[Federal Register Volume 71, Number 105 (Thursday, June 1, 2006)]
[Proposed Rules]
[Pages 31121-31124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8491]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1732

RIN 2550-AA34


Record Retention

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Proposed regulation.

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SUMMARY: The Office of Federal Housing Enterprise Oversight (OFHEO) is 
issuing a proposed regulation that would set forth record retention 
requirements with respect to the record management programs of the 
Federal National Mortgage Association and the Federal Home Loan 
Mortgage Corporation (collectively, the Enterprises) consistent with 
the safety and soundness responsibilities of OFHEO under the Federal 
Housing Enterprises Financial Safety and Soundness Act of 1992.

DATES: Written comments on the proposed regulation must be received by 
no later than July 31, 2006.

ADDRESSES: You may submit your comments on the proposed regulation, 
identified by regulatory information number (RIN) 2550-AA34, by any of 
the following methods:
     U.S. Mail, United Parcel Post, Federal Express, or Other 
Mail Service: The mailing address for comments is: Alfred M. Pollard, 
General Counsel, Attention: Comments/RIN 2550-AA34, Office of Federal 
Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552.
     Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2550-AA34, 
Office of Federal Housing Enterprise Oversight, Fourth Floor, 1700 G 
Street, NW., Washington, DC 20552. The package should be logged at the 
Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m.
     E-mail: [email protected]. Comments to Alfred M. 
Pollard, General Counsel, may be sent by e-mail at 
[email protected]. Please include RIN 2550-AA34 in the subject line 
of the message.

FOR FURTHER INFORMATION CONTACT: Tina 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. Comments

    The Office of Federal Housing Enterprise Oversight (OFHEO) invites 
comments on all aspects of the proposed regulation, including legal and 
policy considerations, and will take all comments into consideration 
before issuing the final regulation. OFHEO requests that comments 
submitted in hard copy also be accompanied by the electronic version in 
Microsoft[reg] Word or in portable document format (PDF) on 3.5'' disk 
or CD-ROM.
    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 on business 
days between the hours of 10 a.m. and 3 p.m., at the Office of Federal 
Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. To make an appointment to inspect comments, 
please call the Office of General Counsel at (202) 414-6924.

II. Background

A. Introduction

    Title XIII of the Housing and Community Development Act of 1992, 
Pub. L. 102-550, titled the ``Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992'' (Act) (12 U.S.C. 4501 et seq.), 
established OFHEO as an independent office within the Department of 
Housing and Urban Development. OFHEO is statutorily mandated 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 in a safe and sound 
manner and in compliance with applicable laws, rules, and regulations.
    The Act provides that the Director of OFHEO (the Director) is 
authorized to make such determinations, take such actions, and perform 
such functions as the Director determines are necessary regarding his 
supervisory authorities, which include examinations of the 
Enterprises.\1\ Under the Act, the Director is authorized to conduct 
on-site examinations of the Enterprises each year, and any other 
examinations that the Director determines are necessary to ensure their 
safety and soundness.\2\
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    \1\ 12 U.S.C. 4513(b)(2).
    \2\ 12 U.S.C. 4517(a) and (b).

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[[Page 31122]]

