[Federal Register Volume 86, Number 5 (Friday, January 8, 2021)]
[Proposed Rules]
[Pages 1326-1347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28812]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1242
RIN 2590-AB13
Resolution Planning
AGENCY: Federal Housing Finance Agency.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is seeking comment
on a proposed rule that would require Fannie Mae and Freddie Mac (the
Enterprises) to develop plans to facilitate their rapid and orderly
resolution in the event FHFA is appointed receiver. A resolution
planning rule is an important part of FHFA's on-going effort to develop
a robust prudential regulatory framework for the Enterprises, including
capital, liquidity, and stress testing requirements, as well as
enhanced oversight, which will be critical to FHFA supervision of the
Enterprises after they exit the conservatorships. In addition, a
resolution plan as proposed to be required would support FHFA if
appointed as receiver to, among other things, minimize disruption in
the national housing finance markets by providing for the continued
operation of an Enterprise's core business lines by a limited-life
regulated entity (LLRE); ensure that investors in mortgage-backed
securities guaranteed by the Enterprises and in Enterprise unsecured
debt bear losses in accordance with the priority of payments set out in
the Safety and Soundness Act while minimizing unnecessary losses and
costs to these investors; and, help foster market discipline in part
through FHFA publication of ``public'' sections of Enterprise
resolution plans.
DATES: Comments must be received on or before March 9, 2021.
ADDRESSES: You may submit your comments on the proposed rule,
identified by regulatory information number (RIN) 2590-AB13, by any one
of the following methods:
Agency Website: https://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 FHFA.
Include the following information in the subject line of your
submission: Comments/RIN 2590-AB13.
[[Page 1327]]
Hand Delivered/Courier: The hand delivery address is:
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AB13,
Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW,
Washington, DC 20219. Deliver the package at the Seventh Street
entrance Guard Desk, First Floor, on business days between 9 a.m. and 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-AB13, Federal
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW,
Washington, DC 20219. Please note that all mail sent to FHFA via U.S.
Mail is routed through a national irradiation facility, a process that
may delay delivery by approximately two weeks. For any time-sensitive
correspondence, please plan accordingly.
FOR FURTHER INFORMATION CONTACT: Ellen S. Bailey, Managing Associate
General Counsel, (202) 649-3056, [email protected]; Francisco
Medina, Assistant General Counsel, (202) 649-3076,
[email protected]; Jason Cave, Deputy Director, Division of
Resolutions, (202) 649-3027, [email protected]; or Sam Valverde,
Principal Advisor, Division of Resolutions, (202) 649-3732,
[email protected]. These are not toll-free numbers. The mailing
address is: Federal Housing Finance Agency, 400 Seventh Street SW,
Washington, DC 20219. The telephone number for the Telecommunications
Device for the Deaf is (800) 877-8339.
SUPPLEMENTARY INFORMATION:
Comments
FHFA invites comments on all aspects of the proposed rule and will
take all comments into consideration before issuing a final rule.
Copies of all comments will be posted without change, and will include
any personal information you provide such as your name, address, email
address, and telephone number, on the FHFA website at http://www.fhfa.gov. In addition, copies of all comments received will be
available for examination by the public through the electronic
rulemaking docket for this proposed rule also located on the FHFA
website.
Table of Contents
I. Background; Purpose of and Need for the Rule
A. Business and Supervision of the Enterprises
B. FHFA Appointment as Conservator for the Enterprises; Actions
Necessary to End the Conservatorships
C. Purpose of and Need for Resolution Planning
II. The Proposed Rule
A. Overview of the Resolution Planning Framework
B. Identification of Core Business Lines and Associated
Operations and Services
C. Content and Form of an Enterprise Resolution Plan
D. FHFA Review and Feedback, Plan Deficiencies, and the
``Credible'' Standard
E. Corrective Processes; Significance as a Prudential Standard
F. Corporate Governance Related to Resolution Planning
G. Timing of Plan Submission; Interim Updates
H. Effect of a Resolution Plan on Rights of Other Parties
III. Section-by-Section Summary
A. Section 1242.1 Purpose; Identification as a Prudential
Standard
B. Section 1242.2 Definitions
C. Section 1242.3 Identification of Core Business Lines
D. Section 1242.4 Credible Resolution Plan Required; Other
Notices to FHFA
E. Section 1242.5 Informational Content of a Resolution Plan;
Required and Prohibited Assumptions
F. Section 1242.6 Form of Resolution Plan; Confidentiality
G. Section 1242.7 Review of Resolution Plans; Resubmission of
Deficient Resolution Plans
H. Section 1242.8 No Limiting Effect or Private Right of Action
IV. Comments Specifically Requested
V. Paperwork Reduction Act
VI. Regulatory Flexibility Act
I. Background; Purpose of and Need for the Rule
A. Business and Supervision of the Enterprises
Enterprise Purpose and Business. Fannie Mae and Freddie Mac are
federally chartered housing finance enterprises whose purposes include
providing stability to the secondary market for residential mortgages;
providing ongoing assistance to the secondary market for residential
mortgages (including activities related to mortgages on housing for
low- and moderate-income families) by increasing the liquidity of
mortgage investments and improving distribution of investment capital
available for residential mortgage financing; and, promoting access to
mortgage credit throughout the United States, including central cities,
rural areas, and underserved areas, by increasing the liquidity of
mortgage investments and improving the distribution of investment
capital available for residential mortgage financing.\1\ To meet these
purposes, the Enterprises are statutorily authorized to engage in
limited activities--primarily, the purchase and securitization of
eligible mortgage loans--and are directed to use their authority in
some ways, such as meeting FHFA-established goals related to housing
loans for low- and very low-income families and serving underserved
housing markets.\2\ Loans eligible for purchase or securitization by
the Enterprises must meet statutory, regulatory, and business
eligibility requirements.
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\1\ 12 U.S.C. 1451 (note) and 1716.
\2\ See, e.g., id. 1454, 1723a, 4561, and 4565.
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Each Enterprise generally organizes its business activity into a
single-family business and a multifamily business. The Enterprise
business models for supporting single-family and multifamily housing
consist primarily of a guarantee business. Mortgage lenders participate
in the mortgage-backed securities (MBS) swap and cash window programs,
originating loans in accordance with Enterprise standards and either
providing those loans to an Enterprise in exchange for securities
guaranteed by the Enterprise or selling loans directly to the
Enterprise for cash. Among other things, the cash window enables
smaller lenders to access the secondary market at competitive rates. In
the portfolio business, the Enterprises issue debt and invest the
proceeds in whole loans that they hold on their balance sheets rather
than securitizing, and in MBS. In the past, the Enterprises have had
substantial portfolio businesses. The Enterprises' ability to hold
loans on their balance sheets continues to be important to support the
cash window acquisition channel and to hold delinquent loans that have
been bought out of pools of loans collateralizing MBS.
In both their portfolio and guarantee businesses, the Enterprises
assume credit risk on purchased or securitized loans (in the MBS swap
and cash programs, the Enterprise assumes the credit risk in exchange
for a guarantee fee). Statutory requirements for loan purchase
eligibility reduce credit risk somewhat. For example, the Enterprises
may not acquire single-family loans with loan-to-value ratios (LTVs) at
the time of purchase in excess of 80 percent without additional credit
enhancement, the most common form of which is private mortgage
insurance.\3\ In both their multifamily and single-family businesses,
the Enterprises may further reduce the credit risk they assume by
engaging in risk management activities such as credit risk transfer
(CRT) transactions, where the Enterprises pay a fee to transfer some
credit risk to
[[Page 1328]]
private investors.\4\ Structures of CRT transactions vary.
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\3\ 12 U.S.C. 1454(a)(2) and 1717(b)(2).
\4\ See https://www.fhfa.gov/AboutUs/Reports/Pages/Overview-of-Fannie-Mae-and-Freddie-Mac-Credit-Risk-Transfer-Transactions-8212015.aspx, and other reports at https://www.fhfa.gov/PolicyProgramsResearch/Policy/Pages/Credit-Risk-Transfer.aspx.
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The Enterprises' mortgage business lines require administration of
cashflows derived from payments of principal and interest on underlying
mortgage loans. The Enterprises contract with loan servicers (often,
sellers of loans to an Enterprise who retain mortgage servicing rights)
to administer payments from mortgagors. The Enterprises also jointly
own and contract with Common Securitization Solutions, LLC (CSS), which
operates a common securitization platform for single-family mortgages
and performs certain back-office and administration operations
previously conducted by the Enterprises directly (and separately). A
common securitization platform also facilitates issuance of a common
security, the uniform mortgage-backed security (UMBS), intended to
promote liquidity in the secondary mortgage market and eliminate
pricing differences between Fannie Mae and Freddie Mac single-family
securities. By contrast, each Enterprise securitizes, issues, and
administers multifamily MBS for its own account, using distinct
collateralization structures.
While there are similarities between the Enterprises' business and
that of the Government National Mortgage Association (Ginnie Mae), the
Enterprises' guarantee of timely payment of principal and interest to
investors is not backed by the full faith and credit of the United
States.\5\ The Enterprises are required to state in all of their
obligations and securities that such obligations and securities,
including the interest thereon, are not guaranteed by the United States
and do not constitute a debt or obligation of the United States or any
agency or instrumentality thereof other than the Enterprise itself.\6\
Nonetheless, because of the Enterprises' federal statutory charters and
some federally conferred business privileges,\7\ pricing of Enterprise
obligations has reflected investor perception of a full faith and
credit guarantee.\8\ Investors may have been relying on this perception
when deciding to invest in the Enterprises' debt and MBS at borrowing
costs near that of debt issued by the federal government, despite the
Enterprises' high leverage. That same perception may encourage
typically conservative investors, including foreign sovereigns, to
purchase Enterprise obligations and securities. The perception of an
implicit guarantee thus undermines market discipline and incentivizes
risk taking and growth at the Enterprises.
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\5\ Compare 12 U.S.C. 1717(a)(2)(A), 1455(h)(2), and 1719(d);
see also id. 4501(4) and 4503.
\6\ Id. 1455(h)(2) and 1719(d). Since September 2008, the
Enterprises have been provided explicit, but limited, support by the
U.S. Department of the Treasury through Senior Preferred Stock
Purchase Agreements (PSPAs) to assure continuing operation of the
Enterprises in conservatorships. See https://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-Stock-Purchase-Agreements.aspx. The PSPAs currently remain in place, although they
are meant to be temporary, and the PSPA for each Enterprise
establishes a limit or cap on the amount of support Treasury will
provide, so they are not an exercise of the full faith and credit of
the United States. More information on the Enterprise
conservatorships and the PSPAs is set forth below in section B, FHFA
Appointment as Conservator of the Enterprises; Actions Necessary to
End the Conservatorships.
\7\ The Enterprises may be depositories of public money; are
exempt from almost all federal, state, and local taxation; and, are
not required to be licensed to do business in any state. Id. 1452(d)
and (e), 1456(a), 1723a(c)(2), and 1723a(a). Enterprise securities
are exempt securities within the meaning of laws administered by the
Securities and Exchange Commission, and the Secretary of the
Treasury may purchase their obligations and may do so with public
money. Id. 1455(c) and (g), 1719(c) and (e), and 1723c.
\8\ See https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Working-Paper-07-4.aspx.
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Enterprise Supervision; Resolution. As regulator and supervisor of
the Enterprises, FHFA's duties include ensuring that the Enterprises
operate in a safe and sound manner; foster liquid, efficient,
competitive, and resilient national housing finance markets; and,
operate in a manner that is consistent with the public interest.\9\ In
common with other federal financial safety and soundness supervisors,
FHFA is authorized to examine the Enterprises and to require regular
and special reports from them; to establish capital, liquidity, and
other prudential management and operations standards; to require the
Enterprises to submit corrective plans and take corrective actions if
certain standards are not met; and, to bring enforcement actions
against the Enterprises and certain ``entity-affiliated'' parties.\10\
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\9\ 12 U.S.C. 4513(a)(1)(B).
\10\ See generally, id. 4513b, 4514, 4517, 4611, 4622, and 4631.
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FHFA is also authorized to appoint itself as conservator or
receiver of an Enterprise if statutory grounds are met.\11\ When
appointed receiver of an Enterprise, FHFA must establish an LLRE which
immediately succeeds to the Enterprise's federal charter and thereafter
operates subject to the Enterprise's authorities and duties.\12\
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\11\ Id. 4617(a).
\12\ Id. 4617(i)(1)(A)(ii) and (2)(A).
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FHFA's authorities as receiver or conservator were modeled on those
provided to the Federal Deposit Insurance Corporation (FDIC) through
the Federal Deposit Insurance Act, and the concept of an LLRE is
derived from an FDIC-established bridge bank.\13\ FDIC resolutions,
however, involve insured depository institutions (IDIs) that pay into
the FDIC's Deposit Insurance Fund (DIF) and receive, for the benefit of
deposit customers, FDIC deposit insurance on deposit amounts up to a
certain limit.\14\ The FDIC may use the DIF when conducting a
resolution and may replenish the DIF through assessments paid by
thousands of IDIs.\15\ To enable the FDIC ``to understand and
anticipate the operational, managerial, financial and other aspects of
the IDI that would complicate efforts by the FDIC as receiver to . . .
determine and maximize franchise value, and conduct a least-cost
[resolution],'' the FDIC has adopted a regulation requiring larger IDIs
to engage in resolution planning.\16\
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\13\ Compare, 12 U.S.C. 1821(c) and 4617(b); 1821(n) and
4617(i).
\14\ See generally, 12 U.S.C. 1821.
\15\ 12 U.S.C. 1817(b) and 1821(a)(4).
\16\ 75 FR 27464, 27465 (May 17, 2010); see also 12 CFR 360.10
(2020).
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In contrast to FDIC resolutions, there is no fund similar to the
DIF available to FHFA when conducting an Enterprise resolution.\17\
Because Enterprise obligations and securities are not backed by the
full faith and credit of the United States and because there is no DIF-
like fund for Enterprise resolution, resolution of an Enterprise by
FHFA necessarily would involve only the Enterprise's resources
available to absorb losses and satisfy investor and creditor claims--
Enterprise assets, capital and capital-like instruments, and contracts
that transfer risk of loss to third parties.
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\17\ See generally, 12 U.S.C. 1817(b) and 1821(a)(4); compare 12
U.S.C. 1455(c)(2), 1719(c), and 4516(e).
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B. FHFA Appointment as Conservator for the Enterprises; Actions
Necessary to End the Conservatorships
The 2007-2008 financial crisis began with stresses in the
``subprime'' and ``Alt-A'' mortgage market and grew to the traditional
mortgage market and other financial sectors in the United States and
globally.\18\ As asset prices fell and other large financial firms
failed, it became increasingly difficult for the Enterprises to issue
debt to fund their retained portfolios, to raise new capital to cover
mark-to-market losses from private label securities the Enterprises
[[Page 1329]]
held, and to build reserves for projected credit losses from their
guarantees. In September 2008, when it was apparent that substantial
deterioration in the housing market would leave the Enterprises unable
to fulfill their statutory purposes and mission without government
intervention, FHFA appointed itself conservator of each Enterprise.\19\
At the same time, as conservator for each Enterprise, FHFA entered into
the Senior Preferred Stock Purchase Agreements (PSPAs) with the U.S.
