§ 1242.5 Informational content of a resolution plan; required and prohibited assumptions. ( a ) *In general.* An Enterprise resolution plan shall reflect required and prohibited assumptions specified in paragraph (b) of this section and include information specified in paragraphs (c) through (h) of this section, as well as analysis, in detail, to facilitate a rapid and orderly resolution of the Enterprise by FHFA as receiver in a manner that minimizes the risk that resolution of an Enterprise would have serious adverse effects on the national housing finance markets, and to the extent possible, the amount of any losses to be realized by the Enterprise's creditors. Notwithstanding anything to the contrary in this part, FHFA may adjust or tailor the scope or form of information specified in paragraphs (c) through (g) of this section, as FHFA determines appropriate considering the significance of such information to FHFA when reviewing resolution plans, the appropriate level of detail of information, and reduction of burden on an Enterprise or FHFA.
( b ) *Required and prohibited assumptions when developing a resolution plan.* In developing a resolution plan, each Enterprise shall: ( 1 ) Take into account that receivership of the Enterprise may occur under the severely adverse economic conditions provided to the Enterprise by FHFA in conjunction with any stress testing required or in another scenario provided by FHFA;
( 2 ) Not assume the provision or continuation of extraordinary support by the United States to the Enterprise to prevent either its becoming in danger of default or in default (including, in particular, support obtained or negotiated on behalf of the Enterprise by FHFA in its capacity as supervisor, conservator, or receiver of the Enterprise, including the Senior Preferred Stock Purchase Agreements entered into by FHFA and the U.S. Department of the Treasury on September 7, 2008 and any amendments thereto); and
( 3 ) Reflect statutory provisions that obligations and securities of the Enterprise issued pursuant to its authorizing statute, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than the Enterprise.
( c ) *Executive summary.* Each resolution plan of an Enterprise shall include an executive summary describing: ( 1 ) Summary of the key elements of the Enterprise's strategic analysis;
( 2 ) A description of each material change experienced by the Enterprise since submission of the Enterprise's prior resolution plan (or affirmation that no such change has occurred);
( 3 ) Changes to the Enterprise's previously submitted resolution plan resulting from any: ( i ) Change in law or regulation;
( ii ) Guidance or feedback from FHFA; or
( iii ) Material change described pursuant to paragraph (c)(2) of this section; and
( 4 ) Any actions taken by the Enterprise since submitting its prior resolution plan to improve the effectiveness of the resolution plan or remediate or otherwise mitigate any material weaknesses or impediments to a rapid and orderly resolution.
( d ) *Strategic analysis.* Each resolution plan shall include a strategic analysis describing the Enterprise's plan for facilitating its rapid and orderly resolution by FHFA. Such analysis shall: ( 1 ) Include detailed descriptions of— ( i ) Key assumptions and supporting analysis underlying the resolution plan, including any assumptions made concerning the economic or financial conditions that would be present at the time resolution would occur;
( ii ) Actions, or ranges of actions, which if taken by the Enterprise could facilitate a rapid and orderly resolution and those actions that the Enterprise intends to take;
( iii ) The corporate governance framework that supports determination of the specific actions to be taken to facilitate a rapid and orderly resolution as the Enterprise is becoming in danger of default (including identifying the senior management officials responsible for making those determinations and taking those actions);
( iv ) Funding, liquidity, and capital needs of, and resources and loss absorbing capacity available to, the Enterprise, which shall be mapped to its core business lines, in the ordinary course of business and in the event the Enterprise becomes in danger of default or in default;
