[Federal Register Volume 65, Number 249 (Wednesday, December 27, 2000)]
[Proposed Rules]
[Pages 81771-81775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32781]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1770

RIN 2550--AA13


Executive Compensation

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Federal Housing Enterprise Oversight (``OFHEO'') 
solicits comments on this proposal to adopt a regulation to clarify the 
procedures OFHEO employs in overseeing compensation provided by the 
Federal National Mortgage Association and the Federal Home Loan 
Mortgage Corporation (collectively, ``the Enterprises'') to their 
executive officers. The proposed regulation would largely formalize 
processes currently used by OFHEO in performing its executive 
compensation oversight responsibilities. The processes require the 
submission of relevant information by the Enterprises on a timely basis 
to enable OFHEO to efficiently carry out its executive compensation 
functions.

DATES: Written comments regarding the Notice of Proposed Rulemaking 
must be received on or before March 27, 2001.

ADDRESSES: Comments concerning the proposed rule should be addressed to 
Alfred M. Pollard, General Counsel, Office of Federal Housing 
Enterprise Oversight, 1700 G Street NW., Fourth Floor, Washington, DC 
20552. Copies of all communications received will be available for 
public inspection and copying at the address above. All comments will 
be posted on the OFHEO web site at http://www.ofheo.gov. OFHEO requests 
that written comments submitted in hard copy also be accompanied by an 
electronic version in MS Word or in portable document format 
(PDF) on 3.5" disk. Alternatively, comments may be submitted via 
electronic mail to: [email protected].

FOR FURTHER INFORMATION CONTACT: Christine C. Dion, Associate General 
Counsel, telephone (202) 414-3838 (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:

I. Statutory Framework

    Title XIII of the Housing and Community Development Act of 1992, 
Pub. L. 102-550, entitled the ``Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992'' (the ``Act''),\1\ established the 
Office of Federal Housing Enterprise Oversight (``OFHEO'') as an 
independent office within the Department of Housing and Urban 
Development. Generally, OFHEO is the safety and soundness regulator of 
two of the nation's largest housing-related government sponsored 
enterprises: the Federal National Mortgage Association (``Fannie Mae'') 
and the Federal Home Loan Mortgage Corporation (``Freddie Mac'') 
(collectively, the ``Enterprises''). In addition to establishing OFHEO, 
the Act made amendments to the Enterprises' enabling statutes 
(collectively, the ``charter acts''),\2\ in part to accommodate OFHEO's 
statutory supervisory powers.
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    \1\ 12 U.S.C. 4501 et seq..
    \2\ Federal National Mortgage Association Charter Act (12 U.S.C. 
1716-1723i) and Federal Home Loan Mortgage Corporation Act (12 
U.S.C. 1451-1459).
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    Included in the supervisory responsibilities of the Director of 
OFHEO (the ``Director'') is oversight of compensation provided by the 
Enterprises to their respective executive officers. Briefly, the 
Director's statutory oversight of executive compensation involves two 
statutory mandates: (1) the prohibition of excessive compensation, as 
required by the Act; and (2) the prior review of termination benefits, 
as required by the charter acts. Notably, the differing statutes use 
similar but not identical terms in delineating the standards and 
identifying the different comparator groups to be used in these 
matters.
    Specifically, the Act requires the Director to prohibit the 
Enterprises from providing compensation to any executive officer that 
is not reasonable and comparable with that paid by similar businesses 
to executives doing similar work. Businesses used for comparison 
purposes include publicly held financial institutions or major 
financial services companies.\3\
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    \3\ Section 1318(a) (12 U.S.C. 4518(a)).
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    The charter acts were amended by the Act to similarly provide that 
an Enterprise may only pay compensation that it determines is 
reasonable and comparable with compensation for employment in other 
similar businesses, and that the Enterprise must report annually to 
Congress on the comparability of the compensation policies for their 
employees with the compensation policies of other similar 
businesses.\4\ The Enterprises have the general power to select the 
individuals who will work for them and to set their specific 
compensation. The Act explicitly provides that OFHEO may not prescribe 
or set a specific level or range of compensation for executive officers 
of the Enterprises.\5\
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    \4\ Section 309(d)(2) and (3) of Federal National Mortgage 
Association Charter Act (12 U.S.C. 1723a(d)(2) and (3)) and section 
303(c) and (h) of Federal Home Loan Mortgage Corporation Act (12 
U.S.C. 1452(c) and (h)).
    \5\ Section 1318(b) (12 U.S.C. 4518(b)).
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    To effectuate OFHEO's charge to prohibit excessive compensation, 
the Act empowers OFHEO to take such actions and perform such functions 
as the Director determines to be necessary.\6\ OFHEO may also require 
an Enterprise to submit reports and special reports as deemed 
appropriate and in such form as the Director may require.\7\ Moreover, 
OFHEO has express statutory

