[Federal Register Volume 76, Number 28 (Thursday, February 10, 2011)]
[Rules and Regulations]
[Pages 7479-7482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2845]



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  Federal Register / Vol. 76, No. 28 / Thursday, February 10, 2011 / 
Rules and Regulations  

[[Page 7479]]



FEDERAL HOUSING FINANCE BOARD

12 CFR Part 907

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1213

RIN 2590-AA20


Office of the Ombudsman

AGENCIES: Federal Housing Finance Board; Federal Housing Finance 
Agency.

ACTION: Final regulation.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting a final 
regulation that establishes an Office of the Ombudsman, which is 
responsible for considering complaints and appeals from the Federal 
National Mortgage Association, the Federal Home Loan Mortgage 
Corporation, the Federal Home Loan Banks (collectively, regulated 
entities), the Federal Home Loan Bank System's Office of Finance, and 
any person that has a business relationship with a regulated entity or 
the Office of Finance, regarding any matter relating to the regulation 
and supervision of the regulated entities or the Office of Finance by 
FHFA.

DATES: Effective Date: March 14, 2011.

FOR FURTHER INFORMATION CONTACT: Sandy Comenetz, Executive Advisor to 
the Acting Director, (202) 414-3771, or Andra Grossman, Senior Counsel, 
(202) 343-1313 (not toll-free numbers), Federal Housing Finance Agency, 
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. Background

    The Housing and Economic Recovery Act of 2008 (HERA), Public Law 
110-289, 122 Stat. 2654 (2008), 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 FHFA as an independent agency 
of the Federal Government.\1\ FHFA was established to oversee the 
prudential operations of the Federal National Mortgage Association 
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie 
Mac) (together, Enterprises), and the Federal Home Loan Banks 
(FHLBanks); and to ensure that they operate in a safe and sound manner; 
remain adequately capitalized; foster liquid, efficient, competitive 
and resilient national housing finance markets; comply with the Safety 
and Soundness Act and their respective authorizing statutes, as well as 
all rules, regulations, guidelines, and orders and carry out their 
missions through activities that are authorized by their respective 
statutes and are consistent with the public interest. FHFA also has 
regulatory authority over the FHLBank System's Office of Finance under 
section 1311(b)(2) of the Safety and Soundness Act (12 U.S.C. 
4511(b)(2)).
---------------------------------------------------------------------------

    \1\ See Division A, ``Federal Housing Finance Regulatory Reform 
Act of 2008,'' Title I, Section 1101 of HERA.
---------------------------------------------------------------------------

    Section 1105(e) of HERA amended section 1317(i) of the Safety and 
Soundness Act (12 U.S.C. 4517(i)) to require the Director of FHFA to 
establish, by regulation, an Office of the Ombudsman (Office). The 
Office must be headed by an Ombudsman who will consider complaints and 
appeals from any regulated entity and any person that has a business 
relationship with a regulated entity regarding any matter relating to 
the regulation and supervision of such regulated entity. The regulation 
must specify the authority and duties of the Office.
    On August 6, 2010, FHFA published for comment a proposed regulation 
to establish an Office of the Ombudsman at FHFA.\2\ The proposed 
regulation set forth the authority and duties of the Office, and 
included provisions concerning retaliation and confidentiality.
---------------------------------------------------------------------------

    \2\ 74 FR 47495.
---------------------------------------------------------------------------

    FHFA received comment letters from Fannie Mae; Freddie Mac; the 
FHLBanks of Des Moines, Pittsburgh, Seattle, and Topeka; and Wells 
Fargo Home Mortgage. All comments were considered and have been posted 
on the FHFA Web site at http://www.fhfa.gov. A discussion of 
significant comments as they relate to the final regulation follows.

II. Final Regulation

    Specific concerns raised by commenters are described and addressed 
below. After considering the comments, FHFA adopts a final regulation 
implementing section 1317(i) of the Safety and Soundness Act as amended 
by section 1105(e) of HERA to establish an FHFA Office of the 
Ombudsman.

Scope of Ombudsman's Authority

    Several commenters requested that the final regulation clarify that 
the following types of matters--business decisions of the regulated 
entities, disputes between the regulated entities or the Office of 
Finance and vendors, and matters in litigation--are not within the 
scope of the Office's responsibilities. They requested that the 
Ombudsman's authority be expressly limited to complaints concerning 
FHFA's regulatory and supervisory activities.
    FHFA's view is that business decisions of the regulated entities, 
and disputes between the regulated entities or the Office of Finance 
and vendors may relate to the regulation and supervision of the 
regulated entities. It is the Ombudsman's responsibility to consider 
the facts of each case to determine whether the matter is appropriate 
for consideration. Accordingly, there is no need for clarifying 
language.
    As to the requested language about matters in litigation, FHFA 
agrees, and the final regulation specifically provides that the 
Ombudsman will not consider matters in litigation, arbitration, or 
mediation.
    Several commenters requested that the final regulation permit 
appeals of non-final decisions or conclusions, and also in situations 
where there is an existing avenue or another forum for appeal. FHFA 
declines to allow appeals to the Ombudsman in such circumstances on the 
grounds that to do so would be inefficient and would lead to confusion 
as to the status of the respective appeals.
    One commenter requested that the regulation authorize the Ombudsman 
to (i) Engage in a collaborative dialogue with the person that has a 
business

