[Federal Register: June 30, 2009 (Volume 74, Number 124)]
[Proposed Rules]
[Page 31209-31217]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jn09-20]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 25
[Docket ID OCC-2009-0010]
RIN 1557-AD24
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Docket No. R-1360]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 345
[RIN 3064-AD45]
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563e
[Docket ID OTS-2009-0010]
RIN 1550-AC35]
Community Reinvestment Act Regulations
AGENCY: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
Treasury (OTS).
ACTION: Joint notice of proposed rulemaking.
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SUMMARY: The OCC, the Board, the FDIC, and the OTS (collectively, ``the
Agencies'') are issuing this notice of proposed rulemaking that would
revise our rules implementing the Community Reinvestment Act (CRA). The
proposed rule would incorporate into our rules recently adopted
statutory language that requires the Agencies, when assessing an
institution's record of meeting community credit needs, to consider, as
a factor, low-cost education loans provided by the financial
institution to low-income borrowers. The proposal also would
incorporate into our rules statutory language that allows the Agencies,
when assessing an
[[Page 31210]]
institution's record, to consider as a factor capital investment, loan
participation, and other ventures undertaken by nonminority-owned and
nonwomen-owned financial institutions in cooperation with minority- and
women-owned financial institutions and low-income credit unions.
DATES: Comments must be received by: July 30, 2009.
ADDRESSES: Comments should be directed to:
OCC: Because paper mail in the Washington, DC area and at the
Agencies is subject to delay, commenters are encouraged to submit
comments by the Federal eRulemaking Portal or e-mail, if possible.
Please use the title ``Community Reinvestment Act Regulation'' to
facilitate the organization and distribution of the comments. You may
submit comments by any of the following methods:
Federal eRulemaking Portal--``Regulations.gov'': Go to
http://www.regulations.gov, under the ``More Search Options'' tab click
next to the ``Advanced Docket Search'' option where indicated, select
``Comptroller of the Currency'' from the agency drop-down menu, then
click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2009-0010''
to submit or view public comments and to view supporting and related
materials for this joint notice of proposed rulemaking. The ``How to
Use This Site'' link on the Regulations.gov home page provides
information on using Regulations.gov, including instructions for
submitting or viewing public comments, viewing other supporting and
related materials, and viewing the docket after the close of the
comment period.
E-mail: regs.comments@occ.treas.gov.
Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 2-3, Washington, DC 20219.
Fax: (202) 874-5274.
Hand Delivery/Courier: 250 E Street, SW., Mail Stop 2-3,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket Number OCC-2009-0010'' in your comment. In general, OCC will
enter all comments received into the docket and publish them on the
Regulations.gov Web site without change, including any business or
personal information that you provide such as name and address
information, e-mail addresses, or phone numbers. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this joint notice of proposed rulemaking by any of the following
methods:
Viewing Comments Electronically: Go to http://
www.regulations.gov, under the ``More Search Options'' tab click next
to the ``Advanced Document Search'' option where indicated, select
``Comptroller of the Currency'' from the agency drop-down menu, then
click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2009-0010''
to view public comments for this rulemaking action.
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC, 250 E Street, SW., Washington, DC.
For security reasons, the OCC requires that visitors make an
appointment to inspect comments. You may do so by calling (202) 874-
4700. Upon arrival, visitors will be required to present valid
government-issued photo identification and submit to security screening
in order to inspect and photocopy comments.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
Board: You may submit comments, identified by Docket No. R-1360, by
any of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
Fax: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, 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/generalinfo/foia/ProposedRegs.cfm 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 in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
FDIC: You may submit comments, identified by RIN number 3064-AD45
by any of the following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/
federal/propose.html. Follow instructions for submitting comments on
the Agency Web site.
E-mail: Comments@FDIC.gov. Include the RIN number 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.
Instructions: All submissions received must include the agency name
and RIN number. All comments received will be posted without change to
http://www.fdic.gov/regulations/laws/federal/propose.html, including
any personal information provided.
OTS: You may submit comments identified by OTS-2009-0010, by any of
the following methods:
Federal eRulemaking Portal-``Regulations.gov'': Go to
http://www.regulations.gov, under the ``more Search Options'' tab click
next to the ``Advanced Docket Search'' option where indicated, select
``Office of Thrift Supervision'' from the agency drop-down menu, then
click ``Submit.'' In the ``Docket ID'' column, select ``OTS-2009-0010''
to submit or view public comments and to view supporting and related
materials for this proposed rule. The ``How to Use This Site'' link on
the Regulations.gov home page provides information on using
Regulations.gov, including instructions for submitting or viewing
public comments, viewing other supporting and related materials, and
viewing the docket after the close of the comment period.
Mail: Regulation Comments, Chief Counsel's Office, Office
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,
Attention: OTS-2009-0010.
Fax: (202) 906-6518.
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Regulation Comments, Chief Counsel's Office, Attention: OTS-2009-0010.
Instructions: All submissions received must include the
agency name and docket number for this rulemaking. All comments
received will be entered into the docket and posted on Regulations.gov
without change, including any personal information provided. Comments
including
[[Page 31211]]
attachments and other supporting materials received are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
Viewing Comments Electronically: Go to http://
www.regulations.gov, under the More Search Options'' tab click next to
the ``Advanced Document Search'' option where indicated, select
``Office of Thrift Supervision'' from the agency drop-down menu, then
click ``Submit.'' In the ``Docket ID'' column, select ``OTS-2009-0010''
to view public comments for this rulemaking action.