[[Page 81772]]

authority to retain any consultant that the Director determines is 
necessary to assist in such matters.\8\ The Act also grants OFHEO a 
wide array of enforcement powers. Thus, without regard to the capital 
condition of an Enterprise, the Director can issue a notice of charges, 
or take such other enforcement action, for conduct violative of the 
compensation provisions of the Act, the charter acts or this 
regulation.\9\ The Director can require an Enterprise, or any executive 
officer or member of the board of directors to correct or remedy any 
violation as the Director determines to be appropriate.\10\
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    \6\ Section 1313(8) (12 U.S.C. 4513(8)).
    \7\ Section 1314(a) (12 U.S.C. 4514(a)).
    \8\ Section 1315(e) (12 U.S.C. 4515(e)).
    \9\ Section 1371(a)(3) (12 U.S.C. 4631) and section 1372 (12 
U.S.C. 4632).
    \10\ Section 1371(d)(7) (12 U.S.C. 4631)(d)(7)).
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    In addition to prohibiting the payment of excessive executive 
compensation, OFHEO is empowered to approve individual termination 
packages provided by the Enterprises to their executive officers. The 
respective charter acts of the Enterprises were identically amended by 
the Act to provide that an Enterprise may not enter into an agreement 
or contract to provide for payment of money or other thing of current 
or potential value in connection with the termination of employment of 
an executive officer unless the agreement or contract is approved in 
advance by OFHEO.\11\ The Act further amended the charter acts to 
prohibit the Director from approving termination benefits that are not 
comparable to such benefits provided by other businesses to executives 
doing similar work. Businesses used for comparison purposes include 
public and private entities involved in financial services and housing.
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    \11\ Section 309(d)(3)(B) of Federal National Mortgage 
Association Charter Act (12 U.S.C. 1723a(d)(3)(B) and section 
303(h)(2) of Federal Home Loan Mortgage Corporation Act (12 U.S.C. 
1452(h)(2)).
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    These amendments to the charter acts were effective after October 
28, 1992. Therefore, agreements to provide termination payments to 
executives that were entered into before that date are not explicity 
subjected to retroactive review for approval or disapproval by OFHEO. 
However, the amended charter acts provide that any subsequent 
renegotiation, amendment or change to any such agreement entered into 
on or before October 28, 1992, is to be considered as entering into an 
agreement subject to approval by OFHEO. An extension of such an 
agreement is deemed to constitute a change subject to OFHEO's prior 
approval. OFHEO's approval is required regardless of how such an 
extension is structured, e.g., by a written agreement or by a 
resolution adopted by the board of directors of the Enterprise.
    The requirement that OFHEO receive and approve termination 
provisions before an agreement or change is effective may be met when 
new executive officers are hired or contracts and agreements with 
existing executive officers are amended if such contracts or agreements 
contain a provision noting that termination benefits provided under the 
agreements are not effective until approved by OFHEO.
    The term ``executive officer'' for these purposes is defined to 
include an Enterprise's chairman of the board of directors, chief 
executive officer, chief financial officer, president, vice chairman 
and any executive vice president, as well as any senior vice president 
(SVP) ``in charge of a principal business unit, division or function.'' 
\12\ The Director has also found the term to include any individual who 
acts as the chief operating officer of an Enterprise. Additionally, the 
