[Federal Register Volume 74, Number 126 (Thursday, July 2, 2009)]
[Rules and Regulations]
[Pages 31602-31618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15304]
[[Page 31602]]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1253
RIN 2590-AA17
Prior Approval for Enterprise Products
AGENCY: Federal Housing Finance Agency.
ACTION: Interim final rule; request for comments.
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SUMMARY: The Federal Housing Finance Agency (FHFA or Agency) is
promulgating and seeking comment on an interim final regulation to
implement section 1321 of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, as amended by section 1123 of the
Housing and Economic Recovery Act of 2008. The regulation establishes a
process for the Federal National Mortgage Association (Fannie Mae) and
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively,
the Enterprises) to obtain prior approval from the FHFA Director for a
new product and provide prior notice to the Director of a new activity.
Specifically, the interim final regulation implements section 1321 and
is designed to ensure that the FHFA Director has the opportunity to
determine prior to an Enterprise commencing a new activity whether the
new activity is a new product, and if it is a new product, to determine
whether the new product is authorized by the Enterprise's charter, is
in the public interest, and is consistent with the safety and soundness
of the Enterprise or the mortgage finance or financial system. FHFA
invites public comment on all aspects of the regulation.
DATES: Effective Date: July 2, 2009.
Comment Date: FHFA will accept written comments on the interim
final regulation on or before August 31, 2009.
ADDRESSES: Submit comments to FHFA using any one of the following
methods:
E-mail: [email protected]. Please include ``Public
Comment--RIN 2590-AA17 (Prior Approval for Enterprise Products)'' in
the subject line of the message.
Mail/Hand Delivery: Federal Housing Finance Agency, 1700 G
Street, NW., Washington, DC 20552, Attention: Public Comment--RIN 2590-
AA17 (Prior Approval for Enterprise Products). The package should be
logged at the Guard Desk, First Floor, on business days between 9 a.m.
and 5 p.m.
Federal eRulemaking: http://www.regulations.gov. Follow
the instructions for submitting comments. If you submit your comment to
the Federal eRulemaking Portal, please also send it by e-mail to FHFA
at [email protected] to ensure timely receipt by the Agency. Include
the following information in the subject line of your submission:
``Public Comment--RIN 2590-AA17 (Prior Approval for Enterprise
Products)''.
We will post all public comments we receive without change,
including any personal information you provide, such as your name and
address, on the FHFA Web site at http://www.fhfa.gov.
FOR FURTHER INFORMATION CONTACT: Carol Connelly, 202-414-8910 (not a
toll-free number), e-mail: [email protected], Office of
Supervision--Office of Supervision Infrastructure; or Ming-Yuen Meyer-
Fong, 202-414-3798 (not a toll-free number), e-mail: [email protected], Office of General Counsel, Federal Housing Finance
Agency, 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 and Access
This interim final regulation as well as any comments posted may be
accessed via the Internet. Users can access the FHFA Web page at http://www.fhfa.gov; select Supervision and Regulations Tab; select
Regulations, Notices and Public Comments; then, select the link titled
``Prior Approval for Enterprise Products.'' 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 Federal
Housing Finance Agency, 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. Establishment of the Federal Housing Finance Agency
On July 30, 2008, the President signed the Housing and Economic
Recovery Act (Pub. L. 110-289, 122 Stat. 2654) (HERA). Among other
things, HERA amended the Federal Housing Enterprises Financial Safety
and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) (Safety and
Soundness Act) to establish a new independent agency of the Federal
Government known as the Federal Housing Finance Agency (FHFA) and
transferred the supervisory and oversight responsibilities for Fannie
Mae and Freddie Mac (the Enterprises) from the Office of Federal
Housing Enterprise Oversight (OFHEO) and components of the Department
of Housing and Urban Development to FHFA. The Enterprises are
government-sponsored enterprises chartered by Congress for the purposes
of establishing secondary market facilities for residential mortgages.
12 U.S.C. 1716 et seq. (Fannie Mae Charter Act) and 12 U.S.C. 1451 et
seq. (Freddie Mac Corporation Act) (the authorizing statutes).
Congress established FHFA, among other things, to oversee the
prudential operations of the Enterprises, and to ensure that: (1) The
Enterprises operate in a safe and sound manner, including maintenance
of adequate capital and internal controls; (2) The activities of the
Enterprises foster liquid, efficient, competitive, and resilient
national housing finance markets; (3) The Enterprises comply with the
Safety and Soundness Act and the rules, regulations, guidelines, and
orders issued under the Safety and Soundness Act and the authorizing
statutes; and (4) The Enterprises carry out their public missions
through activities and operations that are authorized by and consistent
with the Safety and Soundness Act, their respective authorizing
statutes, and the public interest. See section 1313(a)(1)(B) of the
Safety and Soundness Act, as amended (12 U.S.C. 4513(a)(1)(B)).
