1326 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

(2) If FHFA determines that the 

Enterprise is otherwise non-compliant 

with applicable requirements of this 

part, FHFA may require the Enterprise 

to submit a plan for achieving 

compliance with the requirements. 

(3) If the Enterprise is required to 

submit a plan for achieving compliance 

with applicable requirements of this 

part, the Enterprise must promptly 

submit its plan to FHFA for approval, 

consistently with § 1236.4. 

(4) The Enterprise plan must include, 

as applicable: 

(i) An assessment of the Enterprise’s 

liquidity and funding profile, and the 

reasons for the shortfall; 

(ii) The actions that the Enterprise has 

taken and will take to achieve full 

compliance with this part, including: 

(A) A plan for adjusting the 

Enterprise’s liquidity and funding risk 

profile, liquidity portfolio, liquidity and 

funding risk management practices, and 

funding sources in order to achieve full 

compliance with this part; 

(B) A plan for remediating any 

operational or management issues that 

contributed to noncompliance with this 

part; 

(C) A best estimate time frame for 

achieving full compliance with this 

part; and 

(D) A commitment to report to FHFA 

daily on Enterprise progress to achieve 

compliance in accordance with the plan 

until full compliance with this part is 

achieved. 

(iii) Other considerations or actions as 

may be required for FHFA approval. 

(c) Supervisory and enforcement 

actions. FHFA may, at its sole 

discretion, take additional supervisory 

or enforcement actions to address noncompliance with the requirements of 

this part, including non-compliance 

with the minimum liquidity 

requirements or non-compliance with 

any requirement to submit a liquidity 

plan acceptable to FHFA. 

§ 1241.31 Supervisory determination of 

temporarily increased liquidity 

requirements. 

(a) Notice. Whenever FHFA 

determines that, due to economic, 

market, or Enterprise-specific 

circumstances, temporary modified 

minimum liquidity requirements above 

those established under this part are 

necessary or appropriate for an 

Enterprise, FHFA will notify the 

Enterprise in writing of the proposed 

modified temporarily increased 

Enterprise liquidity requirements, the 

timeframe by which the Enterprise is 

required to achieve and comply with the 

proposed requirements, and an 

explanation of why the proposed 

modified Enterprise liquidity 

requirements are considered necessary 

or appropriate for the Enterprise. 

(b) Response. (1) The Enterprise may 

respond in writing to any or all of the 

matters addressed in the notice. The 

response may include any information 

which the Enterprise would like FHFA 

to consider in determining whether the 

proposed temporarily increased 

liquidity requirements should be 

established for the Enterprise, and the 

timeframe for compliance with the 

proposed requirements. Any response 

from the Enterprise must be submitted 

in writing to FHFA within 30 days of 

the Enterprise receipt of the notice. 

FHFA may shorten the required 

Enterprise response time, when in the 

opinion of FHFA, the condition of the 

Enterprise so requires, provided that the 

Enterprise is informed promptly of the 

shortened response time, or with the 

consent of the Enterprise. In its 

discretion, FHFA may extend the 

Enterprise response time. 

(2) Failure by the Enterprise to 

respond within 30 days or such other 

time period as may be specified by 

FHFA shall constitute a waiver of any 

objections to the proposed modified 

liquidity requirements or the timeframes 

for compliance. 

(c) Determination. After the close of 

the Enterprise response time period, 

FHFA will determine, based on a review 

of the Enterprise response and other 

relevant information, whether the 

proposed requirements should be 

established for the Enterprise and, if so, 

the timeframe in which the 

requirements will be effective. FHFA 

will notify the Enterprise of its 

determination in writing. The 

determination will be accompanied by 

an order effectuating the modified 

liquidity requirements, which shall be 

temporary and time-limited to address 

the relevant circumstances. The 

determination will include a supporting 

explanation, except for a determination 

not to establish the proposed 

requirements. 

(d) Submission of plan. FHFA’s 

determination may require the 

Enterprise to develop and submit to 

FHFA, within a time period specified, 

an acceptable plan to reach and 

maintain the modified liquidity 

requirements. 

Subpart E—[Reserved] 

Mark A. Calabria, 

Director, Federal Housing Finance Agency. 

[FR Doc. 2020–28204 Filed 1–7–21; 8:45 am] 

BILLING CODE 8070–01–P 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1242 

RIN 2590–AB13 

Resolution Planning 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is seeking comment on 

a proposed rule that would require 

Fannie Mae and Freddie Mac (the 

Enterprises) to develop plans to 

facilitate their rapid and orderly 

resolution in the event FHFA is 

appointed receiver. A resolution 

planning rule is an important part of 

FHFA’s on-going effort to develop a 

robust prudential regulatory framework 

for the Enterprises, including capital, 

liquidity, and stress testing 

requirements, as well as enhanced 

oversight, which will be critical to 

FHFA supervision of the Enterprises 

after they exit the conservatorships. In 

addition, a resolution plan as proposed 

to be required would support FHFA if 

appointed as receiver to, among other 

things, minimize disruption in the 

national housing finance markets by 

providing for the continued operation of 

an Enterprise’s core business lines by a 

limited-life regulated entity (LLRE); 

ensure that investors in mortgagebacked securities guaranteed by the 

Enterprises and in Enterprise unsecured 

debt bear losses in accordance with the 

priority of payments set out in the 

Safety and Soundness Act while 

minimizing unnecessary losses and 

costs to these investors; and, help foster 

market discipline in part through FHFA 

publication of ‘‘public’’ sections of 

Enterprise resolution plans. 

DATES: Comments must be received on 

or before March 9, 2021. 

ADDRESSES: You may submit your 

comments on the proposed rule, 

identified by regulatory information 

number (RIN) 2590–AB13, by any one of 

the following methods: 

• Agency Website: https://

www.fhfa.gov/open-for-comment-orinput. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by email to FHFA at 

RegComments@fhfa.gov to ensure 

timely receipt by FHFA. Include the 

following information in the subject line 

of your submission: Comments/RIN 

2590–AB13. 


tkelley on DSKBCP9HB2PROD with PROPOSALS
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 1327 

1 12 U.S.C. 1451 (note) and 1716. 

2See, e.g., id. 1454, 1723a, 4561, and 4565. 

3 12 U.S.C. 1454(a)(2) and 1717(b)(2). 

• Hand Delivered/Courier: The hand 

delivery address is: Alfred M. Pollard, 

General Counsel, Attention: Comments/ 

RIN 2590–AB13, Federal Housing 

Finance Agency, Eighth Floor, 400 

Seventh Street SW, Washington, DC 

20219. Deliver the package at the 

Seventh Street entrance Guard Desk, 

First Floor, on business days between 9 

a.m. and 5 p.m. 

• U.S. Mail, United Parcel Service, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Alfred M. Pollard, General Counsel, 

Attention: Comments/RIN 2590–AB13, 

Federal Housing Finance Agency, 

Eighth Floor, 400 Seventh Street SW, 

Washington, DC 20219. Please note that 

all mail sent to FHFA via U.S. Mail is 

routed through a national irradiation 

facility, a process that may delay 

delivery by approximately two weeks. 

For any time-sensitive correspondence, 

please plan accordingly. 

FOR FURTHER INFORMATION CONTACT: 

Ellen S. Bailey, Managing Associate 

General Counsel, (202) 649–3056, 

Ellen.Bailey@fhfa.gov; Francisco 

Medina, Assistant General Counsel, 

(202) 649–3076, Francisco.Medina@

fhfa.gov; Jason Cave, Deputy Director, 

Division of Resolutions, (202) 649–3027, 

Jason.Cave@fhfa.gov; or Sam Valverde, 

Principal Advisor, Division of 

Resolutions, (202) 649–3732, 

Sam.Valverde@fhfa.gov. These are not 

toll-free numbers. The mailing address 

is: Federal Housing Finance Agency, 

400 Seventh Street SW, Washington, DC 

20219. The telephone number for the 

Telecommunications Device for the Deaf 

is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

Comments 

FHFA invites comments on all aspects 

of the proposed rule and will take all 

comments into consideration before 

issuing a final rule. Copies of all 

comments will be posted without 

change, and will include any personal 

information you provide such as your 

name, address, email address, and 

telephone number, on the FHFA website 

at http://www.fhfa.gov. In addition, 

copies of all comments received will be 

available for examination by the public 

through the electronic rulemaking 

docket for this proposed rule also 

located on the FHFA website. 

Table of Contents 

I. Background; Purpose of and Need for the 

Rule 

A. Business and Supervision of the 

Enterprises 

B. FHFA Appointment as Conservator for 

the Enterprises; Actions Necessary to 

End the Conservatorships 

C. Purpose of and Need for Resolution 

Planning 

II. The Proposed Rule 

A. Overview of the Resolution Planning 

Framework 

B. Identification of Core Business Lines 

and Associated Operations and Services 

C. Content and Form of an Enterprise 

Resolution Plan 

D. FHFA Review and Feedback, Plan 

Deficiencies, and the ‘‘Credible’’ 

Standard 

E. Corrective Processes; Significance as a 

Prudential Standard 

F. Corporate Governance Related to 

Resolution Planning 

G. Timing of Plan Submission; Interim 

Updates 

H. Effect of a Resolution Plan on Rights of 

Other Parties 

III. Section-by-Section Summary 

A. Section 1242.1 Purpose; Identification 

as a Prudential Standard 

B. Section 1242.2 Definitions 

C. Section 1242.3 Identification of Core 

Business Lines 

D. Section 1242.4 Credible Resolution 

Plan Required; Other Notices to FHFA 

E. Section 1242.5 Informational Content 

of a Resolution Plan; Required and 

Prohibited Assumptions 

F. Section 1242.6 Form of Resolution 

Plan; Confidentiality 

G. Section 1242.7 Review of Resolution 

Plans; Resubmission of Deficient 

Resolution Plans 

H. Section 1242.8 No Limiting Effect or 

Private Right of Action 

IV. Comments Specifically Requested 

V. Paperwork Reduction Act 

VI. Regulatory Flexibility Act 

I. Background; Purpose of and Need for 

the Rule 

A. Business and Supervision of the 

Enterprises 

Enterprise Purpose and Business. 

Fannie Mae and Freddie Mac are 

federally chartered housing finance 

enterprises whose purposes include 

providing stability to the secondary 

market for residential mortgages; 

providing ongoing assistance to the 

secondary market for residential 

mortgages (including activities related 

to mortgages on housing for low- and 

moderate-income families) by increasing 

the liquidity of mortgage investments 

and improving distribution of 

investment capital available for 

residential mortgage financing; and, 

promoting access to mortgage credit 

throughout the United States, including 

central cities, rural areas, and 

underserved areas, by increasing the 

liquidity of mortgage investments and 

improving the distribution of 

investment capital available for 

residential mortgage financing.1 To meet 

these purposes, the Enterprises are 

statutorily authorized to engage in 

limited activities—primarily, the 

purchase and securitization of eligible 

mortgage loans—and are directed to use 

their authority in some ways, such as 

meeting FHFA-established goals related 

to housing loans for low- and very lowincome families and serving 

underserved housing markets.2 Loans 

eligible for purchase or securitization by 

the Enterprises must meet statutory, 

regulatory, and business eligibility 

requirements. 

Each Enterprise generally organizes 

its business activity into a single-family 

business and a multifamily business. 

The Enterprise business models for 

supporting single-family and 

multifamily housing consist primarily of 

a guarantee business. Mortgage lenders 

participate in the mortgage-backed 

securities (MBS) swap and cash window 

programs, originating loans in 

accordance with Enterprise standards 

and either providing those loans to an 

Enterprise in exchange for securities 

guaranteed by the Enterprise or selling 

loans directly to the Enterprise for cash. 

Among other things, the cash window 

enables smaller lenders to access the 

secondary market at competitive rates. 

In the portfolio business, the Enterprises 

issue debt and invest the proceeds in 

whole loans that they hold on their 

balance sheets rather than securitizing, 

and in MBS. In the past, the Enterprises 

have had substantial portfolio 

businesses. The Enterprises’ ability to 

hold loans on their balance sheets 

continues to be important to support the 

cash window acquisition channel and to 

hold delinquent loans that have been 

bought out of pools of loans 

collateralizing MBS. 

In both their portfolio and guarantee 

businesses, the Enterprises assume 

credit risk on purchased or securitized 

loans (in the MBS swap and cash 

programs, the Enterprise assumes the 

credit risk in exchange for a guarantee 

fee). Statutory requirements for loan 

purchase eligibility reduce credit risk 

somewhat. For example, the Enterprises 

may not acquire single-family loans 

with loan-to-value ratios (LTVs) at the 

time of purchase in excess of 80 percent 

without additional credit enhancement, 

the most common form of which is 

private mortgage insurance.3 In both 

their multifamily and single-family 

businesses, the Enterprises may further 

reduce the credit risk they assume by 

engaging in risk management activities 

such as credit risk transfer (CRT) 

transactions, where the Enterprises pay 

a fee to transfer some credit risk to 


tkelley on DSKBCP9HB2PROD with PROPOSALS
1328 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

4See https://www.fhfa.gov/AboutUs/Reports/ 

Pages/Overview-of-Fannie-Mae-and-Freddie-MacCredit-Risk-Transfer-Transactions-8212015.aspx, 

and other reports at https://www.fhfa.gov/ 

PolicyProgramsResearch/Policy/Pages/Credit-RiskTransfer.aspx. 5Compare 12 U.S.C. 1717(a)(2)(A), 1455(h)(2), 

and 1719(d); see also id. 4501(4) and 4503. 6 Id. 1455(h)(2) and 1719(d). Since September 

2008, the Enterprises have been provided explicit, 

but limited, support by the U.S. Department of the 

Treasury through Senior Preferred Stock Purchase 

Agreements (PSPAs) to assure continuing operation 

of the Enterprises in conservatorships. See https:// 

www.fhfa.gov/Conservatorship/Pages/SeniorPreferred-Stock-Purchase-Agreements.aspx. The 

PSPAs currently remain in place, although they are 

meant to be temporary, and the PSPA for each 

Enterprise establishes a limit or cap on the amount 

of support Treasury will provide, so they are not 

an exercise of the full faith and credit of the United 

States. More information on the Enterprise 

conservatorships and the PSPAs is set forth below 

in section B, FHFA Appointment as Conservator of 

the Enterprises; Actions Necessary to End the 

Conservatorships. 

7The Enterprises may be depositories of public 

money; are exempt from almost all federal, state, 

and local taxation; and, are not required to be 

licensed to do business in any state. Id. 1452(d) and 

(e), 1456(a), 1723a(c)(2), and 1723a(a). Enterprise 

securities are exempt securities within the meaning 

of laws administered by the Securities and 

Exchange Commission, and the Secretary of the 

Treasury may purchase their obligations and may 

do so with public money. Id. 1455(c) and (g), 

1719(c) and (e), and 1723c. 

8See https://www.fhfa.gov/ 

PolicyProgramsResearch/Research/Pages/WorkingPaper-07-4.aspx. 

9 12 U.S.C. 4513(a)(1)(B). 

10See generally, id. 4513b, 4514, 4517, 4611, 

4622, and 4631. 

11 Id. 4617(a). 

12 Id. 4617(i)(1)(A)(ii) and (2)(A). 

13Compare, 12 U.S.C. 1821(c) and 4617(b); 

1821(n) and 4617(i). 14See generally, 12 U.S.C. 1821. 15 12 U.S.C. 1817(b) and 1821(a)(4). 16 75 FR 27464, 27465 (May 17, 2010); see also 

12 CFR 360.10 (2020). 17See generally, 12 U.S.C. 1817(b) and 1821(a)(4); 

compare 12 U.S.C. 1455(c)(2), 1719(c), and 4516(e). 18See 83 FR 33312, 33317 (July 17, 2018) (FHFA 

Notice of proposed rulemaking on Enterprise 

Capital Requirements, which discusses 2007–2008 

financial crisis and the Enterprises). 

private investors.4 Structures of CRT 

transactions vary. 

The Enterprises’ mortgage business 

lines require administration of 

cashflows derived from payments of 

principal and interest on underlying 

mortgage loans. The Enterprises contract 

with loan servicers (often, sellers of 

loans to an Enterprise who retain 

mortgage servicing rights) to administer 

payments from mortgagors. The 

Enterprises also jointly own and 

contract with Common Securitization 

Solutions, LLC (CSS), which operates a 

common securitization platform for 

single-family mortgages and performs 

certain back-office and administration 

operations previously conducted by the 

Enterprises directly (and separately). A 

common securitization platform also 

facilitates issuance of a common 

security, the uniform mortgage-backed 

security (UMBS), intended to promote 

liquidity in the secondary mortgage 

market and eliminate pricing differences 

between Fannie Mae and Freddie Mac 

single-family securities. By contrast, 

each Enterprise securitizes, issues, and 

administers multifamily MBS for its 

own account, using distinct 

collateralization structures. 

