[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Proposed Rules]
[Pages 35960-35963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14512]


 ========================================================================
 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. 79, No. 122 / Wednesday, June 25, 2014 / 
Proposed Rules  

[[Page 35960]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1207

RIN 2590-AA67


Minority and Women Inclusion Amendments

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is proposing to 
amend its regulation on minority and women inclusion by requiring the 
Federal Home Loan Banks (Banks), and the Office of Finance to include 
in the contents of their annual reports certain demographic information 
related to their boards of directors as well as a description of their 
related activities during the reporting year.

DATES: Written comments must be received on or before August 25, 2014.

ADDRESSES: You may submit your comments, identified by Regulatory 
Information Number (RIN) 2590-AA67, by any of the following methods:
     Agency Web site: www.fhfa.gov/open-for-comment-or-input.
     Federal eRulemaking Portal: 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 email 
to FHFA at [email protected] to ensure timely receipt by the agency. 
Please include Comments/RIN 2590-AA67 in the subject line of the 
message.
     Courier/Hand Delivery: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA67, 
Federal Housing Finance Agency, 400 Seventh Street SW., Eighth Floor, 
Washington, DC 20024. Deliver the package to the Seventh Street 
entrance Guard Desk, First Floor, on business days between 9 a.m. to 5 
p.m.
     U.S. Mail, United Parcel Service, Federal Express or Other 
Mail Service: The mailing address for comments is: Alfred M. Pollard, 
General Counsel, Attention: Comments/RIN 2590-AA67, Federal Housing 
Finance Agency, 400 Seventh Street SW., Eighth Floor, Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Nancy Burnett, Acting Associate 
Director, Office of Minority and Women Inclusion, (202) 649-3017; or 
Karen Lambert, Associate General Counsel, (202) 649-3094 (not toll-free 
numbers), Federal Housing Finance Agency, 400 Seventh Street SW., 
Washington, DC 20024. The telephone number for the Telecommunications 
Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Comments

    FHFA invites comments on all aspects of the proposed regulation, 
and will develop final regulations after taking all comments into 
consideration. Copies of all comments received will be posted without 
change on the FHFA Web site at http://www.fhfa.gov, and will include 
any personal information you provide, such as your name, address, email 
address, and telephone number. Copies of all comments received will be 
made 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, 
400 Seventh Street SW., Eighth Floor, Washington, DC 20024. To make an 
appointment to inspect comments, please call the Office of General 
Counsel at (202) 649-3804.

II. Background

    Effective July 30, 2008, the Housing and Economic Recovery Act of 
2008 (HERA), Public Law 110-289, 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. HERA transferred the supervisory and 
oversight responsibilities of the Office of Federal Housing Enterprise 
Oversight over the Federal National Mortgage Association (Fannie Mae), 
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, 
Enterprises), and of the Federal Housing Finance Board over the Banks 
and the Bank System's Office of Finance to FHFA.\1\ The Enterprises and 
the Banks are collectively referred to as the regulated entities.
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    \1\ For Fannie Mae and Freddie Mac, the term ``regulated 
entity'' includes any affiliates thereof; for the Banks, the term 
``regulated entity'' only includes the Banks. See 12 U.S.C. 
4502(20).
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    The Safety and Soundness Act provides that FHFA is headed by a 
Director with general supervisory and regulatory authority over the 
regulated entities. FHFA is charged, among other things, with 
overseeing the prudential operations of the regulated entities. FHFA is 
also charged with ensuring that the regulated entities: operate in a 
safe and sound manner including maintenance of adequate capital and 
internal controls; foster liquid, efficient, competitive, and resilient 
national housing finance markets; comply with the Safety and Soundness 
Act, and the respective authorizing statutes of the regulated entities; 
and carry out their missions through activities authorized and 
consistent with the Safety and Soundness Act and their authorizing 
statutes; and, that the activities and operations of the regulated 
entities are consistent with the public interest.\2\
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    \2\ Section 1102 of HERA, 122 Stat. 2663 and 2664.
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    Section 1116 of HERA amended section 1319A of the Safety and 
Soundness Act, 12 U.S.C. 4520, to require, in part, that the regulated 
entities establish or designate an office to carry out the requirements 
of an Office of Minority and Women Inclusion (OMWI). That office is 
responsible for: all matters relating to diversity in the entity's 
management, employment, and business activities; the development and 
implementation of standards and procedures to promote diversity in all 
business and activities of the regulated entity; and the submission of 
an annual report to FHFA detailing the actions taken to promote 
diversity and inclusion. Furthermore, 12 U.S.C. 1833e, and Executive 
Order 11478, generally require FHFA and the regulated entities to 
promote equal opportunity in employment and contracting.
    FHFA has adopted regulations to implement section 1116 of HERA, 12 
U.S.C. 1833e, and Executive Order 11478, and to set forth the minimum 
requirements for the regulated entities' diversity programs and 
reporting requirements. Those regulations, which are located at 12 CFR 
part 1207, require each regulated entity and the Office of Finance to 
establish an OMWI office, or to designate another office, that would