Department of the Treasury (Treasury) to provide each Enterprise
financial support up to a specified amount.\20\ This limited support,
which continues to the present, permits the Enterprises to meet their
outstanding obligations and continue to provide liquidity to the
mortgage markets while maintaining a positive net worth. The
Enterprises required a combined $187 billion dollars in Treasury
support from 2008 to 2012. However, Fannie Mae and Freddie Mac have not
requested a major draw from the Treasury since 2012.\21\
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\18\ See 83 FR 33312, 33317 (July 17, 2018) (FHFA Notice of
proposed rulemaking on Enterprise Capital Requirements, which
discusses 2007-2008 financial crisis and the Enterprises).
\19\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/
Statement-of-FHFA-Director-James-B_Lockhart-at-News-Conference-
Annnouncing-Conservatorship-of-Fannie-Mae-and-Freddie-Mac.aspx.
\20\ See supra, fn 6.
\21\ Due to corporate tax law changes in 2017 that resulted in
write-downs to the value of deferred tax assets, Fannie Mae received
a $3.7 billion dollar draw from Treasury in 2018. This was a one-
time accounting event.
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FHFA appointed itself as conservator of each Enterprise in
September 2008, instead of receiver, in part due to concerns about
potential market instability that could have resulted from an
unprecedented receivership proceeding for which FHFA and the
Enterprises had not planned or prepared, which could have been
compounded by market perception that all Enterprise debt was backed to
some extent by the U.S. government.\22\ Until July 2008, the Safety and
Soundness Act did not provide for Enterprise receivership and there was
no process for separating Enterprise operations between functions that
were necessary to maintaining the stability of the housing market and
those which were not, leaving the regulator and policymakers with
limited options. The Enterprise conservatorships have now lasted for
over twelve years, considerably longer than any conservatorship under
the auspices of the FDIC or of the Resolution Trust Corporation,
established to resolve failed thrifts following the 1989 thrift
crisis.\23\
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\22\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/
Statement-of-FHFA-Director-James-B_Lockhart-at-News-Conference-
Annnouncing-Conservatorship-of-Fannie-Mae-and-Freddie-Mac.aspx;
https://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-of-OFHEO-Director-James-B-Lockhart-in-Support-of-Secretary-Paulson,-Administration-and-the-Federal-Reserve-in-T.aspx; and, https://www.treasury.gov/press-center/press-releases/pages/hp1129.aspx.
\23\ By comparison, the RTC closed 706 failed thrift institution
conservatorships from its establishment in 1989 through June 1995.
See FDIC, Managing the Crisis: The FDIC and RTC Experience, 1980-
1994 (1998), vol. 1, 27.
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FHFA's current Strategic Plan includes the objective of responsibly
ending the conservatorships.\24\ In preparation, FHFA is developing a
more robust prudential regulatory framework for the Enterprises,
including capital, liquidity, and stress testing requirements, and
enhanced supervision. The Treasury Housing Reform Plan noted the
importance of developing a credible resolution framework for the
Enterprises to protect taxpayers, enhance market discipline, and
mitigate moral hazard and systemic risk.\25\ FHFA believes this
proposed rule is an important part of developing such a framework and
is a key step toward the robust regulatory post-conservatorship
framework FHFA is developing. Further, FHFA concurs with Treasury's
enumeration of the benefits of a credible resolution framework. The
importance of such a framework for the Enterprises is heightened by the
historical precedent set by the decision to place each Enterprises in
conservatorship instead of receivership. FHFA also notes that
additional changes may be warranted, such as requiring each Enterprise
to maintain a minimum amount of loss-absorbing capacity in the form of
subordinated or convertible debt that could be ``bailed in'' should the
Enterprise encounter significant financial distress, which could
facilitate the establishment of a viable LLRE.\26\ FHFA is considering
a separate rulemaking that would require each Enterprise to maintain
minimum amounts of long-term debt and other loss-absorbing capacity
requirements.
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\24\ See https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA_StrategicPlan_2021-2024_Final.pdf.
\25\ See U.S. Department of the Treasury, Housing Reform Plan
(September, 2019), available at https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf.
\26\ To facilitate a credible resolution planning framework, the
Housing Reform Plan recommends requiring each Enterprise to maintain
a minimum amount of total loss-absorbing capacity that could be
bailed-in in the event of financial distress. Id. Such a requirement
is beyond the scope of the current proposal.
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In developing the proposed resolution planning framework, FHFA has
considered the resolution planning framework of the FDIC for large IDIs
and a framework jointly established by the FDIC and the Federal Reserve
Board (FRB) pursuant to section 165(d) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (the DFA section 165 rule),
which covers large, interconnected bank holding companies and nonbank
financial companies designated by the Financial Stability Oversight
Council (FSOC) for enhanced supervision by the FRB. While there would
be significant differences among FDIC resolution of an IDI, resolution
of a bank holding company in a bankruptcy proceeding, and FHFA
resolution of an Enterprise, the FDIC's IDI rule and the DFA section
165 rule provided helpful context for FHFA's consideration of the goals
and requirements of an appropriate Enterprise resolution planning
framework in view of FHFA's statutory authorities and mandates.\27\
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\27\ In this notice of proposed rulemaking, FHFA refers to the
DFA section 165 rule as applying to bank holding companies, rather
than that rule's ``Covered Companies,'' for ease of reading and
because currently there are no FSOC-designated nonbank financial
companies.
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C. Purpose of and Need for Resolution Planning
Considering the Enterprises' statutory purposes and mission and
FHFA's statutory duties and authorities, the goals of Enterprise
resolution planning are to facilitate the continuation of Enterprise
functions that are essential to maintaining stability in the housing
market in the establishment of an LLRE by FHFA as receiver and to
allocate losses to creditors in the order of their priority. The
Enterprises' combined single-family book of business is in excess of $5
trillion and the combined multifamily book is approximately $650
billion. Given the Enterprises' statutory obligation to provide
liquidity to the secondary mortgage market, their market dominance in
providing such liquidity, and the potentially significant impact
financial stress in the secondary mortgage market could have on the
national housing finance markets, financial stability, and the broader
economy,\28\ transferring Enterprise assets and liabilities to and
continuing functions in an LLRE requires careful consideration and
tailoring to the specific function of the Enterprises, despite the
Enterprises' limited business lines (relative to other large and
complex financial institutions) and simple corporate structures.
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\28\ See https://home.treasury.gov/system/files/261/Financial-Stability-Oversight-Councils-Statement-on-Secondary-Mortgage-Market-Activities.pdf.
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To facilitate FHFA's role as receiver, the proposed rule would
establish a
[[Page 1330]]
multi-faceted, iterative Enterprise resolution planning process that
provides FHFA an Enterprise resolution plan containing (i) key
information about an Enterprise's structure, governance, operations,
business practices, financial responsibilities, and risk exposures and
(ii) advance strategic thinking and analysis, including the
identification of impediments to ``rapid and orderly'' resolution as
well as actions that could facilitate resolution if taken before
receivership or in establishing the LLRE. The proposed resolution
planning process also includes Enterprise development and maintenance
of resolution-related capabilities to be assessed or verified
periodically by FHFA that could generate, on a timely basis, critical
information (e.g., identification of key personnel) that FHFA would
need as receiver to fulfill its statutory duties. Together, these
components would help inform the immediate establishment of the LLRE to
continue Enterprise business functions, including an informed division
of assets and liabilities between the Enterprise receivership estate
and a newly established LLRE.
Advance information, strategic analysis, and action, where
appropriate, would also support other important goals of a rapid and
orderly Enterprise resolution--to minimize disruption in the national
housing finance markets, preserve Enterprise franchise and asset value,
and ensure creditors bear losses in the order of their priority.\29\
These goals work in concert, since a disruption of national housing
finance markets also could increase costs to FHFA as receiver to the
detriment of claimants on an Enterprise's receivership estate.
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\29\ Advance action could include, for example, ensuring that
certain arrangements (master netting agreements related to qualified
financial contracts, for example) are resilient to the creation of
and transfer of assets to an LLRE.
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As well, the proposed rule would support transparency in the
Enterprises' resolution planning process by requiring each Enterprise
resolution plan to include a ``public section'' that FHFA would
publish. FHFA may publish its own high-level assessment of Enterprise
resolution plans as the planning process matures. FHFA believes that
such transparency would further another important policy goal--
fostering market discipline. Despite statutory provisions clarifying
that neither the Enterprises themselves nor their securities or
obligations are backed by the United States, investors, creditors and
others doing business with the Enterprises may perceive that the
Enterprises have implicit United States government support. Financial
support from the Treasury Department provided through the PSPAs, which
continues today, could encourage that perception. To clarify the status
of the Enterprises as privately owned corporations, FHFA seeks to make
explicit in this resolution planning rule that no extraordinary
government support will be available to prevent an Enterprise
receivership, indemnify investors against losses, or fund the
resolution of an Enterprise. Each Enterprise must incorporate that
assumption into its resolution plan, and this assumption must be
apparent in the plan's public section.
II. The Proposed Rule
A. Overview of the Resolution Planning Framework
``Rapid and orderly resolution'' of an Enterprise. The proposed
rule would establish the procedural and substantive requirements for
Enterprise resolution plans developed to facilitate their rapid and
orderly resolution by FHFA as receiver. The term ``rapid and orderly
resolution'' is used in the DFA section 165 and its implementing
rule.\30\ FHFA has carefully considered whether an Enterprise
resolution planning rule should include a similar standard.
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\30\ 12 CFR 243.2; see also 12 U.S.C. 5365(d)(1), requiring
certain bank holding companies to report to the FRB on their plans
``for rapid and orderly resolution.'' The DFA section 165 rule
defines ``rapid and orderly resolution'' as ``a reorganization or
liquidation of the [bank holding] company . . . that can be
accomplished within a reasonable period of time in a manner that
substantially mitigates the risk that the failure of the [bank
holding] company would have serious adverse effects on [the]
financial stability of the United States.''
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A similar standard, reflecting FHFA's authorities as receiver and
the Enterprises' statutory authorities and obligations, would help the
Enterprises, market participants, and the public understand that the
proposed rule seeks to achieve a similar, but appropriately tailored,
goal--resolution, if necessary, of a large financial intermediary that
performs functions other market participants rely on for their
efficient operation, and which would be difficult to transfer or for
which there are not available substitutes. FHFA views an Enterprise
resolution planning rule as similar to the DFA section 165 rule, one
purpose of which is to promote U.S. financial stability, and to efforts
of other U.S. financial safety and soundness supervisors to align with
common goals of the Financial Stability Board, such as improving ``the
capacity of national authorities to implement orderly resolutions of
large and interconnected financial firms.'' \31\
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\31\ 75 FR 27464, 27466 (May 17, 2010). In general, FDIC Federal
Register notices on its IDI rule provide high level background on
U.S. participation in international efforts toward resolution of
large, interconnected financial firms.
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FHFA recognizes, however, that statutory provisions creating the
Enterprises and authorizing their resolution by FHFA answer some
questions that are not determined in advance for other receivers or
administrators in bankruptcy--the Safety and Soundness Act directs that
the Enterprises' functions as set forth in their charter acts will
continue and establishes the framework for the continuation of these
functions in a successor LLRE. FHFA's approach to ``rapid and orderly
resolution'' is necessarily formed against that statutory backdrop.\32\
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\32\ See generally, 12 U.S.C. 4617(i).
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For the foregoing reasons, FHFA proposes to establish ``rapid and
orderly resolution'' as a standard for Enterprise resolution, but to
define it in a manner tailored to resolution of an Enterprise
contemplated by the Safety and Soundness Act. Thus, FHFA proposes to
define ``rapid and orderly resolution'' as a process for establishing
an LLRE as successor to an Enterprise, including transferring
Enterprise assets and liabilities to the LLRE, such that succession by
LLRE ``can be accomplished within a reasonable amount of time and in a
manner that substantially mitigates the risk that the failure of the
Enterprise would have serious adverse effects on national housing
finance markets.'' FHFA requests comment on the use of ``rapid and
orderly resolution,'' as defined in the proposed rule, as the standard
for an Enterprise resolution.
Procedural overview of the proposed Enterprise resolution planning
framework. Procedurally, development of an Enterprise resolution plan
would begin with the identification of Enterprise ``core business
lines.'' Core business lines and the operations, services, functions,
and supports associated with core business lines are important focal
points of resolution planning, as FHFA expects ``core'' Enterprise
business lines would be conducted in an LLRE established to continue
the business operations of an Enterprise in receivership.
After core business lines and associated operations, services,
functions, and supports are identified, each Enterprise would be
required to develop and submit to FHFA a resolution plan that provides
strategic analysis and information to facilitate
[[Page 1331]]
FHFA's rapid and orderly resolution of the Enterprise in a
receivership, including setting forth actions that an Enterprise would
take to improve its resolvability and identified impediments to
resolvability that may be beyond the Enterprise's ability to address or
control.
FHFA would review a received and complete resolution plan and
provide notice to the Enterprise identifying deficiencies in its
resolution plan, if any, as well as actions or changes set forth by the
Enterprise in its resolution plan that FHFA agrees could facilitate a
rapid and orderly resolution. FHFA may also provide other feedback,
such as on the timing of actions or changes to be undertaken by the
Enterprise. An Enterprise receiving a notice of deficiency would be
required to submit a revised resolution plan that corrects the
deficiency, or addresses what actions will be taken to correct it.
The resolution planning process proposed is an iterative one,
involving episodic and periodic reviews (and updates as appropriate) of
business lines, and periodic development of revised resolution plans.
FHFA would employ its examination authority to assess Enterprise
compliance with any final rule on resolution planning and, importantly,
to assess or verify Enterprise capabilities that would be critical to
facilitate resolution by FHFA, including timely production of accurate
information from management information systems. The proposed rule is
discussed in greater detail below.
B. Identification of Core Business Lines and Associated Operations and
Services
Proposed definition of ``core'' business line; FHFA considerations
on scope. The resolution planning process begins with identification of
Enterprise core business lines and associated operations and services.
Because the statutory outcome of Enterprise resolution is establishment
of an LLRE that succeeds to the charter of the Enterprise and continues
its operations on the same statutory basis as the Enterprise, FHFA
proposes to define a ``core business line'' as each business line of
the Enterprise that plausibly would continue to operate in an LLRE,
considering the purposes, mission, and authorized activities of the
Enterprise set forth in its authorizing statute and the Safety and
Soundness Act.\33\ ``Core business line'' would include operations,
services, functions, and supports associated with the business line and
necessary for the business line's continuation in the LLRE.
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\33\ As defined in the Safety and Soundness Act, an Enterprise's
``authorizing statute'' is its charter act (the Federal National
Mortgage Association Charter Act for Fannie Mae, and the Federal
Mortgage Loan Corporation Act for Freddie Mac). See 12 U.S.C.
4502(3). In this notice of proposed rulemaking, FHFA may use the
terms ``authorizing statute'' and ``charter act'' interchangeably.
---------------------------------------------------------------------------
As an example of how the proposed ``core business line'' definition
could operate, application of the concept may result in identification
of two core business lines for each Enterprise, a single-family
business line and a multifamily business line. Within the single-family
business line, associated operations, services, functions, and supports
may include purchasing single-family mortgage loans for cash as well as
related operations such as loan servicing, credit enhancement,
securitization support, information technology support and operations,
and essential human resources and personnel support. When identifying
associated operations, services, functions, and supports, an Enterprise
should consider those functions that it performs directly and those
that are performed by an affiliate or provided by a third party,
including third parties whose direct relationship is with the borrower,
but whose function may benefit an Enterprise (such as the provider of
borrower loan-level mortgage insurance).
