1050

PART 561-DEFINITIONS

1053

§ 561.3 Insured account.

An "insured account" is a withdrawable or repurchasable share, investment certificate, deposit, or savings account held by an insured member in an institution insured by the Corporation. Accounts which by the terms of the contract of the holder with the institution or by provisions of state law cannot be withdrawn or the value therof paid to the holder until all of the liabilities, including other classes of share liabilities, of the institution have been fully liquidated and paid upon the winding up of the institution are not insurable, and are hereinafter referred to as "nonwithdrawable accounts". Subordinated debt securities issued by an insured institution are deemed not to be "accounts", and such securities are not insurable.

[9-1-67; revised eff. 1-8-73]

.1 See also ¶¶ 651-655, 1170 et seq.

.2 A provision in a Christmas club account that forbids withdrawals during the club year does not make the account "nonwithdrawable" under this regulation. Op. G.C., 3/17/64.

.3 The Insurance Corporation will not refuse to insure an account for the sole reason that a signature card was not obtained by the association in connection with the opening of the account. The failure of a Federal association to obtain a signature card is, however, a violation of § 545.2(a). Op. G.C., 7/12/65.

.4 [Ed. Note] [The following opinion is quoted substantially in full.]

Generally speaking, "escrow accounts", or "impounds" as they are often called, represent prepayments by a borrower to a lender on a monthly or other basis to assure that funds necessary to pay insurance premiums or taxes will be available when such payments fall due.

Savings and loan associations follow several different procedures in handling so-called impounds. Occasionally such accounts are established on the association's records as savings accounts or short-term savings accounts on which earnings may or may not be paid, depending upon the individual association's policy. An alternative procedure is to credit the total amount of the monthly payment (including the amount estimated to be for taxes and insurance) to the mortgage loan with a subsequent charge to the mortgage loan account at such time as the taxes or insurance are paid. A second alternative is to accept the funds as a required non-interest-bearing general deposit, with a concurrent assumption by the association of the obligation to pay the taxes and insurance when due.

In the first instance cited above, the borrower's account would be an insured account, up to the statutory maximum of $20,000, in the event of default of an insured institution. In the second instance, since the prepayment would have

§ 561.3

490-941 O 732

reduced the mortgage loan balance, the borrower would have received credit for it in the event of default. In the second alternative above, while the borrower would neither hold an insured account nor have received credit or reduction on his mortgage loan balance in the event of default, any receiver would be obligated to pay the taxes and insurance on the property when they fell due in order to provide for the protection of the security property. Op. G.C., 9/21/70.

5. An acquisition agreement provides that the purchasing mutual associations shall issue passbook accounts to permanent stockholders of the merging association. The agreement limits withdrawals from these passbook accounts as follows: "(i) For 30 days no withdrawals shall be made; (ii) After 30 days up to $3000.00 of the principal balance may be withdrawn; (iii) After one year accrued dividends may be withdrawn; (iv) One-third of the principal balance in excess of $3000.00 may be withdrawn after one year, an additional one-third after two years, and the remainder after three years." These restrictions do not make the passbook accounts "nonwithdrawable". Op. G.C., 6/26/67.

.6 Variable Rate Certificates are issued only to investors on agreement to open or maintain passbook accounts at a balance at least equal the amount of the certificate being issued or to make withdrawals in such a manner as to maintain the balance. Since the limitation on the withdrawability of the passbook accounts would only be in effect until the certificate accounts are withdrawn, the passbook accounts are not "nonwithdrawable". Op. G.C., 11/30/67.

.7 Convertible capital debentures are not insured accounts requiring approval of the Insurance Corporation since they are nonwithdrawable accounts pursuant to section 561.3. They are, however, securities which guarantee a definite return and therefore may not be issued by an insured institution without Corporation approval. The debenture form must also contain a statement that it does not represent an account of an insurable type and is not insured by FSLIC, pursuant to section 563.5. Op. G.C., 6/12/68.

sion or department has been expressly authorized by state statute, (b) to which some functions of government have been delegated by state statute, and (c) to which funds have been allocated by statute or ordinance for its exclusive use and control. It also includes drainage, irrigation, navigation, improvement, levee, sanitary, school or power districts and bridge or port authorities and other special districts created by state statute or compacts between the states. Excluded from the term are subordinate or nonautonomous divisions, agencies or boards within principal departments. [As amended eff. 1-18-69.]

§ 561.8 Without recourse.

The term "without recourse" means, in connection with the sale of a loan or a participation interest in a loan, without any agreement or arrangement under which the purchaser is to be entitled to receive from the seller any sum of money or thing of value, whether tangible or intangible (including any substitution), upon default in payment of any loan or mortgage involved or any part thereof or to withhold or to have withheld from the seller any sum of money or any such thing of value by way of security against any such default.

[Added 11-1-59; revised eff. 6–2–71.]

cases in which loans are sold by way of instruments of assignment, there would ordinarily be no recourse against the seller upon default of the borrower, unless the seller expressly agreed to be liable for the indebtedness. If the instrument of assignment does not contain some agreement to that effect, the sale is considered to be "without recourse". Op. G.C., 10/9/52.

.52 A proposed instrument of assignment would constitute a sale of a loan with recourse if it contained the following language: "And the assignor convenants that there is owing upon said mortgage, without offset or defense of any kind, the principal sum of- -." Op. G.C., 10/9/62.

53 The requirement of section 545.11 of the Federal Regulations that loans sold pursuant to it be sold "without recourse", as defined in section 541.17 of the Regulations, does not preclude a selling association from agreeing to repurchase in the event that its own representations to a purchaser regarding loans sold are, in fact, false. Op. G.C., 3/17/70.

1061

$561.9 Premium prepayment; premium.

The term "premium prepayment" means and refers to the payments provided for by

subsection (d) of section 404 of the National Housing Act, as amended. The term "premium" does not include or refer to additional premiums provided for by subsection (c) of section 404 of said act and, except where used in the term "premium prepayment", does not include or refer to payments provided for by said subsection (d).

¶ 1062

§ 561.10 Primary Reserve; Secondary Re

serve.

The term "Primary Reserve" means the Primary Reserve referred to in subsection (a) of section 404 of the National Housing Act, as amended, and the term "Secondary Reserve" means the Secondary Reserve referred to in said subsection (a).

427-504 O-71 - 4