[[Page 35961]]

be responsible for fulfilling the entity's OMWI responsibilities under 
the statute and regulations. Each of these entities must implement 
policies and procedures to ensure, to the maximum extent possible in 
balance with financially safe and sound business practices, the 
inclusion and utilization of minorities, women, individuals with 
disabilities, and minority-, women-, and disabled-owned businesses in 
all business and activities and at all levels of the regulated entity 
and the Office of Finance, including in management, employment, 
procurement, insurance, and all types of contracts.\3\ These policies 
also must encourage the consideration of diversity in nominating or 
soliciting nominees for positions on boards of directors and engage in 
recruiting and outreach directed at encouraging individuals who are 
minorities, women and individuals with disabilities to seek or apply 
for employment with the regulated entity or the Office of Finance.\4\
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    \3\ 12 CFR 1207.21(b).
    \4\ 12 CFR 1207.21(b)(5).
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    Part 1207 also requires each regulated entity and the Office of 
Finance to submit to the FHFA Director, on or before March 1 of each 
year, a detailed annual report summarizing its activities during the 
reporting year (January 1 through December 31 of the preceding year) to 
comply with the OMWI regulatory requirements.\5\ To that end, each 
regulated entity and the Office of Finance is required to submit as 
part of its annual report the EEO-1 Employer Information Report (Form 
EEO-1 used by the Equal Employment Opportunity Commission and the 
Office of Federal Contract Compliance Programs to collect certain 
demographic information) or similar report.\6\ The Form EEO-1 pertains 
only to broad occupational categories of employees such as executives/
senior level officials, first/mid-level officials and managers, 
professionals, technicians, and other employee job categories, and 
those employees' gender, race, and ethnicity classifications.\7\
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    \5\ 12 CFR 1207.23.
    \6\ 12 CFR 1207.23(b)(1).
    \7\ The race and ethnicity categories used on the Form EEO-1 
are: Hispanic or Latino; White (Not Hispanic or Latino); Black or 
African American (Not Hispanic or Latino); Native Hawaiian or Other 
Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or 
Latino); American Indian or Alaska Native (Not Hispanic or Latino); 
Two or More Races (Not Hispanic or Latino).
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    In addition, part 1207 provides that the FHFA Director has broad 
enforcement authority in that he or she may enforce this regulation and 
standards issued under it in any manner and through any means within 
his or her authority, including through identifying matters requiring 
attention, corrective action orders, directives, or enforcement actions 
under 12 U.S.C. 4513b and 4514.\8\ To that end, the FHFA Director may 
conduct examinations of a regulated entity's or the Office of Finance's 
activities under and in compliance with this part pursuant to 12 U.S.C. 
4517.\9\
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    \8\ 12 CFR 1207.24.
    \9\ Id.
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    The Bank System (System) was created by the Federal Home Loan Bank 
Act of 1932 (Bank Act) as another GSE to support mortgage lending and 
related community investment. It is composed of 12 Banks, Bank member 
financial institutions, and the System's fiscal agent, the Office of 
Finance. The Banks fulfill their statutory mission primarily through 
providing secured loans (advances) to their members.
    Section 1202 of HERA altered the composition of the Banks' boards 
of directors by amending section 7 of the Bank Act (12 U.S.C. 1427) to 
require the management of each Bank to be vested in a board of 13 
directors, or such other number as the Director determines appropriate, 
and that each board be comprised of both a majority of member directors 
and at least 40% of independent directors. Each member of the board of 
directors is elected by plurality vote of the members, in accordance 
with FHFA regulations. Previously, section 7 of the Bank Act required 
each Bank's board of directors to be comprised of 14 directors, 8 of 
whom were elected by members and 6 of whom were appointed by the former 
Federal Housing Finance Board.
    The Office of Finance is a joint office of the Banks, the primary 
responsibility of which is to act as their agent in offerings, issuing, 
and servicing the consolidated obligations that are issued to fund the 
operations of the Banks. The Office of Finance also prepares the 
combined financial reports for the System, functions as its fiscal 
agent, and performs certain duties relating to the Financing 
Corporation and Resolution Funding Corporation, respectively.\10\ The 
board of directors of the Office of Finance consists of 17 members, 
which includes the 12 Bank presidents, who serve ex officio, and five 
independent directors. The independent directors must each be a citizen 
of the United States, and not have any material relationship with a 
Bank or the Office of Finance. As a group, the independent directors 
must have substantial experience in financial and accounting 
matters.\11\ The initial independent directors were appointed by FHFA, 
however, once their terms expire or positions otherwise become vacant, 
the succeeding independent directors must be elected by majority vote 
of the Office of Finance board of directors.\12\
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    \10\ 12 CFR 1273.3.
    \11\ 12 CFR 1273.7(a).
    \12\ 12 CFR 1273.7(d); See 75 FR 23152, 23163 (May 3, 2010).
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III. Analysis of Proposed Rule