Viewing Comments On-Site: You may inspect comments at the
Public Reading Room, 1700 G Street, NW., by appointment. To make an
appointment for access, call (202) 906-5922, send an e-mail to
public.info@ots.treas.gov, or send a facsimile transmission to (202)
906-5618. (Prior notice identifying the materials you will be
requesting will assist us in serving you.) We schedule appointments on
business days between 10 a.m. and 4 p.m. In most cases, appointments
will be available the next business day following the date we receive a
request.
FOR FURTHER INFORMATION CONTACT:
OCC: Margaret Hesse, Special Counsel, Community and Consumer Law
Division, (202) 874-5750; or Karen Tucker, National Bank Examiner,
Compliance Policy, (202) 874-4428, Office of the Comptroller of the
Currency, 250 E Street, SW., Washington, DC 20219.
Board: Rebecca Lassman, Supervisory Consumer Financial Services
Analyst, (202) 452-2080; or Brent Lattin, Senior Attorney, (202) 452-
3667, Division of Consumer and Community Affairs, Board of Governors of
the Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Deirdre Foley, Senior Policy Analyst, Division of Supervision
and Consumer Protection, Compliance Policy Branch, (202) 898-6612; or
Susan van den Toorn, Counsel, Legal Division, (202) 898-8707, Federal
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC
20429.
OTS: Stephanie Caputo, Senior Compliance Program Analyst, Consumer
Regulations Section, (202) 906-6549; or Richard Bennett, Senior
Compliance Counsel, Regulations and Legislation Division, (202) 906-
7409, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC
20552.
SUPPLEMENTARY INFORMATION:
Background
The Community Reinvestment Act (CRA) requires the federal banking
and thrift regulatory agencies to assess the record of each insured
depository institution (hereinafter, ``institution'') in meeting the
credit needs of its entire community, including low- and moderate-
income neighborhoods, consistent with the safe and sound operation of
the institution, and to take that record into account when the agency
evaluates an application by the institution for a deposit facility.\1\
The Agencies have promulgated substantially similar regulations to
implement the requirements of the CRA.\2\
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\1\ 12 U.S.C. 2903.
\2\ See 12 CFR parts 25 (OCC), 228 (Board), 345 (FDIC), and 563e
(OTS).
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Discussion of the Proposal on Low-Cost Education Loans
Under the existing CRA regulations, education loans are evaluated
as consumer loans.\3\ An institution's consumer lending must be
evaluated if consumer lending makes up a substantial majority of an
institution's business. Institutions that do not meet this criterion
may choose to have consumer loans evaluated when the institution's CRA
record is being examined. Institutions must collect and maintain data
about consumer loans if they choose to have those loans evaluated.\4\
Like other consumer loans, institutions' education loans are generally
evaluated by total number and amount; borrower characteristics (i.e.,
distribution among borrowers of different income levels); geographic
distribution (i.e., distribution among borrowers in geographies with
different income levels and whether the loans are made to borrowers in
the institution's assessment areas); and, for large retail
institutions, whether the education loan program is innovative or
flexible in addressing the credit needs of low- or moderate-income
individuals or geographies.\5\
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\3\ ``Consumer loan'' is defined in the CRA regulations as a
loan to one or more individuals for household, family, or other
personal expenditures. Consumer loans include the following
categories of loans: motor vehicle loans, credit card loans, home
equity loans, other secured consumer loans, and other unsecured
consumer loans. 12 CFR 25.12(j), 228.12(j), 345.12(j), and
563e.12(j).
\4\ See 12 CFR 25.22(a)(1) and 25.42(c); 12 CFR 228.22(a)(1) and
228.42(c); 12 CFR 345.12(a)(1) and 345.42(c); and 12 CFR
563e.22(a)(1) and 563e.42(c).
\5\ See, e.g., 12 CFR 25.22 and 25.26; 228.22 and 228.26, 345.22
and 345.26, and 563e.22 and 563.26.
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Section 1031 of the Higher Education Opportunity Act, Public Law
110-315, 122 Stat. 3078 (August 14, 2008) (the ``HEOA''), revised the
CRA to require the Agencies, when evaluating an institution's record of
meeting community credit needs, to consider, as a factor, low-cost
education loans provided by the institution to low-income borrowers. 12
U.S.C. 2903(d). The revisions being proposed today would implement this
statutory provision.
The Agencies are proposing to define ``low-cost education loans''
to mean (1) education loans originated by an institution through a U.S.
Department of Education loan program or (2) any private education loan
as defined in the Truth in Lending Act, including loans under a State
or local education loan program, originated by an institution for a
student at an ``institution of higher education,'' with interest rates
and fees no greater than those of comparable education loans offered
through loan programs of the U.S. Department of Education.
Under the first prong of the definition, loans that institutions
make through a Department of Education loan program would be considered
``low-cost education loans.'' Institutions currently make those loans
through the Federal Family Education Loan (FFEL) Program. However,
since Department of Education loan programs may change over time, the
proposed definition does not specifically refer to any particular
program by name.\6\
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\6\ The Agencies note that other Department of Education loan
programs currently exist, such as the William D. Ford Direct Loan
Program and the Federal Perkins Loan Program, in which loans are
made directly by the Department of Education or a school rather than
by a financial institution. As these programs do not involve lending
by an institution, they are not relevant to the evaluation of CRA
performance.