term ``executive officer'' includes any individual who performs 
functions similar to such positions, whether or not the individual has 
an official title.
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    \12\ Section 1303(7) (12 U.S.C. 4502(7). The terminology used in 
defining an ``executive officer'' under OFHEO's statute is 
essentially similar to the definition of ``executive officer'' and 
``officer'' contained in the reporting rules of the Securities and 
Exchange Commission (SEC). See SEC Rule 3b-7 (17 CRF 240.3b-7) and 
SEC Rule 16a-1(f) (17 CFR 240.16a-1(f)) (1999). See also Note to 
Rule 16a.-2. For purposes of provisions in the Charter Acts relating 
to compensation, the term ``executive officer'' has the meaning 
given the term in section 1303 of OFHEO's statute. See section 
309(d)(3)(C) of the Federal National Mortgage Association Charter 
Act (12 U.S.C. 1723a(d)(3)(C)) and section 303(H)(3) of the Federal 
Home Loan Mortgage Corporation Act (12 U.S.C. 1452(h)(3)).
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    For purposes of this regulation, the term ``executive officer'' 
includes any SVP in charge of a principal business unit, division or 
function as well as any individual, however titled, who has similar 
authority. A reading of the statute joined with an analysis of job 
functions at the Enterprises could lead to a reasonable determination 
that all current senior vice presidents are subject to the provisions 
of this section. If an individual is identified by an Enterprise in 
public disclosures as being an ``executive officer,'' a presumption 
shall exist that such individual is an executive officer for these 
purposes. The Act's use of qualifying language in defining ``executive 
officer'' suggests that Congress intended OFHEO to classify covered 
individuals on a functional basis, rather than solely on a basis of 
title. That is, any officer or employee who participates or has 
authority to participate in major policymaking functions is deemed to 
be an executive officer, regardless of his or her title. Notably, the 
indicia of a major policymaking function may include the authority to 
control substantial resources or expend substantial funds of an 
Enterprise. A major policymaking function is not limited to a revenue-
generating function.
    The Act defines the term ``compensation'' to include ``any payment 
of money or the provision of any other thing of current or potential 
value in connection with employment.'' \13\ [Emphasis added.] The 
legislative history of the Act, demonstrates that the term is to be 
defined broadly.\14\ OFHEO's analysis of an executive officer's 
compensation reasonably includes factors that are weighed by federal 
bank regulators in similarly assessing compensation issues. The 
definition of ``compensation'' adopted by the federal banking agencies 
is all-inclusive, encompassing all direct and indirect payments of 
benefits, both cash and non-cash, granted to or for the benefit of any 
executive officer including, but not limited to, payments and benefits 
derived from an employment contract, compensation or benefit agreement, 
fee arrangement, perquisite, stock option plan, post employment benefit 
or other compensatory arrangement.\15\
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    \13\ Section 1303(3) (12 U.S.C. 4502(3)).
    \14\ See, e.g., Floor discussion on S. 2733 by Senator Levin at 
138 Cong. Rec. S. 17923 (October 8, 1992).
    \15\ See the definitional section of the safety and soundness 
standards of: the Office of the Comptroller of the Currency at 12 
CFR Part 30, App. A; the Board of Governors of the Federal Reserve 
System at 12 CFR Part 208, App. D-1; the Federal Deposit Insurance 
Corporation at 12 CFR Part 364, App. A and the Office of Thrift 
Supervision at 12 CFR Part 570, App. A.
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II. Background

