14764 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 

1 86 FR 53230. 

2 85 FR 82150. 

3 In conservatorships, the Enterprises are 

supported by Senior Preferred Stock Purchase 

Agreements (PSPAs) between the U.S. Department 

of the Treasury (Treasury) and each Enterprise, 

through FHFA as its conservator (Fannie Mae’s 

Amended and Restated Senior Preferred Stock 

Purchase Agreement with Treasury (September 26, 

2008), https://www.fhfa.gov/Conservatorship/ 

Documents/Senior-Preferred-Stock-Agree/FNM/ 

SPSPA-amends/FNM-Amend-and-Restated-SPSPA_

09-26-2008.pdf; Freddie Mac’s Amended and 

Restated Senior Preferred Stock Purchase 

Agreement with Treasury (September 26, 2008), 

https://www.fhfa.gov/Conservatorship/Documents/ 

Senior-Preferred-Stock-Agree/FRE/SPSPA-amends/ 

FRE-Amended-and-Restated-SPSPA_09-26- 

2008.pdf). The PSPAs, as amended by letter 

agreements executed by the parties on January 14, 

2021 (2021 Fannie Mae Letter Agreement, https:// 

home.treasury.gov/system/files/136/ExecutedLetter-Agreement-for-Fannie-Mae.pdf; 2021 Freddie 

Mac Letter Agreement, https://home.treasury.gov/ 

system/files/136/Executed-Letter-Agreement-forFreddie%20Mac.pdf), include a covenant at section 

5.15 which states: ‘‘[The Enterprise] shall comply 

with the Enterprise Regulatory Capital Framework 

[published in the Federal Register at 85 FR 82150 

on December 17, 2020] disregarding any subsequent 

amendment or other modifications to that rule.’’ 

Modifying that covenant will require agreement 

between the Treasury and FHFA under section 6.3 

of the PSPAs. 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1240 

RIN 2590–AB17 

Enterprise Regulatory Capital 

Framework—Prescribed Leverage 

Buffer Amount and Credit Risk 

Transfer 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA or the Agency) is 

adopting a final rule (final rule) that 

amends the Enterprise Regulatory 

Capital Framework (ERCF) by refining 

the prescribed leverage buffer amount 

(PLBA or leverage buffer) and credit risk 

transfer (CRT) securitization framework 

for the Federal National Mortgage 

Association (Fannie Mae) and the 

Federal Home Loan Mortgage 

Corporation (Freddie Mac, and with 

Fannie Mae, each an Enterprise). The 

final rule also makes technical 

corrections to various provisions of the 

ERCF that was published on December 

17, 2020. 

DATES: This rule is effective May 16, 

2022. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Varrieur, Senior Associate 

Director, Office of Capital Policy, (202) 

649–3141, Andrew.Varrieur@fhfa.gov; 

Christopher Vincent, Senior Financial 

Analyst, Office of Capital Policy, (202) 

649–3685, Christopher.Vincent@

fhfa.gov; or Ming-Yuen Meyer-Fong, 

Associate General Counsel, Office of 

General Counsel, (202) 649–3078, MingYuen.Meyer-Fong@fhfa.gov. These are 

not toll-free numbers. For TTY/TRS 

users with hearing and speech 

disabilities, dial 711 and ask to be 

connected to any of the contact numbers 

above. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Overview of the Final Rule 

A. Amendments to the ERCF 

B. Effective Date 

III. General Comments on the Proposed Rule 

A. 20 Percent Risk Weight Floor 

B. Multifamily Countercyclical Adjustment 

IV. Leverage Buffer 

V. Credit Risk Transfer 

VI. ERCF Technical Corrections 

VII. Paperwork Reduction Act 

VIII. Regulatory Flexibility Act 

IX. Congressional Review Act 

I. Introduction 

On September 27, 2021, FHFA 

published in the Federal Register a 

notice of proposed rulemaking 

(proposed rule) seeking comments on 

amendments to the ERCF that would 

refine the leverage buffer and the riskbased capital treatment for retained CRT 

exposures.1 FHFA proposed these 

amendments to ensure that the ERCF 

appropriately reflects the risks inherent 

to the Enterprises’ business models and 

contains proper incentives for the 

Enterprises to distribute acquired credit 

risk to private investors rather than to 

buy and hold that risk. In meeting these 

objectives, the proposed amendments 

would help restore FHFA’s intended 

paradigm of having the Enterprises’ 

leverage capital requirements and buffer 

provide a credible backstop to their riskbased capital requirements and buffers, 

enhancing the safety and soundness of 

the Enterprises. FHFA is now adopting 

in this final rule the proposed 

amendments, substantially as proposed. 

