Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 81395 

1See Division A, titled the ‘‘Federal Housing 

Finance Regulatory Reform Act of 2008,’’ Title I, 

section 1101 of HERA. 2See 75 FR 10446, March 8, 2010. 

Section 4. (a) Subject to the 

limitations in 12 CFR 701.33(c)(5) 

through (c)(7) of the NCUA regulations, 

the corporate credit union may elect to 

indemnify to the extent authorized by 

(check one) ( ) law of the State of 

llll or ( ) Model Business 

Corporation Act the following 

individuals from any liability asserted 

against them and expenses reasonably 

incurred by them in connection with 

judicial or administrative proceedings to 

which they are or may become parties 

by reason of the performance of their 

official duties: (Check as appropriate) ( ) 

current officials, ( ) former officials, 

( ) current employees, ( ) former 

employees. 

(b) The corporate credit union may 

purchase and maintain insurance on 

behalf of the individuals indicated in (a) 

above against any liability asserted 

against them and expenses reasonably 

incurred by them in their official 

capacities and arising out of the 

performance of their official duties to 

the extent such insurance is permitted 

by the applicable State law or the Model 

Business Corporation Act. 

(c) The term ‘‘official’’ in this bylaw 

means a person who is a member of the 

board of directors, supervisory 

committee, other volunteer committee 

(including elected or appointed loan 

officers or membership officers), 

established by the board of directors. 

* * * * * 

[FR Doc. 2010–32115 Filed 12–27–10; 8:45 am] 

BILLING CODE 7535–01–P 

FEDERAL HOUSING FINANCE BOARD 

12 CFR Part 906 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1207 

RIN 2590–AA28 

Minority and Women Inclusion 

AGENCIES: Federal Housing Finance 

Board; Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA or agency) is adopting a 

final rule to implement section 1116 of 

the Housing and Economic Recovery 

Act of 2008 (HERA). Section 1116 of 

HERA requires FHFA, the Federal 

National Mortgage Association (Fannie 

Mae), the Federal Home Loan Mortgage 

Corporation (Freddie Mac), and the 

Federal Home Loan Banks (Banks) to 

promote diversity and the inclusion of 

women and minorities in all activities. 

The final rule implements the 

provisions of section 1116 of HERA that 

apply to Fannie Mae, Freddie Mac, and 

the Banks. 

DATES: This rule is effective January 27, 

2011. 

FOR FURTHER INFORMATION CONTACT: Eric 

Howard, Equal Employment 

Opportunity and Diversity Director, 

Eric.Howard@fhfa.gov, (202) 408–2502, 

1625 Eye Street NW., Washington, DC 

20006; or Mark Laponsky, Deputy 

General Counsel, 

Mark.Laponsky@fhfa.gov, (202) 414– 

3832 (not toll-free numbers), Federal 

Housing Finance Agency, Fourth Floor, 

1700 G Street, NW., Washington, DC 

20552. The telephone number for the 

Telecommunications Device for the 

Hearing Impaired is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Effective July 30, 2008, HERA, Public 

Law 110–289, 122 Stat. 2654, amended 

the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 (12 U.S.C. 4501 et seq.) (Safety and 

Soundness Act) to establish FHFA as an 

independent agency of the Federal 

government.1 HERA transferred the 

supervisory and oversight 

responsibilities of the Office of Federal 

Housing Enterprise Oversight (OFHEO) 

over Fannie Mae and Freddie Mac 

(collectively, Enterprises), and of the 

Federal Housing Finance Board (FHFB) 

over the Banks (collectively, regulated 

entities) and the Bank System’s Office of 

Finance to FHFA. 

The Safety and Soundness Act 

provides that FHFA is headed by a 

Director with general supervisory and 

regulatory authority over the regulated 

entities. FHFA is charged, among other 

things, with overseeing the prudential 

operations of the regulated entities. 

FHFA is also charged to ensure that the 

regulated entities: Operate in a safe and 

sound manner including maintenance of 

adequate capital and internal controls; 

foster liquid, efficient, competitive, and 

resilient national housing finance 

markets; comply with the Safety and 

Soundness Act and rules, regulations, 

guidelines and orders issued under the 

Safety and Soundness Act, and the 

respective authorizing statutes of the 

regulated entities; carry out the 

respective missions through activities 

authorized and consistent with the 

Safety and Soundness Act and the 

authorizing statutes; and, engage in 

activities and operations that are 

consistent with the public interest. 

Section 1116 of HERA amended 

section 1319A of the Safety and 

Soundness Act (12 U.S.C. 4520) to 

require FHFA to engage in certain 

activities to promote a diverse 

workforce. It also requires each 

regulated entity to establish an Office of 

Minority and Women Inclusion, or 

designate an office, responsible for 

carrying out the requirements of the 

section and such requirements and 

standards established by the Director. 

Section 1319A of the Safety and 

Soundness Act requires the regulated 

entities to promote diversity in all 

activities and at every level of the 

organization, including management, 

employment and contracting. 

Furthermore, 12 U.S.C. 1833e, as 

amended, and Executive Order 11478 

require FHFA and the regulated entities 

to promote equal opportunity in 

employment and contracting. 

On January 11, 2010, FHFA published 

a proposed rule on Minority and 

Women Inclusion to implement section 

1116 of HERA, 12 U.S.C. 4520. The 

proposal set forth minimum 

requirements for regulated entity 

diversity programs as well as 

requirements for reporting on these 

programs. The proposal also set forth 

the minimum requirements for the 

agency’s own diversity program. 

The proposed rule consisted of the 

following subparts: Subpart A addressed 

matters of general application; subpart B 

applied only to FHFA’s internal 

operational requirements under section 

1116 of HERA; and subpart C 

implemented the requirements under 

section 1116 of HERA for the regulated 

entities. FHFA initially established a 60- 

day comment period but, at the request 

of the public, extended that period 

another forty-five (45) days.2 The 

extended comment period closed on 

April 26, 2010. 

FHFA received 23 comment letters to 

the proposed rule from individuals and 

entities. Three letters came from private 

citizens. Fannie Mae, Freddie Mac, and 

eleven of the Banks submitted comment 

letters. The Banks of Atlanta, Boston, 

Chicago, Dallas, Indianapolis, New 

York, San Francisco, Seattle, Topeka, 

Des Moines and Pittsburgh sent 

comments that were generally similar. 

The Bank System’s fiscal agent, the 

Office of Finance, also submitted a 

comment. The following trade 

associations or potential vendors to the 

regulated entities submitted comment 

letters: The National Association of 

Hispanic Real Estate Professionals 


srobinson on DSKHWCL6B1PROD with RULES
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3See Federal Deposit Insurance Corporation 

regulation 12 CFR Part 361 Minority and Women 

Outreach Program Contracting. 

(NAHRE); the New America Alliance 

(NAA); FinaCorp Securities; Trade 

Street Advisors (TSA); the Asian Real 

Estate Association of America (AREAA); 

and the National Association of 

Securities Professionals (NASP). The 

comments were extensive, thoughtful 

and significant. All comments were 

considered. None of the comments 

addressed the provisions of subpart B 

with respect to the requirements for 

FHFA’s internal diversity management 

program. A discussion of significant 

comments as they relate to the 

provisions of the final rule follows. 

II. Reservation of Subpart B 

This regulation finalizes subpart A, 

addressing matters of general 

applicability, and subpart C, addressing 

regulation of diversity at the regulated 

entities and the Bank System’s Office of 

Finance. FHFA has decided to reserve 

subpart B of the proposed rule. After the 

comment period for the proposed rule 

closed, the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

Public Law 111–203 (Dodd-Frank) was 

enacted. Section 342 of Dodd-Frank 

expands on the requirements of HERA. 

Unlike HERA, Dodd-Frank requires the 

agency to establish and staff a separate 

Office of Minority and Women 

Inclusion responsible for carrying out 

operational diversity requirements. The 

requirements of Dodd-Frank are similar, 

but not identical to HERA and apply to 

several other financial regulatory 

agencies. FHFA plans to finalize subpart 

B once it has reconciled the 

requirements of HERA section 1116, the 

reserved subpart B to this rule, and 

section 342 of Dodd-Frank. FHFA wants 

to ensure that any proposed 

requirements under subpart B of the 

rule will facilitate the appropriate 

alignment of the agency’s diversity and 

inclusion program with the programs 

the other agencies subject to section 342 

of Dodd-Frank will be implementing. 

III. Final Rule—Subparts A and C 

FHFA responds to specific concerns 

below as it explains aspects of the rule 

commented upon. After considering the 

comments received in response to the 

proposed rule, FHFA is adopting a final 

rule implementing the provisions of 

section 1116 of HERA that apply to 

Fannie Mae, Freddie Mac, and the 

Banks. 