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Under the second prong of the definition, ``private education
loans'' that institutions make would be considered ``low-cost education
loans,'' provided that the interest rates and fees are no greater than
those of comparable education loans offered through loan programs of
the U.S. Department of Education. The proposal would adopt the terms
``private education loan,'' ``private educational lender,'' and
``postsecondary educational expenses,'' each of which is defined in the
HEOA for purposes of the Truth in Lending Act. Section 1011 of the HEOA
added section 140 of the Truth in Lending Act to provide the following
definition:
[T]he term ``private education loan''--
(A) Means a loan provided by a private educational lender that--
(i) Is not made, insured, or guaranteed under title IV of the
Higher Education Act of 1965 (20 U.S.C. 1070 et seq.); and
(ii) Is issued expressly for postsecondary educational expenses to
a
[[Page 31212]]
borrower, regardless of whether the loan is provided through the
educational institution that the subject student attends or directly to
the borrower from the private educational lender; and
(B) Does not include an extension of credit under an open end
consumer credit plan, a reverse mortgage transaction, a residential
mortgage transaction, or any other loan that is secured by real
property or a dwelling.\7\
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\7\ Section 140(a)(7) of the Truth in Lending Act, as added by
section 1011 of the HEOA.
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In turn, HEOA defines a ``private educational lender'' to include,
among others, any financial institution that solicits, makes, or
extends private education loans.\8\
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\8\ Section 140(a)(6)(A) of the Truth in Lending Act, as added
by section 1011 of the HEOA.
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Although section 1031 of the HEOA is not expressly limited to loans
for higher education, the Agencies have included this limitation in the
definition of low-cost education loans. The proposal, thus, would
provide for consideration of low-cost education loans to attend
``institutions of higher education,'' including accredited colleges,
universities, and vocational schools, as discussed more fully below.
The new statutory requirement to consider education loans was adopted
as a part of the HEOA, which specifically addresses higher education
reform. The HEOA defines ``postsecondary educational expenses'' to mean
any of the expenses that are included as part of the cost of attendance
of a student, as defined under section 472 of the Higher Education Act
of 1965 (20 U.S.C. 1087ll). That definition includes tuition and fees,
books, supplies, miscellaneous personal expenses, room and board, and
an allowance for any loan fee, origination fee, or insurance premium
charged to a student or parent for a loan incurred to cover the cost of
the student's attendance.\9\
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\9\ See 20 U.S.C. 1087ll (definition of ``cost of attendance'').
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The Agencies are proposing to define ``low-cost education loan''
consistent with HEOA. The purpose of H.R. 4137, which introduced the
incentive of CRA consideration for low-cost education loans, as stated
in H.R. Report No. 500, was ``to make college more affordable and
accessible;'' to ``expand college access and support for low-income and
minority students;'' and to provide incentives for lenders to provide
``low-cost private student loans to low-income borrowers.'' \10\
Although the HEOA does not define ``private student loan,'' it does
define the similar term, ``private education loan,'' as discussed
above.
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\10\ H.R. Rep. No. 110-500 at 203, 297 (2007) (emphasis added).
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Further, the HEOA defines the term ``education loan'' in other
contexts. In Section 120 of the HEOA, ``education loan'' is defined as
any loan made, insured, or guaranteed under the FFEL Program, any loan
made under the William D. Ford Direct Loan Program, or a private
education loan.\11\ As discussed above, institutions' FFEL loans would
be covered by the first prong of the definition, while private
education loans would be covered by the second prong of the
definition.\12\
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\11\ Section 120 of Public Law 110-315, 122 Stat. 3118 (Aug. 14,
2008). Sections 432 and 493 use the same definition.
\12\ As noted above, the William D. Ford Direct Loan Program is
a direct loan program where the loans are made by the Department of
Education rather than a financial institution. Thus, this loan
program is not relevant for purposes of CRA consideration for an
institution.
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The second prong of the definition would encompass any
``institution of higher education'' as that term is generally defined
in sections 101 and 102 of the Higher Education Act of 1965 (HEA), 20
U.S.C. 1001 and 1002. Such institutions generally include accredited
public or non-profit colleges and vocational schools, accredited
private colleges and vocational schools, and certain foreign
institutions offering postsecondary education that are comparable to
institutions of higher education in the United States based on
standards approved by the U.S. Department of Education. The Agencies
are not proposing to cover unaccredited colleges, universities, or
vocational schools because we lack sufficient information regarding
these institutions, but are soliciting comment on this issue.
The term ``low-income'' will have the same meaning as that term is
defined in the existing CRA rule with respect to individuals.\13\
Consequently, it will mean an individual income that is less than 50
percent of the area median income. If an institution considers the
income of more than one person in connection with an education loan,
the gross annual incomes of all primary obligors on the loan, including
co-borrowers and co-signers, would be combined to determine whether the
borrowers are ``low-income.'' \14\
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\13\ 12 CFR 25.12(m)(1), 228.12(m)(1), 345.12(m)(1), and
563e.12(m)(1).
\14\ See ``Interagency Questions and Answers Regarding Community
Reinvestment,'' 74 FR 498, 533 (Jan. 6, 2009) (Q&A Sec. --
--.42(c)(1)(iv)-4).
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Consistent with the statutory focus on the community in which an
institution is chartered to do business and the regulatory emphasis on
an institution's activities in its assessment area(s), the Agencies
have clarified in the proposed revision that low-cost education loans
will be considered as a factor if they are made to low-income borrowers
in an institution's assessment area(s). This clarification also appears
consistent with the legislative history of the Act, which indicates
that the Agencies are to consider ``low-cost education loans provided
by a financial institution to low-income borrowers in assessing and
taking into account the record of a financial institution in meeting
the credit needs of its local community.'' \15\
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\15\ H. Rep. No. 110-500, at 366 (2007) (emphasis added).
