[Federal Register Volume 86, Number 129 (Friday, July 9, 2021)]
[Rules and Regulations]
[Pages 36199-36202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14438]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part Chapter XII

[No. 2021-N-7]


Policy Statement on Fair Lending

AGENCY: Federal Housing Finance Agency.

ACTION: Notification of approval and adoption of policy statement; 
request for comment.

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SUMMARY: The Federal Housing Finance Agency (FHFA or agency) is issuing 
a policy statement on Fair Lending (Policy Statement) to communicate 
the agency's general position on monitoring and information gathering, 
supervisory examinations, and administrative enforcement related to the 
Equal Credit Opportunity Act, the Fair Housing Act, and the Federal 
Housing Enterprises Financial Safety and Soundness Act, and is 
soliciting comments on its application.

DATES: The Policy Statement becomes effective on July 9, 2021. Comments 
must be received on or before September 7, 2021.

FOR FURTHER INFORMATION CONTACT: Annalyce Shufelt, Senior Attorney 
Advisor (Fair Lending), Office of Fair Lending Oversight, (202) 649-
3416, [email protected], Federal Housing Finance Agency, 
Constitution Center, 400 7th Street SW, Washington, DC 20219; or Ming-
Yuen Meyer-Fong, Associate General Counsel, Office of General Counsel, 
(202) 649-3078 (not toll-free numbers), [email protected]. 
The Telecommunications Device for the Deaf is (800) 877-8339.

ADDRESSES: FHFA welcomes comments about application of the principles 
set out in the policy statement to specific policies and practices. You 
may submit your comments to FHFA, identified by ``Policy Statement; 
Comment Request: (2021-N-7)'', by any one of the following methods:
     Agency website: www.fhfa.gov/open-for-comment-or-input.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If

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you submit your comment to the Federal eRulemaking Portal, please also 
send it by email to FHFA at [email protected] to ensure timely 
receipt by FHFA. Include the following information in the subject line 
of your submission: ``Policy Statement; Comment Request: (2021-N-7).''
     Hand Delivered/Courier: The hand delivery address is: 
Clinton Jones, General Counsel, Attention: ``Policy Statement; Comment 
Request: (2021-N-7)'', Federal Housing Finance Agency, Eighth Floor, 
400 Seventh Street SW, Washington, DC 20219. Deliver the package at the 
Seventh Street entrance Guard Desk, First Floor, on business days 
between 9 a.m. and 5 p.m.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Clinton Jones, 
General Counsel, Attention: ``Policy Statement; Comment Request: (2021-
N-7)'', Federal Housing Finance Agency, Eighth Floor, 400 Seventh 
Street SW, Washington, DC 20219. Please note that all mail sent to FHFA 
via U.S. Mail is routed through a national irradiation facility, a 
process that may delay delivery by approximately two weeks. For any 
time-sensitive correspondence, please plan accordingly.
    We will post all public comments we receive without change, 
including any personal information you provide, such as your name and 
address, email address, and telephone number, on the FHFA website at 
http://www.fhfa.gov. In addition, copies of all comments received will 
be available for examination by the public through the electronic 
comment docket also located on the FHFA website.

SUPPLEMENTARY INFORMATION:

I. Purpose

    FHFA is the primary regulator for Fannie Mae and Freddie Mac (the 
Enterprises) and the Federal Home Loan Banks (the Banks) (collectively, 
the regulated entities). FHFA is issuing this Policy Statement to 
communicate FHFA's general position on monitoring and information 
gathering, supervisory examinations, and administrative enforcement 
related to the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et 
seq., the Fair Housing Act, 42 U.S.C. 3601 et seq., and section 4545 of 
the Federal Housing Enterprises Financial Safety and Soundness Act 
(Safety and Soundness Act), 12 U.S.C. 4501 et seq. (collectively, with 
implementing regulations and other sources, ``fair lending laws''). 
This Policy Statement is intended to be consistent with those statutes 
and their implementing regulations and to provide guidance to FHFA's 
regulated entities seeking to comply with them. It describes sources of 
statutory authority for actions that may be taken by FHFA and it 
articulates FHFA's policies for supervisory oversight and enforcement 
of fair lending matters. FHFA is also issuing this Policy Statement to 
provide a foundation for possible future interpretations and 
rulemakings by the agency for its regulated entities.\1\
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    \1\ As a historical note, in 1994, a number of Federal agencies 
published a Policy Statement on Discrimination in Lending (1994 
Statement) which, in part, described how Federal agencies use their 
authorities to oversee fair lending compliance. See 59 FR 18266 
(April 15, 1994). FHFA did not exist at the time and was not a 
signatory. In 2008, Congress abolished the former Office of Federal 
Housing Enterprise Oversight and the Federal Housing Finance Board, 
which had been parties to the 1994 Statement. In their place, 
Congress established FHFA with authorities that, in contrast to its 
predecessor agencies, include overseeing Enterprise and Bank 
compliance with applicable law. 12 U.S.C. 4511(b) (FHFA ``shall have 
general regulatory authority over each regulated entity . . . and 
shall exercise such general regulatory authority . . . to ensure 
that the purposes of this Act, the authorizing statutes, and any 
other applicable law are carried out''). Given the importance of 
fair lending compliance, FHFA is publishing this FHFA Policy 
Statement on Fair Lending to implement its authorities and 
articulate agency activities in relevant areas including monitoring, 
examination, enforcement, and coordination to oversee regulated 
entity fair lending compliance.
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II. Policy Statement

