shall include any indication of a total percentage yield, compounded or simple, based on a period in excess of a year, or an average annual percentage yield achieved by compounding during period in excess of a year.

(d) Time or amount requirements. If an advertised rate is payable only on savings accounts that meet time or amount requirements, such requirements shall be clearly and conspicuously stated. Where the time requirement for an advertised rate is in excess of a year, the required number of years for the rate shall be stated with equal prominence, together with an indication of any lower rate or rates that will apply if the savings account is withdrawn at an earlier maturity.

(e) Penalty for early withdrawals. Any advertisement, announcement, or solicitation relating to interest or dividends paid by a member institution on certificate accounts shall include clear and conspicuous notice that Federal regulations require member institutions to impose a substantial interest penalty for a withdrawal from a certificate account before the end of the fixed or minimum term or qualifying period of such account. Such notice may state that, "A substantial interest penalty is required for early withdrawal".

(f) Profit. The term "profit” shall not be used in referring to interest or dividends paid on savings accounts.

(g) Accuracy of advertising. No member institution shall make any advertisement, announcement, or solicitation, relating to the interest or dividends paid on savings accounts which is inaccurate or misleading or which misrepresents its savings account contracts.

(h) Solicitation of savings accounts for member institution. Any person or organization which solicits savings accounts for a member institution shall be bound by the rules contained in this section with respect to any advertisement, announcement, or solicitation relating to such savings accounts. No such person or organization shall advertise a percentage yield on any savings account it solicits for a member institution which is not authorized to be paid and advertised by such institution.

(i) No such advertisement, announcement, or solicitation shall state that all or any portion of the interest or dividends on any type of savings account is payable in gold (including any type of gold coin), in gold-related instruments

or securities, or in an amount of money determined in any manner involving or having reference to gold.

134 FR 9704, June 21, 1969, as amended at 38 FR 29568, Oct. 26, 1973; 40 FR 17246, Apr. 18, 1975]

§ 526.6-1 Disclosure upon acceptance.

At the time a member institution accepts a certificate account deposit, such institution shall provide to the depositor a written description of the penalty imposed by such institution on a withdrawal from such certificate account before the end of the fixed or minimum term or qualifying period for such account. A member institution need not provide such a written statement in connection with the renewal of an existing certificate account.

[38 FR 29568, Oct. 26, 1973]

§ 526.7

Penalty for early withdrawal.

(a) With respect to each certificate account issued on or after November 1, 1973 (except as provided in paragraph (b) of this section), each member institution which is not an insured institution shall impose the following conditions on withdrawal from such an account before the expiration of its fixed or minimum term or qualifying period: (1) The account holder shall receive interest or dividends from the date of issuance of such account on the amount withdrawn at a rate not in excess of the rate being paid on regular accounts; and (2) the account holder shall also pay a penalty in an amount not less than the lesser of (i) the interest or dividends at such rate for 90 days (3 months) on the amount withdrawn or (ii) all interest or dividends at such rate (since issuance or renewal of the certificate account) on the amount withdrawn.

(b) Such member institution need not penalize a withdrawal of all or any portion of a certificate account prior to expiration of its term if (1) Such withdrawal is made subsequent to the death of any owner of such account; for purposes hereof an "owner" is an individual who at death had full legal and beneficial title to all or a portion of such account, or beneficial title to all or a portion of such account and full power of disposition and alienation with respect thereto, including but not limited to power of revocation with respect to any trust, regardless of whether such owner was a trustee, of which such account comprises all or part of the trust assets; or (2) Such account

qualifies as a retirement account under section 401(d) or section 408(a) of the Internal Revenue Code of 1954, and withdrawal is made to effect distribution of the funds in the account following the participant's death or disability, or upon attaining not less than 591⁄2 years of age. (Sec. 5B, 47 Stat. 727, as amended; (12 U.S.C. §§ 1425b, 1437). Reorg. Plan No. 3 of 1947, 12 FR 4981, 3 CFR, 1943-48 Comp., p. 1071). [40 FR 18771, Apr. 30, 1975, as amended at 41 FR 50413, Nov. 16, 1976]

§ 526.8 Transaction accounts.