A. Comments on FHFA’s Authority 

All eleven of the Banks that submitted 

comments and the Office of Finance 

commented that the proposed rule 

exceeds FHFA’s authority under HERA 

in several respects, but most notably by 

including any coverage of disabilities in 

the rule. The comments suggest that 

coverage of the rule must be strictly 

limited to HERA’s identification of 

minorities and women. 

FHFA disagrees. HERA contains more 

than sufficient authority for the Director 

to expand the coverage of the rule. 

Several provisions of HERA make clear 

that the provisions of section 1116 are 

minimum standards on which the 

Director may expand as he determines 

appropriate. Section 1116, in explaining 

the responsibilities of a regulated 

entity’s Office of Minority and Women 

Inclusion, requires the office to ‘‘carry 

out this section and all matters of the 

entity relating to diversity * * * in 

accordance with such standards and 

requirements as the Director shall 

establish.’’ 12 U.S.C. 4520(a) (emphasis 

added). The reference to ‘‘this section 

and all matters of the entity relating to 

diversity’’ signals that Congress did not 

intend the terms of the section to limit 

the Director’s authority. They indicate 

an understanding that ‘‘all matters of the 

entity relating to diversity’’ is not 

limited to matters relating to minorities 

and women. That understanding is 

buttressed by the unqualified authority 

for the Director to establish ‘‘such 

standards and requirements’’ as he 

determines appropriate. 

The Director’s authority does not stop 

at the language of section 1116. The 

Director has broad general regulatory 

authority (12 U.S.C. 4511(b)(2)) which is 

required to include a principal duty of 

‘‘oversee[ing] the prudential operations 

of each regulated entity.’’ 12 U.S.C. 

4513(a)(1)(A). Moreover, the scope of 

the Director’s authority includes 

‘‘exercis[ing] such incidental powers as 

may be necessary or appropriate to 

fulfill the duties and responsibilities of 

the Director in the supervision and 

regulation of each regulated entity.’’ 12 

U.S.C. 4513(a)(2)(B). 

The Director believes that the antidiscrimination provisions in the 

Rehabilitation Act of 1973 (29 U.S.C. 

791, 793, 794, and 794a) and the 

congressional findings concerning 

extensive discrimination and barriers to 

economic participation faced by 

individuals with disabilities underlying 

the Americans with Disabilities Act (42 

U.S.C. 12101) (ADA) constitute 

sufficient reason to include individuals 

with disabilities and disabled-owned 

businesses within the scope of this final 

rule. The final rule includes 

requirements for inclusion and diversity 

with respect to individuals with 

disabilities. 

B. Disabilities Terminology 

In several instances, the proposed rule 

used the term ‘‘disabled’’ to refer to the 

community of individuals with 

disabilities. The final rule changes that 

terminology to ‘‘individuals with 

disabilities’’ or ‘‘persons with 

disabilities,’’ where appropriate. 

Consistent with current convention and 

usage in the ADA, the final rule no 

longer refers to individuals with 

disabilities as ‘‘disabled’’ and the 

definition of ‘‘disabled’’ has been 

removed. The term ‘‘disabled-owned 

business’’ is separately defined and is 

retained for ease of use. 

C. Disabilities Data Reporting 

Several commenters requested 

removal of data reporting requirements 

with respect to disabilities. FHFA found 

their comments compelling to the extent 

that some elements of the proposed rule 

create unnecessary tension with medical 

privacy and anti-discrimination statutes. 

Therefore, data reporting with respect to 

disabilities is significantly reduced in 

the final rule, as discussed below. 

However, the rule retains some data 

reporting requirements and continues to 

require outreach to the individuals with 

disabilities. 

D. Scope of Contracts Included Under 

the Rule 

A significant number of commenters 

requested that the agency clarify the 

scope of the contracts subject to the 

requirements of the rule. Several 

commenters proposed that the agency 

limit the rule to contracts for services. 

Several others proposed that the final 

rule apply to contracts for goods and 

services, but as described by the Federal 

Deposit Insurance Corporation’s own 

outreach regulation.3 Some commenters 

raised serious concerns about applying 

the rule to loans, advances and other 

contracts that are for neither goods nor 

services. 

Section 1116(c) of HERA, entitled 

‘‘Applicability,’’ provides: ‘‘This section 

shall apply to all contracts of a regulated 

entity for services of any kind, including 

services of investment banking, asset 

management entities, broker-dealers, 

financial services entities, underwriters, 

accountants, investment consultants, 

and providers of legal services.’’ This 

makes clear that the section covers all 

contracts for services. However, the 

section does not limit the scope to just 

contracts for services as a number of 

commenters asserted. On the contrary, 

section 1116(b) seeks inclusion and 

diversity ‘‘in all business and activities 

of the regulated entity at all levels, 

including in procurement, insurance 


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Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 81397 

and all types of contracts (including 

contracts for the issuance or guarantee 

of any debt, equity, or mortgage-related 

securities, the management of its 

mortgage and securities portfolios, the 

making of its equity investments, the 

purchase, sale, and servicing of singleand multi-family mortgage loans, and 

the implementation of its affordable 

housing program and initiatives).’’ An 

interpretation that limits coverage to 

contracts for services makes section 

1116(b) a nullity. Even restricting 

coverage to contracts for goods and 

services severely limits section 1116(b) 

beyond the plain language of the statute. 

However, FHFA understands the 

practical difficulties in applying a rule 

to cover contracts for services, contracts 

for goods, and contracts for all other 

subjects, such as financial contracts, 

loans, financial transactions, financial 

instruments, realty, deeds, mortgages, 

letters of credit, confidentiality and nondisclosure agreements, software and 

other licenses, corporate operating 

agreements and similar arrangements, 

and the Banks’ advances. HERA, by 

requiring every contract for services to 

be covered but not using the same 

inclusive language for all contracts, 

allows for reasonable distinctions. 

FHFA believes that contracts for goods 

that are for more than minimal amounts, 

as well as contracts for services, present 

great opportunities for the regulated 

entities and the Office of Finance to 

advance the interests of diversity. The 

final rule requires demographic data 

reporting and all other relevant 

elements in the regulation for every 

contract for services and every contract 

for goods that equals or exceeds $10,000 

in annual value (whether as a single 

contract or as a series of contracts or 

renewals with a single vendor). The 

final rule exempts from the material 

clause and demographic data reporting 

requirements of §§ 1207.21(b)(6), 

1207.22 and 1207.23(b)(11) through 

1207.23(b)(13) all other contracts. The 

regulated entities’ diversity outreach 

efforts in contracting under § 1207.21(c), 

however, should seek to include every 

type of contract. Paragraph (b) has been 

added to § 1207.3, ‘‘Limitations,’’ to 

reflect these distinctions. To further 

ensure the reasonable implementation 

of this limitation, section 1207.21(b) is 

expanded to require that each regulated 

entity and the Office of Finance identify 

the types of contracts it considers 

exempt under § 1207.3(b). 

E. Business Certifications 

A few commenters asked for guidance 

with respect to what certifications 

FHFA would accept for minority-, 

women-, and disabled-owned 

businesses. Other commenters requested 

clarity with respect to identifying 

qualified businesses. The proposed rule 

noted that the definition of ‘‘disabledowned businesses’’ is satisfied by a 

business that qualifies with the U.S. 

Small Business Administration (SBA) as 

a Service-Disabled Veteran-Owned 

Small Business Concern. Other methods 

of certification exist through State 

government entities, trade associations 

and specialty organizations, and 

chambers of commerce, such as the US 

Business Leadership Network, a 

national disability organization of 

businesses, or the National Association 

of Minority and Women Owned Law 

Firms. 

Despite inherent shortcomings in selfcertification, FHFA believes that the 

regulated entities and the Office of 

Finance should be allowed to rely on a 

self-certification from a business so long 

as both the certification and the reliance 

are in good faith. Nonetheless, FHFA 

prefers that the regulated entities rely on 

certifications from qualified 

independent third parties. 

F. Quotas and Demographic 

Benchmarks 

Several commenters urged FHFA to 

disclaim the use of demographic quotas, 

while other commenters urged the 

agency to establish numerical targets 

and goals. Nothing in the proposed rule, 

or in the final rule, envisions or suggests 

the use of quotas. Additionally, a 

generally applicable regulation is not 

the vehicle through which to prescribe 

remedial targets for specific 

circumstances at particular entities. 

FHFA will not forego the use of any 

legally permissible standards, methods, 

tools and techniques that it determines 

appropriate to analyze data reported and 

to measure progress or adherence to 

standards. Diversity at each regulated 

entity and the Office of Finance needs 

to be evaluated separately. FHFA is not 

willing to impose an artificial standard 

on all entities. Deficiencies at a 

regulated entity or the Office of Finance 

will be addressed as they arise on a 

case-by-case and issue-by-issue basis. 

The use of remedies to address the 

deficiencies will be tailored to fit the 

circumstances at hand. 

Several commenters requested that 

FHFA use regional demographic data 

when analyzing workforce diversity and 

the progress of each regulated entity. 

