[Federal Register Volume 86, Number 84 (Tuesday, May 4, 2021)]
[Rules and Regulations]
[Pages 23577-23593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09287]



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 Rules and Regulations
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  Federal Register / Vol. 86, No. 84 / Tuesday, May 4, 2021 / Rules and 
Regulations  

[[Page 23577]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1242

RIN 2590-AB13


Resolution Planning

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is publishing a 
final rule that requires 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 ongoing effort to develop a robust prudential 
regulatory framework for the Enterprises, including capital, liquidity, 
and stress testing requirements, as well as enhanced supervision, which 
will be critical to FHFA's supervision of the Enterprises particularly 
in the event of an exit from conservatorship. Requiring the Enterprises 
to develop resolution plans would support FHFA's efforts as receiver 
for the Enterprises 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 (CBLs) by a limited-
life regulated entity (LLRE); ensure that private-sector investors in 
Enterprise securities, including Enterprise debt, stand to bear losses 
in accordance with the statutory priority of payments while minimizing 
unnecessary losses and costs to these investors. In addition, 
resolution planning will help foster market discipline in part through 
FHFA publication of ``public'' sections of Enterprise resolution plans.

DATES: This rule is effective on July 6, 2021.

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: 

Table of Contents

I. Introduction
    A. Background; Purpose of and Need for the Rule
    B. Overview of the Proposed Rule
II. Discussion of Comments and Agency Response
    A. Overview of Comments Received
    B. Purpose of the Rule; ``Rapid and Orderly'' Resolution
    C. Identification of Core Business Lines; Associated Operations 
and Services
    D. Content and Form of an Enterprise Resolution Plan
    E. Timing of Plan Submission; Interim Updates
    F. FHFA Identification of Deficiencies and Shortcomings
    G. Timing of FHFA Feedback; Provision of Formal Guidance
    H. Comments Beyond the Scope of the Rule
III. Summary of Changes to the Final Rule
    A. Section 1242.4(a)(2), Altering Submission Dates
    B. Section 1242.5(a), Reservation of Authority To Tailor 
Submission Requirements
    C. Section 1242.7(b), Addition of a ``Shortcomings'' Category
IV. Regulatory Analyses
    A. Paperwork Reduction Act
    B. Regulatory Flexibility Act
    C. Congressional Review Act

I. Introduction

A. Background; Purpose of and Need for the Rule

    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 
certain ways, such as meeting statutorily required goals related to 
housing loans for low- and very low-income families and serving 
underserved housing markets.\2\
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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 Enterprises' 
combined single-family book of business is in excess of $5 trillion and 
the combined multifamily book is approximately $650 billion.
    The Enterprise business models for supporting single-family and 
multifamily housing consist primarily of a guarantee business in which 
the Enterprises guarantee the timely payment of principal and interest 
to investors in mortgage-backed securities (MBS) issued by the 
Enterprises.\3\ Mortgage lenders participate in the 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. In the portfolio business, the Enterprises 
issue debt and invest the proceeds in whole loans or in MBS that they 
hold on their

[[Page 23578]]

balance sheets. In both their portfolio and guarantee businesses, the 
Enterprises assume credit risk on purchased or securitized loans (in 
MBS swap and cash programs, the Enterprise assumes the credit risk in 
exchange for a guarantee fee).
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    \3\ In general, the Enterprises do not cross-guarantee each 
other's MBS. However, Supers, which are resecuritizations of 
Enterprise uniform mortgage-backed securities (UMBS), may be 
supported by UMBS issued by both Enterprises. In the case of such 
``commingled'' Supers, the guarantor is the issuing Enterprise, but 
the issuing Enterprise may look to the non-issuing Enterprise to 
cover timely payments of principal and interest through the issuing 
Enterprise's guarantee on its underlying UMBS. The Enterprise that 
issues and guarantees the Supers is ultimately responsible to the 
investor for making those payments.
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    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.\4\ 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.\5\ 
Nonetheless, because of the Enterprises' federal statutory charters and 
some federally conferred business privileges,\6\ pricing of Enterprise 
obligations suggested, even before the provision of explicit Treasury 
support at the time of the financial crisis, that investors perceive a 
full faith and credit guarantee.\7\ 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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    \4\ Compare 12 U.S.C. 1717(a)(2)(A), 1455(h)(2), and 1719(d); 
see also id. 4501(4) and 4503.
    \5\ 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, and each PSPA 
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.
    \6\ 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 
U.S. 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.
    \7\ 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.\8\ 
FHFA is also authorized to appoint itself as conservator or receiver of 
an Enterprise if statutory grounds are met.\9\ When appointed receiver 
of an Enterprise, FHFA must establish a limited-life regulated entity 
(LLRE), which immediately succeeds to the Enterprise's federal charter 
and thereafter operates subject to the Enterprise's authorities and 
duties.\10\ Because Enterprise obligations and securities are not 
backed by the full faith and credit of the United States, 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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    \8\ 12 U.S.C. 4513(a)(1)(B).
    \9\ Id. 4617(a).
    \10\ Id. 4617(i)(1)(A)(ii) and (2)(A).
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    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.\11\ 
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 or Treasury Department) to provide 
each Enterprise financial support up to a specified amount.\12\ 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.
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    \11\ 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.
    \12\ See supra, fn. 4.
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    The Enterprise conservatorships have lasted for over twelve years, 
considerably longer than any conservatorship under the auspices of the 
Federal Deposit Insurance Corporation (FDIC) or the Resolution Trust 
Corporation (established to resolve failed thrifts following the 1989 
thrift crisis and since abolished).\13\ FHFA's current Strategic Plan 
includes the objective of responsibly ending the conservatorships.\14\ 
In preparation, FHFA is developing a more robust prudential regulatory 
framework for the Enterprises, including capital, liquidity, and stress 
testing requirements, and enhanced supervision.
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    \13\ 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.
    \14\ See https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA_StrategicPlan_2021-2024_Final.pdf.
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    FHFA believes a resolution planning rule is also an important part 
of developing such a framework and is a key step toward the robust 
regulatory post-conservatorship framework FHFA is developing. The 
Treasury Department's 2019 Housing Reform Plan also 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.\15\ FHFA shares that Plan's 
view of the benefits of a credible Enterprise resolution framework. 
Finally, by providing that the charter of an Enterprise that has been 
placed into receivership be transferred immediately to the LLRE upon 
its organization \16\ and prohibiting FHFA from terminating the 
charter,\17\ the Safety and Soundness Act effectively requires that an 
Enterprise resolution through receivership be viable. Resolution 
planning would be a key element of implementing that statutory mandate, 
and thus of meeting congressional intent.
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    \15\ 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.
    \16\ See 12 U.S.C. 4617(i)(2).
    \17\ See 12 U.S.C. 4617(k).
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    For the foregoing reasons, FHFA proposed a rule that would require 
the Enterprises to develop credible resolution plans and submit them to 
FHFA for review, set forth information and other content requirements 
for such plans, and establish procedures for submission and review.\18\ 
The proposed rule is summarized for convenience below.
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    \18\ See 86 FR 1326 (Jan. 8, 2021).
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    In developing an Enterprise resolution planning framework, FHFA has 
considered the resolution planning framework of the FDIC for large 
insured depository institutions (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

[[Page 23579]]

Stability Oversight Council 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 valuable 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.