[[Page 7480]]

relationship with the regulated entity, (ii) revise a requirement of 
the regulated entities, and (iii) revise an interpretation of the 
regulated entities.
    Engaging in a collaborative dialogue as a facilitator or mediator 
is the essence of the Ombudsman's role and does not need further 
clarification. In contrast, revising a requirement of a regulated 
entity or an interpretation of a regulated entity's charter does not 
come within the Ombudsman's authority because the Ombudsman is not a 
decision maker. However, as with any complaint or appeal, where a 
supervisory or regulatory requirement or a charter interpretation is 
challenged, the Ombudsman is authorized to conduct inquiries and submit 
findings of fact and make a recommendation to the Director concerning 
resolution of the issue. Accordingly, FHFA concludes there is no need 
for further clarification of these issues.

Definitions

    Business Relationship. In the proposed regulation ``business 
relationship'' means a relationship or potential relationship between a 
person and a regulated entity or the Office of Finance that involves 
the provision of goods or services, but does not mean a relationship 
between a mortgagor and a regulated entity that directly or indirectly 
owns, purchased, guarantees, or sold the mortgage.
    Several commenters requested that the definition exclude 
``potential relationships'' because including them would, in their 
terms, exponentially increase the universe of persons to whom the 
regulation would apply. They noted that the operative provision, 12 
U.S.C. 4517(i), does not use the word ``potential.'' FHFA will not make 
the change because, like existing business relationships, a potential 
business relationship may relate to FHFA's regulation and supervision 
of a regulated entity. FHFA has made a technical revision to the 
definition of the term ``business relationship,'' by substituting the 
term ``interaction'' for ``relationship'' in the body of the 
definition.
    Person. In the proposed regulation, ``person'' means an 
organization, business entity, or individual that has a business 
relationship with a regulated entity or the Office of Finance or that 
represents directly or indirectly the interests of a person that has a 
business relationship with a regulated entity or the Office of Finance. 
It does not mean an individual borrower.
    Some commenters requested that the definition expressly exclude 
employees to clarify that a dispute between a regulated entity or the 
Office of Finance and an employee would not come within the Ombudsman's 
purview. The commenters' rationale is that there are other forums for 
such disputes, namely State or Federal court.
    As the Ombudsman evaluates the facts of each case to determine 
whether the matter is appropriate for consideration, FHFA's view is 
that adding the requested language is unnecessary and could lead to 
confusion as to whether employees may complain about FHFA policies that 
affect them.
    The same commenters requested that the Ombudsman be required to 
notify a regulated entity of any whistleblower complaint in which the 
entity is named so that the entity will be able to address the matter 
quickly. FHFA is not required to provide such notification under 
applicable law, but will do so as it deems appropriate under the 
circumstances. No additional language will be added to the final 
regulation.

Reviews of Disputed Supervisory Determinations

    One commenter asked whether the Office is intended to replace the 
process under 12 CFR 907.9 by which FHLBanks may seek review of a 
disputed supervisory determination, or whether it is intended to be an 
alternate path of appeal. The answer is that the Ombudsman's 
responsibility to consider complaints and appeals from regulated 
entities replaces the Sec.  907.9 process. All of the regulated 
entities and the Office of Finance may submit appeals of final 
supervisory determinations to the Ombudsman for consideration. The 
Ombudsman will conduct an inquiry and submit findings of fact and a 
recommendation to the Director concerning resolution of the case. 
Consequently, 12 CFR 907.9 will be removed on the effective date of 
this part.

No Retaliation

    Proposed Sec.  1213.6 provides that neither FHFA nor any FHFA 
employee may retaliate against a regulated entity, the Office of 
Finance, or a person for submitting a complaint or appeal. As proposed, 
the Ombudsman would receive and address complaints of retaliation and 
upon completion of an investigation, report the findings to the 
Director with recommendations, including a recommendation to take 
disciplinary action against any FHFA employee found to have retaliated.
    FHFA did not receive comments from the public on the proposed 
section. However, subsequent to publication of the proposed rule, the 
FHFA Inspector General was appointed and confirmed. Accordingly, FHFA 
has revised Sec.  1213.6 to provide that the Ombudsman, in coordination 
with the Inspector General, is to examine the basis of the alleged 
retaliation. At the completion of the examination, the Ombudsman is to 
report the findings to the Director with recommendations, including any 
recommendation to take disciplinary action against any FHFA employee 
found to have retaliated.