FHFA published the ERCF on 

December 17, 2020 2 with the purpose of 

implementing a going-concern 

regulatory capital standard to ensure 

that each Enterprise operates in a safe 

and sound manner and is positioned to 

fulfill its statutory mission to provide 

stability and ongoing assistance to the 

secondary mortgage market across the 

economic cycle.3 The ERCF, which 

became effective on February 16, 2021, 

aimed to address issues that arose 

during the notice and comment period 

such as the pro-cyclicality of the singlefamily risk-based capital requirements, 

the quality of Enterprise capital used to 

meet the capital requirements, and the 

quantity of required capital at the 

Enterprises. Accordingly, the ERCF is 

significantly stronger than the statutory 

framework which governed the 

Enterprises’ capital requirements prior 

to entering conservatorships. 

However, after finalizing the ERCF, 

FHFA identified specific aspects of the 

framework that might incentivize risk 

taking in certain economic 

environments and create disincentives 

to the Enterprises’ CRT programs. 

Together, these features of the ERCF 

could result in an excessive buildup of 

risk accruing to taxpayers and the 

housing finance market, particularly 

because the Enterprises presently are 

severely undercapitalized and lack the 

resources on their own to safely absorb 

the credit risk associated with their 

normal operations. 

FHFA views the transfer of risk, 

particularly credit risk, to a broad set of 

investors as an important tool to reduce 

taxpayer exposure to the risks posed by 

the Enterprises and to mitigate systemic 

risk caused by the size and monoline 

nature of the Enterprises’ businesses. 

Since their development began in 2013, 

the CRT programs have been the 

Enterprises’ primary mechanism to 

successfully effectuate reliable risk 

transfer to the private sector. Through 

these programs, the Enterprises have 

shed a significant amount of credit risk 

to help protect against potential losses 

while the PSPAs have significantly 

limited the Enterprises’ ability to hold 

capital and withstand losses through 

normal operations. During this current 

period where the Enterprises are 

building capital, CRT remains an 

important risk mitigation tool to protect 

taxpayers against the heightened risk of 

potential PSPA draws in the event of a 

significant stress to the housing sector. 

It is therefore crucial that the 

Enterprises’ capital requirements are 

appropriately sized, where the leverage 

capital framework is a credible backstop 

to the risk-based capital framework and 

where responsible and effective risk 

transfer is not unduly discouraged. 

II. Overview of the Final Rule 

A. Amendments to the ERCF 

After carefully considering the 

comments on the proposed rule, and as 

described in this preamble, FHFA is 

adopting, substantially as proposed, 

amendments to the leverage buffer and 

risk-based capital treatment of CRT 

exposures. FHFA continues to believe 

that the amendments in this final rule 

will lessen the potential deterrents to 

Enterprise risk transfer by properly 

aligning incentives in the ERCF and will 

position the Enterprises to operate in a 


jspears on DSK121TN23PROD with RULES1
Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 14765 

4See comments on Amendments to the Enterprise 

Regulatory Capital Framework Rule—Prescribed 

Leverage Buffer Amount and Credit Risk Transfer, 

available at https://www.fhfa.gov/ 

SupervisionRegulation/Rules/Pages/CommentList.aspx?RuleID=708. The comment period for the 

proposed rule closed on November 26, 2021. 5 85 FR 39274. 

safe and sound manner to fulfill their 

statutory mission throughout the 

economic cycle, both during and after 

conservatorships. Specifically, the final 

rule will: 

• Replace the fixed leverage buffer 

equal to 1.5 percent of an Enterprise’s 

adjusted total assets with a dynamic 

leverage buffer equal to 50 percent of 

the Enterprise’s stability capital buffer 

as calculated in accordance with 12 CFR 

1240.400; 

• Replace the prudential floor of 10 

percent on the risk weight assigned to 

any retained CRT exposure with a 

prudential floor of 5 percent on the risk 

weight assigned to any retained CRT 

exposure; and 

• Remove the requirement that an 

Enterprise must apply an overall 

effectiveness adjustment to its retained 

CRT exposures in accordance with 12 

CFR 1240.44(f) and (i). 

