[Federal Register: July 7, 1997 (Volume 62, Number 129)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 338
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The FDIC is amending its fair housing regulation to clarify
certain nondiscriminatory advertising requirements with regard to the
type of slogan and logotype insured state nonmember banks may use in
written, oral and visual advertisements, the type of fair housing
posters they may display, and the location for displaying the poster.
The final rule also eliminates the FDIC's separate fair housing
recordkeeping requirements that serve as a substitute monitoring
program permitted by the Federal Reserve Board's Regulation B, which
implements the Equal Credit Opportunity Act. Furthermore, the final
rule reduces the burden associated with maintaining, updating, and
reporting a register of home loan applications by requiring insured
state nonmember banks to comply only with the Federal Reserve Board's
Regulation C, which implements the Home Mortgage Disclosure Act. The
final rule simply cross-references Regulations B and C.
This action is being taken in accordance with section 303(a) of the
Riegle Community Development and Regulatory Improvement Act of 1994
which requires the federal bank and thrift regulatory agencies to
review and streamline their regulations and policies in order to
improve efficiency, reduce unnecessary costs, eliminate unwarranted
constraints on credit availability, and remove inconsistencies and
outmoded and duplicative requirements.
The final rule seeks to reduce burden on insured state nonmember
banks and to more closely align the FDIC's fair housing regulation with
those of other federal bank and thrift regulatory agencies.
EFFECTIVE DATE: August 6, 1997.
FOR FURTHER INFORMATION CONTACT: Steve Fritts, Associate Director,
Division of Compliance and Consumer Affairs, (202) 942-3454; Michael R.
Evans, Fair Lending Specialist, Supervision and Regulation Section,
Division of Compliance and Consumer Affairs, (202) 942-3091; or Lori J.
Sommerfeld, Attorney, Regulation and Legislation Section, Legal
Division, (202) 898-8515; Federal Deposit Insurance Corporation, 550
17th Street, NW., Washington, DC 20429.
I. Proposed Rule
In accordance with section 303(a) of the Riegle Community
Development and Regulatory Improvement Act (CDRIA) of 1994 (12 U.S.C.
4803(a)), the FDIC conducted a systematic review of its regulations and
written policies and determined that it was appropriate to revise part
338, Fair Housing (12 CFR part 338). A notice of proposed rulemaking on
this issue was published on September 20, 1996 (61 FR 49420).
A. Subpart A (Advertising)
The proposed rule revised subpart A of part 338 by clarifying
certain nondiscriminatory advertising requirements. Currently,
Sec. 338.4 requires all insured state nonmember banks engaged in
extending loans for the purpose of purchasing, constructing, improving,
repairing, or maintaining a dwelling or any loan secured by a dwelling
to display an Equal Housing Lender poster where deposits are received
or home loans are made in a manner clearly visible to the general
public entering the bank. Also, current Sec. 338.3 requires all insured
state nonmember banks to include in all written and visual
advertisements a copy of the Equal Housing Lender logotype and legend
contained in the poster and, with respect to oral advertisements, a
statement that the bank is an ``Equal Housing Lender.'' These
advertising requirements are intended to help an insured state
nonmember bank communicate to its customers (or potential customers)
seeking home loans that the bank is committed to fair lending.
The proposed rule revised Sec. 338.3 to give insured state
nonmember banks the option of using either the FDIC's Equal Housing
Lender logotype and legend, or the Equal Housing Opportunity logotype
and legend contained in the Equal Housing Opportunity poster as
prescribed by regulations of the Department of Housing and Urban
Development (HUD) (specifically, 24 CFR 110.25(a)), in written and
visual advertisements. With respect to oral advertisements, insured
state nonmember banks were also offered the option of using the slogan
``Equal Opportunity Lender'' in lieu of the current slogan ``Equal
Housing Lender.'' The optional use of either poster, logotype or slogan
is designed to provide flexibility for institutions that offer a
broader variety of loan products than mortgage loans (e.g., auto,
consumer, and credit card extensions of credit).