B. Prior Approval Authority for Products and Activities
Through products offered to the marketplace and their activities in
the housing finance system, Freddie Mac and Fannie Mae, together, own
or guarantee nearly $5.4 trillion of residential mortgages in the
United States. Their products play a key role in housing finance and
the U.S. economy. However, the Enterprises also take on risks, and
create risks for themselves and the mortgage finance and financial
system, through their activities and product offerings. The
configuration of particular products may also raise questions of how
successfully such products achieve the Enterprises' public missions
while balancing the risks borne or created through such products.
Because of the significant effects Enterprise products and activities
have and could have on the market and market participants, the Safety
and Soundness Act empowered the FHFA Director to review products prior
to being offered. Specifically, the Safety and Soundness Act requires
``each Enterprise to obtain the approval of the Director for any
product of the enterprise before initially offering the product.'' See
section 1321(a) of the
[[Page 31603]]
Safety and Soundness Act (12 U.S.C. 4541(a)).
Before commencing a new activity that an Enterprise does not
consider to be a new product, the Safety and Soundness Act requires an
Enterprise to provide ``written notice'' to the Director for a
determination of whether such a new activity is a new product subject
to prior approval under section 1321. See section 1321(e)(2) of the
Safety and Soundness Act (12 U.S.C. 4541(e)(2)). If the Director
determines such a new activity to be a new product, the Enterprise
shall ``obtain the approval of the Director for any product of the
enterprise before initially offering the product.'' See id. at section
1321(a) of the Safety and Soundness Act (12 U.S.C. 4541(a)).
III. Analysis of the Interim Final Rule
A. Synopsis of the Interim Final Rule
The structure of the statute superficially suggests that an
Enterprise has a choice of two types of submission to make to FHFA:
First, a request for prior approval of a new product; and second, a
notice of a new activity that the Enterprise does not believe to be a
new product. However, the statute does not define either ``product'' or
``activity,'' nor does it direct the agency to define those terms. The
standards for determining when an activity must be published for public
notice and comment--thereby constituting a new product--include
considerations of charter compliance, safety and soundness, and the
public interest. These factors are of a high-level character,
implicating many considerations in each case that may be difficult to
define or identify in advance. FHFA concludes that the determination
whether a new activity is a new product in specific instances is
committed to agency discretion by law.
The agency does not believe that it is practical to require an
Enterprise to identify a new product--as distinct from a new activity
that is not a product--in advance for purposes of determining which
type of submission to make to the agency. For that reason, the
regulation meets the statutory mandate through employing a streamlined
``notice'' process. It requires an Enterprise to make a single form of
submission--a notice of new activity. The Director will then decide
whether the new activity is a new product that must be published for
public notice and comment. In exigent circumstances, the Director may
decide to allow an Enterprise to undertake a new product before the
public notice and comment period.
To avoid duplication of review, a product undertaken by an
Enterprise which is substantially similar to a product previously
approved under this part for either Enterprise is not a new product.
The definition of new product also does not include a product that is
substantially similar to a product that has been continuously
undertaken by either Enterprise since prior to the effective date of
HERA of July 30, 2008. However, in either case, an Enterprise seeking
to undertake such a product for the first time must provide notice to
FHFA of the product as a new activity and obtain the Director's
approval. FHFA reserves its authority to review such a new activity to
ensure compliance with the Enterprise's authorizing statute, safety and
soundness considerations, and the public interest, and to deny or to
impose any terms, conditions, or limitations on the Enterprise's
ability to undertake such a new activity. We note that 12 CFR part
1750, Subpart B, App. A (Risk-based capital) provides for a definition
for new activity which applies to the relevant section of that
appendix, and is not controlling for purposes of 12 CFR part 1253.
The Director's exercise of his authority under the regulations in
this part in no way restricts his safety and soundness authority over
all new and existing products or activities of an Enterprise, or his
authority to review all new and existing products or activities to
determine that such products or activities are consistent with the
statutory mission of an Enterprise.
B. Section-by-Section Analysis
Section 1253.1 sets forth the purpose and authority of this part.
Section 1253.2 sets forth definitions of terms used in this part
which are discussed further below in the context that they are used.
