Garn St Germain Depository Institutions Act

Garn–St. Germain Depository Institutions Act
Great Seal of the United States
Other short titles
  • Banking Affiliates Act of 1982
  • Deposit Insurance Flexibility Act
  • Net Worth Certificate Act
  • Thrift Institutions Restructuring Act of 1982
Long title An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans.
Nicknames Alternative Mortgage Transaction Parity Act of 1982
Enacted by the 97th United States Congress
Effective October 15, 1982
Citations
Public law 97-320
Statutes at Large 96 Stat. 1469
Codification
Titles amended 12 U.S.C.: Banks and Banking
U.S.C. sections amended 12 U.S.C. ch. 3 § 226
Legislative history

The Garn–St Germain Depository Institutions Act of 1982 (Pub.L. 97–320H.R. 6267, enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. It is disputed whether the act was a mitigating or contributing factor in the savings and loan crisis of the late 1980s.[1]

The bill, whose full title was “An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans,” was a Reagan Administrationinitiative.[2]

The bill is named after its sponsors, Congressman Fernand St. GermainDemocrat of Rhode Island, and Senator Jake GarnRepublican of Utah. The bill had broad support in Congress, with co-sponsors including Charles Schumerand Steny Hoyer.[3] The bill passed overwhelmingly, by a margin of 272–91 in the House.[4]

An important consumer change was to allow anyone to place real estate in their own trust without triggering the due-on-sale clause that allows lenders to foreclose on a current loan upon transfer to another. This greatly facilitates the use of trusts to pass property to heirs and minors. It may also protect the property of wealthy or risky owners against the possibility of future lawsuits or creditors, because the trust owns the property, not the individuals at risk. The bill states “… a lender may not exercise its option pursuant to a due-on-sale clause upon … a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property[.]” (The Garn St. Germain Depository Institutions Act of 1982, (U.S.C.) 1701j-3(d)(8).)[5]

Title VIII of the act, Alternative Mortgage Transactions, allowed banks to provide adjustable-rate mortgage loans.[6]