Fair Lending Policy Statement

    FHFA is committed to ensuring that its regulated entities operate 
consistently with the public interest and with sufficient overall risk 
management by providing fair, equitable, and nondiscriminatory access 
to credit and housing. Fair lending is central to the principles under 
which the U.S. housing finance system operates and is a requirement of 
law. FHFA will never tolerate illegal discrimination by the regulated 
entities. FHFA will engage in comprehensive fair lending oversight of 
its regulated entities and adopts the following high-level policies to 
guide its fair lending monitoring, supervision, and enforcement. FHFA 
is committed to interagency engagement, coordination, and collaboration 
in fair lending.

Legal Overview

    While many Federal statutes seek to promote fair lending, FHFA's 
policy statement focuses on ECOA, the Fair Housing Act, and the fair 
lending provisions of the Safety and Soundness Act as they apply to the 
regulated entities' activities. This policy statement does not create 
or confer any substantive or procedural rights which could be 
enforceable in any administrative or civil proceeding.
    The Consumer Financial Protection Bureau's (CFPB) Regulation B, 12 
CFR part 1002, along with Official Interpretations in Supplement I to 
12 CFR part 1002, implements ECOA.\2\ The U.S. Department of Housing 
and Urban Development's (HUD) regulations at 24 CFR part 100 implement 
the Fair Housing Act. Together, these statutes and regulations prohibit 
discrimination on the basis of race or color, religion, national 
origin, sex, marital status, age (provided the applicant has the 
capacity to contract), receipt of income derived from any public 
assistance program, exercise, in good faith, of any right under the 
Consumer Credit Protection Act, familial status (defined by 42 U.S.C. 
3602(k) of the Fair Housing Act as children under the age of 18 living 
with a parent or legal custodian, pregnant women, and people securing 
custody of children under 18), and disability.\3\
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    \2\ The Federal Reserve Board of Governors also implements ECOA 
through a regulation covering auto dealers.
    \3\ The Fair Housing Act uses the term ``handicap'' instead of 
``disability.'' This document uses the term ``disability,'' which is 
more generally accepted. See Joint Statement of the Department of 
Housing and Urban Development and the Department of Justice on 
Accessibility (Design and Construction) Requirements for Covered 
Multifamily Dwellings under the Fair Housing Act, April 30, 2013, 
available at https://www.hud.gov/sites/documents/JOINTSTATEMENT.PDF 
(citing Bragdon v. Abbott, 524 U.S. 624, 631 (1998), to say that 
both terms have the same legal meaning).
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    The Enterprises are also subject to section 4545 of the Safety and 
Soundness Act, which requires HUD, by regulation, to prohibit the 
Enterprises from discriminating in the purchase of mortgages on the 
bases of race, color, religion, sex, disability, familial status, age, 
or national origin, including any consideration of the age or location 
of the dwelling or the age of the neighborhood or census tract where 
the dwelling is located in a manner that has a discriminatory 
effect.\4\
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    \4\ 12 U.S.C. 4545.
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    FHFA also recognizes that there are a number of applicable and 
relevant sources of fair lending law and guidance, including judicial 
decisions, administrative interpretations and guidance, and 
administrative actions.