Section 1253.3 establishes that before commencing any new activity,
an Enterprise must submit to FHFA a written Notice. As part of its
submission, an Enterprise must complete the FHFA Notice of New Activity
Form (Notice Form) and submit it to FHFA in the manner described in the
Instructions for the Notice Form established through the appendix to
this part, and which may be modified from time to time by written
direction of the Director. The Notice Form provides a mechanism for the
Director to determine whether the new activity is a new product in
accordance with 12 U.S.C. 4541 and 12 CFR part 1253. The Notice Form
also serves, where the Director determines the activity is not a new
product, to provide information to FHFA necessary in exercising its
authorities as safety and soundness regulator. A Notice will not be
considered complete and received for processing until all of the
information required by the Notice Form, along with any follow-up
information required by FHFA upon review of the initially submitted
information to enable a determination whether the new activity is a new
product, has been submitted. FHFA will notify the Enterprise once a
Notice Form is deemed complete and accepted for review.
An Enterprise may not commence a new activity unless the Director
makes a written determination that the new activity is not a new
product, or at least 15 business-days have elapsed since the Enterprise
was notified that a Notice was complete and received for processing
without the Director having made a determination. If the Director
determines that the new activity is a new product, the Enterprise must
await approval of the new product under Sec. 1253.4.
Section 1253.4 provides for public notice and comment of a new
product to enable the Director to determine whether the new product is:
(1) Authorized by the Charter Act (Fannie Mae) or Corporation Act
(Freddie Mac); (2) In the public interest; and (3) Consistent with the
safety and soundness of the Enterprise or the mortgage finance and
financial system. Among the factors that the Director may consider when
determining whether a new product is in the public interest are: (1)
The degree to which the new product might reasonably be expected to
advance any of the charter purposes of Fannie Mae or Freddie Mac; (2)
The degree to which the new product serves underserved markets as set
forth in section 1335 of the Safety and Soundness Act (12 U.S.C. 4565);
(3) The degree to which the new product is being supplied or could be
supplied by non-government-sponsored-enterprise firms; (4) Other
alternatives for providing the new product to the market; (5) The
degree to which the new product promotes competition in the marketplace
or, to the contrary, would result in less competition and greater
concentration of economic activity or risk; (6) The degree to which
Enterprise provision of the service overcomes natural market barriers
or inefficiencies; (7) The degree to which Enterprise provision of the
new product might raise or mitigate systemic risks to the mortgage,
mortgage finance or financial markets; (8) the degree to which the new
product furthers fair housing; and (9) such other factors determined to
be appropriate by the Director.
[[Page 31604]]
Section 1321(c) of the Safety and Soundness Act (12 U.S.C. 4541(c))
authorizes the Director to grant ``temporary approval'' of the new
product if a delay associated with seeking public comment is contrary
to public interest. See id. at section 1321 paragraphs (c)(2) through
(c)(4) (12 U.S.C. 4541(c)(2) through (c)(4)). Accordingly, once FHFA
determines that a new activity is a new product, FHFA will publish
notice along with a description of the new product for a 30-day public
comment period, unless the Director determines that delay associated
with first seeking public comment is contrary to public interest. Where
the Director determines that exigent circumstances exist such that
delay associated with seeking public comment is contrary to public
interest, the Director may consider and temporarily approve the new
product without providing an advance public comment period. In such
circumstances, the Director will provide for a public comment period
after granting the Temporary Approval.
In making a determination, the Director will consider all public
comments received by the closing date of the comment period. The
Director will make a determination on the new product no later than 30
calendar-days after the close of the public comment period. If the
Director fails to make a determination on the new product within the
30-day time period, the Enterprise may offer the new product. If the
Director approves the new product, the Director may condition such
approval upon terms, conditions, and limitations with which the
Enterprise must comply. If the Director denies a new product, the
Enterprise may not offer the new product.
Where, as a result of public comment or otherwise in the course of
considering the new product, FHFA believes that any information in
addition to that supplied by the Enterprise is necessary for its
decision, FHFA may request such information. FHFA may deny a new
product if it does not receive the information requested from the
Enterprise in sufficient time to permit adequate evaluation of the
information.
Section 1253.5 states that confidential information submitted in
support of either a Notice or a public comment submission, is presumed
public. An Enterprise or commenter may request confidential treatment,
and FHFA will consider such requests upon Enterprise or commenter
compliance with the specified requirements.