FHFA responds by noting that it will 

use the data it considers appropriate in 

the context of what it is evaluating. 

Regional demographic data are 

appropriate for some purposes, but not 

for all. By way of example only, it 

would be appropriate to apply national 

data when recruiting for employees or 

soliciting for contractors on a national 

basis. Under no circumstance will 

FHFA accept regional demographic data 

as a means of justifying the failure to 

make efforts to advance diversity. 

G. Comments Disputing the Public 

Policy Reflected in Section 1116 and the 

Proposed Rule 

One private citizen commented that 

any approach to inclusion and diversity 

that recognizes characteristics like 

gender and race are misguided and 

counterproductive. Another private 

citizen commented that FHFA should 

not require the creation of Offices of 

Minority and Women Inclusion and 

should let existing agencies, such as the 

Equal Employment Opportunity 

Commission (EEOC), regulate diversity 

at the regulated entities. 

Both of these comments are mistaken 

and take issue with the public policy 

expressed by Congress in section 1116 

of HERA. Congress directed each 

regulated entity to establish an Office of 

Minority and Women Inclusion, or 

designate an office to perform the 

functions required by the statute of such 

an office. Congress also required that the 

regulated entities pay attention to and 

report on gender and racial diversity in 

their activities including in employment 

and contracting. FHFA does not have 

the discretion to ignore the statute. 

Moreover, HERA gives certain 

regulatory oversight and enforcement 

authority to FHFA to broadly encourage 

diversity in employment, contracting, 

and all business and activities at the 

regulated entities which are not 

otherwise subject to such regulation. 

Existing agencies do not, as one 

private citizen suggested, regulate 

diversity in employment or contracting 

at the regulated entities. The EEOC is an 

enforcement agency to which certain 

demographic data is reported. It files 

lawsuits and investigates and processes 

charges of discrimination in 

employment against businesses for 

violations of anti-discrimination laws. It 

publishes reports about employment 

discrimination as well as diversity 

trends and progress throughout the 

country and in specific segments of the 

economy. The EEOC’s regulations 

provide guidelines for addressing and 

avoiding employment discrimination 

and it issues recommended best 

practices and legal policy 

announcements. It does not exercise 

regulatory oversight of diversity. 

Furthermore, its authority is limited to 

discrimination in employment. The 

EEOC has no authority with respect to 

contracting in any industry. Similarly, 

unlike Federally insured depository 


srobinson on DSKHWCL6B1PROD with RULES
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4See School Board of Nassau County v. Arline, 

480 U.S. 273, 279 (1987) (quoting the Rehabilitation 

Act definition of ‘‘handicapped individual’’ as 

amended in 1974). 5 42 U.S.C. 12102(2). 

institutions, FHFA’s regulated entities 

are not considered government 

contractors subject to Executive Order 

11246, under which the Department of 

Labor’s Office of Federal Contract 

Compliance Programs (OFCCP) 

exercises mainly enforcement authority 

with respect to discrimination on 

specific bases at many financial 

institutions and other companies. In 

short, the responsibilities given to FHFA 

are not—as the commenter suggested— 

duplicative of existing regulatory 

regimes. 

Section 1207.1 Definitions 

In several instances, the proposed rule 

used the term ‘‘disabled’’ to refer to the 

community of individuals with 

disabilities. The final rule uses the term 

‘‘individuals with disabilities’’ or 

‘‘persons with disabilities’’ instead of 

‘‘disabled’’ where appropriate. This 

change is made consistent with current 

convention and usage in the ADA. The 

final rule no longer refers to individuals 

with disabilities as ‘‘disabled’’ and the 

definition of ‘‘disabled’’ has been 

removed. The term ‘‘disabled-owned 

business’’ is separately defined and is 

retained for ease of use. 

Seven Banks commented that the 

proposed definition of ‘‘business and 

activities’’ is too broad, exceeds the 

scope of HERA, and makes compliance 

with some sections of the proposed rule 

impossible. 

FHFA disagrees. The definition is 

intentionally broad and all-inclusive 

because the statute’s description of 

covered activities is broad and allinclusive. Section 1116 of HERA applies 

the diversity and inclusion 

requirements to ‘‘all matters of the entity 

relating to diversity in management, 

employment and business activities 

***’’ 12 U.S.C. 4520(a). It extends to 

‘‘all business and activities * * * at all 

levels, including in procurement, 

insurance and all types of contracts 

(including contracts for the issuance of 

debt, equity or mortgage-related 

securities, the management of its 

mortgage and securities portfolios, the 

making of its equity investments, the 

purchase, sale and servicing of singleand multi-family mortgage loans, and 

the implementation of its affordable 

housing program and initiatives).’’ 12 

U.S.C. 4520(b). The breadth of the 

definition is necessary to ensure that 

‘‘all types of contracts,’’ management 

activities, employment, procurement 

and ‘‘all contracts * * * for services of 

any kind’’ (12 U.S.C. 4520(c)) in fact are 

captured by the regulation. The final 

rule retains the proposed definition. 

Seven Banks identified as problematic 

the definition of ‘‘disabled-owned 

business’’ because it relies on inherently 

unreliable self-identifications. Another 

regulated entity suggested expressly 

permitting the use of voluntary 

commercially reasonable efforts to 

identify qualified populations. Selfidentifications, while not ideal, are 

commonly relied upon, including in the 

decennial censuses. With respect to 

disabilities, certain inquiries cannot be 

made and some disabilities are not 

observable. Self-identification actually 

is a preferred method for classification. 

FHFA does not believe that further 

clarification is needed, having 

addressed the issues of business 

certifications above. The final rule 

retains the proposed definition. 

Five regulated entities commented 

that the proposed definition of 

‘‘minority’’ is inconsistent with HERA, 

which cross-references section 1204 of 

the Financial Institutions Reform 

Recovery and Enforcement Act of 1989. 

The commenters are correct. Although 

under the Director’s authority, FHFA 

can require reporting with respect to 

classifications that are beyond those 

included in the mandatory definition of 

‘‘minority,’’ the final rule conforms the 

definition of ‘‘minority’’ to that 

referenced in HERA. 

One Bank requested that FHFA limit 

the definition of ‘‘disability’’ by 

disregarding the so-called ‘‘regarded as’’ 

alternative contained in both the 

Rehabilitation Act of 1973 4 and the 

ADA.5 FHFA declines to adopt the 

suggestion. The definition incorporates 

standards developed by authorities 

responsible for enforcing the ADA and 

FHFA finds no reason to create a 

narrower definition than that which 

Federal law has recognized for more 

than thirty (30) years. 

Section 1207.2 Policy, Purpose and 

Scope 

Nine Banks and the Office of Finance 

requested that FHFA limit the phrase ‘‘to 

the maximum extent possible’’ to actions 

that are consistent with other laws and 

accounting for safety and soundness 

concerns. FHFA believes that 

compliance with other applicable laws 

is an inherent qualification on any 

action and need not be expressed in the 

final rule. With respect to safety and 

soundness considerations, the final rule 

reflects that safety and soundness are 

concerns that should be balanced when 

implementing the phrase ‘‘to the 

maximum extent possible.’’ However, 

the goals of inclusion and diversity are 

not inconsistent with safety and 

soundness. Therefore, safety and 

soundness should not be used, and 

FHFA will not accept it, as a 

justification for the regulated entities 

and the Office of Finance failing to 

make efforts to advance inclusion and 

diversity. 

The proposed rule did not include 

individuals with disabilities in 

describing FHFA’s policy to promote 

nondiscrimination, diversity, and 

inclusion. The final rule corrects that 

omission, consistent with the rest of the 

rule. Additionally, the final rule 

clarifies that the described policy is a 

minimum standard. The final rule also 

removes references to any standards 

pertaining to FHFA in § 1207.2(b) and 

(c) since subpart B in which the 

standards were addressed has been 

reserved. 

Section 1207.20 Office of Minority and 

Women Inclusion 

Six Banks requested clarification that 

an entity would be in compliance with 

paragraph (a) of this section if some of 

the responsibilities of § 1207.20 were 

performed by employees outside of the 

designated Office of Minority and 

Women Inclusion. The final rule retains 

the language from the proposed rule. 

However, FHFA does not believe it 

necessary for an Office of Minority and 

Women Inclusion to operate in isolation 

from other parts of the entity. As long 

as the Office of Minority and Women 

Inclusion, or other designated office, 

remains responsible and accountable for 

directing and implementing the entity’s 

diversity and inclusion program, other 

units of the entity may assist as 

required. FHFA encourages efforts to 

integrate respect for and attention to 

diversity and inclusion throughout each 

regulated entity. 

Five Banks objected to the use of the 

phrase ‘‘standards and guidance’’ in 

§ 1207.20(c). The final rule uses the 

phrase ‘‘standards and requirements’’ to 

conform to the language in 12 U.S.C. 

4520(a). Nonetheless, FHFA intends to 

use various tools to implement this 

regulation and guidances may be among 

them, when appropriate. 

