hich shall have priority within ragraph (a)(10) in accordance e terms of the written instruhat evidence such claims.

terest after the date of default ns under paragraph (a)(6) of tion shall be at a rate or rates 1 monthly to reflect the avere for U.S. Treasury bills with ies of not more than ninety1) days during the preceding 5) months.

the rejection or repudiation of xpired lease or executory cony the receiver gives rise to a or damages, such claims, if alshall be classified as a claim s accrued and become uncondi

fixed on or before the date of , and not as an administrative e of the receiver.

11 unsecured claims of any cater class or priority described in aphs (a)(1) through (a)(10) of ection shall be paid in full, or on made for such payment, any claims of lesser priority are f there are insufficient funds to claims of a category or class in istribution to claimants in such ry or class shall be made pro Notwithstanding anything to the ry herein, the receiver may, at me, and from time to time, prior payment in full of all claims of gory or class with higher prioriake such distributions to claimin priority classes outlined in raphs (a)(1) through (a)(6) of ection as the receiver believes are mably necessary to conduct the ership, provided that the receivetermines that adequate funds or will be recovered during the vership to pay in full all claims of higher priority.

If the association is in mutual

and a surplus remains after ng distribution in full of allowed as as set forth in paragraphs (a) (b) of this section, such surplus be distributed to the depositors roportion to their accounts as of date of default.

R 25132, July 5, 1988, as amended at 53 0667, Aug. 15, 1988]

Sec.

PART 570-BOARD RULINGS

570.1-570.2 [Reserved]

570.3 Reserves; Federal insurance reserve; transfers from; undivided profits. 570.4 Regulatory capital. 570.7 Appraisals; payment for. 570.8 Computation of scheduled items, assets and specified assets. 570.10 Separate corporate existence of a

service corporation.

570.11 Most Favored Lender status. 570.12 Insurance of accounts evidenced by

negotiable instruments.

570.13 Insurance of annuity accounts.

AUTHORITY: Secs. 552, 559, 80 Stat. 383, 388, as amended (5 U.S.C. 552, 559); sec. 11, 47 Stat. 733, as amended (12 U.S.C. 1431); sec. 5, 48 Stat. 132, as amended (12 U.S.C. 1464); secs. 401-403, 405, 407, 48 Stat. 12551257, 1259-1260, as amended (12 U.S.C. 1724-1726, 1728, 1730); sec. 414, as added by sec. 522, 94 Stat. 165, as amended (12 U.S.C. 1730g); Reorg. Plan No. 3 of 1947, 12 FR 4981, 3 CFR, 1943-48 Comp., p. 1071.

88 570.1-570.2 [Reserved]

§ 570.3 Reserves; Federal insurance reserve; transfers from; undivided profits.

Section 563.11 of this subchapter requires that the Federal insurance reserve be used solely for the purpose of absorbing losses, permits only асcounts so limited in use to be designated as the Federal insurance reserve, and provides that the general reserves of Federal associations are deemed to meet such requirement. No deduction may be made from, and no charge may be made against, such reserves for any purpose other than to absorb losses. No reduction of the Federal insurance reserve, through transfers therefrom to undivided profits or surplus, is permissible.

[29 FR 9606, July 16, 1964] §570.4 Regulatory capital.

(a) The term "regulatory capital" is defined in § 561.13 of this subchapter to mean the sum of equity capital as determined in accordance with generally accepted accounting principles, definitional capital, certain other components of capital as the Board determines consistent with its risk analysis conventions, and risk analysis reporting forbearances. To the extent regulatory capital includes reserves (except specific or valuation reserves),

the rules set forth in paragraphs (b) and (c) of this § 570.4 shall apply.

(b) Specific loss reserves required by the California Savings and Loan Commissioner under section 7255 of the California Savings and Loan Association Law are not specific reserves within the meaning of the foregoing exception clause unless established in respect of loans whose outstanding balance is in excess of the appraised value of the security property as determined by the Commissioner.

(c) Temporary designation of a portion of earned surplus or undivided profits as a specific loss reserve, and subsequent restoration to earned surplus or undivided profits, shall not be deemed to constitute a previous allocation to another regulatory capital account within the meaning of paragraph (e) of § 563.13 of this chapter.