In addition, the proposed rule clarified placement of the poster in
Sec. 338.4. Regardless of which poster an institution chooses to
display, the poster must be displayed in a single central location
clearly visible to the general public entering the area, either where
deposits are received or where home loans are made. This change was
designed to create consistency and eliminate confusion among insured
state nonmember banks about the need for multiple posters.
The proposed rule also eliminated a reference to HUD's advertising
regulations. As a result of HUD's regulatory review, part 109 (Fair
Housing Advertising) was removed from its regulations (24 CFR part 109)
and will be relegated to other non-codified guidance. See 61 FR 14378
(April 1, 1996). Accordingly, Sec. 338.1 was revised to eliminate the
reference to Part 109. New information was also added to Sec. 338.3
advising all insured state nonmember banks to refer to HUD for further
guidance concerning fair housing advertising beyond that set forth in
No changes were proposed to the definitions governing subpart A
B. Subpart B (Recordkeeping Requirements)
Section 338.6 of the proposed rule eliminated the definitions of
application, dwelling, home improvement loan, and home purchase loan.
Because these definitions have created some confusion within the
industry, the FDIC believed that eliminating them from part 338 would
create consistency by automatically subjecting insured state nonmember
banks to the relevant definitions in the Federal Reserve Board's
Regulations B and C (12 CFR parts 202 and 203). Regulation B implements
the Equal Credit Opportunity Act (ECOA, 15 U.S.C. 1691-1691f), and
Regulation C implements the Home Mortgage Disclosure Act (HMDA, 12
U.S.C. 2801-2810). Proposed Sec. 338.6 also reinstated a definition for
controlled entity, which is a ``corporation, partnership, association,
or other business entity with respect to which a bank possesses
directly or indirectly, the power to direct or cause the direction of
management and policies, whether through the ownership of voting
securities, by contract, or otherwise.'' This term is used in
Sec. 338.9 (which governs mortgage lending of a controlled entity), and
was inadvertently omitted from part 338 when it was last amended in
Section 338.7 currently requires insured state nonmember banks to
request and maintain certain information regarding the race and other
personal characteristics of applicants for a home purchase loan. The
purpose of collecting and retaining this information is to monitor the
institution's compliance with ECOA, and Sec. 338.7 serves as a
substitute monitoring system permitted by Regulation B. However,
Sec. 338.7 requires the collection of more extensive data. For example,
under current Sec. 338.7(a)(1), institutions that have no office
located in a primary metropolitan statistical area (PMSA) or a
metropolitan statistical area (MSA), or which have total assets of $10
million or less, are also required to request and retain information on
the location of the property to be purchased. Further, current
Sec. 338.7(a)(2) requires insured state nonmember banks that have an
office located in a PMSA or MSA and that have total assets exceeding
$10 million to request and retain essentially all of the information
listed on the model Residential Loan Application Form contained in
appendix B of Regulation B (12 CFR part 202, appendix B). Under
Regulation B, the only information that must be requested is the race
or national origin, sex, marital status, and age of home loan
Current Sec. 338.8 also notifies institutions of their duty to
maintain, update, and report a register of home loan applications
consistent with Regulation C. Information required to be collected
includes the type of loan requested, the purpose of the loan, whether
the loan was approved or denied (including an option for collecting
denial reasons for disapproved loans), and the type of purchaser (if
the loan was sold). Further, Sec. 338.8 requires all institutions
subject to Regulation C to report data on the sex, race or national
origin and income of applicants. Until recently, such data were
optional under Regulation C for institutions with assets between $10
and $30 million.
When the FDIC's proposed rule was issued, Regulation C required the
collection of data only for institutions with assets of $30 million or
more. However, current Sec. 338.8 extends the requirements to all
insured state nonmember institutions with assets exceeding $10 million
that have offices located in a PMSA or an MSA. Regulation C specifies a
quarterly schedule for entering the required data on the HMDA register,
whereas Sec. 338.8 currently requires more rigorous updating (within 30
days after final disposition of the loan application).
