[Federal Register Volume 72, Number 163 (Thursday, August 23, 2007)]
[Rules and Regulations]
[Pages 48221-48225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-16711]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 72, No. 163 / Thursday, August 23, 2007 /
Rules and Regulations
[[Page 48221]]
DEPARTMENT OF THE TREASURY
5 CFR Part 3101
RINs 1550-AC03, 3209-AA15
Supplemental Standards of Ethical Conduct for Employees of the
Department of the Treasury
AGENCY: Department of the Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury (Department), with the
concurrence of the Office of Government Ethics (OGE), is amending the
Supplemental Standards of Ethical Conduct for Employees of the
Department of the Treasury (Treasury Supplemental Ethics Regulations).
The final rule revises the circumstances under which covered Office of
Thrift Supervision (OTS) employees may obtain credit cards and loans
secured by a principal residence from OTS-regulated savings
associations or their subsidiaries. This amendment also modifies rules
on disqualifications.
DATES: Effective Date: August 23, 2007.
FOR FURTHER INFORMATION CONTACT: Ira S. Kaye, Senior Ethics Counsel,
Office of the Assistant General Counsel (General Law and Ethics),
Department of the Treasury, Room 2023, Washington, DC 20220, (202) 622-
1963, or Elizabeth Moore, Ethics Counsel, OTS Litigation Division, 1700
G Street, NW., Washington, DC 20552, (202) 906-7039.
SUPPLEMENTARY INFORMATION:
I. Background
The Office of Government Ethics (OGE) has issued rules setting out
the Standards of Ethical Conduct for Employees of the Executive Branch
at 5 CFR part 2635 (Standards). The Treasury Supplemental Ethics
Regulations at 5 CFR part 3101 supplement these Standards, and were
issued to minimize potential conflicts of interest by Department of
Treasury employees. The Treasury Supplemental Ethics Regulations set
out additional rules for Office of Thrift Supervision (OTS) employees
at 5 CFR 3101.109. These rules were designed to prevent employees of
OTS from taking actions that violate (or appear to violate) conflict of
interest laws or certain criminal statutes, or that create (or may
create) an appearance of a loss of impartiality.
The Treasury Supplemental Ethics Regulations generally prohibit
covered OTS employees from seeking or obtaining loans or other
extensions of credit from any OTS-regulated savings association or from
an officer, director, employee or subsidiary of such a savings
association. 5 CFR 3101.109(c)(1).\1\ This prohibition extends to the
spouses and minor children of covered OTS employees, unless the loan or
extension of credit meets specified standards.\2\
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\1\ Covered OTS employees include OTS examiners, employees in
positions at OTS grade 17 and above, and other designated OTS
employees. 5 CFR 3101.109(a).
\2\ A spouse or a minor child may obtain a loan or extension of
credit if: (1) The loan is supported only by the income or
independent means of the spouse or child; (2) the loan is obtained
on terms and conditions no more favorable than those offered to the
general public; and (3) the covered OTS employee does not
participate in the negotiation of the loan, or serve as co-maker,
endorser, or guarantor. 5 CFR 3101.109(c)(2). This final rule makes
a clarifying change to the second of these conditions to conform it
to the statutory conditions in 18 U.S.C. 212(c)(4)(A) and (B), as
amended.
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The current Treasury Supplemental Ethics Regulations prescribe an
exception to this general prohibition for credit card accounts. Except
for examiners, a covered OTS employee (or a spouse or minor child of a
covered OTS employee), may obtain and hold a credit card from an OTS-
regulated savings association (or its subsidiary) if the credit card is
issued on terms and conditions no more favorable than those offered to
the general public. 5 CFR 3101.109(c)(3)(i) (2006). An examiner (or a
spouse or minor child of an examiner) may obtain and hold a credit card
from an OTS-regulated savings association (or its subsidiary) only if:
(1) The savings association is not headquartered in the examiner's
region; (2) the examiner is not assigned to examine the savings
association; (3) the terms and conditions are no more favorable than
those offered to the general public; and (4) the examiner submits a
written disqualification from examining that savings association. 5 CFR
3101.109(c)(3)(ii) (2006).