[29 FR 11334, Aug. 6, 1964, as amended at 30 FR 8963, July 16, 1965; 52 FR 18352, May 15, 1987]

8 570.7 Appraisals; payment for.

(a) Payment by the Institution. Paragraph (b) of § 563.17-1 of this subchapter provides, among other things, that if appraisals of real estate securing an insured institution's loans are obtained as part of an examination by the Insurance Corporation, the cost of such appraisals shall promptly be paid by the insured institution direct to the appraiser or appraisers. Failure to make payment for appraisals as provided in § 563.17-1 of this subchapter within 60 days after receipt of a statement of the cost of the appraisals approved by the Chief Examiner will be considered a violation of a regulation to which the insured institution is subject within the meaning of section 407 of the National Housing Act, as amended.

(b) Payment by the Corporation. In any instance where the cost of appraisals has not been paid as provided in paragraph (a) of this section, the Corporation will make such payment to the appraiser or appraisers and, in turn, charge such cost to the insured institution as part of the cost of examination. Payment by the Corporation will not constitute correction by the insured institution of the violation of the regulation.

[30 FR 11101, Aug. 27, 1965]

§ 570.8 Computation of scheduled items, assets and specified assets.

(a) Insurance Regulation § 563.17-2 provides for the establishment of specific reserves in connection with the reevaluation of assets of an insured institution.

(b) The amount of any specific reserve established to offset the overvaluation of any asset shall be deducted from the book value of the asset in determining scheduled items, assets and specified assets.

[30 FR 14196, Nov. 11, 1965]

8 570.10 Separate corporate existence of a service corporation.

(a) General. If an insured institution and its service corporation fail to maintain their separate corporate existence, a court, for equitable reasons in an extreme situation, might hold the institution liable for the obligations of its service corporation. To insure judicial recognition of the separate corporation existence of service corprations, the institution and its service corporations should operate so that: (1) Their respective business transactions, accounts, and records are not intermingled, (2) each observes the formalities of their separate corporate procedures, (3) each is adequately financed as a separate unit in the light of normal obligations reasonably foreseeable in a business of its size and character, (4) each is held out to the public as a separate enterprise, and (5) the insured institution does not dominate the service corporation to the extent that the latter is treated as a mere department of the former. In recommending such operating prac tices, the Board is not suggesting that a failure to follow one or more or all of such practices by an insured institution and its service corporation should cause a court to ignore the separate corporate existence of the service corporation.

(b) Operation of service corpora tions. Section 563.37(a) of this subchapter requires that an insured institution and its service corporations be operated in a manner which demonstrates their separate corporate exist

Failure to assure corporate sepaess could result in serious risk to sured institution and to the Coron. In monitoring compliance - § 563.37(a) of this subchapter, Corporation will look for ates of corporate separateness as those contained in paragraph this section.

26112, Sept. 18, 1973; 38 FR 29569, , 1973]

1 Most Favored Lender status. Under section 522 of the DeposiInstitutions Deregulation and tary Control Act, insured instituare authorized to charge on any an interest rate equal to the er of one percentage point above iscount rate on ninety day comal paper in the institution's FedReserve district or "the rate al1 by the laws of the State * * * e such institution is located" Lever either of these rates exceeds rate the institution is currently Litted. 12 U.S.C 1730g. The stated ose of this provision is to provide ed institutions with competitive lity with national banks. In view is Congressional purpose and the cial construction of the phrase e allowed by the laws of the e" in the context of the National

Act, it is the opinion of the d that section 522 allows insured tutions to charge interest at a rate to exceed the greater of either one ent above the Federal Reserve ty-day discount rate or the rate aled to the most favored lender on particular class of loans under De law whenever the greater of er of these rates exceeds the rate institution is permitted to charge State law.

) Insured institutions may only rge the preferential rates reserved most favored lenders when they making the same type of loans as most favored lender. Accordingly, ared institutions could not charge maximum loan rates permitted for all loan companies unless that loan t the substantive state law requirents as to loan term amount, use of oceeds, identity of borrower, etc. nsumer protections specifically reired in such loans when made by

the most favored lender would also be considered substantive and must be included in loans made by insured institutions which desire to use most-favored-lender rates.