While there are similarities between 

the Enterprises’ business and that of the 

Government National Mortgage 

Association (Ginnie Mae), the 

Enterprises’ guarantee of timely 

payment of principal and interest to 

investors is not backed by the full faith 

and credit of the United States.5 The 

Enterprises are required to state in all of 

their obligations and securities that such 

obligations and securities, including the 

interest thereon, are not guaranteed by 

the United States and do not constitute 

a debt or obligation of the United States 

or any agency or instrumentality thereof 

other than the Enterprise itself.6

Nonetheless, because of the Enterprises’ 

federal statutory charters and some 

federally conferred business privileges,7

pricing of Enterprise obligations has 

reflected investor perception of a full 

faith and credit guarantee.8 Investors 

may have been relying on this 

perception when deciding to invest in 

the Enterprises’ debt and MBS at 

borrowing costs near that of debt issued 

by the federal government, despite the 

Enterprises’ high leverage. That same 

perception may encourage typically 

conservative investors, including 

foreign sovereigns, to purchase 

Enterprise obligations and securities. 

The perception of an implicit guarantee 

thus undermines market discipline and 

incentivizes risk taking and growth at 

the Enterprises. 

Enterprise Supervision; Resolution. 

As regulator and supervisor of the 

Enterprises, FHFA’s duties include 

ensuring that the Enterprises operate in 

a safe and sound manner; foster liquid, 

efficient, competitive, and resilient 

national housing finance markets; and, 

operate in a manner that is consistent 

with the public interest.9 In common 

with other federal financial safety and 

soundness supervisors, FHFA is 

authorized to examine the Enterprises 

and to require regular and special 

reports from them; to establish capital, 

liquidity, and other prudential 

management and operations standards; 

to require the Enterprises to submit 

corrective plans and take corrective 

actions if certain standards are not met; 

and, to bring enforcement actions 

against the Enterprises and certain 

‘‘entity-affiliated’’ parties.10

FHFA is also authorized to appoint 

itself as conservator or receiver of an 

Enterprise if statutory grounds are 

met.11 When appointed receiver of an 

Enterprise, FHFA must establish an 

LLRE which immediately succeeds to 

the Enterprise’s federal charter and 

thereafter operates subject to the 

Enterprise’s authorities and duties.12

FHFA’s authorities as receiver or 

conservator were modeled on those 

provided to the Federal Deposit 

Insurance Corporation (FDIC) through 

the Federal Deposit Insurance Act, and 

the concept of an LLRE is derived from 

an FDIC-established bridge bank.13 FDIC 

resolutions, however, involve insured 

depository institutions (IDIs) that pay 

into the FDIC’s Deposit Insurance Fund 

(DIF) and receive, for the benefit of 

deposit customers, FDIC deposit 

insurance on deposit amounts up to a 

certain limit.14 The FDIC may use the 

DIF when conducting a resolution and 

may replenish the DIF through 

assessments paid by thousands of IDIs.15

To enable the FDIC ‘‘to understand and 

anticipate the operational, managerial, 

financial and other aspects of the IDI 

that would complicate efforts by the 

FDIC as receiver to . . . determine and 

maximize franchise value, and conduct 

a least-cost [resolution],’’ the FDIC has 

adopted a regulation requiring larger 

IDIs to engage in resolution planning.16

In contrast to FDIC resolutions, there 

is no fund similar to the DIF available 

to FHFA when conducting an Enterprise 

resolution.17 Because Enterprise 

obligations and securities are not backed 

by the full faith and credit of the United 

States and because there is no DIF-like 

fund for Enterprise resolution, 

resolution of an Enterprise by FHFA 

necessarily would involve only the 

Enterprise’s resources available to 

absorb losses and satisfy investor and 

creditor claims—Enterprise assets, 

capital and capital-like instruments, and 

contracts that transfer risk of loss to 

third parties. 

B. FHFA Appointment as Conservator 

for the Enterprises; Actions Necessary to 

End the Conservatorships 

The 2007–2008 financial crisis began 

with stresses in the ‘‘subprime’’ and 

‘‘Alt-A’’ mortgage market and grew to 

the traditional mortgage market and 

other financial sectors in the United 

States and globally.18 As asset prices fell 

and other large financial firms failed, it 

became increasingly difficult for the 

Enterprises to issue debt to fund their 

retained portfolios, to raise new capital 

to cover mark-to-market losses from 

private label securities the Enterprises 


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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 1329 

19See https://www.fhfa.gov/Media/PublicAffairs/ 

Pages/Statement-of-FHFA-Director-James-B— 

Lockhart-at-News-Conference-AnnnouncingConservatorship-of-Fannie-Mae-and-FreddieMac.aspx. 

20See supra, fn 6. 

21 Due to corporate tax law changes in 2017 that 

resulted in write-downs to the value of deferred tax 

assets, Fannie Mae received a $3.7 billion dollar 

draw from Treasury in 2018. This was a one-time 

accounting event. 

22See https://www.fhfa.gov/Media/PublicAffairs/ 

Pages/Statement-of-FHFA-Director-James-B— 

Lockhart-at-News-Conference-AnnnouncingConservatorship-of-Fannie-Mae-and-FreddieMac.aspx; https://www.fhfa.gov/Media/ 

PublicAffairs/Pages/Statement-of-OFHEO-DirectorJames-B-Lockhart-in-Support-of-Secretary-Paulson,- 

Administration-and-the-Federal-Reserve-in-T.aspx; 

and, https://www.treasury.gov/press-center/pressreleases/pages/hp1129.aspx. 

23By 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. 

24See https://www.fhfa.gov/AboutUs/Reports/ 

ReportDocuments/FHFA_StrategicPlan_2021-2024_

Final.pdf. 

25See U.S. Department of the Treasury, Housing 

Reform Plan (September, 2019), available at https:// 

home.treasury.gov/system/files/136/TreasuryHousing-Finance-Reform-Plan.pdf. 

26To facilitate a credible resolution planning 

framework, the Housing Reform Plan recommends 

requiring each Enterprise to maintain a minimum 

amount of total loss-absorbing capacity that could 

be bailed-in in the event of financial distress. Id. 

Such a requirement is beyond the scope of the 

current proposal. 

27 In this notice of proposed rulemaking, FHFA 

refers to the DFA section 165 rule as applying to 

bank holding companies, rather than that rule’s 

‘‘Covered Companies,’’ for ease of reading and 

because currently there are no FSOC-designated 

nonbank financial companies. 

28See https://home.treasury.gov/system/files/261/ 

Financial-Stability-Oversight-Councils-Statementon-Secondary-Mortgage-Market-Activities.pdf. 

held, and to build reserves for projected 

credit losses from their guarantees. In 

September 2008, when it was apparent 

that substantial deterioration in the 

housing market would leave the 

Enterprises unable to fulfill their 

statutory purposes and mission without 

government intervention, FHFA 

appointed itself conservator of each 

Enterprise.19 At the same time, as 

conservator for each Enterprise, FHFA 

entered into the Senior Preferred Stock 

Purchase Agreements (PSPAs) with the 

U.S. Department of the Treasury 

(Treasury) to provide each Enterprise 

financial support up to a specified 

amount.20 This limited support, which 

continues to the present, permits the 

Enterprises to meet their outstanding 

obligations and continue to provide 

liquidity to the mortgage markets while 

maintaining a positive net worth. The 

Enterprises required a combined $187 

billion dollars in Treasury support from 

2008 to 2012. However, Fannie Mae and 

Freddie Mac have not requested a major 

draw from the Treasury since 2012.21

FHFA appointed itself as conservator 

of each Enterprise in September 2008, 

instead of receiver, in part due to 

concerns about potential market 

instability that could have resulted from 

an unprecedented receivership 

proceeding for which FHFA and the 

Enterprises had not planned or 

prepared, which could have been 

compounded by market perception that 

all Enterprise debt was backed to some 

extent by the U.S. government.22 Until 

July 2008, the Safety and Soundness Act 

did not provide for Enterprise 

receivership and there was no process 

for separating Enterprise operations 

between functions that were necessary 

to maintaining the stability of the 

housing market and those which were 

not, leaving the regulator and 

policymakers with limited options. The 

Enterprise conservatorships have now 

lasted for over twelve years, 

considerably longer than any 

conservatorship under the auspices of 

the FDIC or of the Resolution Trust 

Corporation, established to resolve 

failed thrifts following the 1989 thrift 

crisis.23

FHFA’s current Strategic Plan 

includes the objective of responsibly 

ending the conservatorships.24 In 

preparation, FHFA is developing a more 

robust prudential regulatory framework 

for the Enterprises, including capital, 

liquidity, and stress testing 

requirements, and enhanced 

supervision. The Treasury Housing 

Reform Plan noted the importance of 

developing a credible resolution 

framework for the Enterprises to protect 

taxpayers, enhance market discipline, 

and mitigate moral hazard and systemic 

risk.25 FHFA believes this proposed rule 

is an important part of developing such 

a framework and is a key step toward 

the robust regulatory postconservatorship framework FHFA is 

developing. Further, FHFA concurs 

with Treasury’s enumeration of the 

benefits of a credible resolution 

framework. The importance of such a 

framework for the Enterprises is 

heightened by the historical precedent 

set by the decision to place each 

Enterprises in conservatorship instead 

of receivership. FHFA also notes that 

additional changes may be warranted, 

such as requiring each Enterprise to 

maintain a minimum amount of lossabsorbing capacity in the form of 

subordinated or convertible debt that 

could be ‘‘bailed in’’ should the 

Enterprise encounter significant 

financial distress, which could facilitate 

the establishment of a viable LLRE.26

FHFA is considering a separate 

rulemaking that would require each 

Enterprise to maintain minimum 

amounts of long-term debt and other 

loss-absorbing capacity requirements. 

In developing the proposed resolution 

planning framework, FHFA has 

considered the resolution planning 

framework of the FDIC for large IDIs and 

a framework jointly established by the 

FDIC and the Federal Reserve Board 

(FRB) pursuant to section 165(d) of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 (the 

DFA section 165 rule), which covers 

large, interconnected bank holding 

companies and nonbank financial 

companies designated by the Financial 

Stability Oversight Council (FSOC) for 

enhanced supervision by the FRB. 

While there would be significant 

differences among FDIC resolution of an 

IDI, resolution of a bank holding 

company in a bankruptcy proceeding, 

and FHFA resolution of an Enterprise, 

the FDIC’s IDI rule and the DFA section 

165 rule provided helpful context for 

FHFA’s consideration of the goals and 

requirements of an appropriate 

Enterprise resolution planning 

framework in view of FHFA’s statutory 

authorities and mandates.27

C. Purpose of and Need for Resolution 

Planning 

Considering the Enterprises’ statutory 

purposes and mission and FHFA’s 

statutory duties and authorities, the 

goals of Enterprise resolution planning 

are to facilitate the continuation of 

Enterprise functions that are essential to 

maintaining stability in the housing 

market in the establishment of an LLRE 

by FHFA as receiver and to allocate 

losses to creditors in the order of their 

priority. The Enterprises’ combined 

single-family book of business is in 

excess of $5 trillion and the combined 

multifamily book is approximately $650 

billion. Given the Enterprises’ statutory 

obligation to provide liquidity to the 

secondary mortgage market, their 

market dominance in providing such 

liquidity, and the potentially significant 

impact financial stress in the secondary 

mortgage market could have on the 

national housing finance markets, 

financial stability, and the broader 

economy,28 transferring Enterprise 

assets and liabilities to and continuing 

functions in an LLRE requires careful 

consideration and tailoring to the 

specific function of the Enterprises, 

despite the Enterprises’ limited business 

lines (relative to other large and 

complex financial institutions) and 

simple corporate structures. 

To facilitate FHFA’s role as receiver, 

the proposed rule would establish a 


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1330 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

29Advance 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. 

30 12 CFR 243.2; see also 12 U.S.C. 5365(d)(1), 

requiring certain bank holding companies to report 

to the FRB on their plans ‘‘for rapid and orderly 

resolution.’’ The DFA section 165 rule defines 

‘‘rapid and orderly resolution’’ as ‘‘a reorganization 

or liquidation of the [bank holding] company . . . 

that can be accomplished within a reasonable 

period of time in a manner that substantially 

mitigates the risk that the failure of the [bank 

holding] company would have serious adverse 

effects on [the] financial stability of the United 

States.’’ 

31 75 FR 27464, 27466 (May 17, 2010). In general, 

FDIC Federal Register notices on its IDI rule 

provide high level background on U.S. participation 

in international efforts toward resolution of large, 

interconnected financial firms. 

32See generally, 12 U.S.C. 4617(i). 

multi-faceted, iterative Enterprise 

resolution planning process that 

provides FHFA an Enterprise resolution 

plan containing (i) key information 

about an Enterprise’s structure, 

governance, operations, business 

practices, financial responsibilities, and 

risk exposures and (ii) advance strategic 

thinking and analysis, including the 

identification of impediments to ‘‘rapid 

and orderly’’ resolution as well as 

actions that could facilitate resolution if 

taken before receivership or in 

establishing the LLRE. The proposed 

resolution planning process also 

includes Enterprise development and 

maintenance of resolution-related 

capabilities to be assessed or verified 

periodically by FHFA that could 

generate, on a timely basis, critical 

information (e.g., identification of key 

personnel) that FHFA would need as 

receiver to fulfill its statutory duties. 

Together, these components would help 

inform the immediate establishment of 

the LLRE to continue Enterprise 

business functions, including an 

informed division of assets and 

liabilities between the Enterprise 

receivership estate and a newly 

established LLRE. 

Advance information, strategic 

analysis, and action, where appropriate, 

would also support other important 

goals of a rapid and orderly Enterprise 

resolution—to minimize disruption in 

the national housing finance markets, 

preserve Enterprise franchise and asset 

value, and ensure creditors bear losses 

in the order of their priority.29 These 

goals work in concert, since a disruption 

of national housing finance markets also 

could increase costs to FHFA as receiver 

to the detriment of claimants on an 

Enterprise’s receivership estate. 

As well, the proposed rule would 

support transparency in the Enterprises’ 

resolution planning process by requiring 

each Enterprise resolution plan to 

include a ‘‘public section’’ that FHFA 

would publish. FHFA may publish its 

own high-level assessment of Enterprise 

resolution plans as the planning process 

matures. FHFA believes that such 

transparency would further another 

important policy goal—fostering market 

discipline. Despite statutory provisions 

clarifying that neither the Enterprises 

themselves nor their securities or 

obligations are backed by the United 

States, investors, creditors and others 

doing business with the Enterprises may 

perceive that the Enterprises have 

implicit United States government 

support. Financial support from the 

Treasury Department provided through 

the PSPAs, which continues today, 

could encourage that perception. To 

clarify the status of the Enterprises as 

privately owned corporations, FHFA 

seeks to make explicit in this resolution 

planning rule that no extraordinary 

government support will be available to 

prevent an Enterprise receivership, 

indemnify investors against losses, or 

fund the resolution of an Enterprise. 

Each Enterprise must incorporate that 

assumption into its resolution plan, and 

this assumption must be apparent in the 

plan’s public section. 

II. The Proposed Rule 

A. Overview of the Resolution Planning 

Framework 

‘‘Rapid and orderly resolution’’ of an 

Enterprise. The proposed rule would 

establish the procedural and substantive 

requirements for Enterprise resolution 

plans developed to facilitate their rapid 

and orderly resolution by FHFA as 

receiver. The term ‘‘rapid and orderly 

resolution’’ is used in the DFA section 

165 and its implementing rule.30 FHFA 

has carefully considered whether an 

Enterprise resolution planning rule 

should include a similar standard. 

