[Federal Register Volume 80, Number 120 (Tuesday, June 23, 2015)]
[Notices]
[Pages 35953-35956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15412]
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FEDERAL RESERVE SYSTEM
Proposed Agency Information Collection Activities; Comment
Request
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: On June 15, 1984, the Office of Management and Budget (OMB)
delegated to the Board of Governors of the Federal Reserve System
(Board) its approval authority under the Paperwork Reduction Act (PRA),
to approve of and assign OMB numbers to collection of information
requests and requirements conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official
OMB inventory of currently approved collections of information. Copies
of the PRA Submission, supporting statements and approved collection of
information instruments are placed into OMB's public docket files. The
Federal Reserve may not conduct or sponsor, and the respondent is not
required to respond to, an information collection that has been
extended, revised, or implemented on or after October 1, 1995, unless
it displays a currently valid OMB number.
DATES: Comments must be submitted on or before August 24, 2015.
ADDRESSES: You may submit comments, identified by FR 4027 or FR 4029,
by any of the following methods:
Agency Web site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include OMB
number in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
Mail: Robert deV. Frierson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/apps/foia/proposedregs.aspx as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper form in Room
3515, 1801 K Street (between 18th and 19th Streets NW) Washington, DC
20006 between 9:00 a.m. and 5:00 p.m. on weekdays.
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Additionally, commenters may send a copy of their comments to the
OMB Desk Officer--Shagufta Ahmed--Office of Information and Regulatory
Affairs, Office of Management and Budget, New Executive Office
Building, Room 10235, 725 17th Street NW., Washington, DC 20503 or by
fax to (202) 395-6974.
FOR FURTHER INFORMATION CONTACT: A copy of the PRA OMB submission,
including the proposed reporting form and instructions, supporting
statement, and other documentation will be placed into OMB's public
docket files, once approved. These documents will also be made
available on the Federal Reserve Board's public Web site at: http://www.federalreserve.gov/apps/reportforms/review.aspx or may be requested
from the agency clearance officer, whose name appears below.
Federal Reserve Board Clearance Officer--Nuha Elmaghrabi--Office of
the Chief Data Officer, Board of Governors of the Federal Reserve
System, Washington, DC 20551, (202) 452-3829. Telecommunications Device
for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors
of the Federal Reserve System, Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
Request for Comment on Information Collection Proposals
The following information collections, which are being handled
under this delegated authority, have received initial Board approval
and are hereby published for comment. At the end of the comment period,
the proposed information collections, along with an analysis of
comments and recommendations received, will be submitted to the Board
for final approval under OMB delegated authority. Comments are invited
on the following:
a. Whether the proposed collection of information is necessary for
the proper performance of the Federal Reserve's functions; including
whether the information has practical utility;
b. The accuracy of the Federal Reserve's estimate of the burden of
the proposed information collection, including the validity of the
methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
Proposal To Approve Under OMB Delegated Authority the Extension for
Three Years, Without Revision, of the Following Reports
1. Report title: Recordkeeping Requirements Associated with the
Guidance on Sound Incentive Compensation Policies.
Agency form number: FR 4027.
OMB control number: 7100-0327.
Frequency: On occasion.
Reporters: State member banks, U.S. bank holding companies, savings
and loan holding companies, Edge Act and agreement corporations, and
the U.S. operations of foreign banks with a branch, agency, or
commercial lending company in the United States.
Estimated annual reporting hours: One-time implementation: Large
institutions--2,400 hours and small institutions--400 hours; Ongoing
maintenance--228,400 hours.
Estimated average hours per response: One-time implementation:
Large institutions--480 hours and small institutions--80 hours; Ongoing
maintenance--40 hours.
Number of respondents: One-time implementation: Large
institutions--5 respondents and small institutions--5 respondents;
Ongoing maintenance--5,710 respondents.
General description of report: This information collection is
authorized pursuant to sections 9, 11(a), 11(i), 25, and 25A of the
Federal Reserve Act (12 U.S.C. 248(a), 248(i), 324, 602, and 625),
section 5 of the Bank Holding Company Act (12 U.S.C. 1844), section
10(b)(2) of the Home Owners' Loan Act (12 U.S.C. 1467a(b)(2)), and
section 7(c) of the International Banking Act (12 U.S.C. 3105(c)).
Because the recordkeeping requirements are contained within guidance
(and not a statute or regulation) they are voluntary. Because the
records will be maintained by each banking institution, the Freedom of
Information Act (FOIA) would only be implicated if the Board's
examiners retained a copy of the records as part of an examination or
supervision of the banking institution. To the extent the Board
collects this information during the course of an examination or
supervision of a banking institution, the information is considered
confidential under exemption 8 of the FOIA (5 U.S.C. 552(b)(8)). In
addition, the information may also be kept confidential under exemption
4 of the FOIA which protects commercial or financial information
obtained from a person that is privileged or confidential (5 U.S.C.