B. Overview of the Proposed Rule

    In the proposed rule, FHFA addressed the substantive and procedural 
requirements for ``credible'' Enterprise resolution plans that would be 
developed to facilitate their ``rapid and orderly resolution'' by FHFA 
as receiver. Because FHFA is statutorily required to create an LLRE for 
an Enterprise in receivership, and because the LLRE immediately 
succeeds to the Enterprise's federal charter and thereafter operates 
subject to the Enterprise's authorities and duties, FHFA proposed to 
define ``rapid and orderly resolution'' for an Enterprise as the 
process for establishing its successor LLRE, including transferring 
Enterprise assets and liabilities to the LLRE, such that succession 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.
    The Enterprise resolution planning process would begin with 
identification of an Enterprise's ``core business lines'' (CBLs)--those 
business lines of the Enterprise that plausibly would continue to 
operate in the LLRE, considering the Enterprise's statutory purposes, 
mission, and authorized activities. Identification of CBLs would 
include identification of associated operations, services, functions, 
and supports necessary for each CBL to be continued. Understanding CBLs 
will enable FHFA and the Enterprise to determine the operations of the 
LLRE, and what assets and liabilities must be transferred from the 
Enterprise to carry out those operations. FHFA proposed a two-step 
process for identifying CBLs, in which FHFA would determine Enterprise 
CBLs after reviewing the Enterprises' preliminary identification. That 
process is intended to balance FHFA's statutory responsibilities as 
supervisor of the Enterprises with the Enterprises' greater awareness 
of their own business operations.
    Other proposed substantive requirements addressed the content of 
Enterprise resolution plans. FHFA proposed to require each resolution 
plan to contain strategic analysis and information important to 
understanding an Enterprise's CBLs and facilitating their continuation 
in an LLRE established by FHFA as receiver. Each resolution plan would 
also be required to reflect required and prohibited assumptions.
    Specifically, each 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 regulation on stress testing of the 
regulated entities, 12 CFR part 1238, or another scenario provided by 
FHFA, possibly more idiosyncratic to an Enterprise. Similar to the DFA 
section 165 rule, 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.\19\ For the Enterprises, 
this includes support obtained or negotiated on behalf of the 
Enterprises by FHFA in its capacity as conservator of each Enterprise 
through the PSPAs with the Treasury Department. Each Enterprise's 
resolution plan would also 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].'' \20\
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    \19\ Compare, 12 CFR 243.4(h)(2).
    \20\ 12 U.S.C. 1455(h)(2) and 1719(d).
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    Each Enterprise's strategic analysis would 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 CBLs. Among other elements, this 
analysis would address: (1) Actions that the Enterprise could take to 
facilitate its rapid and orderly resolution, including those actions it 
plans to take and the time period for successfully executing them; (2) 
funding, liquidity, support functions, and other resources, mapped to 
the Enterprise's CBLs, including 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, 
mapped to associated assets; (3) the Enterprise's strategy for 
maintaining and funding its CBLs when the Enterprise is becoming in 
danger of default or in default; (4) capital support that will be 
needed by an LLRE, both during its life and when its status as a 
``limited-life'' regulated entity ends, to maintain market confidence; 
(5) the Enterprise's strategy in the event of a failure or 
discontinuation of a CBL (including an associated operation, service, 
function, or support that is critical to a CBL) and actions that could 
be taken to prevent or mitigate any adverse effects of such failure or 
discontinuation on the national housing finance markets; (6) 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 regulation setting forth the priority of expenses and unsecured 
claims set forth at 12 CFR 1237.9, consistent with continuation of the 
Enterprise's CBLs by an LLRE; and (7) the Enterprise's strategy for 
transferring or unwinding qualified financial contracts, consistent 
with applicable statutory requirements.\21\
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    \21\ ``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).
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    Each Enterprise's strategic plan would also be required to identify 
and describe potential material weaknesses or impediments to rapid and 
orderly resolution as conceived in its plan, and any actions or steps 
the Enterprise has taken or proposes to take, or 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.
    In addition to strategic analysis, the proposed rule set forth 
other information requirements for Enterprise resolution plans, 
including key information about the Enterprise's structure, governance, 
operations, business practices, financial responsibilities, and risk 
exposures. The proposed rule also addressed 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

[[Page 23580]]

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.\22\ 
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. 
Likewise, transparency in the Enterprises' resolution planning process, 
including a proposed requirement that each Enterprise resolution plan 
contain a ``public section'' that FHFA would publish, would further 
another important policy goal--fostering market discipline.
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    \22\ 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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    In addition to the substantive requirements of Enterprise 
resolution plans, the proposed rule addressed procedural requirements 
related to resolution planning, including the dates for submission of 
initial and subsequent resolution plans; FHFA review of and feedback on 
Enterprise resolution plans, including identification and notice of any 
deficiencies; requirements related to submission of revised resolution 
plans, to address identified deficiencies; the confidential treatment 
of all information that is not included in the plan's ``public'' 
section; and identification of the resolution planning rule as a 
prudential standard. In addition, FHFA clarified that neither the 
Enterprise resolution planning rule nor any resolution plan would give 
rise to rights of third parties and did not limit actions FHFA may take 
as receiver. FHFA retains all discretion conferred by statute or rule 
on the agency when acting as receiver for an Enterprise.

II. Discussion of Comments and Agency Response

A. Overview of Comments Received

    FHFA received 14 comments on the proposed Enterprise resolution 
planning rule, which included comments from each Enterprise, the 
Mortgage Bankers Association, the American Bankers Association, the 
National Association of Home Builders, the Housing Policy Council, the 
National Association of Realtors, the Center for Responsible Lending, 
and the Heritage Foundation, as well as comments from five individuals 
including a former Chief Executive Officer of Freddie Mac. Most 
comments were supportive of resolution planning generally and many 
suggested areas where the proposed rule could be improved or clarified.
    Many supportive comments expressed the view that efforts by FHFA to 
improve supervision of the Enterprises (as demonstrated through the 
recent Enterprise capital final rule, a recently proposed Enterprise 
liquidity rule, and this resolution planning rulemaking) did not 
obviate the need for housing finance reform legislation. Some comments 
focused considerable attention on elements for legislative reform, 
which are beyond the scope of FHFA rulemaking. Other commenters 
addressed the need for additional FHFA rulemaking in conjunction with 
resolution planning, such as a potential rule on total loss absorbing 
capacity (TLAC), which is also beyond the scope of this rulemaking.\23\
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    \23\ As noted in the preamble to the proposed rule, FHFA is 
considering the utility of a separate rulemaking that would require 
each Enterprise to maintain minimum amounts of loss-absorbing 
capacity such as subordinated or convertible long-term debt. See 86 
FR at 1329, n.26.
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    Comments received and FHFA's responses are summarized by topic 
below. In general, however, many commenters raised questions about 
FHFA's approach to support provided to the Enterprises through the 
PSPAs with Treasury. While most of these commenters generally supported 
FHFA's proposal to prohibit the Enterprises from assuming the provision 
or continuation of extraordinary government support, many requested 
clarification about what that assumption meant, in terms of how the 
Enterprises and the broader market should consider the existing PSPAs 
for purposes of Enterprise resolution planning. Commenters also 
addressed the proposed definition of ``core business line'' and the 
process for identifying CBLs; identification of impediments to rapid 
and orderly resolution; the benefit of a ``shortcomings'' category for 
supervisory concerns about a resolution plan that do not rise to the 
level of a ``deficiency''; reduction of burden; and some rule 
processes.

