TO:  Chief Executive Officers of National Banks, Department and Division Heads, and 
     all Examining Personnel

PURPOSE

This bulletin transmits the final rule on multifamily housing.  The rule lowers the risk weight on
multifamily housing loans and certain mortgage backed securities to 50 percent.  The OCC
published this final rule in the Federal Register on March 9, 1994.  The final rule is effective
immediately upon publication in the Federal Register.

BACKGROUND

On September 17, 1992, the Office of the Comptroller of the Currency (OCC), published a notice
of proposed rulemaking (NPRM) to modify the capital treatment of assets secured by  multifamily
residential property.  This proposed rule was consistent with sections 618(b) of the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 (RTCRRIA) and
305(b)(1)(B) of the Federal Deposit Insurance Corporation Improvement Act (FDICIA).  The
NPRM included a proposal to assign to the 50 percent risk-weight category certain loans secured
by qualifying multifamily residential properties.  The NPRM also proposed that qualifying
privately issued mortgage backed securities (MBS) secured by qualifying multifamily residential
property loans qualify for a 50 percent risk weight.  In addition, the final rule extends the current
OCC capital treatment for assets sold with recourse on a pro rata basis to loans secured by
multifamily residential property.  The Federal Deposit Insurance Corporation (FDIC), Federal
Reserve Board (FRB), and Office of Thrift Supervision (OTS) promulgated similar rules.

SUMMARY

The OCC's final rule on multifamily housing fulfills the statutory requirements in RTCRRIA and
FDICIA.  The rule amends the risk-based capital rules to include in the 50 percent risk weight
category loans secured by qualifying multifamily residential properties.  This includes loans
secured by apartment buildings, cooperatives, and joint-use properties.  Qualifying loans must
meet certain loan-to-value, amortization, maturity, seasoning, and other prudent underwriting
requirements.



In addition, the final rule reduces the risk weight on qualifying privately issued mortgage backed
securities (MBS) to 50 percent.  To be eligible to receive the lower risk weight, the MBS must
be secured, at origination, by qualifying loans on multifamily residential properties.

In the RTCRRIA, Congress required that the OCC allow banks to use sales treatment for that
portion of multifamily residential property loans sold on a pro rata loss sharing basis.  This is
consistent with the OCC's existing rules on recourse.  Accordingly, the final rule merely restates
the current OCC policy on assets sold with recourse on a pro rata basis.  The RTCRRIA also
required the OCC to take into account other loss sharing arrangements.  In this regard, the OCC
is working with the Federal Financial Institutions Examination Council (FFIEC) to
comprehensively consider other recourse issues.

This amendment will also foster lending for reconstruction of multifamily residential housing in
areas of the country recently devasted by natural disaster.  For these reasons, the OCC is waiving
the normal 30 day delay in effectiveness of this final rule.  Accordingly, this final rule is effective
on March 9, 1994.  

FOR FURTHER INFORMATION CONTACT

Questions concerning this final rule should be directed to the Office of the Chief National Bank
Examiner (202) 874 - 5070.



                                       
Donald G. Coonley
Chief National Bank Examiner

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