FHFA notes that the FDIC IDI and DFA section 165 resolution
planning rules also require IDIs and bank holding companies,
respectively, to identify ``core business lines'' but define such
business lines as those whose failure, in the view of the institution
or company, would result in material loss of revenue, profit, or
franchise value. FHFA understands such concepts, in the context of
those rules, to frame core business lines as those whose value the
receiver should prioritize preserving in resolution or for which the
receiver may obtain a higher price or find a ready market should such a
business line be sold in a resolution. FHFA's proposed definition of
``core business line'' is different from the definition in the IDI and
DFA section 165 resolution planning rules, considering that the Safety
and Soundness Act requires FHFA to establish an LLRE for, and the LLRE
to succeed to the charter of, an Enterprise in receivership.
Consequently, FHFA believes it appropriate for an Enterprise resolution
planning rule to focus on continuation of core business lines in an
LLRE, and sees less need for the identification of Enterprise core
business lines to consider the impact of failure on revenue, profit, or
franchise value. FHFA requests comment on whether the proposed
definition of ``core business line'' should be expanded to include
consideration of the impact of failure (e.g., whether the definition of
``core business line'' should be revised to state ``each business line
of the Enterprise whose failure would result in a material loss of
revenue, profit, or franchise value or would impair the Enterprise's
ability to fulfill its purposes, mission, or obligations under in its
authorizing statute and the Safety and Soundness Act.'').
FHFA believes that the scope of the proposed ``core business line''
definition, when considering the Enterprises' statutory purposes and
missions and relatively simple corporate structures, makes it
unnecessary for an Enterprise resolution planning rule to require
identification of ``critical operations'' (which bank holding companies
subject to the DFA section 165 rule must identify) or of ``critical
services'' (which IDIs subject to the FDIC IDI rule must identify).
Enterprise resolution planning is a process distinct from the
identification of operations, services, functions, and supports
associated with an Enterprise core business line. Likewise, FHFA does
not believe it would be necessary to define the terms ``critical
operations'' or ``critical services,'' in an Enterprise resolution
planning rule, for reasons set forth below.
In the DFA section 165 rule, ``critical operations'' is defined as
``those operations of the [bank holding] company, including associated
services, functions and support, the failure or discontinuance of which
would pose a threat to the financial stability of the United States.''
\34\ Unlike any bank holding company, each Enterprise was created by
statute to perform limited functions in support of a particular market.
---------------------------------------------------------------------------
\34\ 12 CFR 243.2.
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In that light, for purposes of resolution planning, it would be
difficult for FHFA to conclude that a business line integral to an
Enterprise's statutory purposes and mission could be discontinued
without threatening the stability of the secondary mortgage market or
another market an Enterprise is required to serve; each Enterprise's
appropriate functions, as carried out through its core business lines,
are in service to its purposes and mission.\35\ In other words, if
``critical operations'' understood with regard to the
[[Page 1332]]
Enterprises as operations that, if not performed, could cause
disruption or instability in the secondary market for residential
mortgages, FHFA expects there would be alignment between the
Enterprises' core business lines with their statutory purposes and
mission, such that all core business lines would be considered critical
operations.
---------------------------------------------------------------------------
\35\ Supra, fn 1. FHFA also notes that discontinuation of
mission-related functions could be disruptive to other markets, such
as markets that are underserved.
---------------------------------------------------------------------------
As for ``critical services,'' the FDIC IDI rule defines these as
services and operations of the IDI that are necessary to continue its
day-to-day operations, such as servicing, information technology
support and operations, and human resources and personnel.\36\ When
proposing its IDI rule, FDIC explained that ``[k]ey decisions affecting
the IDI, and key services or functions relating to the IDI, are often
made . . . by parent holding companies or affiliates of the IDI,'' \37\
that ``reliance upon affiliates to provide critical services can
establish an impediment to transferring its assets, liabilities and
operations to an acquiring institution or bridge bank,'' \38\ and that
one purpose of the resolution planning rule was for IDIs to
``demonstrat[e] how [they] could be separated from their affiliate
structure and wound down in an orderly and timely manner in the event
of receivership.'' \39\ FHFA agrees that identification of critical
services is important (particularly so if services are being provided
by an affiliate within a holding company, possibly without an arms-
length contract), but believes that such services already would be
covered by the proposed definition of ``core business lines'' that
includes operations, services, functions, and supports associated with
the business line and necessary for its continuation.
---------------------------------------------------------------------------
\36\ 12 CFR 360.10(b)(5).
\37\ 75 FR 27464, 27465 (May 17, 2010).
\38\ Id., at 27467.
\39\ Id., at 27464.
---------------------------------------------------------------------------
FHFA invites comment on its view that there would be sufficient
alignment between the definition of core business lines (those
businesses line of the Enterprise that plausibly would continue to
operate in an LLRE, considering the purposes, mission, and authorized
activities of the Enterprise) and the concept of ``critical
operations'' (operations that, if not performed, could cause disruption
or instability in the secondary market for residential mortgages) such
that an Enterprise resolution planning rule would not need a separate
process for identification of ``critical operations.'' Also, FHFA
requests comment on the conclusion that a definition of ``core business
line'' that includes operations, services, functions, and supports
associated with the business line and necessary for it to continue
would capture the concept of ``critical services'' (services and
operations of the Enterprise that would be necessary to continue its
day-to-day operations), such that an Enterprise resolution planning
rule would not need to separately identify those associated operations
and services that are ``critical.''
Process for identifying core business lines; methodology.
Procedurally, FHFA proposes to require each Enterprise to review its
business lines and provide FHFA notice of those business lines
preliminarily determined to be core, subject to FHFA review. On review,
FHFA may approve or disapprove of any business line identified by an
Enterprise as core (or of any operation, service, function, or support
associated with any business line) and may independently identify any
other business line as core. Following its review, and generally within
three months of receiving an Enterprise's preliminary identification,
FHFA will provide each Enterprise a notice of its core business lines
for purposes of that Enterprise's resolution planning. Notice by FHFA
may not include all associated operations, services, functions, and
supports, as these aspects of a core business line could vary by
Enterprise and would be better identified by the Enterprise,
considering its experience operating that particular business line.
The proposed rule would permit FHFA to provide an Enterprise notice
of identification of a core business line at any time at FHFA's
initiative. To give an Enterprise time to incorporate any core business
line newly identified by FHFA into its resolution planning, the
Enterprise would not be required to incorporate a core business line
identified by FHFA in its next required resolution plan, if that plan
is required to be submitted within six months after the date the
Enterprise receives notice of identification from FHFA.
The proposed approach to identification is intended to ensure that
both the Enterprises and FHFA separately consider the Enterprises'
statutory purposes, mission, and authorities when identifying core
business lines, bringing both business and supervisory expertise and
perspective to bear on identification. The proposed approach leverages
each Enterprise's responsibility to meet the purposes of its statutory
charter and its understanding of its own business operations, while
recognizing FHFA's statutory duties as supervisor to ensure that each
Enterprise complies with its charter act and operates in the public
interest and FHFA's obligation as receiver to ensure that an LLRE is
constituted in a manner to operate in accordance with the charter of
the Enterprise for which it is successor.
To identify its core business lines, each Enterprise would be
required to develop and implement an identification process, including
a methodology to evaluate the Enterprise's participation in activities
and markets that are critical to fostering liquidity, efficiency,
resilience, stability, and competition in the national housing finance
markets or carrying out the statutory mission and purpose of the
Enterprise. That methodology should take into account the markets and
activities in which the Enterprise participates; the significance of
those markets and activities with respect to the national housing
finance markets or the Enterprise's fulfillment of its statutory
mission and purpose; and, the significance of the Enterprise as a
provider or other participant in those markets and activities. An
Enterprise's process for identifying its core business lines could
incorporate, for example, review and assessment of business activities
toward meeting its statutory duty to serve and its statutory affordable
housing goals.\40\
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\40\ See generally, 12 U.S.C. 4561 and 4565.
---------------------------------------------------------------------------
FHFA would not be required to utilize any particular methodology
for identifying any core business line but believes that it would be
appropriate to consider the factors set forth above in the methodology
for Enterprise identification. FHFA would be able to consider any other
factor it deemed appropriate.
Because FHFA proposes to require the Enterprises periodically to
review their business lines to ensure that identification of core
business lines is up-to-date, the proposed rule would require each
Enterprise periodically to review its identification process and to
revise it as necessary to ensure its continued effectiveness.
Additional information regarding periodic reviews is set forth below.
Timing of initial and subsequent Enterprise identifications of core
business lines. FHFA proposes to require each Enterprise to provide its
initial notice preliminarily identifying core business lines to FHFA
within three months after the effective date of a final rule, and
requests comment on whether three months is sufficient time for such
identification, considering that identification necessarily involves
establishing and implementing the methodology described above to assess
business lines and their associated operations, services, functions,
and
[[Page 1333]]
supports. Because identification of core business lines is only the
first step in a resolution planning process, by proposing a relatively
short period from the effective date of a final rule to the submission
date of an initial identification notice, FHFA seeks to balance the
Enterprises' need for sufficient time to develop and implement a
meaningful identification process with FHFA's need for the Enterprises
to develop and submit initial resolution plans that consider those core
business lines, within a reasonable period of time after the effective
date of a final rule. For the same reason--the desire for the
Enterprises to complete initial resolution plans within a reasonable
time after the effective date of a final rule--FHFA expects that it
would view an Enterprise's initial identification process as sufficient
if it reflects thoughtful consideration and application of a
methodology consistent with a final rule, even if improvements to the
Enterprise's identification process are warranted and would be
undertaken as part of any subsequent identification activities.
Following its initial preliminary identification of core business
lines, each Enterprise would be expected to review its business lines
periodically, in accordance with the methodology set forth in the
proposed rule, and to do so sufficiently in advance of its next
resolution plan submission that the Enterprise could complete the
notice-and-review process for FHFA identification of any new core
business lines and also submit information required to be in the
resolution plan for each core business line. Up-to-date identification
of core business lines and associated operations, services, functions,
and supports is critical for Enterprise resolution planning and to the
development of a credible resolution plan.
In line with the proposed definition of ``core business line,'' in
the period from submission of one resolution plan to the next, business
lines identified as core may not change. To avoid unnecessary burden on
the Enterprises and FHFA which may result if, out of an abundance of
caution, an Enterprise conducts more frequent identification processes
than necessary, FHFA also proposes to reserve authority to direct the
Enterprises as to the timeframe for conducting any subsequent periodic
identification process. Such direction would address only the timing of
a periodic identification process and would not, for example, relieve
an Enterprise of the need to review its business lines if it
experienced a ``material change,'' as addressed below. By reserving
authority to direct the timing of periodic identification processes,
FHFA seeks to balance the need for up-to-date information about core
business lines with the burden of conducting a periodic process, if it
becomes apparent that identified core business lines are not changing
over the course of several resolution plan submissions.
Change to identification as a core business line, including FHFA
reconsideration. FHFA recognizes that there may be different views on
whether a business line is core, for purposes of resolution planning,
and that business lines may evolve over time, such that a business line
once identified as core may cease to be a core business line. Three
elements of the proposed rule address possible changes in
identification of a core business line.
First, an Enterprise may identify new core business lines when
conducting its periodic identification process. Such identification
would be a ``material change,'' which FHFA proposes to define as a
change, event, or occurrence that could reasonably be foreseen to have
a material effect on the resolvability of the Enterprise, the
Enterprise's resolution strategy, or how the Enterprise's resolution
plan may be implemented. That ``material change'' would be an
``extraordinary event,'' described in the proposed rule as ``any
material change, merger, reorganization, sale or divestiture of a
business unit or material assets, or similar transaction, or any
fundamental change to the Enterprise's resolution strategy.'' Such a
``material change'' would thus trigger an Enterprise notice to FHFA
within 45 days after the occurrence of the change (the new
identification). Relatedly, an ``extraordinary event'' could occur that
gives rise to identification of a new core business line outside of an
Enterprise's periodic identification process. In that instance as well,
notice to FHFA would be required within 45 days of the identification
of the new core business line. Finally, because the definition of
``core business line'' includes associated operations, services,
functions, or supports, a notice of material change would also be
required when there is a material change to such operations, services,
functions, or supports that could affect the Enterprise's resolution
plan.
The proposed rule would also provide a process for FHFA
reconsideration of identification of a core business line. Only FHFA
may remove the identification of a core business line (including
removing the identification of any associated operation, service,
function, or support), and it may do so on its own initiative, at any
time, upon notice to an Enterprise. An Enterprise would be permitted to
initiate a reconsideration, by submitting a written request to FHFA
that includes arguments and other material information that the
Enterprise believes would be relevant to that reconsideration. The
proposed rule would provide FHFA three months to respond to a
reconsideration request, unless FHFA extended that review period. If
the Enterprise requests FHFA to reconsider a core business line that
FHFA has previously reconsidered, pursuant to an earlier Enterprise
request, the written request should describe the material differences
between the current request and the most recent prior request. The
proposed rule does not set forth a process for discussion or
negotiation with an Enterprise about reconsideration, but FHFA
anticipates that it would engage with an Enterprise as part of an
established supervisory process to understand any different views on
the nature of a particular business line.
Finally, FHFA recognizes that a resolution plan is necessarily
developed at a point in time, while business activities are fluid
through time. For that reason, a notice removing identification as a
core business line may include an effective date or other delaying
conditions or triggers (such as, for example, sufficient decrease in
volume of a core business line, after which it would not be necessary
to consider that business line in the Enterprise's resolution planning
process).
FHFA invites comment on all aspects of the proposed processes for
identifying core business lines and changing a core business line
identification. FHFA invites comment on a process element that it has
not proposed but is considering--whether, due to similarities between
the activities each Enterprise is authorized or directed to take in its
charter, there would be benefit to FHFA's providing notice to each
Enterprise of all core business lines identified or any removal of a
core business line identification, across both Enterprises. In contrast
to bank holding companies subject to the DFA section 165 rule, where
there presumably would not be common core business lines and critical
operations across companies, there exist greater possibilities of
common core business lines across the Enterprises. This is apparent if
core business lines are identified primarily based on the Enterprise
charter acts. FHFA believes that there could be alignment of core
business lines across
[[Page 1334]]
the Enterprises when considering their current businesses and the
proposed Enterprise methodology for determining core business lines.
One possible benefit of core business line identification across the
Enterprises is that there would be a process to assure that each
Enterprise's resolution planning and plan addresses the same core
business lines. At the same time, in the unlikely event the
Enterprises' core business lines did not align based on their
individual application of the proposed rule's identification
methodology, each Enterprise could be required to address business
lines that are not, in fact, core as to that Enterprise in its
resolution planning.
C. Content and Form of an Enterprise Resolution Plan
After identifying its core business lines, the proposed rule would
require an Enterprise to develop a resolution plan. Each resolution
plan would contain strategic analysis and information important to
understanding an Enterprise's core business lines and facilitating
their continuation, possibly with appropriate changes, in an LLRE
established by FHFA as receiver.
Under the proposed rule, a resolution plan would be required to
include both strategic analysis and information components, including a
description of the Enterprise's corporate governance structure for
resolution planning; how the LLRE will be funded throughout its
existence and be well capitalized within the timeline provided by
statute; information regarding the Enterprise's overall organizational
structure; information regarding the Enterprise's management
information systems; a description of interconnections and
interdependencies among the Enterprise's core business lines, including
with CSS and other third-party providers; and, a clear identification
of any potential impediments to the strategies developed and Enterprise
plans for addressing such obstacles where practicable. An executive
summary would also be required. In proposing these components, FHFA
reviewed both the FDIC IDI resolution planning rule and the DFA section
165 rule and has incorporated concepts from each framework, and
tailored those concepts to reflect Enterprise and FHFA authorities and
duties.