B. Purpose of the Rule; ``Rapid and Orderly'' Resolution

    Priority of Objectives. FHFA proposed to require the Enterprises to 
develop ``credible'' plans to facilitate their ``rapid and orderly 
resolution'' by FHFA as receiver, and proposed to define a ``credible'' 
plan in part as one that ``plausibly achieves'' the purpose of the 
rule.\24\ The purpose of the rule, also set forth in the proposal, is 
to require each Enterprise to develop a resolution plan to facilitate 
its rapid and orderly resolution using FHFA's receivership authority in 
a manner that: (1) Minimizes disruption in the national housing finance 
markets by providing for the continued operation of the CBLs of the 
Enterprise in receivership by a newly constituted LLRE; (2) preserves 
the value of the Enterprise's franchise and assets; (3) facilitates the 
division of assets and liabilities between the LLRE 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 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.\25\
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    \24\ See 12 CFR 1242.1, 1242.2, and 1242.4(a)(1), 86 FR at 1342-
1344.
    \25\ Id., 1242.1, 86 FR at 1342.
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    One commenter observed that the five objectives of Enterprise 
resolution planning could potentially be competing priorities. To 
assist the Enterprises in the development of ``credible'' plans, that 
commenter suggested FHFA should clarify the priority of the objectives. 
The commenter also advocated for the flexibility to submit a resolution 
plan with optional strategies that reflect relative weighting of the 
rule's objectives, because different, reasonable, strategies could 
provide optionality to FHFA in any receivership scenario. If optional 
strategies were provided in a resolution plan, FHFA could evaluate 
whether the Enterprise demonstrated ``that one strategy achieves such 
purposes better than the other reasonable strategies [it] analyzed.''
    FHFA recognizes that there is some tension among the objectives set 
forth in the proposed rule. After consideration, however, FHFA has 
determined not to prioritize among them in this rulemaking. The 
priority of these objectives may change over time or in a particular 
resolution scenario, which argues against establishing a priority 
structure in a rule. FHFA also believes that, as drafted, the rule 
provides flexibility to an Enterprise to consider, offer, and explain 
prioritization of objectives, tradeoffs among the objectives that the 
Enterprise considered in proposing a resolution strategy or

[[Page 23581]]

other choices reflected in its plan, and even optional strategies that 
reflect relative weighting of the rule's objectives. In such instances, 
the Enterprise's explanation would be helpful to FHFA in its 
understanding and review of submitted plans. More broadly, the rule 
permits optionality in the resolution planning process, which could 
result in plans that are more resilient and actionable under a range of 
possible circumstances.
    ``Rapid and Orderly'' Standard. FHFA proposed to require each 
Enterprise to develop resolution plans to facilitate its ``rapid and 
orderly'' resolution, and proposed to define ``rapid and orderly 
resolution'' as ``a process for establishing a [LLRE] 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 [LLRE], such that succession by the [LLRE] 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.'' \26\ One commenter remarked that, 
as drafted, the definition of ``rapid and orderly resolution'' would 
apply to all aspects of resolution, where ``only certain . . . stages 
need to be conducted rapidly for an orderly resolution to occur, 
namely, the initial recapitalization and stabilization phase[s].'' In 
contrast, ``the claims process through a receivership will necessarily 
take . . . a longer period'' and imposing ``rapidity on these stages of 
the resolution would come at the expense of their orderliness, and 
could undermine the stability of the U.S. financial system.'' Another 
commenter opined that ``a rapid and orderly resolution is . . . 
unrealistic [and] FHFA should . . . work with other stakeholders, 
including Congress, to implement critical reforms to minimize the 
potential for market disruption in the event of an Enterprise's 
insolvency.''
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    \26\ See 12 CFR 1242.5(a), 86 FR at 1344.
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    FHFA agrees that conducting some stages of a resolution rapidly, or 
promptly, will facilitate an orderly resolution, while other stages--
such as the claims process--could take longer to carry out. However, 
FHFA disagrees that the rule text as proposed must be changed to 
accommodate this distinction. As drafted, the rule definition of 
``rapid and orderly resolution'' focuses on accomplishing succession by 
the LLRE promptly. More generally, FHFA intends the ``rapid and 
orderly'' standard to work in concert with the rule's purpose and 
objectives. In that light, while FHFA recognizes that not all steps in 
a resolution process may, or should, be taken with similar speed, FHFA 
also believes that no step in a ``rapid and orderly'' resolution would 
involve undue delay.

C. Identification of Core Business Lines; Associated Operations and 
Services

    Definition of ``Core Business Line.'' FHFA proposed to require each 
Enterprise to make a preliminary identification of each ``core business 
line'' and provide notice of such identification to FHFA.\27\ For this 
purpose, FHFA proposed to define ``core business line'' as ``a business 
line of the Enterprise that plausibly would continue to operate in a 
[LLRE], considering the purposes, mission, and authorized activities of 
the Enterprise as set forth in its authorizing statute and the Safety 
and Soundness Act [including] associated operations, services, 
functions, and supports necessary for any identified core business line 
to be continued.'' As examples of ``associated operations, services, 
functions, and supports,'' the proposed CBL definition listed 
``servicing, credit enhancement, securitization support, information 
technology support and operations, and human resources and personnel.'' 
\28\
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    \27\ See 12 CFR 1242.3(a), 86 FR at 1343.
    \28\ See 12 CFR 1242.2, 86 FR at 1343.
---------------------------------------------------------------------------

    FHFA noted in the preamble to the proposed rule that the DFA 
section 165 and FDIC IDI resolution planning rules included the terms 
``critical operations'' and ``critical services,'' respectively, which 
bank holding companies or insured depository institutions were required 
to identify in addition to their ``core business lines.'' \29\ 
Considering the DFA section 165 rule definition of ``critical 
operations'' and the Enterprises' statutory purposes and mission, FHFA 
expressed the view that there would be alignment between the 
Enterprises' core business lines and their critical operations, such 
that there was no need to separately identify ``critical operations.'' 
Likewise, considering the FDIC IDI rule definition of ``critical 
services,'' FHFA reasoned that there would be alignment between such 
services and the ``associated operations, services, functions, and 
supports necessary for any identified core business line to be 
continued,'' which each Enterprise is required to identify for each of 
its CBLs. On that basis, FHFA determined that it was not necessary to 
require the Enterprises to separately identify their ``critical 
services.'' FHFA requested comment on its determination not to require 
identification of, or define, ``critical operations'' and ``critical 
services.'' \30\
---------------------------------------------------------------------------

    \29\ 86 FR at 1331.
    \30\ Id. at 1331-1332.
---------------------------------------------------------------------------

    Commenters generally agreed with FHFA's proposed approach to 
identification of Enterprise CBLs, noting that it is important to 
understand what business lines would be continued in the LLRE. One 
commenter called identification of CBLs ``the primary benefit . . . [of 
Enterprise resolution planning,]'' because it would provide notice of 
business lines that should be assumed by the LLRE to preserve a well-
functioning market; and another commenter remarked that identification 
of CBLs would ``[m]ake clear to market participants and the public what 
the operational capabilities of the LLRE will be and what any changes 
or limitations will be, compared to pre-resolution operations.''
    Some commenters agreed that separate identification of ``critical 
operations'' and ``critical services'' was not necessary and would not 
improve the rule. One commenter offered the opposite view that 
bifurcating the CBL definition ``between core business lines and 
critical services . . . [would] allow the Enterprises to more clearly 
map core business lines and critical services . . . [and] show what 
core business lines rely on each of the critical services.''
    Another commenter addressed the scope of the CBL definition, to the 
effect that associated ``supports'' could cover third parties and, if 
CBLs were intended to be continued by the LLRE, then the proposed rule 
could imply that the Enterprise was responsible for the continuation of 
the third party itself. That commenter suggested FHFA clarify that 
``resolution planning with respect to Third Parties would not impose 
obligations beyond a need to maintain resolution-friendly contracts and 
an ability to pay Third Parties to maintain access to critical 
outsourced services during resolution.'' To that end, the commenter 
also suggested clarifying that ``supports'' in the CBL definition did 
not include ``third parties'' and that FHFA ``include a definition of 
Third Parties to capture those external service providers necessary to 
support'' CBLs.
    After considering these comments, FHFA does not believe that the 
rule should create separate categories for ``critical operations'' or 
``critical services,'' because these concepts are already covered 
within the CBL definition. Likewise, FHFA does not believe that 
``support'' should be removed from the CBL definition. The description 
of business activities associated with execution of a CBL, in