A similar standard, reflecting FHFA’s 

authorities as receiver and the 

Enterprises’ statutory authorities and 

obligations, would help the Enterprises, 

market participants, and the public 

understand that the proposed rule seeks 

to achieve a similar, but appropriately 

tailored, goal—resolution, if necessary, 

of a large financial intermediary that 

performs functions other market 

participants rely on for their efficient 

operation, and which would be difficult 

to transfer or for which there are not 

available substitutes. FHFA views an 

Enterprise resolution planning rule as 

similar to the DFA section 165 rule, one 

purpose of which is to promote U.S. 

financial stability, and to efforts of other 

U.S. financial safety and soundness 

supervisors to align with common goals 

of the Financial Stability Board, such as 

improving ‘‘the capacity of national 

authorities to implement orderly 

resolutions of large and interconnected 

financial firms.’’ 31

FHFA recognizes, however, that 

statutory provisions creating the 

Enterprises and authorizing their 

resolution by FHFA answer some 

questions that are not determined in 

advance for other receivers or 

administrators in bankruptcy—the 

Safety and Soundness Act directs that 

the Enterprises’ functions as set forth in 

their charter acts will continue and 

establishes the framework for the 

continuation of these functions in a 

successor LLRE. FHFA’s approach to 

‘‘rapid and orderly resolution’’ is 

necessarily formed against that statutory 

backdrop.32

For the foregoing reasons, FHFA 

proposes to establish ‘‘rapid and orderly 

resolution’’ as a standard for Enterprise 

resolution, but to define it in a manner 

tailored to resolution of an Enterprise 

contemplated by the Safety and 

Soundness Act. Thus, FHFA proposes to 

define ‘‘rapid and orderly resolution’’ as 

a process for establishing an LLRE as 

successor to an Enterprise, including 

transferring Enterprise assets and 

liabilities to the LLRE, such that 

succession by LLRE ‘‘can be 

accomplished within a reasonable 

amount of time and in a manner that 

substantially mitigates the risk that the 

failure of the Enterprise would have 

serious adverse effects on national 

housing finance markets.’’ FHFA 

requests comment on the use of ‘‘rapid 

and orderly resolution,’’ as defined in 

the proposed rule, as the standard for an 

Enterprise resolution. 

Procedural overview of the proposed 

Enterprise resolution planning 

framework. Procedurally, development 

of an Enterprise resolution plan would 

begin with the identification of 

Enterprise ‘‘core business lines.’’ Core 

business lines and the operations, 

services, functions, and supports 

associated with core business lines are 

important focal points of resolution 

planning, as FHFA expects ‘‘core’’ 

Enterprise business lines would be 

conducted in an LLRE established to 

continue the business operations of an 

Enterprise in receivership. 

After core business lines and 

associated operations, services, 

functions, and supports are identified, 

each Enterprise would be required to 

develop and submit to FHFA a 

resolution plan that provides strategic 

analysis and information to facilitate 


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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 1331 

33As defined in the Safety and Soundness Act, 

an Enterprise’s ‘‘authorizing statute’’ is its charter 

act (the Federal National Mortgage Association 

Charter Act for Fannie Mae, and the Federal 

Mortgage Loan Corporation Act for Freddie Mac). 

See 12 U.S.C. 4502(3). In this notice of proposed 

rulemaking, FHFA may use the terms ‘‘authorizing 

statute’’ and ‘‘charter act’’ interchangeably. 

34 12 CFR 243.2. 

35Supra, fn 1. FHFA also notes that 

discontinuation of mission-related functions could 

be disruptive to other markets, such as markets that 

are underserved. 

FHFA’s rapid and orderly resolution of 

the Enterprise in a receivership, 

including setting forth actions that an 

Enterprise would take to improve its 

resolvability and identified 

impediments to resolvability that may 

be beyond the Enterprise’s ability to 

address or control. 

FHFA would review a received and 

complete resolution plan and provide 

notice to the Enterprise identifying 

deficiencies in its resolution plan, if 

any, as well as actions or changes set 

forth by the Enterprise in its resolution 

plan that FHFA agrees could facilitate a 

rapid and orderly resolution. FHFA may 

also provide other feedback, such as on 

the timing of actions or changes to be 

undertaken by the Enterprise. An 

Enterprise receiving a notice of 

deficiency would be required to submit 

a revised resolution plan that corrects 

the deficiency, or addresses what 

actions will be taken to correct it. 

The resolution planning process 

proposed is an iterative one, involving 

episodic and periodic reviews (and 

updates as appropriate) of business 

lines, and periodic development of 

revised resolution plans. FHFA would 

employ its examination authority to 

assess Enterprise compliance with any 

final rule on resolution planning and, 

importantly, to assess or verify 

Enterprise capabilities that would be 

critical to facilitate resolution by FHFA, 

including timely production of accurate 

information from management 

information systems. The proposed rule 

is discussed in greater detail below. 

B. Identification of Core Business Lines 

and Associated Operations and Services 

Proposed definition of ‘‘core’’ 

business line; FHFA considerations on 

scope. The resolution planning process 

begins with identification of Enterprise 

core business lines and associated 

operations and services. Because the 

statutory outcome of Enterprise 

resolution is establishment of an LLRE 

that succeeds to the charter of the 

Enterprise and continues its operations 

on the same statutory basis as the 

Enterprise, FHFA proposes to define a 

‘‘core business line’’ as each business 

line of the Enterprise that plausibly 

would continue to operate in an LLRE, 

considering the purposes, mission, and 

authorized activities of the Enterprise 

set forth in its authorizing statute and 

the Safety and Soundness Act.33 ‘‘Core 

business line’’ would include 

operations, services, functions, and 

supports associated with the business 

line and necessary for the business 

line’s continuation in the LLRE. 

As an example of how the proposed 

‘‘core business line’’ definition could 

operate, application of the concept may 

result in identification of two core 

business lines for each Enterprise, a 

single-family business line and a 

multifamily business line. Within the 

single-family business line, associated 

operations, services, functions, and 

supports may include purchasing 

single-family mortgage loans for cash as 

well as related operations such as loan 

servicing, credit enhancement, 

securitization support, information 

technology support and operations, and 

essential human resources and 

personnel support. When identifying 

associated operations, services, 

functions, and supports, an Enterprise 

should consider those functions that it 

performs directly and those that are 

performed by an affiliate or provided by 

a third party, including third parties 

whose direct relationship is with the 

borrower, but whose function may 

benefit an Enterprise (such as the 

provider of borrower loan-level 

mortgage insurance). 

FHFA notes that the FDIC IDI and 

DFA section 165 resolution planning 

rules also require IDIs and bank holding 

companies, respectively, to identify 

‘‘core business lines’’ but define such 

business lines as those whose failure, in 

the view of the institution or company, 

would result in material loss of revenue, 

profit, or franchise value. FHFA 

understands such concepts, in the 

context of those rules, to frame core 

business lines as those whose value the 

receiver should prioritize preserving in 

resolution or for which the receiver may 

obtain a higher price or find a ready 

market should such a business line be 

sold in a resolution. FHFA’s proposed 

definition of ‘‘core business line’’ is 

different from the definition in the IDI 

and DFA section 165 resolution 

planning rules, considering that the 

Safety and Soundness Act requires 

FHFA to establish an LLRE for, and the 

LLRE to succeed to the charter of, an 

Enterprise in receivership. 

Consequently, FHFA believes it 

appropriate for an Enterprise resolution 

planning rule to focus on continuation 

of core business lines in an LLRE, and 

sees less need for the identification of 

Enterprise core business lines to 

consider the impact of failure on 

revenue, profit, or franchise value. 

FHFA requests comment on whether the 

proposed definition of ‘‘core business 

line’’ should be expanded to include 

consideration of the impact of failure 

(e.g., whether the definition of ‘‘core 

business line’’ should be revised to state 

‘‘each business line of the Enterprise 

whose failure would result in a material 

loss of revenue, profit, or franchise 

value or would impair the Enterprise’s 

ability to fulfill its purposes, mission, or 

obligations under in its authorizing 

statute and the Safety and Soundness 

Act.’’). 

FHFA believes that the scope of the 

proposed ‘‘core business line’’ 

definition, when considering the 

Enterprises’ statutory purposes and 

missions and relatively simple corporate 

structures, makes it unnecessary for an 

Enterprise resolution planning rule to 

require identification of ‘‘critical 

operations’’ (which bank holding 

companies subject to the DFA section 

165 rule must identify) or of ‘‘critical 

services’’ (which IDIs subject to the 

FDIC IDI rule must identify). Enterprise 

resolution planning is a process distinct 

from the identification of operations, 

services, functions, and supports 

associated with an Enterprise core 

business line. Likewise, FHFA does not 

believe it would be necessary to define 

the terms ‘‘critical operations’’ or 

‘‘critical services,’’ in an Enterprise 

resolution planning rule, for reasons set 

forth below. 

In the DFA section 165 rule, ‘‘critical 

operations’’ is defined as ‘‘those 

operations of the [bank holding] 

company, including associated services, 

functions and support, the failure or 

discontinuance of which would pose a 

threat to the financial stability of the 

United States.’’ 34 Unlike any bank 

holding company, each Enterprise was 

created by statute to perform limited 

functions in support of a particular 

market. 

In that light, for purposes of 

resolution planning, it would be 

difficult for FHFA to conclude that a 

business line integral to an Enterprise’s 

statutory purposes and mission could be 

discontinued without threatening the 

stability of the secondary mortgage 

market or another market an Enterprise 

is required to serve; each Enterprise’s 

appropriate functions, as carried out 

through its core business lines, are in 

service to its purposes and mission.35 In 

other words, if ‘‘critical operations’’ 

understood with regard to the 


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1332 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

36 12 CFR 360.10(b)(5). 

37 75 FR 27464, 27465 (May 17, 2010). 

38 Id., at 27467. 

39 Id., at 27464. 40See generally, 12 U.S.C. 4561 and 4565. 

Enterprises as operations that, if not 

performed, could cause disruption or 

instability in the secondary market for 

residential mortgages, FHFA expects 

there would be alignment between the 

Enterprises’ core business lines with 

their statutory purposes and mission, 

such that all core business lines would 

be considered critical operations. 

As for ‘‘critical services,’’ the FDIC IDI 

rule defines these as services and 

operations of the IDI that are necessary 

to continue its day-to-day operations, 

such as servicing, information 

technology support and operations, and 

human resources and personnel.36

When proposing its IDI rule, FDIC 

explained that ‘‘[k]ey decisions affecting 

the IDI, and key services or functions 

relating to the IDI, are often made . . . 

by parent holding companies or 

affiliates of the IDI,’’ 37 that ‘‘reliance 

upon affiliates to provide critical 

services can establish an impediment to 

transferring its assets, liabilities and 

operations to an acquiring institution or 

bridge bank,’’ 38 and that one purpose of 

the resolution planning rule was for IDIs 

to ‘‘demonstrat[e] how [they] could be 

separated from their affiliate structure 

and wound down in an orderly and 

timely manner in the event of 

receivership.’’ 39 FHFA agrees that 

identification of critical services is 

important (particularly so if services are 

being provided by an affiliate within a 

holding company, possibly without an 

arms-length contract), but believes that 

such services already would be covered 

by the proposed definition of ‘‘core 

business lines’’ that includes operations, 

services, functions, and supports 

associated with the business line and 

necessary for its continuation. 

FHFA invites comment on its view 

that there would be sufficient alignment 

between the definition of core business 

lines (those businesses line of the 

Enterprise that plausibly would 

continue to operate in an LLRE, 

considering the purposes, mission, and 

authorized activities of the Enterprise) 

and the concept of ‘‘critical operations’’ 

(operations that, if not performed, could 

cause disruption or instability in the 

secondary market for residential 

mortgages) such that an Enterprise 

resolution planning rule would not need 

a separate process for identification of 

‘‘critical operations.’’ Also, FHFA 

requests comment on the conclusion 

that a definition of ‘‘core business line’’ 

that includes operations, services, 

functions, and supports associated with 

the business line and necessary for it to 

continue would capture the concept of 

‘‘critical services’’ (services and 

operations of the Enterprise that would 

be necessary to continue its day-to-day 

operations), such that an Enterprise 

resolution planning rule would not need 

to separately identify those associated 

operations and services that are 

‘‘critical.’’ 

Process for identifying core business 

lines; methodology. Procedurally, FHFA 

proposes to require each Enterprise to 

review its business lines and provide 

FHFA notice of those business lines 

preliminarily determined to be core, 

subject to FHFA review. On review, 

FHFA may approve or disapprove of 

any business line identified by an 

Enterprise as core (or of any operation, 

service, function, or support associated 

with any business line) and may 

independently identify any other 

business line as core. Following its 

review, and generally within three 

months of receiving an Enterprise’s 

preliminary identification, FHFA will 

provide each Enterprise a notice of its 

core business lines for purposes of that 

Enterprise’s resolution planning. Notice 

by FHFA may not include all associated 

operations, services, functions, and 

supports, as these aspects of a core 

business line could vary by Enterprise 

and would be better identified by the 

Enterprise, considering its experience 

operating that particular business line. 

The proposed rule would permit 

FHFA to provide an Enterprise notice of 

identification of a core business line at 

any time at FHFA’s initiative. To give an 

Enterprise time to incorporate any core 

business line newly identified by FHFA 

into its resolution planning, the 

Enterprise would not be required to 

incorporate a core business line 

identified by FHFA in its next required 

resolution plan, if that plan is required 

to be submitted within six months after 

the date the Enterprise receives notice of 

identification from FHFA. 

The proposed approach to 

identification is intended to ensure that 

both the Enterprises and FHFA 

separately consider the Enterprises’ 

statutory purposes, mission, and 

authorities when identifying core 

business lines, bringing both business 

and supervisory expertise and 

perspective to bear on identification. 

The proposed approach leverages each 

Enterprise’s responsibility to meet the 

purposes of its statutory charter and its 

understanding of its own business 

operations, while recognizing FHFA’s 

statutory duties as supervisor to ensure 

that each Enterprise complies with its 

charter act and operates in the public 

interest and FHFA’s obligation as 

receiver to ensure that an LLRE is 

constituted in a manner to operate in 

accordance with the charter of the 

Enterprise for which it is successor. 

To identify its core business lines, 

each Enterprise would be required to 

develop and implement an 

identification process, including a 

methodology to evaluate the 

Enterprise’s participation in activities 

and markets that are critical to fostering 

liquidity, efficiency, resilience, stability, 

and competition in the national housing 

finance markets or carrying out the 

statutory mission and purpose of the 

Enterprise. That methodology should 

take into account the markets and 

activities in which the Enterprise 

participates; the significance of those 

markets and activities with respect to 

the national housing finance markets or 

the Enterprise’s fulfillment of its 

statutory mission and purpose; and, the 

significance of the Enterprise as a 

provider or other participant in those 

markets and activities. An Enterprise’s 

process for identifying its core business 

lines could incorporate, for example, 

review and assessment of business 

activities toward meeting its statutory 

duty to serve and its statutory affordable 

housing goals.40

FHFA would not be required to utilize 

any particular methodology for 

identifying any core business line but 

believes that it would be appropriate to 

consider the factors set forth above in 

the methodology for Enterprise 

identification. FHFA would be able to 

consider any other factor it deemed 

appropriate. 

Because FHFA proposes to require the 

Enterprises periodically to review their 

business lines to ensure that 

identification of core business lines is 

up-to-date, the proposed rule would 

require each Enterprise periodically to 

review its identification process and to 

revise it as necessary to ensure its 

continued effectiveness. Additional 

information regarding periodic reviews 

is set forth below. 

Timing of initial and subsequent 

Enterprise identifications of core 

business lines. FHFA proposes to 

require each Enterprise to provide its 

initial notice preliminarily identifying 

core business lines to FHFA within 

three months after the effective date of 

a final rule, and requests comment on 

whether three months is sufficient time 

for such identification, considering that 

identification necessarily involves 

establishing and implementing the 

methodology described above to assess 

business lines and their associated 

operations, services, functions, and 


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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 1333 

supports. Because identification of core 

business lines is only the first step in a 

resolution planning process, by 

proposing a relatively short period from 

the effective date of a final rule to the 

submission date of an initial 

identification notice, FHFA seeks to 

balance the Enterprises’ need for 

sufficient time to develop and 

implement a meaningful identification 

process with FHFA’s need for the 

Enterprises to develop and submit 

initial resolution plans that consider 

those core business lines, within a 

reasonable period of time after the 

effective date of a final rule. For the 

same reason—the desire for the 

Enterprises to complete initial 

resolution plans within a reasonable 

time after the effective date of a final 

rule—FHFA expects that it would view 

an Enterprise’s initial identification 

process as sufficient if it reflects 

thoughtful consideration and 

application of a methodology consistent 

with a final rule, even if improvements 

to the Enterprise’s identification process 

are warranted and would be undertaken 

as part of any subsequent identification 

activities. 

Following its initial preliminary 

identification of core business lines, 

each Enterprise would be expected to 

review its business lines periodically, in 

accordance with the methodology set 

forth in the proposed rule, and to do so 

sufficiently in advance of its next 

resolution plan submission that the 

Enterprise could complete the noticeand-review process for FHFA 

identification of any new core business 

lines and also submit information 

required to be in the resolution plan for 

each core business line. Up-to-date 

identification of core business lines and 

associated operations, services, 

functions, and supports is critical for 

Enterprise resolution planning and to 

the development of a credible resolution 

plan. 