Section 1207.21 Equal Opportunity in 

Employment and Contracting 

Eight Banks commented that 

paragraph (a) of this section should not 

be broadened beyond the demographic 

classifications of ‘‘minority’’ and gender, 

noted in HERA. Section 1207.21(a) 

requires an equal opportunity notice 

and FHFA declines to narrow the 

identification of so-called ‘‘protected 

classes’’ recognized in an equal 

opportunity notice. FHFA notes that the 


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Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 81399 

6 42 U.S.C. 12112(b)(5). 

exact language of the notice is not 

prescribed, but making this notice 

exclusive, rather than inclusive, of 

classifications is inconsistent with 

encouraging diversity. If anything, the 

proposed rule’s requirement is underinclusive, as it only addresses protected 

classifications recognized in Federal 

employment discrimination laws. Many 

businesses, perhaps some regulated 

entities, already have policies that 

recognize equal opportunity for other 

classifications, such as marital or 

parental status, sexual orientation or 

political affiliation. The final rule 

clarifies that the status classifications 

required in the notice establishes a 

minimal level of inclusiveness and 

additional coverage is voluntary to the 

entity. The notice should be 

supplemented and amended from timeto-time as additional protected 

classifications are identified in Federal 

anti-discrimination laws. For additional 

clarity, the final rule also requires the 

entity to confirm its commitment 

against retaliation, a fundamental 

principle for realizing the objective of 

equal opportunity. 

Eight regulated entities objected to the 

‘‘alternative media’’ publication 

requirements in paragraphs (a) and (b) 

of this section as overly burdensome. 

FHFA disagrees. The proposed rule 

language required the regulated entities 

and the Office of Finance to make 

certain notices, policies and procedures 

readily accessible to the public 

‘‘(including through alternative media— 

e.g., Braille, audio—as necessary).’’ The 

language with respect to Braille and 

audio formats is illustrative of 

accessibility and not prescriptive. The 

proposed rule was clear that if 

alternative media formats were 

‘‘necessary,’’ they should be used. FHFA 

has decided to use the phrase 

‘‘alternative media formats, as 

necessary,’’ to make it very clear that the 

language does not limit the types of 

alternative formats a regulated entity or 

the Office of Finance should use when 

necessary to make notices, policies and 

procedures accessible. 

One regulated entity commented that 

FHFA should modify paragraphs (b) and 

(c) of this section to clarify that 

demographic preferences in hiring and 

contracting are not required. FHFA 

declines to make the requested 

modification because it is unnecessary. 

Nothing in the proposal or the final rule 

requires preferences. However, the 

comment alerted FHFA to the fact that 

recruiting and outreach to sources for 

applicants for employment who are 

minorities, women or individuals with 

disabilities had been omitted from the 

proposal. To correct this oversight, the 

final rule adds a clause to paragraph 

(b)(5) of this section requiring the 

regulated entities and the Office of 

Finance to encourage and engage in 

recruiting and outreach for applicants 

for employment from minorities, 

women and individuals with 

disabilities. 

Twelve of the regulated entities 

submitted comments objecting to 

paragraph (b)(3) of this section requiring 

alternative dispute resolution 

mechanisms for complaints of 

discrimination. The requirement is 

procedural. It does not create a 

substantive right, but provides a process 

that is known for both the regulated 

entity and claimants to resolve disputes 

early. However, FHFA does not intend 

to micro-manage the affairs of the 

regulated entities and the Office of 

Finance. If, in the exercise of 

management judgment, a regulated 

entity or the Office of Finance 

determines that an alternative dispute 

resolution mechanism is advisable, 

FHFA encourages it to make the process 

transparent and known through the 

entity’s policies. The final rule requires 

internal procedures for accepting and 

resolving complaints of discrimination, 

but does not require any particular 

design or the use of alternative dispute 

resolution options. 

Ten Banks contended that the 

reasonable accommodation procedure 

requirement of paragraph (b)(4) of this 

section exceeds HERA’s scope and 

creates substantive rights for individuals 

with disabilities. 

FHFA disagrees. The substantive and 

enforceable right is created by the 

American with Disabilities Act.6 The 

final rule requires the regulated entities 

and the Office of Finance to establish 

transparent procedures for fulfilling 

their legal obligations under the ADA to 

provide reasonable accommodations to 

employees and applicants for 

employment. The final rule retains the 

language of the proposal. 

Eleven Banks and the Office of 

Finance objected to the proposed 

paragraph (b)(6) of this section requiring 

that all contracts contain a material 

clause committing the contractor to the 

principles of non-discrimination and 

diversity and that all contractors require 

such clauses in subcontracts for goods 

and services provided to the regulated 

entities. The Banks believe that 

requiring such clauses places them at a 

competitive disadvantage in contracting; 

that such clauses are unenforceable; and 

that the requirement interferes with a 

Bank’s and a contractor’s right to 

contract. The final rule retains the 

requirement. As a matter of public 

policy FHFA believes that any regulated 

entity or the Office of Finance, as a 

Federal government sponsored 

enterprise, should decline to enter into 

business with contractors who find such 

clauses objectionable. Similar clauses 

have been required in government 

contracts under Executive Order 11246 

for more than (forty) 40 years. Unlike 

the requirements for government 

contracts, FHFA has not prescribed 

specific language to be included. Each 

entity is free to develop the specific 

language of its own required clause. In 

developing the clause, each entity can 

address the difficulties it believes exist 

for enforcement. These clauses create 

contractual conditions that a contractor 

or subcontractor can accept or reject. 

FHFA does not believe that such 

provisions pose any greater enforcement 

difficulty than any other contractual 

condition. Nevertheless, FHFA 

recognizes that in some contexts and for 

limited types of contracts these clauses 

may not be commercially reasonable to 

obtain. Therefore, § 1207.3(b) 

establishes certain limitations on the 

material clause requirement. 

Nine regulated entities asked FHFA to 

confirm that the required standards and 

procedures for publication of 

contracting opportunities under 

paragraph (c)(2) of this section may 

include reasonable exceptions identified 

by the regulated entity or the Office of 

Finance. The commenters were 

concerned that the expansive scope of 

the proposed regulation could hinder 

their ability to engage in certain 

business transactions. Although the 

commenters did not provide options for 

addressing or implementing their 

suggestions, FHFA recognizes that the 

requirements under paragraph (c)(2) of 

this section could result in unintended 

hardships for the regulated entities and 

the Office of Finance. 

FHFA finds that the publication, 

solicitation and competitive bidding 

processes are critical to ensuring broad 

and fair participation of potential 

vendors, thereby enhancing the 

opportunities for a more diverse pool of 

contractors. The final rule retains the 

publication and bidding process 

requirements. However, each regulated 

entity and the Office of Finance may 

exercise reasonable discretion to 

develop thresholds, exceptions, or 

limitations for implementing paragraph 

(c)(2) of this section. A new 

§ 1207.21(b)(7) requires the regulated 

entities and the Office of Finance to 

develop policies and procedures that 

address the rationale, necessity, and 

parameters for employing any 

thresholds, exceptions, or limitations 


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81400 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 

with respect to implementing paragraph 

(c)(2) of this section. The thresholds, 

exceptions, or limitations for 

implementing § 1207.21(c)(2) must be 

commercially reasonable and consistent 

with the intent of HERA. Under the 

express terms of HERA, procedures to 

‘‘review and evaluat[e] * * * contract 

proposals and to hire service providers 

shall include a component that gives 

consideration to the diversity of the 

applicant.’’ 12 U.S.C. 4520(b). The final 

rule retains, in § 1207.21(c)(3), the 

requirement for considering diversity. 

Section 1207.22 Regulated Entity and 

Office of Finance Reports 

Seven Banks asked that the final rule 

enumerate the expected deliverables 

necessary for the preliminary status 

report, as required by paragraph (a)(1) of 

this section. 

FHFA declines to expand on the 

requirement as requested, because the 

expansion is unnecessary. Paragraph 

(a)(1) of this section, as proposed, 

required the preliminary report to 

describe ‘‘actions taken, plans for and 

progress toward implementing the 

provisions of 12 U.S.C. 4520 and this 

part; and including to the extent 

available the data and information 

required by this part to be included in 

an annual report.’’ The proposed rule 

provides sufficient information for the 

regulated entities and the Office of 

Finance to understand what is required 

to be included in the preliminary 

reports. 

Nine regulated entities and the Office 

of Finance commented on the timing of 

reports. Some requested that the annual 

report required by paragraph (c) of this 

section not be required until at least 120 

days after the end of a reporting period. 

Others requested that the due date for 

submission be April 1 of each year 

rather than February 1 and beginning in 

2012 rather than 2011. Others requested 

that the first annual reporting period 

begin on the date that the final rule is 

effective while others suggested an 

October 1 to September 30 reporting 

period. The comments are far from 

uniform, but they illustrate that the 

regulated entities are likely to require 

significantly different lengths of time to 

place in operation an infrastructure 

capable of providing the information 

required by the rule. Therefore, FHFA 

has determined that the transition 

period before the filing of preliminary 

reports should be lengthened from 90 to 

180 days after the effective date of the 

final rule. 