    The current regulations require the regulated entities and the 
Office of Finance to have policies that, among other things, encourage 
the consideration of diversity in nominating or soliciting nominations 
for positions on the boards of directors. The regulations also require 
the annual OMWI report to include the institution's Form EEO-1 as well 
as the demographic information of those applying for employment, hired, 
separated, or promoted during the reporting year.
    The proposed rule would revise the existing reporting requirements 
to require each Bank and the Office of Finance to include in the 
contents of its annual report data showing the demographic status of 
its respective board members, which is to be provided without any 
personally identifiable information. Such data would be obtained by 
each Bank and the Office of Finance through a request for information 
of its board members who could then voluntarily choose to self-identify 
using the same demographic classifications as those used for the Form 
EEO-1.
    The current rule does not require the regulated entities and the 
Office of Finance to collect demographic data about the boards of 
directors. That is because the occupational or job categories included 
on the Form EEO-1 pertain only to employees and the members of the 
board of directors of each institution are not employees.
    As conservator of Fannie Mae and Freddie Mac, FHFA is involved in 
the selection of their board members. At this time, FHFA does not 
believe that it is necessary to consider promulgating regulations 
pertaining to the Enterprises with respect to these requirements.
    Requiring the Banks and the Office of Finance to report on the 
demographic profile of their boards of directors is a logical extension 
of the current regulation, which requires the development, 
implementation, and maintenance of policies and procedures for 
promoting board diversity. The aggregate demographic data related to 
the boards of directors of each Bank and the Office of Finance would 
establish a

[[Page 35962]]