(a) General. Subject to the provisions of this section, a member institution having its home office in New Hampshire, Massachusetts, Connecticut, Rhode Island, Maine, or Vermont may pay a return on transaction accounts.

(b) Maximum rate of return. Such a member institution may pay a return at a rate not in excess of 5.00 percent per annum on any transaction account.

(c) Service charge. Such a member institution may impose a service charge for the handling of instruments used in connection with a transaction account.

(d) [Reserved]

(e) Advertising. To the extent practicable, member institutions shall limit every advertisement, announcement, or solicitation relating to transaction accounts made in any newspaper, magazine, radio, television, or any other form of communication to such media or other communications as are directed toward residents of New Hampshire, Massachusetts, Connecticut, Rhode Island, Maine, and Vermont and which have a substantial circulation or audience within those States. The provisions of § 526.6 shall also apply to all advertisements, announcements, and solicitations related to transaction accounts.

[38 FR 34459, Dec. 14, 1973, as amended at 3 9FR 34646, Sept. 27, 1974; 41 FR 9297, Mar. 4, 1976]

Title I of the Emergency Home Finance Act of 1970, Public Law 91-351, provides for the Board to make disbursement of appropriated funds to the Banks for the purpose of adjusting the effective interest rate charged by such Banks on advances. Said title authorizes the Board to prescribe terms and conditions to assure that the sums disbursed are used to assist in the provision of housing for low- and middle-income families and that such families share fully in the benefits resulting from such disbursements. This Subpart A applies to loans for the purchase of single-family dwellings by middle-income families. [37 F.R. 12559, June 27, 1972]

§ 527.2

Definitions.

As used in this Subpart A:

(a) Allowance. The term "allowance" means & Housing Opportunity Allowance to be credited against interest due on loans and bank advances as provided in §§ 527.3 and 527.4.

1 37 F.R. 12559, June 27, 1972.

(b) Borrower. The term "borrower" means the person or persons who are to be obligated to repay a qualifying loan.

(c) Effective rate of interest. The term "effective rate of interest" means the annual percentage rate of finance charge on a loan or advance determined in accordance with the provisions of § 226.5 of this title relating to extensions of credit other than open end credit.

(d) Eligible borrower. The term "eligible borrower" means a borrower who, at the time of making application for an allowance

(1) Is one of the following:

(1) Either spouse of a married couple living together, or both such spouses; or (ii) A head of household with one or more dependent children;

(2) Has a current adjusted annual income (including income of both spouses) not in excess of the applicable maximum limits prescribed by the Board from time to time; and

(3) Has need of a Housing Opportunity Allowance to warrant the making of a qualifying loan by a member institution.

(e) Adjusted annual income. The term "adjusted annual income" means the total of

(1) Adjusted gross income as defined in 62 of the Internal Revenue Code; and

(2) "Tax-free" interest on State, municipal, and other governmental obligations.

(f) Guaranteed loan. The term "guaranteed loan" means a loan that is guaranteed, or as to which a commitment to guarantee has been made, under the provisions of the Servicemen's Readjustment Act of 1944, or chapter 37 of title 38, United States Code, as now or hereafter amended.

(g) Insured loan, The term "insured loan" means a loan that is insured, or as to which the mortgagee is insured, or as to which a commitment for any such insurance has been made, under the provisions of either the National Housing Act or the Servicemen's Readjustment Act of 1944, or chapter 37 of title 38, United States Code, as now or hereafter amended.

(h) Member institution. The term "member institution” means (1) an institution which is a member of a Bank and whose accounts or deposits are insured by the Federal Savings and Loan Insurance Corporation or the Federal Deposit Insurance Corporation and (2)

any other member which enters into an agreement with the Board to permit and pay the cost of such examination as the Board may from time to time deem necessary to insure compliance with the provisions of this part.

(1) Monthly installment loan. The term "monthly installment loan" means a loan repayable in equal, or substantially equal, monthly payments of principal and interest sufficient to amortize the principal amount of the loan in full within the term of the loan.