The commenters also presented 

various and not always consistent 

alternative reporting periods and dates 

for their annual accomplishment 

reports. FHFA understands the 

challenges the regulated entities and the 

Office of Finance may encounter when 

submitting their annual 

accomplishment reports. As a result, the 

first annual report under the rule will be 

required on March 1, 2012, and will 

report on the period of January 1 

through December 31, 2011. The March 

1 date for annual reports provides a 

minimal amount of time for the agency 

to analyze information and include 

elements in its own report to Congress. 

The January 1 through December 31 

reporting period maintains consistency 

with the periods covered in its annual 

reports to Congress. 

One regulated entity suggested that 

the rule consolidate the annual 

summary required by § 1207.22(d) and 

the annual report under § 1207.22(c). 

Another requested that the annual 

report coincide with the due date for an 

annual financial report. 

FHFA declines to adopt either 

suggestion. The annual report and the 

annual summary serve different 

purposes. The summary is the minimum 

information that HERA requires to be 

reported along with each entity’s annual 

report to the Director. The annual report 

is more detailed and provides greater 

specificity to aid the agency in fulfilling 

its regulatory responsibilities. 

One regulated entity requested 

modification to paragraph (b) of this 

section to provide that the information 

in annual reports will not be disclosed 

to the public. Other commenters 

requested that all information gathered 

from the regulated entities and the 

Office of Finance be publicly available. 

Another regulated entity argued that 

FHFA should acknowledge that it is 

bound by other statutes to maintain the 

confidentiality of some of the 

information reported, such as reports 

filed with the EEOC. The applicability 

of this provision to FHFA is not clear, 

but FHFA does not intend to publicly 

release the subject information and data. 

FHFA considers the reports and data 

to be related to examinations and 

examination, operation, or condition 

reports. In general, FHFA will consider 

all the information and data attributed 

to a particular regulated entity to be 

non-public, subject to Freedom of 

Information Act Exemption (b)(8) and to 

the examination privilege. The agency 

does not intend to make attributed 

information public. However, FHFA 

intends to use the information and data 

arrayed or aggregated in a variety of 

ways, without attribution to specific 

institutions, in order to identify trends, 

success or lack of success, or best 

practices each regulated entity can use 

to assess or improve its own programs. 

Additionally, FHFA may use such 

unattributed information in various 

formats to inform the public on such 

trends, success, lack of success and best 

practices among the regulated entities. 

As a result, FHFA does not believe that 

any change to the rule is required in this 

respect. 

Two regulated entities asked for 

clarification of the term ‘‘third-party 

contractor’’ as used in paragraph (d) of 

this section. ‘‘Third-party contractor’’ is 

an undefined term used in 12 U.S.C. 

4520(d). In the context of this part, 

FHFA considers the term to be coextensive with the term ‘‘contractor’’ and 

deletes ‘‘third-party’’ from the final rule. 

The intent is to capture the various 

types of contracts entered into between 

a regulated entity and another person or 

entity independent of the regulated 

entity, as limited by § 1207.3(b) of the 

final rule. 

One commenter recommended that 

the final rule should establish a 

threshold amount and require large 

contractors to report on any 

subcontracting activities. FHFA believes 

the purpose of the suggestion is an effort 

to ensure that businesses owned by 

minorities, women and individuals with 

disabilities are not used as fronts to 

steer a majority of the ‘‘real’’ work and 

business under a contract to other 

businesses. However, FHFA does not 

believe that the final rule should 

establish such detailed requirements. 

The good faith requirements described 

above with respect to business 

certifications are in part intended to 

address the concern. Moreover, FHFA 

expects the regulated entities and Office 

of Finance to develop their contracting 

policies to ensure that methods are 

present for verifying that the performing 

contractor is in fact the qualified 

minority-, women- or disabled-owned 

business. 

Section 1207.23 Annual Reports— 

Format and Contents 

Eleven regulated entities and the 

Office of Finance, to differing degrees, 

objected to voluntary self-identification 

by employees, directors, and 

contractors. The commenters objected to 

the use of voluntary self-identification 

because it could yield unreliable data 

for the annual reports. Selfidentification is an accepted means of 

gathering demographic data. The 

decennial censuses rely on selfidentification. The EEOC and the 

OFCCP also recognize that selfidentification, as well as visual 

observation identification, are among 

acceptable means of gathering 

demographic data. This issue also is 

addressed above with respect to the 


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definition of ‘‘disabled-owned business’’ 

and business certifications. The final 

rule is not changed to address this 

objection. 

Twelve regulated entities requested 

removal of § 1207.23 (b)(3) because the 

regulated entity will not be able to 

provide the disability classification for 

individuals who applied for, but were 

not offered, employment. The comments 

raise a significant issue in that antidiscrimination laws severely restrict 

pre-employment inquiries about 

disabilities. Consequently, the final rule 

deletes from paragraphs (b)(3) and (4) of 

this section references to reporting by 

disability classification. 

Nine Banks requested clarification of 

paragraphs (b)(3), (7) and (8), of this 

section allowing regulated entities to 

use minimum job qualifications as a 

threshold for reporting the number of 

individuals applying for employment or 

promotion. This issue relates to the 

identification of who is an applicant 

under anti-discrimination in 

employment laws. FHFA believes that 

the regulated entities should follow the 

guidance provided by the EEOC and the 

OFCCP in determining what constitutes 

an applicant requiring reporting. It is 

not FHFA’s charge or intent to interpret 

the statutes enforced by other agencies. 

Eleven regulated entities commented 

that requiring data on employment 

terminations under § 1207.23(b)(5) is 

inconsistent with the proposed rule’s 

statement that personally identifiable 

information is not required. 

FHFA disagrees. The provision 

requires that the entities present a 

simple numerical tally of employment 

terminations, whether voluntary or 

involuntary. It does not require the 

entities to submit any identifiable 

information. While it is theoretically 

possible that someone with access to 

attributed data from a sufficiently small 

population of terminations and with 

pre-existing knowledge of personally 

identifiable information on an entity’s 

workforce could deduce the identity of 

a terminated employee, the prospect is 

remote and too attenuated to require any 

adjustment to the rule. The provision 

does not require personally identifiable 

information and the entities should not 

report personally identifiable 

information. 

Eleven regulated entities requested 

removal of the requirements in 

§ 1207.23(b)(10) with respect to 

outreach to low-income and inner-city 

populations, activities to provide 

financial literacy education and efforts 

to provide contracting technical 

assistance. These activities are not 

required of the regulated entities by 

HERA and are removed from paragraph 

(b)(10) of this section. However, if a 

regulated entity engages in such 

activities, FHFA encourages the entity 

to report on them. 

One Bank requested modification to 

§§ 1207.23 (b)(15) and (16) to remove 

the requirement to report information 

about complaints and claims of 

discrimination, the outcomes of those 

complaints and claims, and the amounts 

paid in settlements and judgments. 

FHFA believes that this data is 

important for identifying trends and the 

costs of discrimination claims at each 

regulated entity separately and in 

aggregate. The final rule retains the 

proposed provision. 

Nine regulated entities requested 

removal of §§ 1207.23(b)(18) and (19) as 

beyond the scope of the reporting 

requirements of 12 U.S.C. 4520(d). The 

final rule retains both provisions which 

require narrative self-analyses of the 

entity’s progress, successes, needs for 

improvement and plans for fulfilling the 

policy and purpose of the regulation. 

Neither provision is precluded by 

HERA; both are consistent with FHFA’s 

regulatory responsibilities. 

Section 1207.24 Enforcement 

After review of all comments, FHFA 

concluded that no change to this section 

is needed. 

Differences Between the Banks and the 

Enterprises 

Section 1313(f) of the Safety and 

Soundness Act, as amended by section 

1201 of HERA, requires the Director, 

when promulgating regulations relating 

to the Banks, to consider the differences 

between the Banks and the Enterprises 

with respect to the Banks’ cooperative 

ownership structure; mission of 

providing liquidity to members; 

affordable housing and community 

development mission; capital structure; 

and joint and several liability. The 

Director may also consider any other 

differences that are deemed appropriate. 

In preparing the rule, the Director 

considered the differences between the 

Banks and the Enterprises as they relate 

to the above factors. Comments were 

solicited on these differences in relation 

to the proposed rule. 

A significant difference exists in the 

nature of advances and other financial 

contracts that the entities may enter. 

Specifically, the Banks’ advances are 

contracts that are entered between a 

Bank and its members only, limiting the 

universe of potential counterparties. 

