Resolution Planning

CourtFederal Housing Finance Agency
Citation86 FR 23577
Published date04 May 2021
SectionRules and Regulations
Record Number2021-09287
Federal Register, Volume 86 Issue 84 (Tuesday, May 4, 2021)
[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
                 Federal Register
                ________________________________________________________________________
                This section of the FEDERAL REGISTER contains regulatory documents
                having general applicability and legal effect, most of which are keyed
                to and codified in the Code of Federal Regulations, which is published
                under 50 titles pursuant to 44 U.S.C. 1510.
                The Code of Federal Regulations is sold by the Superintendent of Documents.
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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.''
                ---------------------------------------------------------------------------
                 \26\ See 12 CFR 1242.5(a), 86 FR at 1344.
                ---------------------------------------------------------------------------
                 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\
                ---------------------------------------------------------------------------
                 \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
                [[Page 23591]]
                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
                [[Page 23593]]
                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
                

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