SUMMARY: The FDIC is adopting an interim rule to amend its deposit
insurance regulations to reflect Congress's recent action to
temporarily increase the standard deposit insurance amount from
$100,000 to $250,000 and to simplify the deposit insurance rules for
funds maintained in mortgage servicing accounts.
The FDIC's main goals in revising its insurance rule on mortgage
servicing accounts are to simplify a rule that has become increasingly
complex in application due to developments in securitizations and to
provide additional certainty with respect to the deposit insurance
coverage of these accounts at a time of turmoil in the housing and
financial markets. The FDIC believes this regulatory change will help
improve public confidence in the banking system.
DATES: The effective date of the interim rule is October 10, 2008.
Written comments must be received by the FDIC not later than December
ADDRESSES: You may submit comments by any of the following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/federal.
Follow instructions for submitting comments on the Agency Web
E-mail: Comments@FDIC.gov. Include ``Mortgage Servicing
Accounts'' in the subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m. (EST).
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal including any
personal information provided. Paper copies of public comments may be
ordered from the Public Information Center by telephone at (877) 275-
3342 or (703) 562-2200.
FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Counsel, Legal
Division (202) 898-7349 or Christopher Hencke, Counsel, Legal Division
(202) 898-8839, Federal Deposit Insurance Corporation, Washington, DC
A. Temporary Increase in Insurance Coverage
The Emergency Economic Stabilization Act of 2008 temporarily
increased the standard maximum deposit insurance amount (``SMDIA'')
from $100,000 to $250,000, effective October 3, 2008, and ending
December 31, 2009.\1\ After that date, the SMDIA will, by law, return
to $100,000. In the interim rule the FDIC is amending its deposit
insurance regulations to reflect the temporary increase in the SMDIA.
\1\ Public Law 110-343 (October 3, 2008).
B. Mortgage Servicing Accounts
The FDIC was established to maintain public confidence and
stability in the United States banking system and protect insured
depositors. The regulations governing deposit insurance coverage are
codified at 12 CFR part 330, and they include specific rules on
deposits of payments collected by mortgage servicers and placed into
accounts at insured depository institutions. 12 CFR 330.7(d)
(``mortgage servicing accounts''). Accounts maintained by a mortgage
servicer, in a custodial or other fiduciary capacity, may include funds
paid by mortgagors for principal, interest and escrowed amounts for
taxes and insurance premiums. Principal and interest funds are insured
for the interest of each owner (mortgagee, investor or security holder)
in those accounts. Under section 330.7(d) funds maintained by a
servicer, in a custodial or other fiduciary capacity, which represent
payments by mortgagors of taxes and insurance premiums are added
together and insured for the ownership interest of each mortgagor in
The FDIC's rules for mortgage servicing accounts were adopted in
1990, after the Financial Services Reform, Recovery, and Enforcement
Act of 1989, abolished the Federal Savings and Loan Insurance
Corporation (``FSLIC'') and transferred the insurance of savings
association deposits to the FDIC. Prior to that time, the FDIC did not
have specific rules for mortgage servicing accounts, and the FSLIC's
rules provided insurance coverage for principal and interest funds
based on the interest of each mortgagor.\2\
As described above, under section 330.7(d), funds representing
payments of principal and interest are insurable on a pass-through
basis to each mortgagee, investor or security holder. In contrast,
funds representing payments of taxes and insurance are insurable on a
pass-through basis to each mortgagor or borrower. When the FDIC adopted
these rules in 1990, it focused largely on the fact that principal and
interest funds are owned by the investors, on whose behalf the
servicer, as agent, accepts the principal and interest payments, and
are not owned by the borrowers. By contrast, under the current rule,
taxes and insurance funds are insured to the mortgagors or borrowers on
the theory that the borrower still owns the funds until the tax and
insurance bills are actually paid by the servicer.
Over the past several years, securitization methods and vehicles
for mortgages have become more layered and complex. The FDIC believes
that it has become much more difficult and time-consuming for a
servicer to identify and determine the share of any investor in a
securitization and in the principal and interest funds on deposit at an
insured depository institution.