Required and prohibited assumptions. Similar to the DFA section 165
rule, FHFA is proposing to establish required and prohibited
assumptions which must underpin an Enterprise's resolution plan. An
Enterprise would be required to consider that resolution may occur
under the severely adverse economic conditions provided to the
Enterprise by FHFA in conjunction with any stress testing required
pursuant to FHFA's rule on stress testing of the regulated entities, 12
CFR part 1238. On occasion FHFA may identify or provide other stress
scenarios, possibly more idiosyncratic to an Enterprise, which the
Enterprises would be required to consider in preparing the next
periodic resolution plan.
Importantly, each Enterprise would be prohibited from assuming that
any extraordinary support from the United States government would be
continued or provided to the Enterprise to prevent either its becoming
in danger of default or in default, including support obtained or
negotiated on behalf of the Enterprise by FHFA in its capacity as
regulator, conservator, or receiver of the Enterprise through the PSPAs
with the Treasury Department. Likewise, each Enterprise's resolution
plan would be required to reflect statutory provisions that the
Enterprise's ``obligations and securities, together with interest
thereon, are not guaranteed by the United States and do not constitute
a debt or obligation of the United States or any agency or
instrumentality thereof other than [the Enterprise].'' \41\ The
proposed rule seeks to ensure that resolution plans accurately reflect
the statutory construct of the Enterprises--they are not supported by
the full faith and credit of the United States and their securities
(including securities that an Enterprise guarantees) and debt are not
guaranteed by the United States.
---------------------------------------------------------------------------
\41\ 12 U.S.C. 1455(h)(2) and 1719(d).
---------------------------------------------------------------------------
Strategic analysis. Similar to the DFA section 165 rule, FHFA
proposes to require a strategic analysis describing the Enterprise's
plan to facilitate its rapid and orderly resolution. As a practical
matter, there may be two components to this analysis--those strategies
and actions that are feasible for an Enterprise to implement or take
prior to receivership, and those strategies and actions that the
Enterprise believes FHFA could take in conjunction with receivership
and resolution. By statute, moving to receivership is solely FHFA's
authority, and the proposed rule makes clear that FHFA is not bound by
any resolution plan of an Enterprise. Nonetheless, each Enterprise
understands its business operations in greater detail than does FHFA.
An Enterprise's assessment of how the value of its assets and franchise
could be preserved, how assets and liabilities could be divided between
the LLRE and a receivership estate, and how losses and costs could be
minimized, would be important considerations for FHFA. These actions
are the basis for a resolution and receivership that minimize
disruption in the national housing finance markets. They will be
particularly important given that the Enterprises are not supported by
the United States government, and FHFA does not have access to funding
for resolution, such as the DIF.
Each Enterprise's strategic analysis should therefore detail how,
in practice, the Enterprise could be resolved through FHFA's
receivership authority by liquidating assets or by transferring them to
an LLRE, which would continue to operate the Enterprise's core business
lines. The strategic analysis should include the analytical support for
the resolution plan and its key assumptions, including any assumptions
made concerning the economic or financial conditions that would be
present at the time a plan is implemented.
An important element proposed in the strategic analysis is the
Enterprise's description of actions or a range actions that the
Enterprise could take to facilitate its rapid and orderly resolution,
including with respect to its core business lines, in the event of its
becoming in danger of default or in default. For example, an Enterprise
could review service level agreements to assess likelihood of service
continuation after transfer to an LLRE, including whether contracts
have ``resolution-favorable'' terms. The Enterprise should specify
those actions that it plans to take and set forth the time period the
Enterprise expects would be needed to successfully execute each such
action. The Enterprise should also describe any impediments to actions
that could be taken, including impediments to actions that it plans to
take.
The strategic analysis should identify and address funding,
liquidity, support functions, and other resources, mapped to the
Enterprise's core business lines. This element would require the
Enterprise to identify the amount of capital and capital-like
instruments (such as subordinated debt, convertible debt, other
contingent capital, mortgage insurance, and CRT transactions) available
to absorb losses before imposing losses on creditors or investors and,
where applicable, map this loss absorbing capacity to associated
assets. The Enterprise's strategy for maintaining and funding its core
business lines in an environment when it faces becoming in danger of
default or in default should be provided and mapped to its core
business lines, and its strategic analysis should demonstrate how such
resources would be utilized to facilitate an orderly
[[Page 1335]]
resolution. The Enterprise's strategic analysis also should consider
the capital support that will be needed by an LLRE (during its life and
when its status as a ``limited-life'' regulated entity ends) to
maintain market confidence.
The strategic analysis should set forth the Enterprise's strategy
in the event of a failure or discontinuation of a core business line,
including an associated operation, service, function, or support that
is critical to a core business line and the actions that could be taken
to prevent or mitigate any adverse effects of such failure or
discontinuation on the national housing finance markets. This would
include, if appropriate, the Enterprise's strategy for continuing an
associated operation, service, function or support provided by an
affiliate or the third-party provider that has failed. The ability of
each affiliate or third party providing operations, services, functions
or supports to function during the Enterprise's resolution should be
assessed.
The strategic analysis should describe how and the extent to which
claims against the Enterprise by the Enterprise's creditors and
counterparties would be satisfied in accordance with FHFA's rule
setting forth the priority of expenses and unsecured claims set forth
at 12 CFR 1237.9, consistent with continuation of the Enterprise's core
business lines by an LLRE. Another element to be included in a
strategic analysis is the Enterprise's strategy for transferring or
unwinding qualified financial contracts, consistent with applicable
statutory requirements.\42\
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\42\ ``Qualified financial contracts'' are defined and the
requirements for their transfer or unwinding are set forth at 12
U.S.C. 4617(d)(8) through (11).
---------------------------------------------------------------------------
It is likely that each Enterprise will identify potential material
weaknesses or impediments to rapid and orderly resolution as conceived
in its plan. The Enterprise's strategic analysis must identify and
describe those weaknesses or impediments, and any actions or steps the
Enterprise has taken or proposes to take to address them. There may be
overlap between these planned actions and other planned actions
included in the strategic analysis. The Enterprise should identify
actions or steps that other market participants could take to address
the identified weaknesses or impediments. The Enterprise would be
required to include a timeline for such remedial or other mitigating
actions that are under its control.
Finally, FHFA proposes that each Enterprise describe in its
strategic analysis the processes the Enterprise employs to determine
the current market values and marketability of its core business lines
and material asset holdings, as well as to assess the feasibility of
the Enterprise's plans (including timeframes) for executing any sales,
divestitures, restructurings, recapitalizations, or other similar
actions contemplated in the Enterprise's resolution plan. The strategic
analysis would include impact of such actions on the value, funding,
and operations of the Enterprise and its core business lines.
Description of corporate governance related to resolution planning.
The proposed rule would require each Enterprise's resolution plan to
include information on its corporate governance structure related to
resolution planning. Each Enterprise would be required to describe how
resolution planning is integrated into its corporate governance
structure and processes; the Enterprise's methodology and process for
identifying core business lines; Enterprise policies, procedures, and
internal controls governing preparation and approval of its resolution
plan; and, the nature, extent, and frequency of reporting to Enterprise
senior executive officers and the board of directors regarding the
development, maintenance, and implementation of the Enterprise's
resolution plan. Each Enterprise resolution plan would include the name
and position of the senior management official primarily responsible
for overseeing those functions and for compliance with a final
resolution planning rule. The Enterprise's strategic analysis should
address the corporate governance framework that supports determination
of the specific actions to be taken to facilitate a rapid and orderly
resolution as the Enterprise is becoming in danger of default and the
senior management officials responsible for making those determinations
and undertaking those actions.
Each resolution plan would be required to describe any contingency
planning or other similar exercise that the Enterprise has conducted
since submitting its prior resolution plan to assess the viability of
or improve its resolution plan. The proposed rule would require each
Enterprise to identify and describe the relevant risk measures it uses
to report credit risk exposures both internally to its senior
management and board of directors as well as any relevant risk measures
reported externally to investors or to FHFA.
Organizational structure, interconnections, and related
information. Under the proposed rule, each Enterprise's resolution plan
would include information regarding the Enterprise's organizational
structure, including a list of all affiliates and trusts, the
percentage of voting and nonvoting equity of each listed legal entity,
and the location, jurisdiction of incorporation, licensing, and key
management associate with each material legal entity identified. Where
information required to be provided about a legal entity is identical
across multiple legal entities, that information may be presented as
applicable to a group of identified legal entities.
In its resolution plan, each Enterprise would be required to
provide information about interconnections, mapping the operations,
services, functions, and supports associated with each of its core
business lines. Mapping should identify the entity, including any
third-party providers, responsible for conducting each associated
operation or service that supports the functioning of each core
business line as well as the Enterprise's material asset holdings.
Mapping should identify liabilities related to such operations,
services, and core business lines. Such mapping should show the
interconnections between core business lines to be transferred to the
LLRE and any operations anticipated to be left in the receivership
estate.
Enterprise resolution plans would be required to include an
unconsolidated balance sheet for the Enterprise and a consolidating
schedule for all material entities that are subject to consolidation by
the Enterprise. Each Enterprise would be required to describe the
material components of its liabilities, mapped to core business lines,
identifying types and amounts of short-term and long-term liabilities,
secured and unsecured liabilities, and subordinated liabilities, as
well as processes used by the Enterprise to determine to whom
collateral has been pledged collateral, the identity of the entity (or
person) that holds such collateral, and the jurisdiction where
collateral is located and the jurisdiction in which the security
interest in collateral is enforceable against the Enterprise, if
different from the location. Information on material off-balance sheet
exposures, practices related to the booking of trading and derivatives
activities, and hedges would be required and a description of the
process undertaken by the Enterprise to establish exposure limits.
Each Enterprise would be required to include information about
third-party providers with which the Enterprise has significant
business connections, including descriptions of the business connection
(such as the operation, service, function, or support associated
[[Page 1336]]
with a core business line that the third-party provider performs or
provides), the criticality of the connection, the resilience of the
connection, and provisions or actions needed to ensure the continued
availability of the operation, service, function, or support through
the receivership process. For example, the securitization platform
provided by CSS is a critical operation for the securitization of
single-family mortgages for which there is no substitute. An
Enterprise's resolution plan should therefore include provisions for
ensuring the continued viability of the common securitization platform,
such as prepositioning of working capital. Alternatively, where
substitution among providers is feasible, provisions and procedures for
affecting such substitutions in the wake of FHFA's appointment as
receiver should be noted or developed.
The Enterprises would be required to report on their credit risk
exposures to counterparties identified in the proposed rule, including
significant sellers of mortgage loans to an Enterprise, significant
servicers, and providers of loan-level mortgage insurance. Enterprise
resolution plans would be required to analyze whether the failure of a
third-party provider would likely have an adverse impact on the
Enterprise or likely result in the Enterprise becoming in danger of
default or in default. Finally, each Enterprise would be required to
identify trading, payment, clearing, and settlement systems of which
the Enterprise, directly or indirectly, is a member and on which the
Enterprise conducts a material number or material value amount of
trades and transactions.
Certain proposed provisions on organizational structure,
interconnections, and related information to be included in an
Enterprise resolution plan use the term ``third-party provider.'' FHFA
has not proposed a definition of that term. When considering the
concept of a ``third-party provider'' in the context of the proposed
rule's provisions that use it, FHFA concluded that third-party
providers would be identified through application of those rule
provisions, such as provisions that would require each Enterprise to
identify the entity performing or providing operations, services,
functions, or supports associated with core business lines. In that
context, where an appropriate rule definition of ``third-party
providers'' would likely refer to aspects of the rule which, when
applied, would result in their identification, FHFA considered that a
rule definition of ``third-party provider'' would not add to the
understanding of the rule. FHFA was concerned that a rule definition of
``third-party provider'' could inadvertently limit application of rule
provisions that are intended to be broadly applied. Finally, FHFA notes
that the DFA section 165 rule uses the term ``major counterparty,''
which that rule does not define, to somewhat similar effect as ``third-
party provider'' in FHFA's proposed rule. FHFA chose the term ``third-
party provider'' in this instance to avoid implying that a contractual
relationship, financial or otherwise, was required. Notwithstanding
these considerations, FHFA requests comment on whether a definition of
``third-party provider'' should be included in any final rule.
Management information systems. FHFA proposes to require each
Enterprise to provide information in its resolution plan about the key
management information systems and applications supporting its core
business lines, including systems and applications for risk management,
automated underwriting, valuation, accounting, and financial and
regulatory reporting, and systems and applications containing records
used to manage all qualified financial contracts. Each resolution plan
would be required to include information on the legal ownership of such
systems and associated software, licenses, or other intellectual
property. Each Enterprise would be required to map key management
information systems and applications to core business lines that use or
rely on them and to include information on the key internal reports
used to monitor the financial health, risks, and operation of the
Enterprise and core business lines.
The proposed rule would require each resolution plan to include a
description of the capabilities of the Enterprise's management
information systems to collect, maintain, and report the information
and other data underlying the resolution plan, in a timely manner to
Enterprise management to FHFA. Each Enterprise would be required to
identity in its resolution plan deficiencies, gaps, or weaknesses in
the capabilities of its management information systems and describe
actions the Enterprise plans to undertake, including the associated
timelines for implementation, to address such deficiencies, gaps, or
weaknesses. The goal of the analysis, and any practical steps
identified by the Enterprise, is to confirm the continued availability
of the key management information systems that support core business
lines through resolution, including their availability to the LLRE.
Finally, each Enterprise resolution plan would be required to describe
the process for FHFA to access the management information systems and
applications required to be identified.
Executive summary. The proposed rule would require each resolution
plan to include an executive summary, addressing the key elements of
the Enterprise's strategic analysis; identifying material changes that
occurred since the Enterprise's prior resolution plan, if any; and,
describing changes to the previously submitted resolution plan because
of any change in law or regulation, guidance or supervisory feedback
from FHFA, or any identified material change. The executive summary
should also describe actions taken by the Enterprise to improve the
feasibility or effectiveness of the resolution plan or remediate, or
otherwise mitigate, any material weaknesses or impediments to a rapid
and orderly resolution.
Enterprise point-of-contact. The proposed rule would require each
Enterprise to identify a senior management official responsible for
serving as a point-of-contact regarding the resolution plan, in the
resolution plan.
Public section of the resolution plan; confidentiality of other
parts. The proposed rule would require each resolution plan to include
an identified public section--in essence, a second executive summary
that describes the business of the Enterprise and its identified core
business lines and associated operations and services. The public
section would address as well financial information regarding assets,
liabilities, capital and major funding sources; derivative activities,
hedging activities, and CRT instruments; listing memberships in
material payment, clearing or settlement systems; identifying the
Enterprise's principal officers; the Enterprise's corporate governance
structure and processes related to resolution planning, including the
identification of core business lines; and, material management
information systems. The public section would include a high-level
description of the Enterprise's strategies to facilitate its resolution
by FHFA as receiver, such as the types of potential purchasers of the
Enterprise's core business lines and other significant assets, and
steps that, if taken by the Enterprise, could minimize the risk that
its resolution would have serious adverse effects on the national
housing finance markets and the amount of potential loss to the
Enterprises' investors and creditors. The proposed rule would require
that the public section clearly reflect the
[[Page 1337]]
required and prohibited assumptions governing development of the
resolution plan.
FHFA notes that the DFA section 165 rule requires bank holding
companies to identify ``material entities'' in the public sections of
their resolution plans.\43\ FHFA has not proposed a similar
requirement, considering the corporate structures of the Enterprises.