Section 1253.6 sets forth certification requirements and grounds to
nullify an approval. The Notice, any applicable Forms, and supporting
information must be certified by an executive officer as that term is
defined by 12 CFR 1770.3(g). We note that 12 CFR 1770.3(g) is in the
process of being replaced, and Sec. 1230.2 will become the relevant
reference. 74 FR 26989 (June 5, 2009). If FHFA discovers a material
misrepresentation or omission after the Director has rendered a
decision, FHFA may nullify any approval, or terms, conditions, and
limitations to such approval. Any person responsible for any material
misrepresentation or omission in a filing or supporting materials may
be subject to enforcement action and other penalties, including
criminal penalties provided in 18 U.S.C. 1001.
Section 1253.7 states penalties for failure to comply. If an
Enterprise: (1) Offers a new product or commences a new activity
without submitting a Notice; (2) offers a new product or commences a
new activity after submitting a Notice before the expiration of time
provided for the Director to make a determination; (3) offers a new
product after the Director disapproves it; or (4) fails to adhere to
any terms, conditions, or limitations established by the Director, the
Enterprise must cease offering the new product or engaging in the new
activity immediately upon discovery or notice of the events described
in this section, unless otherwise informed by the Director in writing.
Upon discovery or notice of any one of these occurrences, the
Enterprise must provide the FHFA Director and its board of directors,
chief risk officer, internal audit, and compliance officer, a written
description of the failure or failures of controls that resulted in the
offering of the new product or commencement of new activity in
contravention of regulations in this part. The Enterprise must also
provide information regarding the steps it has taken and will take to
remediate the control failures. Failure to comply with these steps may
result in FHFA taking enforcement action.
Section 1253.8 provides that, if the Director approves a new
product for one Enterprise, or the new product is otherwise available
to that Enterprise under Sec. 1253.4, the other Enterprise may also
offer that new product, subject to submitting a request to the Director
in the form of a Notice under Sec. 1253.3 and approval by the
Director.
Section 1253.9 states that the Director's authority is preserved.
The Director's exercise of the Safety and Soundness Act's provisions on
prior approval authority for products in no way restricts the safety
and soundness authority of the Director over all new and existing
products or activities, or the authority of the Director to review all
new and existing products or activities to determine that such products
or activities are consistent with the statutory mission of an
Enterprise. See section 1321(f) of the Safety and Soundness Act (12
U.S.C. 4541(f)).
IV. Notice and Public Participation
The notice and comment procedure required by the Administrative
Procedure Act is inapplicable to this interim final regulation because
it is in the public interest to implement section 1123 of HERA that
amends section 1321 of the Safety and Soundness Act (12 U.S.C. 4541)
immediately. See 5 U.S.C. 553(b)(B). The regulation facilitates the
Enterprises' continued ability to meet their public mission in
conservatorship, enabling them to contribute to combating the
continuing deterioration and volatility of the residential mortgage
market. Also, the regulation establishes procedures for the Enterprises
to submit notices of new activities and new products for approval.
However, because FHFA believes that public comments are valuable, it
encourages comments on all aspects of the interim final regulation, and
will consider all comments received on or before August 31, 2009 in
adopting a final regulation.
V. Effective Date
For the reasons stated in section IV., above, the FHFA for good
cause finds that the interim final regulation is immediately effective
on July 2, 2009. See id. at para. (d)(3).
VI. Regulatory Flexibility Act
FHFA is promulgating this regulation in the form of an interim
final regulation and not as a proposed regulation. Therefore, the
provisions of the Regulatory Flexibility Act do not apply. See 5 U.S.C.
601(2) and 603(a).
VII. Paperwork Reduction Act
The interim final regulation does not contain any information
collection requirement that requires the approval of the Office of
Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501
et seq.).
List of Subjects in 12 CFR Part 1253
Government-sponsored enterprises; Mortgages; New activities; New
products.
Authority and Issuance
0
Accordingly, for the reasons stated in the preamble, under the
authorities of
[[Page 31605]]
12 U.S.C. 4526 and 12 U.S.C. 4541, the Federal Housing Finance Agency
hereby amends Chapter XII of Title 12, Code of Federal Regulations as
follows:
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
Subchapter C--Enterprises
0
1. Add part 1253 to subchapter C to read as follows:
PART 1253--PRIOR APPROVAL FOR ENTERPRISE PRODUCTS
Sec.
1253.1 Purpose and authority.
1253.2 Definitions.
1253.3 Notice of new activity.
1253.4 New product approval.
1253.5 Confidential information.
1253.6 Certifying and nullifying an approval.
1253.7 Failure to comply.
1253.8 Availability of new product to an Enterprise after it has
been approved for the other Enterprise.