In line with the proposed definition of 

‘‘core business line,’’ in the period from 

submission of one resolution plan to the 

next, business lines identified as core 

may not change. To avoid unnecessary 

burden on the Enterprises and FHFA 

which may result if, out of an 

abundance of caution, an Enterprise 

conducts more frequent identification 

processes than necessary, FHFA also 

proposes to reserve authority to direct 

the Enterprises as to the timeframe for 

conducting any subsequent periodic 

identification process. Such direction 

would address only the timing of a 

periodic identification process and 

would not, for example, relieve an 

Enterprise of the need to review its 

business lines if it experienced a 

‘‘material change,’’ as addressed below. 

By reserving authority to direct the 

timing of periodic identification 

processes, FHFA seeks to balance the 

need for up-to-date information about 

core business lines with the burden of 

conducting a periodic process, if it 

becomes apparent that identified core 

business lines are not changing over the 

course of several resolution plan 

submissions. 

Change to identification as a core 

business line, including FHFA 

reconsideration. FHFA recognizes that 

there may be different views on whether 

a business line is core, for purposes of 

resolution planning, and that business 

lines may evolve over time, such that a 

business line once identified as core 

may cease to be a core business line. 

Three elements of the proposed rule 

address possible changes in 

identification of a core business line. 

First, an Enterprise may identify new 

core business lines when conducting its 

periodic identification process. Such 

identification would be a ‘‘material 

change,’’ which FHFA proposes to 

define as a change, event, or occurrence 

that could reasonably be foreseen to 

have a material effect on the 

resolvability of the Enterprise, the 

Enterprise’s resolution strategy, or how 

the Enterprise’s resolution plan may be 

implemented. That ‘‘material change’’ 

would be an ‘‘extraordinary event,’’ 

described in the proposed rule as ‘‘any 

material change, merger, reorganization, 

sale or divestiture of a business unit or 

material assets, or similar transaction, or 

any fundamental change to the 

Enterprise’s resolution strategy.’’ Such a 

‘‘material change’’ would thus trigger an 

Enterprise notice to FHFA within 45 

days after the occurrence of the change 

(the new identification). Relatedly, an 

‘‘extraordinary event’’ could occur that 

gives rise to identification of a new core 

business line outside of an Enterprise’s 

periodic identification process. In that 

instance as well, notice to FHFA would 

be required within 45 days of the 

identification of the new core business 

line. Finally, because the definition of 

‘‘core business line’’ includes associated 

operations, services, functions, or 

supports, a notice of material change 

would also be required when there is a 

material change to such operations, 

services, functions, or supports that 

could affect the Enterprise’s resolution 

plan. 

The proposed rule would also provide 

a process for FHFA reconsideration of 

identification of a core business line. 

Only FHFA may remove the 

identification of a core business line 

(including removing the identification 

of any associated operation, service, 

function, or support), and it may do so 

on its own initiative, at any time, upon 

notice to an Enterprise. An Enterprise 

would be permitted to initiate a 

reconsideration, by submitting a written 

request to FHFA that includes 

arguments and other material 

information that the Enterprise believes 

would be relevant to that 

reconsideration. The proposed rule 

would provide FHFA three months to 

respond to a reconsideration request, 

unless FHFA extended that review 

period. If the Enterprise requests FHFA 

to reconsider a core business line that 

FHFA has previously reconsidered, 

pursuant to an earlier Enterprise 

request, the written request should 

describe the material differences 

between the current request and the 

most recent prior request. The proposed 

rule does not set forth a process for 

discussion or negotiation with an 

Enterprise about reconsideration, but 

FHFA anticipates that it would engage 

with an Enterprise as part of an 

established supervisory process to 

understand any different views on the 

nature of a particular business line. 

Finally, FHFA recognizes that a 

resolution plan is necessarily developed 

at a point in time, while business 

activities are fluid through time. For 

that reason, a notice removing 

identification as a core business line 

may include an effective date or other 

delaying conditions or triggers (such as, 

for example, sufficient decrease in 

volume of a core business line, after 

which it would not be necessary to 

consider that business line in the 

Enterprise’s resolution planning 

process). 

FHFA invites comment on all aspects 

of the proposed processes for 

identifying core business lines and 

changing a core business line 

identification. FHFA invites comment 

on a process element that it has not 

proposed but is considering—whether, 

due to similarities between the activities 

each Enterprise is authorized or directed 

to take in its charter, there would be 

benefit to FHFA’s providing notice to 

each Enterprise of all core business lines 

identified or any removal of a core 

business line identification, across both 

Enterprises. In contrast to bank holding 

companies subject to the DFA section 

165 rule, where there presumably would 

not be common core business lines and 

critical operations across companies, 

there exist greater possibilities of 

common core business lines across the 

Enterprises. This is apparent if core 

business lines are identified primarily 

based on the Enterprise charter acts. 

FHFA believes that there could be 

alignment of core business lines across 


tkelley on DSKBCP9HB2PROD with PROPOSALS
1334 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

41 12 U.S.C. 1455(h)(2) and 1719(d). 

the Enterprises when considering their 

current businesses and the proposed 

Enterprise methodology for determining 

core business lines. One possible benefit 

of core business line identification 

across the Enterprises is that there 

would be a process to assure that each 

Enterprise’s resolution planning and 

plan addresses the same core business 

lines. At the same time, in the unlikely 

event the Enterprises’ core business 

lines did not align based on their 

individual application of the proposed 

rule’s identification methodology, each 

Enterprise could be required to address 

business lines that are not, in fact, core 

as to that Enterprise in its resolution 

planning. 

C. Content and Form of an Enterprise 

Resolution Plan 

After identifying its core business 

lines, the proposed rule would require 

an Enterprise to develop a resolution 

plan. Each resolution plan would 

contain strategic analysis and 

information important to understanding 

an Enterprise’s core business lines and 

facilitating their continuation, possibly 

with appropriate changes, in an LLRE 

established by FHFA as receiver. 

Under the proposed rule, a resolution 

plan would be required to include both 

strategic analysis and information 

components, including a description of 

the Enterprise’s corporate governance 

structure for resolution planning; how 

the LLRE will be funded throughout its 

existence and be well capitalized within 

the timeline provided by statute; 

information regarding the Enterprise’s 

overall organizational structure; 

information regarding the Enterprise’s 

management information systems; a 

description of interconnections and 

interdependencies among the 

Enterprise’s core business lines, 

including with CSS and other thirdparty providers; and, a clear 

identification of any potential 

impediments to the strategies developed 

and Enterprise plans for addressing 

such obstacles where practicable. An 

executive summary would also be 

required. In proposing these 

components, FHFA reviewed both the 

FDIC IDI resolution planning rule and 

the DFA section 165 rule and has 

incorporated concepts from each 

framework, and tailored those concepts 

to reflect Enterprise and FHFA 

authorities and duties. 

Required and prohibited assumptions. 

Similar to the DFA section 165 rule, 

FHFA is proposing to establish required 

and prohibited assumptions which must 

underpin an Enterprise’s resolution 

plan. An Enterprise would be required 

to consider that resolution may occur 

under the severely adverse economic 

conditions provided to the Enterprise by 

FHFA in conjunction with any stress 

testing required pursuant to FHFA’s rule 

on stress testing of the regulated 

entities, 12 CFR part 1238. On occasion 

FHFA may identify or provide other 

stress scenarios, possibly more 

idiosyncratic to an Enterprise, which 

the Enterprises would be required to 

consider in preparing the next periodic 

resolution plan. 

Importantly, each Enterprise would be 

prohibited from assuming that any 

extraordinary support from the United 

States government would be continued 

or provided to the Enterprise to prevent 

either its becoming in danger of default 

or in default, including support 

obtained or negotiated on behalf of the 

Enterprise by FHFA in its capacity as 

regulator, conservator, or receiver of the 

Enterprise through the PSPAs with the 

Treasury Department. Likewise, each 

Enterprise’s resolution plan would be 

required to reflect statutory provisions 

that the Enterprise’s ‘‘obligations and 

securities, together with interest 

thereon, are not guaranteed by the 

United States and do not constitute a 

debt or obligation of the United States 

or any agency or instrumentality thereof 

other than [the Enterprise].’’ 41 The 

proposed rule seeks to ensure that 

resolution plans accurately reflect the 

statutory construct of the Enterprises— 

they are not supported by the full faith 

and credit of the United States and their 

securities (including securities that an 

Enterprise guarantees) and debt are not 

guaranteed by the United States. 

Strategic analysis. Similar to the DFA 

section 165 rule, FHFA proposes to 

require a strategic analysis describing 

the Enterprise’s plan to facilitate its 

rapid and orderly resolution. As a 

practical matter, there may be two 

components to this analysis—those 

strategies and actions that are feasible 

for an Enterprise to implement or take 

prior to receivership, and those 

strategies and actions that the Enterprise 

believes FHFA could take in 

conjunction with receivership and 

resolution. By statute, moving to 

receivership is solely FHFA’s authority, 

and the proposed rule makes clear that 

FHFA is not bound by any resolution 

plan of an Enterprise. Nonetheless, each 

Enterprise understands its business 

operations in greater detail than does 

FHFA. An Enterprise’s assessment of 

how the value of its assets and franchise 

could be preserved, how assets and 

liabilities could be divided between the 

LLRE and a receivership estate, and how 

losses and costs could be minimized, 

would be important considerations for 

FHFA. These actions are the basis for a 

resolution and receivership that 

minimize disruption in the national 

housing finance markets. They will be 

particularly important given that the 

Enterprises are not supported by the 

United States government, and FHFA 

does not have access to funding for 

resolution, such as the DIF. 

Each Enterprise’s strategic analysis 

should therefore detail how, in practice, 

the Enterprise could be resolved 

through FHFA’s receivership authority 

by liquidating assets or by transferring 

them to an LLRE, which would continue 

to operate the Enterprise’s core business 

lines. The strategic analysis should 

include the analytical support for the 

resolution plan and its key assumptions, 

including any assumptions made 

concerning the economic or financial 

conditions that would be present at the 

time a plan is implemented. 

An important element proposed in the 

strategic analysis is the Enterprise’s 

description of actions or a range actions 

that the Enterprise could take to 

facilitate its rapid and orderly 

resolution, including with respect to its 

core business lines, in the event of its 

becoming in danger of default or in 

default. For example, an Enterprise 

could review service level agreements to 

assess likelihood of service continuation 

after transfer to an LLRE, including 

whether contracts have ‘‘resolutionfavorable’’ terms. The Enterprise should 

specify those actions that it plans to take 

and set forth the time period the 

Enterprise expects would be needed to 

successfully execute each such action. 

The Enterprise should also describe any 

impediments to actions that could be 

taken, including impediments to actions 

that it plans to take. 

The strategic analysis should identify 

and address funding, liquidity, support 

functions, and other resources, mapped 

to the Enterprise’s core business lines. 

This element would require the 

Enterprise to identify the amount of 

capital and capital-like instruments 

(such as subordinated debt, convertible 

debt, other contingent capital, mortgage 

insurance, and CRT transactions) 

available to absorb losses before 

imposing losses on creditors or 

investors and, where applicable, map 

this loss absorbing capacity to 

associated assets. The Enterprise’s 

strategy for maintaining and funding its 

core business lines in an environment 

when it faces becoming in danger of 

default or in default should be provided 

and mapped to its core business lines, 

and its strategic analysis should 

demonstrate how such resources would 

be utilized to facilitate an orderly 


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42 ‘‘Qualified financial contracts’’ are defined and 

the requirements for their transfer or unwinding are 

set forth at 12 U.S.C. 4617(d)(8) through (11). 

resolution. The Enterprise’s strategic 

analysis also should consider the capital 

support that will be needed by an LLRE 

(during its life and when its status as a 

‘‘limited-life’’ regulated entity ends) to 

maintain market confidence. 

The strategic analysis should set forth 

the Enterprise’s strategy in the event of 

a failure or discontinuation of a core 

business line, including an associated 

operation, service, function, or support 

that is critical to a core business line 

and the actions that could be taken to 

prevent or mitigate any adverse effects 

of such failure or discontinuation on the 

national housing finance markets. This 

would include, if appropriate, the 

Enterprise’s strategy for continuing an 

associated operation, service, function 

or support provided by an affiliate or 

the third-party provider that has failed. 

The ability of each affiliate or third 

party providing operations, services, 

functions or supports to function during 

the Enterprise’s resolution should be 

assessed. 

The strategic analysis should describe 

how and the extent to which claims 

against the Enterprise by the 

Enterprise’s creditors and counterparties 

would be satisfied in accordance with 

FHFA’s rule setting forth the priority of 

expenses and unsecured claims set forth 

at 12 CFR 1237.9, consistent with 

continuation of the Enterprise’s core 

business lines by an LLRE. Another 

element to be included in a strategic 

analysis is the Enterprise’s strategy for 

transferring or unwinding qualified 

financial contracts, consistent with 

applicable statutory requirements.42

It is likely that each Enterprise will 

identify potential material weaknesses 

or impediments to rapid and orderly 

resolution as conceived in its plan. The 

Enterprise’s strategic analysis must 

identify and describe those weaknesses 

or impediments, and any actions or 

steps the Enterprise has taken or 

proposes to take to address them. There 

may be overlap between these planned 

actions and other planned actions 

included in the strategic analysis. The 

Enterprise should identify actions or 

steps that other market participants 

could take to address the identified 

weaknesses or impediments. The 

Enterprise would be required to include 

a timeline for such remedial or other 

mitigating actions that are under its 

control. 

Finally, FHFA proposes that each 

Enterprise describe in its strategic 

analysis the processes the Enterprise 

employs to determine the current 

market values and marketability of its 

core business lines and material asset 

holdings, as well as to assess the 

feasibility of the Enterprise’s plans 

(including timeframes) for executing 

any sales, divestitures, restructurings, 

recapitalizations, or other similar 

actions contemplated in the Enterprise’s 

resolution plan. The strategic analysis 

would include impact of such actions 

on the value, funding, and operations of 

the Enterprise and its core business 

lines. 

Description of corporate governance 

related to resolution planning. The 

proposed rule would require each 

Enterprise’s resolution plan to include 

information on its corporate governance 

structure related to resolution planning. 

Each Enterprise would be required to 

describe how resolution planning is 

integrated into its corporate governance 

structure and processes; the Enterprise’s 

methodology and process for identifying 

core business lines; Enterprise policies, 

procedures, and internal controls 

governing preparation and approval of 

its resolution plan; and, the nature, 

extent, and frequency of reporting to 

Enterprise senior executive officers and 

the board of directors regarding the 

development, maintenance, and 

implementation of the Enterprise’s 

resolution plan. Each Enterprise 

resolution plan would include the name 

and position of the senior management 

official primarily responsible for 

overseeing those functions and for 

compliance with a final resolution 

planning rule. The Enterprise’s strategic 

analysis should address the corporate 

governance framework that supports 

determination of the specific actions to 

be taken to facilitate a rapid and orderly 

resolution as the Enterprise is becoming 

in danger of default and the senior 

management officials responsible for 

making those determinations and 

undertaking those actions. 

Each resolution plan would be 

required to describe any contingency 

planning or other similar exercise that 

the Enterprise has conducted since 

submitting its prior resolution plan to 

assess the viability of or improve its 

resolution plan. The proposed rule 

would require each Enterprise to 

identify and describe the relevant risk 

measures it uses to report credit risk 

exposures both internally to its senior 

management and board of directors as 

well as any relevant risk measures 

reported externally to investors or to 

FHFA. 

Organizational structure, 

interconnections, and related 

information. Under the proposed rule, 

each Enterprise’s resolution plan would 

include information regarding the 

Enterprise’s organizational structure, 

including a list of all affiliates and 

trusts, the percentage of voting and 

nonvoting equity of each listed legal 

entity, and the location, jurisdiction of 

incorporation, licensing, and key 

management associate with each 

material legal entity identified. Where 

information required to be provided 

about a legal entity is identical across 

multiple legal entities, that information 

may be presented as applicable to a 

group of identified legal entities. 

In its resolution plan, each Enterprise 

would be required to provide 

information about interconnections, 

mapping the operations, services, 

functions, and supports associated with 

each of its core business lines. Mapping 

should identify the entity, including any 

third-party providers, responsible for 

conducting each associated operation or 

service that supports the functioning of 

each core business line as well as the 

Enterprise’s material asset holdings. 

Mapping should identify liabilities 

related to such operations, services, and 

core business lines. Such mapping 

should show the interconnections 

between core business lines to be 

transferred to the LLRE and any 

operations anticipated to be left in the 

receivership estate. 