Specifically, as defined in the DFA section 165 rule, a ``material
entity'' is a ``subsidiary or foreign office of the [bank holding]
company that is significant to the activities of an identified critical
operation or core business line, or is financially or operationally
significant to the resolution of the [bank holding] company.'' \44\
Were FHFA to adopt a similar requirement and definition, each
Enterprise would identify one ``material entity''--CSS.
---------------------------------------------------------------------------
\43\ 12 CFR 243.11(c)(2)(i). ``Material entity'' is differently
defined but appears to be similarly applied in the FDIC IDI rule,
id., 12 CFR 360.10(b)(8).
\44\ Id., 12 CFR 243.2.
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Based on the DFA section 165 rule definition of ``material
entity,'' FHFA does not view that rule's requirement to identify such
entities in the public section of a bank holding company's resolution
plan as intending to require the company to identify its major
counterparties or third-party providers. Only entities that are
``significant to the activities of an identified critical operation or
core business line'' or ``financially or operationally significant'' to
the bank holding company's resolution and that are within the company's
organizational structure would be required to be identified in the
public section of the bank holding company's resolution plan.
Because FHFA sees little, if any value, in requiring each
Enterprise to identify CSS as its single ``material entity,'' FHFA has
not proposed a similar requirement for the public section of an
Enterprise resolution plan.\45\ FHFA requests comment, however, on
whether an Enterprise should be required to identify significant third-
party providers and major counterparties in the public section of its
resolution plan.
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\45\ FHFA also notes that resolution of CSS is not addressed by
the proposed resolution planning rule, and the proposed rule would
not require CSS to develop a resolution plan. On the other hand, as
an affiliate of an Enterprise, CSS could be within FHFA resolution
authority. FHFA expects to address these aspects of its supervision
of CSS at a different time.
---------------------------------------------------------------------------
FHFA expects to publish the public section of each Enterprise's
resolution plan on its website. If published as proposed, the public
section would make clear the assumptions pursuant to which the
Enterprise drafted its resolution plan, including the assumption that
no government support will be available to prevent the failure of an
Enterprise or to fund its resolution. It would indicate the extent to
which potential claims by creditors and counterparties against the
Enterprise might be satisfied in a resolution, and priority of those
claims. By providing the public with greater transparency about the
satisfaction of potential claims and the manner in which those claims
might be satisfied, FHFA believes publishing the public section of each
Enterprise's resolution plan would foster market discipline by making
clear to investors in Enterprise-guaranteed MBS and Enterprise debt
that they should no longer rely on an implicit government guarantee and
that they should price the risk of these investments accordingly. FHFA
may also publish other information about Enterprise resolution
planning, which may include its high-level assessments of the
Enterprises' resolution plans.
With regard to the first resolution plans the Enterprises submit,
however, it is plausible FHFA would not publish the public section, but
may publish information based on it or drawn from it on FHFA's website
or in its Annual Report to Congress. This approach recognizes that the
Enterprises and FHFA will learn from the process of developing and
reviewing resolution plans, and balances the desire for transparency
and market awareness of Enterprise resolution plans with the desire to
permit improvement in resolution plans before the public sections are
published.
All material that is not in the public section would be presumed to
be confidential, and the proposed rule provides that information
contained in the confidential section of a resolution plan would be
treated as confidential in line with applicable law. The proposed rule
would provide a process for an Enterprise to request confidential
treatment of information in a resolution plan or any related materials
under 5 U.S.C. 552(b)(4), 12 CFR part 1202 (Freedom of Information
Act), and 12 CFR part 1214 (availability of non-public information),
and states that FHFA will determine confidentiality in accordance with
applicable exemptions under the Freedom of Information Act, FHFA's rule
implementing that Act, and FHFA's rule on the availability of non-
public information and its statutory requirements and authorities.
Preparation of the initial resolution plan. FHFA recognizes the
burden associated with developing an initial resolution plan, including
establishing necessary processes, procedures, and systems. Although
FHFA proposes to require an Enterprise's initial resolution plan to
include all informational elements set forth in the proposal, FHFA
expects the process of submission and review of the initial resolution
plan to involve dialogue with each Enterprise. In developing its
initial resolution plan, each Enterprise should focus on the key
elements of the resolution plan, including identifying core business
lines and associated operations, services, functions, and supports,
developing a robust strategic analysis, and identifying and describing
the interconnections and interdependencies among the Enterprise, its
affiliates, and its third-party providers.
Incorporation by reference of material from prior resolution plans.
FHFA proposes to permit an Enterprise to incorporate by reference
information from a prior resolution plan submitted to FHFA, provided
that the information remains accurate in all material respects. The
``incorporating'' resolution plan would be required to clearly identify
the information that is being incorporated as well as the resolution
plan in which it was originally contained and its specific location in
that plan.
D. FHFA Review and Feedback, Plan Deficiencies, and the ``Credible''
Standard
FHFA review and feedback. After a resolution plan is submitted,
FHFA would review it and provide feedback to the Enterprise. Feedback
could range from informal discussion with an Enterprise to an FHFA
determination of, and notice to the Enterprise identifying,
deficiencies in the resolution plan as submitted. FHFA feedback could
address any planned actions or changes set forth by the Enterprise that
FHFA agrees could facilitate a rapid and orderly resolution, or
priority or timing of actions or changes to be undertaken by the
Enterprise. After FHFA and Enterprise experience over the first few
resolution plan submission and review cycles, it may also be
appropriate for FHFA to share more general ``lessons-learned'' feedback
on meeting rule requirements and developing a resolution plan, or for
FHFA to develop and publish responses to frequently-asked-questions.
FHFA expects that it would first assess submitted resolution plans
for substantive completeness. If additional information is necessary in
order for FHFA to review a plan, the Enterprise would receive notice
and be provided
[[Page 1338]]
an opportunity to submit the missing information, generally within 30
days. An Enterprise that does not receive a notice that additional
information is needed may assume that FHFA has accepted the plan as
substantially complete; however this does not prevent FHFA from making
reasonable requests for additional information it believes would be
helpful to understand the Enterprise's resolution plan in the course of
its review.
FHFA believes a completeness review would improve the efficiency
and effectiveness of the review process, in particular because it
establishes a process for obtaining missing information outside of the
deficiency identification process (discussed below). FHFA also
observes, however, that a resolution plan that is missing substantial
information, or as to which an Enterprise does not timely provide
missing information, may warrant a deficiency notice.
FHFA notice following review; determination of deficiencies. The
proposed rule would establish a process for FHFA to identify
deficiencies in an Enterprise's resolution plan and provide notice to
the Enterprise identifying deficiencies or affirming that there were no
deficiencies. For this purpose, the proposed rule would define
``deficiency'' as an aspect of the Enterprise's resolution plan that
FHFA determines presents a weakness that, individually or in
conjunction with other aspects, could undermine the feasibility of the
Enterprise's resolution plan. For example, a deficiency may be that the
nature, extent, or frequency an Enterprise's reporting on resolution
planning to the board of directors is insufficient or that an
Enterprise's contracts with third-party providers do not clearly
address continuity of services or operations after an LLRE is
established as successor to the Enterprise. An Enterprise receiving a
notice of deficiency would be required to submit a revised resolution
plan that corrects the deficiency, which may include planned actions or
next steps.
Because a notice of deficiency would trigger the need for an
Enterprise to submit a revised resolution plan that addresses the
deficiency, the proposed rule would establish the principle that a
deficiency would be something an Enterprise could plausibly address by
taking or adding a planned action, considering of additional factors,
or undertaking additional strategic analysis. Although there could be
an overlap between deficiencies and material weaknesses or impediments
identified by the Enterprise in its resolution plan as conceived and
described in its strategic analysis, FHFA does not anticipate
identifying as deficiencies those material weaknesses or impediments to
a well-conceived plan that an Enterprise is reasonably unable to
address, or which would be impracticable to change.
FHFA notes that the DFA section 165 rule includes reference to
``shortcomings,'' defined as ``a weakness or gap that raises questions
about the feasibility of a [bank holding] company's resolution plan,
but does not rise to the level of a deficiency.'' \46\ Determination of
a shortcoming in a resolution plan would not trigger the requirement to
submit a revised plan, but unaddressed shortcomings could become
deficiencies in subsequent plans. FHFA does not propose a similar
concept because, as the proposed rule indicates, FHFA could inform an
Enterprise through routine communications of any concerns with its
resolution plan that do not yet rise to the level of a ``deficiency,''
but which could rise to such a level if unaddressed in future plans.
FHFA requests comment on whether a final resolution planning rule
should include a process for FHFA identification of a ``shortcoming,''
in addition to a ``deficiency'' and, if so, whether FHFA should adopt a
definition of ``shortcoming'' similar to that contained in the DFA
section 165 rule.
---------------------------------------------------------------------------
\46\ 12 CFR 243.8(e).
---------------------------------------------------------------------------
``Credible'' standard. Concepts of deficiency in a resolution plan,
and a plan's identification of material weaknesses in or impediments to
resolution, must be considered in the context of a ``credible''
resolution plan. While ``credible'' is commonly used as a standard for
resolution plans, it is not always defined when used.\47\ As did the
FDIC, FHFA has determined to propose a rule standard for a resolution
plan to be ``credible.''
---------------------------------------------------------------------------
\47\ Compare FDIC IDI rule, 12 CFR 360.10(c)(4)(i) (used and
defined); DFA section 165 rule, 12 CFR 243.8(b) (used but not
defined) and Treasury Department Housing Reform Plan supra, p. 13
(used but not defined).
---------------------------------------------------------------------------
Specifically, FHFA is proposing to consider a resolution plan to be
``credible'' if, demonstrating consideration of the proposed rule's
required and prohibited assumptions, the plan's strategic analysis and
detailed information required are well-founded and based on information
and data that are observable or otherwise verifiable and employ
reasonable projections from current and historical conditions within
the broader financial markets. A resolution plan that meets this
standard will reflect depth and thoroughness of thought and analysis,
clarity and appropriateness of assumptions and projections, and
accuracy and detail in supporting data and other information. Under
this standard, a resolution plan may be ``credible'' even if it
identifies material weaknesses or impediments to rapid and orderly
resolution or if it sets forth steps that an Enterprise indicates it
will take to improve the likelihood of its rapid and orderly
resolution. FHFA is not proposing to correlate identification of
deficiencies with application of the ``credible'' standard, although it
is inevitable that sufficiently significant deficiencies would result
in a resolution plan that is not credible.
Through its proposed standard for a ``credible'' resolution plan,
FHFA seeks to clarify that such a plan would not require an Enterprise
to produce a roadmap that FHFA would follow to discharge its
responsibilities as receiver. This clarification is important for two
reasons: (1) To reassure the Enterprises, and inform other stakeholders
that Enterprise resolution plans may stop short of an FHFA-executable
``playbook'' and still be credible; and, (2) To emphasize that
resolution of an Enterprise remains FHFA's responsibility, to be
carried out pursuant to its statutorily conferred authorities and
discretion.
On the other hand, the ``credible'' standard would make the
Enterprises accountable to FHFA on critical aspects of resolution
planning as the standard includes concepts of ``well-founded'' and
``verifiable.'' FHFA expects to use its examination authority to assess
such aspects of an Enterprise's resolution plan as the capabilities of
the Enterprise's management information systems to collect and maintain
information and data underlying the resolution plan and report it in a
timely manner to management of the Enterprise and to FHFA. Such
capabilities and the importance of assessing them were both emphasized
in consultations with FDIC and FRB staff on their experience
implementing the FDIC IDI and DFA section 165 rules.\48\
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\48\ See also, 77 FR 3075, 3083 (Jan. 23, 2012) (FDIC IDI final
rule) (``The [IDI's] ability to produce the information and data
underlying its resolution rapidly and on demand is a vital element
in a credible [r]esolution [p]lan.'') and 76 FR 58379, 58380 (Sept.
21, 2011) (FDIC IDI interim final rule) (``The [Financial Stability
Board] Crisis Management Working Group has recommended that
supervisors ensure that firms are capable of supplying in a timely
fashion the information that may be required by the authorities in
managing a financial crisis.'').
Verifying capabilities set forth in an Enterprise's resolution
plan is not the only area of resolution planning that would be
subject to FHFA's examination authority. FHFA may use its
examination authority at any time to review Enterprise compliance
with a resolution planning rule, including the Enterprise's
methodology and process for identification of core business lines,
resolution planning strategic analysis, and corporate governance
related to resolution planning.
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[[Page 1339]]
Timing of feedback. FHFA intends to provide substantive feedback to
an Enterprise on an informationally complete resolution plan within 12
months of receipt. The proposed rule would permit FHFA to extend that
timeframe if extenuating circumstances so require. FHFA wishes to
provide timely feedback but must take the time necessary to review each
plan appropriately. Given that FHFA has proposed to require each
Enterprise to submit resolution plans every two years, receipt of
feedback one year after submission of a plan would provide the
Enterprise another year to incorporate that feedback into its next
resolution plan.
If FHFA provides an Enterprise a notice of deficiency, the
Enterprise must submit appropriate revisions to its prior plan within a
timeframe established by the Agency. Procedures for submitting revised
resolution plans and taking other corrective actions are addressed
below.
E. Corrective Processes; Significance as a Prudential Standard
The proposed rule would require an Enterprise that receives
notification from FHFA of any deficiency in its resolution plan to
submit a revised resolution plan to FHFA that addresses the deficiency.
The proposed rule would also identify the resolution planning rule, in
its entirety, as a prudential standard within the meaning of 12 U.S.C.
4513b (section 4513b) and for purposes of 12 CFR part 1236. The
interplay of these two elements of the proposed rule is described
below.
Section 4513b(b) authorizes FHFA to establish prudential management
and operations standards for its regulated entities and provides that
if a regulated entity fails to meet a standard, FHFA may require
submission of a corrective plan specifying actions that the regulated
entity will take to correct the deficiency.\49\ To implement section
4513b, FHFA has adopted a prudential management and operations
standards (PMOS) regulation, at 12 CFR part 1236. That regulation
addresses FHFA determinations that a regulated entity has failed to
meet a standard and provides that FHFA may base that determination on
an examination, inspection, or any other information.\50\ The PMOS
regulation codifies FHFA's authority to permit a regulated entity to
submit a PMOS corrective plan in conjunction with other required
submissions, such as a capital restoration plan or a response to an
examination report.\51\ If a regulated entity fails to submit a
corrective plan or fails to implement an approved corrective plan, the
PMOS regulation provides for an FHFA order to correct the deficiency or
to undertake additional corrective or remedial measures as FHFA may
require.
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\49\ 12 U.S.C. 4513b(b)(2)(B).
\50\ 12 CFR 1236.4(a).
\51\ Id., 1236.4(c)(2)(ii).
---------------------------------------------------------------------------
FHFA has determined that it is legally appropriate and would be
sound policy to identify its resolution planning rule as a prudential
standard. Identifying the rule as a prudential standard provides FHFA
access to section 4513b corrective measures, if necessary, to address
deficiencies in a resolution plan, an Enterprise's failure to take
actions set forth in its resolution plan that FHFA agrees could
facilitate the Enterprise's rapid and orderly resolution, or concerns
with an Enterprise's resolution planning process.\52\ Section 4513b
corrective measures are in line with FHFA's approach to resolution
planning, which will be iterative and involve dialogue between an
Enterprise and FHFA. A corrective approach to encourage or direct
Enterprise management's attention to concerns of high priority to FHFA
could in some cases be more constructive and more conducive to
improvements in a resolution plan or the Enterprise planning process
than an enforcement approach.