1253.9 Preservation of authority.
Appendix to Part 1253--Prior Approval for Enterprise Products:
Instructions and Notice of New Activity Form
Authority: 12 U.S.C. 4526; 12 U.S.C. 4541.
Sec. 1253.1 Purpose and authority.
The purpose of this part is to establish policies and procedures
implementing the prior approval authority for enterprise products, in
accordance with section 1321 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (Safety and Soundness Act)
(12 U.S.C. 4541), as amended.
Sec. 1253.2 Definitions.
For purposes of this part:
Authorizing statute means, in the case of Fannie Mae, the Federal
National Mortgage Association Charter Act (12 U.S.C. 1716 et seq.) and,
in the case of Freddie Mac, the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1451 et seq.).
Director means the Director of the Federal Housing Finance Agency
or his or her designee.
Enterprise means the Federal National Mortgage Association (Fannie
Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
FHFA means the Federal Housing Finance Agency.
New activity means with respect to an Enterprise, any business
line, business practice, or service, including guarantee, financial
instrument, consulting, or marketing, that is proposed to be undertaken
by the Enterprise either on a standalone basis or as an incident to
providing one or more Enterprise products to the market, and which
was--
(a) Not initially engaged in prior to July 30, 2008;
(b) Commenced by the Enterprise prior to July 30, 2008, but which,
after July 30, 2008, the Enterprise ceased to engage in, and presently
intends to resume; or
(c) Offered or engaged in by the Enterprise after July 30, 2008, at
a significantly different level, or in a significantly different
manner, in terms of the activity's effect on public interest or risk to
the Enterprise or the mortgage finance or financial system.
The term ``new activity'' does not include--
(1) Any Enterprise business practice, transactions, or conduct
performed solely as an incident to the administration of the
Enterprise's internal affairs to conduct its business; or
(2) Any business practice or service undertaken by an Enterprise
that is de minimis in scope, volume, risk, or duration.
New product means any activity that the Director determines merits
public notice and comment on matters of compliance with the applicable
authorizing statute, safety and soundness, or public interest. ``New
product'' does not include--
(a) The automated loan underwriting system of an Enterprise in
existence as of July 30, 2008, including any upgrade to the technology,
operating system, or software to operate the underwriting system;
(b) Any modification to the mortgage terms and conditions or
mortgage underwriting criteria relating to the mortgages that are
purchased or guaranteed by the Enterprise, provided that such
modifications do not alter the underlying transaction so as to include
services or financing, other than residential mortgage financing;
(c) Any activity that is substantially similar to the activities
described in paragraphs (a) or (b) of this section;
(d) Any activity that is substantially similar to an activity or
product that has been approved in accordance with this part for either
Enterprise; or
(e) Any activity that is substantially similar to an activity or
product continuously undertaken by the other Enterprise since prior to
July 30, 2008.
Substantially similar. In considering whether an activity is
``substantially similar'' to any activity described in section
1321(e)(1)(A) and (B) of the Safety and Soundness Act, 12 U.S.C.
4541(e)(1)(A) and in paragraphs (a) or (b) of this section under the
definition of new product, or to any activity approved in accordance
with this part, or continuously engaged in by the other Enterprise as
referenced in paragraphs (d) and (e) of this section under the
definition of new product, the Director may consider if the activity in
question--
(1) Is a product;
(2) Is authorized under the applicable authorizing statute;
(3) Represents an upgrade to the way an approved product is
delivered;
(4) Poses a significant change in risk to the Enterprise or the
mortgage finance system from a previously approved product or activity;
(5) Involves a significant change in terms, conditions, or
limitations expressly contained in any prior approval granted under
this part;
(6) Poses a significant change in its effect on the public interest
compared to a previously approved product or activity;
(7) Poses a significant change from a previously approved product
or activity and if so, does a tradeoff exist in the composite of risk,
public interest, and safety and soundness elements in the proposed new
activity;
(8) Is likely to have significantly more enterprise resources
dedicated to it;
(9) Requires approval by regulators other than FHFA, including
Federal, State, or local regulators;
(10) Involves new classes or types of borrowers, investors, or
counterparties;
(11) Involves new classes or types of collateral; or
(12) Such other factor as the Director determines to be
appropriate.
Sec. 1253.3 Notice of new activity.