Confidentiality

    One commenter requested that Sec.  1213.7 of the final regulation 
permit parties to request that their identity or specific information 
remain confidential. The final regulation, as does the proposed 
regulation, requires the Ombudsman to ensure that safeguards exist to 
preserve confidentiality, and prohibits the Ombudsman from disclosing 
information, including a party's identity, provided by a party except 
to appropriate reviewing or investigating officials or if disclosure is 
required by law. The final regulation clarifies that an appropriate 
investigating official may include the Inspector General.

Differences Between the FHLBanks and the Enterprises

    Section 1313(f) of the Safety and Soundness Act (12 U.S.C. 
4513(f)), as amended by section 1201 of HERA, requires the Director, 
when promulgating regulations relating to the FHLBanks, to consider the 
differences between the FHLBanks and the Enterprises with respect to 
the FHLBanks' cooperative ownership structure, mission of providing 
liquidity to members, affordable housing and community development 
mission, capital structure, and joint and several liability. The 
Director may also consider any other differences that are deemed 
appropriate. The Director considered the differences between the 
FHLBanks and the Enterprises as they relate to the above factors and 
concluded that none of the unique factors relating to the FHLBanks 
warranted establishing different treatment under the final regulation.

III. Regulatory Impact

Paperwork Reduction Act

    The 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.).

[[Page 7481]]

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). FHFA has considered the impact of the final 
regulation under the Regulatory Flexibility Act. FHFA certifies that 
the final regulation is not likely to have a significant economic 
impact on a substantial number of small entities for purposes of the 
Regulatory Flexibility Act.

List of Subjects

12 CFR Part 907

    Administrative practice and procedure, Federal home loan banks.

12 CFR Part 1213

    Administrative practice and procedure, Federal home loan banks, 
Government-sponsored enterprises.

Authority and Issuance

    Accordingly, for the reasons stated in the preamble, under the 
authority of 12 U.S.C. 4511(b)(2), 4517(i), and 4526, the Federal 
Housing Finance Agency amends Chapters IX and XII of Title 12, Code of 
Federal Regulations as follows:

CHAPTER IX--FEDERAL HOUSING FINANCE BOARD

PART 907--PROCEDURES

0
1. The authority citation for part 907 continues to read as follows:

    Authority: 12 U.S.C. 1422b(a)(1).


Sec.  907.9  [Removed and reserved]

0
2. Remove and reserve Sec.  907.9.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER A--ORGANIZATION AND OPERATIONS

0
3. Add part 1213 to subchapter A to read as follows:

PART 1213--OFFICE OF THE OMBUDSMAN

Sec.
1213.1 Purpose and scope.
1213.2 Definitions.
1213.3 Authorities and duties of the Ombudsman.
1213.4 Complaints and appeals from a regulated entity or the Office 
of Finance.
1213.5 Complaints from a person.
1213.6 No retaliation.
1213.7 Confidentiality.

    Authority: 12 U.S.C. 4511(b)(2), 4517(i), and 4526.


Sec.  1213.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to establish within FHFA 
the Office of the Ombudsman (Office) under section 1317(i) of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992 
(12 U.S.C. 4517(i)), as amended, and to set forth the authorities and 
duties of the Ombudsman.
    (b) Scope.--(1) This part applies to complaints and appeals from 
any regulated entity and any person that has a business relationship 
with a regulated entity regarding any matter relating to the regulation 
and supervision of such regulated entity or the Office of Finance by 
FHFA.
    (2) The establishment of the Office does not alter or limit any 
other right or procedure associated with appeals, complaints, or 
administrative matters submitted by a person regarding any matter 
relating to the regulation and supervision of a regulated entity or the 
Office of Finance under any other law or regulation.


Sec.  1213.2  Definitions.

    For purposes of this part, the term:
    Business relationship means any existing or potential interaction 
between a person and a regulated entity or the Office of Finance for 
the provision of goods or services. The term business relationship does 
not include any interaction between a mortgagor and a regulated entity 
that directly or indirectly owns, purchased, guarantees, or sold the 
mortgage.
    Director means the Director of FHFA or his or her designee.
    FHFA means the Federal Housing Finance Agency.
    Office of Finance means the Office of Finance of the Federal Home 
Loan Bank System.
    Person means an organization, business entity, or individual that 
has a business relationship with a regulated entity or the Office of 
Finance, or that represents the interests of a person that has a 
business relationship with a regulated entity or the Office of Finance. 
The term person does not include an individual borrower.
    Regulated entity means the Federal National Mortgage Association 
and any affiliate, the Federal Home Loan Mortgage Corporation and any 
affiliate, and any Federal Home Loan Bank.