Enterprise resolution plans would be 

required to include an unconsolidated 

balance sheet for the Enterprise and a 

consolidating schedule for all material 

entities that are subject to consolidation 

by the Enterprise. Each Enterprise 

would be required to describe the 

material components of its liabilities, 

mapped to core business lines, 

identifying types and amounts of shortterm and long-term liabilities, secured 

and unsecured liabilities, and 

subordinated liabilities, as well as 

processes used by the Enterprise to 

determine to whom collateral has been 

pledged collateral, the identity of the 

entity (or person) that holds such 

collateral, and the jurisdiction where 

collateral is located and the jurisdiction 

in which the security interest in 

collateral is enforceable against the 

Enterprise, if different from the location. 

Information on material off-balance 

sheet exposures, practices related to the 

booking of trading and derivatives 

activities, and hedges would be required 

and a description of the process 

undertaken by the Enterprise to 

establish exposure limits. 

Each Enterprise would be required to 

include information about third-party 

providers with which the Enterprise has 

significant business connections, 

including descriptions of the business 

connection (such as the operation, 

service, function, or support associated 


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1336 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

with a core business line that the thirdparty provider performs or provides), 

the criticality of the connection, the 

resilience of the connection, and 

provisions or actions needed to ensure 

the continued availability of the 

operation, service, function, or support 

through the receivership process. For 

example, the securitization platform 

provided by CSS is a critical operation 

for the securitization of single-family 

mortgages for which there is no 

substitute. An Enterprise’s resolution 

plan should therefore include 

provisions for ensuring the continued 

viability of the common securitization 

platform, such as prepositioning of 

working capital. Alternatively, where 

substitution among providers is feasible, 

provisions and procedures for affecting 

such substitutions in the wake of 

FHFA’s appointment as receiver should 

be noted or developed. 

The Enterprises would be required to 

report on their credit risk exposures to 

counterparties identified in the 

proposed rule, including significant 

sellers of mortgage loans to an 

Enterprise, significant servicers, and 

providers of loan-level mortgage 

insurance. Enterprise resolution plans 

would be required to analyze whether 

the failure of a third-party provider 

would likely have an adverse impact on 

the Enterprise or likely result in the 

Enterprise becoming in danger of 

default or in default. Finally, each 

Enterprise would be required to identify 

trading, payment, clearing, and 

settlement systems of which the 

Enterprise, directly or indirectly, is a 

member and on which the Enterprise 

conducts a material number or material 

value amount of trades and transactions. 

Certain proposed provisions on 

organizational structure, 

interconnections, and related 

information to be included in an 

Enterprise resolution plan use the term 

‘‘third-party provider.’’ FHFA has not 

proposed a definition of that term. 

When considering the concept of a 

‘‘third-party provider’’ in the context of 

the proposed rule’s provisions that use 

it, FHFA concluded that third-party 

providers would be identified through 

application of those rule provisions, 

such as provisions that would require 

each Enterprise to identify the entity 

performing or providing operations, 

services, functions, or supports 

associated with core business lines. In 

that context, where an appropriate rule 

definition of ‘‘third-party providers’’ 

would likely refer to aspects of the rule 

which, when applied, would result in 

their identification, FHFA considered 

that a rule definition of ‘‘third-party 

provider’’ would not add to the 

understanding of the rule. FHFA was 

concerned that a rule definition of 

‘‘third-party provider’’ could 

inadvertently limit application of rule 

provisions that are intended to be 

broadly applied. Finally, FHFA notes 

that the DFA section 165 rule uses the 

term ‘‘major counterparty,’’ which that 

rule does not define, to somewhat 

similar effect as ‘‘third-party provider’’ 

in FHFA’s proposed rule. FHFA chose 

the term ‘‘third-party provider’’ in this 

instance to avoid implying that a 

contractual relationship, financial or 

otherwise, was required. 

Notwithstanding these considerations, 

FHFA requests comment on whether a 

definition of ‘‘third-party provider’’ 

should be included in any final rule. 

Management information systems. 

FHFA proposes to require each 

Enterprise to provide information in its 

resolution plan about the key 

management information systems and 

applications supporting its core 

business lines, including systems and 

applications for risk management, 

automated underwriting, valuation, 

accounting, and financial and regulatory 

reporting, and systems and applications 

containing records used to manage all 

qualified financial contracts. Each 

resolution plan would be required to 

include information on the legal 

ownership of such systems and 

associated software, licenses, or other 

intellectual property. Each Enterprise 

would be required to map key 

management information systems and 

applications to core business lines that 

use or rely on them and to include 

information on the key internal reports 

used to monitor the financial health, 

risks, and operation of the Enterprise 

and core business lines. 

The proposed rule would require each 

resolution plan to include a description 

of the capabilities of the Enterprise’s 

management information systems to 

collect, maintain, and report the 

information and other data underlying 

the resolution plan, in a timely manner 

to Enterprise management to FHFA. 

Each Enterprise would be required to 

identity in its resolution plan 

deficiencies, gaps, or weaknesses in the 

capabilities of its management 

information systems and describe 

actions the Enterprise plans to 

undertake, including the associated 

timelines for implementation, to address 

such deficiencies, gaps, or weaknesses. 

The goal of the analysis, and any 

practical steps identified by the 

Enterprise, is to confirm the continued 

availability of the key management 

information systems that support core 

business lines through resolution, 

including their availability to the LLRE. 

Finally, each Enterprise resolution plan 

would be required to describe the 

process for FHFA to access the 

management information systems and 

applications required to be identified. 

Executive summary. The proposed 

rule would require each resolution plan 

to include an executive summary, 

addressing the key elements of the 

Enterprise’s strategic analysis; 

identifying material changes that 

occurred since the Enterprise’s prior 

resolution plan, if any; and, describing 

changes to the previously submitted 

resolution plan because of any change 

in law or regulation, guidance or 

supervisory feedback from FHFA, or any 

identified material change. The 

executive summary should also describe 

actions taken by the Enterprise to 

improve the feasibility or effectiveness 

of the resolution plan or remediate, or 

otherwise mitigate, any material 

weaknesses or impediments to a rapid 

and orderly resolution. 

Enterprise point-of-contact. The 

proposed rule would require each 

Enterprise to identify a senior 

management official responsible for 

serving as a point-of-contact regarding 

the resolution plan, in the resolution 

plan. 

Public section of the resolution plan; 

confidentiality of other parts. The 

proposed rule would require each 

resolution plan to include an identified 

public section—in essence, a second 

executive summary that describes the 

business of the Enterprise and its 

identified core business lines and 

associated operations and services. The 

public section would address as well 

financial information regarding assets, 

liabilities, capital and major funding 

sources; derivative activities, hedging 

activities, and CRT instruments; listing 

memberships in material payment, 

clearing or settlement systems; 

identifying the Enterprise’s principal 

officers; the Enterprise’s corporate 

governance structure and processes 

related to resolution planning, including 

the identification of core business lines; 

and, material management information 

systems. The public section would 

include a high-level description of the 

Enterprise’s strategies to facilitate its 

resolution by FHFA as receiver, such as 

the types of potential purchasers of the 

Enterprise’s core business lines and 

other significant assets, and steps that, 

if taken by the Enterprise, could 

minimize the risk that its resolution 

would have serious adverse effects on 

the national housing finance markets 

and the amount of potential loss to the 

Enterprises’ investors and creditors. The 

proposed rule would require that the 

public section clearly reflect the 


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43 12 CFR 243.11(c)(2)(i). ‘‘Material entity’’ is 

differently defined but appears to be similarly 

applied in the FDIC IDI rule, id., 12 CFR 

360.10(b)(8). 

44 Id., 12 CFR 243.2. 

45FHFA also notes that resolution of CSS is not 

addressed by the proposed resolution planning rule, 

and the proposed rule would not require CSS to 

develop a resolution plan. On the other hand, as an 

affiliate of an Enterprise, CSS could be within 

FHFA resolution authority. FHFA expects to 

address these aspects of its supervision of CSS at 

a different time. 

required and prohibited assumptions 

governing development of the resolution 

plan. 

FHFA notes that the DFA section 165 

rule requires bank holding companies to 

identify ‘‘material entities’’ in the public 

sections of their resolution plans.43

FHFA has not proposed a similar 

requirement, considering the corporate 

structures of the Enterprises. 

Specifically, as defined in the DFA 

section 165 rule, a ‘‘material entity’’ is 

a ‘‘subsidiary or foreign office of the 

[bank holding] company that is 

significant to the activities of an 

identified critical operation or core 

business line, or is financially or 

operationally significant to the 

resolution of the [bank holding] 

company.’’ 44 Were FHFA to adopt a 

similar requirement and definition, each 

Enterprise would identify one ‘‘material 

entity’’—CSS. 

Based on the DFA section 165 rule 

definition of ‘‘material entity,’’ FHFA 

does not view that rule’s requirement to 

identify such entities in the public 

section of a bank holding company’s 

resolution plan as intending to require 

the company to identify its major 

counterparties or third-party providers. 

Only entities that are ‘‘significant to the 

activities of an identified critical 

operation or core business line’’ or 

‘‘financially or operationally 

significant’’ to the bank holding 

company’s resolution and that are 

within the company’s organizational 

structure would be required to be 

identified in the public section of the 

bank holding company’s resolution 

plan. 

Because FHFA sees little, if any value, 

in requiring each Enterprise to identify 

CSS as its single ‘‘material entity,’’ 

FHFA has not proposed a similar 

requirement for the public section of an 

Enterprise resolution plan.45 FHFA 

requests comment, however, on whether 

an Enterprise should be required to 

identify significant third-party providers 

and major counterparties in the public 

section of its resolution plan. 

FHFA expects to publish the public 

section of each Enterprise’s resolution 

plan on its website. If published as 

proposed, the public section would 

make clear the assumptions pursuant to 

which the Enterprise drafted its 

resolution plan, including the 

assumption that no government support 

will be available to prevent the failure 

of an Enterprise or to fund its 

resolution. It would indicate the extent 

to which potential claims by creditors 

and counterparties against the 

Enterprise might be satisfied in a 

resolution, and priority of those claims. 

By providing the public with greater 

transparency about the satisfaction of 

potential claims and the manner in 

which those claims might be satisfied, 

FHFA believes publishing the public 

section of each Enterprise’s resolution 

plan would foster market discipline by 

making clear to investors in Enterpriseguaranteed MBS and Enterprise debt 

that they should no longer rely on an 

implicit government guarantee and that 

they should price the risk of these 

investments accordingly. FHFA may 

also publish other information about 

Enterprise resolution planning, which 

may include its high-level assessments 

of the Enterprises’ resolution plans. 

With regard to the first resolution 

plans the Enterprises submit, however, 

it is plausible FHFA would not publish 

the public section, but may publish 

information based on it or drawn from 

it on FHFA’s website or in its Annual 

Report to Congress. This approach 

recognizes that the Enterprises and 

FHFA will learn from the process of 

developing and reviewing resolution 

plans, and balances the desire for 

transparency and market awareness of 

Enterprise resolution plans with the 

desire to permit improvement in 

resolution plans before the public 

sections are published. 

All material that is not in the public 

section would be presumed to be 

confidential, and the proposed rule 

provides that information contained in 

the confidential section of a resolution 

plan would be treated as confidential in 

line with applicable law. The proposed 

rule would provide a process for an 

Enterprise to request confidential 

treatment of information in a resolution 

plan or any related materials under 5 

U.S.C. 552(b)(4), 12 CFR part 1202 

(Freedom of Information Act), and 12 

CFR part 1214 (availability of nonpublic information), and states that 

FHFA will determine confidentiality in 

accordance with applicable exemptions 

under the Freedom of Information Act, 

FHFA’s rule implementing that Act, and 

FHFA’s rule on the availability of nonpublic information and its statutory 

requirements and authorities. 

Preparation of the initial resolution 

plan. FHFA recognizes the burden 

associated with developing an initial 

resolution plan, including establishing 

necessary processes, procedures, and 

systems. Although FHFA proposes to 

require an Enterprise’s initial resolution 

plan to include all informational 

elements set forth in the proposal, 

FHFA expects the process of submission 

and review of the initial resolution plan 

to involve dialogue with each 

Enterprise. In developing its initial 

resolution plan, each Enterprise should 

focus on the key elements of the 

resolution plan, including identifying 

core business lines and associated 

operations, services, functions, and 

supports, developing a robust strategic 

analysis, and identifying and describing 

the interconnections and 

interdependencies among the 

Enterprise, its affiliates, and its thirdparty providers. 

Incorporation by reference of material 

from prior resolution plans. FHFA 

proposes to permit an Enterprise to 

incorporate by reference information 

from a prior resolution plan submitted 

to FHFA, provided that the information 

remains accurate in all material 

respects. The ‘‘incorporating’’ resolution 

plan would be required to clearly 

identify the information that is being 

incorporated as well as the resolution 

plan in which it was originally 

contained and its specific location in 

that plan. 

D. FHFA Review and Feedback, Plan 

Deficiencies, and the ‘‘Credible’’ 

Standard 

FHFA review and feedback. After a 

resolution plan is submitted, FHFA 

would review it and provide feedback to 

the Enterprise. Feedback could range 

from informal discussion with an 

Enterprise to an FHFA determination of, 

and notice to the Enterprise identifying, 

deficiencies in the resolution plan as 

submitted. FHFA feedback could 

address any planned actions or changes 

set forth by the Enterprise that FHFA 

agrees could facilitate a rapid and 

orderly resolution, or priority or timing 

of actions or changes to be undertaken 

by the Enterprise. After FHFA and 

Enterprise experience over the first few 

resolution plan submission and review 

cycles, it may also be appropriate for 

FHFA to share more general ‘‘lessonslearned’’ feedback on meeting rule 

requirements and developing a 

resolution plan, or for FHFA to develop 

and publish responses to frequentlyasked-questions. 

FHFA expects that it would first 

assess submitted resolution plans for 

substantive completeness. If additional 

information is necessary in order for 

FHFA to review a plan, the Enterprise 

would receive notice and be provided 


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1338 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules 

46 12 CFR 243.8(e). 

47Compare FDIC IDI rule, 12 CFR 360.10(c)(4)(i) 

(used and defined); DFA section 165 rule, 12 CFR 

243.8(b) (used but not defined) and Treasury 

Department Housing Reform Plan supra, p. 13 (used 

but not defined). 

48See also, 77 FR 3075, 3083 (Jan. 23, 2012) 

(FDIC IDI final rule) (‘‘The [IDI’s] ability to produce 

the information and data underlying its resolution 

rapidly and on demand is a vital element in a 

credible [r]esolution [p]lan.’’) and 76 FR 58379, 

58380 (Sept. 21, 2011) (FDIC IDI interim final rule) 

(‘‘The [Financial Stability Board] Crisis 

Management Working Group has recommended that 

supervisors ensure that firms are capable of 

supplying in a timely fashion the information that 

may be required by the authorities in managing a 

financial crisis.’’). 

Verifying capabilities set forth in an Enterprise’s 

resolution plan is not the only area of resolution 

planning that would be subject to FHFA’s 

examination authority. FHFA may use its 

examination authority at any time to review 

Enterprise compliance with a resolution planning 

an opportunity to submit the missing 

information, generally within 30 days. 

An Enterprise that does not receive a 

notice that additional information is 

needed may assume that FHFA has 

accepted the plan as substantially 

complete; however this does not prevent 

FHFA from making reasonable requests 

for additional information it believes 

would be helpful to understand the 

Enterprise’s resolution plan in the 

course of its review. 

FHFA believes a completeness review 

would improve the efficiency and 

effectiveness of the review process, in 

particular because it establishes a 

process for obtaining missing 

information outside of the deficiency 

identification process (discussed 

below). FHFA also observes, however, 

that a resolution plan that is missing 

substantial information, or as to which 

an Enterprise does not timely provide 

missing information, may warrant a 

deficiency notice. 

FHFA notice following review; 

determination of deficiencies. The 

proposed rule would establish a process 

for FHFA to identify deficiencies in an 

Enterprise’s resolution plan and provide 

notice to the Enterprise identifying 

deficiencies or affirming that there were 

no deficiencies. For this purpose, the 

proposed rule would define 

‘‘deficiency’’ as an aspect of the 

Enterprise’s resolution plan that FHFA 

determines presents a weakness that, 

individually or in conjunction with 

other aspects, could undermine the 

feasibility of the Enterprise’s resolution 

plan. For example, a deficiency may be 

that the nature, extent, or frequency an 

Enterprise’s reporting on resolution 

planning to the board of directors is 

insufficient or that an Enterprise’s 

contracts with third-party providers do 

not clearly address continuity of 

services or operations after an LLRE is 

established as successor to the 

Enterprise. An Enterprise receiving a 

notice of deficiency would be required 

to submit a revised resolution plan that 

corrects the deficiency, which may 

include planned actions or next steps. 