552(b)(4)).
Abstract: Incentive compensation practices in the financial
services industry were one of many factors contributing to the
financial crisis that began in 2007. Banking organizations too often
rewarded employees for increasing the firm's short-term revenue or
profit without adequate recognition of the risks the employees'
activities posed for the firm. More importantly, problematic
compensation practices were not limited to the most senior executives
at financial firms. Compensation practices can encourage employees at
various levels of a banking organization, either individually or as a
group, to undertake imprudent risks that can significantly and
adversely affect the risk profile of the firm.
The Sound Incentive Compensation Policies (the Guidance) was
developed to help protect the safety and soundness of banking
organizations and promote the prompt improvement of incentive
compensation practices throughout the banking industry. In addition,
the guidance is consistent with the Principles for Sound Compensation
Practices adopted by the Financial Stability Board (FSB) in April 2009,
as well as the Implementation Standards for those principles issued by
the FSB in September 2009.
Compatibility With Effective Controls and Risk Management
Principle 2 of the Guidance states that a banking organization
should have strong controls governing its process for designing,
implementing, and monitoring incentive compensation arrangements. An
organization's policies and procedures should:
Identify and describe the role(s) of the personnel,
business units, and control units authorized to be involved in the
design, implementation, and monitoring of incentive compensation
arrangements;
identify the source of significant risk-related inputs
into these processes and establish appropriate controls governing the
development and approval of these inputs to help ensure their
integrity; and
identify the individual(s) and control unit(s) whose
approval is necessary for the establishment of new incentive
compensation arrangements or modification of existing arrangements.
Banking organizations also should create and maintain sufficient
documentation to permit an audit of the organization's processes for
establishing, modifying, and monitoring incentive compensation
arrangements.
The Guidance also states that a banking organization should conduct
regular internal reviews to ensure that
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its processes for achieving and maintaining balanced incentive
compensation arrangements are consistently followed. Such reviews
should be conducted by audit, compliance, or other personnel in a
manner consistent with the organization's overall framework for
compliance monitoring. An organization's internal audit department also
should separately conduct regular audits of the organization's
compliance with its established policies and controls relating to
incentive compensation arrangements. The results should be reported to
appropriate levels of management and, where appropriate, the
organization's board of directors.
Strong Corporate Governance
Principle 3 of the Guidance states that the board of directors
should review and approve the overall goals and purposes of the firm's
incentive compensation system. The board of directors should provide
clear direction to management to ensure that its policies and
procedures are carried out in a manner that achieves balance and is
consistent with safety and soundness.
The board of directors should approve and document any material
exceptions or adjustments to the incentive compensation arrangements
established for senior executives and should carefully consider and
monitor the effects of any approved exceptions or adjustments on the
balance of the arrangement, the risk-taking incentives of the senior
executive, and the safety and soundness of the organization.
The board of directors should receive and review, on an annual or
more frequent basis, an assessment by management, with appropriate
input from risk management personnel, of the effectiveness of the
design and operation of the organization's incentive compensation
system in providing risk taking incentives that are consistent with the
organization's safety and soundness. These reports should include an
evaluation of whether or how incentive compensation practices may be
encouraging excessive risk taking. These reviews and reports should be
appropriately scoped to reflect the size and complexity of the banking
organization's activities and the prevalence and scope of its incentive
compensation arrangements. In addition, at banking organizations that
are significant users of incentive compensation arrangements, the board
should receive periodic reports that review incentive compensation
awards and payments relative to risk outcomes on a backward-looking
basis to determine whether the organization's incentive compensation
arrangements may be promoting excessive risk-taking.
2. Report title: Interagency Guidance on Managing Compliance and
Reputation Risks for Reverse Mortgage Products.
Agency form number: FR 4029.
OMB control number: 7100-0330.
Frequency: On occasion.
Reporters: State member banks that originate proprietary and Home
Equity Conversion Program (HECM) reverse mortgages.
Estimated annual reporting hours: Implementation of policies and
procedures, 680 hours; Review and maintenance of policies and
procedures, 136 hours.
Estimated average hours per response: Implementation of policies
and procedures, 40 hours; Review and maintenance of policies and
procedures, 8 hours.
Number of respondents: Implementation of policies and procedures,
17 respondents; Review and maintenance of policies and procedures, 17
respondents.
