[Federal Register Volume 67, Number 120 (Friday, June 21, 2002)]
[Proposed Rules]
[Pages 42200-42202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15678]
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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. 67, No. 120 / Friday, June 21, 2002 /
Proposed Rules
[[Page 42200]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Federal Housing Enterprise Oversight
12 CFR Part 1720
RIN 2550-AA22
Safety and Soundness Regulation
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 a proposed regulation that would support increased
transparency and public awareness of minimum supervisory standards as
may from time to time be adopted by OFHEO and applied in overseeing the
safety and soundness of the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac) (collectively, the Enterprises). The format of the proposal
reflects that used by other Federal regulators to delineate supervisory
standards in a manner consistent with the United States Supreme Court
rulings affecting such agency pronouncements. OFHEO will adopt and
publish supervisory policy guidances as appendices to the proposed rule
as it deems appropriate to illuminate areas of particular interest or
potential concern.
DATES: Written comments on the proposed rule must be received by July
22, 2002.
ADDRESSES: All comments concerning the proposed rule should be
addressed to Alfred M. Pollard, General Counsel, Office of 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 a 3.5'' disk. Alternatively, comments
may be submitted via electronic mail to [email protected].
FOR FURTHER INFORMATION CONTACT: David W. Roderer, Deputy General
Counsel, or Marvin Shaw, Senior Counsel, at (202) 414-6924 (not a toll-
free number), Office of General Counsel, Office of Federal Housing
Enterprise Oversight, 1700 G Street NW., Fourth Floor, Washington, DC
20552. The telephone number for the Telecommunications for the Deaf is:
(800) 877-8339 (TTD only).
SUPPLEMENTARY INFORMATION: The Federal Housing Enterprises Safety and
Soundness Act of 1992, Title XIII of Public Law 102-550 (the Act),
empowers OFHEO to take any such action as the Director determines to be
appropriate to ensure that the federally sponsored housing enterprises,
the Federal National Mortgage Association (Fannie Mae) and the Federal
Home Loan Mortgage Corporation (Freddie Mac) (collectively, the
Enterprises), are adequately capitalized and operating safely by, among
other things, adopting supervisory policies and standards by regulation
or other guidance or process. On December 19, 2000, OFHEO issued Policy
Guidance PG-00-001 setting forth minimum supervisory standards in eight
broad areas of particular regulatory interest and potential concern.\1\
One year later, a second policy guidance was adopted that specifically
sets out the minimum safety and soundness standards for information
systems and security.\2\ That policy guidance, entitled ``Safety and
Soundness Standards for Information,'' focused narrowly on safety and
soundness concerns with the adequacy of the Enterprises' respective
policies and procedures affecting the security of their information
systems and integrity of such information, including borrower
information maintained by the Enterprises.
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\1\ OFHEO Policy Guidance PG-00-001, Minimum Safety and
Soundness Requirements (Dec. 19, 2000) (available on OFHEO's Web
site at http://www.ofheo.gov).
\2\ OFHEO Policy Guidance PG-01-002, Safety and Soundness
Standards for Information (Dec. 19, 2001) (available at http://www.ofheo.gov).
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Under those or any subsequently adopted policy guidances, if OFHEO
finds that an Enterprise fails to meet specified requirements or
standards, the Director may, among other things, require the Enterprise
to submit to the agency and to implement a written plan to achieve
timely compliance with the requirement or standard. If the Enterprise
fails to submit such an adequate plan in the format and within the time
specified by the agency or fails in some material respect to implement
the plan, the agency may take additional supervisory action. The
Director may at any time initiate an action to cease or prescribe
conduct by the Enterprise as the agency deems to be appropriate to
remedy or correct conditions resulting from an unsafe or unsound
practice or condition. Agency actions may include, but are not limited
to, issuance of a notice of charges or order, imposition of civil money
penalties, or such other remedial actions or sanctions as determined by
the Director.
The minimum standards set forth in OFHEO's policy guidances are
designed to identify key safety and soundness concerns regarding
operation and management of an Enterprise, and to ensure that conduct
and practices of the Enterprises reasonably avoid the emergence of
problems that might entail serious risks. The minimum standards also
reflect the need for internal policies and procedures in particular
areas that, if not appropriately addressed by the Enterprises, may
warrant supervisory action by OFHEO in order to reduce risks of loss
and corresponding capital impairment. The minimum standards set out in
such guidances are intended to effect these purposes without dictating
how the Enterprises must be operated and managed; moreover, the
guidances do not purport to set out detailed operational and managerial
procedures that an Enterprise must have in place. Rather, the guidances
identify the ends that proper operational and management policies and
procedures are to achieve, while leaving the means to be devised by
each Enterprise as it designs and implements its own policies and
procedures. To the limited extent that OFHEO does specify particular
requirements, each Enterprise's management is left with substantial
flexibility to fashion and implement those requirements.
[[Page 42201]]
In this notice of proposed rulemaking, OFHEO is proposing to issue
a rule to provide regulatory support for the adoption and publication
of such guidances, and thereby to increase the transparency and public
awareness of the supervisory standards employed by OFHEO in the
oversight of the Enterprises. The format of the proposed regulation, as
a formal agency pronouncement delineating the parameters of the
supervisory standards applicable to the Enterprises, mirrors that used
by the Office of Comptroller of the Currency (OCC) in promulgating
safety and soundness standards for national banks \3\ pursuant to
Section 39 of the Federal Deposit Insurance Act,\4\ as well as in later
adopting specific supervisory standards applicable to the information
systems of banks.\5\
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\3\ For the OCC, these regulations appear at 12 CFR part 30,
Appendix A: ``Interagency Guidelines Establishing Standards for
Safety and Soundness''; see also, for the Board of Governors of the
Federal Reserve System at 12 CFR part 263; and for the Federal
Deposit Insurance Corporation at 12 CFR part 308, subpart R; and for
the Office of Thrift Supervision at 12 CFR part 570.
