District Circular Letters

June 01, 2000

BANKING SUPERVISION AND REGULATION:
EXAMINATION PROCEDURES FOR
HOMEOWNERS PROTECTION ACT

REGULATION P: PRIVACY OF
CONSUMER FINANCIAL INFORMATION

REQUEST FOR COMMENT:
DISCLOSURE AND REPORTING OF
CRA-RELATED AGREEMENTS

To State Member Banks,
Bank Holding Companies, U.S.
Branches and Agencies of Foreign Banks,
and Others Concerned
in the Twelfth Federal Reserve District

Examination Procedures for the Homeowners Protection Act (HOPA) (CA 00-5)

Please find attached the examination procedures for the Homeowners Protection Act (HOPA), which were recommended by the FFIEC and subsequently adopted by the Board. These procedures reflect statutory provisions of the HOPA, which became effective on July 29, 1999. The HOPA requires lenders or servicers to provide certain disclosures and notifications concerning private mortgage insurance (PMI) on loans secured by the consumer's primary residence consummated on or after July 29, 1999. The Act also contains disclosure provisions for mortgage loans that closed before July 29, 1999. In addition, the Act includes provisions requiring borrower-requested cancellation and automatic termination of PMI.

Agencies Approve New Regulation P: Privacy of Consumer Financial Information (R-1058)

The final regulations implementing the provisions of the Gramm-Leach-Bliley Act governing the privacy of consumer financial information have been approved. They impose three main requirements:

• Financial institutions must provide initial notices to customers about their privacy policies, describing the conditions under which they may disclose nonpublic personal information to nonaffiliated third parties and affiliates. These notices must be accurate, clear, and conspicuous.
• Financial institutions must provide annual notices of their privacy policies to their current customers. These notices must be accurate, clear, and conspicuous.
• Financial institutions must provide a reasonable method for consumers to "opt out" of disclosures to nonaffiliated third parties. That is, consumers must be given a reasonable opportunity to "opt out" and a reasonable means to do so. Consumers may exercise their "opt out" option at any time.

The regulations apply to financial institutions for which the agencies have primary supervisory authority. The regulations limit disclosure by financial institutions of "nonpublic personal information" about individuals who obtain financial products or services for personal, family, or household purposes. Subject to certain exceptions allowed by law, the regulations cover information sharing between financial institutions and nonaffiliated third parties.

The regulations are effective November 13, 2000, but in order to provide sufficient time for financial institutions to establish policies and procedures and to put in place systems to implement the requirements of the regulations, the time for full compliance with the regulations is extended until July 1, 2001.

Agencies Propose Rule on Disclosure and Reporting of Agreements Relating to CRA (Community Reinvestment Act) (R-1069)

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision jointly request comments on a proposed rule implementing section 711, CRA Sunshine Requirements, of the recently enacted Gramm-Leach-Bliley Act.

Section 711 establishes annual reporting and public disclosure requirements for certain written agreements between insured depository institutions or their affiliates and nongovernmental entities or persons (including business entities) made pursuant to, or in connection with, the fulfillment of the Community Reinvestment Act of 1977 (CRA). The proposed rule would implement the requirements of the statute.

Section 711 exempts from coverage all agreements with nongovernmental entities or persons that have not had a contact concerning the CRA with the relevant banking organization or a banking agency. Certain types of loans and loan commitments also are exempt from coverage. The proposed rule would implement the exemptions in the statute.

Consistent with the statute, the proposed rule seeks to implement the disclosure and reporting requirements of section 711 in a manner that limits potential burden. For example, the proposed rule would establish simple reporting procedures where possible and would allow nongovernmental entities or persons to use reports that they have prepared for other purposes, such as tax returns and financial statements, if these reports provide the information required by the Act.

The agencies will accept comments on the proposed rule until July 21, 2000.

Copies

Paper copies of the Board's documents (Docket R-1058, 1069, CA 00-5) are available from our Corporate Services Department. To request copies to be sent by mail, please call (415) 974-2060. CA 00-5 is also available by fax. To request copies of CA 00-5 to be faxed, please call (415) 974-3333, and specify document number 4121.

Additional Information

For additional information about the examination procedures, please contact our Banking Supervision and Regulation Department, at (415) 974-2953, or (415) 974-2955.

FEDERAL RESERVE BANK OF SAN FRANCISCO

Attachment: Not all attachments are available electronically.