Because a notice of deficiency would 

trigger the need for an Enterprise to 

submit a revised resolution plan that 

addresses the deficiency, the proposed 

rule would establish the principle that 

a deficiency would be something an 

Enterprise could plausibly address by 

taking or adding a planned action, 

considering of additional factors, or 

undertaking additional strategic 

analysis. Although there could be an 

overlap between deficiencies and 

material weaknesses or impediments 

identified by the Enterprise in its 

resolution plan as conceived and 

described in its strategic analysis, FHFA 

does not anticipate identifying as 

deficiencies those material weaknesses 

or impediments to a well-conceived 

plan that an Enterprise is reasonably 

unable to address, or which would be 

impracticable to change. 

FHFA notes that the DFA section 165 

rule includes reference to 

‘‘shortcomings,’’ defined as ‘‘a weakness 

or gap that raises questions about the 

feasibility of a [bank holding] 

company’s resolution plan, but does not 

rise to the level of a deficiency.’’ 46

Determination of a shortcoming in a 

resolution plan would not trigger the 

requirement to submit a revised plan, 

but unaddressed shortcomings could 

become deficiencies in subsequent 

plans. FHFA does not propose a similar 

concept because, as the proposed rule 

indicates, FHFA could inform an 

Enterprise through routine 

communications of any concerns with 

its resolution plan that do not yet rise 

to the level of a ‘‘deficiency,’’ but which 

could rise to such a level if unaddressed 

in future plans. FHFA requests 

comment on whether a final resolution 

planning rule should include a process 

for FHFA identification of a 

‘‘shortcoming,’’ in addition to a 

‘‘deficiency’’ and, if so, whether FHFA 

should adopt a definition of 

‘‘shortcoming’’ similar to that contained 

in the DFA section 165 rule. 

‘‘Credible’’ standard. Concepts of 

deficiency in a resolution plan, and a 

plan’s identification of material 

weaknesses in or impediments to 

resolution, must be considered in the 

context of a ‘‘credible’’ resolution plan. 

While ‘‘credible’’ is commonly used as 

a standard for resolution plans, it is not 

always defined when used.47 As did the 

FDIC, FHFA has determined to propose 

a rule standard for a resolution plan to 

be ‘‘credible.’’ 

Specifically, FHFA is proposing to 

consider a resolution plan to be 

‘‘credible’’ if, demonstrating 

consideration of the proposed rule’s 

required and prohibited assumptions, 

the plan’s strategic analysis and detailed 

information required are well-founded 

and based on information and data that 

are observable or otherwise verifiable 

and employ reasonable projections from 

current and historical conditions within 

the broader financial markets. A 

resolution plan that meets this standard 

will reflect depth and thoroughness of 

thought and analysis, clarity and 

appropriateness of assumptions and 

projections, and accuracy and detail in 

supporting data and other information. 

Under this standard, a resolution plan 

may be ‘‘credible’’ even if it identifies 

material weaknesses or impediments to 

rapid and orderly resolution or if it sets 

forth steps that an Enterprise indicates 

it will take to improve the likelihood of 

its rapid and orderly resolution. FHFA 

is not proposing to correlate 

identification of deficiencies with 

application of the ‘‘credible’’ standard, 

although it is inevitable that sufficiently 

significant deficiencies would result in 

a resolution plan that is not credible. 

Through its proposed standard for a 

‘‘credible’’ resolution plan, FHFA seeks 

to clarify that such a plan would not 

require an Enterprise to produce a 

roadmap that FHFA would follow to 

discharge its responsibilities as receiver. 

This clarification is important for two 

reasons: (1) To reassure the Enterprises, 

and inform other stakeholders that 

Enterprise resolution plans may stop 

short of an FHFA-executable 

‘‘playbook’’ and still be credible; and, 

(2) To emphasize that resolution of an 

Enterprise remains FHFA’s 

responsibility, to be carried out 

pursuant to its statutorily conferred 

authorities and discretion. 

On the other hand, the ‘‘credible’’ 

standard would make the Enterprises 

accountable to FHFA on critical aspects 

of resolution planning as the standard 

includes concepts of ‘‘well-founded’’ 

and ‘‘verifiable.’’ FHFA expects to use 

its examination authority to assess such 

aspects of an Enterprise’s resolution 

plan as the capabilities of the 

Enterprise’s management information 

systems to collect and maintain 

information and data underlying the 

resolution plan and report it in a timely 

manner to management of the Enterprise 

and to FHFA. Such capabilities and the 

importance of assessing them were both 

emphasized in consultations with FDIC 

and FRB staff on their experience 

implementing the FDIC IDI and DFA 

section 165 rules.48


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rule, including the Enterprise’s methodology and 

process for identification of core business lines, 

resolution planning strategic analysis, and 

corporate governance related to resolution 

planning. 

49 12 U.S.C. 4513b(b)(2)(B). 

50 12 CFR 1236.4(a). 

51 Id., 1236.4(c)(2)(ii). 

52This determination reflects, among other 

things: (1) Safety and Soundness Act provisions 

that require FHFA to act as receiver for an 

Enterprise, should receivership be necessary; (2) 

Requirements for FHFA, as receiver, to establish an 

LLRE to continue the business of an Enterprise in 

resolution; (3) Requirements for the receiver to pay 

all valid obligations of the Enterprise, pursuant to 

the receiver’s determination of claims; and, (4) 

clarifies the absence of any U.S. government 

support for the Enterprises or FHFA when acting as 

receiver. Prudential management and operation of 

an Enterprise and its successor LLRE during the 

resolution process will require advance planning. 

Also of note, FHFA is directed by statute to 

establish prudential management and operations 

standards on topics that would have a direct and 

critical bearing on an Enterprise’s rapid and orderly 

resolution, such as: (1) The adequacy of 

management information systems; (2) Adequacy 

and maintenance of liquidity and reserves; (3) 

Overall risk management processes, including 

processes to identify, measure, monitor, and control 

material risks and for business resumption (or 

continuation) for all major systems to protect 

against disruptive events; (4) Management of 

counterparty risk; and, (5) Maintenance of adequate 

records to enable FHFA to determine the financial 

condition of an Enterprise. See 12 U.S.C. 

4513b(a)(1), (4), (8), (9), and (10). It would be 

possible to address resolution planning in the 

context of these and other required standards, but 

it would be more coherent to address it in a single, 

more focused, standard. 

53See 12 U.S.C. 4513b(a) (authorizing FHFA to 

establish standards as regulations) and 12 U.S.C. 

4631(a)(1) (authorizing FHFA to issue a cease-anddesist order for, among other things, violating a 

regulation). 

Timing of feedback. FHFA intends to 

provide substantive feedback to an 

Enterprise on an informationally 

complete resolution plan within 12 

months of receipt. The proposed rule 

would permit FHFA to extend that 

timeframe if extenuating circumstances 

so require. FHFA wishes to provide 

timely feedback but must take the time 

necessary to review each plan 

appropriately. Given that FHFA has 

proposed to require each Enterprise to 

submit resolution plans every two years, 

receipt of feedback one year after 

submission of a plan would provide the 

Enterprise another year to incorporate 

that feedback into its next resolution 

plan. 

If FHFA provides an Enterprise a 

notice of deficiency, the Enterprise must 

submit appropriate revisions to its prior 

plan within a timeframe established by 

the Agency. Procedures for submitting 

revised resolution plans and taking 

other corrective actions are addressed 

below. 

E. Corrective Processes; Significance as 

a Prudential Standard 

The proposed rule would require an 

Enterprise that receives notification 

from FHFA of any deficiency in its 

resolution plan to submit a revised 

resolution plan to FHFA that addresses 

the deficiency. The proposed rule 

would also identify the resolution 

planning rule, in its entirety, as a 

prudential standard within the meaning 

of 12 U.S.C. 4513b (section 4513b) and 

for purposes of 12 CFR part 1236. The 

interplay of these two elements of the 

proposed rule is described below. 

Section 4513b(b) authorizes FHFA to 

establish prudential management and 

operations standards for its regulated 

entities and provides that if a regulated 

entity fails to meet a standard, FHFA 

may require submission of a corrective 

plan specifying actions that the 

regulated entity will take to correct the 

deficiency.49 To implement section 

4513b, FHFA has adopted a prudential 

management and operations standards 

(PMOS) regulation, at 12 CFR part 1236. 

That regulation addresses FHFA 

determinations that a regulated entity 

has failed to meet a standard and 

provides that FHFA may base that 

determination on an examination, 

inspection, or any other information.50

The PMOS regulation codifies FHFA’s 

authority to permit a regulated entity to 

submit a PMOS corrective plan in 

conjunction with other required 

submissions, such as a capital 

restoration plan or a response to an 

examination report.51 If a regulated 

entity fails to submit a corrective plan 

or fails to implement an approved 

corrective plan, the PMOS regulation 

provides for an FHFA order to correct 

the deficiency or to undertake 

additional corrective or remedial 

measures as FHFA may require. 

FHFA has determined that it is legally 

appropriate and would be sound policy 

to identify its resolution planning rule 

as a prudential standard. Identifying the 

rule as a prudential standard provides 

FHFA access to section 4513b corrective 

measures, if necessary, to address 

deficiencies in a resolution plan, an 

Enterprise’s failure to take actions set 

forth in its resolution plan that FHFA 

agrees could facilitate the Enterprise’s 

rapid and orderly resolution, or 

concerns with an Enterprise’s resolution 

planning process.52 Section 4513b 

corrective measures are in line with 

FHFA’s approach to resolution 

planning, which will be iterative and 

involve dialogue between an Enterprise 

and FHFA. A corrective approach to 

encourage or direct Enterprise 

management’s attention to concerns of 

high priority to FHFA could in some 

cases be more constructive and more 

conducive to improvements in a 

resolution plan or the Enterprise 

planning process than an enforcement 

approach. 

Because the resolution planning 

standard would be established as a 

regulation, FHFA could also bring an 

enforcement action if appropriate 

grounds existed and FHFA determined 

such action to be necessary.53 Under its 

general enforcement authority, FHFA 

may order an Enterprise to cease and 

desist from a violation of law, which 

would include the final resolution 

planning rule, and may require an 

Enterprise to take other appropriate 

corrective action, including by 

implementing a plan to correct a 

violation of the final resolution 

planning rule. FHFA also may impose a 

civil money penalty for a violation of a 

final resolution planning rule. 

Procedurally, the proposed rule 

permits FHFA to deem a determination 

of a deficiency in a resolution plan or 

an Enterprise’s failure to undertake 

actions or changes that FHFA identified 

in any notice to an Enterprise following 

review of a resolution plan to be the 

failure of a prudential standard and to 

deem the Enterprise’s submission of a 

revised resolution plan in accordance 

with any final resolution planning rule 

to be a corrective plan for purposes of 

the PMOS regulation. The proposed rule 

states that FHFA may find an Enterprise 

to have failed the resolution planning 

standard if the Enterprise does not 

undertake any planned action or change 

set forth by the Enterprise, and which 

FHFA identified as necessary in its 

notice to the Enterprise following 

review of the resolution plan. 

In such cases, FHFA could provide 

the Enterprise a notice of failure in 

accordance with the PMOS regulation, 

and would inform the Enterprise of the 

need to submit a PMOS corrective plan 

or, a revised resolution plan that is 

deemed to be a PMOS corrective plan. 

Within 90 days, absent FHFA 

establishing a longer or shorter period, 

the Enterprise would be required to 

submit a revised resolution plan that 

addresses: (1) The deficiencies 

identified and discusses revisions to the 

plan to address the deficiencies; (2) Any 

changes to the Enterprise’s business 

operations and corporate structure the 

Enterprise proposes to undertake to 

address the deficiencies, and a timeline 

for completing them; and, (3) Why the 

Enterprise believes the revised 

resolution plan is feasible and would 

facilitate its rapid and orderly resolution 

by FHFA, as receiver. 

If a regulated entity fails to submit a 

corrective plan (which may be a revised 


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resolution plan) or fails to implement an 

approved corrective plan, then, in 

accordance with 12 U.S.C. 4513b and 

the PMOS regulation, FHFA may order 

the Enterprise to correct the deficiency 

or to implement the corrective plan and 

take other corrective or remedial 

measures. 

F. Corporate Governance Related to 

Resolution Planning 

The proposed rule would require the 

Enterprise’s board of directors to 

approve each preliminary notice of core 

business lines prior to submission to 

FHFA, with approval noted in the 

minutes. A similar process would be 

required for any Enterprise request for 

FHFA reconsideration of a business 

line. 

The proposed rule would require the 

Enterprise’s board to approve each 

resolution plan prior to its submission 

to FHFA, with approval noted in the 

minutes. A revised resolution plan is 

considered a resolution plan, also 

requiring board approval. In contrast, an 

‘‘interim update’’ (discussed below) 

would not be considered a resolution 

plan and would not require board 

approval. The content of an interim 

update, however, may warrant board 

approval, as a matter of appropriate 

corporate governance related to the 

nature of such update. 

G. Timing of Plan Submission; Interim 

Updates 

Submission of initial resolution plan; 

successive plans. FHFA proposes to 

require each Enterprise to submit its 

initial resolution plan 18 months after 

the regulatory due date for the initial 

notice of core business lines, which 

FHFA proposes to be three months after 

the effective date of a final rule. FHFA 

anticipates that any final rule would be 

effective 30 days after publication in the 

Federal Register. As a result, an 

Enterprise’s first resolution plan would 

be required to be submitted to FHFA 

slightly less than two years after the 

final rule is published in the Federal 

Register. The due date for the initial 

plan will establish the due dates for 

successive plans with FHFA proposing 

to require each Enterprise to submit a 

resolution plan every two years 

thereafter. 

While the effective date for a final 

rule is uncertain, FHFA is aware that 

other end-of-year reporting 

requirements may make it more 

challenging if the recurring due date for 

resolution plans were to fall in the 

fourth quarter of the calendar year. For 

that reason, among others, the proposed 

rule includes a provision permitting 

FHFA to alter the submission date of 

resolution plans. FHFA would provide 

notice to an Enterprise of any altered 

submission due date established by a 

final rule with the intention of 

providing the Enterprises two full years 

to develop their initial resolution plans. 

FHFA could alter a submission date on 

any other basis, such as on request by 

an Enterprise or if financial or economic 

conditions merit a delay. 

Interim update to a prior plan. The 

proposed rule would permit FHFA to 

request an interim update to the 

Enterprise’s most recently submitted 

resolution plan, on written notice to the 

Enterprise. FHFA may require an 

interim update after receiving a notice 

of an extraordinary event, for example. 

FHFA’s notice requiring an interim 

update would set forth a deadline for 

submission and identify the portions or 

aspects of the resolution plan to be 

updated. FHFA expects to provide the 

Enterprise a reasonable amount of time 

to complete the update, and may alter 

any date set forth in the notice, in its 

discretion and as appropriate. 

An interim update is not considered 

a resolution plan. Consequently, 

submission of an interim update would 

not itself affect the date for submission 

of the next resolution plan. If FHFA 

determines that it is appropriate, the 

Agency could alter that submission date 

on notice to an Enterprise. 

H. Effect of a Resolution Plan on Rights 

of Other Parties 

The proposed rule also includes three 

provisions addressing the effect of an 

Enterprise resolution plan on such 

considerations as preservation of 

privileges, execution of a receivership, 

and rights of private parties. The 

proposed rule would clarify and assert 

that the submission of any nonpublic 

data or information under FHFA’s 

resolution planning rule would not 

constitute a waiver of or otherwise affect 

any privilege arising under Federal or 

state law, including the rules of any 

Federal or state court, to which the data 

or information is otherwise subject. The 

proposed rule also indicates that FHFA 

may assert examination privilege for any 

nonpublic data or information 

submitted under the rule. 

The proposed rule would also clarify 

that an Enterprise’s resolution plan 

would not have any binding effect on 

FHFA when appointed as receiver 

under 12 U.S.C. 4617. The resolution 

plan would not be binding on FHFA as 

conservator, either currently or if FHFA 

is appointed conservator in the future. 

FHFA proposes to clarify that any final 

rule would not create any private right 

of action based on a resolution plan 

prepared by an Enterprise or submitted 

to FHFA or based on any action taken 

by FHFA with respect to any such 

resolution plan. These provisions 

support the resolution planning process 

as a strategic, informational, and 

assessment regime which is critical to 

facilitate rapid and orderly resolution, 

but which does not commit FHFA to 

any action in exercising its authorities 

as receiver. FHFA or an Enterprise may 

take actions that are different from those 

considered or contained in any 

resolution plan. 

