[Federal Register Volume 66, Number 66 (Thursday, April 5, 2001)]
[Rules and Regulations]
[Pages 18037-18040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8424]



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  Federal Register / Vol. 66, No. 66 / Thursday, April 5, 2001 / Rules 
and Regulations  

[[Page 18037]]



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: Final regulation.

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SUMMARY: The Office of Federal Housing Enterprise Oversight is issuing 
a final 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.

EFFECTIVE DATE: The effective date of this regulation is May 7, 2001.

FOR FURTHER INFORMATION CONTACT: David W. Roderer, Deputy General 
Counsel, telephone (202) 414-3804; or 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:

Background

    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 (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 procedures developed 
under section 1316. OFHEO recently published a proposed regulation for 
comment to spell out and clarify its policies and procedures with 
respect to such assessments at 65 FR 81768 (December 27, 2000).

Comments

    In response to the proposed regulation, OFHEO received comments 
from Freddie Mac and Fannie Mae, as follows:

Adequately Capitalized  (Sec. 1701.2(b))

    One Enterprise suggested a technical change to the proposed 
definition of the term ``adequately capitalized.'' OFHEO agrees that 
such change will clarify the definition and accordingly modifies 
Sec. 1701.2(b) to read:
    Adequately capitalized means the adequately capitalized capital 
classification under section 1364 of the Act (12 U.S.C. 4614).

Enterprise  (Sec. 1701.2(d))

    One Enterprise suggested a revision to the definition of the term 
``Enterprise'' to include also a definition of the term 
``Enterprises.'' OFHEO agrees that such a technical change would be 
appropriate and has modified Sec. 1701.2(d) of the proposed regulation 
to read:

    (d) Enterprise means the Federal National Mortgage Association 
or the Federal Home Loan Mortgage Corporation; and the term 
``Enterprises'' means, collectively, the Federal National Mortgage 
Association and the Federal Home Loan Mortgage Corporation.

Surplus Funds  (Sec. 1701.2(e))

    In connection with a comment on ``Increase in Semiannual 
Payments,'' Sec. 1701.4, discussed below, one Enterprise suggested that 
the regulation clarify that in calculating the following year's 
assessment, OFHEO will credit any surplus funds that were previously 
collected pursuant to Sec. 1701.4 in addition to those surplus funds 
collected pursuant to Sec. 1701.3. OFHEO agrees that this clarification 
is best accomplished by a technical modification of the definition of 
the term ``surplus funds,'' as follows:

    (e) Surplus funds means funds that are not obligated as of 
September 30 of each fiscal year that were collected from any 
Enterprise pursuant to Sec. 1701.3 or Sec. 1701.4.

Total Assets  (Sec. 1701.2(f))

    Section 1701.2(f) of the proposed regulation defines the term 
``total assets.'' Both Enterprises suggested that the definition 
incorporate by reference the methodology applied under the OFHEO 
minimum capital regulation at 12 CFR part 1750, rather than describe 
such methodology in detail. OFHEO agrees with the comment to 
incorporate 12 CFR part 1750 by reference and accordingly modifies 
Sec. 1701.2(f) to read:

    (f) Total assets means the sum, as of the most recent June 
quarterly minimum capital report of the Enterprise, of the amounts 
of the following assets that are used to calculate the quarterly 
minimum capital requirement of the Enterprise under 12 CFR part 
1750:
    (1) On-balance sheet assets;
    (2) Off-balance sheet mortgage-backed securities; and
    (3) Other off-balance sheet obligations.

    One Enterprise suggested that OFHEO calculate the allocation of the 
annual assessment semiannually rather than annually. If this suggestion 
were accepted, the definition of the term ``total assets'' would 
require additional modification. As discussed more fully below under 
``Allocation and Proportional Share,'' Sec. 1701.3(b), OFHEO has 
rejected the recommendation and determined not to calculate the annual 
assessment semiannually; therefore, additional modification of the 
definition of the term ``total assets'' is not required.

Establishment of Assessment  (Sec. 1701.3(a))

    Section 1701.3(a) of the proposed regulation recites the statutory 
bases of the authority of the Director to collect the annual assessment 
from the Enterprises. One Enterprise recommended that OFHEO reference 
the narrow statutory language of 12 U.S.C. 4516(a) (section 4516(a)), 
rather than the amplifying statutory language of 12 U.S.C. 4516(f) 
(section 4516(f)), in determining the amount of the assessment that may 
be collected.
    Section 4516(a) provides that the Director may collect an annual 
assessment ``in an amount not exceeding the amount sufficient to

