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Federal Reserve Bank
OF DALLAS
ROBERT
AND

D. M c T E E R , J R .

president
CH IE F E X EC U TIV E

2 7 , 1992
November

OFFICER

dallas, texas 7 5 2 2 2

Notice 92-114
TO:

The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Initiatives to Facilitate Recovery
in Major Disasters Areas
DETAILS

The federal financial institutions regulatory agencies have an­
nounced several initiatives to facilitate recovery in major disaster areas
such as those areas affected by Hurricanes Andrew and Iniki
and the Los
Angeles civil unrest. These initiatives are being taken to implement the
provisions of the Depository Institutions Disaster Relief Act of 1992 (DIDRA),
which was enacted on October 23, 1992. The initiatives include:
•

issuance of a joint interagency order to waive the real estate
appraisal requirements and the agencies’ appraisal regulations,
for a period of 36 months from the date the President declared a
major disaster in the areas affected by Hurricanes Andrew and
Iniki and the Los
Angeles civil unrest;

•

implementation of agency orders granting relief from leverage
ratio capital standards under prompt corrective action if an
institution experiences a temporary increase in its total asset
position because of the deposit of insurance proceeds or govern­
ment assistance funds paid to depositors in connection with
damage or loss caused by a major disaster;

•

adoption of exceptions to the Regulation Z rules regarding
consumer waivers of the right to cancel certain home-secured
loans so that borrowers in the major disaster areas may more
readily gain access to loan funds;

•

extension of the interagency statement on supervisory practices
issued in connection with the Los Angeles civil unrest and
Hurricane Andrew to communities devastated by Hurricane Iniki;
and,

•

giving positive consideration in assessing performance under the
Community Reinvestment Act to a financial institution’s active

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

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2

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participation in programs where most or all of the financing
provided may ultimately benefit low- and moderate-income borrow­
ers or such neighborhoods located outside of the institution’s
delineated community.
ATTACHMENTS

A copy of the agencies’ joint news release, the Board’s notice, and
the interagency statement concerning those affected by Hurricane Iniki are
attached.
MORE INFORMATION

For more information, please contact Gloria Vasquez Brown at (214)
922-5266. For additional copies of this Bank’s notice, please contact the
Public Affairs Department at (214) 922-5254.
Sincerely yours,

Joint News Release

Federal Reserve Board
Comptroller of the Currency
Office of Thrift Supervision
Federal Deposit Insurance Corporation
National Credit Union Administration

For immediate release

November 13, 1992

The federal financial institutions regulatory agencies
today announced several initiatives to facilitate recovery in
major disasters areas such as those areas affected by Hurricanes
Andrew and Iniki and the Los Angeles civil unrest.

These

initiatives are being taken to implement the provisions of the
Depository Institutions Disaster Relief Act of 1992 ("DIDRA"),
which was enacted on October 23, 1992.
As authorized under section 2 of DIDRA, the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
the National Credit Union Administration (NCUA), the Office of
the Comptroller of the Currency (OCC), and the Office of Thrift
Supervision (OTS) have jointly issued an interagency order to
waive the real estate appraisal requirements of Title XI of the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), and the agencies' appraisal regulations
promulgated under FIRREA, for a period of 36 months from the date
the President declared a major disaster in the areas affected by
Hurricanes Andrew and Iniki and the Los Angeles civil unrest.

A

copy of the Federal Register notice is attached.
The FDIC, Federal Reserve, OCC, and OTS are also in

the

process of implementing section 4 of DIDRA, Deposit of Insurance
Proceeds.

This section allows the agencies, by individual order,

2

to grant relief from leverage ratio capital standards under
prompt corrective action if an institution experiences a
temporary increase in its total asset position because of the
deposit of insurance proceeds or government assistance funds paid
to depositors in connection with damage or loss caused by a major
disaster.

Depository institutions that are headquartered in a

major disaster area and that derive more than 60 percent of their
total deposits from the area of intense devastation should
contact the appropriate Federal Reserve Bank, FDIC or OTS
regional office, or OCC district office if they believe that an
exception from the leverage ratio capital standards will be
necessary.

Such regulatory relief may be allowed for an 18-month

period from the enactment of DIDRA.
The Federal Reserve Board has also adopted an order to
permit an exception to the Regulation Z rules regarding consumer
waivers of the right to cancel certain home-secured loans so that
borrowers in the major disaster areas may more readily gain
access to loan funds.