Fair Lending Oversight Considerations

    FHFA has broad statutory authority to supervise the regulated 
entities, including authority to monitor and gather information, 
conduct supervisory examinations, and enforce compliance with law where 
appropriate. FHFA monitors regulated entities for fair lending risk, 
conducts supervisory examinations, and, when necessary,

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takes enforcement action to ensure compliance with fair lending laws.
Monitoring and Information Gathering
    FHFA regularly monitors the fair lending risk presented by 
Enterprise and Bank activities and may request data and information in 
its role as supervisor and regulator to ensure effective, ongoing 
oversight. FHFA reviews the regulated entities' internal fair lending 
data monitoring, risk assessments, policies and procedures, internal 
control systems, and other information to appropriately scope 
monitoring and examinations commensurate with fair lending risk. Fair 
lending monitoring information may be collected pursuant to FHFA's 
supervisory and regulatory authority, including 12 U.S.C. 4514(a) which 
authorizes FHFA to order regulated entities to submit both regular and 
special reports. FHFA may require regulated entities to submit 
``regular reports . . . on the condition (including financial 
condition), management, activities, or operations of the regulated 
entity, as the Director considers appropriate.'' \5\ Fair lending 
monitoring information includes, but is not limited to: Data and other 
information necessary to monitor and evaluate the policies, programs, 
and activities of the regulated entities; information about changes in 
policies, programs, and activities; information about the regulated 
entities' fair lending testing and other compliance activities; and the 
regulated entities' self-evaluations of fair lending risk and the 
compliance of their policies, programs, and activities with respect to 
fair lending laws.
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    \5\ 12 U.S.C. 4514(a).
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Supervisory Examinations
    FHFA has broad authority to supervise the Enterprises and the Banks 
for compliance with fair lending standards. The regulated entities are 
subject to FHFA's overarching ``supervision and regulation.'' \6\ FHFA 
may conduct examinations of the regulated entities whenever FHFA 
determines that an examination is necessary or appropriate.\7\ FHFA 
examiners have examination authority equivalent to other Federal 
prudential regulators.\8\ FHFA also has a duty to ensure that the 
regulated entities are operating consistently with the public 
interest.\9\
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    \6\ 12 U.S.C. 4511(b)(1) (``Each regulated entity shall, to the 
extent provided in this chapter, be subject to the supervision and 
regulation of the Agency''); 12 U.S.C. 4511(b)(2) (``The Director 
shall have general regulatory authority over each regulated entity 
and the Office of Finance, and shall exercise such general 
regulatory authority, including such duties and authorities set 
forth under section 4513 of this title, to ensure that the purposes 
of this Act, the authorizing statutes, and any other applicable law 
are carried out.'').
    \7\ 12 U.S.C. 4517(b).
    \8\ 12 U.S.C. 4517(e). The statute particularly references the 
authority of examiners employed by the Federal Reserve banks.
    \9\ 12 U.S.C. 4513(a)(1)(B)(v).
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    FHFA conducts risk-based fair lending examinations of the regulated 
entities. FHFA's fair lending oversight program is committed to 
effective, appropriately tailored supervisory measures to ensure that 
the regulated entities adhere to applicable fair lending compliance 
standards. The Enterprises and the Banks each engage in activities that 
present differing levels and kinds of fair lending risk. FHFA carefully 
weighs the totality of available information, including monitoring 
information, market intelligence, and relevant data, when considering 
how best to employ supervisory resources.
Enforcement
    FHFA may use its administrative enforcement authority to address 
violations of ECOA and the Fair Housing Act by the regulated entities. 
That a regulated entity is in conservatorship does not preclude other 
enforcement actions; however, the conservator's broad statutory powers 
may provide FHFA with more efficient means to address problems than 
traditional enforcement tools. FHFA as conservator may take immediate 
action, consistent with applicable law, to direct or restrict the 
activities at the regulated entity, including the activities of the 
board of directors and executive management.
    FHFA has broader enforcement authority than its predecessor 
agencies FHFB and OFHEO, including for fair lending violations. The 
Housing and Economic Recovery Act (HERA) \10\ granted FHFA the 
authority to use cease and desist orders to enforce violations of all 
applicable laws, including ECOA and the Fair Housing Act.\11\ FHFA may 
also use civil money penalties as a tool to ensure fair lending 
compliance, where the statutory bases for such penalties are 
present.\12\
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    \10\ The Housing and Economic Recovery Act of 2008 (HERA), 
Public Law 110-289 (July 30, 2008), available at https://www.govinfo.gov/content/pkg/PLAW-110publ289/pdf/PLAW-110publ289.pdf.
    \11\ Public Law 110-289, sec. 1101 (amended the former OFHEO 
authorities to provide the new FHFA general supervisory and 
regulatory authority requiring regulated entity compliance with the 
Safety and Soundness Act, the regulated entities statutory charters, 
and ``any other applicable law''); sec. 1151 (amended cease and 
desist authorities to include violations of law generally); codified 
at 12 U.S.C. 4511 and 4631.
    \12\ 12 U.S.C. 4636.
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    Prior to HERA, OFHEO's fair lending enforcement authority over the 
Enterprises was limited to the Safety and Soundness Act fair housing 
provision and HUD's implementing regulation.\13\ HUD's implementing 
regulation anticipates HUD referring violations and potential 
violations of that provision by an Enterprise to FHFA for 
enforcement.\14\ FHFA will support enforcement of HUD's regulation 
implementing the Safety and Soundness Act's fair housing provision. 
FHFA will conduct a full review of HUD's referral of a violation or 
potential violation and all evidence submitted as part of the referral 
and resolve the matter appropriately and in accordance with FHFA's 
enforcement policy and in consultation with HUD. In addition, FHFA will 
continue to facilitate HUD's periodic fair lending reviews of the 
Enterprises. FHFA may also independently pursue administrative 
enforcement actions for any violations of section 4545 of the Safety 
and Soundness Act.
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    \13\ See 24 CFR 81.47(a).
    \14\ 24 CFR 81.47(a). Under the Safety and Soundness Act, FHFA 
is empowered to initiate enforcement actions for Enterprise 
violations of 12 U.S.C. 4545 and HUD's implementing regulations. The 
process for referring ``violations or potential violations'' to FHFA 
under 24 CFR 81.47(a) is distinct from the process under 24 CFR 
81.47(b), in which HUD shall conduct an investigation of the Fair 
Housing Act complaint, make a determination as to whether or not 
reasonable cause exists to believe discrimination occurred, and, if 
it does, proceed to enforcement under the Fair Housing Act.
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    FHFA's enforcement policy applies when taking any enforcement 
action against regulated entities for violations of law, including 
violations of fair lending law.\15\ Pursuant to FHFA's enforcement 
policy, FHFA may engage in consent order negotiations with regulated 
entities to resolve violations of fair lending laws.\16\ FHFA is not 
required by statute to refer potential fair lending violations to the 
Attorney General when the agency has a reason to believe that a 
regulated entity has engaged in a pattern or practice of discouraging 
or denying applications for