    The legislative history of the Act and that of contemporaneously 
enacted federal banking legislation reveal that Congress viewed 
executive compensation to be a serious matter of safety and soundness 
concern. In discussing the need for oversight of the executive 
compensation provided by the Enterprises, the congressional sponsor of 
language relating to executive compensation explicitly referred to 
similar legislation earlier enacted in the same Congress to require the 
federal bank regulators to adopt safety and soundness standards 
affecting, among other things, executive compensation paid by insured 
banks and thrift institutions, as well as their parent

[[Page 81773]]

holding companies.\16\ The statutory authorities of OFHEO and the 
banking agencies, however, are not identical in this regard.\17\ OFHEO 
treats as an unsafe and unsound practice any compensation arrangement 
that would result in an executive of an Enterprise receiving 
compensation that is excessive or termination benefits that are not 
comparable to compensation provided by other businesses to executives 
doing similar work.
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    \16\ See note 15 at 17922-17923.
    \17\ See note 16. The agencies' safety and soundness standards 
were adopted in 1992 pursuant to section 39 (12 U.S.C. 1831p-1) of 
the Federal Deposit Insurance Act (FDIA).
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    With respect to its statutory mandate to prohibit excessive 
executive compensation, OFHEO evaluates all aspects of each 
Enterprise's executive compensation practices and policies, and 
periodically undertakes a study to compare compensation of executives 
at the Enterprises with compensation of executives in other similar 
businesses (including other publicly held financial institutions or 
major financial services companies). OFHEO separately reviews 
termination benefit packages submitted by the Enterprises under the 
prior approval requirements of the charter acts.
    In order to carry out its executive compensation responsibilities, 
OFHEO requires each Enterprise to make timely submissions of relevant 
information to OFHEO on both routine and episodic bases.\18\ Practice 
and procedures reflected in this rule have evolved over time. As noted 
in Sec. 1770.2 of the proposed rule, the purposes of this regulation 
are to formalize the existing process and to clarify the terms used 
therein in order to facilitate the routine conduct and enhance the 
efficiency of OFHEO's procedures.
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    \18\ OFHEO recognizes the sensitive, nonpublic nature of such 
information and treats submissions with appropriate safeguards under 
its internal procedures and regulations.
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    OFHEO's executive compensation authorities are recited in 
Sec. 1770.1 of the proposed rule. Definitions applicable to terms used 
in the proposed rule are enumerated in Sec. 1770.3. Reporting and 
submission requirements are set forth in Sec. 1770.4.
    Specifically, paragraph (a) of Sec. 1770.4 identifies to whom an 
Enterprise is to make timely submission of relevant information in such 
fashion as specified by OFHEO. Paragraph (b) lists the categories of 
information to be provided by the Enterprise to OFHEO. Paragraph (c) 
sets out when information relevant to the Director's prior approval of 
termination benefits should be submitted by an Enterprise to OFHEO. 
Paragraph (d) specifies what information the Enterprise is to submit 
and when it must be submitted in order for OFHEO to calculate an 
executive officer's total termination or severance benefits package.
    Section 1770.5 of the proposed rule addresses compliance 
requirements. Paragraph (a) codifies current practices to require that 
certain employment agreements expressly state that termination benefits 
provided therein are not to be effective until approved by the OFHEO. 
Additionally, the section provides that disclosures to employees should 
note that alteration of benefit plans that affect the benefits accorded 
a covered employee, that occur subsequent to OFHEO approval of a 
termination package, will require OFHEO review of the termination 
agreement at the time a covered employee terminates their relation with 
the Enterprise. Paragraph (b) requires the Enterprises to establish 
written procedures implementing the submission requirements of section 
1770.4. Paragraph (c) states that failure by an Enterprise to comply 
with the requirements of paragraph (a) or (b) of section 1770.5 or the 
submission requirements of section 1770.4 may be deemed to be an unsafe 
or unsound practice warranting specific corrective action. Paragraph 
(d) of section 1770.5 provides that OFHEO may require corrective or 
remedial action under this regulation by an Enterprise or individual 
either separately from, in conjunction with, or in addition to any 
other remedy, or an enforcement action.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review

    This proposed rule is not deemed to be a significant rule under 
Executive Order 12866 because it will not result in (1) an annual 
effect on the economy of $100 million or more; (2) a major increase in 
costs or prices for consumers, individual industries, Federal, State, 
or local government agencies, or geographic regions; or (3) significant 
adverse effects on competition, employment, investment, productivity, 
innovation or on the 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 rule 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 rule 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 this 
proposed rule under the Regulatory Flexibility Act. The General Counsel 
certifies that this proposed rule will not have a significant economic 
impact on a substantial number of small business entities.

Paperwork Reduction Act

    This proposed rule does not contain any information collection 
requirements that require the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

Unfunded Mandates Reform Act of 1995

    This proposed rule does not require the preparation of an 
assessment statement in accordance with the Unfunded Mandates Reform 
Act of 1995, 2 U.S.C. 1531. Assessment statements are not required for 
regulations that incorporate requirements specifically set forth in 
law. As explained in the preamble, this rule implements specific 
statutory requirements. In addition, this rule does not include a 
Federal mandate that may result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year.

List of Subjects in 12 CFR Part 1770

    Administrative practice and procedure, Confidential business 
information, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, OFHEO proposes to add 12 
CFR part 1770 to read as follows:

PART 1770--EXECUTIVE COMPENSATION

Sec.
1770.1   Authority and scope.
1770.2   Purpose.
1770.3   Definitions.
1770.4   Submissions requirements.
1770.5   Compliance.

    Authority: 12 U.S.C. 1452(h)(2), 1723a(d)(3)(B), 4501(6), 
4502(3), 4502(7),

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4513, 4514, 4517, 4518(a), 4631, 4632, 4636, 4641.


Sec. 1770.1  Authority and scope.

