Regulatory Capital Standards Interim Final Rule for Mortgages Modified Under the Making Home Affordable Program

On March 4, 2009, the U.S. Department of the Treasury announced guidelines under the Making Home Affordable Program (MHAP) to promote sustainable loan modifications for homeowners at risk of losing their homes due to foreclosure. The interim final rule clarifies that a banking organization may retain the risk weight assigned to a mortgage loan before the loan was modified under the MHAP following modification of the mortgage loan.

The federal banking and thrift agencies are issuing the attached interim final rule, which will take effect when published in the Federal Register . Public comments must be submitted within 30 days after publication of the interim final rule in the Federal Register .

Highlights: 

• Mortgage loans risk weighted at 50 percent before modification would continue to be risk weighted at 50 percent after modification provided they continue to meet other applicable prudential criteria. Mortgage loans risk weighted at 100 percent would continue to be risk weighted at 100 percent after modification.
• Under the FDIC's general risk-based capital rules, a state nonmember bank may assign a 50 percent risk weight to any modified mortgage loan, provided the loan, as modified, is not 90 days or more past due or in nonaccrual status and meets other applicable criteria for a 50 percent risk weight. Thus, the revisions provided under this interim final rule relative to the FDIC's risk-based capital rules are clarifying in nature.
• Consistent with current practice, the agencies will continue to allow past due and nonaccrual loans that receive a 100 percent risk weight to return to a 50 percent risk weight under certain circumstances, including after demonstration of a sustained period of repayment performance.

Distribution: 
FDIC-Supervised Banks (Commercial and Savings) 

Suggested Routing: 
Chief Executive Officer 
Chief Financial Officer 
Chief Accounting Officer 

Note: 
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/financial-institution-letters/2009/index.html . 

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html . 

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).