The proposed rule eliminated the FDIC's separate fair housing
recordkeeping requirements contained in Sec. 338.7 that serve as a
substitute monitoring program permitted by Regulation B. The proposed
rule also removed the requirements in Sec. 338.8 that insured state
nonmember banks maintain, update and report a register of home loan
applications that are duplicative and more rigorous than the
requirements of Regulation C. Instead, the proposed rule simply cross-
referenced Regulations B and C and required insured state nonmember
banks to comply only with those regulations. However, the FDIC proposed
to revise Sec. 338.8 to require those institutions subject to
Regulation C to collect and report the reasons for denial of each loan
application. The reporting of loan denial reasons is currently optional
under Regulation C.
The proposed rule also revised Sec. 338.5, which describes the
purpose of subpart B, to reflect the changes to Secs. 338.6, 338.7, and
II. Final Rule
The FDIC received 15 comment letters reflecting the views of one
law firm that represents insured state nonmember banks, one community-
based organization, three trade associations, four bank holding
companies, and six insured state nonmember banks.
A. Subpart A (Advertising)
The vast majority of the commenters favored the changes with
respect to the advertising requirements which would permit insured
state nonmember banks to use either the FDIC's Equal Housing Lender
poster, logotype or slogan, or HUD's Equal Housing Opportunity poster,
logotype or slogan. Commenters also generally approved of clarifying
placement of the poster in a single central location within a bank
readily visible to customers. One commenter suggested that the FDIC
provide a definition of ``advertisement'' in subpart A which would
include certain electronic advertisements. However, the FDIC believes
it would be more appropriate to address this issue in connection with
release of the agency's examination guidelines for electronic banking
activities. Another commenter suggested that the definitions for
dwelling, handicap and familial status, which are identical to the
definitions for the same terms contained in the Fair Housing Act (42
U.S.C. 3602), be replaced with cross-references. The FDIC originally
inserted those definitions in subpart A for ease of reference so that
bankers and their attorneys would not have to consult the Fair Housing
Act, and the agency believes that logic still applies.
The FDIC is eliminating from the final rule a proposed section,
Sec. 338.3(c), which would have advised all insured state nonmember
banks to consult the U.S. Department of Housing and Urban Development
(HUD) for further guidance concerning fair housing advertising beyond
that set forth in Sec. 338.3. No comments were received on this aspect
of this proposal. However, upon further reflection the FDIC believes
that this provision is unnecessary because questions concerning the
size of the logotype and legend in print advertising occur rather
infrequently and can be handled through informal referrals to HUD.
Accordingly, Sec. 338.3(c) is being removed from the final rule. Other
than this modification, the FDIC is retaining the advertising portion
of part 338 (subpart A) as proposed.
B. Subpart B (Recordkeeping Requirements)
Two commenters suggested definitional changes to subpart B. One
commenter suggested that Sec. 338.7 be modified to require insured
nonmember banks to collect the ``government'' monitoring information
required by Regulation C. However, Sec. 338.7 contains a cross-
reference to Regulation B, not Regulation C. Moreover, Regulation B
uses the term ``monitoring information''. Although the FNMA/FHLMC
residential mortgage loan application form contains a section on
``government monitoring'' information, the FDIC believes that it is
more appropriate to parallel the language of Regulation B rather than
an application that may be subject to change. Therefore, this change is
not being implemented. Another commenter suggested adding a definition
of ``home loan'', which is used in Sec. 338.9 (mortgage lending of a
controlled entity), to Sec. 338.6 or clarifying the term in Sec. 338.9.
The FDIC agrees that this term is ambiguous. It is intended to cover
home purchase loans and home improvement loans as defined in
Secs. 203.2 (f) and (g) of Regulation C (12 CFR 203.2 (f), (g)).
Accordingly, the FDIC is modifying Sec. 338.9 by replacing the term
``home loan'' with the phrase ``home purchase loans or home improvement
loans as defined in Regulation C''.
