12 U.S.C. § 4541: Prior approval authority for…

Summary

The Director must require each enterprise to get approval before offering any new product for the first time. To approve a product, the Director must find that it is allowed by the laws that govern each enterprise (for the Federal National Mortgage Association, certain parts of sections 1717(b) or 1719; for the Federal Home Loan Mortgage Corporation, certain parts of section 1454(a)). The Director must also find the product is in the public interest and that it is consistent with the safety and soundness of the enterprise and the mortgage finance system. An enterprise must send a written request in the form the Director requires. The Director must publish notice and let the public comment for 30 days. Within 30 days after that comment period ends, the Director must approve or deny the product in writing. If the Director does not act in that 30-day window, the enterprise may offer the product. The Director can give temporary approval in urgent situations and can attach conditions to any approval. The approval rules do not apply to certain things, such as an automated loan underwriting system that existed on July 30, 2008 (and its upgrades), certain changes to mortgage terms or underwriting that don’t change the basic mortgage transaction, and other similar activities the Director defines. If an enterprise thinks a new activity is not a product, it must notify the Director in writing and wait. The Director must decide within 15 days whether it is a product; if the Director does not decide, the enterprise may start the activity. Nothing in these rules limits the Director’s authority to protect safety and soundness or to check that products match the enterprise’s legal mission.

Title 12, §4541

Banks and Banking, Source: USLM XML via OLRC

(a)In general

The Director shall require each enterprise to obtain the approval of the Director for any product of the enterprise before initially offering the product.

(b)Standard for approval

In considering any request for approval of a product pursuant to subsection (a), the Director shall make a determination that—

(1)in the case of a product of the Federal National Mortgage Association, the product is authorized under paragraph (2), (3), (4), or (5) of section 1717(b) or section 1719 of this title;

(2)in the case of a product of the Federal Home Loan Mortgage Corporation, the product is authorized under paragraph (1), (4), or (5) of section 1454(a) of this title;

(3)the product is in the public interest; and

(4)the product is consistent with the safety and soundness of the enterprise or the mortgage finance system.

(c)Procedure for approval

(1)Submission of request

An enterprise shall submit to the Director a written request for approval of a product that describes the product in such form as prescribed by order or regulation of the Director.

(2)Request for public comment

Immediately upon receipt of a request for approval of a product, as required under paragraph (1), the Director shall publish notice of such request and of the period for public comment pursuant to paragraph (3) regarding the product, and a description of the product proposed by the request. The Director shall give interested parties the opportunity to respond in writing to the proposed product.

(3)Public comment period

During the 30-day period beginning on the date of publication pursuant to paragraph (2) of a request for approval of a product, the Director shall receive public comments regarding the proposed product.

(4)Offering of product

(A)In general

Not later than 30 days after the close of the public comment period described in paragraph (3), the Director shall approve or deny the product, specifying the grounds for such decision in writing.

(B)Failure to act

If the Director fails to act within the 30-day period described in subparagraph (A), then the enterprise may offer the product.

(C)Temporary approval

The Director may, subject to the rules of the Director, provide for temporary approval of the offering of a product without a public comment period, if the Director finds that the existence of exigent circumstances makes such delay contrary to the public interest.

(d)Conditional approval

If the Director approves the offering of any product by an enterprise, the Director may establish terms, conditions, or limitations with respect to such product with which the enterprise must comply in order to offer such product.

(e)Exclusions

(1)In general

The requirements of subsections (a) through (d) do not apply with respect to—

(A)the automated loan underwriting system of an enterprise in existence as of July 30, 2008, including any upgrade to the technology, operating system, or software to operate the underwriting system;

(B)any modification to the mortgage terms and conditions or mortgage underwriting criteria relating to the mortgages that are purchased or guaranteed by an enterprise, provided that such modifications do not alter the underlying transaction so as to include services or financing, other than residential mortgage financing; or

(C)any other activity that is substantially similar, as determined by rule of the Director to—

(i)the activities described in subparagraphs (A) and (B); and

(ii)other activities that have been approved by the Director in accordance with this section.

(2)Expedited review

(A)Enterprise notice

For any new activity that an enterprise considers not to be a product, the enterprise shall provide written notice to the Director of such activity, and may not commence such activity until the date of receipt of a notice under subparagraph (B) or the expiration of the period described in subparagraph (C). The Director shall establish, by regulation, the form and content of such written notice.

(B)Director determination

Not later than 15 days after the date of receipt of a notice under subparagraph (A), the Director shall determine whether such activity is a product subject to approval under this section. The Director shall, immediately upon so determining, notify the enterprise.

(C)Failure to act

If the Director fails to determine whether such activity is a product within the 15-day period described in subparagraph (B), the enterprise may commence the new activity in accordance with subparagraph (A).

(f)No limitation

Nothing in this section may be construed to restrict—

(1)the safety and soundness authority of the Director over all new and existing products or activities; or

(2)the authority of the Director to review all new and existing products or activities to determine that such products or activities are consistent with the statutory mission of an enterprise.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 4541, Pub. L. 102–550, title XIII, § 1321, Oct. 28, 1992, 106 Stat. 3952, related to the Secretary of Housing and Urban Development’s regulatory authority, prior to repeal by Pub. L. 110–289, div. A, title I, § 1121(2), July 30, 2008, 122 Stat. 2689.

§4541 Prior Approval Authority for Products

Summary

Title 12, §4541

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Citations & Metadata