(1) Qualified appraiser. The term "qualified appraiser" means (1) a professional real estate appraiser whose regular occupation includes the valuation of residential real estate, and (2) any appraiser who is employed by a lender on a regular basis.

(k) Qualifying loan. The term "qualifying loan" means a loan which

(1) Is for the purpose of financing the purchase of a single-family dwelling to be owned and occupied by an eligible borrower as a primary residence;

(2) Is secured or is to be secured by a first lien on such single-family dwelling; (3) Is not an insured loan or a guaranteed loan;

(4) Is in a principal amount

(1) Not less than 70 percent of the lesser of

(a) An amount equal to the value of the security property; or

(b) The purchase price of the security property.

(ii) Not more than the lesser of(a) An amount equal to 100 percent of the value of the security property;

(b) The purchase price of the security property; or

(c) $25,000; or, in the case of a loan secured by property located in either Alaska or Hawaii, such higher amount as the Board may approve.

(5) Bears an effective rate of interest which does not (and will not, for a period of 5 years from the date the loan is made) exceed the effective rate of interest on long-term, fixed-rate advances offered by the member institution's Bank, at the time the qualifying loan is approved, by more than such percentile amount (not in excess of 150 basis points) as the Board has determined to be appropriate, at the time of such approval, for member institutions of such Bank;

(6) Is a monthly installment loan repayable over a period of not less than 25 years nor more than 30 years;

(7) Requires the borrower to pay, monthly, in advance, to the member institution, the equivalent of one-twelfth of the estimated annual taxes, assessments, and insurance premiums on the security property; and

(8) Permits the borrower to prepay the loan in full or in part at any time with no prepayment privilege fee in excess of 6 months' advance interest on that part of the aggregate amount of all prepayments made on such loan in any 12-month period which exceeds 20 percent of the original principal amount of the loan.

(1) Single-family dwelling. The term "single-family dwelling" means a structure designed for residential use by one family; or a unit designed for residential use by one family, the owner of which unit owns an undivided interest in the underlying real estate. The term also includes property, owned in common with others, which is necessary or contributes to the use and enjoyment of such a structure or unit.

(m) Value. The term "value" means the value of a property as determined by a qualified appraiser using comparable properties (when available) for such determination.

[36 F.R. 13769, July 24, 1971, as amended at 37 F.R. 12559, June 27, 1972]

§ 527.3 Housing opportunity allowances.

(a) General. Subject to the provisions of this part, any eligible borrower who has obtained a qualifying loan from a member institution and a commitment for an allowance from such member institution, as provided in paragraph (c) of this section, will receive from such member institution an allowance of $20 to be credited against the interest to be charged on each of the first 60 monthly installments paid on such qualifying loan, as provided in such commitment.

(b) Application. (1) Form. The application for an allowance shall be on a form approved by the Director of the Office of the Federal Home Loan Banks. Copies of such form shall be furnished upon request by the Banks. Such application shall be made in triplicate: One copy is to be furnished to the borrower, one copy is to be retained by the member institution, and one copy is to be submitted to the member institution's Bank as provided in paragraph (b) of § 527.6. Such application, together with the loan application, shall provide all information necessary to enable the member institution

to determine whether the applicant is an eligible borrower and whether the loan applied for will be a qualifying loan. Each copy of such application shall be signed by each applicant who is to be a borrower.

(2) Statement of intention. In making such application, each applicant shall sign a statement of intention that, if the qualifying loan is made, the borrower:

(1) Will be the title owner of the real estate securing the loan;

(i) Will occupy the single-family dwelling comprising such real estate as a primary residence; and

(iii) Will not give or execute any secondary lien or charge upon such real estate in connection with the purchase thereof.

(c) Commitment to be furnished to borrower. At the time of closing of the qualifying loan, the member institution shall furnish to the borrower, and the borrower shall acknowledge receipt of, a commitment, signed by an officer of the member institution, stating the terms and conditions under which the borrower shall be entitled to receive an allowance from the member institution. Such commitment, which shall be printed on or attached to the reverse side of the application prescribed pursuant to paragraph (b) of this section shall be in the following form:

HOUSING OPPORTUNITY ALLOWANCE
COMMITMENT

To: (Name of each person who is obligated on the loan.)