The more rigorous credit card rule for examiners was designed to
prevent violations of 18 U.S.C. 213, a criminal statute, which
prohibits an examiner from accepting a loan or gratuity from a
financial institution that he or she examines. Until December 2003, 18
U.S.C. 213 (2000) provided:
Whoever, being an examiner or assistant examiner of * * *
financial institutions the deposits of which are insured by the
Federal Deposit Insurance Corporation * * * accepts a loan or
gratuity from any bank, branch, agency, corporation, association or
organization examined by him or from any person connected
[t]herewith, shall be fined under this title or imprisoned not more
than one year, or both; and may be fined a further sum equal to the
money so loaned or gratuity given, and shall be disqualified from
holding office as such examiner.
A related criminal statute, 18 U.S.C. 212, prohibits officers,
directors, or employees of financial institutions from making or
granting such loans or gratuities.
On December 19, 2003, the President signed the Preserving
Independence of Financial Institution Examinations Act of 2003, Public
Law 108-198, which amended 18 U.S.C. 212 and 213. The new law preserves
the general prohibition against an examiner accepting a loan or
gratuity from a financial institution under examination, but creates
two exceptions to the criminal bar. Under the new law, it is no longer
a crime for an examiner to hold an open-end consumer credit card
account or obtain a loan secured by residential real property that is
used as the principal residence of the examiner if:
(A) The applicant satisfies any financial requirements for the
credit card account or residential real property loan that are
generally applicable to all applicants for the same type of credit
card account or residential real property loan;
(B) the terms and conditions applicable with respect to such
account or residential real property loan, and any credit extended
to the examiner under such account or residential real property
loan, are no more favorable generally to the examiner than the terms
and conditions that are generally applicable to credit card accounts
or residential real property loans offered by the same financial
institution to other borrowers [or] cardholders in comparable
circumstances
[[Page 48222]]
under open end consumer credit plans or for residential real
property loans; and
(C) with respect to residential real property loans, the loan is
with respect to the primary residence of the applicant.\3\
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\3\ 18 U.S.C. 212(c)(4), as amended.
Other types of loans, such as overdraft protection not secured by a
principal residence, vacation home loans, car loans, and personal loans
still are subject to the prohibitions in 18 U.S.C. 212 and 213. It
remains a crime for an examiner to examine an institution that has
extended those types of credit to him or her.
The Department has reexamined the restrictions on credit cards and
loans on principal residences for covered OTS employees, and their
spouses and minor children, in light of these recent statutory changes
and is making several revisions to the Treasury Supplemental Ethics
Regulation pursuant to its rulemaking authority under 18 U.S.C. 212(b)
and 5 CFR Part 2635. In making these revisions, the Department has
consulted with the other financial institution regulatory agencies. To
the extent that the revised provisions apply to covered OTS employees,
their spouses and minor children, the Department has determined, with
OGE concurrence, that the regulations are needed so that a reasonable
person would not question the impartiality and objectivity with which
agency programs are administered. See 5 CFR 2635.403(a). Further, with
respect to the revised restrictions and prohibitions on the holding of
financial interests (indebtedness, that is certain loans and extensions
of credit) by covered OTS employees' spouses and minor children, the
Department has determined that there is a direct and appropriate nexus
between such restrictions and prohibitions as applied to the spouses
and minor children, and the efficiency of covered employees' service.
II. Rule Changes
A. Credit Card Loans
The Department has reviewed the extent to which credit cards
present conflicts of interest for OTS examiners and has concluded that,
in most instances, neither obtaining nor holding a credit card creates
a conflict of interest or presents the likelihood of a loss of
impartiality by an OTS examiner. Individuals usually do not negotiate
the terms and conditions of a credit card account. Rather, relevant
terms and conditions, including credit limits, fees, and rates, are
generally set according to various income and creditworthiness
standards.
