[Federal Register Volume 65, Number 249 (Wednesday, December 27, 2000)]
[Proposed Rules]
[Pages 81768-81771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32780]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 65, No. 249 / Wednesday, December 27, 2000 / 
Proposed Rules  

[[Page 81768]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1701

RIN 2550-AA15


Assessments

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Proposed regulation.

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SUMMARY: The Office of Federal Housing Enterprise Oversight is 
proposing a regulation setting forth its policy and procedures with 
respect to the annual assessment of the Federal National Mortgage 
Association and the Federal Home Loan Mortgage Corporation as provided 
by statute.

DATES: Written comments on the proposed regulation must be received by 
January 26, 2001.

ADDRESSES: Send written comments concerning the proposed regulation to 
Alfred M. Pollard, General Counsel, Office of Federal Housing 
Enterprise Oversight, Fourth Floor, 1700 G Street, NW., Washington, DC 
20552. Written comments may also be sent to Mr. Pollard by electronic 
mail at [email protected]. OFHEO requests that written comments 
submitted in hard copy also be accompanied by the electronic version in 
MS Word  or in portable document format (PDF) on 3.5" disk.

FOR FURTHER INFORMATION CONTACT: Isabella W. Sammons, Associate General 
Counsel, telephone (202) 414-3790, (not a toll-free number), Office of 
Federal Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. The telephone number for the Telecommunications 
Device for the Deaf is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

Comments

    OFHEO requests comments from the public and will take all comments 
into consideration before issuing the final regulation. Copies of all 
comments will be posted on the OFHEO Internet web site at http://www.ofheo.gov. In addition, copies of all comments received will be 
available for examination by the public at the Office of Federal 
Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552.

Background

    Title XIII of the Housing and Community Development Act of 1992, 
Pub.L. No. 102-550, entitled the Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992 (Act), established OFHEO as an 
independent office within the Department of Housing and Urban 
Development to ensure that the Federal National Mortgage Association 
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie 
Mac) (collectively, the Enterprises) are capitalized adequately and 
operate safely and in compliance with applicable laws, rules and 
regulations.
    Section 1316 of the Act (12 U.S.C. 4516) provides that OFHEO may 
establish and collect annual assessments from the Enterprises. OFHEO 
has been assessing the Enterprises pursuant to section 1316 and 
proposes to set forth its policies and procedures with respect to such 
assessments in the proposed regulation.

Section-by-Section Analysis

Section 1701.1  Purpose

    This section states that the purpose of the proposed regulation is 
to set forth the policy and procedures of OFHEO with respect to the 
annual assessments of the Enterprises under section 1316 of the Act. 
The Act provides for an initial annual assessment for the startup costs 
of OFHEO; however, since the initial annual assessment has been 
collected and OFHEO no longer has start up costs, the initial annual 
assessment is not addressed in the proposed regulation.

Section 1701.2  Definitions

    Section 1701.2 sets forth the definition of terms used in the 
proposed regulation.
    The term ``Act'' is defined to mean the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992, Title XIII of the Housing 
and Community Development Act of 1992, Pub.L. No. 102-550, Sec. 1301, 
Oct. 28, 1992, 106 Stat. 3672, 3941-4012 (1993).
    The term ``adequately capitalized'' is defined to mean the 
adequately capitalized capital classification under section 1364 of the 
Act (12 U.S.C. 4614). It is used in proposed Sec. 1701.4.
    The term ``Director'' is defined to mean the Director of the Office 
of Federal Housing Enterprise Oversight or his or her designee. The 
Director may delegate his or her authority under section 1316 of the 
Act to officers or employees of OFHEO.
    The term ``Enterprise'' is defined to mean the Federal National 
Mortgage Association and the Federal Home Loan Mortgage Corporation.
    The term ``surplus funds'' is defined to mean funds, which were 
collected from an Enterprise in connection with an annual assessment, 
that are unobligated as of September 30 of each fiscal year. 
Appropriated funds of OFHEO are available for obligation and 
expenditure for an indefinite period without fiscal year limitation. 
Notably, section 1316(d) of the Act (12 U.S.C. 4516(d)) requires the 
crediting of surplus funds that are ``unobligated at the end of the 
year for which the assessment was collected.'' Any unobligated funds 
remaining as of September 30, regardless when they were collected, 
should be treated as surplus funds and credited to the annual 
assessment.
    The term ``total assets'' is used in Sec. 1701.3(b) of the proposed 
regulation in connection with the calculation of the proportional 
amount of the annual assessment of each Enterprise. The definition of 
the term ``total assets'' is broader than the definition of the term 
``total assets'' in section 1316(b)(3) of the Act (12 U.S.C. 
4516(b)(3)) in that it lists the types of other off-balance sheet 
assets to be used in the calculation of total assets. The assets used 
to calculate total assets for purposes of the annual assessment are the 
same as the assets used to calculate the minimum capital level of an 
Enterprise under 12 CFR part 1750, subpart A. The proposed regulation 
defines the term as the sum, as of the June quarterly minimum capital 
report of the Enterprise under 12 CFR part 1750, subpart A, of the on-
balance-sheet-assets, as adjusted in the June quarterly minimum capital 
report under 12 CFR part 1750, subpart A; the unpaid principal balance 
of outstanding