A majority of the comments favored eliminating the additional data
collection and retention requirements imposed by subpart B of part 338
that go beyond the requirements of Regulations B and C. However, one
commenter indicated that the FDIC should increase the current data
collection and retention requirements of Sec. 338.7. The commenter
indicated that the elimination of such data would make it very
difficult for neighborhood organizations to work with lenders in
identifying and assisting in the removal of real and perceived barriers
to credit. However, the FDIC remains convinced that the collection of
the additional data imposed by Sec. 338.7 beyond Regulation B is
unnecessary because collection of this or similar data is standard
industry practice. Even without the additional data collection and
retention requirements, the settlement agreements negotiated between
the Department of Justice and several lenders alleged to have engaged
in discriminatory lending practices indicate that sufficient data are
still available to identify lenders who may be impeding access to
The FDIC also considered completely removing Secs. 338.7 and 338.8
because, absent a specific requirement by the FDIC in part 338, all
insured state nonmember banks would still be required by Regulation B
to collect information about an applicant's race and other personal
characteristics in applications for certain dwelling-related loans and,
pursuant to Regulation C, to maintain, update and report a register of
home loan applications. Two commenters did not perceive a need for a
regulatory cross-reference to Regulations B and C. However, the FDIC
believes that it is appropriate to provide a cross-reference to
Regulations B and C to put insured state nonmember banks on notice of
their responsibilities under ECOA and HMDA.
Section 338.8 of the proposed rule also required those institutions
that are subject to Regulation C to collect and report the reasons for
denial of each loan application that would be reportable under
Regulation C. The reporting of denial reasons is currently optional
under Regulation C. However, both the OCC and the OTS require those
depository institutions they supervise that are subject to Regulation C
to collect and report loan denial reasons. See 12 CFR 27.3(a)(1)(i) and
12 CFR 528.6, respectively. While comments on this issue were mixed,
the FDIC has decided to eliminate the requirement in the final rule for
the following reasons.
Previously, depository institutions with assets of $10 million or
less were exempt from HMDA. Section 2225 of the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (EGRPRA) (12 U.S.C. 2808)
increased this exemption by adjusting the $10 million figure by the
change since 1975 in the Consumer Price Index (CPI). By an interim rule
amending Regulation C, the Federal Reserve Board increased the asset-
size exemption threshold for HMDA reporters to $28 million in
accordance with the EGRPRA amendment. Thus, depository institutions
with assets of $28 million or less as of December 31, 1996 are exempt
from HMDA data collection and reporting requirements during 1997. This
regulatory change became effective February 1, 1997 (62 FR 3603,
January 24, 1997). However, depository institutions with assets between
$28 million and $30 million as of December 31, 1996 will still have the
option of collecting and reporting HMDA data. See 12 CFR
203.4(b)(2)(ii). The Federal Reserve Board will amend the asset-size
exemption threshold annually based on November CPI data and publish the
new threshold in the Federal Register each December for compliance
beginning January 1 (62 FR 28620, May 27, 1997). The FDIC intends to
notify insured state nonmember banks of these changes via supervisory
guidance in the near future.
Because these statutory and regulatory amendments significantly
reduced the number of insured state nonmember banks that are required
to collect and report HMDA data from 3052 to 1593, it would be less
burdensome to allow collection and reporting of data on denial reasons
to remain an option as currently prescribed by Regulation C.
Furthermore, the 1995 HMDA data shows that approximately 92% of the
insured state nonmember banks with assets of $28 million or more
exercised this option and voluntarily collected and reported 83% of
denial reasons. Moreover, as part of their regulatory review under
section 303(a) of CDRIA, the Federal Reserve Board will be reviewing
Regulation C. Until the Federal Reserve Board determines how, if at
all, it will revise Regulation C, it would be premature for the FDIC to
require collecting and reporting of loan denial reasons. Accordingly,
the FDIC is adopting its proposed recordkeeping requirements for part
338 (subpart B) with the exception of mandatory recording and reporting
of loan denial reasons.