Moreover, the present regulatory restriction may have a detrimental
impact on OTS's ability to supervise certain operations. OTS supervises
a small number of thrifts with large credit card portfolios. Due to the
scope of these institutions' credit card operations, OTS has
experienced some difficulty in fielding and maintaining appropriate
examination teams for the institutions. Accordingly, the Department
believes that the examiner restriction should be revised to ensure that
OTS Regional and Washington offices have more flexibility to assign
projects to examiners.\4\
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\4\ On December 23, 2003, upon the enactment of the revised
statute, the OTS Director granted a blanket waiver of the credit
card regulation pursuant to 5 CFR 3101.109(g). Specifically, the OTS
Director waived 5 CFR 3101.109(c) to permit examiners, their
spouses, and minor children to obtain credit cards subject to the
statutory conditions. On March 31, 2006, the Director granted a
blanket waiver to permit all covered employees, their spouses and
minor children, to obtain loans from OTS-regulated thrifts if the
loan is secured by the borrower's principal residence and meets
certain other conditions. Covered employees are required to report
any such loans and credit cards on their annual OTS supplemental
financial disclosure reports and to attest that the card or loan was
obtained and is being held on non-preferential terms.
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The Department is amending the Treasury Supplemental Ethics
Regulations to permit examiners (and their spouses and minor children)
to obtain credit cards from OTS-regulated savings associations (or
their subsidiaries) on the same basis as other covered OTS employees.
Under the final rule, any covered OTS employee (or spouse or minor
child of a covered OTS employee) may obtain and hold a credit card
account established under an open-end consumer credit plan and issued
by an OTS-regulated savings association (or its subsidiary) subject to
certain conditions. These conditions were designed to reflect the new
statutory exemption at 18 U.S.C. 212.
Specifically, the final rule states at new amended paragraph
(c)(3)(i) of Sec. 3101.109 that covered OTS employees, their spouses,
and minor children may obtain and hold a credit card established under
an open-end consumer credit plan and issued by an OTS-regulated savings
association or its subsidiary if: (1) The cardholder satisfies all
financial requirements for the credit card account that are generally
applicable to all applicants for the same type of credit card account;
and (2) the terms and conditions applicable with respect to the account
and any credit extended to the cardholder under the account are no more
favorable generally to that cardholder than the terms and conditions
that are generally applicable to credit card accounts offered by the
same savings association (or the same subsidiary) to other cardholders
in comparable circumstances under open-end consumer credit plans. These
requirements are modeled on the conditions in 18 U.S.C. 212, as
amended, and are substantially identical to the condition applicable to
credit card accounts permitted under the current rules, which provides
that credit cards must be ``issued and held on terms and conditions no
more favorable than those offered [to] the general public.'' See 5 CFR
3101.109(c)(3)(i) and (c)(3)(ii)(C) (2006).
Under the current Treasury Supplemental Ethics Regulations, an
examiner must disqualify himself from examining a savings association
if the examiner (or the spouse or minor child of an examiner) has
obtained a credit card from that savings association or its subsidiary.
5 CFR 3101.109(c)(3)(ii)(D) (2006). Today's final rule no longer
requires such a disqualification every time the OTS examiner, spouse,
or minor child obtains a credit card loan from a particular thrift or
its subsidiary.\5\ Instead, the final rule in new amended paragraph
(c)(3)(i)(C) requires a covered OTS employee to submit a written
disqualification if the employee (or his or her spouse or minor child)
as cardholder becomes involved in an ``adversarial dispute'' with the
issuer of the credit card account. For the purposes of this rule, a
cardholder is involved in an adversarial dispute if he or she is
delinquent in payments on the credit card account; the issuer and the
cardholder are negotiating to restructure the credit card debt; the
issuer garnishes the cardholder's wages; the cardholder disputes the
terms and conditions of the account; or the cardholder becomes involved
in any disagreement with the issuer that casts doubt on the employee's
ability to remain impartial with respect to the savings association or
its subsidiaries. Preliminary inquiries regarding the accuracy of
billing information or billed items are not, but may become, an
adversarial dispute.
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\5\ OTS will, however, continue to require covered OTS employees
to disclose their credit cards on their annual OTS supplemental
financial disclosure reports, and to attest that their credit cards
meet the requirements of this rule.