[[Page 81769]]

mortgage-backed securities issued or guaranteed by the Enterprise that 
are not included in on-balance-sheet assets; one-half of the average 
dollar amount of commitments outstanding each quarter over the 
preceding four quarters; the sum of the credit-equivalent amounts for 
interest rate contracts; the unpaid principal balance of other 
guaranteed obligations, such as multifamily credit enhancements; other 
guaranteed amounts, such as sold portfolio remittances pending; and 
other off-balance-sheet obligations, as determined by the Director.
    The term ``OFHEO'' is defined to mean the Office of Federal Housing 
Enterprise Oversight.

Section 1701.3  Annual Assessments

    Paragraph (a) of proposed Sec. 1701.3 sets forth the authority of 
the Director to establish and collect assessments under section 1316(a) 
of the Act (12 U.S.C. 4516(a)). As provided in section 1316(a) and (f) 
of the Act (12 U.S.C. 4516(a) and (f)), the proposed regulation 
provides that the Director may, to the extent provided in appropriation 
acts, establish and collect from the Enterprises an annual assessment 
for each fiscal year. It further indicates that the amount of the 
annual assessment shall not exceed the estimated amount to be 
sufficient to provide for the necessary administrative and non-
administrative expenses to carry out the responsibilities of the 
director relating to the Enterprises and to carry out the purposes of 
the Act.
    Paragraph (b) of proposed Sec. 1701.3 reiterates the statutory 
formula in section 1316(b) of the Act (12 U.S.C. 4516(b)) for 
determining how the annual assessment is to be allocated between the 
Enterprises. The allocation for each Enterprise is the proportion of 
the annual assessment that bears the same ratio to the total annual 
assessment as the total assets of each Enterprise bears to the total 
assets of both Enterprises. The term ``total assets'' is defined in 
proposed Sec. 1701.2.
    Section 1316(b)(2) of the Act (12 U.S.C. 4516(b)(2)) requires the 
Enterprises to pay their proportional share of the annual assessment in 
semiannual payments on or before October 1 and April 1 of each fiscal 
year. Paragraph (c)(1) of proposed Sec. 1701.3 restates this 
requirement and clarifies that one-half of the proportional share of 
the annual assessment is to be paid in each semiannual payment.
    Paragraph (c)(2) of proposed Sec. 1701.3 also explains how the 
semiannual payments are to be handled in the event OFHEO does not have 
a regular appropriation as of October 1 of any year. When legislative 
action on a regular appropriation bill is not completed before the 
beginning of a fiscal year, a continuing appropriation (also called a 
continuing resolution) may be enacted to provide funding for the 
affected agencies until their regular appropriations are enacted. In 
such a situation, each Enterprise is to pay, by such date as determined 
by the Director, an amount that is determined by applying the annual 
assessment proportion calculated pursuant to paragraph (b) of proposed 
Sec. 1701.3 to the amount authorized by the Office of Management and 
Budget (OMB). After OFHEO receives a regular appropriation, the amount 
of the proportional share of the annual assessment collected from each 
Enterprise is to be reduced by the partial payments made by each 
Enterprise in connection with any continuing appropriations. In the 
event there is no continuing appropriation as of October 1 of any 
fiscal year, OFHEO would continue to operate if authorized by OMB to 
use funds remaining from the prior fiscal year assessment.
    Paragraph (d) of proposed Sec. 1701.3 provides that the annual 
assessment is to be credited by the amount of any surplus funds, a 
requirement which is set forth in section 1316(d) of the Act (12 U.S.C. 
4516(d)). Paragraph (d) also provides that surplus funds are to be 
allocated in the same proportion in which they were collected, except 
as determined by the Director. The term ``surplus funds'' is defined in 
proposed Sec. 1701.2.

Section 1701.4  Increase in Semiannual Payments

    Proposed Sec. 1701.4 sets forth the authority of the Director under 
section 1316(c) of the Act (12 U.S.C. 4516(c)) to provide for an 
increase in the semi-annual payments made by an Enterprise that is not 
classified as ``adequately capitalized,'' as that term is defined in 
proposed Sec. 1701.2. The funds collected under this provision are to 
be deposited in the Federal Housing Enterprise Oversight Fund, but are 
not to be considered funds appropriated by Congress.

