```

[Federal Register Volume 75, Number 248 (Tuesday, December 28, 2010)]
[Rules and Regulations]
[Pages 81395-81405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32541]

=======================================================================
-----------------------------------------------------------------------

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, [email protected], (202) 408-
2502, 1625 Eye Street NW., Washington, DC 20006; or Mark Laponsky, 
Deputy General Counsel, [email protected], (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.
---------------------------------------------------------------------------

    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, section 1101 of HERA.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \2\ See 75 FR 10446, March 8, 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

[[Page 81396]]

(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 anti-discrimination 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.
---------------------------------------------------------------------------

    \3\ See Federal Deposit Insurance Corporation regulation 12 CFR 
Part 361 Minority and Women Outreach Program Contracting.
---------------------------------------------------------------------------

    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

[[Page 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 single- and 
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 non-disclosure 
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 Sec. Sec.  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 Sec.  1207.21(c), 
however, should seek to include every type of contract. Paragraph (b) 
has been added to Sec.  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 Sec.  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 ``disabled-owned 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 self-certification, 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

[[Page 81398]]

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 all-inclusive. 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 single- and 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. Self-identifications, 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.
---------------------------------------------------------------------------

    \4\ See 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).
---------------------------------------------------------------------------

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 Sec.  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 Sec.  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 Sec.  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

[[Page 81399]]

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 under-inclusive, 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 time-to-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.
---------------------------------------------------------------------------

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

    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, Sec.  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 Sec.  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

[[Page 81400]]

with respect to implementing paragraph (c)(2) of this section. The 
thresholds, exceptions, or limitations for implementing Sec.  
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 Sec.  
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 Sec.  1207.22(d) and the annual report under Sec.  
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 co-extensive 
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 Sec.  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. Self-identification is an accepted means of 
gathering demographic data. The decennial censuses rely on self-
identification. The EEOC and the OFCCP also recognize that self-
identification, as well as visual observation identification, are among 
acceptable means of gathering demographic data. This issue also is 
addressed above with respect to the

[[Page 81401]]

definition of ``disabled-owned business'' and business certifications. 
The final rule is not changed to address this objection.
    Twelve regulated entities requested removal of Sec.  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 anti-
discrimination 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 Sec.  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 
Sec.  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 Sec. Sec.  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 Sec. Sec.  
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.

[[Page 81402]]

12 CFR Part 1207

    Disability, Discrimination, Equal employment opportunity, 
Government contracts, Minority businesses, Office of Finance, Outreach, 
Regulated entities.

Authority and Issuance

0
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

0
1. The authority citation for part 906 continues to read as follows:

    Authority: 12 U.S.C. 4516.

Subpart C--[Removed and Reserved]

0
2. Remove and reserve subpart C, consisting of Sec. Sec.  906.10 
through 906.13.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

Subchapter A--Organization and Operations

0
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

Sec.  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 multi-family 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.

Sec.  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,

[[Page 81403]]

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.

Sec.  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 Sec. Sec.  1207.22 and 1207.23(b)(11) through Sec.  
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.

Sec. Sec.  1207.4 through 1207.9  [Reserved].

Subpart B--Minority and Women Inclusion and Diversity at the 
Federal Housing Finance Agency

Sec.  1207.10  through 1207.19 [Reserved]

Subpart C--Minority and Women Inclusion and Diversity at Regulated 
Entities and the Office of Finance

Sec.  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.

Sec.  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 re-published, 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 Sec.  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 Sec.  1207.3(b) and any commercially reasonable 
thresholds, exceptions, and limitations the regulated entity 
establishes for the implementation of Sec.  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

[[Page 81404]]

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.

Sec.  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 Sec.  1207.3(b).

Sec.  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 Sec.  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--

[[Page 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 minority-owned businesses, women or women-
owned 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 Sec. Sec.  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.

Sec.  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
```