The final rule modifies proposed Sec. 338.5 (purpose of subpart B)
to reflect the elimination of denial reasons from Sec. 338.8 and to
clarify that the FDIC is simply providing a cross-reference to
Regulations B and C in Secs. 338.7 and 338.8, rather than imposing the
agency's own recordkeeping requirements.
III. Regulatory Flexibility Act
The Board of Directors, in accordance with the Regulatory
Flexibility Act (5 U.S.C. 606(b)), has reviewed and approved this final
rule, and in so doing, certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
This final rule reduces burden on insured state nonmember banks by
clarifying or removing unnecessary provisions.
IV. Paperwork Reduction Act
The final rule contains two collections of information that have
Office of Management and Budget (OMB) Paperwork Reduction Act clearance
numbers. The first collection is a recordkeeping requirement imposed by
the Federal Reserve Board's Regulation B and enforced by the FDIC with
regard to insured State nonmember banks. This collection carries OMB
clearance number 3064-0085 which expires on September 30, 1998. This
final rulemaking is consistent with the OMB approved collection and
will be subject to routine public comment and OMB submission and review
in 1998 pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et
The second collection is a recordkeeping and reporting requirement
imposed by the Federal Reserve Board's Regulation C and enforced by the
FDIC with regard to insured State nonmember banks. This collection
carries OMB clearance number 3064-0046 which expires on July 31, 1997.
The FDIC submitted to OMB its request for a three year renewal of this
Paperwork Reduction Act clearance on June 13, 1997. See notice and
request for comments published at 62 FR 33410, June 19, 1997.
V. Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA) (Title II, Pub. L. 104-121) provides generally for agencies to
report rules to Congress and the General Accounting Office (GAO) for
review. The reporting requirement is triggered when a federal agency
issues a final rule. Accordingly, the FDIC will file the appropriate
reports with Congress and the GAO as required by SBREFA.
Because the Office of Management and Budget has determined that
this final revision of part 338 does not constitute a ``major rule'' as
defined by SBREFA, the final rule will take effect 30 days from
publication in the Federal Register.
List of Subjects in 12 CFR Part 338
Advertising, Aged, Banks, Banking, Civil rights, Credit, Fair
housing, Individuals with disabilities, Marital status discrimination,
Religious discrimination, Reporting and recordkeeping requirements, Sex
discrimination, Signs and symbols.
For the reasons set forth in the preamble, 12 CFR part 338 is
amended as set forth below.
PART 338--FAIR HOUSING
1. The authority citation for part 338 is revised to read as
Authority: 12 U.S.C. 1817, 1818, 1819, 1820(b), 2801 et seq.; 15
U.S.C. 1691 et seq.; 42 U.S.C. 3605, 3608; 12 CFR parts 202, 203; 24
CFR part 110.
2. Section 338.1 is revised to read as follows:
Sec. 338.1 Purpose.
The purpose of this subpart A is to prohibit insured state
nonmember banks from engaging in discriminatory advertising with regard
to residential real estate-related transactions. This subpart A also
requires insured state nonmember banks to publicly display either the
Equal Housing Lender poster set forth in Sec. 338.4(b) of the FDIC's
regulations or the Equal Housing Opportunity poster prescribed by part
110 of the regulations of the United States Department of Housing and
Urban Development (24 CFR part 110). This subpart A enforces section
805 of title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601-3619
(Fair Housing Act), as amended by the Fair Housing Amendments Act of
3. Section 338.3 is amended by revising paragraphs (a)(1) and
(a)(2) to read as follows:
Sec. 338.3 Nondiscriminatory advertising.
(a) * * *
(1) With respect to written and visual advertisements, this
requirement may be satisfied by including in the advertisement a copy
of the logotype with the Equal Housing Lender legend contained in the
Equal Housing Lender poster prescribed in Sec. 338.4(b) of the FDIC's
regulations or a copy of the logotype with the Equal Housing
Opportunity legend contained in the Equal Housing Opportunity poster
prescribed in Sec. 110.25(a) of the United States Department of Housing
and Urban Development's regulations (24 CFR 110.25(a)).