General description of report: Previously, the Board's Legal
Division determined that the Board was authorized to issue this
guidance pursuant to its authority under section 18(f) of the Federal
Trade Commission Act, which authorized the Board to prescribe
regulations regarding unfair or deceptive acts or practice by banks (15
U.S.C. 57a(f)) and section 105 of the Truth in Lending Act, which
authorized the Board to prescribe regulations to carry out the purposes
of the Truth in Lending Act (TILA) (15 U.S.C. 1604). However, under the
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank
Act) much of the Board's authority under these laws was transferred to
the Consumer Financial Protection Bureau. Nonetheless, we continue to
believe that the Board has the authority to issue this guidance
pursuant to its authority under section 39 of the Federal Deposit
Insurance Act (FDI Act), which generally authorizes the Board to
establish safety and soundness standards for depository institutions
supervised by the Board (12 U.S.C. 1381p-1(a)). Financial institutions'
obligation under this guidance is voluntary. Because the documentation
required by the guidance is maintained by each institution, the Freedom
of Information Act (FOIA) would only be implicated if the Board's
examiners retained a copy of this information as part of an examination
or supervision of a bank. However, records obtained as a part of an
examination or supervision of a bank are exempt from disclosure under
FOIA exemption (b)(8), for examination material (5 U.S.C. 552(b)(8)).
In addition, the information may also be kept confidential under
exemption 4 of the FOIA which protects commercial or financial
information obtained from a person that is privileged or confidential
(5 U.S.C. 552(b)(4)).
Abstract: Reverse mortgages are home-secured loans typically
offered to elderly consumers. Financial institutions currently provide
two types of reverse mortgage products: The lenders' own proprietary
reverse mortgage products and reverse mortgages insured by the
Department of Housing and Urban Development's Federal Housing
Administration (FHA). Reverse mortgage loans insured by the FHA are
made pursuant to the guidelines and rules established by HUD's HECM
program. HECM loans and proprietary reverse mortgages are also subject
to the rules that implement consumer protection laws such as the Real
Estate Settlement Procedures Act (RESPA) and TILA.
In August 2010, the Federal Financial Institutions Examination
Council, on behalf of its member agencies,\1\ published a Federal
Register notice adopting supervisory guidance titled ``Reverse Mortgage
Products: Guidance for Managing Compliance and Reputation Risks.'' \2\
The guidance is designed to help financial institutions with risk
management and assist financial institutions' efforts to ensure that
their reverse mortgage lending practices adequately address consumer
compliance and reputation risks.
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\1\ The Board, the Federal Deposit Insurance Corporation, the
National Credit Union Administration, the Office of the Comptroller
of the Currency, and the Office of Thrift Supervision.
\2\ 75 FR 50801.
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The guidance describes reporting, recordkeeping, and disclosures
for both proprietary and HECM reverse mortgages. A number of these
disclosures are ``usual and customary'' business practices for
proprietary and HECM reverse mortgages, and these would not meet the
PRA's definition of ``paperwork.'' Other included disclosure
requirements are currently mandated by RESPA or TILA for all reverse
mortgage loans and information collections required by HUD's rules for
HECM loans.\3\ Discussion of these requirements in the guidance is also
not considered additional paperwork burden imposed by the guidance.
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\3\ OMB Control No. 2502-0524.
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Proprietary reverse mortgage products, however, are not subject to
HUD's rules for HECM loans. To the extent that the interagency guidance
applies HECM requirements to
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proprietary loans, this would meet the PRA's definition of paperwork
burden.
There are also additional provisions in the guidance that apply to
both proprietary and HECM reverse mortgages that do not meet the
``usual and customary'' standard, are not covered by already approved
information collections and, therefore, likewise meet the PRA's
definition of paperwork burden.
Proprietary Reverse Mortgages
Financial institutions offering proprietary reverse mortgages are
encouraged under the guidance to follow or adopt relevant HECM
requirements for mandatory counseling, disclosures, affordable
origination fees, restrictions on cross-selling of ancillary products,
and reliable appraisals.
Proprietary and HECM Reverse Mortgages
Financial institutions offering either proprietary or HECM reverse
mortgages are encouraged to develop clear and balanced product
descriptions and make them available to consumers shopping for a
mortgage. They should set forth a description of how disbursements can
be received and include timely information to supplement disclosures
mandated by TILA and other disclosures. Promotional materials and
product descriptions should include information about the costs, terms,
features, and risks of reverse mortgage products.
Financial institutions should adopt policies and procedures that
prohibit directing a consumer to a particular counseling agency or
contacting a counselor on the consumer's behalf. They should adopt
clear written policies and establish internal controls specifying that
neither the lender nor any broker will require the borrower to purchase
any other product from the lender in order to obtain the mortgage.
Policies should be clear so that originators do not have an
inappropriate incentive to sell other products that appear linked to
the granting of a mortgage. Legal and compliance reviews should include
oversight of compensation programs so that lending personnel are not
improperly encouraged to direct consumers to particular products.
Financial institutions making, purchasing, or servicing reverse
mortgages through a third party should conduct due diligence and
establish criteria for third-party relationships and compensation. They
should set requirements for agreements and establish systems to monitor
compliance with the agreement and applicable laws and regulations. They
should also take corrective action if a third party fails to comply.
Third-party relationships should be structured in a way that does not
conflict with RESPA.
Board of Governors of the Federal Reserve System, June 18, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-15412 Filed 6-22-15; 8:45 am]
BILLING CODE 6210-01-P