[[Page 23582]]

whatever manner those activities are carried out, was meant to be 
comprehensive, and creating segmentation in the rule--e.g., removing 
supports provided by third parties from the CBL definition and creating 
a separate definition and process for ``third party'' identification--
could undercut that comprehensive understanding.
    Although FHFA is not changing the CBL definition, it should also be 
noted that the rule would not prevent an Enterprise, in developing its 
resolution plan, from characterizing some operations or services as 
``critical,'' or from distinguishing services necessary for the 
continuation of a CBL in an LLRE provided by a third party from those 
provided by a business unit or affiliate. FHFA believes this approach--
permitting the use of such categories without requiring it--creates 
flexibility for the Enterprises and reduces burden on the Enterprises 
and FHFA.
    Finally, FHFA agrees that an Enterprise is not responsible for 
continuation in business of third parties that provide associated 
supports. Rather, an Enterprise resolution plan should address its 
strategy for ensuring the continuation of the business support that the 
third party provides, which is necessary to the continuation of the 
CBL. This may include renegotiating contracts with third-party 
providers to be more resolution-friendly, considering strategies for 
maintaining the ability to pay third parties during Enterprise 
resolution, and considering the ability of other parties to provide the 
same type of support and the feasibility of substitution.
    Process for Identifying ``Core Business Lines.'' The proposed rule 
set forth a process by which the Enterprises would make a preliminary 
identification of their CBLs, subject to FHFA review. Thereafter, FHFA 
would provide notice to each Enterprise of its CBLs.\31\ The entire 
identification process would be completed within six months, with three 
months for Enterprise preliminary identification.\32\
---------------------------------------------------------------------------

    \31\ See 12 CFR 1242.3(a)(1) and (3) and 1242.3(b), 86 FR at 
1343.
    \32\ Id. 1242.3(a)(5) and (b)(1), 86 FR at 1343.
---------------------------------------------------------------------------

    Some commenters objected to FHFA's discretion to determine 
Enterprise CBLs, with one commenter remarking that it was unnecessary 
to have an Enterprise process for identification in light of FHFA's 
discretion, and intention, to determine CBLs. Instead, that commenter 
suggested that FHFA should determine Enterprise CBLs in consultation 
with the Enterprises, and the CBLs should be the same for each 
Enterprise. Two commenters opined that all Enterprise charter-compliant 
activities should be deemed CBLs. One commenter questioned whether 
three months was adequate for the Enterprises to complete their 
preliminary review, including engagement with senior management and 
their respective boards of directors. One commenter expressed support 
for FHFA's providing notice to each Enterprise of all CBLs identified 
or any removal of a CBL identification, across both Enterprises.
    After considering these comments, FHFA is not changing the proposed 
process for identifying of CBLs. It is appropriate for FHFA to 
determine Enterprise CBLs, considering FHFA's statutory duties to 
ensure that the Enterprises meet their statutory purposes and that the 
LLRE established for an Enterprise in receivership preserves and 
continues the Enterprise's statutory function and mission in the 
housing finance market. However, given the Enterprises' greater 
understanding of their business operations, it is also appropriate for 
the Enterprises to identify associated operations, services, functions, 
and supports, which are included in the CBL definition.
    FHFA does not agree that it should simply deem all charter-
compliant activities to be CBLs. One purpose of the rule is to 
consider, and then identify, those Enterprise business lines that 
plausibly would continue to operate in an LLRE in light of the 
Enterprise's purposes, mission, and authorized activities. That purpose 
is not achieved by simply assuming that all charter-compliant 
activities are CBLs. While all CBLs transferred to the LLRE will be 
charter-compliant activities, not all charter-compliant activities may 
be identified as core.
    At this time, FHFA is also not establishing a rule process or 
requirement for deeming a CBL at one Enterprise to be a CBL of the 
other Enterprise. While FHFA anticipates there will be substantial or 
even complete alignment of CBLs across the Enterprises, after 
additional consideration FHFA believes it would be appropriate to 
consider the CBLs of each Enterprise independently of the other, 
implementing the rule's CBL identification process, before making any 
decision that would require alignment.
    Finally, FHFA does not propose to change the three-month time 
period for the Enterprises' initial preliminary identification of CBLs, 
because the Enterprises did not object to it. FHFA also notes that, 
after the Enterprises provide preliminary notices of identification to 
FHFA, there is an additional three-month period for FHFA to review each 
Enterprise's notice and follow up as appropriate. That second three-
month period and the opportunity it creates for Enterprise and FHFA 
collaboration provide flexibility to ensure CBLs are identified within 
six months after the effective date of the rule.

D. Content and Form of an Enterprise Resolution Plan

    Prohibited Assumption of Extraordinary Government Support. FHFA 
proposed to prohibit the Enterprises, when developing their resolution 
plans, from assuming ``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 [PSPAs] 
entered into by FHFA and the U.S. Department of the Treasury on 
September 7, 2008 and any amendments thereto).'' \33\ This prohibition 
received a considerable amount of input from commenters.
---------------------------------------------------------------------------

    \33\ See 12 CFR 1242.5(b)(2), 86 FR at 1344.
---------------------------------------------------------------------------

    Some commenters supported the proposed prohibited assumption, while 
others did not. Among the former, one commenter viewed it as 
``critical'' that Enterprise resolution planning not include the 
support currently provided by the PSPAs. In contrast, another commenter 
viewed the ``the denial that the [PSPAs] for the [Enterprises] exist[ ] 
and can be relied upon, and . . . the requirement that the 
[Enterprises] plan to continue operations in receivership without that 
support, despite its being necessary and integral to their business 
model'' as ``fatal flaws'' that ``vitiate the entire rule.'' A third 
commenter called it ``impractical'' to require the Enterprises to 
``continue operations in receivership without any government support.'' 
Some commenters suggested FHFA reserve authority to waive provisions of 
the rule and offered the treatment of the PSPAs as an example of an 
area where FHFA could use waiver authority. Similar comments suggested 
FHFA expressly retain discretion in the rule, such as discretion ``to 
permit, if FHFA deems it useful, the Enterprises to assume the 
continuation of the PSPAs on a transitional basis'' or, more pointedly, 
suggested that FHFA clarify that it ``retains the discretion to allow 
the Enterprises to assume the continuation of any government support

[[Page 23583]]