( v ) Considering the Enterprise's core business lines, a strategy for identifying assets and liabilities of the Enterprise to be transferred to a limited-life regulated entity; and for transferring operations of, and funding for, the Enterprise to a limited-life regulated entity, which shall be mapped to core business lines;
( vi ) A strategy for preventing the failure or discontinuation of each core business line and its associated operations, services, functions, or supports as the core business line is transferred to a limited-life regulated entity, and actions that, in the Enterprise's view, FHFA could take to prevent or mitigate any adverse effects of such failure or discontinuation on the national housing finance markets;
( vii ) A strategy for mitigating the effect on the Enterprise of another Enterprise becoming in danger of default or in default, on the continuation of each of the Enterprise's core business lines and its associated operations, services, functions, or supports as any assets or operations of the other Enterprise are transferred to the Enterprise;
( viii ) The extent to which claims against the Enterprise by creditors and counterparties would be satisfied in accordance with § 1237.9 of this chapter and the manner and source of satisfaction of those claims consistent with the continuation of the Enterprise's core business lines by the limited-life regulated entity; and
( ix ) A strategy for transferring or unwinding qualified financial contracts, as defined at 12 U.S.C. 4617(d)(8)(D)(i), in a manner consistent with 12 U.S.C. 4617(d)(8) through (11);
( 2 ) Identify the time period(s) the Enterprise expects would be needed to successfully execute each action identified in paragraph (d)(1)(ii) of this section to facilitate rapid and orderly resolution, and any impediments to such actions;
( 3 ) Identify and describe— ( i ) Any potential material weaknesses or impediments to rapid and orderly resolution as conceived in the Enterprise's plan;
( ii ) Any actions or steps the Enterprise has taken or proposes to take, or which other market participants could take, to remediate or otherwise mitigate the weaknesses or impediments identified by the Enterprise; and
( iii ) A timeline for the remedial or other mitigating action that the Enterprise proposes to take; and
( 4 ) Provide a detailed description of the processes the Enterprise employs for— ( i ) Determining the current market values and marketability of the core business lines and material asset holdings of the Enterprise;
( ii ) Assessing the feasibility of the Enterprise's plans (including timeframes) for executing any sales, divestitures, restructurings, recapitalizations, or other similar actions contemplated in the Enterprise's resolution plan; and
( iii ) Assessing the impact of any sales, divestitures, restructurings, recapitalizations, or other similar actions on the value, funding, and operations of the Enterprise and its core business lines.
( e ) *Corporate governance relating to resolution planning.* Each resolution plan shall: ( 1 ) Include a detailed description of— ( i ) How resolution planning is integrated into the corporate governance structure and processes of the Enterprise;
( ii ) The process for identifying core business lines, including a description of the Enterprise's methodology considering the requirements of § 1242.3(a);
( iii ) Enterprise policies, procedures, and internal controls governing preparation and approval of the resolution plan; and
( iv ) The nature, extent, and frequency of reporting to Enterprise senior executive officers and the board of directors regarding the development, maintenance, and implementation of the Enterprise's resolution plan;
( 2 ) Provide the identity and position of the Enterprise senior management official primarily responsible for overseeing the development, maintenance, implementation, and submission of the Enterprise's resolution plan and for the Enterprise's compliance with this part;
( 3 ) Describe the nature, extent, and results of any contingency planning or similar exercise conducted by the Enterprise since the date of the Enterprise's most recently submitted resolution plan to assess the viability of or improve the resolution plan of the Enterprise; and
( 4 ) Identify and describe the relevant risk measures used by the Enterprise to report credit risk exposures both internally to its senior management and board of directors, as well as any relevant risk measures reported externally to investors or to FHFA.
