[Federal Register Volume 76, Number 154 (Wednesday, August 10, 2011)]
[Notices]
[Pages 49477-49478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20311]


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FEDERAL HOUSING FINANCE AGENCY

[No. 2011-N-08]


Termination of Federal Home Loan Bank Resolution Funding 
Corporation Obligation

AGENCY: Federal Housing Finance Agency.

ACTION: Notice.

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SUMMARY: The Federal Housing Finance Agency (FHFA) has determined that, 
as of July 15, 2011, the Federal Home Loan Banks (Banks) have satisfied 
their statutory obligation to contribute a percentage of their annual 
net earnings toward the interest payments due on bonds issued by the 
Resolution Funding Corporation (RefCorp).

FOR FURTHER INFORMATION CONTACT: Joseph A. McKenzie, Associate 
Director, Division of Federal Home Loan Bank Regulation, 202-408-2845, 
[email protected], Federal Housing Finance Agency, 1625 Eye 
Street, NW., Washington, DC 20006-4001, or Neil R. Crowley, Deputy 
General Counsel, 202-343-1316, [email protected], Federal Housing 
Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20052. 
The telephone number for the Telecommunications Device for the Deaf is 
800-877-8339.

SUPPLEMENTARY INFORMATION: 

[[Page 49478]]

I. Statutory and Regulatory Background

    In 1989, Congress established RefCorp as a vehicle to provide 
funding for the Resolution Trust Corporation to finance its efforts to 
resolve the savings and loan crisis. 12 U.S.C. 1441b(a), (b). RefCorp 
issued approximately $30 billion of long-term bonds, the last of which 
will mature in April 2030. The interest due on the RefCorp bonds is 
paid from several sources, including contributions from the Banks.
    As initially enacted, the law required the Banks to contribute $300 
million annually toward the RefCorp interest payments. Public Law 101-
73, Title V, Sec.  511(a), 103 Stat. 394, (August 9, 1989). In 1999, 
Congress amended the law to require each Bank to pay 20 percent of its 
net earnings annually toward the RefCorp interest payments. Public Law 
106-102, Title VI, Sec.  607(a), 113 Stat. 1455, (November 12, 1999), 
codified at 12 U.S.C. 1441b(f)(2)(C)(i). The Banks' payment obligation 
was to continue until the value of all payments made by the Banks to 
RefCorp equaled the value of a benchmark annuity of $300 million per 
year that commenced on the date that the RefCorp bonds had been issued 
and ended on the last maturity date for the RefCorp bonds, which is 
April 15, 2030.
    The law further directed the Federal Housing Finance Board (Finance 
Board) to determine annually the extent to which the value of the 
Banks' contributions for that year exceeded or fell short of the value 
of the benchmark annuity. In determining those values, the law required 
the Finance Board to use present-value factors established in 
consultation with the Secretary of the Treasury and further required 
that the Finance Board terminate the Banks' payment obligation once the 
value of their payments equaled the value of the benchmark annuity. 
Regulations of the Finance Board, which remain in effect, address the 
manner in which the calculations of the Banks' RefCorp obligation, 
including its termination, are to be conducted. 12 CFR part 997. In 
2008, Congress established FHFA, which, among other things, succeeded 
to all of the above responsibilities of the Finance Board with respect 
to the determinations that are to be made regarding the RefCorp 
payments, and was required to submit semiannual reports to Congress 
that estimated the projected date on which the Banks would satisfy 
their obligation to contribute to the RefCorp debt service payments. 
Public Law 110-289, Title I, Sec.  1101, Title II, Sec. Sec.  1204, 
1213, Title III, Sec.  1312, 122 Stat. 2661, 2785-86, 2791, 2798 (July 
30, 2008).

II. Termination of Payment Obligation

    The Banks make their RefCorp contributions on a quarterly basis, 
and FHFA determines how the value of those payments compares to the 
value of the benchmark annuity on a quarterly basis as well. To the 
extent that any quarterly RefCorp payments exceed $75 million (one 
quarter of the $300 million benchmark annuity) FHFA applies the excess 
portion to simulate the purchase of zero-coupon Treasury bonds, which 
``defeases'' the most-distant of the Banks' remaining RefCorp payments 
and effectively shortens the duration of their repayment obligation.
    Since 1999, all but two of the Banks' quarterly RefCorp 
contributions have exceeded the $75 million benchmark, which has caused 
the termination date to move incrementally closer. In its most recent 
report to Congress on the RefCorp obligation, FHFA projected that if 
the Banks' quarterly earnings subsequent to December 31, 2010, were to 
equal their average quarterly income over the preceding four quarters, 
then their final RefCorp contribution would be made with the payment 
due on July 15, 2011.\1\
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    \1\ See Letters from Edward J. DeMarco, Acting Director, to 
Senator Tim Johnson, Chairman, and Senator Richard C. Shelby, 
Ranking Member, of the Committee on Banking, Housing, and Urban 
Affairs, and to Representative Spencer Bachus, Chairman, and 
Representative Barney Frank, Ranking Member, of the Committee on 
Financial Services, all dated February 4, 2011.
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    After consulting with the Department of the Treasury and conducting 
the calculations in accordance with 12 CFR Part 997, FHFA determined 
that the remaining amount owed by the Banks for the RefCorp debt 
service was $75,148,203.13, which amount the Banks paid on July 15, 
2011.
    Accordingly, the Director has determined that the payment made on 
July 15, 2011, caused the value of all RefCorp payments made by the 
Banks to that date to equal the value of the benchmark annuity, which 
terminates the obligation of the Banks to contribute toward the debt 
service for the RefCorp bonds.

    Authority:  12 U.S.C. 1441b(f)(2)(C)(iii).

    Dated: August 5th, 2011.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2011-20311 Filed 8-9-11; 8:45 am]
BILLING CODE 8070-01-P