that is actually in place at least 12 months before each planned 
submission date.''
    Commenters also raised questions or requested clarification about 
how the prohibited assumption, as related to the PSPAs, should be given 
effect when the Enterprises develop their resolution plans. One 
commenter interpreted the fact that PSPA support must be assumed away 
to mean that FHFA intended the Enterprises to plan for resolution after 
they had exited conservatorship and were well-capitalized, and asked 
FHFA to clarify that interpretation. Another commenter suggested that 
Enterprise resolution plans should reflect the Enterprise's actual 
assets and obligations at the time the plan is drafted and thus, ``[a]s 
long as . . . PSPA support continues to be available, a plan that 
assumes the opposite will be less useful in guiding the actual 
resolution.'' That commenter requested FHFA clarify that ``an 
Enterprise should not assume in its initial resolution plan a future 
state in which it is fully capitalized and released from 
conservatorship'' and that, for purposes of developing a resolution 
strategy, ``the PSPA support of the Enterprise's existing obligations 
continues to apply.''
    Other commenters noted that the proposed rule clearly prohibited 
consideration of support provided by the PSPAs but did not address how 
the Enterprises should, or may, consider other aspects of the PSPAs, 
and thus needed clarification. One commenter identified ``potential . . 
. ambiguity regarding the scope of the assumption'' and suggested that 
the final rule clarify that the prohibited assumption ``means that the 
PSPAs would be assumed to have been terminated in their entirety . . . 
[leaving] no restrictions on the Enterprises' freedom to raise debt or 
equity or transfer all or any portion of their assets without the U.S. 
Treasury Department's consent, and that the senior preferred stock will 
have been retired at no additional cost to the Enterprises.'' That 
commenter opined that without such clarification, PSPA restrictions 
could operate as impediments to the rapid and orderly resolution of the 
Enterprises or to actions or steps designed to remediate other 
impediments. Another commenter requested FHFA to clarify that the 
rulemaking ``does not constitute any weakening--real or perceived--of 
the existing PSPAs,'' due to concern that the rule's prohibited 
assumption could cause investors to ``doubt the ongoing government 
support for the Enterprises and pull back from their participation in 
the secondary market.''
    FHFA has carefully considered comments received on the proposed 
prohibited assumption and believes it should remain in the final rule 
as it was proposed, without change. One important purpose of the rule 
is to foster market discipline. The Enterprise charter acts make clear 
that they are private companies, and the Safety and Soundness Act makes 
no provision for funding a receivership. Statutory provisions clarify 
that neither the Enterprises themselves nor their securities or 
obligations are backed by the United States. Despite these provisions, 
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, while explicitly limited to a finite amount 
of support and usable in receivership only for certain purposes, could 
encourage that perception.
    To clarify the status of the Enterprises as privately owned 
corporations and to accurately reflect the provisions of the 
Enterprises' charter acts and the Safety and Soundness Act, FHFA sought 
to make explicit in the Enterprise resolution planning rule that, in 
drafting their resolution plans, each Enterprise should assume that no 
extraordinary government support would be available to prevent it from 
being placed into receivership, to indemnify investors against losses, 
or to fund its resolution. Changing the prohibited assumption as it 
relates to government support provided through the PSPAs would not be 
consistent with the policy of fostering market discipline. In addition, 
the support available under the PSPAs is finite in amount and cannot be 
replenished if drawn. There is no assurance that there would be any 
available capacity under the PSPA at the point in which an Enterprise 
is placed in receivership. FHFA believes it would be inconsistent with 
these limitations to allow the Enterprises to factor into their 
resolution plans--plans that are premised upon some future adverse 
event--any remaining PSPA support that might exist today.
    Although FHFA is not changing the prohibition against assuming the 
provision or continuation of extraordinary government support, 
questions commenters raised about the treatment of other aspects of the 
PSPAs in Enterprise resolution planning should be addressed. The PSPAs 
do exist and they remain in effect. In prohibiting the Enterprises from 
assuming the provision of support through the PSPAs, FHFA does not 
intend the Enterprises to plan, today, for a future resolution that 
occurs after they are out of conservatorship and well-capitalized. 
Likewise, FHFA does not intend an Enterprise to assume that the PSPAs 
have been terminated in their entirety. Resolution plans that could 
result from either of those approaches could be conjectural and less 
useful to FHFA and the Enterprises, where more useful resolution plans 
will reflect the Enterprise's assets and obligations at the time the 
plan is developed.
    For these reasons, while an Enterprise may not consider support 
provided by the PSPA in developing a resolution plan, an Enterprise may 
consider how other provisions of the PSPAs could impact resolution. An 
Enterprise may, for example, address constraints imposed by PSPA 
covenants, if appropriate within the context of the Enterprise's full 
plan. An Enterprise may also identify an aspect of or provision in a 
PSPA as an ``impediment'' to resolution or in association with an 
identified ``material weakness'' in the Enterprise's resolution plan, 
and such characterization would not, in itself, cause the resolution 
plan not to be ``credible.'' Other comments related to the 
identification of impediments in a resolution plan are addressed below.
    Finally, FHFA interprets comments advocating for FHFA's reservation 
of discretion or express waiver authority regarding the assumption 
against extraordinary government support as comments calling for 
eliminating this assumption from the final rule. In that light, while 
it is appropriate to note that FHFA has retained general waiver 
authority in a separate rule,\34\ and does have discretion to develop 
resolution planning scenarios for Enterprise consideration, FHFA does 
not now anticipate using its discretion or waiver authority to change 
such essential underpinnings of resolution planning as the prohibited 
assumption of the provision or continuation of extraordinary government 
support.
---------------------------------------------------------------------------

    \34\ See 12 CFR 1211.2(a).
---------------------------------------------------------------------------

    Strategic Analysis; Identification of Impediments to Rapid and 
Orderly Resolution. FHFA proposed to require each Enterprise resolution 
plan to include a strategic analysis that, among other things, would 
identify and describe ``[a]ny potential material weaknesses or 
impediments to rapid and orderly resolution as conceived in the 
Enterprise's plan'' and ``[a]ny actions or steps the Enterprise has 
taken or proposes to take, or which other market participants could 
take, to remediate or otherwise mitigate the

[[Page 23584]]

weaknesses or impediments identified.'' The Enterprises would also be 
required to provide a timeline for planned remedial or mitigating 
actions.\35\ As FHFA noted in the preamble to the proposed rule, FHFA 
did not anticipate that it would identify as deficiencies those 
impediments that an Enterprise would be reasonably unable to address or 
that it would be impracticable to change.\36\ Moreover, a resolution 
plan could be deemed credible even if it identified impediments to 
rapid and orderly resolution.\37\
---------------------------------------------------------------------------

    \35\ 12 CFR 1242.5(d)(3), 86 FR at 1345.
    \36\ 86 FR at 1338.
    \37\ Id.
---------------------------------------------------------------------------

    Commenters raised questions about the identification of impediments 
and remedial or mitigating actions. One commenter, for example, 
requested that FHFA clarify in the rule that examples of ``existing 
impediments'' listed in its comment letter ``and others similarly 
identified in the course of preparing the early resolution plan 
submissions'' would not be ``grounds for rejecting the Enterprises' 
resolution plans under FHFA's credibility standard.'' ``Existing 
impediments'' included: (1) An inability to satisfy current and future 
regulatory capital needs, including a projected resolution capital 
execution need, without relying on the PSPA or other government capital 
support; (2) an inability to impose losses on long-term debt without 
imposing them pro rata on their short-term creditors, counterparties of 
qualified financial contracts, and mortgage guarantee beneficiaries, 
given the unsubordinated nature of such long-term debt; (3) 
insufficient high-quality liquid assets to satisfy existing and future 
regulatory liquidity requirements and the projected resolution 
liquidity execution needs of an LLRE; and (4) PSPA restrictions on 
raising additional debt or equity, issuing subordinated debt, or 
transferring assets without U.S. Treasury consent.
    FHFA believes furnishing a list of potential impediments in the 
rule is unnecessary to clarify that FHFA would not, solely on the basis 
of identifying such impediments in a resolution plan, deem the 
resolution plan to not be ``credible.'' The rule provides discretion to 
the Enterprises in identifying impediments. Provisions of the proposed 
rule on identification of impediments did not impose any requirements 
or constraints on the types of impediments an Enterprise could identify 
within a ``credible'' resolution plan. To the extent that ``existing 
impediments'' listed by the commenter could relate to or implicate 
provisions of the PSPAs, FHFA has expressly affirmed that such 
provisions could be identified as impediments in a resolution plan and 
would not cause the plan not to be ``credible,'' if appropriate in the 
context of the specific resolution plan.
    One commenter requested that FHFA clarify that identification of 
impediments to rapid and orderly resolution in a resolution plan would 
not cause that plan not to be credible, if the Enterprise also 
identified actions that could be taken to remediate the impediment, 
explained why such actions are feasible and who is responsible for 
taking them, and provided a timeline for completing remedial actions 
the Enterprise planned to take. Three important result of resolution 
planning will be the identification of impediments, actions that can be 
taken to remediate them, and timelines for taking planned remedial 
actions. Taking such actions should improve the resolvability of the 
Enterprise in a manner that furthers the objectives of the rule. On the 
other hand, FHFA is not prepared to say that it will always be 
necessary to have a corresponding remedial action in order for 
identification of an impediment not to cause a plan to be not credible. 
Stated another way, FHFA does not believe that identification of an 
impediment without identifying a remedial action would always cause a 
plan not to be credible. If FHFA's view changes after gaining 
experience with Enterprise resolution planning, FHFA will consider 
whether the rule should be clarified as the commenter suggested.
    In general, FHFA anticipates that, where an Enterprise can act to 
remediate an impediment, the Enterprise's resolution plan may provide 
relatively more specificity about planned remedial actions and timing 
for taking them. Where remediating an impediment may require action by 
others, less within the control of an Enterprise, relatively less 
detail may be appropriate and less detail would not, in itself, cause 
the plan not to be credible.
    FHFA Identification of a Resolution Strategy. FHFA did not suggest 
or establish any resolution strategy in the proposed rule. Instead, the 
proposed rule reflected provisions of the Safety and Soundness Act that 
require FHFA, as receiver for an Enterprise, to establish an LLRE that 
``by operation of law and immediately upon its organization . . . 
succeed[s] to the charter of the [Enterprise] and thereafter operate[s] 
in accordance with, and subject to, such charter, [the Safety and 
Soundness Act], and any other provision of law to which the 
[Enterprise] is subject'' except as otherwise provided in the Safety 
and Soundness Act.\38\ One commenter suggested that FHFA establish ``a 
preferred resolution strategy or strategies to guide FHFA's actions in 
resolution and receivership . . . [to] provide clarity to the 
Enterprises, the market, and the public.'' That commenter also asked 
FHFA to confirm certain resolution ``mechanics:'' That the LLRE will be 
created at the outset of the receivership process; that the LLRE will 
be permitted to raise capital and debt financing; and that ``FHFA will 
proactively assist in identifying business areas that can be sold to an 
acquirer.''
---------------------------------------------------------------------------