In addition, the final rule will 

implement technical corrections to 

various provisions of the ERCF that was 

published on December 17, 2020, 

highlighted by a significant 

typographical error in the definition of 

the long-term HPI trend that constitutes 

the basis for calculating the singlefamily countercyclical adjustment. 

B. Effective Date 

Under the rule published on 

December 17, 2020 establishing the 

ERCF, an Enterprise will not be subject 

to any requirement in the ERCF until 

the compliance date for the requirement 

as detailed in the ERCF. The effective 

date for the ERCF was February 16, 

2021. The effective date for the ERCF 

amendments and technical corrections 

in this final rule will be 60 days after 

the day of publication of this final rule 

in the Federal Register. 

III. General Comments on the Proposed 

Rule 

FHFA received 89 public comment 

letters on the proposed rule from a 

variety of interested parties, including 

private individuals, trade associations, 

consumer advocacy groups, think-tanks 

and institutes, and financial 

institutions.4 In general, and as 

discussed in greater detail below in the 

relevant sections of this preamble, 

commenters were supportive of FHFA’s 

proposed amendments to both the 

leverage buffer and the risk-based 

capital treatment of retained CRT 

exposures. Overall, most commenters 

supported FHFA’s efforts to restore the 

intended paradigm between leverage 

capital and risk-based capital at the 

Enterprises and to properly incentivize 

risk transfer within the ERCF. However, 

as discussed in the relevant sections of 

this preamble, FHFA also received a 

number of comments indicating concern 

over various aspects of the proposed 

amendments. 

Over half of the 89 comments FHFA 

received during this notice and 

comment period focused on issues not 

directly related to the proposed 

amendments or technical corrections. In 

these letters, commenters offered views 

on important topics such as loan-level 

pricing adjustments, incorporating 

guarantee fees into capital requirements, 

the ERCF grids and risk multipliers, the 

magnitude of single-family and 

multifamily risk weights, various other 

aspects of the CRT securitization 

framework, the costs of CRT 

transactions, and the overall complexity 

of the ERCF, among others. In addition, 

commenters offered views on housing 

finance reform and on matters relating 

to the Enterprises’ conservatorships, 

including issues related to the 

Enterprises’ consent to conservatorships 

in 2008, subsequent actions by FHFA or 

the U.S. Department of the Treasury 

(Treasury), the magnitude of funds 

remitted to Treasury by the Enterprises 

relative to cumulative draws, Treasury’s 

financial interests in the Enterprises, 

and the PSPAs. FHFA acknowledges the 

importance of these topics and will 

thoroughly consider the public’s 

feedback on these issues when relevant 

rulemakings and policy decisions are 

under consideration. 

In addition to soliciting comments on 

the proposed amendments and technical 

corrections, FHFA also sought feedback 

on two additional topics related to the 

ERCF: The 20 percent risk weight floor 

on single-family and multifamily 

mortgage exposures and potential 

options for a countercyclical adjustment 

for multifamily mortgage exposures. 

FHFA received feedback on both topics. 

A. 20 Percent Risk Weight Floor 

FHFA asked the public whether, in 

light of the proposed changes to the 

leverage buffer and the risk-based 

capital requirements for retained CRT 

exposures, the prudential risk weight 

floor of 20 percent on single-family and 

multifamily mortgage exposures was 

appropriately calibrated. FHFA did not 

propose a change to the risk weight floor 

on single-family and multifamily 

mortgage exposures. Nine commenters 

provided feedback on this question, and 

the opinions expressed by commenters 

were varied. 