Regulation Z sets a mandatory waiting

period of three days before funds can be disbursed so that
consumers have time to reflect on the terms of the loan and to
elect to cancel the loan.

This order makes it easier for a

consumer in a major disaster area to waive the three-day waiting
period if the home securing the extension of credit is located in
the disaster area.

This exception expires one year from the date

of enactment of DIDRA or from the date the area was declared a
major disaster, whichever is earlier.

A copy of the Federal

Register notice is attached.
Further, the FDIC, Federal Reserve, OCC, and OTS have
extended the interagency statement on supervisory practices

3

issued in connection with the Los Angeles civil unrest and
Hurricane Andrew to communities devastated by Hurricane Iniki.
The statement indicates that efforts to restructure debt or
extend repayment terms— so long as these efforts are consistent
with safe and sound banking practice— should not be subject to
examiner criticism.

A copy of this statement is attached.

Finally, in keeping with the intent of DIDRA and the
agencies' previous initiatives to encourage financial
institutions to meet the needs of communities devastated by major
disasters, the FDIC, Federal Reserve, OCC, and OTS in assessing
Community Reinvestment Act ("CRA") performance will give positive
consideration to a financial institution's active participation
in programs where most or all of the financing provided may
ultimately benefit low- and moderate-income borrowers or such
neighborhoods located outside of the institution's delineated
community.

In determining whether and to what extent positive

consideration will be given, the agencies will assess the
activities undertaken in the context of an institution's overall
CRA program.

Where such participation augments or complements an

overall CRA program that is directly responsive to the credit
needs in an institution's delineated community, it will be
considered favorably in reaching an overall CRA conclusion.
Further, under section 6 of DIDRA, national banks and state
member banks are authorized to make community development
investments of up to 5 percent of capital stock plus 5 percent of
their unimpaired surplus.
-

Attachments

0-

[4810-33-M]
[6210-01-F]
[6714-01-M]
[6720-01-M]
[7535-01-M]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 34, Subpart C
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225, Subpart G
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 323
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 564
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 722
Real Estate Appraisal Exceptions in Major Disaster Areas

AGENCIES: Office of the Comptroller of the Currency, Treasury;
Board of Governors of the Federal Reserve System; Federal Deposit
Insurance Corporation; Office of Thrift Supervision, Treasury;
and National Credit Union Administration.

ACTION:

SUMMARY:

Statement and Order; Temporary exceptions.

Section 2 of the Depository Institutions Disaster

Relief Act of 1992 (DIDRA), signed by the President on
October 23, 1992, authorizes the agencies to make exceptions to
statutory and regulatory requirements relating to appraisals for
certain transactions.

The exceptions are available for

transactions that involve real property in major disaster areas

-

DATES:

2

-

This order is effective as of November 12, 1992.

FOR FURTHER INFORMATION CONTACT: Adrienne D. Hurt, Senior
Attorney, Division of Consumer and Community Affairs, at (202)
452-2412; for the hearing impaired only, contact Dorothea
Thompson, Telecommunications Device for the Deaf, at (202) 452­
3544, Board of Governors of the Federal Reserve System,
Washington, DC 20551.
SUPPLEMENTARY INFORMATION:

In May 1992, civil unrest occurred in

Los Angeles and in August 1992, Hurricanes Andrew and Iniki
devastated areas in Florida, Louisiana, and Hawaii.
Subsequently, the President declared the affected communities
major disaster areas.

To facilitate recovery from major

disasters, the Depository Institutions Disaster Relief Act of
1992 (DIDRA), Pub. L. 102-485, 106 Stat. 2771 (1992), was enacted
into law on October 23, 1992.

Section 3 of DIDRA authorizes the

Board, until April 23, 1993, to take immediate action to make
temporary exceptions to the Truth in Lending Act (TILA) and
Regulation Z for transactions in an area the President has
declared to be a major disaster area, pursuant to section 401 of
the Robert T. Stafford Disaster Relief and Emergency Assistance
Act, 42 U.S.C. 5170.
Under the TILA and Regulation Z, with some exceptions, a
consumer has the right to cancel a credit obligation that is
secured by the consumer's principal dwelling.

Because of the

3

Board of Governors of the Federal Reserve System (Board):
Rhoger H. Pugh, Assistant Director,

(202) 728-5883, Stanley B.

Rediger, Supervisory Financial Analyst,

(202) 452-2629, or

Virginia M. Gibbs, Senior Financial Analyst,

(202) 452-2521,

Division of Banking Supervision and Regulation; or Christopher
Bellini, Attorney (202) 452-3269, Legal Division; 20th and
Constitution Avenue, NW., Washington, DC 20551.