(c) Federally-chartered insured institutions would not be required to submit to state most-favored-lender restrictions that are primarily procedural or regulatory in nature. Such restrictions would include licensing, bonding, and reporting to State authorities. The degree to which statechartered insured institutions must comply with such restrictions will be determined by their State supervisors. [46 FR 13988, Feb. 25, 1981]

§ 570.12 Insurance of accounts evidenced by negotiable instruments.

(a) General. Section 564.1 of this chapter authorizes the Corporation to determine the insured members of an institution in default "from the account contracts and the books and records of the institution, or otherwise." If any insured account is evidenced by a negotiable account certificate, negotiable draft, negotiable cashier's or officer's check, negotiable certified check, negotiable money order, negotiable traveler's check, negotiable letter of credit, or any other negotiable instrument, the owner of such instrument will be recognized for all purposes of claim for insured accounts to the same extent as if such person's name and interest were disclosed in the account contracts, books and records of the institution as an insured member, provided the instrument was in fact negotiated to such person prior to the date of the closing of the institution. Affirmative proof of such negotiation must be offered in all cases to substantiate the claim. For purposes of this section, the term "insured account" includes monies received by the insured institution in payment for a cashier's check, money order, traveler's check, or similar instrument payable by the institution or payable out of funds of the institution on deposit with another financial institution.

(b) Collecting institution acting as agent. Where an institution in default has become obligated for the payment of an item forwarded for collection by

an institution acting solely as agent, the owner of the item shall be entitled to insurance coverage if the conditions of the preceding paragraph are met. Such collecting institution shall be recognized as the agent of such owner for the purpose of making an assignment of the rights of such owner against the insured institution to the Corporation and for the purpose of receiving payment on behalf of such

owner.

[46 FR 30080, June 5, 1981]

§ 570.13 Insurance of annuity accounts.

(a) Definition. For purposes of this Ruling, the term "annuity account" means an account established or maintained by an insurance company at an insured institution for the exclusive purpose of funding life insurance contracts or annuity contracts (and any benefits incidental to such contracts), payable in fixed or variable amounts, or both, Provided, however, That the account was established or maintained pursuant to a state statute which, at the time the life insurance contract or annuity contract was issued:

(1) Required the insurance company to establish or maintain a “separate account" for the purpose described above; and

(2) Provided that the "separate account" was the property of the insurance company and that the insurance company could not be, or hold itself out to be, a trustee with respect to the funds in the separate account.

(b) Insurance of annuity accounts. Pursuant to the Board's Insurance Regulations, trust-account insurance is only available to express irrevocable trusts, established pursuant to either trust instrument or statute, which are valid under applicable state law. 12 CFR 561.4, 564.2(a), 564.10. Annuity accounts, as defined in section (a) above, do not meet these requirements and, therefore, can not be insured as trust accounts pursuant to the Board's regulations.

(c) Delay of effective date. Application of the interpretation of the Corporation's insurance regulations set forth in this Ruling shall be delayed, in the case of annuity accounts opened before August 18, 1986, in reliance upon opinions of the Board's Office of

General Counsel, until the expiration of the annuity contracts underlying those accounts.

[51 FR 29459, Aug. 18, 1986, as amended at 53 FR 27675, July 22, 1988]

PART 571-STATEMENTS OF POLICY

Sec.

571.1 Appraisal of real estate securing assets of insured institutions. 571.1a Classification of certain assets. 571.1b Appraisal policies and practices of insured institutions and service corporations.