Some commenters recommended 

reducing or eliminating the 20 percent 

risk weight floor. Among these 

commenters, some suggested that 

lowering the floor is appropriate due to 

the Enterprises’ improved balance 

sheets and mortgage lending standards 

relative to pre-crisis economics. Others 

suggested that the 20 percent risk 

weight floor in the ERCF is not 

appropriately calibrated. Another 

commenter suggested that the 20 

percent floor distorts market signals 

about risk and incentivizes risk taking 

by the Enterprises. 

Conversely, some commenters 

recommended maintaining the 20 

percent risk weight floor. Among these 

commenters, some suggested that such a 

floor is prudent to ensuring the safety 

and soundness of the Enterprises. One 

commenter suggested that the risk 

weight floor is useful as an incentive for 

the Enterprises to transfer credit risk on 

lower-risk exposures. Another 

commenter suggested that the risk 

weight floor is important to mitigate the 

model risks inherent in the risksensitive methodology FHFA used to 

calibrate risk weights for mortgage 

exposures. One commenter suggested 

that reducing this risk weight floor 

could significantly increase the gap 

between the credit risk capital 

requirements of the Enterprises and 

other market participants. 

One of the key objectives FHFA cited 

for proposing amendments to the ERCF 

was to ensure the leverage capital 

framework was a credible backstop to 

the risk-based capital framework. 

Despite changes to the 2020 ERCF 

proposed rule 5 that increased risk-based 

capital under the 2020 ERCF final rule, 

including raising the 15 percent risk 

weight floor on single-family and 

multifamily mortgage exposures to 20 

percent and changing the dataset on 

which the single-family countercyclical 

adjustment is calculated, tier 1 leverage 

capital remains greater than tier 1 riskbased capital at each Enterprise in the 

absence of the leverage buffer and CRT 

amendments in the proposed rule. 

Should FHFA materially reduce the 20 

percent floor on single-family and 

multifamily mortgage exposures without 

taking additional action, the likelihood 

that the leverage framework would once 

again be the binding capital constraint 

for the Enterprises would significantly 

increase. For this reason, and given the 

commenters’ diverse feedback, FHFA 

has determined not to take action 

related to the 20 percent risk weight 


jspears on DSK121TN23PROD with RULES1
14766 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 

6 12 CFR 1240.400. 

floor on single-family and multifamily 

mortgage exposures at this time. 

B. Multifamily Countercyclical 

Adjustment 

FHFA also asked the public to 

recommend an approach for mitigating 

the pro-cyclicality of the credit risk 

capital requirements for multifamily 

mortgage exposures that relies only on 

non-proprietary data or indices. Eight 

commenters provided feedback on this 

question, recommending three different 

types of approach. The first group of 

commenters suggested solutions 

following the same principles as FHFA’s 

single-family countercyclical 

adjustment, where risk attributes such 

as the loan-to-value (LTV) ratio would 

be adjusted up or down depending on 

deviations from a long-term trend. For 

use in this approach, commenters 

recommended FHFA consider the 

property index published by the 

National Council of Real Estate 

Investment Fiduciaries (NCREIF), longterm vacancy rates, long-term property 

value and income growth rates, and 

adjusted cap rates. The second group of 

commenters recommended FHFA 

consider an approach where the 

countercyclical adjustment is based on 

ratios of index peaks to current values. 

Commenters suggested FHFA could use 

the NCREIF property index for property 

values and Enterprise investor reporting 

for net operating income (NOI). This 

approach would assume that the 

multifamily risk weights already 

account for a 35 percent shock to 

property values and a 15 percent shock 

to NOI, so an adjustment would be 

made only to the extent that the 

property value and/or NOI index ratios 

suggest a further adjustment is 

necessary. Finally, one commenter 

suggested that FHFA should address 

pro-cyclicality for multifamily mortgage 

exposures by replacing mark-to-market 

LTV with original LTV and mark-tomarket debt service coverage ratio 

(DSCR) with original DSCR. 

FHFA appreciates the public’s 

feedback on this topic and is committed 

to addressing the pro-cyclicality in the 

capital required for multifamily 

mortgage exposures. However, given the 

complexity of potential solutions and 

the diversity of suggestions provided by 

commenters, FHFA has determined that 

this topic requires further consideration, 

potentially in a future rulemaking. 

