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F ed er a l R eser ve Ba n k
DALLAS, TEXAS

of

Dallas

75222

Circular No. 73-121
May 21, 1973

Notice of Possible Rule Making
/
REGULATION Y
(Underwriting Real Estate Mortgage Guarantee Insurance)

To All Banks, Bank Holding Companies, and Others
Concerned in the Eleventh Federal Reserve District:

The Board of Governors of the Federal Reserve System
on May lU, 1973, issued for comment a notice of possible rule
making with respect to applications to the Board to engage in
the activity of underwriting real estate mortgage guarantee
insurance by bank holding companies.
The proposal is enclosed. Comments should be received
by the Secretary, Board of Governors of the Federal Reserve
System, Washington, D. C. 20551? not later than June lU, 1973-

Yours very truly,
P. E. Coldwell,
President
Enclosure

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

FEDERAL RESERVE SYSTEM
[12 CFR Part 225]
[Reg Y]
Bank Holding Companies
Notice of Applications to Acquire Companies to be Engaged
in the Underwriting of Real Estate Mortgage Guaranty Insurance;
and of Possible Rulemaking with Respect Thereto.
The Board of Governors has received the following applica­
tions filed pursuant to § 4(c)(8) of the Bank Holding Company
Act (12 U.S.C. 1848(c)(8)) and § 225.4(b)(2) of the Board's
Regulation Y (12 CFR 225.4(b)(2)) for prior approval to acquire
shares of companies to be engaged in the underwriting of real
estate mortgage guaranty insurance.
1.

Indiana National Corporation, Indianapolis, Indiana,

has applied to acquire voting shares of Monument Insurance Company,
Indianapolis, Indiana, a proposed d e novo insurance company to be
t
organized under Indiana law to underwrite real estate mortgage
guaranty insurance.
2.

First Virginia Bankshares Corporation, Falls Church,

Virginia, has applied to acquire voting shares of Commonwealth
Mortgage Guaranty Company, Falls Church, Virginia, a proposed
de novo insurance company to be organized under Virginia law to
underwrite real estate mortgage guaranty insurance.

-2 -

The activity of underwriting real estate mortgage guaranty
insurance has not heretofore been found by the Board to be closely
related to banking.

Both Applicants state that the proposed

activity essentially involves a credit decision, is part of the
credit-extending process, and, as such, is, in Applicants'
opinion, so closely related to banking as to be a proper incident
thereto.
In connection with these applications, the Board will also
consider possible rulemaking to add the proposed activity to the
list of activities the Board has previously determined to be
closely related to banking.

In its deliberations on the activity

proposed in the present applications and the proposed rulemaking
related thereto, the Board will also consider possible imposition
of certain restrictions and requirements upon bank holding company
entry into the proposed activity.

Among the restrictions and

requirements the Board will consider are that?
a.

the proposed subsidiary may not underwrite real
estate mortgage guaranty insurance on mortgages
originated by the holding company system;

b.

the proposed subsidiary must, prior to under­
writing any insurance, become an insurer qualified
by the Federal Home Loan Mortgage Corporation;

c.

the bank holding company system may not make demand
deposits in or reduce correspondent service charges

>

-3 for any financial institution as an indirect means
of compensating that financial institution for
utilizing the holding company's proposed underwriting
subsidiary; and
d.

the name of the proposed subsidiary may not
resemble that of the holding company or any
subsidiary bank.

Additionally, the Board will consider the desirability of
providing that, with respect to any proposed mortgage guaranty
subsidiary, due to its status as a nonbanking subsidiary, in no
event may the resources of any banking subsidiary of the holding
company be used to support such company if it encounters financial
difficulties.
Interested persons may express their views on the question
of whether the underwriting of real estate mortgage guaranty
insurance is so closely related to banking or managing or
controlling banks as to be a proper incident thereto, and the
restrictions and requirements which are being considered in
connection with the proposed activity.
Interested persons may also express their views on the
question of whether consummation of the subject proposals can
"reasonably be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices."

- 4-

Any requests for a hearing on these questions should be
accompanied by a statement summarizing the evidence the person
requesting the hearing proposes to submit or to elicit at the
hearing and a statement of the reasons why this matter should not
be resolved without a hearing.
The applications may be inspected at the offices of the
Board of Governors or at the respective Federal Reserve Banks of
each of the bank holding companies.
Any views or requests for hearing should be submitted in
writing and received by the Secretary, Board of Governors of
the Federal Reserve System, Washington, D. C. 20551, not later
than June 14, 1973.
By order of the Board of Governors, effective May 14, 1973.
(Signed) Tynan Smith
Tynan Smith
Secretary of the Board

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