B. Record Retention and Safe and Sound Operations

    In furtherance of the safety and soundness authorities of OFHEO, 
the proposed regulation would require the Enterprises to establish and 
maintain a record retention program to ensure that the records are 
readily accessible for examination and other supervisory purposes. 
OFHEO recognizes that the effectiveness of the examination process is 
dependent upon the prompt production of complete and accurate records. 
OFHEO, through the supervisory process, must have access to the records 
of an Enterprise that are necessary to determine the financial 
condition of the Enterprise or the details or the purpose of any 
transaction that may have a material effect on the financial condition 
of the Enterprise.\3\
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    \3\ 12 U.S.C. 4632(c).
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    Retention of such records not only facilitates the examination 
process, but also allows an Enterprise to manage more effectively its 
business and detect improper behavior that might cause financial damage 
to the corporation. Additionally, such records serve as documentation 
for an Enterprise in any controversy over its business activities or 
transactions.
    The importance of sound record retention policies and procedures by 
regulated institutions also has been recognized by Congress and other 
federal regulators. Adequate record retention by the institutions has 
been determined to have a high degree of usefulness in criminal, tax, 
and regulatory investigations or proceedings, and has been identified 
as a requisite component of an institution's operation and management 
on a safety and soundness basis.\4\
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    \4\ See, e.g., 12 U.S.C. 1829b, and the Guidelines and 
Interagency Standards for Safety and Soundness at 12 CFR part 30, 
Appendix A, II, B.
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    In addition to facilitating the oversight and enforcement of 
federal banking laws, adequate record retention has been recognized by 
Congress as being essential to the oversight and enforcement of the 
federal securities laws. For example, as mandated by section 802 of the 
Sarbanes-Oxley Act,\5\ the U.S. Securities and Exchange Commission 
adopted rules requiring accounting firms to retain for seven years 
certain records relevant to their audits and reviews of issuers' 
financial statements. Records to be retained include an accounting 
firm's workpapers and certain other documents that contain conclusions, 
opinions, analyses, or financial data related to the audit or 
review.\6\
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    \5\ Public Law 107-204, 116 Stat. 745 (2002).
    \6\ 17 CFR part 210. See Release Nos. 33-8180; 34-47241; IC-
2591; FR-66; File No. S7-46-02.
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    As noted above, the importance of adequate record retention has 
been recognized by federal regulators to facilitate their oversight and 
enforcement of Federal laws and regulations. This proposed regulation 
represents a similar recognition by OFHEO. However, it is noted that 
the requirements of the proposal would have no effect on the policies, 
rules, or guidance of other federal agencies that may require record 
retention terms or practices different from those set forth in the 
proposal. This proposed regulation only addresses record retention 
requirements for the record management programs of the Enterprises 
under the safety and soundness responsibilities of OFHEO under the Act.

III. Analysis of Proposed Regulation

    Section 1732.1 would explain that the proposal is intended to make 
Enterprise records readily accessible for OFHEO examination and 
supervisory purposes.
    Section 1732.2 would define the terms contained in the proposed 
regulation.
    Section 1732.5 would require that each Enterprise establish and 
maintain a record retention program, and evaluate such program. The 
record retention program would be required to include a record 
retention schedule. Section 1732.6 would provide minimum requirements 
for the program, including requirements relating to a record retention 
schedule. Requirements relating to a record hold, specified in proposed 
Sec.  1732.7 would address record retention methods, record access and 
retrieval policies, and notification procedures for employees. 
Moreover, the section would require an Enterprise employee who is aware 
of a potential OFHEO investigation, enforcement proceeding, or 
litigation involving the Enterprise or an employee to notify 
immediately the legal department of the Enterprise and retain any 
records that may be relevant to such investigation, enforcement 
proceeding, or litigation.
    Section 1732.10 would explain that failure by an Enterprise to 
comply with the requirements of the proposed regulation may subject the 
Enterprise or the board members, officers, or employees to supervisory 
action by OFHEO. The section also would provide that the proposed 
regulation does not limit the authority of OFHEO under its safety and 
soundness mandate to take other actions such as conducting 
examinations, requiring reports and disclosures, and enforcing 
compliance with applicable laws, rules and regulations.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review
    The proposed regulation would 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. Nevertheless, 
the proposed regulation was submitted to the Office of Management and 
Budget for review under other provisions of Executive Order 12866 as a 
significant regulatory action.
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.
Executive Order 13132, Federalism
    Executive Order 13132 requires that Executive departments and 
agencies identify regulatory actions that have significant federalism 
implications. A regulation has federalism implications if it has 
substantial direct effects on the States, on the relationship or 
distribution of power between the Federal Government and the States, or

[[Page 31123]]

on the distribution of power and responsibilities among various levels 
of Government. The Enterprises are federally chartered corporations 
supervised by OFHEO. The proposed regulation sets forth minimum record 
retention requirements with which the Enterprises must comply for 
Federal supervisory purposes and address the safety and soundness 
authorities of the agency. The proposed regulation does not affect in 
any manner the powers and authorities of any State with respect to the 
Enterprises or alter the distribution of power and responsibilities 
between State and Federal levels of government. Therefore, OFHEO has 
determined that the proposed regulation has no federalism implications 
that warrant the preparation of a Federalism Assessment in accordance 
with Executive Order 13132.