(a) Before commencing a new activity, an Enterprise must submit a
Notice of New Activity (Notice) to the FHFA, and either receive a
determination that the new activity is not a new product, await passage
of the 15 business-day period as described in paragraph (d) of this
section, or, where FHFA determines the new activity to be a new
product, await approval of the new product under Sec. 1253.4. In
addition, for any new activity that an Enterprise seeks to engage in
which FHFA had previously approved in accordance with this part for the
other Enterprise, or in which the other Enterprise had engaged
continuously since prior to July 30, 2008, the Enterprise must submit a
Notice to FHFA. In support of its Notice, the Enterprise shall submit
information sufficient to allow the Director to make a determination on
the Notice pursuant to section 1321 of the Safety and Soundness Act (12
U.S.C. 4541), as amended, including any information required by FHFA by
regulation or otherwise. The Enterprise shall provide a thorough,
meaningful, complete and
[[Page 31606]]
specific description of the new activity such that the public will be
able to provide fully informed comment on the new activity if FHFA
determines the new activity to be a new product. Such information shall
include that contained in the FHFA Notice Form and the Instructions for
the FHFA Notice of New Activity Form (Notice Form Instructions) that
appear in the appendix of this part. The Notice Form and Notice Form
Instructions may be amended from time to time by written direction of
the Director. Requests for confidential treatment for any portion of an
Enterprise's submission must be made consistent with Sec. 1253.5.
(b) FHFA will evaluate a Notice to establish whether the submission
contains sufficient information for FHFA to make a determination
whether the new activity is a new product subject to prior approval.
Upon establishing that the Notice contains sufficient information, FHFA
shall deem the submission complete and ``received'' for purposes of
section 1321(e)(2)(B) of the Safety and Soundness Act (12 U.S.C.
4541(e)(2)(B)), and shall notify the Enterprise accordingly.
(c) No later than 15 business-days after the Notice is deemed
completed and ``received'' for purposes of section 1321(e)(2)(B) of the
Safety and Soundness Act (12 U.S.C. 4541(e)(2)(B)), the Director will
make a written determination on the Notice, and shall notify the
Enterprise accordingly. The Director may also approve the new activity
subject to such terms, conditions, or limitations on the Enterprise's
engagement in the new activity as the Director determines to be
appropriate.
(d) If the Director fails to make a determination within the 15
business-day period specified in paragraph (c) of this section, the
Enterprise may commence the new activity. The Director's failure to
make a determination within the 15-day period does not limit or
restrict the Director's safety and soundness authority or the authority
of the Director to review the new activity to determine whether the
activity is consistent with the statutory mission of the Enterprise.
Sec. 1253.4 New product approval.
(a) Public notice. If the Director determines that the new activity
is a new product, FHFA shall publish a public notice soliciting
comments on the proposed product for a 30 calendar-day period.
(1) The public notice will describe the new product and state the
closing date of the public comment period. The public notice will
provide instructions for submission of public comment.
(2) The Director will consider all public comments received by the
closing date of the comment period.
(3) In computing the 30 calendar-day public comment period, FHFA
excludes the day on which the public notice is published in the Federal
Register, from which the period begins to run, and includes the last
day of the period, regardless of whether it is a Saturday, Sunday, or
legal holiday.
(b) Director's determination. (1) No later than 30 calendar-days
after the end of the public comment period, the Director will provide
the Enterprise with a written determination on whether it may proceed
with the new product. The written determination will specify the
grounds for the Director's determination.
(2) The Director will approve the new product if the Director
determines that the new product complies with the applicable
authorizing statute, is in the public interest, and is consistent with
the safety and soundness of the Enterprise and the mortgage finance and
financial system. The Enterprise may then offer the new product subject
to any terms, conditions, or limitations as may be established by the
Director.
(3) Among the factors that the Director may consider when
determining whether a new product is in the public interest are--
(i) The degree to which the new product might reasonably be
expected to advance any of the purposes of the Enterprise under the
applicable authorizing statute;
(ii) The degree to which the new product serves underserved markets
as set forth in section 1335 of the Safety and Soundness Act (12 U.S.C.
4565);
(iii) The degree to which the new product is being supplied or
could be supplied by non-government-sponsored-enterprise firms;
(iv) Other alternatives for providing the new product;
(v) The degree to which the new product promotes competition in the
marketplace or, to the contrary, would result in less competition and
greater concentration of economic activity or risk;
(vi) The degree to which Enterprise provision of the new product
overcomes natural market barriers or inefficiencies;
(vii) The degree to which Enterprise provision of the new product
might raise or mitigate systemic risks to the mortgage, mortgage
finance or other financial markets;
(viii) The degree to which the new product furthers fair housing;
and
(ix) Such other factors determined appropriate by the Director.