[[Page 18038]]

provide for reasonable costs and expenses of [OFHEO], including the 
expenses of any examinations under [12 U.S.C. 4517].'' In further 
delineating the authority of OFHEO, section 4516(f) provides more 
broadly that the amount of the assessment collected may be used for 
``carrying out the responsibilities of the Director relating to the 
enterprises'' and ``necessary administrative and nonadministrative 
expenses of [OFHEO] to carry out the purposes of [the Act].'' The 
narrow language of section 4516(a) is not reasonably to be read to 
restrict the amount of funds that may be collected to an amount 
arguably less than contemplated under section 4516(f). It would be 
inconsistent with a reading of the Act, as a whole, to set forth in the 
regulation restrictions on the collection of funds that are greater 
than the restrictions on the use of such funds after they are 
collected. OFHEO, therefore, has determined to reject and not to make 
the recommended modification. While referring only to examination 
expenses, the non-exclusive language of the law presumably contemplates 
the use of the authorized assessment to meet all costs and expenses of 
the agency.

Allocation and Proportional Share  (Sec. 1701.3(b))

    One Enterprise suggested that OFHEO calculate the proportional 
share of the annual assessment for each Enterprise semiannually rather 
than annually. The Enterprise suggested that it would be more equitable 
to the Enterprise to have a subsequent recalculation of its 
proportional share because the total assets of the Enterprises may vary 
during any year.
    There is, however, no overriding reason to depart from the 
statutory scheme that clearly contemplates that the proportional share 
to be paid by each Enterprise is to be calculated on an annual basis. 
Therefore, OFHEO has determined to reject and not to make the suggested 
modification to calculate the proportional share semiannually.

Timing of Payment  (Sec. 1701.3(c))

    One Enterprise pointed out that proposed Sec. 1701.3(c) mistakenly 
contains inapplicable references to other sections of the proposed 
regulation. Section 1701.3(c)(1) is accordingly revised to correct and 
clarify which references are applicable.

Surplus Funds  (Sec. 1701.3(d))

    One Enterprise suggested that proposed Sec. 1701.3(d) be modified 
to clarify that surplus funds be credited fully to the first semiannual 
assessment payment. Section 1316(d) of the Act (12 U.S.C. 4516(d)) 
requires that surplus funds ``be credited to the assessment to be 
collected from the enterprise for the following year,'' without 
specifying to which semiannual payment such surplus funds must be 
credited. OFHEO cannot determine the amount, if any, of surplus funds 
until about mid-October; therefore, OFHEO cannot credit the surplus 
funds to the first semiannual payment due on or before October 1, but 
rather credits the surplus funds to the second semiannual payment due 
on or before April 1. Consequently, OFHEO cannot adopt the suggestion 
that would require it to credit surplus funds to the first semiannual 
payment. Where OFHEO is operating under one or more continuing 
resolutions and does not receive its full appropriation until later in 
the fiscal year, OFHEO may be able to determine the amount of surplus 
funds before the first full semiannual payment is made. In such a case, 
OFHEO has and will continue to credit the surplus funds to the first 
full semiannual payment.
    The Enterprise also suggested that, in any instance when OFHEO 
determines that there was a surplus for the prior year after the first 
semiannual payment has been made, OFHEO immediately return such surplus 
to the Enterprises, i.e., refund the overpayment of the first 
semiannual payment. OFHEO has determined not to adopt this suggestion 
because section 1316(d) of the Act (12 U.S.C. 4516(d)) requires that 
surplus funds be credited to the next annual assessment, not refunded 
as an overpayment.

Increase in semiannual payments  (Sec. 1701.4)

    Section 1701.4 of the proposed regulation sets forth the statutory 
authority of OFHEO to increase the semiannual payment of an Enterprise 
that is not classified as adequately capitalized. Both Enterprises 
suggested that this section include the regulatory purposes for which 
such an increase may be used, as provided in 12 U.S.C. 4516(c). OFHEO 
agrees and modifies Sec. 1701.4 to read:

    The Director, in his or her discretion, may increase any 
semiannual payment to be collected under Sec. 1701.3 from an 
Enterprise that is not classified as adequately capitalized as 
necessary to pay additional estimated costs of regulation of the 
Enterprise.

Notice and Review  (Sec. 1701.5)

    Section 1701.5 of the proposed regulation requires that the 
Director provide written notice of the annual assessment, the 
semiannual payments, and any partial payments to be collected from each 
Enterprise. It also provides that the Enterprises receive notice of any 
changes to the assessment procedures that the Director, in his or her 
sole discretion, deems necessary under the circumstances.
    One Enterprise requested that actual notice of any semiannual 
payment be made at least five business days prior to the due date. A 
minimum five-day-notice, the Enterprise asserted, is needed for the 
Enterprise to review the calculation, process the notice of payment, 
and make the payment in a timely manner. OFHEO is not required by 
statute to provide a minimum notice period for any semiannual payment 
and believes that it would be inappropriate to bind itself to a 
specific notice period. OFHEO, nevertheless, will continue to provide 
the Enterprises with ample notice of the actual semiannual payment.
    The Enterprise also suggested that any change to current assessment 
procedures would require notice and comment rulemaking under the 
Administrative Procedure Act (APA). To the extent, however, that a 
particular change is not subject to the APA notice and comment 
procedures, the Enterprise further suggested that notice of such change 
should be given at least 30 days in advance of the implementation of 
the change in order for the Enterprises to review, understand, prepare 
for, and respond to the change.
    OFHEO does not agree that every change to the assessment procedures 
would require notice and comment rulemaking under the APA. Furthermore, 
OFHEO has determined not to adopt the 30-days advance notice suggested 
by the Enterprise because to do so would unnecessarily restrict the 
statutory authority of OFHEO to assess and carry out its statutory 
duties and responsibilities with regard to the Enterprises and the 
mortgage market.

