THRIFT INDUSTRY RECOVERY REGULATIONS.

SEC. 404. THRIFT INDUSTRY RECOVERY REGULATIONS. (a) Federally Chartered Thrifts.— The Home Owners’ Loan Act of 1933 (12 U.S.C. 1461 et seq.) is amended by adding after section 9 (as added by section 402(a) of this title) the following new section: “SEC. 10. THRIFT INDUSTRY RECOVERY REGULATIONS. “(a) In General.— The Board shall prescribe capital recovery regulations for regulating and supervising troubled but well-managed and viable associations in a manner which will maximize the long-term viability of the thrift industry at the lowest cost to the Federal Savings and Loan Insurance Corporation. 101 STAT. 610 “(b) Capital Recovery.— The regulations required to be prescribed under subsection (a) shall provide that an association with net worth of 0.5 percent or more, as determined in accordance with regulatory accounting principles, may be allowed to continue to operate and be eligible for capital forbearance if— “(1) the Board determines that the association’s weak capital condition is— “(A) primarily the result of losses recognized on, the nonperforming status of, or the failure of borrowers to otherwise remain in compliance with the repayment terms of, loans, or participations in loans, the value of the collateral for which has been adversely affected by economic conditions in a designated economically depressed region; or “(B) primarily the result of losses recognized on, the nonperforming status of, or the failure of borrowers to otherwise remain in compliance with the repayment terms of, loans, or participation in loans, made by a minority association 50 percent or more of whose loan assets are minority loans and 50 percent or more of whose originated loans are construction or permanent loans for 1 to 4 family residences; “(2) the Board determines that the association’s weak capital condition is not the result of imprudent operating practices, such as practices that were speculative at the time the practices were undertaken, insider abuses, excessive operating expenses, dividends paid by the association, or actions taken solely for the purpose of qualifying for capital recovery under this subsection; “(3) the Board approves a plan submitted by the association for increasing such association’s capital; and “(4) the association— “(A) adheres to the plan approved under paragraph (3); and “(B) submits regular and complete reports on such association’s progress in meeting the association’s goals under such plan. “(c) Associations With Net Worth of Less Than 0.5 Percent May Participate in Capital Recovery.— In the regulations required to be prescribed under subsection (a), the Board may provide that a well-managed association with a net worth of less than 0.5 percent, as determined in accordance with regulatory accounting principles, may, in the discretion of the Board, be allowed to continue to operate and be eligible for capital forbearance if— “(1) the conditions described in each paragraph of subsection (a) have been met with respect to such association; and “(2) the association has reasonable and demonstrable prospects of returning to a satisfactory capital level, as determined by the Board. “(d) Definitions.— For purposes of this section— “(1) Designated economically depressed region defined.— The term ‘designated economically depressed region’ means any geographical region which the Board determines, by regulation, to be a region within which real estate values have suffered serious declines due to severe economic conditions, such as a decline in energy or agricultural values or prices. 101 STAT. 611 “(2) Minority.— The term ‘minority’ means any Black American, Native American, Hispanic American, or Asian American. “(3) Minority association.— The term ‘minority association’ means any association of which— “(A) more than 50 percent of the ownership or control (of such association) is held by minority individuals; and “(B) more than 50 percent of the net profit or loss (of such association) accrues to minority individuals. “(4) Minority loan.— The term ‘minority loan’ means any obligation or other extension or advance of credit which is made to 1 or more minority individuals or to any person which is owned or controlled by 1 or more minority individuals.”. (b) State Chartered, Federally Insured Thrifts.— Title IV of the National Housing Act (12 U.S.C. 1724 et seq.) is amended by adding after section 415 (as added by section 402(b) of this title) the following new section: “SEC. 416. THRIFT INDUSTRY RECOVERY REGULATIONS. “(a) In General.— The Corporation shall prescribe capital recovery regulations for regulating and supervising troubled but well-managed and viable insured institutions in a manner which will maximize the long-term viability of the thrift industry at the lowest cost to the Corporation. “(b) Capital Recovery.