Therefore, FHFA has determined not to 

take action related to a multifamily 

countercyclical adjustment at this time. 

IV. Leverage Buffer 

The proposed rule would amend the 

ERCF by replacing the fixed tier 1 

capital leverage buffer equal to 1.5 

percent of an Enterprise’s adjusted total 

assets with a dynamic tier 1 capital 

leverage buffer equal to 50 percent of 

the Enterprise’s stability capital buffer.6

In the proposed rule, FHFA presented 

several benefits to this approach. 

First, a properly calibrated leverage 

ratio requirement and leverage buffer 

are critical aspects of a sound regulatory 

capital framework. The purpose of 

leverage capital is to promote financial 

stability by establishing a robust capital 

floor that persists throughout the 

economic cycle and by limiting risk 

taking when risk-based capital may 

otherwise fall to unduly low levels. 

Recalibrating the 1.5 percent leverage 

buffer will promote safety and 

soundness and financial stability at the 

Enterprises by lessening the likelihood 

that leverage capital will drive 

Enterprise decision-making in the 

majority of economic environments and 

reduce the frequency in which an 

Enterprise has an incentive to take on 

more risk in a capital optimization 

strategy. Furthermore, restoring leverage 

capital to a position of a credible 

backstop will allow other aspects of the 

ERCF, namely the risk-based capital 

requirements, including the singlefamily countercyclical adjustment, to 

work as intended. Second, the proposed 

leverage buffer amendment will 

encourage the Enterprises to transfer 

risk rather than to buy and hold risk. 

Third, a leverage framework with a 

dynamic buffer that grows and shrinks 

as an Enterprise grows and shrinks, 

respectively, will function as a better 

backstop to a risk-based capital 

framework that includes a stability 

capital buffer linked to an Enterprise’s 

size. And fourth, a dynamic leverage 

buffer that is tied to the stability capital 

buffer will further align the ERCF with 

Basel III standards. Internationally, 

under the latest Basel framework 

adopted by the Bank for International 

Settlements, global systemically 

important banks (G–SIBs) are required 

to hold a leverage buffer equal to 50 

percent of their higher loss-absorbency 

risk-based requirements—a measure 

akin to the G–SIB surcharge in the U.S. 

banking framework—to tailor an 

institution’s leverage ratio to its 

business activities and risk profile. 

The vast majority of comments FHFA 

received supported decreasing the tier 1 

capital leverage buffer from a fixed 1.5 

percent of adjusted total assets. Many 

commenters supported FHFA’s 

proposed approach, while some 

supported decreasing the leverage buffer 

without tying it to the stability capital 

buffer and others favored eliminating 

the leverage buffer altogether. 

Many commenters who recommended 

decreasing the leverage buffer suggested 

doing so because it is preferrable for 

risk-based capital metrics to be the 

binding capital constraint more 

frequently than non-risk-based capital 

floors such as leverage. Commenters 

suggested that this paradigm helps 

eliminate incentives for the Enterprises 

to increase risk taking and risk retention 

while providing flexibility to the 

Enterprises as they manage risk and 

rebuild robust levels of capital. In 

addition, commenters agreed with 

FHFA that a smaller leverage buffer 

would encourage the transfer of 

mortgage credit risk from the 

Enterprises to private investors. Another 

commenter stated that the 1.5 percent 

leverage buffer is unnecessary relative to 

the Enterprises’ recent stress test results, 

and that such a high buffer would likely 

be excessive to the point of impairing 

the Enterprises’ ability to support the 

market and meet their mission. 

Many commenters expressed their 

general support for FHFA’s proposed 

approach of tying the leverage buffer to 

the stability capital buffer. Commenters 

contended that a dynamic leverage 

buffer that expands and contracts with 

an Enterprise as its size and strategy 

evolve would more accurately reflect 

the Enterprise’s risk and thereby help 

facilitate the Enterprises’ ability to carry 

out their missions through all economic 

cycles. Thus, commenters reasoned that 

the proposed approach would help 

leverage serve as a credible backstop to 

the risk-based capital framework and 

allow the Enterprises to withstand 

losses in excess of those experienced 

during the great financial crisis. Other 

commenters supported FHFA’s effort to 

move toward a dynamic leverage buffer 

to better reflect the spirit and intent of 

the leverage ratio, and also because 

dynamic buffers have proven to be an 

effective tool for managing capital at the 

global systemically important banks. 