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Under amended paragraph (c)(3)(i)(C) of the final rule, a written
disqualification must state that the covered OTS employee will not
participate in any examination, the review of any application, or any
other supervisory or regulatory matter directly affecting the savings
association or its subsidiaries. This disqualification will
[[Page 48223]]
not, however, prevent a covered OTS employee from participating in
formulating OTS policy or writing guidance, policy statements or
regulations generally applicable to savings associations or their
subsidiaries.\6\
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\6\ The disqualification requirement may be waived on a case-by-
case basis under the circumstances described at 5 CFR 3101.109(g).
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Currently, the rules disqualify an examiner only with respect to
activities that affect the savings association or the savings
association's subsidiaries. 5 CFR 3101.109(c)(3)(ii) (2006). The
disqualification does not extend to the savings association's holding
company or to the holding company's other subsidiaries. The final rule
takes this same approach. OTS may, of course, require a covered OTS
employee to submit a disqualification that also covers the holding
company and its other subsidiaries. On a case-by-case basis, OTS may
require a disqualification if the relevant facts and circumstances
surrounding the examiner's participation in an examination, the review
of an application, or any other supervisory or regulatory matter
directly affecting the holding company and its other subsidiaries would
cause a reasonable person to question the examiner's impartiality. See
5 CFR 2635.502.
B. Loans Secured by Principal Residence
The Department has also reviewed whether it should retain
restrictions on loans secured by a principal residence. Typically, home
loans, unlike credit card loans, are the subject of negotiation between
borrowers and lenders. While such negotiations increase the opportunity
for a real or perceived conflict of interest, the Department believes
that such conflicts may be minimized by the imposition of appropriate
conditions. The Department does not believe that this rule change will
unduly interfere with OTS's ability to distribute work assignments
among employees, since each covered OTS employee is unlikely to have
more than one or two loans secured by a principal residence.
Accordingly, the Department has revised the rule in new amended
paragraph (c)(3)(ii) of Sec. 3101.109 to permit a covered OTS employee
(or a spouse or minor child of a covered OTS employee) to obtain and
hold loans from a savings association or subsidiary of a savings
association, subject to several conditions. First, pursuant to new
amended paragraph (c)(3)(ii)(A), the loan must be secured primarily by
residential real property that is the borrower's principal residence.
This final rule applies to any loan secured primarily by a principal
residence including a new mortgage loan, a refinanced loan, and a home
equity line of credit. The rule, however, applies only to loans secured
primarily by the borrower's principal residence. It does not apply to
loans secured by vacation homes, investment properties, or other
dwellings. The rule permits the borrower to retain a loan that was
permissible when it was made, even though the residential real property
has ceased to be the borrower's principal residence. However, any
subsequent renewal or renegotiation of the original terms of such a
loan must meet the requirements of the prohibited borrowings rule.
Second, pursuant to amended paragraph (c)(3)(ii)(B), the borrower
may not apply for the loan while the covered OTS employee participates,
or is scheduled to participate, in any examination, the review of any
application, or any other supervisory or regulatory matter directly
affecting the savings association or its subsidiaries. OTS believes
that a reasonable person might question the employee's impartiality in
such an instance.
Third, the final rule incorporates conditions designed to ensure
compliance with 18 U.S.C. 212, as amended. Specifically, the rule
provides at amended paragraph (c)(3)(ii)(C) that a borrower must
satisfy all financial requirements for the loan that are generally
applicable to all applicants for the same type of residential real
property loan. Also, under amended paragraph (c)(3)(ii)(D), the terms
and conditions applicable with respect to the loan and any credit
extended to the borrower under the loan may be no more favorable
generally to the borrower than the terms and conditions that are
generally applicable to residential real property loans offered by the
same savings association (or same subsidiary) to other borrowers in
comparable circumstances for residential real property loans.
To permit OTS to monitor loans under the principal residence
exception, the final rule requires covered employees to provide certain
information to OTS. Specifically, pursuant to amended paragraph
(c)(3)(ii)(E), a covered OTS employee must inform his or her OTS
supervisor and the OTS ethics officer before the borrower applies for a
residential real property loan under the principal residence exemption.