— The regulations required to be prescribed under subsection (a) shall provide that an insured institution with net worth of 0.5 percent or more, as determined in accordance with regulatory accounting principles, may be allowed to continue to operate and be eligible for capital forbearance if— “(1) the Corporation determines that the insured institution’s weak capital condition is— “(A) primarily the result of losses recognized on, the nonperforming status of, or the failure of borrowers to otherwise remain in compliance with the repayment terms of, loans, or participations in loans, the value of the collateral for which has been adversely affected by economic conditions in a designated economically depressed region; or “(B) primarily the result of losses recognized on, the nonperforming status of, or the failure of borrowers to otherwise remain in compliance with the repayment terms of, loans, or participation in loans, made by a minority institution 50 percent or more of whose loan assets are minority loans and 50 percent or more of whose originated loans are construction or permanent loans for 1 to 4 family residences; “(2) the Corporation determines that the insured institution’s weak capital condition is not the result of imprudent operating practices, such as practices that were speculative at the time the practices were undertaken, insider abuses, excessive operating expenses, dividends paid by the insured institution, or actions taken solely for the purpose of qualifying for capital recovery under this subsection; “(3) the Corporation approves a plan submitted by the insured institution for increasing such institution’s capital; and “(4) the insured institution— “(A) adheres to the plan approved under paragraph (3); and 101 STAT. 612 “(B) submits regular and complete reports on such institution’s progress in meeting the institution’s goals under such plan. “(c) Thrifts With Net Worth of Less Than 0.5 Percent May Participate in Capital Recovery.— In the regulations required to be prescribed under subsection (a), the Corporation may provide that a well-managed insured institution with a net worth of less than 0.5 percent, as determined in accordance with regulatory accounting principles, may, in the discretion of the Corporation, be allowed to continue to operate and be eligible for capital forbearance if— “(1) the conditions described in each paragraph of subsection (a) have been met with respect to such insured institution; and “(2) the insured institution has reasonable and demonstrable prospects of returning to a satisfactory capital level, as determined by the Corporation. “(d) Definitions.— For purposes of this section— “(1) Designated economically depressed region defined.— The term ‘designated economically depressed region’ means any geographical region which the Corporation determines, by regulation, to be a region within which real estate values have suffered serious declines due to severe economic conditions, such as a decline in energy or agricultural values or prices. “(2) Minority.— The term ‘minority’ means any Black American, Native American, Hispanic American, or Asian American. “(3) Minority institution.— The term ‘minority institution’ means any insured institution of which— “(A) more than 50 percent of the ownership or control (of such insured institution) is held by minority individuals; and “(B) more than 50 percent of the net profit or loss (of such insured institution) accrues to minority individuals. “(4) Minority loan.— The term ‘minority loan” means any obligation or other extension or advance of credit which is made to 1 or more minority individuals or to any person which is owned or controlled by 1 or more minority individuals.”. (c) Implementation Report to Congress.— The Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation shall each submit a report to Congress containing the proposed regulations required to be prescribed under subsection (a) or (b), as the case may be, not later than the end of the 90-day period beginning on the date of the enactment of this Act. (d) Effective Date of Regulations.— The regulations required to be prescribed under the amendments made by subsections (a) and (b) shall be implemented not later than the end of the 150-day period beginning on the date of the enactment of this Act. (e) Agency Study and Report on, and Congressional Review of, Capital Recovery.— (1) Study and report required.— Not later than January 31, 1989, the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation shall jointly— (A) conduct a detailed evaluation of the effectiveness of the regulations required to be prescribed under the amendments made by subsections (a) and (b) in achieving an increased level of capitalization for thrift institutions; and (B) submit a report to the Congress containing the findings and conclusions of the Board and the Corporation in 101 STAT. 613connection with the study required under subparagraph (A). (2) Congressional review.— The Committee on Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate shall, upon receipt of the report under paragraph (1)(B), review the regulations and recommend such revisions to the regulations as may be appropriate.