Another commenter suggested that the 

proposed approach will help provide 

stability in the mortgage market and 

increase investor confidence in the 

Enterprises and overall economy 

throughout the economic cycle, helping 

stave off the need for emergency 

taxpayer intervention. Another 

commenter stated that basing the 

leverage buffer on a risk-based capital 

metric is preferrable because it better 

reflects the varying levels of risk within 

an Enterprise’s particular pool of total 

assets. 

Some commenters expressed more 

reserved support for setting the leverage 

buffer equal to 50 percent of the stability 


jspears on DSK121TN23PROD with RULES1
Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 14767 

7 Id. 

8https://home.treasury.gov/news/press-releases/ 

sm1136. 

capital buffer. Several commenters 

expressed concern that tying the 

leverage buffer to the stability capital 

buffer could have pro-cyclical 

implications in the sense that an 

Enterprise’s market share tends to grow 

during a stress when other market 

participants are growing slowly or 

shrinking. Thus, requiring an Enterprise 

to increase its leverage buffer during the 

period when the Enterprise is fulfilling 

its countercyclical role could limit the 

Enterprise’s ability to supply market 

liquidity when it is most needed. In 

contrast to these commenters’ concern, 

FHFA anticipates that setting the 

leverage buffer equal to 50 percent of 

the stability capital buffer will actually 

reduce the pro-cyclicality of the 

leverage framework because increases to 

an Enterprise’s adjusted total assets are 

reflected in the fixed 1.5 percent 

leverage buffer immediately whereas 

increases to an Enterprise’s share of the 

overall mortgage market are reflected in 

the stability capital buffer with up to a 

two-year delay.7 FHFA believes this 

delayed need to raise capital relative to 

the current ERCF will facilitate the 

Enterprises’ abilities to provide liquidity 

to the mortgage market during a stress, 

even if an Enterprise grows its portfolio 

as a result of fulfilling its 

countercyclical mission. 

A few other commenters supported 

FHFA’s proposed amendments but 

recommended that FHFA: i. Continue to 

study the relationship between leverage, 

risk-based capital, and the stability 

capital buffer to determine definitively 

that the leverage buffer should be linked 

to the stability capital buffer; and ii. 

provide historical data affirming the 

proposed approach and demonstrating 

that under the proposed amendments 

leverage will rarely exceed risk-based 

capital. 

Another commenter recommended 

that FHFA must ensure that its 

regulatory capital framework avoids 

discriminatory outcomes and promotes 

equitable treatment of borrowers and 

communities of color. One commenter 

supported FHFA’s proposed 

amendments but expressed a desire for 

FHFA to be more anticipatory and 

expansive in the list of provisions it 

chooses to reconsider. 

Some commenters recommended 

decreasing the leverage buffer but not 

tying it to the stability capital buffer. 

One commenter expressed concern that 

the stability capital buffer was itself 

arbitrarily determined, so by association 

a leverage buffer equal to 50 percent of 

the stability capital buffer is also 

arbitrarily determined. This commenter 

recommended that FHFA consider 

alternative methods of the setting the 

leverage buffer that are more closely tied 

to an Enterprise’s risk. One commenter 

recommended that FHFA decrease an 

Enterprise’s leverage buffer by some 

estimate of future guarantee fees. 

Similarly, another commenter 

recommended that FHFA decrease an 

Enterprise’s leverage buffer to reflect 

risk transferred through CRT in the 

same way that the risk-based capital 

framework provides capital relief for 

CRT. Several commenters recommended 

FHFA simply reduce the leverage buffer 

from 1.5 percent of adjusted total assets 

to a lower percentage of adjusted total 

assets, such as 0.5 percent, because 

market share is not a reasonable 

representation of Enterprise risk. 