( f ) *Organizational structure, interconnections, and related information.* Each resolution plan shall: ( 1 ) Provide a detailed description of the Enterprise's organizational structure, including— ( i ) A list of all affiliates and trusts within the Enterprise's organization that identifies for each affiliate and trust (legal entity), the following information (provided that, where such information would be identical across multiple legal entities, it may be presented in relation to a group of identified legal entities): ( A ) The percentage of voting and nonvoting equity of each legal entity listed; and
( B ) The location, jurisdiction of incorporation, licensing, and key management associated with each material legal entity identified;
( ii ) A mapping of the Enterprise's operations, services, functions, and supports associated with each of its core business lines, identifying— ( A ) The entity, including any third-party providers, responsible for conducting each associated operation or service that supports the functioning of each core business line as well as the Enterprise's material asset holdings; and
( B ) Liabilities related to such operations, services, and core business lines;
( 2 ) Provide an unconsolidated balance sheet for the Enterprise and a consolidating schedule for all securitization trusts consolidated by the Enterprise;
( 3 ) Provide a schedule showing all assets and liabilities of unconsolidated Enterprise securitization trusts;
( 4 ) Include a description of the material components of the liabilities of the Enterprise and each identified core business line that, at a minimum, separately identifies types and amounts of the short-term and long-term liabilities, secured and unsecured liabilities, and subordinated liabilities;
( 5 ) Identify and describe the processes used by the Enterprise to— ( i ) Determine to whom the Enterprise has pledged collateral;
( ii ) Identify the person or entity that holds such collateral; and
( iii ) Identify the jurisdiction in which the collateral is located, and, if different, the jurisdiction in which the security interest in the collateral is enforceable against the Enterprise;
( 6 ) Describe any material off-balance sheet exposures (including guarantees and contractual obligations) of the Enterprise, including a mapping to each of its core business lines;
( 7 ) Describe the practices of the Enterprise and its core business lines related to the booking of trading and derivatives activities;
( 8 ) Identify material hedges of the Enterprise and its core business lines related to trading and derivative activities, including a mapping to legal entity;
( 9 ) Describe the hedging strategies of the Enterprise;
( 10 ) Describe the process undertaken by the Enterprise to establish exposure limits;
( 11 ) Identify the third-party providers with which the Enterprise has significant business connections (including third parties performing or providing operations, services, functions, or supports associated with each core business line) and describe the business connections, dependencies and relationships with such third party;
( 12 ) Report on the counterparty credit risk exposure to— ( i ) The 20 largest single-family mortgage sellers and the 20 largest single-family mortgage servicers to the Enterprise (where “largest” is determined as of the end of the quarter preceding submission of a resolution plan, and the Enterprise includes an entity that is among the largest in both categories in each separate report category); and
( ii ) All multifamily sellers and servicers to the Enterprise, based on purchasing volume during the preceding year.
( 13 ) Report on insurance in force, risk in force, and exposure and potential future exposure related to all providers of loan-level mortgage insurance;
( 14 ) Analyze whether the failure of a third-party provider to an Enterprise would likely have an adverse impact on an Enterprise or result in the Enterprise becoming in danger of default or in default, the availability of alternative providers, and the ability of the Enterprise to change providers when necessary; and
( 15 ) Identify each trading, payment, clearing, or settlement system of which the Enterprise, directly or indirectly, is a member and on which the Enterprise conducts a material number or value amount of trades or transactions, and map membership in each such system to the Enterprise and its core business lines.
( g ) *Management information systems.* ( 1 ) Each resolution plan shall include: ( i ) A detailed inventory and description of the key management information systems and applications, including systems and applications for risk management, automated underwriting, valuation, accounting, and financial and regulatory reporting, used by the Enterprise, and systems and applications containing records used to manage all qualified financial contracts. The description of each system or application provided shall identify the legal owner or licensor, the use or function of the system or application, service level agreements related thereto, any software and system licenses, and any intellectual property associated therewith;
( ii ) A mapping of the key management information systems and applications to core business lines of the Enterprise that use or rely on such systems and applications;
( iii ) An identification of the scope, content, and frequency of the key internal reports that senior management of the Enterprise and core business lines use to monitor the financial health, risks, and operation of the Enterprise and core business lines;
( iv ) A description of the process for FHFA to access the management information systems and applications identified in this paragraph (g); and
( v ) A description and analysis of— ( A ) The capabilities of the Enterprise's management information systems to collect, maintain, and report, in a timely manner to management of the Enterprise and to FHFA, the information and data underlying the resolution plan; and
( B ) Any gaps or weaknesses in such capabilities, and a description of the actions the Enterprise intends to take to promptly address such gaps, or weaknesses, and the timeframe for implementing such actions.
( h ) *Identification of point of contact.* The Enterprise senior management official responsible for serving as a point of contact regarding the resolution plan shall be identified in the resolution plan.