    (a) Authority. 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) (12 U.S.C. 
4501 et seq.), established the Office of Federal Housing Enterprise 
Oversight (``OFHEO'') as an independent office within the Department of 
Housing and Urban Development. In general, OFHEO is the safety and 
soundness regulator of two housing-related government sponsored 
enterprises: the Federal National Mortgage Association (``Fannie Mae'') 
and the Federal Home Loan Mortgage Corporation (``Freddie Mac'') 
(collectively, ``the Enterprises''). The supervisory responsibilities 
of the Director of OFHEO (the ``Director'') include oversight of 
compensation provided by the Enterprises to their executive officers.
    (b) Scope. The procedures set forth in this regulation apply to the 
OFHEO's oversight of executive compensation under the following two 
statutory mandates:
    (1) Prohibition of excessive compensation. The Act empowers the 
Director to prohibit an Enterprise from providing compensation to any 
executive officer that is not reasonable and comparable with that paid 
by other similar businesses to executives doing similar work, i.e., 
having similar duties and responsibilities. Businesses used for 
comparison purposes include publicly held financial institutions or 
major financial services companies. (12 U.S.C. 4518(a)) To effectuate 
this compensation oversight responsibility, the Act provides that the 
Director has full authority to take such actions as the Director 
determines are necessary. (12 U.S.C. 4513(8)) However, the Director may 
not prescribe or set a specific level or range of compensation for 
executive officers of the Enterprises. (12 U.S.C. 4518(b))
    (2) Prior approval of termination benefits. The Enterprises' 
enabling statutes (``charter acts'') provide that the Enterprises may 
not enter into any agreement or contract to provide any payment of 
money or other thing of current or potential value in connection with 
the termination of employment of an executive officer unless the 
agreement or contract is approved in advance by the Director. The 
Director may only approve termination benefits that are comparable to 
benefits provided by other businesses to executives doing similar work. 
Businesses used for comparison purposes include public and private 
entities involved in financial services and housing interests. 
Agreements or contracts that provide for termination payments to 
executives that were entered into before October 28, 1992 are not 
retroactively subject to approval or disapproval by the Director. 
However, a renegotiation, amendment or change to such an agreement or 
contract entered into on or before October 28, 1992 shall be considered 
as entering into an agreement or contract that is subject to approval 
by the Director. (Section 309(d)(3)(B); 12 U.S.C. 1723a(d)(3)(B) of 
Fannie Mae's Charter Act; Section 303(h)(2); 12 U.S.C. 1452(h)(2) of 
Freddie Mac's Corporation Act)


Sec. 1770.2  Purpose.

    In exercising responsibilities related to executive compensation, 
the Director has established a structured process for the submission of 
relevant information by each Enterprise. This part codifies those 
procedures and clarifies the terms used therein in order to facilitate 
the routine conduct and enhance the efficiency of OFHEO's oversight.


Sec. 1770.3  Definitions.

    The following definitions apply to the terms used in this part:
    (a) The Act is Title XIII of the Housing and Community Development 
Act of 1992, Pub. L. No. 102-550, Oct. 28, 1992, 106 Stat. 3672, 3941-
4012 (1993), separately entitled the ``Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992.''
    (b) Affiliate means any entity that controls, is controlled by, or 
is under common control with, an Enterprise.
    (c) Charter acts mean the Federal National Mortgage Association 
Charter Act and the Federal Home Loan Mortgage Corporation Act, which 
are codified at 12 U.S.C. 1716-1723i and 12 U.S.C. 1451-1459, 
respectively.
    (d) Compensation means any payment of money or the provision of any 
other thing of current or potential value in connection with 
employment. Compensation includes all direct and indirect payments of 
benefits, both cash and non-cash, granted to or for the benefit of any 
executive officer, including, but not limited to, payments and benefits 
derived from an employment contract compensation or benefit agreement, 
fee arrangement, perquisite, stock option plan, post employment benefit 
or other compensatory arrangement
    (e) Director means the Director of OFHEO or his or her designee.
    (f) Enterprise means the Federal National Mortgage Association and 
the Federal Home Loan Mortgage Corporation and, except as provided by 
the Director, any affiliate thereof.
    (g) Executive officer means, with respect to an Enterprise:
    (1) The chairman of the board of directors, chief executive 
officer, chief financial officer, chief operating officer, president, 
vice chairman, any executive vice president, and any individual who 
performs functions similar to such positions whether or not the 
individual has an official title; and
    (2) Any senior vice president (SVP) or other individual with 
similar responsibilities, without regard to title:
    (i) Who is in charge of a principal business unit, division or 
function, or
    (ii) who reports directly to the Enterprise's Chair, Vice Chair, 
Chief Operating Officer or President.
    (h) OFHEO means the Office of Federal Housing Enterprise Oversight.


