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1998 Annual Report

Legislation Enacted


Although Congress did not enact comprehensive banking legislation in 1998, lawmakers approved several measures directly affecting the FDIC or insured depository institutions. Among the topics addressed in laws enacted in 1998 were legislation on the Year 2000 computer issue, private mortgage insurance, and the termination of the Thrift Depositor Protection Oversight Board. Congress also appropriated funds for the FDIC Office of Inspector General and for judgments and settlements of "goodwill" lawsuits related to savings and loan association failures.

The Year 2000 Computer Issue
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The Examination Parity and Year 2000 Readiness for Financial Institutions Act (Public Law 105-164) was signed into law on March 20, 1998. The Act requires the FDIC, as well as the other federal banking agencies and the National Credit Union Administration (NCUA), to offer seminars to all institutions under its jurisdiction on the safety and soundness implications of the Year 2000 computer issue. The law also requires the agencies to give insured depository institutions model approaches to common Year 2000 challenges in such areas as project management, vendor contracts, testing regimes and business continuity planning. The Act also amends the Home Owners’ Loan Act and the Federal Credit Union Act to give express authority to the Office of Thrift Supervision and the NCUA to examine and regulate service companies and third-party service providers such as data processing firms.

Private Mortgage Insurance
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The Homeowners Protection Act of 1998 (Public Law 105-216) was signed into law on July 29, 1998. The Act provides a statutory framework for canceling or automatically terminating private mortgage insurance (PMI). PMI is an insurance policy that protects the lender from losses when a mortgage with a low down payment is in default. In general, most PMI requirements in connection with a residential mortgage transaction entered into after July 29, 1999, will terminate when the mortgage is scheduled to reach 78 percent of the original value of the property. A mortgagor with a good payment history and who meets other requirements of the Act may request the cancellation when the mortgage balance reaches 80 percent of the property’s value. The federal banking agencies, the NCUA, and the Farm Credit Administration are directed to enforce these requirements.

Thrift Depositor Protection Oversight Board
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Also as part of the Homeowners Protection Act, Congress abolished the Thrift Depositor Protection Oversight Board, which was created in 1991 to monitor the operations of the Resolution Trust Corporation. The Act transfers the Oversight Board’s authority over the Resolution Funding Corporation—an entity created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to provide funding for use in thrift resolutions—to the Secretary of the Treasury. The Act also amended provisions governing the frequency and location of the Affordable Housing Advisory Board’s (AHAB) meetings. The AHAB, which terminated by law on September 30, 1998, advised the FDIC and the Oversight Board on policies and programs related to the provision on affordable housing.

FDIC Employees’ Health Insurance
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The Federal Employees Health Care Protection Act of 1998 (Public Law 105-266) was signed into law on October 19, 1998. The Act includes provisions permitting FDIC retirees and employees who are within five years of retirement to participate in the Federal Employees Health Benefits Program during retirement.

Appropriations
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Congress provided funding for the FDIC Office of Inspector General as part of the Departments of Veterans Affairs, Housing and Urban Development and Independent Agencies Appropriations Act, 1999 (Public Law 105-276), enacted on October 21, 1998. The Act appropriates approximately $34.6 million from the Bank Insurance Fund, the Savings Association Insurance Fund and the FSLIC Resolution Fund for necessary expenses of the Office of Inspector General in fiscal year 1999.

Also, Congress appropriated funds for payments of judgments and settlements related to the Winstar (goodwill) cases in the Omnibus Consolidated and Emergency Supplemental Appropriations Act for Fiscal Year 1999 (Public Law 105-277), enacted on October 21, 1998. For more information about these cases, (click here).


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