III. Section-by-Section Summary 

A. Section 1242.1 Purpose; 

Identification as a Prudential Standard 

This section of the proposed rule sets 

forth its purposes and goals related to 

Enterprise resolution, identifies the rule 

as a prudential standard for purposes of 

12 U.S.C. 4513b and FHFA’s 

implementing regulation at 12 CFR part 

1236, and addresses the effect of such 

identification relative to corrective 

plans required to be submitted pursuant 

to section 4513b. FHFA may also 

enforce this part pursuant to sections 

1371, 1372, and 1376 of the Safety and 

Soundness Act (12 U.S.C. 4631, 4632, 

and 4636). 

B. Section 1242.2 Definitions 

This section of the proposed rule 

refers users to statutory definitions and 

FHFA’s regulation setting forth 

definitions that are generally applicable 

(12 CFR part 1201) and sets forth 

definitions of other words and terms 

that are not defined by statute or in the 

Safety and Soundness Act. Words or 

terms used in the proposed rule that are 

defined by the Safety and Soundness 

Act or part 1201 include ‘‘affiliate,’’ 

‘‘authorizing statutes,’’ ‘‘default,’’ ‘‘in 

danger of default,’’ ‘‘enterprise,’’ and 

‘‘limited-life regulated entity.’’ The 

proposed rule sets forth definitions of 

‘‘credible,’’ ‘‘core business line,’’ 

‘‘material change,’’ and ‘‘rapid and 

orderly resolution.’’ The proposed 

meaning of each of those terms is 

described above, in material relevant to 

the use of such term. 

C. Section 1242.3 Identification of 

Core Business Lines 

This section of the proposed rule sets 

forth requirements related to 

identification of ‘‘core business lines,’’ 

including associated operations, 

services, functions, and supports. The 

proposed rule would establish a process 

for identification, including preliminary 

identification by each Enterprise and 

FHFA review and determination of core 

business lines, address the Enterprises’ 

periodic review of business lines, 


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establish a process for changes to 

identifications, address the timing of 

each Enterprise’s initial preliminary 

identification of core business lines, and 

address the timing for inclusion of a 

newly-identified core business line to be 

included in the following required 

resolution plan. 

D. Section 1242.4 Credible Resolution 

Plan Required; Other Notices to FHFA 

This section of the proposed rule 

establishes the requirement for 

Enterprise resolution plans to facilitate 

‘‘rapid and orderly resolution’’ in the 

event FHFA is appointed receiver, sets 

forth requirements related to timing and 

frequency of submission of resolution 

plans to FHFA, and establishes 

processes for determining the timing for 

submission of each Enterprise’s initial 

resolution plan and subsequent plans. 

This section also addresses interim 

updates to a resolution plan that may be 

required by FHFA. 

This section establishes the 

requirement that an Enterprise submit a 

notice to FHFA on an extraordinary 

event, which may include a ‘‘material 

change,’’ as well as the timing and 

content of such a notice. This section 

also sets forth other matter related to the 

development and submission of a 

resolution plan, including the 

requirement for Enterprise board 

approval of a resolution plan prior to 

submission of the plan for FHFA. 

Finally, this section addresses the 

incorporation of material from a prior 

resolution plan into a subsequent plan 

by reference and addresses 

identification of an Enterprise point-ofcontact for matters regarding the 

resolution plan. 

E. Section 1242.5 Informational 

Content of a Resolution Plan; Required 

and Prohibited Assumptions 

This section of the proposed rule sets 

forth substantive requirements for an 

Enterprise resolution plan, including 

important required and prohibited 

assumptions that must underpin and be 

reflected throughout each resolution, 

including in each plan’s public section. 

This section describes the informational 

content of each resolution plan, 

including an executive summary, 

strategic analysis, and information on 

corporate governance related to 

resolution planning, organizational 

structures, management information 

systems, and interconnections and 

interdependencies. 

F. Section 1242.6 Form of Resolution 

Plan; Confidentiality 

This section of the proposed rule sets 

forth requirements for the form of a 

resolution plan, which must include a 

public section and a confidential 

section. FHFA expects to publish the 

public section of each resolution plan 

on its website. This section establishes 

both the presumption that material not 

included in the public section is 

confidential and a process for an 

Enterprise to request confidential 

treatment of information for purposes of 

the Freedom of Information Act and 

FHFA’s implementing regulation, and 

for purposes of FHFA’s regulation on 

disclosure of nonpublic information. 

This section of the proposed rule also 

asserts the non-waiver of otherwise 

applicable Federal and state privileges, 

as a result of submitting a resolution 

plan and asserts the bank examination 

privilege for any nonpublic information 

or data in the resolution plan and 

related materials submitted to FHFA. 

G. Section 1242.7 Review of Resolution 

Plans; Resubmission of Deficient 

Resolution Plans 

This section of the proposed rule 

addresses FHFA review of a resolution 

plan, after submission by an Enterprise, 

including an initial review for 

completeness, any request by FHFA for 

missing or additional information, an 

Enterprise’s opportunity to provide such 

information, and a timeframe for 

providing missing or additional 

information. In this section, the 

proposed rule addresses FHFA’s 

substantive review of a complete 

resolution plan, which may result in 

FHFA’s determination of a deficiency in 

the plan. In this section, and for this 

purpose, the proposed rule defines 

‘‘deficiency.’’ The proposed rule 

establishes a process for FHFA to 

provide an Enterprise notice of a 

deficiency (which, in accordance with 

§ 1242.1(b), may be deemed a 

determination of failure of a prudential 

standard) and for Enterprise submission 

of a revised resolution plan to address 

such a deficiency (which, in accordance 

with § 1242.1(b) of the proposed rule, 

may be deemed a corrective plan for 

purposes of FHFA’s PMOS regulation). 

This section of the proposed rule also 

sets forth the timeframe for submission 

of any revised resolution plan, and 

includes a provision permitting FHFA 

to extend timeframes in any resolution 

planning rule adopted as final, on its 

own initiative or on request by an 

Enterprise. 

H. Section 1242.8 No Limiting Effect or 

Private Right of Action 

This section of the proposed rule 

establishes that a resolution plan does 

not limit or bind FHFA when acting as 

conservator or receiver, such that FHFA 

may, or may not, take any action set 

forth in an Enterprise’s resolution plan; 

and, also that neither a resolution plan 

nor an FHFA rule requiring such a plan 

would give rise to any private right of 

action. An Enterprise resolution plan is 

intended, among other things, to 

provide strategic analysis and 

information to FHFA that it may use for 

its benefit, including for purposes of any 

capabilities or other assessment, in 

FHFA’s sole discretion. 

IV. Comments Specifically Requested 

As stated above, FHFA invites 

comments on all aspects of the proposed 

rule and will take all comments into 

consideration before issuing a final rule. 

In addition to comments specifically 

requested within the description of the 

proposed rule, above, FHFA also 

requests comment on the questions set 

forth below. The most helpful 

comments reference the specific 

questions listed, explain the reason for 

any changes, and include supporting 

data. 

Scope 

1. Are the stated goals of Enterprise 

resolution planning clear? Are there 

goals that should be added, removed, or 

modified? 

2. Would Enterprise resolution 

planning benefit from the availability of 

funding mechanisms such as 

convertible long-term debt or other 

similar loss-absorbing instruments (as 

recommended in the Treasury Housing 

Reform Plan)? 

3. What advantages or disadvantages 

does the corporate organization of the 

Enterprises as single operating 

companies present for FHFA 

receivership? 

Definitions 

4. Are the defined terms in the 

proposed rule clear? Do they require 

further clarification and if so, how 

should they be defined? 

5. Are there terms used in the 

proposed rule that should be defined in 

a final rule? 

6. Are there terms or operative 

concepts used in other resolution 

planning regimes, such as the DFA 

section 165 rule or the FDIC IDI rule, 

that should be incorporated into an 

FHFA resolution planning rule (e.g., 

‘‘material entity,’’ ‘‘critical operation’’)? 

Governance and Process 

7. Are there resolution planning 

governance and oversight requirements 

in the proposed rule that could be 

clarified? Are there additional 

governance and oversight requirements 

that should be included? 


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8. Is the required frequency of 

resolution plan submission in the 

proposed rule appropriate? If not, what 

frequency would be appropriate? 

9. Are the proposed timelines for 

Enterprise resolution planning (i.e., core 

business lines identification, resolution 

plan submissions, revised plans, and 

interim updates) adequate for the 

Enterprises to develop and submit the 

information required by the proposed 

rule? If not, what timelines would be 

appropriate? 

10. Should the proposed rule provide 

greater specificity (e.g., in terms of a 

dollar amount or percentage of assets 

acquired or disposed of in a significant 

transaction) with regard to the 

definition of an Enterprise extraordinary 

event that would require notice to 

FHFA? 

Core Business Lines 

11. Should the proposed rule provide 

greater specificity on the required 

methodology, assessment, and process 

for Enterprise identification of core 

business lines? 

12. Is the concept of ‘‘core business 

lines’’ clear, and is ‘‘core business line’’ 

defined appropriately? If not, how can 

FHFA provide additional clarity? 

Resolution Plan Informational Content 

and Assumptions 

13. Are the informational content 

elements described in the proposed rule 

appropriate and adequate for resolution 

planning? Are there any informational 

content elements in the proposed rule 

that create an unnecessary burden or 

should not be included in an Enterprise 

resolution plan? 

14. Are there informational content 

elements described in the proposed rule 

that could be clarified? How can FHFA 

provide additional clarity? 

15. What additional informational 

content elements should the final rule 

require? Describe any impediments to 

collection and production of existing or 

additional informational elements 

identified. What changes could FHFA 

make to reduce the identified burdens 

and impediments? 

16. Should the final rule require any 

informational content elements to be 

delivered to FHFA on a more frequent 

basis (e.g., quarterly) or available to 

FHFA on an ‘‘on demand’’ basis? What 

impediments apply to making such 

information available more frequently or 

on demand? 

17. Are the required and prohibited 

assumptions for Enterprise resolution 

planning in the proposed rule 

appropriate? Are there any required or 

prohibited assumptions for Enterprise 

resolution planning that require 

clarification? Are there required or 

prohibited assumptions that should be 

added? 

FHFA Review of Plans 

18. Are there explicit factors FHFA 

should consider in determining whether 

a resolution plan is deficient? 

Confidentiality 

19. Are there portions of the 

Enterprise resolution plans that should 

be made available to the public? Are 

there portions that should remain 

confidential and privileged? What 

should FHFA consider in making such 

determinations? 

20. Would greater transparency 

around Enterprise resolution plans 

impact market expectations and 

improve market discipline? If so, 

identify specific elements where 

transparency would have the greatest 

effect and describe how transparency 

into those elements would improve 

market discipline. For example, would 

a public description of Enterprise 

sources of funding in receivership or a 

related discussion of how losses may be 

allocated enhance market discipline? 

Are there other ways the proposed rule 

should be modified to improve market 

discipline, and if so, how should the 

proposed rule be modified? 

V. Paperwork Reduction Act 

The proposed rule would not contain 

any information collection requirement 

that would require the approval of the 

Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act (44 U.S.C. 3501 et seq.). Therefore, 

FHFA has not submitted any 

information to OMB for review. 

VI. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. Such an 

analysis need not be undertaken if the 

agency has certified that the regulation 

will not have a significant economic 

impact on a substantial number of small 

entities. 5 U.S.C. 605(b). FHFA has 

considered the impact of this proposed 

rule under the Regulatory Flexibility 

Act. The General Counsel of FHFA 

certifies that this proposed rule, if 

adopted as a final rule, will not have a 

significant economic impact on a 

substantial number of small entities 

because the regulation would apply 

only to the Enterprises, which are not 

small entities for purposes of the 

Regulatory Flexibility Act. 

List of Subjects in 12 CFR Part 1242 

Administrative practice and 

procedure, Government-sponsored 

enterprises, Reporting and record 

keeping requirements, Securitizations. 

Authority and Issuance 

■ For the reasons stated in the preamble, 

and under the authority of 12 U.S.C. 

4511, 4513, and 4526, FHFA proposes to 

amend chapter XII of title 12 of the Code 

of Federal Regulations by adding new 

part 1242 to subchapter C to read as 

follows: 

CHAPTER XII—Federal Housing Finance 

Agency 

SUBCHAPTER C—Enterprise Regulations 

PART 1242—RESOLUTION PLANNING 

Sec. 

1242.1 Purpose; identification as a 

prudential standard. 

1242.2 Definitions. 

1242.3 Identification of core business lines. 

1242.4 Credible resolution plan required; 

other notices to FHFA. 

1242.5 Informational content of a resolution 

plan; required and prohibited 

assumptions. 

1242.6 Form of resolution plan; 

confidentiality. 

1242.7 Review of resolution plans; 

resubmission of deficient resolution 

plans. 

1242.8 No limiting effect or private right of 

action. 

Authority: 12 U.S.C. 4511; 12 U.S.C. 4513; 

12 U.S.C. 4513b; 12 U.S.C. 4514; 12 U.S.C. 

4517; 12 U.S.C. 4526; and 12 U.S.C. 4617. 

§ 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 mortgagebacked securities guaranteed by the 

Enterprises and in Enterprise unsecured 

debt bear losses in accordance with the 


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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 

§ 1242.7(b)(1), to be a failure to meet a 

standard for purposes of § 1236.4. In its 

discretion, FHFA may also deem a 

revised, resubmitted resolution plan to 

be a corrective plan for purposes of 

§ 1236.4. 

§ 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 limitedlife 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 § 1242.5(b); 

(2) Provides strategic analysis and 

detailed information as required by 

§ 1242.5(c) through (g) that is wellfounded 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 

§ 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. 

§ 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 § 1242.5 for each core business 

line. FHFA may also direct an 

Enterprise as to the timeframe for 

conducting any subsequent 

identification process. 

(6) Each Enterprise must periodically 

review its identification process and 

update it as necessary to ensure its 

continued effectiveness. 

(b) FHFA identification of core 

business lines; notice to an Enterprise; 

timing of inclusion in resolution plan. 

(1) Within three months of receiving an 

Enterprise notice of the preliminary 

identification of a business line as a core 

business line, FHFA will provide notice 

to the Enterprise of its determination of 

each core business line. FHFA may also 

identify operations, services, functions, 

or supports associated with any core 

business line. 

(2) FHFA may identify any business 

line of the Enterprise as a core business 

line, considering factors set forth in 

paragraph (a)(2) of this section or any 

other factor FHFA deems appropriate, 

following review of an Enterprise notice 

of preliminary identification or at any 

other time, on written notice to an 

Enterprise. 

(3) If FHFA identifies a core business 

line under paragraph (b)(2) of this 

section, an Enterprise is not required to 

include that core business line in a 

resolution plan if that plan is due 

within six months after the Enterprise 

receives notice of identification from 

FHFA. 

(c) Reconsideration of business line 

identification—(1) Reconsideration 

initiated by an Enterprise. (i) An 

Enterprise may request that FHFA 

reconsider the identification under 

paragraph (a) or (b) of this section, by 

submitting a written request to FHFA 

that includes a clear and complete 


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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. 

§ 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 

§ 1242.3(a)(2). Thereafter, each 

Enterprise shall submit a resolution 

plan to FHFA not later than two years 

following the submission date for the 

prior resolution plan, unless otherwise 

notified by FHFA in accordance with 

paragraph (a)(2) of this section. 

(2) Altering submission dates. 

Notwithstanding anything to the 

contrary in this part, FHFA may 

determine that an Enterprise shall 

submit its resolution plan on a date 

different from any date provided in 

paragraph (a)(1) of this section, which 

may be before or after any date so 

established. 

(3) Interim updates. FHFA may 

require that an Enterprise submit an 

update to a resolution plan submitted 

under this part, within a reasonable 

time, as determined by FHFA. FHFA 

shall notify the Enterprise of its 

requirement to submit an update under 

this paragraph (a)(3) in writing and shall 

specify the portions or aspects of the 

resolution plan the Enterprise shall 

update. Submission of an interim 

update does not affect the date for 

submission of a resolution plan, unless 

otherwise notified by FHFA in 

accordance with paragraph (a)(2) of this 

section. 

(b) Notice of extraordinary events; 

inclusion in next resolution plan. Each 

Enterprise shall provide FHFA with a 

notice no later than 45 days after any 

material change, merger, reorganization, 

sale or divestiture of a business unit or 

material assets, or similar transaction, or 

any fundamental change to the 

Enterprise’s resolution strategy. Such 

notice must describe such extraordinary 

event and explain how it may plausibly 

affect the resolution of the Enterprise. 

The Enterprise shall address any such 

extraordinary event with respect to 

which it has provided notice pursuant 

to this paragraph (b) in the next 

resolution plan submitted by the 

Enterprise, provided that plan is 

required to be submitted more than 90 

days after submission of the notice of an 

extraordinary event to FHFA. 