\4\ 12 U.S.C. 1381p-1.
\5\ See, Appendix B of 12 CFR part 30.
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The regulation and appended guidances are intended to facilitate
the public awareness and enforceability of such standards as official
agency pronouncements in a manner consistent with recent United States
Supreme Court's rulings.\6\ Policy guidances adopted by the agency that
address matters of safety and soundness concern will be published as
appendices to a final rule.
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\6\ See, United States v. Mead Corp., 533 U.S. 218 (2001), and
Christensen v. Harris County, 529 U.S. 576 (2000).
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Policy Guidances
The proposed regulation is not intended to effect any specific
change in OFHEO's supervisory policies, as either reflected in the
policy guidances or elsewhere. OFHEO routinely undertakes to evaluate
an Enterprise's policies and practices, in order to determine whether
such policies are safe and sound in principle and in practice. OFHEO
also evaluates whether procedures are in place to ensure that an
Enterprise's policies as adopted by the Enterprise's board of directors
and management are, in fact, applied in the normal course of business.
OFHEO will continue to determine compliance with the standards
specifically addressed in the policy guidances and to assess the
policies and practices of the Enterprises that might affect their
financial conditions and compliance with applicable laws and
regulations through examinations of the Enterprises, as well as off-
site monitoring and a continuing dialogue with each Enterprise.
Nothing in the OFHEO Policy Guidances in any way limits the
authority of OFHEO to otherwise address unsafe or unsound conditions or
practices, or violations of applicable laws, regulations or supervisory
orders. Any supervisory action undertaken with reference to the policy
guidances or the proposed regulation may be taken separate from, in
conjunction with, or in addition to any other enforcement action
available to OFHEO. Compliance with the minimum standards articulated
in a policy guidance will preclude the agency from finding that an
Enterprise is otherwise engaged in a specific unsafe or unsound
practice or is in an unsafe or unsound condition, or requiring
corrective or remedial action with regard to such practice or
condition. That is, supervisory action is not precluded against an
Enterprise because it has not been cited for a deficiency under a
policy guidance. Conversely, an Enterprise's failure to comply with one
of these supervisory standards may not warrant a formal supervisory
response from OFHEO, if the agency determines the matter can be
otherwise addressed in a satisfactory manner. For example, OFHEO may
require timely submission of a plan to achieve compliance with the
particular standard or standards, and refrain from taking any other
enforcement action.
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 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 need not be submitted to the
Office of Management and Budget for formal review.
Unfunded Mandates Reform Act of 1995
This proposed rule does not include a Federal mandate that could
result in the expenditure by State, local, and tribal governments, in
the aggregate, or by the private sector, of $100,000,000 or more
(adjusted annually for inflation) in any one year. As a result, the
proposed rule does not warrant the preparation of an assessment
statement in accordance with the Unfunded Mandates Reform Act of 1995.
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 only affects
the Enterprises, which are not small entities for purposes of the
Regulatory Flexibility Act.
Paperwork Reduction Act of 1995
This proposed regulatory contains no information collection
requirement that would require the approval of the Office of Management
and Budget pursuant to the Paperwork Reduction Act, 44 U.S.C. 3501-
3520.
List of Subjects in 12 CFR Part 1720
Administrative practice and procedure, Privacy, Mortgages.
Accordingly, for the reasons set out in the preamble, the Office of
Federal Housing Enterprise Oversight proposes to add part 1720 to
subchapter C of 12 CFR chapter XVII to read as follows:
PART 1720--SAFETY AND SOUNDNESS
Sec.
1720.1 Authority.
1720.2 Safety and soundness standards.
Authority: 12 U.S.C. 4513(a), 4513(b)(1), 4513(b)(5), 4517(a),
4521(a)(2) through (3), 4631, 4632, and 4636.
Sec. 1720.1 Authority.
(a) Authority. This part is issued by the Office of Federal Housing
Enterprise Oversight (OFHEO) pursuant to sections 1313(a), 1313(b)(1),
and 1313(b)(5) of the Federal Housing Enterprise Safety and Soundness
Act (Act) (12 U.S.C. 4513(a), 4513(b)(1), and 4513(b)(5)). These
provisions of the Act authorize
[[Page 42202]]
OFHEO to take any action deemed appropriate by the Director of OFHEO to
ensure that the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation (the Enterprises) are operated in a safe
and sound manner, including by adopting supervisory policies and
standards by regulation, guidance, or other process.
(b) Preservation of existing authority. No action by OFHEO
undertaken with reference to a policy guidance or this regulation will
in any way limit the authority of the Director otherwise to address
unsafe or unsound conditions or practices, or other violations of law,
rule or regulation. Action with reference to a policy guidance or this
regulation may be taken separate from, in conjunction with, or in
addition to any other supervisory response, enforcement action, or
agency-imposed requirements deemed appropriate by OFHEO. Nothing in
this regulation or any guidance issued by OFHEO limits the authority of
the Director pursuant to section 1313 of the Act (12 U.S.C. 4513) or
any other provision of law, rule or regulation applicable to the
Enterprises.
Sec. 1720.2 Safety and soundness standards.
Policy guidances as may be adopted from time to time by OFHEO,
addressing safety and soundness standards, shall apply to the Federal
National Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). If
OFHEO determines that an Enterprise does not meet a requirement set out
in such a policy guidance, it may require corrective or remedial
actions by the Enterprise, and take such enforcement action as the
Director deems to be appropriate.
Dated: June 17, 2002.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 02-15678 Filed 6-20-02; 8:45 am]
BILLING CODE 4220-01-P