Under the current regulation, in the event of the failure of an
FDIC-insured depository institution, the FDIC is concerned that there
could be unexpected loss to securitization investors of principal and
interest payments deposited at the institution by
a securitization servicer. As noted above, these accounts may involve
multi-layered securitization structures, and it may prove difficult for
the servicer holding a deposit account in the institution to identify
every security holder in the securitization and determine his or her
share. In addition, some investor holdings may far exceed the current
$250,000 per-depositor insurance limit.\3\ Application of the current
rule under these circumstances could result in delays in the servicer
receiving the insured amounts and in losses for amounts that, because
of the complexity of the securitization agreements, cannot be
attributed to the particular investors to whom the funds belong. This
outcome could increase losses to otherwise insured depositors, lead to
withdrawal of deposits for principal and interest payments from
depository institutions, and unnecessarily reduce liquidity for such
\3\ As noted above, the Emergency Economic Stabilization Act of
2008 temporarily increased the standard maximum deposit insurance
amount from $100,000 to $250,000, effective October 3, 2008, and
ending on December 31, 2009. After that date, the insurance coverage
limit will, by law, return to $100,000.
II. The Interim Rule (for Mortgage Servicing Accounts)
The FDIC's goals in this rulemaking are twofold. First, the FDIC
seeks to make the coverage rules for mortgage servicing accounts easy
to understand and easy to apply (in determining the applicable coverage
amount). Second, the FDIC recognizes that, at any one time, billions of
dollars in principal and interest funds may be on deposit at insured
depository institutions, providing a significant source of liquidity
for the institution and credit to the institution's community. The FDIC
seeks to avoid any uncertainty as to the extent of deposit insurance
coverage that could have inadvertent adverse consequences.
Because it may be difficult for a servicer to identify all
investors and their individual interests in a securitization following
the failure of an insured depository institution, the coverage under
the interim rule will be determined on a per-mortgagor (or borrower)
basis. Moreover, servicers will be able to identify mortgagors more
quickly than investors, thus per-mortgagor coverage will enable the
FDIC to pay deposit insurance more quickly.
Under the interim rule, the coverage afforded in connection with a
mortgage servicing account will be based on each mortgagor's payments
of principal and interest into the mortgage servicing account, up to
standard maximum deposit insurance amount (currently, through December
31, 2009, $250,000) per mortgagor. In effect, coverage will be provided
to the mortgagees/investors, as a collective group, based on the
cumulative amount of the mortgagors' payments of principal and interest
into the account. This insurance coverage afforded in connection with
principal and interest payments in mortgage servicing accounts will not
be aggregated with or otherwise affect the coverage provided to
mortgagors in connection with other accounts the mortgagors might
maintain at the same insured depository institution. As under the
current insurance rules, under the interim rule amounts in a mortgage
servicing account constituting payments of taxes and insurance premiums
will be insured on a pass-through basis as the funds of each respective
mortgagor. Such funds will be added to other individually owned funds
held by each such mortgagor at the same insured institution and insured
to the applicable limit.
Effective Date of the Interim Rule
The interim rule applies to all existing and future mortgage
servicing accounts as of October 10, 2008, the date on which the FDIC
Board of Directors approved the interim rule. October 10, 2008 also is
the date the interim rule was filed for public inspection with the
Office of the Federal Register. In this regard, the FDIC invokes the
good cause exception to the requirements in the Administrative
Procedure Act \4\ (``APA'') that, before a rulemaking can be finalized,
it must first be issued for public comment and, once finalized, must
have a delayed effective date of thirty days from the publication date.