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The Agencies propose to add the new provision addressing favorable
CRA consideration for low-cost education loans to low-income borrowers
to sections 25.21, 228.21, 345.21, and 563e.21 of title 12 of the Code
of Federal Regulations. These sections are entitled, ``Performance
tests, standards, and ratings, in general.'' They apply to all types
and sizes of institutions, without regard to the performance test under
which an institution is evaluated. The new provision also is applicable
to all institutions.
The Agencies also are proposing a conforming amendment to Appendix
A of the regulations to include consideration of low-cost education
loans to low-income borrowers as a factor when assigning a rating to a
financial institution.
Description of the Proposal on Activities Undertaken in Cooperation
With Minority- and Women-Owned Financial Institutions and Low-Income
Credit Unions
When the Agencies assess and take into account the community
reinvestment record of a nonminority- or nonwomen-owned financial
institution, the CRA allows the Agencies to consider as a factor
capital investment, loan participation, and other ventures undertaken
by the institution in cooperation with minority- and women-owned
financial institutions and low-income credit unions, provided that
these activities help meet the credit needs of local communities in
which such institutions and credit unions are chartered.\16\ The
Agencies propose to incorporate this statutory language into their
regulations and to clarify, consistent with the statutory language,
that, in order to receive favorable CRA consideration, such activities
need not also benefit the assessment area(s) or the broader statewide
or regional area that includes the assessment area(s) of the
nonminority- and nonwomen-owned
[[Page 31213]]
institution. Activities undertaken to assist minority- and women-owned
financial institutions and low-income credit unions will be considered
as part of the overall assessment of the nonminority- and nonwomen-
owned institution's CRA performance.
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\16\ 12 U.S.C. 2903(b).
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This proposed revision to the rule would reinforce to examiners,
financial institutions, and the public that the Agencies may consider
and take into account nonminority- and nonwomen-owned financial
institutions' activities in connection with minority- and women-owned
financial institutions and low-income credit unions. The Agencies note
their recent revisions to the ``Interagency Questions and Answers
Regarding Community Reinvestment'' that clarify this point.\17\ The
proposed rule is intended to codify this clarification in the rule.
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\17\ 74 FR 498, 507 (Jan. 6, 2009) (Q&A Sec. ----.12(g)-4).
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The Agencies propose to add the new provision addressing favorable
CRA consideration for activities in cooperation with minority- and
women-owned financial institutions and low-income credit unions to
Sec. Sec. 25.21, 228.21, 345.21, and 563e.21 of title 12 of the Code
of Federal Regulations. As discussed above, these sections apply to all
types and sizes of institutions, without regard to the performance test
under which an institution is evaluated. The new provision also is
applicable to all financial institutions.
The Agencies also are proposing a conforming amendment to Appendix
A of the regulations to include consideration of a financial
institution's activities in cooperation with minority- and women-owned
financial institutions as a factor when assigning a rating to the
institution.
Request for Comments
General Request for Comments
The Agencies request comments on the proposed revisions. Smaller
financial institutions are invited to comment on whether the proposed
regulations should be modified to address any implementation issues
unique to their lines of business or to provide additional flexibility.
Request for Comments on ``Education Loans''
The new statutory provision specifies that the Agencies must
consider low-cost ``education loans'' to low-income borrowers. The
Agencies specifically request comment on how to define ``education
loans.''
As proposed, the definition includes only loans for post-
secondary education (i.e., education at a level beyond high school). As
explained above, section 1031 of the HEOA is not expressly limited to
loans for higher education. Should the definition also extend to loans
for elementary or secondary education?
Should the definition include loans made for education
expenses at an ``institution of higher education'' as that term is
generally defined in sections 101 and 102 of the Higher Education Act
of 1965 (``HEA''), 20 U.S.C. 1001 and 1002, which would include
accredited public and private colleges and universities, whether for-
profit or nonprofit, as well as accredited vocational institutions that
prepare students for gainful employment in a recognized occupation and
certain institutions outside the United States? Should the scope be
expanded or narrowed?
Should the scope of the definition be expanded to include
loans made for education expenses at any ``covered educational
institution'' as that term is defined in section 140 of the Truth in
Lending Act, 15 U.S.C. 1650, which would also encompass unaccredited
institutions, consistent with the Board's proposed approach to defining
that term for purposes of Regulation Z? \18\ Are there reasons that
weigh against including loans to attend unaccredited institutions?
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\18\ See 75 FR 12464 (Mar. 24, 2009).
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Should the scope of the definition be narrowed to
encompass only loans made for education expenses at an ``institution of
higher education'' as that term is defined for general purposes in
section 101 of the HEA, 20 U.S.C. 1001, which is limited to accredited
public and nonprofit colleges, universities, and employment training
schools in the United States for high school graduates or the
equivalent, and public or nonprofit educational institutions in the
United States that admit students beyond the age of compulsory school
attendance, even if they are not high school graduates or the
equivalent?
``Private education loans,'' as defined in section
140(a)(7) of the Truth in Lending Act, would include education loans
made by financial institutions under local and State education loan
programs. Should all education loans offered to low-income borrowers
under State or local education programs, regardless of whether the fees
and costs are comparable to those under Department of Education
programs, be eligible for CRA consideration? Should private loans not
made, insured, or guaranteed under a Federal, State, or local education
program be considered for CRA purposes?