Immediately after the borrower enters into the loan agreement, amended
paragraph (c)(3)(ii)(F) provides that the covered employee must also:
Notify his or her supervisor and the OTS ethics officer of the
agreement; certify that the loan meets the requirements for the
principal residence exception; and submit a written disqualification
stating that he or she will not participate in any examination, the
review of any application, or any other supervisory or regulatory
matter directly affecting the savings association or its
subsidiaries.\7\ Like the credit card disqualification, this
disqualification will not prevent the covered OTS employee from
participating in formulating OTS policy or writing guidance, policy
statements or regulations generally applicable to savings associations;
does not generally extend to the savings association's holding company
(or other holding company affiliates); and may be waived on a case-by-
case basis under 5 CFR 3101.109(g).
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\7\ Covered OTS employees will also be required to disclose
these loans on their annual OTS supplemental financial disclosure
reports.
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C. Pre-Existing and Transferred Loans
The current rules at 5 CFR 3101.109(c)(4) (2006) permit a covered
OTS employee (or spouse or minor child of a covered OTS employee) to
retain a loan on its original terms if (1) the loan was incurred before
April 30, 1991 or before employment with the OTS, whichever date is
later; or (2) the loan was acquired by sale or transfer to an OTS-
regulated savings association or by conversion or merger of the lender
into an OTS-regulated savings association. A renewal or renegotiation
of such a pre-existing or transferred loan, however, must comply with
loan restrictions in 5 CFR 3101.109(c)(1) and (c)(2) (2006) of the
current Treasury Supplemental Ethics Regulations, prior to this final
rule amendment.
The final rule makes a few changes to this provision. First, credit
card accounts will not be eligible for the pre-existing or transferred
loan exception in amended Sec. 3101.109(c)(4). OTS expects all credit
card accounts, including pre-existing credit card accounts, to satisfy
the ``arms-length terms'' and other requirements described in the other
exceptions under the final rule. The final rule also requires a covered
OTS employee to provide the OTS ethics officer with a timely
notification when the employee (or his or her spouse or minor child)
holds a pre-existing or transferred loan under this section, and to
submit a written disqualification stating that the employee will not
participate in any examination, the review of any application, or any
other
[[Page 48224]]
supervisory or regulatory matter directly affecting that savings
association or its subsidiaries.
D. Loans from Holding Companies
Additionally, OTS has decided to prohibit an OTS examiner from
examining a savings and loan holding company (or its subsidiaries), if
the holding company (or its subsidiary) owns or holds the examiner's
loan. This rule is not based on the criminal provisions at 18 U.S.C.
212 and 213, since these entities usually are not financial
institutions. Rather, OTS believes that such arrangements would raise a
question about an examiner's impartiality in the mind of a reasonable
person with knowledge of the relevant facts and circumstances. See 5
CFR 2635.502.
Specifically, the final rule states at new paragraph (c)(5) of
Sec. 3101.109 that an OTS examiner must submit a written
disqualification to OTS if the examiner (or his or her spouse or minor
child) obtains or holds a loan from a savings and loan holding company
or its subsidiary (other than a subsidiary that is an OTS-regulated
savings association or its subsidiary). The written disqualification
must state that the examiner will not participate in any examination,
the review of any application, or any other supervisory or regulatory
matter directly affecting that lender.
However, the last sentence of new paragraph (c)(5) states that an
examiner is not required to submit a disqualification for any loan that
would have been permitted and would not have required a
disqualification under the rules if a savings association had made the
loan. For example, an OTS examiner would not be required to submit a
disqualification for a credit card loan from a holding company if the
examiner satisfies all financial requirements for the credit card
account that are generally applicable to all applicants for the same
kind of account, and the terms and conditions applicable to the account
are no more favorable generally to the cardholder than the terms and
conditions that are generally applicable to credit card accounts
offered by the holding company. Of course, the examiner would be
required to submit a written disqualification to OTS if he or she
became involved in an adversarial dispute with the holding company that
issued the credit card account.