(4) The Director will disapprove the new product if the Director
determines that approval is inconsistent with applicable law,
regulation, or FHFA policy thereunder, or contrary to public interest
or the safety and soundness of the Enterprise or the mortgage finance
or financial system. If the Director disapproves the new product, the
Enterprise may not offer the new product.
(5) The Director may establish terms, conditions, or limitations on
the Enterprise's offering of the new product to ensure that the product
offering is consistent with applicable statutory and regulatory
standards, FHFA policies, public interest, or the safety and soundness
of the Enterprise or the mortgage finance or financial system.
(6) If the Director fails to make a determination within the 30
calendar-day period that begins on the day after the end of the public
comment period, the Enterprise may offer the new product. The
Director's failure to make a determination within such 30-day period
does not limit or restrict the Director's safety and soundness
authority or the authority of the Director to review the new product to
determine that the product is consistent with the statutory mission of
the Enterprise.
(c) Temporary approval. (1) FHFA may approve a new product without
first seeking public comments as described in Sec. 1253.4(c) if--
(i) The Enterprise submits a specific request for Temporary
Approval that describes the exigent circumstances that make the delay
associated with the 30-day public comment period contrary to the public
interest and the Director determines that exigent circumstances exist
and that delay associated with first seeking public comment would be
contrary to the public interest; or
(ii) Notwithstanding the absence of a request by the Enterprise for
Temporary Approval, the Director determines on his or her own
initiative that there are exigent circumstances that make the delay
associated with first seeking public comment contrary to the public
interest.
(2) The Director may impose terms, conditions, or limitations on
the Temporary Approval to ensure that the new product offering is
consistent with applicable statutory and regulatory standards, FHFA
policies, public interest, and the safety and soundness of the
Enterprise or the mortgage finance system.
(3) If the Director grants Temporary Approval, the Director will
notify the Enterprise in writing of the Director's
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decision, and include the period for which it is effective and any
terms, conditions or limitations. Upon granting of Temporary Approval,
FHFA will also publish the request for public comment to begin the
process for permanent approval.
(4) If the Director denies a request for Temporary Approval, the
Director will notify the Enterprise in writing of the Director's
decision, and will evaluate the new product in accordance with
paragraphs (a) through (c) of this section.
(d) Additional information. The Director may request any
information in addition to that supplied in the completed Notice if, as
a result of public comment or otherwise in the course of considering
the Notice, the Director believes that the information is necessary for
his or her decision. The Director may disapprove a new product if he or
she does not receive the information requested from the Enterprise in
sufficient time to permit adequate evaluation of the information within
the time periods set forth in paragraph (c) of this section.
Sec. 1253.5 Confidential information.
(a) Information presumed public. FHFA will treat all information an
Enterprise submits in a Notice as public information, except as
provided in paragraphs (b) through (d) of this section. FHFA will also
treat information provided by a commenter, in response to a notice
requesting comment on an Enterprise new product, as public information,
except as provided in paragraphs (b) through (d) of this section.
(b) Confidential treatment request. An Enterprise or commenter may
designate specific information as confidential and request that it not
be made publicly available. For any information that an Enterprise or
commenter seeks confidential treatment, the Enterprise or commenter is
required to submit a complete copy of the Notice or comment, with a
specific request for confidential treatment. Simultaneously, the
Enterprise or commenter is required to submit a copy of the Notice or
comment containing only those portions for which no request for
confidential treatment is made, and from which those portions for which
confidential treatment is requested have been redacted. The Enterprise
or commenter must specify the bases for designated information not
being made public as set forth in paragraph (c) of this section.
(c) Required information. The Enterprise or commenter is required
to provide the following information in support of its request for
confidential treatment of the designated information--
(1) Identification of the specific information for which
confidential treatment is sought, and the specific Notice for which the
information is being submitted;
(2) Explanation of the bases for the proposed confidential
treatment including, but not limited to, why the information is
``commercial or financial information obtained from a person and
privileged or confidential'' as that phrase is used in Exemption 4 of
the Freedom of Information Act (FOIA), 5 U.S.C. 552(b)(4), and Sec.
1202.4(a)(4) of this chapter;
(3) Explanation of the relevance and necessity of the information
to whether the Notice should be approved or denied;
(4) Explanation of how disclosure of the information would result
in substantial harm to the competitive position of the Enterprise or
commenter;
(5) Explanation of whether the information is available to the
public and the extent of any previous disclosure to third parties;
(6) Justification of the time period during which the Enterprise or
commenter asserts that the material should not be available for public
disclosure; and
(7) Any other information that the Enterprise or commenter seeking
confidential treatment believes may be useful in assessing whether its
request for confidentiality should be granted.