Because advances are neither contracts 

for goods nor contracts for services, they 

are carved out of reporting requirements 

under the rule. The final rule also 

provides the entities latitude to exclude 

contracts from solicitation and bidding 

requirements on commercially 

reasonable bases, so long as those 

exclusions are identified. The unique 

character of advances and the restricted 

market for them provide some reasons 

that a Bank might exclude them from 

outreach, solicitation and bidding 

requirements. However, the 

demographic profile of the restricted 

market should not be an excuse to 

forego diversity efforts. Outreach and 

recruiting to banks that are owned by 

diverse individuals is encouraged, 

which in turn diversifies the market for 

advances. The final rule reflects the 

flexibility needed to address these 

differences. 

The Director has considered the above 

factors and comments and concluded 

that none of the unique factors relating 

to the Banks warrants establishing 

different treatment under this final 

regulation. 

IV. Regulatory Impact 

Paperwork Reduction Act 

The final regulation does not contain 

any information collection requirement 

that requires the approval of the Office 

of Management and Budget under the 

Paperwork Reduction Act (44 U.S.C. 

3501 et seq.). 

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 shall 

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 the final 

regulation under the Regulatory 

Flexibility Act. FHFA certifies that the 

final regulation is not likely to have a 

significant economic impact on a 

substantial number of small business 

entities because the regulation is 

applicable only to the regulated entities 

and the Office of Finance, which are not 

small entities for purposes of the 

Regulatory Flexibility Act. 

List of Subjects 

12 CFR Part 906 

Government contracts, Minority 

businesses. 


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81402 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 

12 CFR Part 1207 

Disability, Discrimination, Equal 

employment opportunity, Government 

contracts, Minority businesses, Office of 

Finance, Outreach, Regulated entities. 

Authority and Issuance 

■ Accordingly, for the reasons stated in 

the preamble, under the authority of 12 

U.S.C. 4526, the Federal Housing 

Finance Agency amends chapters IX 

and XII of Title 12, Code of Federal 

Regulations, as follows: 

CHAPTER IX—FEDERAL HOUSING 

FINANCE BOARD 

PART 906—OPERATIONS 

■ 1. The authority citation for part 906 

continues to read as follows: 

Authority: 12 U.S.C. 4516. 

Subpart C—[Removed and Reserved] 

■ 2. Remove and reserve subpart C, 

consisting of §§ 906.10 through 906.13. 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

Subchapter A—Organization and 

Operations 

■ 3. Add part 1207 to subchapter A to 

read as follows: 

PART 1207—MINORITY AND WOMEN 

INCLUSION 

Subpart A—General 

Sec. 

1207.1 Definitions. 

1207.2 Policy, purpose, and scope. 

1207.3 Limitations. 

1207.4–1207.9 [Reserved]. 

Subpart B—Minority and Women Inclusion 

and Diversity at the Federal Housing 

Finance Agency 

1207.10–1207.19 [Reserved]. 

Subpart C—Minority and Women Inclusion 

and Diversity at Regulated Entities and the 

Office of Finance 

1207.20 Office of Minority and Women 

Inclusion. 

1207.21 Equal opportunity in employment 

and contracting. 

1207.22 Regulated entity and Office of 

Finance Reports. 

1207.23 Annual reports—format and 

contents. 

1207.24 Enforcement. 

Authority: 12 U.S.C. 4520 and 4526; 12 

U.S.C. 1833e; E.O. 11478. 

Subpart A—General 

§ 1207.1 Definitions. 

The following definitions apply to the 

terms used in this part: 

Business and activities means 

operational, commercial, and economic 

endeavors of any kind, whether for 

profit or not for profit and whether 

regularly or irregularly engaged in by a 

regulated entity or the Office of Finance, 

and includes, but is not limited to, 

management of the regulated entity or 

the Office of Finance, employment, 

procurement, insurance, and all types of 

contracts, including contracts for the 

issuance or guarantee of any debt, 

equity, or mortgage-related securities, 

the management of mortgage and 

securities portfolios, the making of 

equity investments, the purchase, sale 

and servicing of single- and multifamily mortgage loans, and the 

implementation of affordable housing or 

community investment programs and 

initiatives. 

Director means the Director of FHFA 

or his or her designee. 

Disability has the same meaning as 

defined in 29 CFR 1630.2(g) and 1630.3 

and Appendix to Part 1630— 

Interpretive Guidance on Title I of the 

Americans with Disabilities Act. 

Disabled-owned business means a 

business, and includes financial 

institutions, mortgage banking firms, 

investment banking firms, investment 

consultants or advisors, financial 

services entities, asset management 

entities, underwriters, accountants, 

brokers, brokers-dealers, and providers 

of legal services— 

(1) Qualified as a Service-Disabled 

Veteran-Owned Small Business Concern 

as defined in 13 CFR 125.8 through 

125.13; or 

(2) More than fifty percent (50%) of 

the ownership or control of which is 

held by one or more persons with a 

disability; and 

(3) More than fifty percent (50%) of 

the net profit or loss of which accrues 

to one or more persons with a disability. 

FHFA means the Federal Housing 

Finance Agency. 

Minority means any Black (or African) 

American, Native American (or 

American Indian), Hispanic (or Latino) 

American, or Asian American. 

Minority-owned business means a 

business, and includes financial 

institutions, mortgage banking firms, 

investment banking firms, investment 

consultants or advisors, financial 

services entities, asset management 

entities, underwriters, accountants, 

brokers, brokers-dealers and providers 

of legal services— 

(1) More than fifty percent (50%) of 

the ownership or control of which is 

held by one or more minority 

individuals; and 

(2) More than fifty percent (50%) of 

the net profit or loss of which accrues 

to one or more minority individuals. 

Office of Finance means the Office of 

Finance of the Federal Home Loan Bank 

System. 

Reasonable accommodation has the 

same meaning as defined in 29 CFR 

1630.2(o) and Appendix to Part 1630— 

Interpretive Guidance on Title I of the 

Americans with Disabilities Act. 

Regulated entity means the Federal 

Home Loan Mortgage Corporation, the 

Federal National Mortgage Association, 

any Federal Home Loan Bank and/or 

any affiliate thereof that is subject to the 

regulatory authority of FHFA. The term 

‘‘regulated entities’’ means (collectively) 

the Federal Home Loan Mortgage 

Corporation, the Federal National 

Mortgage Association, and/or any 

affiliate Federal Home Loan Bank 

and/or any affiliate thereof that is 

subject to the regulatory authority of 

FHFA. 

Women-owned business means a 

business, and includes financial 

institutions, mortgage banking firms, 

investment banking firms, investment 

consultants or advisors, financial 

services entities, asset management 

entities, underwriters, accountants, 

brokers, brokers-dealers and providers 

of legal services— 

(1) More than fifty percent (50%) of 

the ownership or control of which is 

held by one or more women; 

(2) More than fifty percent (50%) of 

the net profit or loss of which accrues 

to one or more women; and 

(3) A significant percentage of senior 

management positions of which are held 

by women. 

§ 1207.2 Policy, purpose, and scope. 

(a) General policy. FHFA’s policy is to 

promote non-discrimination, diversity 

and, at a minimum, the inclusion of 

women, minorities, and individuals 

with disabilities in its own activities 

and in the business and activities of the 

regulated entities and the Office of 

Finance. 

(b) Purpose. This part establishes 

minimum standards and requirements 

for the regulated entities and the Office 

of Finance to promote diversity and 

ensure, to the maximum extent possible 

in balance with financially safe and 

sound business practices, the inclusion 

and utilization of minorities, women, 

individuals with disabilities, and 

minority-, women-, and disabled-owned 

businesses at all levels, in management 

and employment, in all business and 

activities, and in all contracts for 

services of any kind, including services 

that require the services of investment 

banking, asset management entities, 

broker-dealers, financial services 

entities, underwriters, accountants, 


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investment consultants, and providers 

of legal services. 

(c) Scope. This part applies to each 

regulated entity’s and the Office of 

Finance’s implementation of and 

adherence to diversity, inclusion and 

non-discrimination policies, practices 

and principles. 

§ 1207.3 Limitations. 

(a) Except as expressly provided 

herein for enforcement by FHFA, the 

regulations in this part do not, are not 

intended to, and should not be 

construed to create any right or benefit, 

substantive or procedural, enforceable at 

law, in equity, or through administrative 

proceeding, by any party against the 

United States, its departments, agencies, 

or entities, its officers, employees, or 

agents, a regulated entity or the Office 

of Finance, their officers, employees or 

agents, or any other person. 

(b) The contract clause required by 

section 1207.21(b)(6) and the itemized 

data reporting on numbers of contracts 

and amounts involved required under 

§§ 1207.22 and 1207.23(b)(11) through 

§ 1207.23(b)(13) apply only to contracts 

for services in any amount and to 

contracts for goods that equal or exceed 

$10,000 in annual value, whether in a 

single contract, multiple contracts, a 

series of contracts or renewals of 

contracts, with a single vendor. 

§§ 1207.4 through 1207.9 [Reserved]. 

