Counsel to Counsel - November 2008 - (Page 18) DATA CENTEr DEVELoPMENT Recent surveys indicate that perhaps onethird of companies use data centers— environmentally controlled, mission-critical structures containing corporate computer network servers—that are more than 7 years old and likely needing upgrades or expansion. Such potential demand has led many companies to undertake first-time construction and development of data centers. Make these considerations when creating and operating these structures: • Site selection. Account for adequate water availability (for cooling), local economic development incentives, climate change laws that may target data centers’ large energy usage and resulting carbon footprint and the costs associated with operating in one site versus another. • Cost. Consider electric power and overall facility costs (the enhanced need for security and proper cooling can run up to $1,500 per square foot). Since many costs will be passed to data center users, both parties need a very clear pro forma of the total operating costs and an understanding of the cost-controlling methodologies to be employed. • Data center management services. Smaller facilities (under 10,000 square feet) are more likely treated as a full-service colocation offering by the data center owner in a multicustomer environment with an owner-managed shared infrastructure. Larger users may manage their own services, utilizing data center infrastructure on a nonshared basis. Inserting a service component is akin to an IT outsourcing agreement, so handle accordingly. • Design. The basic design determines the best case level of operational certainty parties can hope to achieve. Parties then craft a maintenance model that takes fullest advantage of that design. Periodically implementing certain auditing standards (e.g., a Statement of Auditing Standards (SAS) 70 Type II audit for service organizations) ensures compliance with terms. The lesson: Data centers are extremely complex, requiring substantial advanced planning to build and manage them successfully. ©iStockphoto.com/Hsing-Wen Hsu NEw CoNSuMEr ProTECTIoNS IN rEGuLATIoN Z The Federal Reserve Board has adopted, under authority provided in the Home Ownership and Equity Protection Act (HOEPA), changes to Regulation Z to prevent unfair and abusive residential mortgage lending practices. The final rule, effective Oct. 1, 2009 (except for new property tax and insurance escrow requirements effective in 2010), makes three broad changes: • Creates a new mortgage loan category called “higher-priced mortgage loans” (HPMLs) and increases their applicable protections. An HPML is defined generally as a loan secured by the borrower’s principal dwelling having an interest rate that exceeds by a specified amount a new rate index that the Federal Reserve will publish. Most HOEPA loans (generally with higher rates or points and fees than HPMLs) will also get the added HPML protections. • Provides additional protections for all closed-end mortgage loans (CMLs) secured by the borrower’s principal dwelling regardless of interest rate, extends to all CMLs the requirement in Regulation Z to give early disclosures and prohibits lenders or brokers from collecting fees before borrowers receive early disclosures. • Imposes new advertising requirements for all mortgage loans covered by the Truth in Lending Act that seek to eliminate misleading advertising practices regarding promotional rates or payment terms. These new requirements largely codify changed practices and other new federal and state regulations and guidelines that reflect the dramatic decline in subprime and alt-A loans, where most abuses occurred. The biggest impact will likely be on misleading advertising practices that some mortgage lenders and brokers used to gain a competitive edge. Enforcement of the final rule’s advertising restrictions, plus the potential for civil liability, should benefit both consumers and reputable lenders. robert M. Jaworski Partner, Financial Services Regulation rjaworski@reedsmith.com Barbara S. Mishkin Partner, Financial Services Regulation bmishkin@reedsmith.com Peer Review Rated Craig A. olschansky Partner, Data Center Affairs Group colschansky@thompsoncoburn.com reed Smith LLP LexisNexis® Martindale-Hubbell® 18 Thompson Coburn LLP
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