Delinquent Payment  (Sec. 1701.6)

    Section 1701.6(a) of the proposed regulation provides that the 
Director may assess interest and penalties on any delinquent payment 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).
    One Enterprise suggested that Sec. 1701.6(a) be modified to provide 
details as to how the interest on delinquent payments is to be 
calculated pursuant guidance published by the Department of the 
Treasury (Treasury guidance) as required by 31 U.S.C. 3717 and 12 CFR 
part 1704. OFHEO does not agree that providing such detail in 
Sec. 1701.6(a) is necessary or appropriate.

[[Page 18039]]

OFHEO is required to follow the Treasury guidance regardless whether 
the details of such guidance are spelled out in the regulation. By not 
spelling out the details, OFHEO avoids the need to revise the 
regulation if the Treasury guidance were to be revised.
    In addition to the modifications discussed above, which OFHEO 
considers to be nonsubstantive, OFHEO makes minor editorial 
modifications to the proposed regulation. Accordingly, OFHEO has 
determined to issue the proposed regulation, as modified, as a final 
regulation.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review

    The final 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 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 final 
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 final 
regulation under the Regulatory Flexibility Act. The General Counsel of 
OFHEO certifies that the regulation, as herein 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 adds 12 
CFR part 1701 as follows:

PART 1701--ASSESSMENTS

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

    Authority: 12 U.S.C. 4513(b)(1) and 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 (12 U.S.C. 4516).


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. 102-550, section 1301, Oct. 28, 1992, 
106 Stat. 3672, 3941-4012 (1993) (12 U.S.C. 4501 et seq.).
    (b) Adequately capitalized means the adequately capitalized 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 designee.
    (d) Enterprise means the Federal National Mortgage Association or 
the Federal Home Loan Mortgage Corporation; and the term 
``Enterprises'' means, collectively, the Federal National Mortgage 
Association and the Federal Home Loan Mortgage Corporation.
    (e) Surplus funds means funds that are not obligated as of 
September 30 of each fiscal year that were collected from any 
Enterprise pursuant to Sec. 1701.3 or Sec. 1701.4.
    (f) Total assets means the sum, as of the most recent June 
quarterly minimum capital report of the Enterprise, of the amounts of 
the following assets that are used to calculate the quarterly minimum 
capital requirement of the Enterprise under 12 CFR part 1750:
    (1) On-balance sheet assets;
    (2) Off-balance sheet mortgage-backed securities; and
    (3) Other off-balance sheet obligations.
    (g) OFHEO means the Office of Federal Housing Enterprise Oversight.


Sec. 1701.3  Annual assessment.

    (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 and amount of semiannual payment. (1) Each Enterprise 
shall pay on or before October 1 and April 1 of each fiscal year an 
amount of one-half of its proportional share of the annual assessment, 
except:
    (i) As provided in paragraph (c)(2) of this section;
    (ii) To the extent surplus funds are credited under paragraph (d) 
of this section; and
    (iii) To the extent a semiannual payment is increased under 
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 
in which they were collected, except as determined by the Director.

[[Page 18040]]

Sec. 1701.4  Increase in semiannual payment.

    The Director, in his or her discretion, may increase any semiannual 
payment to be collected under Sec. 1701.3 from an Enterprise that is 
not classified as adequately capitalized as necessary to pay additional 
estimated costs of regulation of the Enterprise.


Sec. 1701.5  Notice and review.

    (a) Written notice. 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) Request for review. 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 payment or partial payment on or 
before the date it is due.


Sec. 1701.6  Delinquent payment.

    (a) Interest and penalties. The Director may assess interest and 
penalties on any delinquent semiannual payment or partial payment 
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) Transfer to general fund. 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 any assessment under this part pursuant to the authorities of 
sections 1371 (12 U.S.C. 4631) (cease-and-desist proceedings), 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 any annual assessment collected under this part 
in the Federal Housing Enterprise Oversight Fund established in the 
Treasury of the United States.

    Dated: April 2, 2001.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 01-8424 Filed 4-4-01; 8:45 am]
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