Federal Deposit Insurance Corporation (FDIC):
Robert F. Miailovich, Associate Director,

(202) 898-6918,

James D. Leitner, Examination Specialist,

(202) 898-6790,

Division of Supervision; or Walter P. Doyle, Counsel,

(202) 898­

3682, Legal Division, 550 17th Street, NW., Washington, D. C.
20429.

National Credit Onion Administration (NCUA)
Michael J. McKenna, Office of General Counsel,

(202) 682-9630, or

Alonzo Swann, Office of Examination and Insurance,
9640; 1776 G Street NW., Washington, D. C.

(202) 682­

20456.

SUPPLEMENTARY INFORMATION:
Statement
Section 2 of DIDRA authorizes the agencies to make
exceptions to existing appraisal requirements to facilitate
recovery in designated major disaster areas, so long as safety
and soundness are not compromised.

This has the effect of

excluding transactions to which the exceptions apply from the
definition of "federally related transaction."

Such exceptions

expire not later than three years after the disaster is declared
by the President.
The agencies have determined that recovery from Hurricanes
Andrew and Iniki and from the Los Angeles civil unrest in May
1992 would be facilitated by excepting transactions involving
real estate located in the areas directly affected by those
disasters from the real estate appraisal requirements of title XI
of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA) and the regulations promulgated pursuant to
title XI of FIRREA.

Disruption of real estate markets in the

affected areas interferes with the ability of regulated
institutions to obtain appraisals that comply with statutory and
regulatory requirements.

The order issued with this statement

removes that impediment to depository institutions making loans
and engaging in other transactions that would help to finance
reconstruction and rehabilitation of such areas.
The agencies also have determined that safety and soundness
would not be adversely affected by such exceptions so long as the
institution's records relating to any such excepted transaction
clearly indicate either that the property involved was directly
affected by the disaster or that the transaction would facilitate
recovery from the disaster.

In addition, the transaction must

continue to be subject to review by management and by the
agencies in the course of examination of the institution under

5

normal supervisory standards relating to safety and soundness,
though the transactions need not comply with the

specific

requirements of title XI of FIRREA and the agencies' existing
appraisal regulations.

Expiration Dates
Exceptions for Florida and Louisiana counties affected by
Hurricane Andrew expire August 23, 1995 and August 25, 1995,
respectively.

Exceptions for Hawaii counties affected by

Hurricane Iniki expire September 11, 1995.

Exceptions for Los

Angeles County expire May 1, 1995.

Order
In accordance with section 2 of DIDRA, relief is hereby
granted from the provisions of title XI of FIRREA and the
agencies' appraisal regulations promulgated thereunder1 for
any real estate-related financial transaction that requires an
appraisal under those provisions; provided that the transaction
involves real property located in an area designated eligible for
Federal assistance by the Federal Emergency Management Agency as

12
12
12
12
12

CFR
CFR
CFR
CFR
CFR

part
34,subpartC
(OCC);
parts 208 and 225, subpart G (Board);
part
323(FDIC);
part
564 (OTS);
part
722(NCUA).

6

a result of Hurricanes Andrew2 or Iniki3 or of the Los Angeles
civil unrest in May 1992;4
PROVIDED:
The real property involved was directly affected by the
major disaster; or
The real property involved was not directly affected by the
major disaster but the institution's records explain how the
transaction would facilitate recovery from the disaster;
AND FURTHER PROVIDED:
There is a binding commitment to fund a transaction that is
made within three years after the date the major disaster was
declared by the President; and
The regulated institution retains in its files, for examiner
review, appropriate documentation supporting the property's
valuation.

Florida counties:

Broward, Collier, Dade, Monroe.

Louisiana parishes: Acadia, Allen, Ascension,
Assumption, Avoyelles, Calcasieu, Cameron, East Baton
Rouge, East Feliciana, Evangeline, Iberia, Iberville,
Jefferson, Jefferson Davis, Lafayette, Lafourche,
Livingston, Orleans, Plaquemines, Pointe Coupee,
Rapides, St. Bernard, St. Charles, St. Helena,
St. James, St. John the Baptist, St. Landry, St.
Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne,
Vermilion, Washington, West Baton Rouge, West
Feliciana.
Hawaiian counties: Hawaii, Kahoolawe, Kauai, Lanai,
Maui, Molokai, Niihau, Oahu.
Los Angeles county.