E. Clarifications
In addition to the changes discussed above, the Department has made
technical changes to the prohibition on borrowing by a spouse or minor
child to conform the provisions addressing permissible terms and
conditions to the related standard contained in the statute at 18
U.S.C. 212(c)(4)(A) and (B), as amended, and to use plain language in
the final rule consistent with 12 U.S.C. 4809.
III. Regulatory Findings
A. Administrative Procedure Act
Pursuant to 5 U.S.C. 553(a)(2), notice of proposed rulemaking,
opportunity for public comment, and a 30-day delayed effective date are
not applicable to this final rule amendment.
B. Regulatory Flexibility Act Analysis
Because no notice of proposed rulemaking is required, the
provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do
not apply.
C. Executive Order 12866
The Department has determined that this final rule does not
constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
List of Subjects in 5 CFR Part 3101
Conflict of interests, Ethics, Extensions of credit, Government
employees, OTS employees.
0
For the reasons set forth in the preamble, the Department, with the
concurrence of OGE, amends 5 CFR part 3101 as follows:
PART 3101--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES
OF THE DEPARTMENT OF THE TREASURY
0
1. The authority citation for part 3101 continues to read as follows:
Authority: 5 U.S.C. 301, 7301, 7353; 5 U.S.C. App. (Ethics in
Government Act of 1978); 18 U.S.C. 212, 213; 26 U.S.C. 7214(b); E.O.
12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by E.O.
12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5 CFR 2635.105,
2635.203(a), 2635.403(a), 2635.803, 2635.807(a)(2)(ii).
0
2. In Sec. 3101.109, revise paragraphs (c)(2), (c)(3), and (c)(4) and
add a new paragraph (c)(5) to read as follows:
Sec. 3101.109 Additional rules for Office of Thrift Supervision
employees.
* * * * *
(c) * * *
(2) Prohibition on borrowing by a spouse or minor child. The
prohibition in paragraph (c)(1) of this section applies to the spouse
and minor child of a covered OTS employee, except that a spouse or
minor child may obtain and hold a loan or extension of credit from an
OTS-regulated savings association (or its subsidiary) if:
(i) The loan or extension of credit is supported only by the income
or independent means of the spouse or minor child;
(ii) The spouse or minor child satisfies all financial requirements
for the loan or extension of credit that are generally applicable to
all applicants for the same type of loan or extension of credit;
(iii) The terms and conditions applicable with respect to the loan
or extension of credit and any credit extended to the borrower under
the loan or extension of credit are no more favorable generally to the
borrower than the terms and conditions that are generally applicable to
loans or extensions of credit offered by the same savings association
(or same subsidiary) to other borrowers in comparable circumstances for
the same type of loan or extension of credit; and
(iv) The covered OTS employee does not participate in the
negotiation for the loan or serve as a co-maker, endorser, or guarantor
of the loan or extension of credit.
(3) Exceptions--(i) Credit cards. A covered OTS employee (or a
spouse or minor child of a covered OTS employee) may obtain and hold a
credit card account established under an open-end consumer credit plan
and issued by an OTS-regulated savings association (or its subsidiary),
subject to the following conditions:
(A) The cardholder must satisfy all financial requirements for the
credit card account that are generally applicable to all applicants for
the same type of credit card account;
(B) The terms and conditions applicable with respect to the account
and any credit extended to the cardholder under the account are no more
favorable generally to that cardholder than the terms and conditions
that are generally applicable to credit card accounts offered by the
same savings association (or the same subsidiary) to other cardholders
in comparable circumstances under open-end consumer credit plans; and
(C) The covered OTS employee must submit a written disqualification
to OTS if the cardholder becomes involved in an adversarial dispute
with the issuer of the credit card account. The written
disqualification must state that the covered OTS employee will not
participate in any examination, the review of any application, or any
other supervisory or regulatory matter directly affecting the savings
association or its subsidiaries. For the purposes of this paragraph
(c)(3)(i), a cardholder is involved in an adversarial dispute if he or
she is delinquent in payments on the
[[Page 48225]]
credit card account; the issuer and the cardholder are negotiating to
restructure the credit card debt; the issuer garnishes the cardholder's
wages; the cardholder disputes the terms and conditions of the account;
or the cardholder becomes involved in any disagreement with the issuer
that may cast doubt on the covered OTS employee's ability to remain
impartial with respect to the savings association or its subsidiaries.