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credit.\17\ Nevertheless, FHFA will consult with and refer matters to 
the Attorney General and coordinate with the Department of Justice on 
enforcement of fair lending matters as appropriate.
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    \15\ Federal Housing Finance Agency, Advisory Bulletin: FHFA 
Enforcement Policy, AB 2013-03 (issued May 31, 2013), available at 
https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/20130531_AB_2013-03_FHFA-Enforcement-Policy_508%20(2).pdf.
    \16\ Federal Housing Finance Agency, Advisory Bulletin: FHFA 
Enforcement Policy, AB 2013-03 (issued May 31, 2013), available at 
https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/20130531_AB_2013-03_FHFA-Enforcement-Policy_508%20(2).pdf. The Enforcement Policy further describes a 
number of informal and formal actions that FHFA may take, many of 
which may be used for enforcing compliance with fair lending laws.
    \17\ 15 U.S.C. 1691e(g).
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    FHFA will consider whether the regulated entity has conducted any 
self-evaluations or undertaken any corrective actions when making 
supervisory and enforcement decisions. FHFA will view responsible 
business practices such as self-testing, implementation of management 
controls, and voluntary remedial action favorably when making fair 
lending supervisory and enforcement determinations. In particular, FHFA 
commits to taking into consideration an entity's cooperation and candor 
during examinations and monitoring. Regulated entities are not required 
to self-report potential violations of fair lending laws. However, 
self-reporting of violations of fair lending laws will be viewed 
favorably by FHFA as it exercises its discretion. FHFA also considers 
the number and duration of violations identified, the nature of the 
evidence of discrimination (i.e., overt discrimination, disparate 
treatment, or disparate impact), the pervasiveness of the 
discrimination, the presence and effectiveness of any anti-
discrimination policies, any history of discriminatory conduct, any 
corrective measures implemented or proposed by the regulated entity, 
and any other factors for determining the appropriateness of any 
potential action.
Consideration of Differences Between the Banks and the Enterprises
    FHFA recognizes the important distinctions between the two types of 
regulated entities, the Enterprises and the Banks. In drafting this 
Policy Statement, FHFA has considered the differences between the 
Enterprises and the Banks with respect to the Banks' cooperative 
ownership structure, mission of providing liquidity to members, 
affordable housing and community development mission, capital 
structure, and joint and several liability, as well as other applicable 
differences.\18\
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    \18\ 12 U.S.C. 4513(f).

Sandra L. Thompson,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2021-14438 Filed 7-8-21; 8:45 am]
BILLING CODE 8070-01-P