Some commenters recommended 

FHFA eliminate the leverage buffer 

completely. These commenters 

generally viewed the leverage buffer as 

not necessary for the leverage 

framework to be a credible backstop to 

the risk-based capital framework. Two 

commenters suggested the 2.5 percent 

leverage capital requirement is itself 

sufficient as a credible backstop to riskbased capital in the ERCF. Another 

commenter suggested the leverage buffer 

is unnecessary because: i. Stress losses 

on a new month of originations are 

lower than the capital required by the 

ERCF; and ii. future guarantee fees 

provide a significant source of claimspaying resources, which are not 

considered as a source of capital in the 

framework. One commenter suggested 

FHFA eliminate the leverage buffer 

rather than decrease it because a future 

FHFA director can just as easily 

increase it again. 

Finally, some commenters 

recommended that FHFA maintain the 

fixed 1.5 percent leverage buffer. One 

commenter claimed that FHFA does not 

provide evidence that the existing ERCF 

leverage-based requirements would be 

binding throughout the economic cycle, 

and that it is difficult to envision any 

realistic scenario in which the proposed 

amendments to the leverage buffer 

would result in a leverage-based 

requirement that could exceed the riskbased requirement, violating the 

concept of being a credible backstop. 

FHFA disagrees with the premise of this 

argument because the argument 

compares tier 1 leverage capital to 

adjusted total risk-based capital, which 

includes tier 2 capital. When looking 

only at tier 1 capital, one can readily 

construct realistic scenarios where tier 1 

risk-based capital at an Enterprise 

decreases due to a period of sustained 

house price appreciation such that tier 

1 leverage capital exceeds tier 1 riskbased capital and therefore leverage 

becomes the binding capital constraint. 

The commenter also suggests that 

FHFA fails to explain how the 

calibration of the 1.5 percent leverage 

buffer is flawed and how the proposed 

leverage buffer is analogous to the riskweighted-asset-based Basel leverage 

buffer for international G–SIBs. In the 

proposed rule, FHFA discussed how the 

leverage framework unduly 

disincentivizes risk transfer 

predominately due to the outsized 

leverage buffer, and how a fixed 

leverage buffer may not concurrently be 

appropriate for both a large and a small 

Enterprise. FHFA views these 

characteristics as flaws in the 

calibration of the leverage buffer 

because the design could result in 

taxpayers bearing excessive undue risk 

for as long as the Enterprises are in 

conservatorships and excessive risk to 

the housing finance market both during 

and after conservatorships. In addition, 

FHFA discussed how the proposed 

leverage buffer is similar to the Basel 

leverage buffer in that both are derived 

from measures that attempt to quantify 

the amount of systemic risk posed by 

the Enterprises and G–SIBs, 

respectively—the stability capital buffer 

in the ERCF and the G–SIB surcharge in 

the Basel framework. There are, of 

course, structural differences between 

the two buffers in both derivation and 

application, as is appropriate given that 

the Enterprises and the other financial 

institutions have different business 

models. 

Furthermore, two commenters noted 

that the Financial Stability Oversight 

Council’s (FSOC) review of the 2020 

ERCF proposed rule found that capital 

requirements ‘‘that are materially less 

than those contemplated by [the 

proposed rule] would likely not 

adequately mitigate the potential 

stability risk posed by the Enterprises,’’ 

and that the proposed rule would result 

in a material two-thirds reduction to the 

leverage buffer, increasing risks to 

taxpayers and financial stability. FHFA 

generally agrees with the findings 

presented in FSOC’s activities-based 

review of the secondary mortgage 

market.8 However, similar to 

approaches followed by other financial 

regulators, FHFA intends to periodically 

review the ERCF and adjust various 

elements as necessary to ensure the 

safety and soundness of the Enterprises 

so they can carry out their mission 

throughout the economic cycle. In 

addition, FHFA notes that Federal 

Reserve officials have publicly 


jspears on DSK121TN23PROD with RULES1
14768 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 

9 12 CFR 1240.44(f) and (i). 

identified binding leverage capital 

requirements under the Supplementary 

Leverage Ratio (SLR) framework as an 

important issue that must be addressed 

so that banks’ incentives are not skewed 

to increase risk-taking. FHFA continues 

to agree with this guiding principle for 

the Enterprises under the ERCF. 

