subdivision? A general

obligation is an obligation that is

guaranteed by the full faith and credit

of a state or political subdivision that

has the power to tax. Indirect payments,

such as through a special fund, may

qualify as general obligations if a state

or political subdivision with taxing

authority has unconditionally agreed to

provide funds to cover payments.

(d) What is appropriate underwriting

for this type of investment? In the case

of a security rated in one of the four

highest investment grades by a

nationally recognized rating agency,

your assessment of the obligor’s credit

quality may be based, in part, on

reliable rating agency estimates of the

obligor’s performance. For all other

securities, you must perform your own

detailed analysis of credit quality. In

doing so, you must consider, as

appropriate, the interest rate, credit,

liquidity, price, transaction, and other

risks associated with the investment

activity and determine that such

investment is appropriate for your

institution. You must also determine

that the obligor has adequate resources

and willingness to provide for all

required payments on its obligations in

a timely manner.

Dated: December 11, 2001.

By the Office of Thrift Supervision.

James E. Gilleran,

Director.

[FR Doc. 01–31052 Filed 12–20–01; 8:45 am]

BILLING CODE 6720–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 99–SW–78–AD; Amendment

39–12560; AD 2001–25–07]

RIN 2120–AA64

Airworthiness Directives; Eurocopter

France Model AS 332C, L, L1, and L2

Helicopters

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule.

SUMMARY: This amendment supersedes

an existing airworthiness directive (AD)

that applies to Eurocopter France Model

AS 332C, L, L1, and L2 helicopters. That

AD requires conducting a filter clogging

warning test, and, if necessary,

replacing a jammed valve with an

airworthy valve. This amendment

requires the same actions as the existing

AD but references a revision to the

previously referenced service

information; adds fuel filter part

numbers to the applicability; and

clarifies other provisions throughout the

AD. This amendment is prompted by

jammed fuel filter by-pass valves. The

actions specified by this AD are

intended to prevent power loss due to

fuel starvation, engine flameouts, and a

subsequent forced landing.

DATES: Effective January 25, 2002.

The incorporation by reference of

certain publications listed in the

regulations is approved by the Director

of the Federal Register as of January 25,

2002.

ADDRESSES: The service information

referenced in this AD may be obtained

from American Eurocopter Corporation,

2701 Forum Drive, Grand Prairie, Texas

75053–4005, telephone (972) 641–3460,

fax (972) 641–3527. This information

may be examined at the FAA, Office of

the Regional Counsel, Southwest

Region, 2601 Meacham Blvd., Room

663, Fort Worth, Texas; or at the Office

of the Federal Register, 800 North

Capitol Street, NW., suite 700,

Washington, DC.

FOR FURTHER INFORMATION CONTACT: Paul

Madej, Aviation Safety Engineer, FAA,

Rotorcraft Directorate, Rotorcraft

Standards Staff, Fort Worth, Texas

76193–0110, telephone (817) 222–5125,

fax (817) 222–5961.

SUPPLEMENTARY INFORMATION: A

proposal to amend 14 CFR part 39 by

superseding AD 99–13–02, Amendment

39–11195 (64 FR 32399, June 17, 1999),

which applies to Eurocopter France

Model AS 332C, L, L1, and L2

helicopters, was published in the

Federal Register on April 14, 2000 (65

FR 20104). That action proposed to

require the same actions as AD 99–13–

02 but would have added another fuel

filter part number to the applicability.

After issuing that notice of proposed

rulemaking (NPRM), Eurocopter France

issued Alert Service Bulletin No.

01.00.56, dated January 16, 2001 (ASB),

which changed the compliance and

operational procedures and added a part

number to the affected fuel filters. The

Direction Generale De L’Aviation Civile,

which is the airworthiness authority for

France, classified that ASB as

mandatory and issued AD Nos. 1998–

318–071(A)R6 and 1998–319–012(A)R6,

both dated April 18, 2001, to ensure the

continued airworthiness of these

helicopters in France. The FAA

determined that the actions and all the

fuel filter part numbers specified in the

SB should be included in the proposal.

Because the changes expanded the

scope of the originally proposed rule,

the FAA determined that it was

necessary to reopen the comment period

to provide additional opportunity for

public comment and issued a

supplemental NPRM on August 17,

2001 (66 FR 45651, August 29, 2001).

Interested persons have been afforded

an opportunity to participate in the

making of this amendment. No

comments were received on the

proposal or the FAA’s determination of

the cost to the public. The FAA has

determined that air safety and the

public interest require the adoption of

the rule as proposed except for a minor

editorial change in Note 2 of the AD.

The word ‘‘bulletin’’ is inserted to

reference the applicable service

information. This change neither

increases the economic burden on any

operator nor increases the scope of the

AD.