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\52\ This determination reflects, among other things: (1) Safety
and Soundness Act provisions that require FHFA to act as receiver
for an Enterprise, should receivership be necessary; (2)
Requirements for FHFA, as receiver, to establish an LLRE to continue
the business of an Enterprise in resolution; (3) Requirements for
the receiver to pay all valid obligations of the Enterprise,
pursuant to the receiver's determination of claims; and, (4)
clarifies the absence of any U.S. government support for the
Enterprises or FHFA when acting as receiver. Prudential management
and operation of an Enterprise and its successor LLRE during the
resolution process will require advance planning. Also of note, FHFA
is directed by statute to establish prudential management and
operations standards on topics that would have a direct and critical
bearing on an Enterprise's rapid and orderly resolution, such as:
(1) The adequacy of management information systems; (2) Adequacy and
maintenance of liquidity and reserves; (3) Overall risk management
processes, including processes to identify, measure, monitor, and
control material risks and for business resumption (or continuation)
for all major systems to protect against disruptive events; (4)
Management of counterparty risk; and, (5) Maintenance of adequate
records to enable FHFA to determine the financial condition of an
Enterprise. See 12 U.S.C. 4513b(a)(1), (4), (8), (9), and (10). It
would be possible to address resolution planning in the context of
these and other required standards, but it would be more coherent to
address it in a single, more focused, standard.
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Because the resolution planning standard would be established as a
regulation, FHFA could also bring an enforcement action if appropriate
grounds existed and FHFA determined such action to be necessary.\53\
Under its general enforcement authority, FHFA may order an Enterprise
to cease and desist from a violation of law, which would include the
final resolution planning rule, and may require an Enterprise to take
other appropriate corrective action, including by implementing a plan
to correct a violation of the final resolution planning rule. FHFA also
may impose a civil money penalty for a violation of a final resolution
planning rule.
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\53\ See 12 U.S.C. 4513b(a) (authorizing FHFA to establish
standards as regulations) and 12 U.S.C. 4631(a)(1) (authorizing FHFA
to issue a cease-and-desist order for, among other things, violating
a regulation).
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Procedurally, the proposed rule permits FHFA to deem a
determination of a deficiency in a resolution plan or an Enterprise's
failure to undertake actions or changes that FHFA identified in any
notice to an Enterprise following review of a resolution plan to be the
failure of a prudential standard and to deem the Enterprise's
submission of a revised resolution plan in accordance with any final
resolution planning rule to be a corrective plan for purposes of the
PMOS regulation. The proposed rule states that FHFA may find an
Enterprise to have failed the resolution planning standard if the
Enterprise does not undertake any planned action or change set forth by
the Enterprise, and which FHFA identified as necessary in its notice to
the Enterprise following review of the resolution plan.
In such cases, FHFA could provide the Enterprise a notice of
failure in accordance with the PMOS regulation, and would inform the
Enterprise of the need to submit a PMOS corrective plan or, a revised
resolution plan that is deemed to be a PMOS corrective plan. Within 90
days, absent FHFA establishing a longer or shorter period, the
Enterprise would be required to submit a revised resolution plan that
addresses: (1) The deficiencies identified and discusses revisions to
the plan to address the deficiencies; (2) Any changes to the
Enterprise's business operations and corporate structure the Enterprise
proposes to undertake to address the deficiencies, and a timeline for
completing them; and, (3) Why the Enterprise believes the revised
resolution plan is feasible and would facilitate its rapid and orderly
resolution by FHFA, as receiver.
If a regulated entity fails to submit a corrective plan (which may
be a revised
[[Page 1340]]
resolution plan) or fails to implement an approved corrective plan,
then, in accordance with 12 U.S.C. 4513b and the PMOS regulation, FHFA
may order the Enterprise to correct the deficiency or to implement the
corrective plan and take other corrective or remedial measures.
F. Corporate Governance Related to Resolution Planning
The proposed rule would require the Enterprise's board of directors
to approve each preliminary notice of core business lines prior to
submission to FHFA, with approval noted in the minutes. A similar
process would be required for any Enterprise request for FHFA
reconsideration of a business line.
The proposed rule would require the Enterprise's board to approve
each resolution plan prior to its submission to FHFA, with approval
noted in the minutes. A revised resolution plan is considered a
resolution plan, also requiring board approval. In contrast, an
``interim update'' (discussed below) would not be considered a
resolution plan and would not require board approval. The content of an
interim update, however, may warrant board approval, as a matter of
appropriate corporate governance related to the nature of such update.
G. Timing of Plan Submission; Interim Updates
Submission of initial resolution plan; successive plans. FHFA
proposes to require each Enterprise to submit its initial resolution
plan 18 months after the regulatory due date for the initial notice of
core business lines, which FHFA proposes to be three months after the
effective date of a final rule. FHFA anticipates that any final rule
would be effective 30 days after publication in the Federal Register.
As a result, an Enterprise's first resolution plan would be required to
be submitted to FHFA slightly less than two years after the final rule
is published in the Federal Register. The due date for the initial plan
will establish the due dates for successive plans with FHFA proposing
to require each Enterprise to submit a resolution plan every two years
thereafter.
While the effective date for a final rule is uncertain, FHFA is
aware that other end-of-year reporting requirements may make it more
challenging if the recurring due date for resolution plans were to fall
in the fourth quarter of the calendar year. For that reason, among
others, the proposed rule includes a provision permitting FHFA to alter
the submission date of resolution plans. FHFA would provide notice to
an Enterprise of any altered submission due date established by a final
rule with the intention of providing the Enterprises two full years to
develop their initial resolution plans. FHFA could alter a submission
date on any other basis, such as on request by an Enterprise or if
financial or economic conditions merit a delay.
Interim update to a prior plan. The proposed rule would permit FHFA
to request an interim update to the Enterprise's most recently
submitted resolution plan, on written notice to the Enterprise. FHFA
may require an interim update after receiving a notice of an
extraordinary event, for example. FHFA's notice requiring an interim
update would set forth a deadline for submission and identify the
portions or aspects of the resolution plan to be updated. FHFA expects
to provide the Enterprise a reasonable amount of time to complete the
update, and may alter any date set forth in the notice, in its
discretion and as appropriate.
An interim update is not considered a resolution plan.
Consequently, submission of an interim update would not itself affect
the date for submission of the next resolution plan. If FHFA determines
that it is appropriate, the Agency could alter that submission date on
notice to an Enterprise.
H. Effect of a Resolution Plan on Rights of Other Parties
The proposed rule also includes three provisions addressing the
effect of an Enterprise resolution plan on such considerations as
preservation of privileges, execution of a receivership, and rights of
private parties. The proposed rule would clarify and assert that the
submission of any nonpublic data or information under FHFA's resolution
planning rule would not constitute a waiver of or otherwise affect any
privilege arising under Federal or state law, including the rules of
any Federal or state court, to which the data or information is
otherwise subject. The proposed rule also indicates that FHFA may
assert examination privilege for any nonpublic data or information
submitted under the rule.
The proposed rule would also clarify that an Enterprise's
resolution plan would not have any binding effect on FHFA when
appointed as receiver under 12 U.S.C. 4617. The resolution plan would
not be binding on FHFA as conservator, either currently or if FHFA is
appointed conservator in the future. FHFA proposes to clarify that any
final rule would not create any private right of action based on a
resolution plan prepared by an Enterprise or submitted to FHFA or based
on any action taken by FHFA with respect to any such resolution plan.
These provisions support the resolution planning process as a
strategic, informational, and assessment regime which is critical to
facilitate rapid and orderly resolution, but which does not commit FHFA
to any action in exercising its authorities as receiver. FHFA or an
Enterprise may take actions that are different from those considered or
contained in any resolution plan.
III. Section-by-Section Summary
A. Section 1242.1 Purpose; Identification as a Prudential Standard
This section of the proposed rule sets forth its purposes and goals
related to Enterprise resolution, identifies the rule as a prudential
standard for purposes of 12 U.S.C. 4513b and FHFA's implementing
regulation at 12 CFR part 1236, and addresses the effect of such
identification relative to corrective plans required to be submitted
pursuant to section 4513b. FHFA may also enforce this part pursuant to
sections 1371, 1372, and 1376 of the Safety and Soundness Act (12
U.S.C. 4631, 4632, and 4636).
B. Section 1242.2 Definitions
This section of the proposed rule refers users to statutory
definitions and FHFA's regulation setting forth definitions that are
generally applicable (12 CFR part 1201) and sets forth definitions of
other words and terms that are not defined by statute or in the Safety
and Soundness Act. Words or terms used in the proposed rule that are
defined by the Safety and Soundness Act or part 1201 include
``affiliate,'' ``authorizing statutes,'' ``default,'' ``in danger of
default,'' ``enterprise,'' and ``limited-life regulated entity.'' The
proposed rule sets forth definitions of ``credible,'' ``core business
line,'' ``material change,'' and ``rapid and orderly resolution.'' The
proposed meaning of each of those terms is described above, in material
relevant to the use of such term.
C. Section 1242.3 Identification of Core Business Lines
This section of the proposed rule sets forth requirements related
to identification of ``core business lines,'' including associated
operations, services, functions, and supports. The proposed rule would
establish a process for identification, including preliminary
identification by each Enterprise and FHFA review and determination of
core business lines, address the Enterprises' periodic review of
business lines,
[[Page 1341]]
establish a process for changes to identifications, address the timing
of each Enterprise's initial preliminary identification of core
business lines, and address the timing for inclusion of a newly-
identified core business line to be included in the following required
resolution plan.
D. Section 1242.4 Credible Resolution Plan Required; Other Notices to
FHFA
This section of the proposed rule establishes the requirement for
Enterprise resolution plans to facilitate ``rapid and orderly
resolution'' in the event FHFA is appointed receiver, sets forth
requirements related to timing and frequency of submission of
resolution plans to FHFA, and establishes processes for determining the
timing for submission of each Enterprise's initial resolution plan and
subsequent plans. This section also addresses interim updates to a
resolution plan that may be required by FHFA.
This section establishes the requirement that an Enterprise submit
a notice to FHFA on an extraordinary event, which may include a
``material change,'' as well as the timing and content of such a
notice. This section also sets forth other matter related to the
development and submission of a resolution plan, including the
requirement for Enterprise board approval of a resolution plan prior to
submission of the plan for FHFA. Finally, this section addresses the
incorporation of material from a prior resolution plan into a
subsequent plan by reference and addresses identification of an
Enterprise point-of-contact for matters regarding the resolution plan.
E. Section 1242.5 Informational Content of a Resolution Plan; Required
and Prohibited Assumptions
This section of the proposed rule sets forth substantive
requirements for an Enterprise resolution plan, including important
required and prohibited assumptions that must underpin and be reflected
throughout each resolution, including in each plan's public section.
This section describes the informational content of each resolution
plan, including an executive summary, strategic analysis, and
information on corporate governance related to resolution planning,
organizational structures, management information systems, and
interconnections and interdependencies.
F. Section 1242.6 Form of Resolution Plan; Confidentiality
This section of the proposed rule sets forth requirements for the
form of a resolution plan, which must include a public section and a
confidential section. FHFA expects to publish the public section of
each resolution plan on its website. This section establishes both the
presumption that material not included in the public section is
confidential and a process for an Enterprise to request confidential
treatment of information for purposes of the Freedom of Information Act
and FHFA's implementing regulation, and for purposes of FHFA's
regulation on disclosure of nonpublic information. This section of the
proposed rule also asserts the non-waiver of otherwise applicable
Federal and state privileges, as a result of submitting a resolution
plan and asserts the bank examination privilege for any nonpublic
information or data in the resolution plan and related materials
submitted to FHFA.
G. Section 1242.7 Review of Resolution Plans; Resubmission of Deficient
Resolution Plans
This section of the proposed rule addresses FHFA review of a
resolution plan, after submission by an Enterprise, including an
initial review for completeness, any request by FHFA for missing or
additional information, an Enterprise's opportunity to provide such
information, and a timeframe for providing missing or additional
information. In this section, the proposed rule addresses FHFA's
substantive review of a complete resolution plan, which may result in
FHFA's determination of a deficiency in the plan. In this section, and
for this purpose, the proposed rule defines ``deficiency.'' The
proposed rule establishes a process for FHFA to provide an Enterprise
notice of a deficiency (which, in accordance with Sec. 1242.1(b), may
be deemed a determination of failure of a prudential standard) and for
Enterprise submission of a revised resolution plan to address such a
deficiency (which, in accordance with Sec. 1242.1(b) of the proposed
rule, may be deemed a corrective plan for purposes of FHFA's PMOS
regulation).
This section of the proposed rule also sets forth the timeframe for
submission of any revised resolution plan, and includes a provision
permitting FHFA to extend timeframes in any resolution planning rule
adopted as final, on its own initiative or on request by an Enterprise.
H. Section 1242.8 No Limiting Effect or Private Right of Action
This section of the proposed rule establishes that a resolution
plan does not limit or bind FHFA when acting as conservator or
receiver, such that FHFA may, or may not, take any action set forth in
an Enterprise's resolution plan; and, also that neither a resolution
plan nor an FHFA rule requiring such a plan would give rise to any
private right of action. An Enterprise resolution plan is intended,
among other things, to provide strategic analysis and information to
FHFA that it may use for its benefit, including for purposes of any
capabilities or other assessment, in FHFA's sole discretion.
IV. Comments Specifically Requested
As stated above, FHFA invites comments on all aspects of the
proposed rule and will take all comments into consideration before
issuing a final rule. In addition to comments specifically requested
within the description of the proposed rule, above, FHFA also requests
comment on the questions set forth below. The most helpful comments
reference the specific questions listed, explain the reason for any
changes, and include supporting data.
Scope
1. Are the stated goals of Enterprise resolution planning clear?
Are there goals that should be added, removed, or modified?
2. Would Enterprise resolution planning benefit from the
availability of funding mechanisms such as convertible long-term debt
or other similar loss-absorbing instruments (as recommended in the
Treasury Housing Reform Plan)?
3. What advantages or disadvantages does the corporate organization
of the Enterprises as single operating companies present for FHFA
receivership?
Definitions
4. Are the defined terms in the proposed rule clear? Do they
require further clarification and if so, how should they be defined?
5. Are there terms used in the proposed rule that should be defined
in a final rule?
6. Are there terms or operative concepts used in other resolution
planning regimes, such as the DFA section 165 rule or the FDIC IDI
rule, that should be incorporated into an FHFA resolution planning rule
(e.g., ``material entity,'' ``critical operation'')?
Governance and Process
7. Are there resolution planning governance and oversight
requirements in the proposed rule that could be clarified? Are there
additional governance and oversight requirements that should be
included?
[[Page 1342]]
8. Is the required frequency of resolution plan submission in the
proposed rule appropriate? If not, what frequency would be appropriate?
9. Are the proposed timelines for Enterprise resolution planning
(i.e., core business lines identification, resolution plan submissions,
revised plans, and interim updates) adequate for the Enterprises to
develop and submit the information required by the proposed rule? If
not, what timelines would be appropriate?
10. Should the proposed rule provide greater specificity (e.g., in
terms of a dollar amount or percentage of assets acquired or disposed
of in a significant transaction) with regard to the definition of an
Enterprise extraordinary event that would require notice to FHFA?
Core Business Lines
11. Should the proposed rule provide greater specificity on the
required methodology, assessment, and process for Enterprise
identification of core business lines?
12. Is the concept of ``core business lines'' clear, and is ``core
business line'' defined appropriately? If not, how can FHFA provide
additional clarity?