baseline to analyze future trends, and could be used to assess the 
effectiveness of the strategies developed by the Banks and the Office 
of Finance related to promoting demographic board diversity.
    In addition, the proposed rule will require the Banks and the 
Office of Finance to include in the contents of their annual reports a 
description of their outreach activities and strategies related to 
promoting demographic diversity in nominating or soliciting nominees 
for positions on boards of directors. By requiring the submission of 
this information, the proposed rule would better enable FHFA to 
determine the effectiveness of those policies and procedures in 
encouraging demographic diversity in the processes of nominating and 
soliciting nominees for positions on boards of directors. Currently, 
Sec.  1207.22(c) requires each Bank and the Office of Finance to submit 
an annual report to FHFA on or before March 1 of each year, reporting 
on the period of January 1 through December 31 of the preceding year. 
The proposed amendment to Sec.  1207.22(c) would require the board 
demographic data and description of outreach activities and strategies 
related to promoting the demographic diversity of board nominees to be 
included in the contents of the annual report submitted to FHFA 
beginning with the report required to be submitted by March 1, 2015.
    Proposed Sec.  1207.23(b)(9)(i) would require each Bank and the 
Office of Finance to include in the contents of its annual report the 
aggregate number of individuals on its board of directors by 
demographic classification. The proposed regulation would require each 
Bank and the Office of Finance to collect and report the data using the 
same classifications as those on the Form EEO-1. The directors of each 
Bank and the Office of Finance would be provided an opportunity to 
voluntarily self-identify their demographic classification without 
personally identifiable information.
    In sending the request to each board member, FHFA expects the Banks 
and the Office of Finance to inform their board members about the 
voluntary nature of the data collection and of its intended uses and 
purposes. The Banks and the Office of Finance are expected to report 
aggregate results only of their respective data collections based on 
the board members' voluntary demographic self-identification.
    Proposed Sec.  1207.23(b)(9)(ii) would require the Banks and the 
Office of Finance to include in the contents of their annual reports a 
description of their outreach activities and related strategies 
executed during the preceding year to promote diversity in nominating 
or soliciting nominees for positions on their respective boards of 
directors.
    The proposed amendment to re-designated Sec.  1207.23(b)(10) would 
clarify that the Banks and the Office of Finance are to include in 
their annual report comparisons of the data required to be submitted by 
proposed paragraph (b)(9).

IV. Consideration of Differences Between the Banks and the Enterprises

    Section 1313(f) of the Safety and Soundness Act, as amended by 
HERA, requires the Director, when promulgating regulations relating to 
the Banks, to consider the differences between the Banks and the 
Enterprises with respect to the Banks': Cooperative ownership 
structure; mission of providing liquidity to members; affordable 
housing and community development mission; capital structure; joint and 
several liability; and any other differences the Director considers 
appropriate. See 12 U.S.C. 4513(f). In preparing this proposed rule, 
the Director considered the differences between the Banks and the 
Enterprises as they relate to the above factors, and determined that 
the proposed rule does not implicate any of the above factors. 
Nevertheless, FHFA requests comments on whether these factors should 
result in a revision of the proposed amendment as it relates to the 
Banks.

V. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) requires that FHFA 
consider the impact of paperwork and other information collection 
burdens imposed on the public.\13\ Under the PRA and the implementing 
regulations of the Office of Management and Budget (OMB), an agency may 
not collect or sponsor the collection of information, nor may it impose 
an information collection requirement unless it displays a currently 
valid control number assigned by OMB.\14\ This proposed rule contains a 
proposed new information collection requirement, which is described 
below. As required by the PRA, FHFA has submitted an analysis of the 
proposed collection of information contained in this proposed rule to 
OMB for review.\15\
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    \13\ See 44 U.S.C. 3507(a) and (d).
    \14\ See 44 U.S.C. 3512(a); 5 CFR 1320.8(b)(3)(vi).
    \15\ See 44 U.S.C. 3507(d).
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    Summary: Under proposed Sec.  1207.23(b)(9)(i), each Bank and the 
Office of Finance would be required to request annually that each 
member of its board of directors provide, on a voluntary basis, self-
identification of his or her demographic classification (using the same 
minority and gender classifications as those used on the Form EEO-1), 
without including personally identifiable information. Proposed Sec.  
1207.23(b)(9) and proposed Sec.  1207.22(c) would require that each 
Bank and the Office of Finance submit the baseline board demographic 
information collected to FHFA as part of the annual report it is 
already required to submit under existing part 1207.
    Use: FHFA would use the information collected under proposed Sec.  
1207.23(b)(9)(i) to assess the effectiveness of the policies and 
procedures that each Bank and the Office of Finance is required to 
implement to promote demographic diversity in all of its business and 
activities ``at all levels'' and, specifically, to encourage 
demographic diversity in the nomination and solicitation of nominees 
for members of its boards of directors. FHFA would also use the 
information to establish a baseline to analyze future trends related to 
the demographic diversity of the boards of directors of the Banks and 
the Office of Finance.
    Respondents: Respondents would be the approximately 210 individuals 
serving on the boards of directors of the regulated entities and the 
Office of Finance in any given year.
    Frequency: The information would be collected annually.
    Annual Burden Estimate: FHFA estimates the total annualized hour 
burden for all respondents to the proposed information collection to be 
21 hours. FHFA estimates that an average of 210 board directors will 
provide information annually and that each response will take 
approximately 0.1 hours on average (210 respondents x 0.1 hours per 
response = 21 hours). There will be no annualized cost to the Federal 
government.
    Comment Request: FHFA will accept written comments concerning the 
accuracy of the burden estimates and suggestions for reducing the 
burden at the address listed above. Comments may also be submitted to 
the Office of Information and Regulatory Affairs, OMB, Attention: Desk 
Officer for Federal Housing Finance Agency, Room 10102, New Executive 
Office Building, 725 17th Street NW., Washington, DC 20503; Fax: (202) 
395-6974; or Email: [email protected].
    Written comments are requested on: (1) Whether the proposed 
collection of information is necessary for the proper performance of 
FHFA functions, including whether the information has practical 
utility; (2) the accuracy of FHFA estimates of the burdens of the 
collection of information; (3) ways to