``Private education loans,'' as defined in section
140(a)(7) of the Truth in Lending Act, include only closed-end,
unsecured loans. That means, for example, that if a borrower obtained a
home equity loan for a student's education, it would not be considered
a private education loan. Is it appropriate to limit CRA consideration
to only closed-end, unsecured private education loans? Why or why not?
The Agencies request comment on whether our proposal to
limit education loans to those originated by the institution, rather
than purchased by the lender, is appropriate. Why or why not?
Request for Comments on ``Low-Cost'' Loans.
The statutory provision requires the Agencies to consider
institutions' ``low-cost'' education loans to low-income borrowers, but
does not define ``low-cost.'' Guaranteed education loans provided by
financial institutions through the U.S. Department of Education's
Federal Family Education Loan Program (FFEL Loans) are subject to
maximum interest rates, which are calculated using statutory formulas.
These rates are the same as rates charged to borrowers under the
William D. Ford Direct Loan Program. Currently, the interest rate in
effect for unsubsidized fixed-rate loans under the FFEL Stafford loan
program or the William D. Ford Direct Loan program, which are made to
undergraduate and graduate students, is 6.8 percent. The current
interest rate for FFEL Plus loans, which are made to parents of
dependent undergraduate students and to graduate or professional degree
students, is 8.5 percent.
Although variable-rate loans are no longer available under the
Department of Education programs, the Department of Education publishes
rates annually for those variable rate student loans that remain
outstanding. The rate effective July 1, 2008 through June 30, 2009, for
variable-rate loans in repayment is 4.21 percent under both the FFEL
Stafford loan program and the William D. Ford Direct Loan program. Fees
that may be charged by lenders on FFEL Stafford and Plus loans are also
comparable to fees charged on loans made directly by the U.S.
Department of Education. The loan fee/origination fee on a Direct
Stafford loan is 2.5 percent of the loan amount; the loan fee/
origination fee on a Direct Plus loan is 4 percent.
The Agencies are proposing to define ``low-cost education loans''
as education loans that are originated by financial institutions
through a program of the
[[Page 31214]]
U.S. Department of Education or any private education loans, including
loans under State or local education loan programs, originated by
financial institutions with interest rates and fees no greater than
those of comparable education loan programs offered by the U.S.
Department of Education. The Agencies note that currently the rates and
fees allowed under the FFEL Stafford loan program and the FFEL Plus
loan program would typically be used to evaluate whether an
institution's education loan is low cost.
Is the Agencies' definition of the term ``low-cost
education loans'' appropriate? If not, how should the Agencies define
low-cost education loans?
How should the Agencies determine whether a private
education loan (including a loan made by an institution under a State
or local education loan program) is ``comparable'' to a Department of
Education loan?
Should the Agencies use the lowest or highest rate and
fees available under the comparable Department of Education program?
Request for Comments on ``Low-Income Borrower''
The CRA regulations currently define ``low-income'' to mean an
individual income that is less than 50 percent of the area median
income. The Agencies propose to use that definition to define ``low-
income borrower.''
However, various education programs offered by the U.S. Department
of Education are targeted to individuals who have financial needs; and
the criteria for the programs vary. Most relevant, for example, are the
Federal Student Aid programs available to students seeking assistance
for education programs beyond high school. Most Federal Student Aid
programs, other than unsubsidized programs available through financial
institutions, including unsubsidized Stafford and FFEL Plus loans,
consider ``financial need.'' Financial need is determined by dividing
the cost of attendance at the school by the expected family
contribution (EFC). The EFC is calculated according to a formula that
considers family taxable and untaxed income, assets and benefits, e.g.,
unemployment, family size, and the number of family members who will be
attending college. Another example of a Department of Education program
that considers income is the TRIO program, which encompasses the Upward
Bound, Talent Search, and Student Support Services programs. The TRIO
program is targeted to ``low-income individuals,'' meaning an
individual whose family's taxable income for the preceding year did not
exceed 150 percent of the poverty level amount.
The proposed rule provides that the term, ``low-income,''
will have the same meaning as that term is defined in the existing CRA
rule with respect to individuals. Consistent with current guidance, if
an institution considers the income of more than one person in
connection with an education loan, the gross annual incomes of all
primary obligors on the loan, including co-borrowers and co-signers,
would be combined to determine whether the borrowers are ``low-
income.'' Should the Agencies consider defining ``low-income'' for
purposes of this proposed provision differently than the term is
already defined in the CRA regulation? If so, why and how?
Specifically, how should the Agencies treat the income of a student's
family or other expected family contributions to ensure that the CRA
consideration provided is consistent with HEOA's focus on low-income
borrowers?
Request for Comments Regarding Other Education Loan Issues
As proposed, institutions would receive favorable qualitative
consideration for originating ``low-cost education loans to low-income
borrowers'' as a factor in the institutions' overall CRA rating. Such
loans would be considered responsive to the credit needs of the
institutions' communities.
As discussed above, under the current CRA regulations,
institutions may choose to have education loans evaluated as consumer
loans under the lending test applicable to the institution. If an
institution opts to have education loans evaluated, the loans would be
evaluated quantitatively, based on the data the institution provides.
Should the agencies also allow an institution to receive separate
quantitative consideration for the number and amount of low-cost
education loans to low-income borrowers as part of its CRA evaluation
under the performance test applicable to that institution, without
regard to other consumer loans?