Resolution Plan Informational Content and Assumptions
13. Are the informational content elements described in the
proposed rule appropriate and adequate for resolution planning? Are
there any informational content elements in the proposed rule that
create an unnecessary burden or should not be included in an Enterprise
resolution plan?
14. Are there informational content elements described in the
proposed rule that could be clarified? How can FHFA provide additional
clarity?
15. What additional informational content elements should the final
rule require? Describe any impediments to collection and production of
existing or additional informational elements identified. What changes
could FHFA make to reduce the identified burdens and impediments?
16. Should the final rule require any informational content
elements to be delivered to FHFA on a more frequent basis (e.g.,
quarterly) or available to FHFA on an ``on demand'' basis? What
impediments apply to making such information available more frequently
or on demand?
17. Are the required and prohibited assumptions for Enterprise
resolution planning in the proposed rule appropriate? Are there any
required or prohibited assumptions for Enterprise resolution planning
that require clarification? Are there required or prohibited
assumptions that should be added?
FHFA Review of Plans
18. Are there explicit factors FHFA should consider in determining
whether a resolution plan is deficient?
Confidentiality
19. Are there portions of the Enterprise resolution plans that
should be made available to the public? Are there portions that should
remain confidential and privileged? What should FHFA consider in making
such determinations?
20. Would greater transparency around Enterprise resolution plans
impact market expectations and improve market discipline? If so,
identify specific elements where transparency would have the greatest
effect and describe how transparency into those elements would improve
market discipline. For example, would a public description of
Enterprise sources of funding in receivership or a related discussion
of how losses may be allocated enhance market discipline? Are there
other ways the proposed rule should be modified to improve market
discipline, and if so, how should the proposed rule be modified?
V. Paperwork Reduction Act
The proposed rule would not contain any information collection
requirement that would require the approval of the Office of Management
and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.). Therefore, FHFA has not submitted any information to OMB for
review.
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 this
proposed rule under the Regulatory Flexibility Act. The General Counsel
of FHFA certifies that this proposed rule, if adopted as a final rule,
will not have a significant economic impact on a substantial number of
small entities because the regulation would apply only to the
Enterprises, which are not small entities for purposes of the
Regulatory Flexibility Act.
List of Subjects in 12 CFR Part 1242
Administrative practice and procedure, Government-sponsored
enterprises, Reporting and record keeping requirements,
Securitizations.
Authority and Issuance
0
For the reasons stated in the preamble, and under the authority of 12
U.S.C. 4511, 4513, and 4526, FHFA proposes to amend chapter XII of
title 12 of the Code of Federal Regulations by adding new part 1242 to
subchapter C to read as follows:
CHAPTER XII--Federal Housing Finance Agency
SUBCHAPTER C--Enterprise Regulations
PART 1242--RESOLUTION PLANNING
Sec.
1242.1 Purpose; identification as a prudential standard.
1242.2 Definitions.
1242.3 Identification of core business lines.
1242.4 Credible resolution plan required; other notices to FHFA.
1242.5 Informational content of a resolution plan; required and
prohibited assumptions.
1242.6 Form of resolution plan; confidentiality.
1242.7 Review of resolution plans; resubmission of deficient
resolution plans.
1242.8 No limiting effect or private right of action.
Authority: 12 U.S.C. 4511; 12 U.S.C. 4513; 12 U.S.C. 4513b; 12
U.S.C. 4514; 12 U.S.C. 4517; 12 U.S.C. 4526; and 12 U.S.C. 4617.
Sec. 1242.1 Purpose; identification as a prudential standard.
(a) Purpose. The purpose of this part is to require each Enterprise
to develop a plan for submission to FHFA that would assist FHFA in
planning for the rapid and orderly resolution of an Enterprise using
FHFA's receivership authority at 12 U.S.C. 4617, in a manner that:
(1) Minimizes disruption in the national housing finance markets by
providing for the continued operation of the core business lines of an
Enterprise in receivership by a newly constituted limited-life
regulated entity;
(2) Preserves the value of an Enterprise's franchise and assets;
(3) Facilitates the division of assets and liabilities between the
limited-life regulated entity and the receivership estate;
(4) Ensures that investors in mortgage-backed securities guaranteed
by the Enterprises and in Enterprise unsecured debt bear losses in
accordance with the
[[Page 1343]]
priority of payments established in the Safety and Soundness Act while
minimizing unnecessary losses and costs to these investors; and
(5) Fosters market discipline by making clear that no extraordinary
government support will be available to indemnify investors against
losses or fund the resolution of an Enterprise.
(b) Identification as a prudential standard; effect of
identification. This part is a prudential standard pursuant to section
1313B of the Safety and Soundness Act, 12 U.S.C. 4513b, and is subject
to 12 CFR part 1236. In its discretion, FHFA may deem:
(1) The determination of a deficiency in a resolution plan; or
(2) The failure to undertake actions or changes identified by FHFA
in the notice provided pursuant to Sec. 1242.7(b)(1), to be a failure
to meet a standard for purposes of Sec. 1236.4. In its discretion,
FHFA may also deem a revised, resubmitted resolution plan to be a
corrective plan for purposes of Sec. 1236.4.
Sec. 1242.2 Definitions.
Unless otherwise indicated, terms used in this part have the
meanings that they have in 12 CFR part 1201 and in the Federal Housing
Enterprises Financial Safety and Soundness Act (12 U.S.C. 4501 et
seq.).
Core business line means a business line of the Enterprise that
plausibly would continue to operate in a limited-life regulated entity,
considering the purposes, mission, and authorized activities of the
Enterprise as set forth in its authorizing statute and the Safety and
Soundness Act. Core business line includes associated operations,
services, functions, and supports necessary for any identified core
business line to be continued, such as servicing, credit enhancement,
securitization support, information technology support and operations,
and human resources and personnel.
Credible, with regard to a resolution plan, means a resolution plan
that:
(1) Demonstrates consideration of required and prohibited
assumptions set forth at Sec. 1242.5(b);
(2) Provides strategic analysis and detailed information as
required by Sec. 1242.5(c) through (g) that is well-founded and based
on information and data related to the Enterprise that are observable
or otherwise verifiable and employ reasonable projections from current
and historical conditions within the broader financial markets; and
(3) Plausibly achieves the purposes of Sec. 1242.1(a).
Material change means an event, occurrence, change in conditions or
circumstances, or other change that results in, or could reasonably be
foreseen to have, a material effect on:
(1) The resolvability of the Enterprise;
(2) The Enterprise's resolution strategy; or
(3) How the Enterprise's resolution plan is implemented. Material
changes may include the identification of a new core business line or
significant increases or decreases in business, operations, funding, or
interconnections.
Rapid and orderly resolution means a process for establishing a
limited-life regulated entity as successor to the Enterprise under
section 1367 of the Safety and Soundness Act (12 U.S.C 4617), including
transferring Enterprise assets and liabilities to the limited-life
regulated entity, such that succession by the limited-life regulated
entity can be accomplished promptly and in a manner that substantially
mitigates the risk that the failure of the Enterprise would have
serious adverse effects on national housing finance markets.
Sec. 1242.3 Identification of core business lines.
(a) Enterprise preliminary identification; notice to FHFA; timing.
(1) Each Enterprise shall conduct periodic reviews of its business
lines to identify core business lines, consistent with the requirements
of paragraph (a)(2) of this section.
(2) Each Enterprise shall establish and implement a process to
identify each of its core business lines. The process shall include a
methodology for evaluating the Enterprise's participation in activities
and markets that may be critical to the stability of the national
housing finance markets or carrying out the statutory mission and
purpose of the Enterprise. The methodology shall be designed, taking
into account the nature, size, complexity, and scope of the
Enterprise's operations, to identify and assess:
(i) The markets and activities in which the Enterprise participates
or has operations;
(ii) The significance of those markets and activities with respect
to the national housing finance markets or the Enterprise's obligation
to carry out its statutory mission and purpose; and
(iii) The significance of the Enterprise as a provider or other
participant in those markets and activities.
(3) Enterprise identification of any business line as a core
business line is preliminary and is subject to review by FHFA. Each
Enterprise must provide a notice of its preliminary identification of
core business lines to FHFA, including a description of its methodology
and the basis for identification of each core business line.
(4) The board of directors of the Enterprise shall approve each
notice of preliminary identification of core business lines before
submission to FHFA, with such approval noted in board minutes.
(5) Each Enterprise must conduct its initial identification process
and submit its initial identification of core business lines to FHFA by
the date that is three months after the effective date of the final
rule. Thereafter, each Enterprise shall conduct periodic identification
processes, determining the timing of each periodic process to ensure
that the process for identification, including FHFA review and
determination required by paragraph (b) of this section, can be
complete in sufficient time for each succeeding required resolution
plan to include the information required under Sec. 1242.5 for each
core business line. FHFA may also direct an Enterprise as to the
timeframe for conducting any subsequent identification process.
(6) Each Enterprise must periodically review its identification
process and update it as necessary to ensure its continued
effectiveness.
(b) FHFA identification of core business lines; notice to an
Enterprise; timing of inclusion in resolution plan. (1) Within three
months of receiving an Enterprise notice of the preliminary
identification of a business line as a core business line, FHFA will
provide notice to the Enterprise of its determination of each core
business line. FHFA may also identify operations, services, functions,
or supports associated with any core business line.
(2) FHFA may identify any business line of the Enterprise as a core
business line, considering factors set forth in paragraph (a)(2) of
this section or any other factor FHFA deems appropriate, following
review of an Enterprise notice of preliminary identification or at any
other time, on written notice to an Enterprise.
(3) If FHFA identifies a core business line under paragraph (b)(2)
of this section, an Enterprise is not required to include that core
business line in a resolution plan if that plan is due within six
months after the Enterprise receives notice of identification from
FHFA.
(c) Reconsideration of business line identification--(1)
Reconsideration initiated by an Enterprise. (i) An Enterprise may
request that FHFA reconsider the identification under paragraph (a) or
(b) of this section, by submitting a written request to FHFA that
includes a clear and complete
[[Page 1344]]
statement of all arguments and all material information that the
Enterprise believes is relevant to reconsideration as a core business
line.
(ii) The board of directors of the Enterprise shall approve each
request for reconsideration of identification before submission to
FHFA, with such approval noted in board minutes.
(iii) FHFA will respond to an Enterprise request for
reconsideration within three months after the date on which a complete
request is received.
(2) Reconsideration initiated by FHFA. FHFA may reconsider the
identification of any business line, including reconsideration of any
operation, service, function, or support, at any time and in its
discretion, on written notice to an Enterprise.
(3) FHFA notice of reconsideration. FHFA will provide a notice of
reconsideration to the affected Enterprise, stating the results of the
reconsideration. If FHFA determines to change an identification, such
notice may also provide an effective date or other delaying or
triggering condition for the change to become effective.
(4) Effect of reconsideration. For purposes of Enterprise
resolution plans, identification as a core business line continues in
effect until any notice of reconsideration removing such identification
becomes effective.
Sec. 1242.4 Credible resolution plan required; other notices to
FHFA.
(a) Credible resolution plan required; frequency and timing of plan
submission--(1) Credible resolution plan required; resolution plan
submission dates. Each Enterprise is required to submit a credible
resolution plan to FHFA in accordance with frequency and timing
requirements established by FHFA. Each Enterprise is required to submit
its initial resolution plan 18 months after the date on which it is
required to submit its initial notice preliminarily identifying core
business lines to FHFA in accordance with Sec. 1242.3(a)(2).
Thereafter, each Enterprise shall submit a resolution plan to FHFA not
later than two years following the submission date for the prior
resolution plan, unless otherwise notified by FHFA in accordance with
paragraph (a)(2) of this section.
(2) Altering submission dates. Notwithstanding anything to the
contrary in this part, FHFA may determine that an Enterprise shall
submit its resolution plan on a date different from any date provided
in paragraph (a)(1) of this section, which may be before or after any
date so established.
(3) Interim updates. FHFA may require that an Enterprise submit an
update to a resolution plan submitted under this part, within a
reasonable time, as determined by FHFA. FHFA shall notify the
Enterprise of its requirement to submit an update under this paragraph
(a)(3) in writing and shall specify the portions or aspects of the
resolution plan the Enterprise shall update. Submission of an interim
update does not affect the date for submission of a resolution plan,
unless otherwise notified by FHFA in accordance with paragraph (a)(2)
of this section.
(b) Notice of extraordinary events; inclusion in next resolution
plan. Each Enterprise shall provide FHFA with a notice no later than 45
days after any material change, merger, reorganization, sale or
divestiture of a business unit or material assets, or similar
transaction, or any fundamental change to the Enterprise's resolution
strategy. Such notice must describe such extraordinary event and
explain how it may plausibly affect the resolution of the Enterprise.
The Enterprise shall address any such extraordinary event with respect
to which it has provided notice pursuant to this paragraph (b) in the
next resolution plan submitted by the Enterprise, provided that plan is
required to be submitted more than 90 days after submission of the
notice of an extraordinary event to FHFA.
(c) Board of directors' approval of resolution plan. The board of
directors of the Enterprise shall approve each resolution plan
(including any revised resolution plan) before submission to FHFA, with
such approval noted in board minutes.
(d) Point of contact. Each Enterprise shall identify an Enterprise
senior management official and position responsible for serving as a
point of contact regarding the resolution plan.
(e) Incorporation of previously submitted resolution plan
information by reference. Any resolution plan submitted by an
Enterprise may incorporate by reference information from a prior
resolution plan submitted to FHFA, provided that:
(1) The resolution plan seeking to incorporate information by
reference clearly indicates:
(i) The information the Enterprise is incorporating by reference;
and
(ii) Which of the Enterprise's previously submitted resolution
plan(s) originally contained the information the Enterprise is
incorporating by reference, including the specific location of that
information in the previously submitted resolution plan; and
(2) The information the Enterprise is incorporating by reference
remains accurate in all respects that are material to the Enterprise's
resolution plan.
(f) Extensions of time. Upon its own initiative or a written
request by an Enterprise, FHFA may extend any time period under this
part. Each extension request by an Enterprise shall be supported by a
written statement describing the basis and justification for the
request.
Sec. 1242.5 Informational content of a resolution plan; required and
prohibited assumptions.
(a) In general. An Enterprise resolution plan shall reflect
required and prohibited assumptions specified in paragraph (b) of this
section and include information specified in paragraphs (c) through (h)
of this section, as well as analysis, in detail, to facilitate a rapid
and orderly resolution of the Enterprise by FHFA as receiver in a
manner that minimizes the risk that resolution of an Enterprise would
have serious adverse effects on the national housing finance markets,
and to the extent possible, the amount of any losses to be realized by
the Enterprise's creditors.
(b) Required and prohibited assumptions when developing a
resolution plan. In developing a resolution plan, each Enterprise
shall:
(1) Take into account that receivership of the Enterprise may occur
under the severely adverse economic conditions provided to the
Enterprise by FHFA in conjunction with any stress testing required or
in another scenario provided by FHFA;
(2) Not assume the provision or continuation of extraordinary
support by the United States to the Enterprise to prevent either its
becoming in danger of default or in default (including, in particular,
support obtained or negotiated on behalf of the Enterprise by FHFA in
its capacity as supervisor, conservator, or receiver of the Enterprise,
including the Senior Preferred Stock Purchase Agreements entered into
by FHFA and the U.S. Department of the Treasury on September 7, 2008
and any amendments thereto); and
(3) Reflect statutory provisions that obligations and securities of
the Enterprise issued pursuant to its authorizing statute, together
with interest thereon, are not guaranteed by the United States and do
not constitute a debt or obligation of the United States or any agency
or instrumentality thereof other than the Enterprise.