Subpart B—Minority and Women 

Inclusion and Diversity at the Federal 

Housing Finance Agency 

§ 1207.10 through 1207.19 [Reserved] 

Subpart C—Minority and Women 

Inclusion and Diversity at Regulated 

Entities and the Office of Finance 

§ 1207.20 Office of Minority and Women 

Inclusion. 

(a) Establishment. Each regulated 

entity and the Office of Finance shall 

establish and maintain an Office of 

Minority and Women Inclusion, or 

designate and maintain an office to 

perform the responsibilities of this part, 

under the direction of an officer of the 

regulated entity or the Office of Finance 

who reports directly to either the Chief 

Executive Officer or the Chief Operating 

Officer, or the equivalent. Each 

regulated entity and the Office of 

Finance shall notify the Director within 

thirty (30) days after any change in the 

designation of the office performing the 

responsibilities of this part. 

(b) Adequate resources. Each 

regulated entity and the Office of 

Finance will ensure that its Office of 

Minority and Women Inclusion, or the 

office designated to perform the 

responsibilities of this part, is provided 

human, technological, and financial 

resources sufficient to fulfill the 

requirements of this part. 

(c) Responsibilities. Each Office of 

Minority and Women Inclusion, or the 

office designated to perform the 

responsibilities of this part, is 

responsible for fulfilling the 

requirements of this part, 12 U.S.C. 

1833e(b) and 4520, and such standards 

and requirements as the Director may 

issue hereunder. 

§ 1207.21 Equal opportunity in 

employment and contracting. 

(a) Equal opportunity notice. Each 

regulated entity and the Office of 

Finance shall publish a statement, 

endorsed by its Chief Executive Officer 

and approved by its Board of Directors, 

confirming its commitment to the 

principles of equal opportunity in 

employment and in contracting, at a 

minimum regardless of color, national 

origin, sex, religion, age, disability 

status, or genetic information. The 

notice also shall confirm commitment 

against retaliation or reprisal. 

Publication shall include, at a 

minimum, conspicuous posting in all 

regulated entity and Office of Finance 

physical facilities, including through 

alternative media formats, as necessary, 

and accessible posting on the regulated 

entity’s and the Office of Finance’s Web 

site. The notice shall be updated and republished, re-endorsed by the Chief 

Executive Officer and re-approved by 

the Board of Directors annually. 

(b) Policies and procedures. Each 

regulated entity and the Office of 

Finance shall develop, implement, and 

maintain policies and procedures to 

ensure, to the maximum extent possible 

in balance with financially safe and 

sound business practices, the inclusion 

and utilization of minorities, women, 

individuals with disabilities, and 

minority-, women-, and disabled-owned 

businesses in all business and activities 

and at all levels of the regulated entity 

and the Office of Finance, including in 

management, employment, 

procurement, insurance, and all types of 

contracts. The policies and procedures 

of each regulated entity and the Office 

of Finance at a minimum shall: 

(1) Confirm its adherence to the 

principles of equal opportunity and 

non-discrimination in employment and 

in contracting; 

(2) Describe its policy against 

discrimination in employment and 

contracting; 

(3) Establish internal procedures to 

receive and attempt to resolve 

complaints of discrimination in 

employment and in contracting. 

Publication will include at a minimum 

making the procedure conspicuously 

accessible to employees and applicants 

through print, electronic, or alternative 

media formats, as necessary, and 

through the regulated entity’s or the 

Office of Finance’s Web site; 

(4) Establish an effective procedure 

for accepting, reviewing and granting or 

denying requests for reasonable 

accommodations of disabilities from 

employees or applicants for 

employment; 

(5) Encourage the consideration of 

diversity in nominating or soliciting 

nominees for positions on boards of 

directors and engage in recruiting and 

outreach directed at encouraging 

individuals who are minorities, women 

and individuals with disabilities to seek 

or apply for employment with the 

regulated entity or the Office of Finance; 

(6) Except as limited by § 1207.3(b), 

require that each contract it enters 

contains a material clause committing 

the contractor to practice the principles 

of equal employment opportunity and 

non-discrimination in all its business 

activities and requiring each such 

contractor to include the clause in each 

subcontract it enters for services or 

goods provided to the regulated entity 

or the Office of Finance; 

(7) Identify the types of contracts the 

regulated entity considers exempt under 

§ 1207.3(b) and any commercially 

reasonable thresholds, exceptions, and 

limitations the regulated entity 

establishes for the implementation of 

§ 1207.21(c)(2). The policies and 

procedures must address the rationale 

and need for implementing the 

thresholds, exceptions, or limitations; 

(8) Be published and accessible to 

employees, applicants for employment, 

contractors, potential contractors, and 

members of the public through print, 

electronic, or alternative media formats, 

as necessary, and through the regulated 

entity’s or the Office of Finance’s Web 

site; and 

(9) Be reviewed at the direction of the 

officer immediately responsible for 

directing the Office of Minority and 

Women Inclusion, or other office 

designated to perform the 

responsibilities of this part, at least 

annually to assess their effectiveness 

and to incorporate appropriate changes. 

(c) Outreach for contracting. Each 

regulated entity and the Office of 

Finance shall establish a program for 

outreach designed to ensure to the 

maximum extent possible the inclusion 

in contracting opportunities of 

minorities, women, individuals with 

disabilities, and minority-, women-, and 


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81404 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 

disabled-owned businesses. The 

program at a minimum shall: 

(1) Apply to all contracts entered into 

by the regulated entity or the Office of 

Finance, including contracts with 

financial institutions, investment 

banking firms, investment consultants 

or advisors, financial services entities, 

mortgage banking firms, asset 

management entities, underwriters, 

accountants, brokers, brokers-dealers, 

and providers of legal services; 

(2) Establish policies, procedures and 

standards requiring the publication of 

contracting opportunities designed to 

encourage contractors that are 

minorities, women, individuals with 

disabilities, and minority-, women-, and 

disabled-owned businesses to submit 

offers or bid for the award of such 

contracts; and 

(3) Ensure the consideration of the 

diversity of a contractor when the 

regulated entity or the Office of Finance 

reviews and evaluates offers from 

contractors. 

§ 1207.22 Regulated entity and Office of 

Finance reports. 

(a) General. Each regulated entity and 

the Office of Finance, through its Office 

of Minority and Women Inclusion, or 

other office designated to perform the 

responsibilities of this part, shall report 

in writing, in such format as the 

Director may require, to the Director 

describing its efforts to promote 

diversity and ensure the inclusion and 

utilization of minorities, women, 

individuals with disabilities, and 

minority-, women-, and disabled-owned 

businesses at all levels, in management 

and employment, in all business and 

activities, and in all contracts for 

services and the results of such efforts. 

(1) Within 180 days after the effective 

date of this regulation each regulated 

entity and the Office of Finance shall 

submit to the Director or his or her 

designee a preliminary status report 

describing actions taken, plans for and 

progress toward implementing the 

provisions of 12 U.S.C. 4520 and this 

part; and including to the extent 

available the data and information 

required by this part to be included in 

an annual report. 

(2) FHFA intends to use the 

preliminary status report solely for the 

purpose of examining the submitting 

regulated entity or the Office of Finance 

and reporting to the institution on its 

operations and the condition of its 

program. 

(b) FHFA use of reports. The data and 

information reported to FHFA under 

this part (except for the initial report 

under paragraph (a)(1) of this section) 

are intended to be used for any 

permissible supervisory and regulatory 

purpose, including examinations, 

enforcement actions, identification of 

matters requiring attention, and 

production of FHFA examination, 

operating and condition reports related 

to one or more of the regulated entities 

and the Office of Finance. FHFA may 

use the information and data submitted 

to issue aggregate reports and data 

summaries that each regulated entity 

and the Office of Finance may use to 

assess its own progress and 

accomplishments, or to the public as it 

deems necessary. FHFA is not requiring, 

and does not desire, that reports under 

this part contain personally identifiable 

information. 

(c) Frequency of reports. Each 

regulated entity and the Office of 

Finance shall submit an annual report 

on or before March 1 of each year, 

beginning in 2012, reporting on the 

period of January 1 through December 

31 of the preceding year, and such other 

reports as the Director may require. If 

the date for submission falls on a 

Saturday, Sunday, or Federal holiday, 

the report is due no later than the next 

day that is not a Saturday, Sunday, or 

Federal holiday. 

(d) Annual summary. Each regulated 

entity and the Office of Finance shall 

include in its annual report to the 

Director (pursuant to 12 U.S.C. 1723a(k), 

1456(c), or 1440, with respect to the 

regulated entities) a summary of its 

activities under this part during the 

previous year, including at a minimum, 

detailed information describing the 

actions taken by the regulated entity or 

the Office of Finance pursuant to 12 

U.S.C. 4520 and a statement of the total 

amounts paid by the regulated entity or 

the Office of Finance to contractors 

during the previous year and the 

percentage of such amounts paid to 

contractors that are minorities or 

minority-owned businesses, women or 

women-owned businesses, and 

individuals with disabilities and 

disabled-owned businesses respectively, 

as limited by § 1207.3(b). 