(c) Board of directors’ approval of 

resolution plan. The board of directors 

of the Enterprise shall approve each 

resolution plan (including any revised 

resolution plan) before submission to 

FHFA, with such approval noted in 

board minutes. 

(d) Point of contact. Each Enterprise 

shall identify an Enterprise senior 

management official and position 

responsible for serving as a point of 

contact regarding the resolution plan. 

(e) Incorporation of previously 

submitted resolution plan information 

by reference. Any resolution plan 

submitted by an Enterprise may 

incorporate by reference information 

from a prior resolution plan submitted 

to FHFA, provided that: 

(1) The resolution plan seeking to 

incorporate information by reference 

clearly indicates: 

(i) The information the Enterprise is 

incorporating by reference; and 

(ii) Which of the Enterprise’s 

previously submitted resolution plan(s) 

originally contained the information the 

Enterprise is incorporating by reference, 

including the specific location of that 

information in the previously submitted 

resolution plan; and 

(2) The information the Enterprise is 

incorporating by reference remains 

accurate in all respects that are material 

to the Enterprise’s resolution plan. 

(f) Extensions of time. Upon its own 

initiative or a written request by an 

Enterprise, FHFA may extend any time 

period under this part. Each extension 

request by an Enterprise shall be 

supported by a written statement 

describing the basis and justification for 

the request. 

§ 1242.5 Informational content of a 

resolution plan; required and prohibited 

assumptions. 

(a) In general. An Enterprise 

resolution plan shall reflect required 

and prohibited assumptions specified in 

paragraph (b) of this section and include 

information specified in paragraphs (c) 

through (h) of this section, as well as 

analysis, in detail, to facilitate a rapid 

and orderly resolution of the Enterprise 

by FHFA as receiver in a manner that 

minimizes the risk that resolution of an 

Enterprise would have serious adverse 

effects on the national housing finance 

markets, and to the extent possible, the 

amount of any losses to be realized by 

the Enterprise’s creditors. 

(b) Required and prohibited 

assumptions when developing a 

resolution plan. In developing a 

resolution plan, each Enterprise shall: 

(1) Take into account that 

receivership of the Enterprise may occur 

under the severely adverse economic 

conditions provided to the Enterprise by 

FHFA in conjunction with any stress 

testing required or in another scenario 

provided by FHFA; 

(2) Not assume the provision or 

continuation of extraordinary support 

by the United States to the Enterprise to 

prevent either its becoming in danger of 

default or in default (including, in 

particular, support obtained or 

negotiated on behalf of the Enterprise by 

FHFA in its capacity as supervisor, 

conservator, or receiver of the 

Enterprise, including the Senior 

Preferred Stock Purchase Agreements 

entered into by FHFA and the U.S. 

Department of the Treasury on 

September 7, 2008 and any amendments 

thereto); and 

(3) Reflect statutory provisions that 

obligations and securities of the 

Enterprise issued pursuant to its 

authorizing statute, together with 

interest thereon, are not guaranteed by 

the United States and do not constitute 

a debt or obligation of the United States 

or any agency or instrumentality thereof 

other than the Enterprise. 

(c) Executive summary. Each 

resolution plan of an Enterprise shall 


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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 § 1237.9 and the 

manner and source of satisfaction of 

those claims consistent with the 

continuation of the Enterprise’s core 

business lines by the limited-life 

regulated entity; and 

(ix) A strategy for transferring or 

unwinding qualified financial contracts, 

as defined at 12 U.S.C. 4617(d)(8)(D)(i), 

in a manner consistent with 12 U.S.C. 

4617(d)(8) through (11); 

(2) Identify the time period(s) the 

Enterprise expects would be needed to 

successfully execute each action 

identified in paragraph (d)(1)(ii) of this 

section to facilitate rapid and orderly 

resolution, and any impediments to 

such actions; 

(3) Identify and describe— 

(i) Any potential material weaknesses 

or impediments to rapid and orderly 

resolution as conceived in the 

Enterprise’s plan; 

(ii) Any actions or steps the Enterprise 

has taken or proposes to take, or which 

other market participants could take, to 

remediate or otherwise mitigate the 

weaknesses or impediments identified 

by the Enterprise; and 

(iii) A timeline for the remedial or 

other mitigating action that the 

Enterprise proposes to take; and 

(4) Provide a detailed description of 

the processes the Enterprise employs 

for— 

(i) Determining the current market 

values and marketability of the core 

business lines and material asset 

holdings of the Enterprise; 

(ii) Assessing the feasibility of the 

Enterprise’s plans (including 

timeframes) for executing any sales, 

divestitures, restructurings, 

recapitalizations, or other similar 

actions contemplated in the Enterprise’s 

resolution plan; and 

(iii) Assessing the impact of any sales, 

divestitures, restructurings, 

recapitalizations, or other similar 

actions on the value, funding, and 

operations of the Enterprise and its core 

business lines. 

(e) Corporate governance relating to 

resolution planning. Each resolution 

plan shall: 

(1) Include a detailed description of— 

(i) How resolution planning is 

integrated into the corporate governance 

structure and processes of the 

Enterprise; 

(ii) The process for identifying core 

business lines, including a description 

of the Enterprise’s methodology 

considering the requirements of 

§ 1242.3(a); 

(iii) Enterprise policies, procedures, 

and internal controls governing 

preparation and approval of the 

resolution plan; and 

(iv) The nature, extent, and frequency 

of reporting to Enterprise senior 

executive officers and the board of 

directors regarding the development, 

maintenance, and implementation of the 

Enterprise’s resolution plan; 

(2) Provide the identity and position 

of the Enterprise senior management 

official primarily responsible for 

overseeing the development, 

maintenance, implementation, and 

submission of the Enterprise’s 

resolution plan and for the Enterprise’s 

compliance with this part; 

(3) Describe the nature, extent, and 

results of any contingency planning or 

similar exercise conducted by the 

Enterprise since the date of the 

Enterprise’s most recently submitted 

resolution plan to assess the viability of 

or improve the resolution plan of the 

Enterprise; and 

(4) Identify and describe the relevant 

risk measures used by the Enterprise to 

report credit risk exposures both 

internally to its senior management and 

board of directors, as well as any 

relevant risk measures reported 

externally to investors or to FHFA. 

(f) Organizational structure, 

interconnections, and related 

information. Each resolution plan shall: 

(1) Provide a detailed description of 

the Enterprise’s organizational structure, 

including— 

(i) A list of all affiliates and trusts 

within the Enterprise’s organization that 

identifies for each affiliate and trust 

(legal entity), the following information 

(provided that, where such information 

would be identical across multiple legal 

entities, it may be presented in relation 

to a group of identified legal entities): 


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(A) The percentage of voting and 

nonvoting equity of each legal entity 

listed; and 

(B) The location, jurisdiction of 

incorporation, licensing, and key 

management associated with each 

material legal entity identified; 

(ii) A mapping of the Enterprise’s 

operations, services, functions, and 

supports associated with each of its core 

business lines, identifying— 

(A) The entity, including any thirdparty providers, responsible for 

conducting each associated operation or 

service that supports the functioning of 

each core business line as well as the 

Enterprise’s material asset holdings; and 

(B) Liabilities related to such 

operations, services, and core business 

lines; 

(2) Provide an unconsolidated balance 

sheet for the Enterprise and a 

consolidating schedule for all 

securitization trusts consolidated by the 

Enterprise; 

(3) Provide a schedule showing all 

assets and liabilities of unconsolidated 

Enterprise securitization trusts; 

(4) Include a description of the 

material components of the liabilities of 

the Enterprise and each identified core 

business line that, at a minimum, 

separately identifies types and amounts 

of the short-term and long-term 

liabilities, secured and unsecured 

liabilities, and subordinated liabilities; 

(5) Identify and describe the processes 

used by the Enterprise to— 

(i) Determine to whom the Enterprise 

has pledged collateral; 

(ii) Identify the person or entity that 

holds such collateral; and 

(iii) Identify the jurisdiction in which 

the collateral is located, and, if different, 

the jurisdiction in which the security 

interest in the collateral is enforceable 

against the Enterprise; 

(6) Describe any material off-balance 

sheet exposures (including guarantees 

and contractual obligations) of the 

Enterprise, including a mapping to each 

of its core business lines; 

(7) Describe the practices of the 

Enterprise and its core business lines 

related to the booking of trading and 

derivatives activities; 

(8) Identify material hedges of the 

Enterprise and its core business lines 

related to trading and derivative 

activities, including a mapping to legal 

entity; 

(9) Describe the hedging strategies of 

the Enterprise; 

(10) Describe the process undertaken 

by the Enterprise to establish exposure 

limits; 

(11) Identify the third-party providers 

with which the Enterprise has 

significant business connections 

(including third parties performing or 

providing operations, services, 

functions, or supports associated with 

each core business line) and describe 

the business connections, dependencies 

and relationships with such third party; 

(12) Report on the counterparty credit 

risk exposure to— 

(i) The 20 largest single-family 

mortgage sellers and the 20 largest 

single-family mortgage servicers to the 

Enterprise (where ‘‘largest’’ is 

determined as of the end of the quarter 

preceding submission of a resolution 

plan, and the Enterprise includes an 

entity that is among the largest in both 

categories in each separate report 

category); and 

(ii) All multifamily sellers and 

servicers to the Enterprise, based on 

purchasing volume during the 

preceding year. 

(13) Report on insurance in force, risk 

in force, and exposure and potential 

future exposure related to all providers 

of loan-level mortgage insurance; 

(14) Analyze whether the failure of a 

third-party provider to an Enterprise 

would likely have an adverse impact on 

an Enterprise or result in the Enterprise 

becoming in danger of default or in 

default, the availability of alternative 

providers, and the ability of the 

Enterprise to change providers when 

necessary; and 

(15) Identify each trading, payment, 

clearing, or settlement system of which 

the Enterprise, directly or indirectly, is 

a member and on which the Enterprise 

conducts a material number or value 

amount of trades or transactions, and 

map membership in each such system to 

the Enterprise and its core business 

lines. 

(g) Management information systems. 

(1) Each resolution plan shall include: 

(i) A detailed inventory and 

description of the key management 

information systems and applications, 

including systems and applications for 

risk management, automated 

underwriting, valuation, accounting, 

and financial and regulatory reporting, 

used by the Enterprise, and systems and 

applications containing records used to 

manage all qualified financial contracts. 

The description of each system or 

application provided shall identify the 

legal owner or licensor, the use or 

function of the system or application, 

service level agreements related thereto, 

any software and system licenses, and 

any intellectual property associated 

therewith; 

(ii) A mapping of the key management 

information systems and applications to 

core business lines of the Enterprise that 

use or rely on such systems and 

applications; 

(iii) An identification of the scope, 

content, and frequency of the key 

internal reports that senior management 

of the Enterprise and core business lines 

use to monitor the financial health, 

risks, and operation of the Enterprise 

and core business lines; 

(iv) A description of the process for 

FHFA to access the management 

information systems and applications 

identified in this paragraph (g); and 

(v) A description and analysis of— 

(A) The capabilities of the Enterprise’s 

management information systems to 

collect, maintain, and report, in a timely 

manner to management of the Enterprise 

and to FHFA, the information and data 

underlying the resolution plan; and 

(B) Any gaps or weaknesses in such 

capabilities, and a description of the 

actions the Enterprise intends to take to 

promptly address such gaps, or 

weaknesses, and the timeframe for 

implementing such actions. 

(h) Identification of point of contact. 

The Enterprise senior management 

official responsible for serving as a point 

of contact regarding the resolution plan 

shall be identified in the resolution 

plan. 

§ 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 § 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, 


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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. 

§ 1242.7 Review of resolution plans; 

resubmission of deficient resolution plans. 

(a) FHFA acceptance of resolution 

plan; review for completeness. (1) After 

receipt of a resolution plan, FHFA will 

either acknowledge acceptance of the 

plan for review or return the resolution 

plan if FHFA determines that it is 

incomplete or that substantial 

additional information is required to 

facilitate review of the resolution plan. 

(2) If FHFA determines that a 

resolution plan is incomplete or that 

substantial additional information is 

necessary to facilitate review of the 

resolution plan: 

(i) FHFA shall provide notice to the 

Enterprise in writing of the area(s) in 

which the resolution plan is incomplete 

or with respect to which additional 

information is required; and 

(ii) Within 30 days after receiving 

such notice (or such other time period 

as FHFA may establish in the notice), 

the Enterprise shall resubmit a complete 

resolution plan or such additional 

information as requested to facilitate 

review of the resolution plan. 

(b) FHFA review of complete plan; 

determination regarding deficient 

resolution plan. (1) Following review of 

a complete resolution plan, FHFA will 

send a notification to each Enterprise 

that: 

(i) Identifies any deficiencies in the 

Enterprise’s resolution plan (or confirms 

that no deficiencies were identified); 

(ii) Identifies any planned actions or 

changes set forth by the Enterprise that 

FHFA agrees could facilitate a rapid and 

orderly resolution of the Enterprise; and 

(iii) Provides any other feedback on 

the resolution plan (including feedback 

on timing of actions or changes to be 

undertaken by the Enterprise). FHFA 

will send the notification no later than 

12 months after accepting a complete 

plan, unless FHFA determines in its 

discretion that extenuating 

circumstances exist that require delay. 

(2) A deficiency is an aspect of an 

Enterprise’s resolution plan that FHFA 

determines presents a weakness that, 

individually or in conjunction with 

other aspects, could undermine the 

feasibility of the Enterprise’s resolution 

plan. 

(c) Resubmission of a resolution plan. 

Within 90 days of receiving a notice of 

deficiency, or such shorter or longer 

period as FHFA may establish by 

written notice to the Enterprise, an 

Enterprise shall submit a revised 

resolution plan to FHFA that addresses 

all deficiencies identified by FHFA, and 

that discusses in detail: 

(1) Revisions to the plan made by the 

Enterprise to address the identified 

deficiencies; 

(2) Any changes to the Enterprise’s 

business operations and corporate 

structure that the Enterprise proposes to 

undertake to address a deficiency 

(including a timeline for completing 

such changes); and 

(3) Why the Enterprise believes that 

the revised resolution plan is feasible 

and would facilitate a rapid and orderly 

resolution by FHFA as receiver. 

§ 1242.8 No limiting effect or private right 

of action. 

(a) No limiting effect on resolution 

proceedings. A resolution plan 

submitted pursuant to this part shall not 

have any binding effect on FHFA when 

appointed as conservator or receiver 

under 12 U.S.C. 4617. 

(b) No private right of action. Nothing 

in this part creates or is intended to 

create a private right of action based on 

a resolution plan prepared or submitted 

under this part or based on any action 

taken by FHFA with respect to any 

resolution plan submitted under this 

part. 

Mark A. Calabria, 

Director, Federal Housing Finance Agency. 

[FR Doc. 2020–28812 Filed 1–7–21; 8:45 am] 

BILLING CODE 8070–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R09–OAR–2020–0618; FRL–10018– 

46–Region 9] 

Partial Approval and Partial 

Disapproval of Air Quality 

Implementation Plans; Arizona; West 

Pinal County; 1987 PM10

Nonattainment Area Requirements 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: The Environmental Protection 

Agency (EPA) is proposing to approve 

in part and to disapprove in part the 

state implementation plan (SIP) revision 

submitted by the State of Arizona to 

meet Clean Air Act (CAA or ‘‘Act’’) 

requirements for the 1987 PM10 national 

ambient air quality standards (NAAQS 

or ‘‘standard’’) in the West Pinal County 

PM10 nonattainment area. The State of 

Arizona’s ‘‘2015 West Pinal Moderate 

PM10 Nonattainment Area SIP’’ (‘‘West 

Pinal County PM10 Plan’’) addresses the 

CAA nonattainment area requirements 

for the 1987 PM10 NAAQS, including 

requirements for an emissions 

inventory, an attainment demonstration, 

reasonable further progress, reasonably 

available control measures, contingency 

measures, and motor vehicle emissions 

budgets. The EPA is proposing to 

approve the base year 2008 emissions 

inventory for direct PM10 and to 

disapprove the remaining elements of 

the West Pinal County PM10 Plan. 

DATES: Written comments must arrive 

on or before February 8, 2021. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R09– 

OAR–2020–0618 at https://

www.regulations.gov. For comments 

submitted at Regulations.gov, follow the 

online instructions for submitting 

comments. Once submitted, comments 

cannot be edited or removed from 

Regulations.gov. The EPA may publish 

any comment received to its public 


tkelley on DSKBCP9HB2PROD with PROPOSALS