The FDIC believes good cause exists for making the interim rule
effectively immediately. Under the current rules, the complexity of
determining the actual interest of each investor in a securitization
could delay significantly the payment of insurance coverage and,
potentially, could result in a determination of uninsured funds because
investors and their interests cannot be identified. The interim rule
simplifies the coverage rules for mortgage servicing accounts to
address those issues, while recognizing the continued relationship of
the principal and interest payments and taxes and insurance payments to
the mortgagor. As a result, the interim rule will provide greater
certainty to depositors, servicers, mortgagees, investors, and other
security holders, depository institutions, and other parties involved
in the securitization of mortgages about the extent to which those
accounts are insured.
For these reasons, the FDIC has determined that the public notice
and participation that ordinarily are required by the APA before a
regulation may take effect would, in this case, be contrary to the
public interest and that good cause exists for waiving the customary
30-day delayed effective date. Nevertheless, the FDIC desires to have
the benefit of public comment before adopting a permanent final rule
and thus invites interested parties to submit comments during a 60-day
comment period. In adopting the final regulation, the FDIC will revise
the interim rule, if appropriate, in light of the comments received on
the interim rule.
III. Request for Comments
The FDIC requests comments on all aspects of this interim rule.
IV. Paperwork Reduction Act
The interim rule will revise the FDIC's deposit insurance
regulations. It will not involve any new collections of information
pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Consequently, no information collection has been submitted to the
Office of Management and Budget for review.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act requires an agency that is issuing a
final rule to prepare and make available a regulatory flexibility
analysis that describes the impact of the final rule on small entities.
5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency
is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
FDIC certifies that the interim rule will not have a significant impact
on a substantial number of small entities. The interim rule implements
the temporary increase in the SMDIA and simplifies the coverage rules
for mortgage servicing accounts.
VI. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the interim rule will not affect
family well-being within the meaning of section 654
of the Treasury and General Government Appropriations Act, enacted as
part of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681).
The interim rule should have a positive effect on families by
clarifying the coverage rules for mortgage servicing accounts, which
contain, for some period of time, the mortgage payments from borrowers.
VII. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the interim
rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement Act of l996
(``SBREFA'') (5 U.S.C. 801 et seq.). As required by SBREFA, the FDIC
will file the appropriate reports with Congress and the General
Accounting Office so that the interim rule may be reviewed.
List of Subjects in 12 CFR Part 330
Bank deposit insurance, Banks, banking, Reporting and recordkeeping
requirements, Savings and loan associations, Trusts and trustees.
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation amends part 330 of chapter III of title
12 of the Code of Federal Regulations as follows:
PART 330--DEPOSIT INSURANCE COVERAGE
1. The authority citation for part 330 continues to read as follows:
2. In Sec. 330.1, paragraph (n) is revised to read as follows:
Sec. 330.1 Definitions.
* * * * *
(n) Standard maximum deposit insurance amount, referred to as the
``SMDIA'' hereafter, means $250,000 from October 3, 2008, until
December 31, 2009. Effective January 1, 2010, the SMDIA means $100,000
adjusted pursuant to subparagraph (F) of section 11(a)(1) of the FDI
Act (12 U.S.C. 1821(a)(1)(F)). All examples in this part use $100,000
as the SMDIA.
* * * * *
3. In Sec. 330.7, paragraph (d) is revised to read as follows:
Sec. 330.7 Account held by an agent, nominee, guardian, custodian or
* * * * *
(d) Mortgage servicing accounts. Accounts maintained by a mortgage
servicer, in a custodial or other fiduciary capacity, which are
comprised of payments by mortgagors of principal and interest, shall be
insured for the cumulative balance paid into the account by the
mortgagors, up to a limit of the SMDIA per mortgagor. Accounts
maintained by a mortgage servicer, in a custodial or other fiduciary
capacity, which are comprised of payments by mortgagors of taxes and
insurance premiums shall be added together and insured in accordance
with paragraph (a) of this section for the ownership interest of each
mortgagor in such accounts. This provision is effective as of October
10, 2008, for all existing and future mortgage servicing account.
* * * * *
By order of the Board of Directors.
Dated at Washington DC., this 10th day of October 2008.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E8-24626 Filed 10-16-08; 8:45 am]
BILLING CODE 6714-01-P