7

DEPARTMENT OF THE TREASURY
OFFICE OF THE COMPTROLLER OF THE CURRENCY

Date
Acting Comptroller of the Currency

CERTIFIED TO BE A TRUE COPY OF THE ORIGINAL DOCUMENT

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

William W. Wiles
Secretary of the Board

FEDERAL DEPOSIT INSURANCE CORPORATION

November 4, 1992
Date
"
Deputy Executive Secretary

DEPARTMENT OF THE TREASURY
OFFICE OF THRIFT SUPERVISION

t Az
,A

Date

•

U inl.
LXz

Jonathan L. Fiechter
Acting Director

NATIONAL CREDIT UNION ADMINISTRATION

Date

Beckv Bak^
Becky Bak^r
Secretary of the Board

FEDERAL RESERVE SYSTEM
Depository Institutions Disaster Relief Act of 1992; Truth in Lending Act
[Docket No. R-0780]
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of Order.
SUMMARY: The Depository Institutions Disaster Relief Act of 1992
temporarily authorizes the Board to take immediate action to make
exceptions to the Truth in Lending Act and Regulation Z (which
implements the Act) for transactions in an area the President has
declared to be a major disaster area.

In accordance with this

law, the Board is granting temporary relief from certain
provisions of Regulation Z governing waivers by consumers of the
right to rescind certain home-secured loans, so that borrowers in
disaster affected communities in Florida, Hawaii, Louisiana, and
California can gain easier access to loan funds for emergency
purposes.

The relief from Regulation Z provides that a

consumer's need to obtain funds immediately shall be regarded as
a bona fide personal financial emergency for purposes of
Regulation Z, and the use of preprinted forms for consumers to
waive the right of rescission is permitted; provided that the
home securing the extension of credit is located in the disaster
area.

A consumer must still provide the creditor with a signed,

dated waiver statement that a personal financial emergency
exists.

2

when the exceptions would facilitate recovery from the disaster
and would not be inconsistent with safety and soundness.

Any

such exceptions would expire no later than three years after the
disaster is declared by the President.

The specific expiration

dates are set out in SUPPLEMENTARY INFORMATION.

DATES:

This order is effective on [DATE OF PUBLICATION IN THE

FEDERAL REGISTER] and expires for specific areas on the dates
listed in SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT:

Office of the Comptroller of the Currency (OCC):
Thomas E. Watson, National Bank Examiner,
William C. Kerr, National Bank Examiner,

(202) 874-5350, or
(202) 874-5170, Office

of the Chief National Bank Examiner; or Horace G. Sneed, Senior
Attorney,

(202) 874-5310, Bank Operations and Assets Division,

250 E Street, SW., Washington, DC 20219.

Office of Thrift Supervision (OTS):
OTS:

Robert Fishman, Program Manager, Credit Risk,

5672; Deirdre Kvartunas, Program Analyst,

(202) 906­

(202) 906-7933; Diana

Garmus, Deputy Assistant Director, Corporate Activities,

(202)

906-5683; Ellen J. Sazzman, Attorney, Regulations and Legislation
Division, Chief Counsel's Office,
NW., Washington, DC 20552.

(202) 907-7133; 1700 G Street,

risk of loss of the consumer's home in the event of default,
there is a mandatory waiting period of three business days before
funds can be disbursed in order to give consumers an opportunity
to reflect on the loan terms and to elect to cancel the
transaction.
A consumer may modify or waive this right of rescission to
meet a bona fide personal financial emergency.

Under Regulation

Z, 12 CFR 226.15(e) and 226.23(e), the consumer must provide the
creditor a written, signed and dated waiver statement that
describes the emergency.

The waiver statement may not be

executed on a preprinted form.
Through discussions with various sources about the major
disaster areas noted above, and based on the Board's experience
in monitoring compliance with Regulation Z, the Board has
determined that the three-day waiting period that provides a
consumer the opportunity to rescind a loan, and the restriction
on the use of a preprinted form to execute a waiver of the right
of rescission, may disadvantage borrowers in the major disaster
areas who are in immediate need of the loan proceeds.