Pursuant to regulations of the Federal Home Loan Bank Board, the undersigned institution will make Housing Opportunity Allowance credits to you in connection with your loan for the purchase of the property described on the reverse side of this commitment, subject to the following terms and conditions:

1. Allowance of Credit. $20 will be credited at the time each of the first 60 monthly installments required under the loan contract is accepted from you, except when any such $20 credit is required to be withheld as stated in item 2 below.

(NOTE: Each of your first 60 monthly installment payments should be in the amount rquired by your loan contract less the $20 credit herein provided for. However, the monthly installment payment should be in the full amount required by your loan contract if any of the exceptions in item 2 below are applicable.)

2. Exceptions to Allowance of Credit. No credit will be made

(a) As to any monthly installment which is accepted more than 6 months before or

more than 6 months after the date such installment is due;

(b) After a sale or transfer of the property except a transfer by reason of death to a surviving tenant by the entirety or joint tenant or to your heirs or devisees;

(c) As to any monthly installment which is accepted at a time when the property is rented;

(d) If you have knowingly made a false statement in order to obtain your loan.

(3) Charge for Disallowable Credit. Your loan account will be charged for any credit previously made but which should have been withheld under an exception set forth in item 2 above.

(4) Dispute as to Allowable Credit. In the event of any dispute as to allowance of any credit under this commitment, the undersigned institution will rely on a determination by an Agent of the Federal Home Loan Bank Board as to whether the credit should be allowed or disallowed, and such determination will be final as to you and the undersigned institution.

(d) Crediting of allowance to borrower. The Board hereby prescribes the terms and conditions contained in the commitment set forth in paragraph (c) of this section as terms and conditions applicable to the crediting of allowances on qualifying loans.

[36 FR 13769, July 24, 1971, as amended at 40 FR 27477, June 30, 1975]

§ 527.4 Credits to member institutions.

(a) General. Each member institution having a commitment for allowance funds as provided in paragraph (b) of this section will, to the extent of such commitment, receive from the bank of which it is a member a credit against interest due on advances in an amount equal to the total amount of allowances which the member institution has properly credited on qualifying loans as provided in § 527.3.

(b) Commitments for allowance funds. Any member institution may request a commitment for allowance funds from the bank of which it is a member. Writ

ten commitments for such funds will be granted by each bank, on such terms and conditions and for such time periods as the bank may deem advisable, subject to such guidelines as may from time to time be prescribed by the Board.

(c) Procedure. Each member institution which has credited one or more allowances during a month shall, by the 20th day of the succeeding month, submit a report to the bank of which it is a member, pursuant to paragraph (d) of this section. Such member shall deduct, from any subsequent bill for interest due on outstanding advances from the bank, an amount equal to the allowances so reported, remitting only the net amount to the bank.

(d) Form of report. The report required by paragraph (c) of this section shall be made on a form prescribed by the Board, copies of which form shall be furnished upon request by the banks. Such report, to be signed by an officer of the member institution, shall state:

(1) The total number of allowances credited during the preceding month and the total dollar amount of allowances so credited; and

(2) Such other information as the Board may from time to time require. § 527.5 Allocation and disbursement of funds to banks.

(a) Allocation of funds—(1) Initial allocation. Subject to the limitation contained in subparagraph (4) of this paragraph, the Board will initially allocate allowance funds to each bank in an amount proportionate to the ratio of (1) the amount of outstanding mortgages on single-family dwellings held by all members in that bank's district on June 30, 1970, to (ii) outstanding mortgages on single-family dwellings held by all members in all bank districts as of such date, as determined by the Board.

(2) Subsequent allocations. Subsoquent allocations of allowance funds to the banks will be made by the Board on such bases and at such times as it may deem desirable, subject to the limitation contained in subparagraph (4) of this paragraph.

(3) Reallocation. Any allowance funds allocated to a bank but not committed by the bank to member institutions within a reasonable time may be subsequently reallocated by the Board on such bases and at such times as it may deem desirable, subject to the limitation contained in subparagraph (4) of this paragraph.