571.2 Audits of insured institutions. 571.3 Interest-rate-risk management. 571.4 Hazard insurance.

571.5 Mergers and transfers of assets and liabilities.

571.6 Policy considerations regarding 'de novo' applications for insurance of accounts.

571.7 Conflicts of interest.

571.8 Investment in State housing corporations.

571.9 Corporate opportunity in insured institutions.

571.10 Gold and gold-related transactions. 571.11 Exclusive leases and similar agreements.

571.12 Applications processing guidelines. 571.13 Participation interests in pools of loans.

571.14 Fidelity bonds; acceptable surety companies.

571.15 Fiduciary activities of state-chartered insured institutions and service corporations.

571.16 Mortgage-backed-securities transaction.

571.17 [Reserved]

571.18 Accounting for troubled debt restructuring.

AUTHORITY: Sec. 5A, 47 Stat. 727, as added by sec. 1, 64 Stat. 256, as amended (12 U.S.C. 1425a); sec. 17, 47 Stat. 736, as amended (12 U.S.C. 1437); sec. 5, 48 Stat. 132, as amended (12 U.S.C. 1464); secs. 402, 403, 406, 407, 48 Stat. 1256, 1257, 1259, 1260, as amended (12 U.S.C. 1725, 1726, 1729, 1730); Reorg. Plan No. 3 of 1947, 12 FR 4981, 3 CFR 1943-48 Comp., p. 1071.

§ 571.1 Appraisal of real estate securing assets of insured institutions.

Insurance Regulations § 563.17-1 provides that the examination of an insured institution shall include appraisals when deemed advisable. It has been, and it now is, the policy of the

1 Home Loan Bank Board to he real estate securing an ininstitution's assets appraised specific facts or information respect to mortgage loans or g, or with respect to operations eral give evidence that an instis appraisals may be excessive ending may be of a marginal

that appraisals policies and es may not conform with genercepted and established professtandards or that assets secured 1 estate are overvalued. This ent of policy sets out the basic nes for a determination that aps should be obtained and the ures to be employed in obtainh appraisals.

eneral. (1) Notwithstanding any ons hereinafter set out in this ent of policy, appraisals may, ill, be made in any instance

in the opinion of the Board, ppraisals are necessary to prone interests of the Corporation, insured institutions, or the - Further, the Director of the 's Office of Examinations and vision has been, and continues to thorized to direct that an exami■, including such appraisals as he advisable, be made at any time y insured institution and any nents made herein shall not act dify or limit such authority.

As used in this statement of , the term "professional appraiseans an individual whose qualifis are demonstrated by means of - membership in a national apl organization or an individual in the opinion of a Chief Examfor the Board qualifies under ards equivalent to those estabby such national organizations. Cact that a professional appraiser ployed by an insured institution fee or salary basis need not, of - adversely affect the acceptabilany report of appraisal prepared - under the direct supervision of appraiser.

A determination to obtain apals must be the product of a careonsideration of current facts and rs and, therefore, such a determion will usually be geared to the orprocesses of examination.

(4) The exercise of judgment in arriving at a decision to obtain appraisals has been, and must continue to be, a matter which requires consultation and close cooperation between all examining and supervisory personnel.

(b) Authority of Supervisory Agent to obtain appraisals. The Board's Supervisory Agent for the Federal Home Loan Bank district in which the home office of an insured institution is located is authorized to instruct the Board's Chief Examiner for such district to obtain, in connection with any examination of such insured institution, appraisals of real estate securing the institution's assets when, in the opinion of such Supervisory Agent, the institution's policies and practices and operating results and trends are such as to cause concern over the quality of such assets.

(c) Authority of Chief Examiner to obtain appraisals. The Board's District Director, Examinations, for the Federal Home Loan Bank district in which the home office of an insured institution is located is authorized to obtain, as a part of and in connection with an examination, appraisals of real estate securing such institution's loans and contracts when an examination discloses the following conditions or such conditions are otherwise known or found to exist:

(1) When the institution's independent public accountant disclaims an opinion on its financial statements in his report of audit because he is of the opinion that the fair market value of real estate securing assets is materially less than book value of such assets.

(2) When the institution's independent public accountant expresses an opinion in his report of audit that the financial statements do not fairly present the institution's financial position or results of operations because of potential losses in the loan portfolio or on the sale of real estate owned.

(3) When a borrower agrees or otherwise obligates himself to pay, or does pay, fees or other consideration to a third party to induce an inflow of funds to savings accounts or checking accounts in the institution.

(4) When there has been two or more changes in record ownership of the security property in comparatively