List of Subjects in 12 CFR Part 1732

    Government-Sponsored Enterprises, Reporting and recordkeeping 
requirements, Records.

    Accordingly, for the reasons stated in the preamble, OFHEO proposes 
to add part 1732 to subchapter C of 12 CFR chapter XVII to read as 
follows:

Subchapter C--Safety and Soundness

PART 1732--RECORD RETENTION

Subpart A--General
Sec.
1732.1 Purpose and scope.
1732.2 Definitions.
1732.3-1732.4 [Reserved]
Subpart B--Record Retention Program
1732.5 Establishment and evaluation of record retention program.
1732.6 Minimum requirements of record retention program.
1732.7 Record hold.
1732.8--1732.9 [Reserved]
Subpart C--Supervisory Action
1732.10 Supervisory action.

    Authority: 12 U.S.C. 4513(a), 4513(b)(1), 4513(b)(5), 4514, 
4631, and 4632.

Subpart A--General


Sec.  1732.1  Purpose and scope.

    In furtherance of the safety and soundness authorities of OFHEO, 
this part sets forth minimum requirements in connection with the record 
retention program of each Enterprise. The requirements are intended to 
ensure that complete and accurate records of an Enterprise are readily 
accessible by OFHEO for examination and other supervisory purposes.


Sec.  1732.2  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, Public Law 102-550, section 1301, Oct. 28, 
1992, 106 Stat. 3672, 3941 through 4012 (1993) (12 U.S.C. 4501 et 
seq.).
    (b) Active record means a document that is necessary to conduct the 
current business of an office or business unit of an Enterprise and, 
therefore, is readily available for consultation and reference.
    (c) Director means the Director of OFHEO, or his or her designee.
    (d) Electronic record means a record created, generated, 
communicated, or stored by electronic means.
    (e) Employee means any officer or employee of an Enterprise, any 
conservator appointed by OFHEO, or any agent or independent contractor 
acting on behalf of an Enterprise.
    (f) 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.
    (g) E-mail means electronic mail, which is a method of 
communication in which:
    (1) Usually text is transmitted (but sometimes also graphics and/or 
audio information);
    (2) Operations include sending, storing, processing, and receiving 
information;
    (3) Users are allowed to communicate under specified conditions; 
and
    (4) Messages are held in storage until called for by the addressee, 
including any attachment of separate electronic files.
    (h) Inactive record means a document that is seldom used but must 
be retained by an Enterprise for legislative, fiscal, legal, archival, 
historical, or vital records purposes.
    (i) OFHEO means the Office of Federal Housing Enterprise Oversight.
    (j) Record means any document whether generated internally or 
received from outside sources by an Enterprise or employee in 
connection with Enterprise business, regardless of the following:
    (1) Form or format, including hard copy documents (e.g. files, 
logs, and reports) and electronic documents (e.g., e-mail, databases, 
spreadsheets, PowerPoint presentations, electronic reporting systems, 
electronic tapes and back-up tapes, optical discs, CD-ROMS, and DVDs), 
and voicemail records;
    (2) Where the document is stored or located, including network 
servers, desktop or laptop computers and handheld computers, other 
wireless devices with text messaging capabilities, and on-site or off-
site at a storage facility;
    (3) Whether the document is maintained or used on Enterprise-owned 
equipment, or personal or home computer systems of an employee; or
    (4) Whether the document is active or inactive.
    (k) Record retention schedule means a form that details the 
categories of records an Enterprise is required to store and their 
corresponding record retention periods. The record retention schedule 
includes reproductions, as well as all media, including microfilm and 
machine-readable computer records, for each record category.
    (l) Retention period means the length of time that records must be 
kept before they are destroyed. Records not authorized for destruction 
have a retention period of ``permanent.''
    (m) Vital records means documents that are needed to meet 
operational responsibilities of an Enterprise under emergency or 
disaster conditions (emergency operating records) or to protect the 
legal and financial rights of an Enterprise and those affected by 
Enterprise activities. Emergency operating records are the type of 
vital records essential to the continued functioning or reconstitution 
of an Enterprise during and after an emergency. A vital record may be 
both an emergency operating record and a legal and financial rights 
record.


Sec.  1732.3-1732.4  [Reserved]

Subpart B--Record Retention Program


Sec.  1732.5  Establishment and evaluation of record retention program.

