Subject of Possible Rule Making: Washington state law requires financial institutions (including state-chartered commercial banks, savings banks and savings associations) that act as residential mortgage lenders to adopt subprime lending policies and procedures that incorporate the principles contained in the federal "Interagency Guidance on Nontraditional Mortgage Product Risks" and the federal "Statement on Subprime Mortgage Lending" ("guidance") and other provisions of chapter 108, Laws of 2008 (SHB 2770).

     Statutes Authorizing the Agency to Adopt Rules on this Subject: Chapter 108, Laws of 2008, RCW 30.04.030, 30.04.060, 32.04.211, 33.04.020, 33.04.025, 43.320.010, 43.320.011(1), 43.320.040.

     Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: Guidance rules are required by statute (section 4, chapter 108, Laws of 2008, SHB 2770). In addition, rules are needed in order to clarify the types of internal policies and procedures needed by state-chartered commercial banks, savings banks and savings associations that may provide subprime or nontraditional residential mortgage loans. Other rule making may be needed to implement other provisions of chapter 108, Laws of 2008 (SHB 2770).

     Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: The Financial Institutions Examination Council (FFIEC), including its members, the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS) and the National Credit Union Administration (NCUA), jointly developed the guidance. The FDIC, which conducts consumer protection compliance examinations of state-chartered commercial banks and savings banks, has or will be implementing a version of the guidance. In addition, the department of financial institutions (DFI) division of credit unions and division of consumer services will initiate separate rule making regarding the guidance, as it applies to other types of financial institutions and licensees regulated by DFI.

     Process for Developing New Rule:       Negotiated rule making; and consultation with division of banks stakeholders (state-chartered banks and savings banks and other interested persons).

     Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting Gloria McVey, Program Manager, Division of Banks, P.O. Box 41200, Olympia, WA 98504-1200, phone (360) 902-8704, fax (360) 704-6979, gmcvey@dfi.wa.gov. Interested parties can participate in this rule making by attending hearings on the proposed rule, monitoring the DFI web site, and contacting the division of banks in writing, including fax and e-mail. All drafts and comments, as well as the audio of hearings, will be posted on the web site.

June 12, 2008

Brad Williamson, Director

Division of Banks

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