    \38\ 12 U.S.C. 4617(i)(2)(A); see also 12 CFR 1242.1(a)(1) and 
1242.2, 86 FR at 1342-1343, requiring Enterprise plans for their 
``rapid and orderly resolution'' by FHFA as receiver and defining 
``rapid and orderly resolution'' as 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.
---------------------------------------------------------------------------

    After consideration, FHFA has not set forth a preferred resolution 
strategy in the rule. FHFA has refrained from doing so, in part, to 
encourage the Enterprises to consider any reasonable approaches to 
resolution, rather than preemptively focusing their efforts on a single 
resolution strategy that may not be appropriate to an Enterprise's 
particular circumstances. In addition, FHFA believes that the iterative 
process of reviewing the Enterprises' resolution plans could reveal 
benefits from one strategy over another, or demonstrate that one 
strategy is preferable to others in certain circumstances. In the 
future, if FHFA develops a preferred resolution strategy, FHFA may 
amend the resolution planning rule if FHFA determines it would be 
appropriate to include such a strategy.
    FHFA also does not believe it is necessary to include the described 
``mechanics'' in a resolution planning rule. In general, however, FHFA 
observes that, because the purpose of the LLRE is to continue CBLs of 
the Enterprise, it would be important to establish the LLRE at the 
outset of the receivership process. How an Enterprise's CBLs as 
continued in the LLRE would be funded is an issue each Enterprise is 
required to address in its resolution plan, and identification of 
business areas that could be sold to an acquirer will emerge through an 
understanding of areas that are not CBLs.

[[Page 23585]]

    Development of a Plan Template; Reduction of Burden. One commenter 
recommended that, in the future, FHFA provide ``a template for 
completing a resolution plan in accordance with the regulatory 
requirements'' as the FRB and FDIC have done for companies subject to 
the DFA section 165 rule. Having such a template would ``allow the 
Enterprises to more clearly understand plan requirements,'' 
``facilitate FHFA's review of submitted plans,'' and ``minimize 
differences in the Enterprises' plans attributable to choices related 
to style and presentation.''
    While FHFA agrees that a template for Enterprise resolution plans 
could provide consistency, FHFA believes it will be better able to 
assess the benefit of or need for a template, as well as its form, 
after gaining experience with reviewing Enterprise resolution plans. 
FHFA also believes that such a template could be provided through 
guidance in the future, without the need for an amendment to the 
resolution planning rule. For those reasons, FHFA is not establishing a 
template at this time.
    Some commenters identified areas where changes to the form or 
content of resolution plans would make developing them less burdensome 
and possibly provide more relevant information to FHFA. One commenter 
suggested adding a ``materiality'' qualifier to rule requirements that 
the Enterprises list ``all affiliates and trusts within the 
Enterprise's organization;'' identify ``third-party providers with 
which the Enterprise has significant business connections;'' and 
analyze ``whether the failure of a third-party provider [to an 
Enterprise] would likely have an adverse impact on the Enterprise'' 
(e.g., list ``material affiliates and trusts;'' identify ``material 
third-party providers;'' and require analysis of third-party failures 
likely to have a ``material'' adverse impact).\39\ One commenter noted 
that the proposed rule permitted an Enterprise to incorporate by 
reference material from an earlier resolution plan into a later plan, 
and suggested permitting the Enterprises to incorporate ``information 
that is otherwise available to FHFA through existing supervisory 
mechanisms . . . such as the Enterprise Regulatory Capital Framework 
reports.'' Finally, a commenter suggested that FHFA consider allowing 
the Enterprises to develop ``targeted plans,'' similar to those 
described in the DFA section 165 rule, ``to increase efficiency.''
---------------------------------------------------------------------------

    \39\ See 12 CFR 1242.5(f)(1), (11), and (14); 86 FR at 1345-
1346.
---------------------------------------------------------------------------

    FHFA does not believe it has sufficient information at this time to 
add a materiality qualifier to information elements required from an 
Enterprise by the resolution planning rule, while still ensuring that 
FHFA receives sufficient information to understand and assess an 
Enterprise resolution plan (for example, how FHFA could quickly 
preserve and divide assets between the LLRE and the receivership 
estate). Likewise, FHFA is not inclined to expand the types of 
information that could be incorporated by reference at this time, due 
to concerns that a large amount of information incorporated by 
reference could make it harder to review, understand, and assess a 
resolution plan.
    FHFA agrees that development of a resolution plan should not impose 
undue burden on an Enterprise or FHFA, however. To that end, FHFA is 
adding to the final rule a reservation of authority that will permit 
FHFA to tailor or adjust the scope or form of information required from 
the Enterprises, considering the significance of such information to 
FHFA when reviewing resolution plans, the appropriate level of detail 
of information, and reduction of burden on an Enterprise or FHFA. That 
provision will permit FHFA to tailor the scope of information 
requirements (including, for example, adding a ``materiality'' 
qualifier in the future), and to tailor the form of information 
required (including expanding the sources of information that can be 
incorporated by reference into a resolution plan).\40\ Because this 
authority is reserved in the final rule, FHFA could provide guidance to 
the Enterprises making non-substantive adjustments to the scope and 
form of information required from them, without amending the final 
rule.\41\
---------------------------------------------------------------------------

    \40\ To better understand the types and sources of information 
an Enterprise may wish to incorporate by reference, FHFA invites the 
Enterprises to identify information in their resolution plans that 
they would have incorporated by reference but for the limited 
authority to do so, and the source that would have been referenced.
    \41\ Substantive changes to the rule would be made in compliance 
with the Administrative Procedure Act, 5 U.S.C. 553.
---------------------------------------------------------------------------