Section 1701.5  Notice and Review

    Paragraph (a) of proposed Sec. 1701.5 codifies the OHFEO practice 
of providing the Enterprises with written notice of the annual 
assessment, semiannual payments, any partial payments, and any changes 
in the assessment procedures.
    Paragraph (b) of proposed Sec. 1701.5 provides that, at the written 
request of an Enterprise, the Director, in his or her discretion, may 
review the calculation of the Enterprise's proportional share of the 
assessment, semiannual payments or partial payments. The determination 
of the Director is final. Review by the Director does not suspend the 
obligation of the Enterprise to make the semiannual payment or partial 
payment on or before the date it is due, except as provided by the 
Director.

Section 1701.6  Delinquent Payments

    This section of the proposed regulation reiterates the statutory 
requirements with respect to the assessment of interest and penalties 
on delinquent payments. It provides that the Director may assess 
interest and penalties on delinquent payments of any assessment under 
this part in accordance with 31 U.S.C. 3717 (interest and penalties on 
claims) and 12 CFR part 1704 (debt collection). The Director may waive 
interest and penalties in his or her discretion. Any interest and 
penalties collected under this section are to be transferred to the 
general fund of the Treasury of the United States.

Section 1701.7  Enforcement of Payment

    Proposed Sec. 1701.7 provides that notwithstanding Sec. 1701.6, the 
Director may enforce the payment of assessments pursuant to the 
authority of section 1371 (12 U.S.C. 4631) (cease-and-desist 
proceedings); section 1372 (12 U.S.C. 4632) (temporary cease-and-desist 
orders), and section 1376 (12 U.S.C. 4636) (civil money penalties) of 
the Act. These sections authorize the Director to take enforcement 
actions for violations of any provisions of the Act.

Section 1701.8  Deposit in Fund

    As provided in 1316(f) of the Act (12 U.S.C. 4516(f)), this section 
of the proposed regulation would require that OFHEO deposit any 
assessments collected under this part in the Federal Housing Enterprise 
Oversight Fund established in the Treasury of the United States.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review

    The proposed regulation is not classified as a significant rule 
under Executive Order 12866 because it will not result in an annual 
effect on the economy of $100 million or more or a major increase in 
costs or prices for consumers, individual industries, Federal, State, 
or local government agencies, or geographic regions; or have 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the

[[Page 81770]]

ability of United States-based enterprises to compete with foreign-
based enterprises in domestic or foreign markets. Accordingly, no 
regulatory impact assessment is required and this proposed regulation 
has not been submitted to the Office of Management and Budget for 
review.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). OFHEO has considered the impact of the 
proposed regulation under the Regulatory Flexibility Act. The General 
Counsel of OFHEO certifies that the proposed regulation, if adopted, is 
not likely to have a significant economic impact on a substantial 
number of small business entities because the regulation is applicable 
only to the Enterprises, which are not small entities for purposes of 
the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1701

    Government Sponsored Enterprises, Reporting and recordkeeping 
requirements.

    Accordingly, for the reasons stated in the preamble, OFHEO proposes 
to add 12 CFR part 1701 as follows:

PART 1701--ASSESSMENTS

Sec.
1701.1   Purpose.
1701.2   Definitions.
1701.3   Annual assessments.
1701.4   Increase in semiannual payments.
1701.5   Notice and review.
1701.6   Delinquent payments.
1701.7   Enforcement of payment.
1701.8   Deposit in fund.

    Authority: 12 U.S.C. 4516.


Sec. 1701.1  Purpose.

    This part sets forth the policy and procedures of OFHEO with 
respect to the establishment and collection of the annual assessments 
of the Enterprises under section 1316 of the Act.


Sec. 1701.2  Definitions.

    For purposes of this part, the term--
    (a) Act means the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, Title XIII of the Housing and Community 
Development Act of 1992, Pub.L. No. 102-550, Sec. 1301, Oct. 28, 1992, 
106 Stat. 3672, 3941-4012 (1993).
    (b) Adequately capitalized means the adequately capitalized for 
purposes of the capital classification under section 1364 of the Act 
(12 U.S.C. 4614).
    (c) Director means the Director of the Office of Federal Housing 
Enterprise Oversight or his or her delegate.
    (d) Enterprise means the Federal National Mortgage Association and 
the Federal Home Loan Mortgage Corporation.
    (e) Surplus funds means the funds from any annual assessment 
collected from an Enterprise that are not obligated as of September 30 
of each fiscal year.
    (f)(1) Total assets means the sum, as of the June quarterly minimum 
capital report of the Enterprise under 12 CFR part 1750, subpart A, of:
    (i) On-balance-sheet assets, as adjusted in the June quarterly 
minimum capital report of the Enterprise under 12 CFR part 1750, 
subpart A;
    (ii) The unpaid principal balance of outstanding mortgage-backed 
securities issued or guaranteed by the Enterprise that are not included 
in on-balance-sheet assets;
    (iii) One-half of the average dollar amount of commitments 
outstanding each quarter over the preceding four quarters;
    (iv) The sum of the credit-equivalent amounts for interest rate 
contracts;
    (v) The unpaid principal balance of other guaranteed obligations, 
such as multifamily credit enhancements;
    (vi) Other guaranteed amounts, such as sold portfolio remittances 
pending; and
    (vii) Other off-balance-sheet obligations as determined by the 
Director.
    (g) OFHEO means the Office of Federal Housing Enterprise Oversight.