Therefore,

the Board believes that granting relief in these situations can
reasonably be expected to produce benefits to the public that
outweigh possible adverse effects.
Accordingly, pursuant to its authority under section 3 of
DIDRA, provided that the dwelling securing the extension of
credit is located in an area of Florida, Louisiana, Hawaii, or

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4

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California that was declared a major disaster by the President
under section 401 of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5170, as a result of
Hurricanes Andrew1 or Iniki2 or the civil unrest in Los Angeles
in May 1992,3 the Board hereby:

(1) determines that a consumer's

need to obtain funds immediately shall be regarded as a bona fide
personal financial emergency for purposes of §§ 226.15(e) and
226.23(e) of Regulation Z and (2) grants relief from §§ 226.15(e)
and 226.23(e) of Regulation Z to permit the use of preprinted
forms for consumers to waive the right of rescission. The Board
notes that consumers must still provide creditors with signed,
dated waiver statements in these transactions.
As required by section 3 of DIDRA, the relief from
Regulation Z provided in this Order shall expire on:

(1) May 2,

1993, for areas affected by the civil unrest in Los Angeles;

(2)

August 24, 1993, for areas affected by Hurricane Andrew in
Florida;

(3) August 26, 1993, for areas affected by Hurricane

1 Florida counties: Broward, Collier, Dade, Monroe.
Louisiana parishes: Acadia, Allen, Ascension, Assumption,
Avoyelles, Calcasieu, Cameron, East Baton Rouge, East Feliciana,
Evangeline, Iberia, Iberville, Jefferson, Jefferson Davis,
Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe
Coupee, Rapides, St. Bernard, St. Charles, St. Helena, St. James,
St. John the Baptist, St. Landry, St. Martin, St. Mary, St.
Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West
Baton Rouge, West Feliciana.
2 Hawaiian counties: Hawaii, Kahoolawe, Kauai, Lanai, Maui,
Molokai, Niihau, Oahu.
3 Los Angeles County.

Andrew in Louisiana; and (4) September 12, 1993, for areas
affected by Hurricane Iniki in Hawaii.

By order of the Board of Governors of the Federal Reserve
System, dated November 5, 1992.

(signed^ William W. Wiles
William W. Wiles
Secretary of the Board

Interagency Statement on Supervisory Practices Regarding
Depository Institutions and Borrowers Affected by
Hurricane Iniki
It has been a long-standing practice of the Federal
bank and thrift regulatory agencies (Federal Deposit Insurance
Corporation, Board of Governors of the Federal Reserve System,
Office of the Comptroller of the Currency and the Office of
Thrift Supervision) to promote supervisory actions that encourage
depository institutions to work constructively with borrowers who
are experiencing difficulties due to conditions beyond their
control. The physical destruction and disruption caused by the
hurricane in Kauai has placed financial pressures on businesses
and individuals in the affected areas, in some cases adversely
affecting their ability to repay loans in accordance with
original terms and conditions. Often the financial pressures
stemming from such events are transitory in nature, and borrowers
are able to resume payments when economic conditions improve or
the borrowers' financial positions stabilize. Under such
circumstances, depository institutions may determine that the
most prudent policy is to work with borrowers experiencing
difficulty, in a manner that is consistent with sound banking
practices, rather than take more precipitous actions such as
foreclosure and/or forcing the borrower into bankruptcy.
Lenders may find that it is beneficial to work with
borrowers experiencing difficulties by extending terms of
repayment or otherwise restructuring the borrower's debt
obligations.
Such cooperative efforts can ease pressures on
troubled borrowers, improve the capacity of such borrowers to
service debt, and strengthen a depository institution's ability
to collect on its loans. Depository institutions in areas
affected by widespread destruction may also deem it appropriate
to ease credit-extending terms for new loans to certain
borrowers, consistent with prudent banking practices, in order to
assist the borrowers in recovering their financial strength and
place them in a better economic position to service their debts.
With proper risk controls and management oversight, these steps
can contribute to the health of the local community, as well as
serve the long-run interests of the lending institution.
If
carried out in a prudent manner, such efforts on the part of the
lender will not be subject to examiner criticism.
In addition, depository institutions in the affected
areas may find that their levels of delinquent and nonperforming
loans will increase.
Consistent with long-standing practice, the
Federal bank and thrift regulatory agencies in supervising these
institutions will take into consideration the unusual
circumstances they face.

1

One of the principal objectives of the examination and
supervision process is to achieve an accurate assessment of a
depository institution's loan portfolio and financial
condition.
In carrying out their supervisory responsibilities,
the Federal bank and thrift regulatory agencies recognize that
efforts to work with borrowers in communities under stress, if
conducted in a reasonable way, are consistent with safe and sound
banking practice as well as in the public interest.

2


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102