Sec. 1770.4  Submission requirements.

    (a) Submission of information to OFHEO. All information required to 
be filed for purposes of this regulation is to be provided in a timely 
fashion by each Enterprise to OFHEO's Associate Director of the Office 
of Policy Analysis and Research, as specified in this section, or as 
designated by the Director.
    (b) Categories of information relating to prohibition of excessive 
compensation. The following materials shall be provided by each 
Enterprise to OFHEO for review:
    (1) Minutes and supporting materials and reports from meetings of 
the Enterprise's Committee responsible for compensation within a week 
of Committee approval, where Committee actions are final insofar as 
affecting a determination regarding a compensation matter, except 
reports on the performance of specific individuals;
    (2) Portions of minutes of the Board of Directors relating to 
executive compensation and supporting materials of the Committee 
responsible for compensation (not otherwise provided to OFHEO by the 
Committee under paragraph (b)(1) of this section), within a week of the 
meeting of the Board of Directors;
    (3) General benefit plans applicable to covered executive officers 
when adopted or amended;
    (4) Any studies the Enterprise conducts or contracts for with 
respect to compensation of executive officers when finalized;
    (5) The Enterprise's annual compensation report when submitted to 
Congress;
    (6) An updated organization chart as changes occur affecting 
executive officers;

[[Page 81775]]

    (7) Proxy statements when issued;
    (8) Information regarding the hiring of and payment of compensation 
to an executive officer for whom a contract remains under negotiation; 
and
    (9) Such other information as deemed appropriate by the Director.
    (c) Timing of submissions related to prior approval requests of 
termination benefits. All relevant information should be provided to 
OFHEO when an Enterprise:
    (1) Enters into any agreement or contract with a new or existing 
executive officer that includes termination benefits;
    (2) Makes any extension or other amendment to such an agreement or 
contract;
    (3) Takes any other action to provide termination benefits to a 
specific executive officer, regardless of how it is effected;
    (4) Makes any changes in post-employment benefit programs affecting 
multiple executive officers; or
    (5) Changes the termination provisions of other compensation 
programs affecting multiple executive officers.
    (d) Specific information required for calculation of termination 
benefits. Before entering into an agreement or contract to provide 
termination benefits to an executive officer, and before any 
renegotiation, amendment or change to such an agreement or contract, an 
Enterprise shall submit to OFHEO the following materials:
    (1) The details of the agreement or program change, e.g., 
employment agreements, termination agreements, severance agreements, 
and portions of Board minutes relating to executive compensation and 
minutes and supporting materials of the compensation committee of the 
Board;
    (2) All information, data, assumptions and calculations for the 
potential total dollar value or range of values of the benefits 
provided, such as but not limited to salary, bonus opportunity, short-
term incentives, long-term incentives, special incentives and pension 
provisions or related contract or benefit terms; and
    (3) Such other information deemed appropriate by the Director.


Sec. 1770.5  Compliance

    (a) An employment agreement or contract subject to the Director's 
prior approval, as set forth in Sec. 1770.1(b)(2), may be entered into 
prior to that approval, provided that such agreement or contract 
specifically provides that termination benefits under the agreement or 
contract shall not be effective and no payments shall be made 
thereunder unless and until approved by OFHEO. Such notice should make 
clear that alteration of benefit plans subsequent to OFHEO approval 
under this section, that affect final termination benefits of an 
executive officer, requires review at the time of the individual's 
termination from the Enterprise and prior to the payment of any 
benefits.
    (b) The Enterprises shall establish and follow written procedures 
implementing the submission requirements contained in Sec. 1770.4 
within 60 days of the effective date of this regulation.
    (c) Failure by an Enterprise to comply with the requirements of 
paragraph (a) or (b) of this section or the submission requirements of 
Sec. 1770.4 may be deemed to constitute an unsafe or unsound practice 
warranting corrective or remedial action by OFHEO.
    (d) Action by OFHEO under this regulation may be taken separately 
from, in conjunction with, or in addition to any other corrective or 
remedial action, including an enforcement action to require an 
individual to make restitution to or reimbursement to the Enterprise of 
improperly paid compensation or termination benefits.

    Dated: December 19, 2000.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 00-32781 Filed 12-26-00; 8:45 am]
BILLING CODE 4220-01-U