    (a) Establishment. An Enterprise shall establish and maintain a 
written record retention program and provide a copy of such program to 
the Examiner in Charge of the Enterprise within 120 days of the 
effective date of this part, and annually thereafter, and whenever a 
significant revision to the program has been made.
    (b) Evaluation. Management of the Enterprise shall evaluate in 
writing the adequacy and effectiveness of the record retention program 
at least every three years and provide a copy of the evaluation to the 
board of directors and the Examiner in Charge of the Enterprise.


Sec.  1732.6  Minimum requirements of record retention program.

    (a) Requirements. The record retention program established and 
maintained by an Enterprise under Sec.  1732.5 shall:

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    (1) Be reasonably designed to assure that retained records are 
complete and accurate;
    (2) Be reasonably designed to assure that the format of retained 
records and the retention period--
    (i) Are adequate to support litigation and the administrative, 
business, external and internal audit functions of the Enterprise;
    (ii) Comply with requirements of applicable laws and regulations; 
and
    (iii) Permit ready access by the Enterprise and, upon request, by 
the examination and other staff of OFHEO;
    (3) Assign in writing authorities and responsibilities for record 
retention activities;
    (4) Include policies and procedures concerning record holds, 
consistent with Sec.  1732.7;
    (5) Include an accurate, current, and comprehensive record 
retention schedule that lists records by major categories, 
subcategories, record type, and retention period, which retention 
period is appropriate to the specific record and consistent with 
applicable legal, regulatory, fiscal, and administrative requirements;
    (6) Include adequate security and internal controls to protect 
records from unauthorized access and data alteration; and
    (7) Provide for adequate back-up and recovery of electronic 
records.
    (b) Training. The record retention program shall provide for 
training of and notice to all employees on a periodic basis on their 
record retention responsibilities, including instruction regarding 
penalties provided by law for the unlawful removal or destruction of 
records.


Sec.  1732.7  Record hold.

    (a) Definition. For purposes of this part, the term ``record hold'' 
means a requirement, an order, or a directive from an Enterprise or 
OFHEO that the Enterprise is to retain records relating to a particular 
issue in connection with an actual or a potential OFHEO examination, 
investigation, enforcement proceeding, or litigation.
    (b) Notification by Enterprise. The record retention program of an 
Enterprise shall:
    (1) Address how all employees will receive prompt notification of a 
record hold;
    (2) Designate an individual to communicate specific requirements 
and instructions, including, when necessary, the instruction to cease 
immediately any otherwise permissible destruction of records; and
    (3) Provide that any employee who is aware of a potential 
investigation, enforcement proceeding, or litigation by OFHEO involving 
the Enterprise or an employee shall notify immediately the legal 
department of the Enterprise and shall retain any records that may be 
relevant in any way to such investigation, enforcement proceeding, or 
litigation.
    (c) Method of record retention. The record retention program of an 
Enterprise shall address the method by which an Enterprise will retain 
records during a record hold. Specifically, the program shall describe 
the method for the continued preservation of electronic records, 
including e-mails, and the conversion of records from paper to 
electronic format as well as any alternative storage method.
    (d) Access to and retrieval of records. The record retention 
program of an Enterprise shall ensure access to and retrieval of 
records by an Enterprise and access, upon request, by OFHEO, during a 
record hold.


Sec. Sec.  1732.8--1732.9  [Reserved]

Subpart C--Supervisory Action


Sec.  1732.10  Supervisory action.

    (a) Supervisory action. Failure by an Enterprise to comply with 
this part may subject the Enterprise or the board members, officers, or 
employees thereof to supervisory action by OFHEO under the Act, 
including but not limited to cease-and-desist proceedings, temporary 
cease-and-desist proceedings, and civil money penalties.
    (b) No limitation of authority. This part does not limit or 
restrict the authority of OFHEO to act under its safety and soundness 
mandate, in accordance with the Act. Such authority includes, but is 
not limited to, conducting examinations, requiring reports and 
disclosures, and enforcing compliance with applicable laws, rules, and 
regulations.

    Dated: May 24, 2006.
James B. Lockhart III,
Acting Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. E6-8491 Filed 5-31-06; 8:45 am]
BILLING CODE 4220-01-P