What is 'Financial Institutions Reform, Recovery And Enforcement Act'

The Financial Institutions Reform, Recovery And Enforcement Act (FIRREA) was enacted to ensure that real estate appraisals are performed up to standard. This includes regulation on the competency of the appraisers, supervisory standards and accurate and full documentation. The FIRREA also holds claim to the creation of the Resolution Trust Corporation, the restructuring of the regulation authority, the abolishment of the Federal Savings and Loan Insurance Corporation and the creation of the Savings Association Insurance Fund and the Bank Insurance Fund.

BREAKING DOWN 'Financial Institutions Reform, Recovery And Enforcement Act'

The Financial Institutions Reform, Recovery And Enforcement Act (FIRREA) was enacted in 1989, following the savings and loan crisis. Its purpose was to create a more efficient, productive and effective base on which to build the industry and better serve as a safeguard for future transactions. It resulted in dramatic changes to the savings and loan industry and its federal regulation, including deposit insurance. Changes included the following:

  1. The Federal Home Loan Bank Board (FHLBB) was abolished.
  2. The Federal Savings and Loan Insurance Corporation (FSLIC) was abolished, and all assets and liabilities were assumed by the FSLIC Resolution Fund administered by the FDIC and funded by the Financing Corporation (FICO).
  3. The Office of Thrift Supervision (OTS), a bureau of the U.S. Treasury Department, was created to charter, regulate, examine, and supervise savings institutions.
  4. The Federal Housing Finance Board (FHFB) was created as an independent agency to take the place of the FHLBB to oversee the 12 Federal Home Loan Banks.
  5. The Savings Association Insurance Fund (SAIF) took the place of the FSLIC as an ongoing insurance fund for thrift institutions (like the FDIC, it insured savings and loan accounts up to $100,000). SAIF is administered by the FDIC.
  6. The Resolution Trust Corporation (RTC) was established to dispose of failed thrift institutions taken over by regulators after January 1, 1989. The RTC makes insured deposits at those institutions available to their customers.

Other Regulations Initiated by FIRREA

In addition, FIRREA gave both Freddie Mac and Fannie Mae additional responsibility to support mortgages for low- and moderate-income families. It also created the Bank Insurance Fund (BIF). Both of these funds were to be administered by the FDIC, but the Federal Deposit Insurance Reform Act of 2005 consolidated the two funds.

FIRREA also allowed bank holding companies to acquire thrifts. It also established new regulations for real estate appraisals. In addition, the FIRREA established Appraisal Subcommittee (ASC) within the Examination Council of the Federal Financial Institutions Examination Council. It also established new capital reserve requirements and increased public oversight of the process. It additionally required agencies to issue Community Reinvestment Act (CRA) ratings publicly and do written performance evaluations, using facts and data to support the agencies' conclusions.

RELATED TERMS
  1. Federal Savings And Loan Insurance ...

    The Federal Savings and Loan Insurance Corporation (FSLIC) is ...
  2. Savings Association Insurance Fund ...

    Savings Association Insurance Fund was a U.S. government insurance ...
  3. Federal Home Loan Bank Act

    The Federal Home Loan Bank Act was passed by the Hoover administration ...
  4. Capital Loss Coverage Ratio

    The difference between an asset’s book value and the amount received ...
  5. Federal Deposit Insurance Corporation ...

    The Federal Deposit Insurance Corporation (FDIC) is an independent ...
  6. Thrift Bank

    A thrift bank is a financial institution focusing on taking deposits ...
Related Articles
  1. Insurance

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  2. Investing

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  3. Insurance

    Insurance Companies Vs. Banks: Separate And Not Equal

    Insurance companies and banks are both financial intermediaries. However, they don't always face the same risks and are regulated by different authorities.
  4. Personal Finance

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  5. Small Business

    A New Plan To Prevent Future Bailouts

    This new and innovative plan by the FDIC could help the government avoid the next bailout.
  6. Investing

    What you should know about home appraisals

    Before you buy or sell a home, you need to have an unbiased professional opinion of the home's value. Home appraisal can help you to determine the value of your home purchases. Check out the ...
  7. Investing

    How To Challenge A Low Home Appraisal

    If you're unhappy with your home appraisal, here are some steps you can take.
  8. Investing

    Certificates Of Deposit

    Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union.
RELATED FAQS
  1. What are some of the major regulatory agencies responsible for overseeing financial ...

    Discover the specific responsibilities of some of the major regulatory agencies that oversee financial institutions in the ... Read Answer >>
  2. What are key government regulations that affect investing in the banking sector?

    Discover how the global financial crisis of 2008 changed the face of banking in the United States and around the world by ... Read Answer >>
  3. Are 401ks FDIC insured?

    Learn what part of your 401(k) retirement plan is covered by FDIC insurance, and what part is not. Find out what happens ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center