(c) Executive summary. Each resolution plan of an Enterprise shall
[[Page 1345]]
include an executive summary describing:
(1) Summary of the key elements of the Enterprise's strategic
analysis;
(2) A description of each material change experienced by the
Enterprise since submission of the Enterprise's prior resolution plan
(or affirmation that no such change has occurred);
(3) Changes to the Enterprise's previously submitted resolution
plan resulting from any:
(i) Change in law or regulation;
(ii) Guidance or feedback from FHFA; or
(iii) Material change described pursuant to paragraph (c)(2) of
this section; and
(4) Any actions taken by the Enterprise since submitting its prior
resolution plan to improve the effectiveness of the resolution plan or
remediate or otherwise mitigate any material weaknesses or impediments
to a rapid and orderly resolution.
(d) Strategic analysis. Each resolution plan shall include a
strategic analysis describing the Enterprise's plan for facilitating
its rapid and orderly resolution by FHFA. Such analysis shall:
(1) Include detailed descriptions of--
(i) Key assumptions and supporting analysis underlying the
resolution plan, including any assumptions made concerning the economic
or financial conditions that would be present at the time resolution
would occur;
(ii) Actions, or ranges of actions, which if taken by the
Enterprise could facilitate a rapid and orderly resolution and those
actions that the Enterprise intends to take;
(iii) The corporate governance framework that supports
determination of the specific actions to be taken to facilitate a rapid
and orderly resolution as the Enterprise is becoming in danger of
default (including identifying the senior management officials
responsible for making those determinations and taking those actions);
(iv) Funding, liquidity, and capital needs of, and resources and
loss absorbing capacity available to, the Enterprise, which shall be
mapped to its core business lines, in the ordinary course of business
and in the event the Enterprise becomes in danger of default or in
default;
(v) Considering the Enterprise's core business lines, a strategy
for identifying assets and liabilities of the Enterprise to be
transferred to a limited-life regulated entity; and for transferring
operations of, and funding for, the Enterprise to a limited-life
regulated entity, which shall be mapped to core business lines;
(vi) A strategy for preventing the failure or discontinuation of
each core business line and its associated operations, services,
functions, or supports as the core business line is transferred to a
limited-life regulated entity, and actions that, in the Enterprise's
view, FHFA could take to prevent or mitigate any adverse effects of
such failure or discontinuation on the national housing finance
markets;
(vii) A strategy for mitigating the effect on the Enterprise of
another Enterprise becoming in danger of default or in default, on the
continuation of each of the Enterprise's core business lines and its
associated operations, services, functions, or supports as any assets
or operations of the other Enterprise are transferred to the
Enterprise;
(viii) The extent to which claims against the Enterprise by
creditors and counterparties would be satisfied in accordance with
Sec. 1237.9 and the manner and source of satisfaction of those claims
consistent with the continuation of the Enterprise's core business
lines by the limited-life regulated entity; and
(ix) A strategy for transferring or unwinding qualified financial
contracts, as defined at 12 U.S.C. 4617(d)(8)(D)(i), in a manner
consistent with 12 U.S.C. 4617(d)(8) through (11);
(2) Identify the time period(s) the Enterprise expects would be
needed to successfully execute each action identified in paragraph
(d)(1)(ii) of this section to facilitate rapid and orderly resolution,
and any impediments to such actions;
(3) Identify and describe--
(i) Any potential material weaknesses or impediments to rapid and
orderly resolution as conceived in the Enterprise's plan;
(ii) Any actions or steps the Enterprise has taken or proposes to
take, or which other market participants could take, to remediate or
otherwise mitigate the weaknesses or impediments identified by the
Enterprise; and
(iii) A timeline for the remedial or other mitigating action that
the Enterprise proposes to take; and
(4) Provide a detailed description of the processes the Enterprise
employs for--
(i) Determining the current market values and marketability of the
core business lines and material asset holdings of the Enterprise;
(ii) Assessing the feasibility of the Enterprise's plans (including
timeframes) for executing any sales, divestitures, restructurings,
recapitalizations, or other similar actions contemplated in the
Enterprise's resolution plan; and
(iii) Assessing the impact of any sales, divestitures,
restructurings, recapitalizations, or other similar actions on the
value, funding, and operations of the Enterprise and its core business
lines.
(e) Corporate governance relating to resolution planning. Each
resolution plan shall:
(1) Include a detailed description of--
(i) How resolution planning is integrated into the corporate
governance structure and processes of the Enterprise;
(ii) The process for identifying core business lines, including a
description of the Enterprise's methodology considering the
requirements of Sec. 1242.3(a);
(iii) Enterprise policies, procedures, and internal controls
governing preparation and approval of the resolution plan; and
(iv) The nature, extent, and frequency of reporting to Enterprise
senior executive officers and the board of directors regarding the
development, maintenance, and implementation of the Enterprise's
resolution plan;
(2) Provide the identity and position of the Enterprise senior
management official primarily responsible for overseeing the
development, maintenance, implementation, and submission of the
Enterprise's resolution plan and for the Enterprise's compliance with
this part;
(3) Describe the nature, extent, and results of any contingency
planning or similar exercise conducted by the Enterprise since the date
of the Enterprise's most recently submitted resolution plan to assess
the viability of or improve the resolution plan of the Enterprise; and
(4) Identify and describe the relevant risk measures used by the
Enterprise to report credit risk exposures both internally to its
senior management and board of directors, as well as any relevant risk
measures reported externally to investors or to FHFA.
(f) Organizational structure, interconnections, and related
information. Each resolution plan shall:
(1) Provide a detailed description of the Enterprise's
organizational structure, including--
(i) A list of all affiliates and trusts within the Enterprise's
organization that identifies for each affiliate and trust (legal
entity), the following information (provided that, where such
information would be identical across multiple legal entities, it may
be presented in relation to a group of identified legal entities):
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(A) The percentage of voting and nonvoting equity of each legal
entity listed; and
(B) The location, jurisdiction of incorporation, licensing, and key
management associated with each material legal entity identified;
(ii) A mapping of the Enterprise's operations, services, functions,
and supports associated with each of its core business lines,
identifying--
(A) The entity, including any third-party providers, responsible
for conducting each associated operation or service that supports the
functioning of each core business line as well as the Enterprise's
material asset holdings; and
(B) Liabilities related to such operations, services, and core
business lines;
(2) Provide an unconsolidated balance sheet for the Enterprise and
a consolidating schedule for all securitization trusts consolidated by
the Enterprise;
(3) Provide a schedule showing all assets and liabilities of
unconsolidated Enterprise securitization trusts;
(4) Include a description of the material components of the
liabilities of the Enterprise and each identified core business line
that, at a minimum, separately identifies types and amounts of the
short-term and long-term liabilities, secured and unsecured
liabilities, and subordinated liabilities;
(5) Identify and describe the processes used by the Enterprise to--
(i) Determine to whom the Enterprise has pledged collateral;
(ii) Identify the person or entity that holds such collateral; and
(iii) Identify the jurisdiction in which the collateral is located,
and, if different, the jurisdiction in which the security interest in
the collateral is enforceable against the Enterprise;
(6) Describe any material off-balance sheet exposures (including
guarantees and contractual obligations) of the Enterprise, including a
mapping to each of its core business lines;
(7) Describe the practices of the Enterprise and its core business
lines related to the booking of trading and derivatives activities;
(8) Identify material hedges of the Enterprise and its core
business lines related to trading and derivative activities, including
a mapping to legal entity;
(9) Describe the hedging strategies of the Enterprise;
(10) Describe the process undertaken by the Enterprise to establish
exposure limits;
(11) Identify the third-party providers with which the Enterprise
has significant business connections (including third parties
performing or providing operations, services, functions, or supports
associated with each core business line) and describe the business
connections, dependencies and relationships with such third party;
(12) Report on the counterparty credit risk exposure to--
(i) The 20 largest single-family mortgage sellers and the 20
largest single-family mortgage servicers to the Enterprise (where
``largest'' is determined as of the end of the quarter preceding
submission of a resolution plan, and the Enterprise includes an entity
that is among the largest in both categories in each separate report
category); and
(ii) All multifamily sellers and servicers to the Enterprise, based
on purchasing volume during the preceding year.
(13) Report on insurance in force, risk in force, and exposure and
potential future exposure related to all providers of loan-level
mortgage insurance;
(14) Analyze whether the failure of a third-party provider to an
Enterprise would likely have an adverse impact on an Enterprise or
result in the Enterprise becoming in danger of default or in default,
the availability of alternative providers, and the ability of the
Enterprise to change providers when necessary; and
(15) Identify each trading, payment, clearing, or settlement system
of which the Enterprise, directly or indirectly, is a member and on
which the Enterprise conducts a material number or value amount of
trades or transactions, and map membership in each such system to the
Enterprise and its core business lines.
(g) Management information systems. (1) Each resolution plan shall
include:
(i) A detailed inventory and description of the key management
information systems and applications, including systems and
applications for risk management, automated underwriting, valuation,
accounting, and financial and regulatory reporting, used by the
Enterprise, and systems and applications containing records used to
manage all qualified financial contracts. The description of each
system or application provided shall identify the legal owner or
licensor, the use or function of the system or application, service
level agreements related thereto, any software and system licenses, and
any intellectual property associated therewith;
(ii) A mapping of the key management information systems and
applications to core business lines of the Enterprise that use or rely
on such systems and applications;
(iii) An identification of the scope, content, and frequency of the
key internal reports that senior management of the Enterprise and core
business lines use to monitor the financial health, risks, and
operation of the Enterprise and core business lines;
(iv) A description of the process for FHFA to access the management
information systems and applications identified in this paragraph (g);
and
(v) A description and analysis of--
(A) The capabilities of the Enterprise's management information
systems to collect, maintain, and report, in a timely manner to
management of the Enterprise and to FHFA, the information and data
underlying the resolution plan; and
(B) Any gaps or weaknesses in such capabilities, and a description
of the actions the Enterprise intends to take to promptly address such
gaps, or weaknesses, and the timeframe for implementing such actions.
(h) Identification of point of contact. The Enterprise senior
management official responsible for serving as a point of contact
regarding the resolution plan shall be identified in the resolution
plan.
Sec. 1242.6 Form of resolution plan; confidentiality.
(a) Form of resolution plan--(1) Generally. Each resolution plan of
an Enterprise shall be divided into a public section and a confidential
section. Each Enterprise shall segregate and separately identify the
public section from the confidential section.
(2) Content of public section. The public section of a resolution
plan shall clearly reflect required and prohibited assumptions set
forth at Sec. 1242.5(b) and consist of an executive summary of the
resolution plan that describes the business of the Enterprise and
includes, to the extent material to an understanding of the Enterprise:
(i) A description of each core business line, including associated
operations and services;
(ii) Consolidated or segment financial information regarding
assets, liabilities, capital and major funding sources;
(iii) A description of derivative activities, hedging activities,
and credit risk transfer instruments;
(iv) A list of memberships in material payment, clearing and
settlement systems;
(v) The identities of the principal officers;
(vi) A description of the corporate governance structure and
processes related to resolution planning;
(vii) A description of material management information systems; and
(viii) A description, at a high level, of strategies to facilitate
resolution,
[[Page 1347]]
covering such items as the range of potential purchasers of the
Enterprise's core business lines and other significant assets, as well
as measures that, if taken by the Enterprise, could minimize the risk
that its resolution would have serious adverse effects on the national
housing finance markets and minimize the amount of potential loss to
the Enterprise's investors and creditors.
(b) Confidential treatment of resolution plan. (1) The
confidentiality of each resolution plan and related materials shall be
determined in accordance with applicable exemptions under the Freedom
of Information Act (5 U.S.C. 552(b)), 12 CFR part 1202 (FHFA's
regulation implementing the Freedom of Information Act), and 12 CFR
part 1214 (FHFA's regulation on the availability of non-public
information).
(2) An Enterprise submitting a resolution plan or related materials
pursuant to this part that desires confidential treatment of the
information under 5 U.S.C. 552(b)(4), 12 CFR part 1202 (Freedom of
Information Act), and 12 CFR part 1214 (availability of non-public
information) may file a request for confidential treatment in
accordance with those rules.
(3) To the extent permitted by law, information comprising the
confidential section of a resolution plan will be treated as
confidential.
(4) To the extent permitted by law, the submission of any nonpublic
data or information under this part shall not constitute a waiver of,
or otherwise affect, any privilege arising under Federal or state law
(including the rules of any Federal or state court) to which the data
or information is otherwise subject. The submission of any nonpublic
data or information under this part shall be subject to the examination
privilege.
Sec. 1242.7 Review of resolution plans; resubmission of deficient
resolution plans.
(a) FHFA acceptance of resolution plan; review for completeness.
(1) After receipt of a resolution plan, FHFA will either acknowledge
acceptance of the plan for review or return the resolution plan if FHFA
determines that it is incomplete or that substantial additional
information is required to facilitate review of the resolution plan.
(2) If FHFA determines that a resolution plan is incomplete or that
substantial additional information is necessary to facilitate review of
the resolution plan:
(i) FHFA shall provide notice to the Enterprise in writing of the
area(s) in which the resolution plan is incomplete or with respect to
which additional information is required; and
(ii) Within 30 days after receiving such notice (or such other time
period as FHFA may establish in the notice), the Enterprise shall
resubmit a complete resolution plan or such additional information as
requested to facilitate review of the resolution plan.
(b) FHFA review of complete plan; determination regarding deficient
resolution plan. (1) Following review of a complete resolution plan,
FHFA will send a notification to each Enterprise that:
(i) Identifies any deficiencies in the Enterprise's resolution plan
(or confirms that no deficiencies were identified);
(ii) Identifies any planned actions or changes set forth by the
Enterprise that FHFA agrees could facilitate a rapid and orderly
resolution of the Enterprise; and
(iii) Provides any other feedback on the resolution plan (including
feedback on timing of actions or changes to be undertaken by the
Enterprise). FHFA will send the notification no later than 12 months
after accepting a complete plan, unless FHFA determines in its
discretion that extenuating circumstances exist that require delay.
(2) A deficiency is an aspect of an Enterprise's resolution plan
that FHFA determines presents a weakness that, individually or in
conjunction with other aspects, could undermine the feasibility of the
Enterprise's resolution plan.
(c) Resubmission of a resolution plan. Within 90 days of receiving
a notice of deficiency, or such shorter or longer period as FHFA may
establish by written notice to the Enterprise, an Enterprise shall
submit a revised resolution plan to FHFA that addresses all
deficiencies identified by FHFA, and that discusses in detail:
(1) Revisions to the plan made by the Enterprise to address the
identified deficiencies;
(2) Any changes to the Enterprise's business operations and
corporate structure that the Enterprise proposes to undertake to
address a deficiency (including a timeline for completing such
changes); and
(3) Why the Enterprise believes that the revised resolution plan is
feasible and would facilitate a rapid and orderly resolution by FHFA as
receiver.
Sec. 1242.8 No limiting effect or private right of action.
(a) No limiting effect on resolution proceedings. A resolution plan
submitted pursuant to this part shall not have any binding effect on
FHFA when appointed as conservator or receiver under 12 U.S.C. 4617.
(b) No private right of action. Nothing in this part creates or is
intended to create a private right of action based on a resolution plan
prepared or submitted under this part or based on any action taken by
FHFA with respect to any resolution plan submitted under this part.
Mark A. Calabria,
Director, Federal Housing Finance Agency.
[FR Doc. 2020-28812 Filed 1-7-21; 8:45 am]
BILLING CODE 8070-01-P