Sec. 1701.3  Annual assessments.

    (a) Establishment of assessment. The Director may, to the extent 
provided in appropriation acts, establish and collect from the 
Enterprises an annual assessment for each fiscal year, as allocated 
under paragraph (b) of this section. The amount of the annual 
assessment shall not exceed the estimated amount to be sufficient to 
provide for the necessary administrative and non-administrative 
expenses to carry out the responsibilities of the Director relating to 
the Enterprises and to carry out the purposes of the Act.
    (b) Allocation and proportional share. The annual assessment 
established under paragraph (a) of this section shall be allocated 
between the Enterprises. Each Enterprise shall pay a proportional share 
of the annual assessment that bears the same ratio to the total annual 
assessment as the total assets of each Enterprise bears to the total 
assets of both Enterprises.
    (c) Timing of payment. (1) Each Enterprise shall pay one-half of 
its proportional share of the annual assessment in semiannual payments 
on or before October 1 and April 1 for each fiscal year, except as 
provided in paragraph (d) of this section and Sec. 1701.4.
    (2) If OFHEO is operating under a continuing appropriation as of 
October 1 of any year, each Enterprise shall pay, on such date as 
determined by the Director, an amount calculated by applying the annual 
assessment proportion calculated under paragraph (b) of this section to 
the amount authorized for expenditure. When OFHEO receives a regular 
appropriation, the amount of the allocation share of the annual 
assessment collected from each Enterprise shall be reduced by any 
partial payments made by each Enterprise in connection with any 
continuing appropriations.
    (d) Surplus funds. Surplus funds shall be credited to the annual 
assessment by reducing the amount collected by the amount of the 
surplus funds. Surplus funds shall be allocated in the same proportion 
as they were collected, except as determined by the Director.


Sec. 1701.4  Increase in semiannual payments.

    The Director, in his or her discretion, may increase the semiannual 
payment to be collected under Sec. 1701.3 from an Enterprise that is 
not classified as adequately capitalized.


Sec. 1701.5  Notice and review.

    (a) The Director shall provide each Enterprise with written notice 
of the annual assessment, the semiannual payments and any partial 
payments to be collected under this part. In addition, the Director 
shall provide each Enterprise with written notice of any changes in the 
assessment procedures that the Director, in his or her sole discretion, 
deems necessary under the circumstances.
    (b) At the written request of an Enterprise, the Director, in his 
or her discretion, may review the calculation of the proportional share 
of the annual assessment, the semiannual payments and any partial 
payments to be collected under this part. The determination of the 
Director is final. Except as provided by the Director, review by the 
Director does not suspend the requirement that the Enterprise make the 
semiannual

[[Page 81771]]

payment or partial payment on or before the date it is due.


Sec. 1701.6  Delinquent payments.

    (a) The Director may assess interest and penalties on delinquent 
semiannual payment or partial payments collected under this part in 
accordance with 31 U.S.C. 3717 (Interest and Penalty on Claims) and 12 
CFR part 1704 (debt collection). The Director may waive interest and 
penalties in his or her discretion.
    (b) Any interest and penalties collected under this section shall 
be transferred to the general fund of the Treasury of the United 
States.


Sec. 1701.7  Enforcement of payment.

    Notwithstanding Sec. 1701.6, the Director may enforce the payment 
of assessments under this part pursuant to the authorities of sections 
1371 (cease-and-desist proceedings) (12 U.S.C. 4631), 1372 (12 U.S.C. 
4632) (temporary cease-and-desist orders), and 1376 (12 U.S.C. 4636) 
(civil money penalties) of the Act.


Sec. 1701.8  Deposit in fund.

    OFHEO shall deposit annual assessments collected under this part in 
the Federal Housing Enterprise Oversight Fund established in the 
Treasury of the United States.

    Dated: December 19, 2000.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 00-32780 Filed 12-26-00; 8:45 am]
BILLING CODE 4220-01-U