FRH5_20180226_omb

Supporting Statement for the
Recordkeeping Requirements Associated with the
Real Estate Lending Standards Regulation for State Member Banks
(FR H-5; OMB No. 7100-0261)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the Recordkeeping Requirements Associated with the Real Estate Lending
Standards Regulation for State Member Banks (FR H-5; OMB No. 7100-0261). This
information collection is a mandatory recordkeeping requirement contained in the Board’s
Regulation H - Membership of State Banking Institutions in the Federal Reserve System
(12 CFR 208.51) that implements section 304 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). State member banks must adopt and maintain a written
real estate lending policy that is reviewed and approved by the bank’s board of directors at least
annually. Also, these banks must identify in their loan records loans in excess of the Board’s
supervisory loan-to-value (LTV) limits. There is no formal reporting form and the information is
not submitted to the Board. The total annual burden is estimated to be 20,745 hours.
Background and Justification
Section 304 of FDICIA requires each of the federal banking agencies1 to adopt uniform
regulations prescribing standards for extensions of credit secured by liens on or interest in real
estate or made for the purpose of financing the construction of a building or other improvements
in real estate, regardless of whether a lien has been taken on the property. In establishing these
standards, the agencies considered the risk posed to the deposit insurance fund by such
extensions of credit, the need for safe and sound operation of insured depository institutions, and
the availability of credit.
Effective March 19, 1993, the agencies adopted uniform real estate lending standards
regulations, which the Board adopted as an amendment to Regulation H. Regulation H requires
state member banks to adopt and maintain written real estate lending policies consistent with safe
and sound banking practices. A bank’s lending policies must establish loan portfolio
diversification standards; prudent underwriting standards, including loan-to-value (LTV) limits;
loan administration procedures; and loan documentation, approval, and reporting requirements.
The policies must be appropriate to the size of the institution and the nature and scope of its
operations. The lending policies should also reflect consideration of the Interagency Guidelines
for Real Estate Lending Policies (Guidelines) that the agencies established as an appendix to the
regulation.2 The bank’s board of directors must review the real estate lending policies at least
annually. The bank’s internal LTV limits generally may not exceed the supervisory LTV limits
as set forth in the Guidelines. However, the Guidelines permit a bank to originate or purchase
loans with LTV ratios in excess of the supervisory limits based on the support provided by other
1

The term federal banking agencies means the Board, the Office of the Comptroller of the Currency, and the
Federal Deposit Insurance Corporation.
2
See 12 CFR Part 208, Appendix C.

credit factors. Bank records must identify loans that exceed the supervisory LTV limits and
aggregate the amount of these loans for board of directors reporting.
Description of Information Collection
Each state member bank must keep records of all loans that exceed the supervisory LTV
limits established by the Guidelines. State member banks must also maintain written internal
real estate lending policies. These policies may be incorporated into the bank’s overall lending
policies and must address the requirements in Regulation H and the Guidelines as described
above.
Time Schedule for Information Collection
The Federal Reserve System neither collects nor publishes the information required under
the collection. Bank examiners verify compliance with the real estate lending standards,
regulation, and guidelines during examinations of state member banks.
Legal Status
The FR H-5 is authorized by section 304 of FDICIA (12 U.S.C. 1828(o)) which provides
the Federal Reserve to require the recordkeeping requirements associated with the Board’s
Regulation H (12 CFR 208.51). The obligation of state member banks to comply with the
Regulation H recordkeeping requirements is mandatory. Since the information is not collected by
the Federal Reserve, no issue of confidentiality under the Freedom of Information Act (FOIA)
normally arises. However, information gathered by the Federal Reserve during examinations of
state member banks would be deemed exempt from disclosure by exemption 8 of FOIA (5 U.S.C.
552(b)(8)). In addition, exemptions (b)(4) and (b)(6) of FOIA (5 U.S.C. 552(b)(4) and (b)(6))
also may exempt from disclosure certain data (specifically, individual loans identified as in excess
of supervisory loan-to-value limits) collected in response to these requirements if gathered by the
Federal Reserve, depending on the particular circumstances. These additional exemptions relate
to confidential commercial and financial information and personal information, respectively.
Applicability of these exemptions would be determined on a case-by-case basis.
Consultation Outside the Agency
On September 27, 2017, the Board published an initial notice in the Federal Register
(82 FR 45025) requesting public comment for 60 days on the proposal to extend, without
revision, the FR H-5. The comment period for this notice expired on November 27, 2017. The
Board did not receive any comments. On January 24, 2018, the Board published a final notice in
the Federal Register (83 FR 3347) and the information collection will be extended as proposed.
Estimate of Respondent Burden
As of December 31, 2016, 829 state member banks were required to maintain written real
estate lending policies and keep records of loans that exceed supervisory LTV limits. There
were no de novo state member banks in the past three years that would have been required to

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create a real estate lending policy statement. However, to avoid potentially underestimating the
burden on de novo state member banks, the Board has estimated that one respondent per year
will be required to create a new policy. In addition to recoding, banks will also spend time on
ongoing maintenance of a compliance monitoring system, including reviewing policies and
procedures related to implementation. The annual recordkeeping burden for real estate lending
standards is estimated to be 20,745 hours. These recordkeeping requirements represent less than
1 percent of the total Federal Reserve System paperwork burden.
Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

829

1

5

4,145

1

1

20

20

829

4

5

16,580

Number of
respondents3

FR H-5
Maintain a policy
statement
Policy statement
(de novo)
Recordkeeping for
loans with LTVs that
exceed supervisory
limits and maintaining a
system of review

20,745

Total
The annual cost to state member banks is estimated to be $1,138,9014.
Sensitive Questions

This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.

3

Number of respondents is based on information from the Changes in Number and Charters of Insured Banks
Report, (http://fedweb.frb.gov/fedweb/bsr/surveil/surveil_chrtchg.shtm) prepared by the Surveillance, Financial
Trends and Analysis section of the Board’s S&R division. For the Aggregate Report, the number of respondents is
the number of state member banks as of Fourth Quarter 2016. There were no de novo state member banks reported
for the past three years. Of these respondents, 580 are considered small entities as defined by the Small Business
Administration (i.e., entities with less than $550 million in total assets) www.sba.gov/contracting/getting-startedcontractor/make-sure-you-meet-sba-size-standards/table-small-business-size-standards.
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Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rate (30% Office & Administrative Support at $18, 45% Financial Managers at
$67, 15% Lawyers at $67, and 10% Chief Executives at $93). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2016, published March 31, 2017, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System associated with this recordkeeping requirement is
minimal because there are no reporting forms and the information is not submitted to the Federal
Reserve.

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