Education loans, including those that do not qualify for
consideration as ``low-cost education loans for low-income borrowers''
(e.g., purchased education loans, loans that are not low-cost, and
loans that are not made to low-income borrowers) would continue to be
eligible for consideration as consumer loans, at an institution's
option, under existing CRA rules.
As discussed above, the Agencies propose to insert the revision
regarding low-cost education loans to low-income borrowers into 12 CFR
25.21, 228.21, 345.21, and 563e.21, which apply to all institutions,
regardless of the performance test under which an institution is
evaluated.
Is it readily understandable to institutions and other
interested parties that the provision is applicable to all institutions
through that placement in the regulation?
Request for Comments on the Proposed Inclusion in the CRA Regulations
of the Statutory Language Regarding Activities Undertaken in
Cooperation With Minority- and Women-Owned Financial Institutions and
Low-Income Credit Unions
The agencies request general comment on the proposal to include in
their CRA regulations the statutory language that allows the agencies
to consider as a factor in a nonminority- or nonwomen-owned financial
institution's CRA evaluation capital investments, loan participations,
and other ventures undertaken in cooperation with minority- and women-
owned financial institutions and low-income credit unions, consistent
with prior agency guidance.\19\
---------------------------------------------------------------------------
\19\ Interagency Questions and Answers Regarding Community
Reinvestment, 74 FR 498, 507 (Jan. 6, 2009).
---------------------------------------------------------------------------
In addition, as discussed above, the Agencies propose to insert the
revision regarding institutions' activities in cooperation with
minority- and women-owned institutions and low-income credit unions
into 12 CFR 25.21, 228.21, 345.21, and 563e.21, which apply to all
institutions, regardless of which performance test under which an
institution is evaluated.
Is it readily understandable to institutions and other
interested parties that the provision is applicable to all institutions
through that placement?
Request for Comments Regarding the Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, sec.
722, 133 Stat. 1338, 1471 (Nov. 12, 1999), requires the Agencies to use
plain language in all proposed and final rules published after January
1, 2000. Therefore, the Agencies specifically invite your comments on
how to make this proposal easier to understand. For example,
Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the proposed regulations clearly
stated? If
[[Page 31215]]
not, how could the regulations be more clearly stated?
Do the proposed regulations contain language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulations easier to
understand? If so, what changes to the format would make them easier to
understand?
What else could we do to make the regulations easier to
understand?
Regulatory Analysis
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Ch. 3506; 5 CFR 1320 Appendix A.1), each agency reviewed its proposed
rule and determined that there are no new collections of information
contained therein. However, the amendments may have a negligible effect
on burden estimates for existing information collections, including
recordkeeping requirements for consumer loans.
Regulatory Flexibility Act
Under section 605(b) of the Regulatory Flexibility Act (RFA), 5
U.S.C. 605(b), the initial regulatory flexibility analysis otherwise
required under section 603 of the RFA is not required if an agency
certifies, along with a statement providing the factual basis for such
certification, that the proposed rule will not have a significant
economic impact on a substantial number of small entities. The Small
Business Administration (SBA) has defined ``small entities'' for
banking purposes as a bank or savings association with $165 million or
less in assets. See 13 CFR 121.201. Each agency has reviewed the impact
of this joint proposed rule on the small entities subject to its
regulation and supervision and certifies that the proposal will not
have a significant economic impact on a substantial number of the small
entities that it regulates and supervises.
The proposal would incorporate into the CRA regulations statutory
language that requires the Agencies to consider as a factor in
evaluating an institution's CRA performance low-cost education loans
provided by the financial institution to low-income borrowers. The
proposal also would incorporate into the CRA regulations existing
statutory language that allows the agencies to consider as a factor in
evaluating CRA performance certain activities of nonminority- and
nonwomen-owned financial institutions entered into in cooperation with
minority- and women-owned financial institutions and low-income credit
unions. However, the joint proposal would not impose new requirements
on small entities because the CRA performance test for small entities
(as defined above) does not specify that small institutions must engage
in any particular types of lending, just that they will be evaluated on
the types of lending in which they choose to engage. Accordingly, a
regulatory flexibility analysis is not required.
OCC and OTS Executive Order 12866 Determination
The OCC and the OTS have each determined that its portion of this
joint proposed rule is not a significant regulatory action as defined
in Executive Order 12866.
OCC and OTS Unfunded Mandates Reform Act of 1995 Determination
Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded
Mandates Act) (2 U.S.C. 1532) requires that covered agencies prepare a
budgetary impact statement before promulgating a rule that includes any
Federal mandate that may result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires
covered agencies to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule. The OCC and the OTS
have determined that this joint proposed rule will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of $100 million or more in any one year. Accordingly, neither
agency has prepared a budgetary impact statement or specifically
addressed the regulatory alternatives considered.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Impact of Federal Regulation on Families
The FDIC has determined that this joint proposed 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, Public Law 105-277 (5 U.S.C. 601 note).
OCC and OTS Executive Order 13132 Determination
The OCC and the OTS have each determined that its portion of this
joint proposed rule does not have any Federalism implications, as
required by Executive Order 13132.
List of Subjects
12 CFR Part 25
Community development, Credit, Investments, National banks,
Reporting and recordkeeping requirements.
12 CFR Part 228
Banks, Banking, Community development, Credit, Investments,
Reporting and recordkeeping requirements.
12 CFR Part 345
Banks, Banking, Community development, Credit, Investments,
Reporting and recordkeeping requirements.
12 CFR Part 563e
Community development, Credit, Investments, Reporting and
recordkeeping requirements, Savings associations.