    Submission of targeted plans is a slightly different issue. 
Requiring targeted plans instead of full resolution plans in some 
cycles could be viewed as tailoring or adjusting the scope or form of 
information required from an Enterprise, and would reduce burden, and 
on that basis FHFA could address targeted plans through its reservation 
of authority. But FHFA is also aware that such plans are provided for 
in the DFA section 165 rule itself. FHFA has consciously worked to 
incorporate in the Enterprise resolution planning rule concepts that 
are similar to those addressed in the DFA section 165, to inform the 
public and other stakeholders of, and affirm, similarities in approach 
and process. Because the DFA section 165 rule includes a provision for 
targeted plans, it may be appropriate for FHFA to include such a 
provision in the Enterprise resolution planning rule, as well. FHFA 
will continue to consider the benefits provided by targeted plans, 
whether such plans would be appropriate for the Enterprises, and if so, 
whether it would be appropriate to provide for targeted plans through a 
rule amendment or through use of reserved authority to tailor the scope 
and form of information required in Enterprise resolution plans.
    Content of the Plan's Public Section. As proposed, the rule would 
require the Enterprises to divide their resolution plans into a public 
section and a confidential section, with the two sections segregated 
and separately identified.\42\ The proposal also listed required 
content of the public section, modeled on the DFA section 165 rule but 
tailored for the Enterprises' resolution plans.\43\ FHFA intends the 
public section to 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, and to 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 will 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 
should price the risk of these investments accordingly.
---------------------------------------------------------------------------

    \42\ See 12 CFR 1242.6(a)(1), 86 FR at 1346.
    \43\ Id., 1242.6(a)(2).
---------------------------------------------------------------------------

    Commenters were supportive of a public section but had differing 
views on its appropriate scope. One commenter, for example, suggested 
that the rule ``should provide a more extensive public section of the 
[Enterprises'] resolution plans than the large-bank resolution planning 
process produces.'' In addition, FHFA should require ``public notice of 
material

[[Page 23586]]

changes to [Enterprise] operations, corporate structures, capabilities, 
etc. that result or will result from their resolution planning.'' In 
contrast, another commenter remarked that the scope of the public 
section should ``be relatively limited in order to allow more candid 
disclosure and discussion in the comprehensive confidential section of 
a resolution plan.'' That commenter also requested FHFA clarify that 
information on specific service providers or counterparties would not 
be shared in the public section, as public disclosure of key third-
party relationships could impact Enterprise commercial relationships.
    FHFA does not plan to change the scope of the public section of an 
Enterprise resolution plan at this time, and is not requiring 
additional public notice of material changes to Enterprise operations, 
organization, or capability that result or could result from resolution 
planning. FHFA expects to work with the Enterprises when developing 
their initial public sections, to ensure appropriate information, with 
an appropriate level of detail, is made available to the public, while 
balancing the need for candor and to preserve confidentiality of some 
information. Regarding public identification of key third-party 
relationships specifically, FHFA notes that the rule does not require 
these to be disclosed.

E. Timing of Plan Submission; Interim Updates

    FHFA proposed to require the Enterprises to submit their initial 
resolution plans roughly two years after the effective date of the 
final rule, and to require resolution plans to be submitted every two 
years thereafter.\44\ FHFA also retained authority to require 
submission on a date different from that established though the rule, 
in part to avoid requiring resolution plans to be submitted in the 
fourth quarter, due to other end-of-year reporting obligations, if, 
based on the date of finalizing the rule, resolutions plans would 
otherwise be due then.\45\
---------------------------------------------------------------------------

    \44\ See 12 CFR 1242.4(a)(1), 86 FR at 1344.
    \45\ 12 CFR 1242.4(a)(2), 86 FR at 1344.
---------------------------------------------------------------------------

    Commenters generally supported the flexibility provided by FHFA's 
reservation of authority to adjust submission dates. One commenter 
noted that the DFA section 165(d) rule provides similar flexibility but 
requires the FRB and FDIC to provide notice of an adjusted submission 
date at least 12 months in advance of the new due date.\46\ That 
commenter suggested FHFA add a similar timing-of-notice provision to 
its rule. FHFA agrees that notice of an adjusted submission date should 
be provided reasonably in advance of the adjusted date, and adding such 
a notice requirement to the rule would make it more transparent. Thus, 
FHFA has added a rule requirement that it provide the Enterprises with 
12 months' notice in advance of the new submission date.
---------------------------------------------------------------------------

    \46\ Cf. 12 CFR 243.4(d)(2).
---------------------------------------------------------------------------

    FHFA also proposed to require the Enterprises to submit interim 
updates to resolution plans ``within a reasonable time, as determined 
by FHFA.'' \47\ One commenter suggested FHFA provide a specific time 
period, such as six months, for an Enterprise to respond to any request 
for an interim update.
---------------------------------------------------------------------------

    \47\ 12 CFR 1242.4(a)(3), 86 FR at 1344.
---------------------------------------------------------------------------

    Although FHFA agrees that the Enterprises should be provided a 
reasonable period to prepare interim updates, FHFA does not believe the 
rule should state a period because what is a ``reasonable'' timeframe 
for preparation will necessarily depend upon the scope of the update 
requested. FHFA expects to engage with an Enterprise subject to an 
interim update request on a reasonable period for preparing the update, 
prior to establishing a submission date.

F. FHFA Identification of Deficiencies and Shortcomings

    FHFA proposed to identify and provide notice to an Enterprise of 
any ``deficiencies'' in its resolution plan, which the Enterprise would 
then be required to address in a revised resolution plan.\48\ FHFA 
noted that the DFA section 165 rule also includes ``shortcomings'' as a 
second, lesser, category for identified supervisory concerns, and asked 
if that category should be included in FHFA's rule.\49\ In the DFA 
section 165 rule, identification of a ``shortcoming'' does not trigger 
the need to submit a revised plan, but companies are expected to 
address shortcomings in their next resolution plans, and a shortcoming 
that is not addressed may be identified as a deficiency in a later 
plan.
---------------------------------------------------------------------------

    \48\ See 12 CFR 1242.7(b), 86 FR at 1347.
    \49\ See 86 FR at 1338.
---------------------------------------------------------------------------

    One commenter responded that a rule category for ``shortcomings'' 
could ``reduce potential ambiguity regarding the level of Enterprise 
action necessary to respond.'' If ``shortcomings'' are addressed in the 
rule, then a concern categorized as a ``shortcoming'' may receive more 
Enterprise resources (funding and staff time) to remediate, which could 
be helpful to Enterprise efforts to prioritize and focus appropriate 
attention.
    FHFA found the response related to the potential value of a 
``shortcomings'' category persuasive and so has added it to the final 
rule, along with a definition of ``shortcoming'' that is modeled on the 
definition of ``shortcoming'' in the DFA section 165 rule. Also in line 
with that rule, FHFA has included provisions to the effect that an 
unaddressed shortcoming may become a deficiency, and that it is not 
necessary for FHFA to identify an aspect of a plan as a shortcoming in 
order to identify it as a deficiency in a later plan.