Preliminary inquiries to the issuer regarding the accuracy of billing
information or billed items are not, but may become, an adversarial
dispute.
(ii) Loans secured primarily by principal residence. A covered OTS
employee (or a spouse or minor child of a covered OTS employee) may
obtain and hold a residential real property loan from an OTS-regulated
savings association (or its subsidiary) subject to the following
conditions:
(A) The loan must be secured primarily by residential real property
that is the borrower's principal residence. The borrower may retain the
loan if the residential real property ceases to be that borrower's
principal residence. However, any subsequent renewal or renegotiation
of the original terms of such a loan must meet the requirements of this
paragraph (c)(3)(ii);
(B) The borrower may not apply for the loan while the covered OTS
employee participates, or is scheduled to participate, in any
examination, the review of any application, or any other supervisory or
regulatory matter directly affecting the savings association or its
subsidiaries;
(C) The borrower must satisfy all financial requirements for the
loan that are generally applicable to all applicants for the same type
of residential real property loan;
(D) The terms and conditions applicable with respect to the loan
and any credit extended to the borrower under the loan are no more
favorable generally to that borrower than the terms and conditions that
are generally applicable to residential real property loans offered by
the same savings association (or same subsidiary) to other borrowers in
comparable circumstances for residential real property loans;
(E) The covered OTS employee must inform his or her OTS supervisor
and the OTS ethics officer before the borrower applies for a
residential real property loan under this paragraph (c)(3)(ii); and
(F) Immediately after the borrower enters into the loan agreement,
the covered OTS employee must:
(1) Notify his or her supervisor and the OTS ethics officer of the
loan agreement;
(2) Certify that the loan meets the requirements of this paragraph
(c)(3)(ii); and
(3) Submit a written disqualification stating that the covered OTS
employee will not participate in any examination, the review of any
application, or any other supervisory or regulatory matter directly
affecting the savings association or its subsidiaries.
(4) Pre-existing loans. (i) Other than a credit card account, which
must comply with paragraph (c)(3)(i) of this section, a covered OTS
employee (or spouse or minor child of a covered OTS employee) may
retain a loan from an OTS-regulated savings association (or its
subsidiary) on its original terms if:
(A) The loan was incurred before April 30, 1991 or the date that
the individual became a covered OTS employee, whichever date is later;
or
(B) The savings association (or its subsidiary) acquired the loan
in a purchase or other transfer, or acquired the loan in a conversion
or merger of the lender.
(ii) A covered OTS employee must notify the OTS ethics officer, in
a timely manner, of any loan that meets the requirements of paragraph
(c)(4)(i) of this section, and must submit a written disqualification
stating that the covered OTS employee will not participate in any
examination, the review of any application, or any other supervisory or
regulatory matter directly affecting the savings association or its
subsidiaries.
(iii) If a covered OTS employee (or his or her spouse or minor
child) renews or renegotiates the original terms of a pre-existing loan
described in this paragraph (c)(4), the renewed or renegotiated loan
will become subject to paragraphs (c)(1) through (c)(3) of this
section.
(5) Loans from holding companies. An OTS examiner must submit to
OTS a written disqualification if the OTS examiner (or a spouse or
minor child of an OTS examiner) obtains or holds a loan from a savings
and loan holding company or its subsidiary (other than a subsidiary
that is an OTS-regulated savings association or its subsidiary, loans
from which are covered by paragraph (c)(3) of this section). The
written disqualification must state that the examiner will not
participate in any examination, the review of any application, or any
other supervisory or regulatory matter directly affecting that lender.
A disqualification is not required for a loan that would have been
permitted and would not have required a disqualification under this
paragraph (c), if a savings association (or its subsidiary) had made
the loan.
* * * * *
Dated: July 9, 2007.
Robert F. Hoyt,
General Counsel, Department of the Treasury.
Approved: August 14, 2007.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. E7-16711 Filed 8-22-07; 8:45 am]
BILLING CODE 6720-01-P