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
For the reasons discussed in the joint preamble, the Office of the
Comptroller of the Currency proposes to amend part 25 of chapter I of
title 12 of the Code of Federal Regulations as follows:
PART 25--COMMUNITY REINVESTMENT ACT AND INTERSTATE DEPOSIT
PRODUCTION REGULATIONS
1. The authority citation for part 25 is revised to read as
follows:
Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215,
215a, 481, 1814, 1816, 1828(c), 1835a, 2901 through 2908, and 3101
through 3111.
2. In Sec. 25.21, add new paragraphs (e) and (f) to read as
follows:
Sec. 25.21 Performance tests, standards, and ratings, in general.
* * * * *
(e) Low-cost education loans provided to low-income borrowers. In
assessing and taking into account the record of a bank under this part,
the OCC considers, as a factor, low-cost education loans provided by
the bank to borrowers in its assessment area(s) who have an individual
income that is less than 50
[[Page 31216]]
percent of the area median income. For purposes of this paragraph,
``low-cost education loans'' means:
(1) Education loans originated by the bank through a loan program
of the U.S. Department of Education; or
(2) Any other private education loan, as defined in section
140(a)(7) of the Truth in Lending Act (including a loan under a state
or local education loan program), originated by the bank for a student
at an ``institution of higher education,'' as that term is generally
defined in sections 101 and 102 of the Higher Education Act of 1965 (20
U.S.C. 1001 and 1002) and the implementing regulations published by the
Department of Education, with interest rates and fees no greater than
those of comparable education loans offered through loan programs of
the U.S. Department of Education.
(f) Activities in cooperation with minority- or women-owned
financial institutions and low-income credit unions. In assessing and
taking into account the record of a nonminority-owned and nonwomen-
owned bank under this part, the OCC considers as a factor capital
investment, loan participation, and other ventures undertaken by the
bank in cooperation with minority- and women-owned financial
institutions and low-income credit unions, provided that such
activities help meet the credit needs of local communities in which the
minority- and women-owned financial institutions and low-income credit
unions are chartered. To be considered, such activities need not also
benefit the bank's assessment area(s) or the broader statewide or
regional area that includes the bank's assessment area(s).
3. In Appendix A to Part 25, paragraph (a)(1) is revised to read as
follows:
Appendix A to Part 25--Ratings
(a) * * * (1) In assigning a rating, the OCC evaluates a bank's
performance under the applicable performance criteria in this part,
in accordance with Sec. Sec. 25.21 and 25.28. This includes
consideration of low-cost education loans provided to low-income
borrowers and activities in cooperation with minority- or women-
owned financial institutions and low-income credit unions, as well
as adjustments on the basis of evidence of discriminatory or other
illegal credit practices.
* * * * *
Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the joint preamble, the Board of
Governors of the Federal Reserve System proposes to amend part 228 of
chapter II of title 12 of the Code of Federal Regulations as follows:
PART 228--COMMUNITY REINVESTMENT (REGULATION BB)
1. The authority citation for part 228 is revised to read as
follows:
Authority: 12 U.S.C. 321, 325, 1828(c), 1842, 1843, 1844, and
2901 through 2908.
2. In Sec. 228.21, add new paragraphs (e) and (f) to read as
follows:
Sec. 228.21 Performance tests, standards, and ratings, in general.
* * * * *
(e) Low-cost education loans provided to low-income borrowers. In
assessing and taking into account the record of a bank under this part,
the Board considers, as a factor, low-cost education loans provided by
the bank to borrowers in its assessment area(s) who have an individual
income that is less than 50 percent of the area median income. For
purposes of this paragraph, ``low-cost education loans'' means:
(1) Education loans originated by the bank through a loan program
of the U.S. Department of Education; or
(2) Any other private education loan, as defined in section
140(a)(7) of the Truth in Lending Act (including a loan under a State
or local education loan program), originated by the bank for a student
at an ``institution of higher education,'' as that term is generally
defined in sections 101 and 102 of the Higher Education Act of 1965 (20
U.S.C. 1001 and 1002) and the implementing regulations published by the
Department of Education, with interest rates and fees no greater than
those of comparable education loans offered through loan programs of
the U.S. Department of Education.
(f) Activities in cooperation with minority- or women-owned
financial institutions and low-income credit unions. In assessing and
taking into account the record of a nonminority-owned and nonwomen-
owned bank under this part, the Board considers as a factor capital
investment, loan participation, and other ventures undertaken by the
bank in cooperation with minority- and women-owned financial
institutions and low-income credit unions, provided that such
activities help meet the credit needs of local communities in which the
minority- and women-owned financial institutions and low-income credit
unions are chartered. To be considered, such activities need not also
benefit the bank's assessment area(s) or the broader statewide or
regional area that includes the bank's assessment area(s).
3. In Appendix A to Part 228, paragraph (a)(1) is revised to read
as follows:
Appendix A to Part 228--Ratings
(a) * * * (1) In assigning a rating, the Board evaluates a
bank's performance under the applicable performance criteria in this
part, in accordance with Sec. Sec. 228.21 and 228.28. This includes
consideration of low-cost education loans provided to low-income
borrowers and activities in cooperation with minority- or women-
owned financial institutions and low-income credit unions, as well
as adjustments on the basis of evidence of discriminatory or other
illegal credit practices.