G. Timing of FHFA Feedback; Provision of Formal Guidance

    FHFA proposed to provide feedback to the Enterprises within one 
year after receiving complete resolution plans.\50\ One commenter 
requested that FHFA commit to providing feedback not less than 12 
months before the filing date of the next plan and to providing the 
Enterprises ``with more than half of the total plan cycle time to 
respond.''
---------------------------------------------------------------------------

    \50\ See 12 CFR 1242.7(b)(1)(iii), 86 FR at 1347.
---------------------------------------------------------------------------

    FHFA intends to provide timely feedback to the Enterprises on their 
resolution plans and established a benchmark of not later than one year 
after plans have been submitted in the proposed rule. FHFA proposed to 
require the Enterprises to provide revised resolution plans addressing 
any deficiency identified by FHFA within 90 days of receiving notice of 
deficiency from FHFA. Other matters of concern, including identified 
shortcomings, may not require half of the total plan cycle for 
response, and committing to that timing in the final rule would likely 
result in the submission and review cycle longer than the biennial 
cycle FHFA desires. For these reasons, FHFA has not amended the rule 
text on timing of FHFA feedback or Enterprise responses.
    Apart from feedback provided directly to an Enterprise on a 
specific resolution plan, commenters also addressed more general FHFA 
guidance on resolution planning. Commenters approved FHFA's view, 
stated in the preamble to the proposed rule, that resolution planning 
was an iterative process that would include guidance to the 
Enterprises.\51\ One commenter encouraged FHFA to consider providing 
public notice of and soliciting comment on formal guidance, similar to 
the process the FDIC and FRB have undertaken with guidance on the DFA 
section 165 rule, ``to engage the public and obtain input from 
interested stakeholders and to promote transparency in the resolution 
planning

[[Page 23587]]

process.'' FHFA sees the potential value of a public notice and comment 
process for formal guidance and will consider the appropriate process 
for developing guidance, including public engagement, in the future. No 
change to the rule is necessary in order for FHFA to develop an 
appropriate process for providing guidance to the Enterprises.
---------------------------------------------------------------------------

    \51\ See 86 FR at 1330, 1331, and 1339.
---------------------------------------------------------------------------

H. Comments Beyond the Scope of the Rule

    Several commenters addressed subjects that were beyond the scope of 
the proposed rule. These included comments on the need for a separate 
FHFA rulemaking requiring or permitting the Enterprises to issue long-
term subordinated debt, commonly known as ``total loss absorbing 
capacity'' or TLAC, as a means of facilitating the rapid and orderly 
resolution of an Enterprise. In the proposed rule, FHFA acknowledged 
that if a TLAC requirement were to be imposed on the Enterprises, such 
a requirement would be the subject of a separate rulemaking.\52\
---------------------------------------------------------------------------

    \52\ See 86 FR at 1329, n. 26.
---------------------------------------------------------------------------

    Another commenter, generally opposed to Enterprise resolution 
planning, opined that instead of resolution planning FHFA should 
prioritize strengthening the Enterprises' affordable housing goals. 
Enterprise housing goals are beyond the scope of the proposed rule.
    Other commenters addressed subjects that are beyond FHFA's 
authority, even if they related to Enterprise resolution planning. For 
example, several commenters remarked on the continuing need for housing 
finance reform, with one commenter expressing the view that the 
possibility of the market disruption that would result if either 
Enterprise were placed in receivership, regardless of how much 
resolution planning had taken place, simply underscored the need for 
comprehensive housing finance system reform legislation. Other 
commenters stated, or implied, that issues or concerns they identified 
as related to the proposed rule were actually the result of current 
statutory requirements. One commenter noted that while FHFA's proposal 
would carry out the law as written, trying to resolve an Enterprise in 
the manner required by current law would risk systemic disruption.
    Another commenter suggested that the Financial Stability Oversight 
Council should designate the Enterprises as Systemically Important 
Financial Market Utilities (SIFMUs) pursuant to title VIII of the Dodd-
Frank Act, and after that, FHFA should ``reevaluate the statutory basis 
for oversight of the [Enterprises] in light of [DFA] section 804 and 
the benefits of SIFMU status.'' That commenter did not elaborate on how 
such a designation would enhance the financial stability, resiliency, 
or resolvability of the Enterprises. Similar to housing finance reform, 
designation of the Enterprises as SIFMUs is outside of FHFA's 
authority.
    Because these comments did not address the text of the proposed 
rule or subjects within the scope of the proposed rule, FHFA did not 
consider them in promulgating the final rule.

III. Summary of Changes to the Final Rule

A. Section 1242.4(a)(2), Altering Submission Dates

    In response to comments, FHFA has added a provision requiring FHFA, 
when altering a submission date, to provide an Enterprise notice of the 
altered date at least 12 months before the submission is due to FHFA. 
This change will ensure the Enterprises have adequate time to prepare 
resolution plans and aligns this aspect of FHFA's resolution planning 
rule with a similar provision in the DFA section 165 rule.

B. Section 1242.5(a), Reservation of Authority To Tailor Submission 
Requirements

    In response to comments, FHFA has added a limited reservation of 
authority to tailor rule requirements on the required form or content 
of resolution plans, to reduce burden on the Enterprises or FHFA. With 
this authority FHFA could make non-substantive changes to Enterprise 
resolution plan form and content requirements without amending the rule 
itself, which would enhance the efficiency of FHFA's response to rule-
imposed burdens.

C. Section 1242.7(b), Addition of a ``Shortcomings'' Category

    In response to comments, FHFA has added a category of 
``shortcomings'' for supervisory concerns identified when reviewing 
Enterprise resolution plans that do not rise to the level of 
``deficiencies,'' but that should be addressed in the Enterprise's next 
resolution plan. While this rule change was not necessary to permit 
categorization of supervisory concerns or the supervisory requirement 
that such concerns be addressed, a rule category for ``shortcomings'' 
could assist an Enterprise when determining the priority and resources 
appropriate for its follow-up actions. In addition, these provisions 
align FHFA's resolution planning rule with the DFA section 165 rule.

IV. Regulatory Analyses

A. Paperwork Reduction Act

    The final rule does 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.

B. 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 must include an analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the final 
rule under the Regulatory Flexibility Act. The General Counsel of FHFA 
certifies that this final rule will not have a significant economic 
impact on a substantial number of small entities because the regulation 
applies only to the Enterprises, which are not small entities for 
purposes of the Regulatory Flexibility Act.

C. Congressional Review Act

    In accordance with the Congressional Review Act (5 U.S.C. 801 et 
seq.), FHFA has determined that this final rule is a major rule and has 
verified this determination with the Office of Information and 
Regulatory Affairs of the Office of Management and Budget.

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, under the authority of 12 
U.S.C. 4511, 4513, and 4526, FHFA amends 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--ENTERPRISES

PART 1242--RESOLUTION PLANNING

Sec.
1242.1 Purpose; identification as a prudential standard.

[[Page 23588]]

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 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 of this chapter. In its 
discretion, FHFA may also deem a revised, resubmitted resolution plan 
to be a corrective plan for purposes of Sec.  1236.4 of this chapter.


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.

[[Page 23589]]

    (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 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. FHFA shall provide an Enterprise with written 
notice of a determination under this paragraph (a)(2) no later than 12 
months before the date by which the Enterprise is required to submit 
the resolution plan.
    (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

[[Page 23590]]

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. Notwithstanding 
anything to the contrary in this part, FHFA may adjust or tailor the 
scope or form of information specified in paragraphs (c) through (g) of 
this section, as FHFA determines appropriate considering the 
significance of such information to FHFA when reviewing resolution 
plans, the appropriate level of detail of information, and reduction of 
burden on an Enterprise or FHFA.
    (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 
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 of this chapter 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

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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):
    (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

[[Page 23592]]

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, 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 or shortcomings in the Enterprise's 
resolution plan (or confirms that no deficiencies or shortcomings 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) For purposes of paragraph (b)(1) of this section, 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. A ``shortcoming'' is a weakness or gap 
that raises questions about the feasibility of an Enterprise's 
resolution plan, but does not rise to the level of a deficiency. If a 
shortcoming is not satisfactorily explained or addressed before or in 
the submission of the Enterprise's next resolution plan, it may be 
found to be a deficiency in the Enterprise's next resolution plan. FHFA 
may identify an aspect of an Enterprise's resolution plan as a 
deficiency even if such aspect was not identified as a shortcoming in 
an earlier resolution plan submission.
    (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

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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. 2021-09287 Filed 5-3-21; 8:45 am]
BILLING CODE 8070-01-P