Sec.  1213.3  Authorities and duties of the Ombudsman.

    (a) General. The Office shall be headed by an Ombudsman, who shall 
consider complaints and appeals from any regulated entity, the Office 
of Finance, and any person that has a business relationship with a 
regulated entity or the Office of Finance regarding any matter relating 
to the regulation and supervision of such regulated entity or the 
Office of Finance by FHFA. In considering any complaint or appeal under 
this part, the Ombudsman shall:
    (1) Conduct inquiries and submit findings of fact and 
recommendations to the Director concerning resolution of the complaint 
or appeal, and
    (2) Act as a facilitator or mediator to advance the resolution of 
the complaint or appeal.
    (b) Other duties. The Ombudsman shall:
    (1) Establish procedures for carrying out the functions of the 
Office,
    (2) Establish and publish procedures for receiving and considering 
complaints and appeals, and
    (3) Report annually to the Director on the activities of the 
Office, or more frequently, as determined by the Director.


Sec.  1213.4  Complaints and appeals from a regulated entity or the 
Office of Finance.

    (a) Complaints.--(1) General. Any regulated entity or the Office of 
Finance may submit a complaint in accordance with procedures 
established by the Ombudsman.
    (2) Matters subject to complaint. A regulated entity or the Office 
of Finance may submit a complaint regarding any matter relating to the 
regulation and supervision of a regulated entity or the Office of 
Finance by FHFA that is not subject to appeal or in litigation, 
arbitration, or mediation. The Ombudsman may further define what 
matters are subject to complaint.
    (b) Appeals.--(1) General. Any regulated entity or the Office of 
Finance may submit an appeal in accordance with procedures established 
by the Ombudsman.
    (2) Matters subject to appeal. A regulated entity or the Office of 
Finance may submit an appeal regarding any final, written regulatory or 
supervisory conclusion, decision, or examination rating by FHFA. The 
Ombudsman may further define what matters are subject to appeal.
    (3) Matters not subject to appeal. Matters for which there is an 
existing avenue of appeal or for which there is

[[Page 7482]]

another forum for appeal; non-final decisions or conclusions; and 
matters in ongoing litigation, arbitration, or mediation, unless there 
has been a breakdown in the process, may not be appealed. Matters not 
subject to appeal include, but are not limited to, appointments of 
conservators or receivers, preliminary examination conclusions, formal 
enforcement decisions, formal and informal rulemakings, Freedom of 
Information Act appeals, final FHFA decisions subject to judicial 
review, and matters within the jurisdiction of the FHFA Inspector 
General. The Ombudsman may further define what matters are not subject 
to appeal.
    (4) Effect of filing an appeal. An appeal under this section does 
not excuse a regulated entity or the Office of Finance from complying 
with any regulatory or supervisory decision while the appeal is 
pending. However, the Director, upon consideration of a written 
request, may waive compliance with a regulatory or supervisory decision 
during the pendency of the appeal.


Sec.  1213.5  Complaints from a person.

    (a) General. Any person that has a business relationship with a 
regulated entity or the Office of Finance may submit a complaint in 
accordance with procedures established by the Ombudsman.
    (b) Matters subject to complaint. A person may submit a complaint 
regarding any matter relating to the regulation and supervision of a 
regulated entity or the Office of Finance by FHFA that is not a matter 
in litigation, arbitration, or mediation. The Ombudsman may further 
define what matters are subject to complaints.


Sec.  1213.6  No retaliation.

    Neither FHFA nor any FHFA employee may retaliate against a 
regulated entity, the Office of Finance, or a person for submitting a 
complaint or appeal under this part. The Ombudsman shall receive and 
address claims of retaliation. Upon receiving a complaint, the 
Ombudsman, in coordination with the Inspector General, shall examine 
the basis of the alleged retaliation. Upon completion of the 
examination, the Ombudsman shall report the findings to the Director 
with recommendations, including a recommendation to take disciplinary 
action against any FHFA employee found to have retaliated.


Sec.  1213.7  Confidentiality.

    The Ombudsman shall ensure that safeguards exist to preserve 
confidentiality. If a party requests that information and materials 
remain confidential, the Ombudsman shall not disclose the information 
or materials, without approval of the party, except to appropriate 
reviewing or investigating officials, such as the Inspector General, or 
as required by law. However, the resolution of certain complaints (such 
as complaints of retaliation against a regulated entity or the Office 
of Finance) may not be possible if the identity of the party remains 
confidential. In such cases, the Ombudsman shall discuss with the party 
the circumstances limiting confidentiality.

    Dated: February 3, 2011.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2011-2845 Filed 2-9-11; 8:45 am]
BILLING CODE 8070-01-P