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Mortgage Banking Comptrollers Handbook - under what circumstances a bank holding company engaged in nonbank activities, directly or indirectly through a subsidiary, pursuant to section 4(c)(8) of the Bank Holding Company Act of 1956; section 4(c)(6) is an unqualified grant of permission to a bank holding company to own 5 percent of the shares of any nonbanking company each of the participating stockholders must be viewed as engaging in the business of insurance underwriting

Mortgage Banking Comptrollers Handbook - under what circumstances a bank holding company engaged in nonbank activities, directly or indirectly through a subsidiary, pursuant to section 4(c)(8) of the Bank Holding Company Act of 1956; section 4(c)(6) is an unqualified grant of permission to a bank holding company to own 5 percent of the shares of any nonbanking company each of the participating stockholders must be viewed as engaging in the business of insurance underwriting

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Published by Mary Cochrane

Bank Holding Company Act - FDIC

12 U.S.C. 1843(c)(8)), may acquire the assets and employees of another company, without first obtaining Board approval pursuant to section 4(c)(8) and the Board's Regulation Y (12 CFR 225.4(b)).

http://www.fdic.gov/regulations/laws/rules/6000-1860.html



section 2(a)(2)(A) of the Act is particularly appropriate on the facts presented here. The company is, in practical effect, a conglomeration of separate business ventures each owned 100 percent by a stockholder the value of whose economic interest in the company is determined by reference to the profits and losses attributable to its respective class of stock. Furthermore, it is the Board's opinion that this application of section 2(a)(2)(A) is not inconsistent with section 4(c)(6). Even assuming that section 4(c)(6) is intended to refer to all outstanding voting shares, and not merely the outstanding shares of a particular class of securities, section 4(c)(6) must be viewed as permitting ownership of 5 percent of a company's voting stock only when that ownership does not constitute "control" as otherwise defined in the Act. For example, it is entirely possible that a company could exercise a controlling influence over the management and policies of a second company, and thus "control" that company under the Act's definitions, even though it held less than 5 percent of the voting stock of the second company. To view section 4(c)(6) as an unqualified exemption for holdings of less than 5 percent would thus create a serious gap in the coverage of the Act.

(2) The Board believes that section 4(c)(6) should properly be interpreted as creating an exemption from the general prohibitions in section 4 on ownership of stock in nonbank companies only for passive investments amounting to not more than 5 percent of a company's outstanding stock; and that the exemption was not intended to allow a group of holding companies, through concerted action, to engage in an activity as entrepreneurs.

Bank Holding Company Act - FDIC

12 U.S.C. 1843(c)(8)), may acquire the assets and employees of another company, without first obtaining Board approval pursuant to section 4(c)(8) and the Board's Regulation Y (12 CFR 225.4(b)).

http://www.fdic.gov/regulations/laws/rules/6000-1860.html



section 2(a)(2)(A) of the Act is particularly appropriate on the facts presented here. The company is, in practical effect, a conglomeration of separate business ventures each owned 100 percent by a stockholder the value of whose economic interest in the company is determined by reference to the profits and losses attributable to its respective class of stock. Furthermore, it is the Board's opinion that this application of section 2(a)(2)(A) is not inconsistent with section 4(c)(6). Even assuming that section 4(c)(6) is intended to refer to all outstanding voting shares, and not merely the outstanding shares of a particular class of securities, section 4(c)(6) must be viewed as permitting ownership of 5 percent of a company's voting stock only when that ownership does not constitute "control" as otherwise defined in the Act. For example, it is entirely possible that a company could exercise a controlling influence over the management and policies of a second company, and thus "control" that company under the Act's definitions, even though it held less than 5 percent of the voting stock of the second company. To view section 4(c)(6) as an unqualified exemption for holdings of less than 5 percent would thus create a serious gap in the coverage of the Act.

(2) The Board believes that section 4(c)(6) should properly be interpreted as creating an exemption from the general prohibitions in section 4 on ownership of stock in nonbank companies only for passive investments amounting to not more than 5 percent of a company's outstanding stock; and that the exemption was not intended to allow a group of holding companies, through concerted action, to engage in an activity as entrepreneurs.

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Published by: Mary Cochrane on Dec 03, 2012
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Other Income Producing Activities
Mortgage Banking
 
Comptroller’s Handbook
Narrative - March 1996, Procedures - March 1998
I-MB
Comptroller of the Currency Administrator of National Banks
I
 
Comptroller's Handbook
i
Mortgage Banking
Mortgage Banking
Table of Contents
1Background1Risks Associated with Mortgage Banking2Statutory and Regulatory Authority6Capital Requirements6Management and Overall Supervision6Internal and External Audit7 Activities Associated with Mortgage Banking8Mortgage Servicing Assets21Glossary30
39
Government-run and Government-sponsored Programs78
79
 
Comptroller's Handbook
1
Mortgage Banking
Mortgage Banking
Introduction
Background
Depository institutions have traditionally originated residential mortgage loans to hold in their loan portfolios, and mortgagebanking is a natural extension of this traditional origination process. Although it can include loan origination, mortgagebanking goes beyond this basic activity. A bank that only originates and holds mortgage loans in its loan portfolio has notengaged in mortgage banking as defined here. Those activities are discussed elsewhere in the
Comptroller’s Handbook 
.Mortgage banking generally involves loan originations, purchases, and sales through the secondary mortgage market. A mortgage bank can retain or sell loans it originates and retain or sell the servicing on those loans. Through mortgagebanking, national banks can and do participate in any or a combination of these activities. Banks can also participate inmortgage banking activities by purchasing rather than originating loans.The mortgage banking industry is highly competitive and involves many firms and intense competition. Firms engagedin mortgage banking vary in size from very small, local firms to exceptionally large, nationwide operations. Commercialbanks and their subsidiaries and affiliates make up a large and growing proportion of the mortgage banking industry.Mortgage banking activities generate fee income and provide cross-selling opportunities that enhance a bank’s retailbanking franchise. The general shift from traditional lending to mortgage banking activities has taken place in the contextof a more recent general shift by commercial banks from interest income activities to non-interest, fee generatingactivities.
Primary and Secondary Mortgage Markets
The key economic function of a mortgage lender is to provide funds for the purchase or refinancing of residentialproperties. This function takes place in the
primary
mortgage market where mortgage lenders originate mortgages bylending funds directly to homeowners. This market contrasts with the
secondary
mortgage market. In the secondarymortgage market, lenders and investors buy and sell loans that were originated directly by lenders in the primarymortgage market. Lenders and investors also sell and purchase securities in the secondary market that arecollateralized by groups of pooled mortgage loans.Banks that use the secondary market to sell loans they originate do so to gain flexibility in managing their long-terminterest rate exposures. They also use it to increase their liquidity and expand their opportunities to earn fee-generatedincome.The secondary mortgage market came about largely because of various public policy measures and programs aimedat promoting more widespread home ownership. Those efforts go as far back as the 1930s. Several government-runand government-sponsored programs have played an important part in fostering home ownership, and are still importantin the market today. The Federal Housing Administration (FHA), for example, encourages private mortgage lending byproviding insurance against default. The Federal National Mortgage Association (FNMA or Fannie Mae) supportsconventional, FHA and Veteran’s Administration (VA) mortgages by operating programs to purchase loans and turnthem into securities to sell to investors. (For a more complete description of government-run and government-sponsored programs, see Appendix.)Most of the loans mortgage banks sell are originated under government-sponsored programs. These loans can besold directly or converted into securities collateralized by mortgages. Mortgage banks also sell mortgages and

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