4000 - Advisory Opinions
FHA Trustees Servicing FHA-Related Mortgage Portfolios Are Not Subject to Brokered Deposit Registration Requirements
November 10, 1992
Gerald J. Gervino, Senior Attorney
In your recent letter you have asked us to clarify the extent to which a mortgage loan servicer, contemplating the deposit of FHA trust funds in your bank, is subject to the registration requirements imposed by the new brokered deposit prohibitions. Those registration requirements are set forth at section 29A of the Federal Deposit Insurance ("FDI") Act.
The mortgage loan servicer holds funds on behalf of the U.S. Department of Housing and Urban Development. In the transactions which you have contemplated, the bank would establish two master MMDA accounts titled approximately as follows:
1. Mortgage loan servicer as FHA trustee in trust for various mortgages (replacement reserves); and
2. Mortgage loan servicer as FHA trustee in trust for various mortgages (residual receipts).
Each account will from time to time hold as much or more than $10 million dollars, however the total amount for each individual mortgagor would not exceed current FDIC insurance limits. The bank will only be responsible for maintaining the two master accounts and reporting each accounts earnings under the mortgage loan servicer's tax identification number. For a monthly service fee, the mortgage loan servicer will aggregate withdrawals and deposits necessary for individual mortgagors and maintain each individual mortgagors balances.
FHA trustees are primarily servicers of the mortgage portfolio, who send funds to the bank, directly or indirectly, in connection with mortgage contracts and agreements with the United States government. They should not be receiving side payments from the depository bank. They are established for a mortgage servicing purpose. Deposit volume is entirely dependent upon mortgage payments under third party contracts.
We anticipate that FHA trustees servicing FHA related mortgage portfolios will not be "deposit brokers," as that term is defined in the FDI Act. Since only deposit brokers have to register with the FDIC, we anticipate that FHA trustees generally will not have to register with the FDIC.
If you have any further questions or would like further explanation of our letter, please write or call us at (202) 898-3723.