(2) With respect to oral advertisements, this requirement may be
satisfied by a statement, in the spoken text of the advertisement, that
the bank is an ``Equal Housing Lender'' or an ``Equal Opportunity
* * * * *
4. Section 338.4 is amended by revising the section heading and
paragraph (a) to read as follows:
Sec. 338.4 Fair housing poster.
(a) Each bank engaged in extending loans for the purpose of
purchasing, constructing, improving, repairing, or maintaining a
dwelling or any loan secured by a dwelling shall conspicuously display
either the Equal Housing Lender poster set forth in paragraph (b) of
this section or the Equal Housing Opportunity poster prescribed by
Sec. 110.25(a) of the United States Department of Housing and Urban
Development's regulations (24 CFR 110.25(a)), in a central location
within the bank where deposits are received or where such loans are
made in a manner clearly visible to the general public entering the
area, where the poster is displayed.
* * * * *
5. Subpart B is amended by revising the subpart heading to read as
6. Section 338.5 is revised to read as follows:
Sec. 338.5 Purpose.
The purpose of this subpart B is two-fold. First, this subpart B
notifies all insured state nonmember banks of their duty to collect and
retain certain information about a home loan applicant's personal
characteristics in accordance with Regulation B of the Board of
Governors of the Federal Reserve System (12 CFR part 202) in order to
monitor an institution's compliance with the Equal Credit Opportunity
Act of 1974 (15 U.S.C. 1691 et seq.). Second, this subpart B notifies
certain insured state nonmember banks of their duty to maintain, update
and report a register of home loan applications in accordance with
Regulation C of the Board of Governors of the Federal Reserve System
(12 CFR part 203), which implements the Home Mortgage Disclosure Act
(12 U.S.C. 2801 et seq.).
7. Section 338.6 is revised to read as follows:
Sec. 338.6 Definitions applicable to this subpart B.
For purposes of this subpart B--
(a) Bank means an insured state nonmember bank as defined in
section 3 of the Federal Deposit Insurance Act.
(b) Controlled entity means a corporation, partnership,
association, or other business entity with respect to which a bank
possesses, directly or indirectly, the power to direct or cause the
direction of management and policies, whether through the ownership of
voting securities, by contract, or otherwise.
8. Section 338.7 is revised to read as follows:
Sec. 338.7 Recordkeeping requirements.
All banks that receive an application for credit primarily for the
purchase or refinancing of a dwelling occupied or to be occupied by the
applicant as a principal residence where the extension of credit will
be secured by the dwelling shall request and retain the monitoring
information required by Regulation B of the Board of Governors of the
Federal Reserve System (12 CFR part 202).
9. Section 338.8 is revised to read as follows:
Sec. 338.8 Compilation of loan data in register format.
Banks and other lenders required to file a Home Mortgage Disclosure
Act loan application register (LAR) with the Federal Deposit Insurance
Corporation shall maintain, update and report such LAR in accordance
with Regulation C of the Board of Governors of the Federal Reserve
System (12 CFR part 203).
10. Section 338.9 is amended by revising the introductory text to
read as follows:
Sec. 338.9 Mortgage lending of a controlled entity.
Any bank which refers any applicants to a controlled entity and
which purchases any home purchase loans or home improvement loans as
defined in Regulation C of the Board of Governors of the Federal
Reserve Board (12 CFR part 203) originated by the controlled entity, as
a condition to transacting any business with the controlled entity,
shall require the controlled entity to enter into a written agreement
with the bank. The written agreement shall provide that the entity
* * * * *
Appendix A to Subpart B of Part 338 [Removed]
11. Appendix A to subpart B of part 338 is removed.
Appendix B to Subpart B of Part 338 [Removed]
12. Appendix B to subpart B of part 338 is removed.
By order of the Board of Directors.
Dated at Washington, D.C. this 24th day of June, 1997.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
[FR Doc. 97-17426 Filed 7-3-97; 8:45 am]
BILLING CODE 6714-01-P