§ 1207.23 Annual reports—format and 

contents. 

(a) Format. Each annual report shall 

consist of a detailed summary of the 

regulated entity’s or the Office of 

Finance’s activities during the reporting 

year to carry out the requirements of 

this part, which report may also be 

made a part of the regulated entity’s or 

the Office of Finance’s annual report to 

the Director. The report shall contain a 

table of contents and conclude with a 

certification by the regulated entity’s or 

the Office of Finance’s officer 

responsible for the annual report that 

the data and information presented in 

the report are accurate, and are 

approved for submission. 

(b) Contents. The annual report shall 

contain the information provided in the 

regulated entity’s or the Office of 

Finance’s annual summary pursuant to 

§ 1207.22(d) and, in addition to any 

other information or data the Director 

may require, shall include: 

(1) The EEO–1 Employer Information 

Report (Form EEO–1 used by the Equal 

Employment Opportunity Commission 

(EEOC) and the Office of Federal 

Contract Compliance Programs (OFCCP) 

to collect certain demographic 

information) or similar reports filed by 

the regulated entity or the Office of 

Finance during the reporting year. If the 

regulated entity or the Office of Finance 

does not file Form EEO–1 or similar 

reports, the regulated entity or the 

Office of Finance shall submit to FHFA 

a completed Form EEO–1; 

(2) All other reports or plans the 

regulated entity or the Office of Finance 

submitted to the EEOC, the Department 

of Labor, OFCCP or Congress (‘‘reports 

or plans’’ is not intended to include 

separate complaints or charges of 

discrimination or responses thereto) 

during the reporting year; 

(3) Data showing by minority and 

gender the number of individuals 

applying for employment with the 

regulated entity or the Office of Finance 

in each occupational or job category 

identified on the Form EEO–1 during 

the reporting year; 

(4) Data showing by minority and 

gender the number of individuals hired 

for employment with the regulated 

entity or the Office of Finance in each 

occupational or job category identified 

on the Form EEO–1 during the reporting 

year; 

(5) Data showing by minority, gender 

and disability classification, and 

categorized as voluntary or involuntary, 

the number of separations from 

employment with the regulated entity or 

the Office of Finance in each 

occupational or job category identified 

on the Form EEO–1 during the reporting 

year; 

(6) Data showing the number of 

requests for reasonable accommodation 

received from employees and applicants 

for employment, the number of requests 

granted, and the disabilities 

accommodated and the types of 

accommodation granted during the 

reporting year; 

(7) Data showing for the reporting 

year by minority, gender, and disability 

classification the number of individuals 

applying for promotion at the regulated 

entity or the Office of Finance— 


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Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 81405 

(i) Within each occupational or job 

category identified on the Form EEO–1; 

and 

(ii) From one such occupational or job 

category to another; 

(8) Data showing by minority, gender, 

and disability classification the number 

of individuals— 

(i) Promoted at the regulated entity or 

the Office of Finance within each 

occupational or job category identified 

on the Form EEO–1, after applying for 

such a promotion; 

(ii) Promoted at the regulated entity or 

the Office of Finance within each 

occupational or job category identified 

on the Form EEO–1, without applying 

for such a promotion; and 

(iii) Promoted at the regulated entity 

or the Office of Finance from one 

occupational or job category identified 

on the Form EEO–1 to another such 

category, after applying for such a 

promotion; 

(9) A comparison of the data reported 

under paragraphs (b)(1) through (b)(8) of 

this section to such data as reported in 

the previous year together with a 

narrative analysis; 

(10) Descriptions of all regulated 

entity or Office of Finance outreach 

activity during the reporting year to 

recruit individuals who are minorities, 

women, or persons with disabilities for 

employment, to solicit or advertise for 

minority or minority-owned, women or 

women-owned, and disabled-owned 

contractors or contractors who are 

individuals with disabilities to offer 

proposals or bids to enter into business 

with the regulated entity or Office of 

Finance, or to inform such contractors 

of the regulated entity’s or Office of 

Finance’s contracting process, including 

the identification of any partners, 

organizations, or government offices 

with which the regulated entity or the 

Office of Finance participated in such 

outreach activity; 

(11) Cumulative data separately 

showing the number of contracts 

entered with minorities or minorityowned businesses, women or womenowned businesses and individuals with 

disabilities or disabled-owned 

businesses during the reporting year; 

(12) Cumulative data separately 

showing for the reporting year the total 

amount the regulated entity or the 

Office of Finance paid to contractors 

that are minorities or minority-owned 

businesses, women or women-owned 

and individuals with disabilities or 

disabled-owned businesses; 

(13) The annual total of amounts paid 

to contractors and the percentage of 

which was paid separately to minorities 

or minority-owned businesses, women 

or women-owned businesses and 

individuals with disabilities or 

disabled-owned businesses during the 

reporting year; 

(14) Certification of compliance with 

§§ 1207.20 and 1207.21, together with 

sufficient documentation to verify 

compliance; 

(15) Data for the reporting year 

showing, separately, the number of 

equal opportunity complaints 

(including administrative agency 

charges or complaints, arbitral or 

judicial claims) against the regulated 

entity or the Office of Finance that— 

(i) Claim employment discrimination, 

by basis or kind of the alleged 

discrimination (race, sex, disability, 

etc.) and by result (settlement, favorable, 

or unfavorable outcome); 

(ii) Claim discrimination in any 

aspect of the contracting process or 

administration of contracts, by basis of 

the alleged discrimination and by result; 

and 

(iii) Were resolved through the 

regulated entity’s or the Office of 

Finance’s internal processes; 

(16) Data showing for the reporting 

year amounts paid to claimants by the 

regulated entity or the Office of Finance 

for settlements or judgments on 

discrimination complaints— 

(i) In employment, by basis of the 

alleged discrimination; and 

(ii) In any aspect of the contracting 

process or in the administration of 

contracts, by basis of the alleged 

discrimination; 

(17) A comparison of the data 

reported under paragraphs (b)(12) and 

(b)(13) of this section with the same 

information reported for the previous 

year; 

(18) A narrative identification and 

analysis of the reporting year’s activities 

the regulated entity or the Office of 

Finance considers successful and 

unsuccessful in achieving the purpose 

and policy of regulations in this part 

and a description of progress made from 

the previous year; and 

(19) A narrative identification and 

analysis of business activities, levels, 

and areas in which the regulated entity’s 

or the Office of Finance’s efforts need to 

improve with respect to achieving the 

purpose and policy of regulations in this 

part, together with a description of 

anticipated efforts and results the 

regulated entity or the Office of Finance 

expects in the succeeding year. 

§ 1207.24 Enforcement. 

The Director may enforce this 

regulation and standards issued under it 

in any manner and through any means 

within his or her authority, including 

through identifying matters requiring 

attention, corrective action orders, 

directives, or enforcement actions under 

12 U.S.C. 4513b and 4514. The Director 

may conduct examinations of a 

regulated entity’s or the Office of 

Finance’s activities under and in 

compliance with this part pursuant to 

12 U.S.C. 4517. 

Dated: December 20, 2010. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2010–32541 Filed 12–27–10; 8:45 am] 

BILLING CODE 8070–01–P 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1252 

RIN 2590–AA22 

Portfolio Holdings 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Final rule; response to 

comments on the interim final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is issuing a final 

regulation that will govern the portfolio 

holdings of Fannie Mae and Freddie 

Mac (collectively, the Enterprises) 

during the pendency of the 

conservatorships. The final regulation 

adopts FHFA’s interim final rule on 

portfolio holdings, without change. See 

74 FR 5609, January 30, 2009. That 

interim rule adopted the portfolio limits 

specified in each Enterprise’s Senior 

Preferred Stock Purchase Agreement 

(PSPA) with the Department of the 

Treasury (Treasury) as the regulation 

limits. Specifically, it provides that each 

Enterprise comply with the portfolio 

limits contained in the respective 

PSPAs, as they may be amended from 

time to time. The interim regulation also 

stipulated that the regulation is to be in 

effect until amended or the Enterprises 

are no longer subject to the PSPAs. 

DATES: Effective December 28, 2010, the 

interim final rule published on January 

30, 2009 (74 FR 5609), which was 

effective January 30, 2009, is confirmed 

as final. 

FOR FURTHER INFORMATION CONTACT: 

Ming-Yuen Meyer-Fong, Office of the 

General Counsel, (202) 414–3798, or 

Valerie Smith, Office of Policy Analysis 

and Research, (202) 414–3770, Federal 

Housing Finance Agency, 1700 G Street, 

NW., Washington, DC 20552. The 

telephone number for the 

Telecommunications Device for the Deaf 

is (800) 877–8339. For more information 

on this Final Regulation, see the 


srobinson on DSKHWCL6B1PROD with RULES