FIRREA dramatically changed the savings and loan industry and its federal regulation, including deposit insurance. The "Paulson Blueprint" summarized it in the following:
The Office of Thrift Supervision, a bureau of the U.S. Treasury Department, was created to charter, regulate, examine, and supervise savings institutions.
The Resolution Trust Corporation was established to dispose of failed thrift institutions taken over by regulators after January 1, 1989. The RTC will make insured deposits at those institutions available to their customers.
Other regulations
In addition, FIRREA gives both Freddie Mac and Fannie Mae additional responsibility to support mortgages for low- and moderate-income families. It also created the Bank Insurance Fund. Both of these funds were to be administered by the Federal Deposit Insurance Corporation. This section of FIRREA was amended by the Federal Deposit Insurance Reform Act of 2005, which consolidated the two funds. FIRREA allowed bank holding companies to acquire thrifts. It established new regulations for real estate appraisals. In addition, the Act established Appraisal Subcommittee within the Examination Council of the Federal Financial Institutions Examination Council. It also established new capitalreserve requirements. It increased public oversight of the process. It required the agencies to issue Community Reinvestment Act ratings publicly and do written performance evaluations using facts and data to support the agencies' conclusions. It also required a four-tiered CRA examination rating system with performance levels of "Outstanding," "Satisfactory," "Needs to Improve," or "Substantial Noncompliance." These rules increased pressure on banks to make mortgage home loans to inner-city and rural areas. Savings and loans were no longer allowed to acquire "junk bonds" and were required to dispose of their holdings of these bonds by 1994. They were also required to mark them to the lower of cost or market value. The amount of "supervisory goodwill" that was allowed to be counted in core capital requirements was phased out through, and then eliminated, by January 1, 1995.
Appraisal standards
Title XI of FIRREA created the Appraisal Subcommittee of the Federal Financial Institutions Examination Council to oversee and monitor appraisal standards. It does not regulate appraisers themselves, but does so indirectly such that if the ASC finds that a particular state’s appraiser regulation and certification program is inadequate, then under the banking agencies’ regulations all appraisers in that state are no longer eligible to do appraisals for depository institutions. To accomplish this, the ASC monitors the activities of the state regulatory agencies and the Appraisal Foundation, which promulgates the generally accepted appraisal standards and qualification standards for state-certified and licensed appraisers. Through the Appraisal Standards Board and the minimum standards for appraisal licensure through the Appraiser Qualifications Board, the Appraisal Foundation publishes the Uniform Standards of Professional Appraisal Practice.
The Act, which gives the government broad authority to bring civil claims and has less stringent requirements to establish liability than commercial fraud statutes, was used after the subprime mortgage crisis to attempt to establish the liability of banks that allegedly misrepresented the quality of loans to the Federal Housing Administration, which, relying on the representations of the banks, insured them and subsequently suffered losses.