* * * * *
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the joint preamble, the Board of
Directors of the Federal Deposit Insurance Corporation proposes to
amend part 345 of chapter III of title 12 of the Code of Federal
Regulations as follows:
PART 345--COMMUNITY REINVESTMENT
1. The authority citation for part 345 is revised to read as
follows:
Authority: 12 U.S.C. 1814-1817, 1819-1920, 1828, 1831u and
2901-2908, 3103-3104, and 3108(a).
2. In Sec. 345.21, add new paragraphs (e) and (f) to read as
follows:
Sec. 345.21 Performance tests, standards, and ratings, in general.
* * * * *
(e) Low-cost education loans provided to low-income borrowers. In
assessing and taking into account the record of a bank under this part,
the FDIC considers, as a factor, low-cost education loans provided by
the bank to borrowers in its assessment area(s) who have an individual
income that is less than 50 percent of the area median income. For
purposes of this paragraph, ``low-cost education loans'' means:
(1) Education loans originated by the bank through a loan program
of the U.S. Department of Education; or
(2) Any other private education loan, as defined in section
140(a)(7) of the Truth in Lending Act (including a loan under a State
or local education loan program), originated by the bank for a student
at an ``institution of higher education,'' as that term is generally
defined in sections 101 and 102 of the Higher Education Act of 1965 (20
U.S.C. 1001 and 1002) and the implementing regulations published by the
Department of Education, with interest
[[Page 31217]]
rates and fees no greater than those of comparable education loans
offered through loan programs of the U.S. Department of Education.
(f) Activities in cooperation with minority- or women-owned
financial institutions and low-income credit unions. In assessing and
taking into account the record of a nonminority-owned and nonwomen-
owned bank under this part, the FDIC considers as a factor capital
investment, loan participation, and other ventures undertaken by the
bank in cooperation with minority- and women-owned financial
institutions and low-income credit unions, provided that such
activities help meet the credit needs of local communities in which the
minority- and women-owned financial institutions and low-income credit
unions are chartered. To be considered, such activities need not also
benefit the bank's assessment area(s) or the broader statewide or
regional area that includes the bank's assessment area(s).
3. In Appendix A to Part 345, paragraph (a)(1) is revised to read
as follows:
Appendix A to Part 345--Ratings
(a) * * * (1) In assigning a rating, the FDIC evaluates a bank's
performance under the applicable performance criteria in this part,
in accordance with Sec. Sec. 345.21 and 345.28. This includes
consideration of low-cost education loans provided to low-income
borrowers and activities in cooperation with minority- or women-
owned financial institutions and low-income credit unions, as well
as adjustments on the basis of evidence of discriminatory or other
illegal credit practices.
* * * * *
Office of Thrift Supervision
12 CFR Chapter V
For the reasons set forth in the joint preamble, the Office of
Thrift Supervision proposes to amend part 563e of chapter V of title 12
of the Code of Federal Regulations as follows:
PART 563e--COMMUNITY REINVESTMENT
1. The authority citation for part 563e is revised to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1814, 1816,
1828(c), and 2901 through 2908.
2. In Sec. 563e.21, add new paragraphs (e) and (f) to read as
follows:
Sec. 563e.21 Performance tests, standards, and ratings, in general.
* * * * *
(e) Low-cost education loans provided to low-income borrowers. In
assessing and taking into account the record of a savings association
under this part, the OTS considers, as a factor, low-cost education
loans provided by the savings association to borrowers in its
assessment area(s) who have an individual income that is less than 50
percent of the area median income. For purposes of this paragraph,
``low-cost education loans'' means:
(1) Education loans originated by the savings association through a
loan program of the U.S. Department of Education; or
(2) Any other private education loan, as defined in section
140(a)(7) of the Truth in Lending Act (including a loan under a State
or local education loan program), originated by the savings association
for a student at an ``institution of higher education,'' as that term
is generally defined in sections 101 and 102 of the Higher Education
Act of 1965 (20 U.S.C. 1001 and 1002) and the implementing regulations
published by the Department of Education, with interest rates and fees
no greater than those of comparable education loans offered through
loan programs of the U.S. Department of Education
(f) Activities in cooperation with minority- or women-owned
financial institutions and low-income credit unions. In assessing and
taking into account the record of a nonminority-owned and nonwomen-
owned savings association under this part, the OTS considers as a
factor capital investment, loan participation, and other ventures
undertaken by the savings association in cooperation with minority- and
women-owned financial institutions and low-income credit unions,
provided that such activities help meet the credit needs of local
communities in which the minority- and women-owned financial
institutions and low-income credit unions are chartered. To be
considered, such activities need not also benefit the savings
association's assessment area(s) or the broader statewide or regional
area that includes the savings association's assessment area(s).
3. In Appendix A to part 563e, paragraph (a)(1) is revised to read
as follows:
Appendix A to Part 563e--Ratings
(a) * * * (1) In assigning a rating, the OTS evaluates a savings
association's performance under the applicable performance criteria
in this part, in accordance with Sec. Sec. 563e.21 and 563e.28.
This includes consideration of low-cost education loans provided to
low-income borrowers and activities in cooperation with minority- or
women-owned financial institutions and low-income credit unions, as
well as adjustments on the basis of evidence of discriminatory or
other illegal credit practices.
* * * * *
Dated: June 19, 2009.
John C. Dugan,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, June 23, 2009.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 23rd day of June 2009.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
Dated: June 17, 2009.
By the Office of Thrift Supervision.
John E. Bowman,
Acting Director.
[FR Doc. E9-15204 Filed 6-29-09; 8:45 am]
BILLING CODE 4810-33-P