[[Page 35963]]

enhance the quality, utility, and clarity of the information collected; 
and (4) ways to minimize the burden of the proposed collection of 
information on board respondents, including through the use of 
automated collection techniques or other forms of information 
technology.
    Individuals and organizations may send comments on the proposed 
information collection requirement by August 25, 2014.

VI. 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 
proposed rule under the Regulatory Flexibility Act.
    The General Counsel of FHFA certifies that the proposed rule, if 
adopted as a final rule, is not likely to have a significant economic 
impact on a substantial number of small entities because the regulation 
is applicable only to the regulated entities and the Office of Finance, 
which are not small entities for purposes of the Regulatory Flexibility 
Act.

List of Subjects in 12 CFR Part 1207

    Discrimination, Diversity, Equal employment opportunity, Government 
contracts, Minority businesses, Office of Finance, Outreach, Regulated 
entities.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, and under 
the authority of 12 U.S.C. 4526, FHFA proposes to amend Subpart C of 
part 1207 of title 12 of the Code of Federal Regulations as follows:

PART 1207--MINORITY AND WOMEN INCLUSION

0
1. The authority citation for part 1207 continues to read as follows:

    Authority: 12 U.S.C. 4520 and 4526; 12 U.S.C. 1833e; E.O. 11478.

Subpart C--Minority and Women Inclusion and Diversity at Regulated 
Entities and the Office of Finance

0
2. Amend Sec.  1207.22 by adding a new sentence at the end of paragraph 
(c) to read as follows:


Sec.  1207.22  Regulated entity and Office of Finance reports.

* * * * *
    (c) * * * The data required to be reported by Sec.  1207.23(b)(9) 
herein shall be included in each annual report beginning with the 
report required by March 1, 2015.
* * * * *
0
3. Amend Sec.  1207.23 as follows:
0
a. Redesignate paragraphs (b)(9) through (19) as paragraphs (b)(10) 
through (20); and
0
b. Add new paragraph (b)(9) and amend newly redesignated paragraph 
(b)(10) to read as follows:


Sec.  1207.23  Annual reports--format and contents.

* * * * *
    (b) * * *
    (9)(i) Data showing for the reporting year by minority and gender 
classification, the number of individuals on the board of directors of 
each Bank and the Office of Finance--
    (A) Using data collected by each Bank and the Office of Finance 
through an information collection requesting each director's voluntary 
self-identification of his or her minority and gender classification 
without personally identifiable information;
    (B) Using the same classifications as those on the Form EEO-1; and
    (ii) A description of the outreach activities and strategies 
executed during the preceding year to promote diversity in nominating 
or soliciting nominees for positions on boards of directors of the 
Banks and the Office of Finance;
    (10) A comparison of the data reported by Fannie Mae and Freddie 
Mac under paragraphs (b)(1) through (8) of this section, and by the 
Banks and the Office of Finance under paragraphs (b)(1) through (9) of 
this section, to such data as reported in the previous year together 
with a narrative analysis;
* * * * *

    Dated: June 12, 2014.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2014-14512 Filed 6-24-14; 8:45 am]
BILLING CODE 8070-01-P