(d) FHFA determination. FHFA will determine whether the designated
information may be withheld from public disclosure and will notify the
Enterprise or commenter of the determination. In the event that FHFA
determines the information may not be withheld from public disclosure,
the Enterprise or commenter may withdraw the information or consent to
public disclosure. Requests for confidential treatment that do not
comply with paragraphs (b) and (c) of this section will not be
considered.
Sec. 1253.6 Certifying and nullifying an approval.
(a) An Enterprise shall certify, through an executive officer, as
that term is defined by Sec. 1770.3(g) of this title, that any filing
or supporting material submitted to FHFA pursuant to regulations in
this part contains no material misrepresentations or omissions. FHFA
may review and verify any information filed in connection with a
Notice. If FHFA discovers a material misrepresentation or omission
after the Director has rendered a decision on the filing, FHFA may
nullify any approval or modify the terms, conditions, and limitations
to such approval. For purposes of this paragraph, an Enterprise's
authority to offer a new product or engage in a new activity by reason
of the Director's not having made an explicit determination within the
statutory time period constitutes an approval.
(b) Any person responsible for any material misrepresentation or
omission in a submission or supporting materials may be subject to
enforcement action and other penalties, including criminal penalties
provided in 18 U.S.C. 1001.
Sec. 1253.7 Failure to comply.
(a) Unless the Director otherwise informs the Enterprise in
writing, an Enterprise must cease offering a new product or engaging in
a new activity immediately upon discovering or receiving notice from
the Director that the Enterprise has--
(1) Offered a new product or commenced a new activity without
submitting a Notice;
(2) Offered a new product or commenced a new activity after
submitting a Notice but before approval is granted, and before the
expiration of the time provided for the Director to make a
determination under Sec. Sec. 1253.3 and 1253.4;
(3) Offered a new product after the Director disapproved it; or
(4) Failed to adhere to any terms, conditions or limitations
established by the Director in his or her approval of a new product or
activity.
(b) Within five (5) business-days of the discovery or notice of any
of the events described in paragraph (a) of this section, the
Enterprise must provide the Director a written description of the
failure or failures of controls that resulted in the offering of the
new product or commencement of the new activity in contravention of
this regulation, and the steps that the Enterprise has taken or will
take to remediate the control failures. The Enterprise must provide the
board of directors of the Enterprise and chief risk officer, internal
audit, and compliance officer of the Enterprise with a copy of the
written description on the same date the description is provided to the
Director of FHFA.
(c) In the event that the Enterprise elects to resubmit the Notice
of a new product or new activity that was undertaken in contravention
of this regulation, the resubmission must provide sufficient
documentation of the effectiveness of the remediation efforts described
in paragraph (b) of this section.
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(d) Failure to comply with paragraphs (a) or (b) of this section
above may result in FHFA's taking enforcement action, including
pursuant to 12 U.S.C. 4631 (orders to cease and desist), 12 U.S.C. 4632
(temporary orders to cease and desist), and 12 U.S.C. 4636 (civil money
penalties).
Sec. 1253.8 Availability of new product to an Enterprise after it has
been approved for the other Enterprise.
(a) If the Director approves a new product for one Enterprise or
the new product is otherwise available to that Enterprise under Sec.
1253.4, the other Enterprise may also undertake that new product,
subject to submitting a request to the Director in the form of a Notice
under Sec. 1253.3 and approval by the Director.
(b) The Director may require such further information from the
requesting Enterprise as he or she deems necessary to approve or deny
the request. Approving the request does not require public notice and
comment.
Sec. 1253.9 Preservation of authority.
(a) The Director's exercise of his or her authority pursuant to the
prior approval authority for products under section 1321 of the Safety
and Soundness Act (12 U.S.C. 4541), and this regulation and other
issuances in no way restricts--
(1) The safety and soundness authority of the Director over all new
and existing products or activities; or
(2) The authority of the Director to review all new and existing
products or activities to determine that such products or activities
are consistent with the statutory mission of an Enterprise.
Appendix to Part 1253--Prior Approval for Enterprise Products--
Instructions and Notice of New Activity Form
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Dated: June 22, 2009.
James B. Lockhart III,
Director, Federal Housing Finance Agency.
[FR Doc. E9-15304 Filed 7-1-09; 8:45 am]
BILLING CODE 8070-01-P