The final rule adopts the dynamic tier 

1 capital leverage buffer equal to 50 

percent of the stability capital buffer as 

proposed. In consideration of the public 

comments on the proposed rule, FHFA 

continues to believe that such a leverage 

buffer determined in this manner will 

best position the Enterprises to fulfil 

their mission in a safe and sound 

manner throughout the economic cycle 

by ensuring that the leverage framework 

acts as a credible backstop to the riskbased capital framework and by 

encouraging the Enterprises to transfer 

credit risk rather than to buy and hold 

risk. 

FHFA notes that the final rule will not 

change the tier 1 leverage capital 

requirement, which will remain at 2.5 

percent of adjusted total assets. This 

requirement, plus other features of the 

ERCF such as the single-family 

countercyclical adjustment and the risk 

weight floor on single-family and 

multifamily mortgage exposures, will 

continue to mitigate the potential 

stability risk posed by the Enterprises 

and will ensure an Enterprise maintains 

robust capital even during the best 

economic conditions when risk-based 

capital requirements might fall due to 

significant house price appreciation. 

In addition, FHFA continues to 

believe that the leverage buffer plays an 

important role in the ERCF, despite the 

recommendations of several 

commenters to eliminate the buffer. The 

leverage buffer represents a cushion 

above an Enterprise’s 2.5 percent 

leverage ratio requirement that can be 

drawn down in a stress scenario without 

violating prompt corrective action, 

providing an Enterprise with flexibility 

to continue its normal operations 

without risk of breaching a requirement. 

V. Credit Risk Transfer 

The proposed rule would replace the 

prudential floor of 10 percent on the 

risk weight assigned to any retained 

CRT exposure with a prudential floor of 

5 percent on the risk weight assigned to 

any retained CRT exposure and would 

remove the requirement that an 

Enterprise must apply an overall 

effectiveness adjustment to its retained 

CRT exposures.9

Many commenters expressed the view 

that CRT is an effective means by which 

to transfer risk to private markets, 

protect taxpayers, and stabilize the 

Enterprises and housing finance more 

generally. Consequently, the vast 

majority of comments FHFA received on 

the proposed amendments to the riskbased capital requirements for retained 

CRT exposures were generally 

supportive of the amendments. 

However, a minority of comments 

questioned the efficacy of CRT and 

noted that the amendments would 

weaken the Enterprises’ financial 

resilience. Several other commenters 

offered broad critiques of and 

suggestions for the risk-based capital 

approach to CRT and the Enterprises’ 

CRT programs more generally. While 

FHFA appreciates and considers all 

comments, the following discussion 

focuses on comments directly pertaining 

to the amendments put forward in the 

proposed rule. 

CRT Risk Weight Floor 

In the proposed rule, FHFA 

contended that amending the CRT risk 

weight floor was necessary for two 

reasons. First, the 10 percent floor on 

the risk weight assigned to a retained 

CRT exposure unduly decreases the 

capital relief provided by CRT and 

reduces an Enterprise’s incentives to 

engage in risk transfer. This occurs in 

part because the aggregate credit risk 

capital required for a retained CRT 

exposure is often greater than the 

aggregate credit risk capital required for 

the underlying exposures, especially 

when the credit risk capital 

requirements on the underlying whole 

loans and guarantees are low or the CRT 

is seasoned. Second, the 10 percent risk 

weight floor discourages CRT through 

its duplicative nature. The operational 

criteria for CRT, which state that FHFA 

must approve each transaction as being 

effective in transferring the credit risk, 

as well as the Enterprises’ own ability 

to mitigate unknown risks through their 

underwriting standards and servicing 

and loss mitigation programs, lessen the 

need for a tranche-level risk weight floor 

as high as 10 percent. 

Commenters were generally very 

supportive of the proposed amendment 

to the CRT risk weight floor. 

Commenters suggested that reducing the 

risk weight floor on retained CRT 

exposures from 10 percent to 5 percent 

raises the regulatory value of risk 

transfer closer to its economic value. 

Commenters stated that the change 

would restore the incentive for the 

Enterprises to engage in CRT to disperse 

credit risk among private investors and 

thereby lessen the systemic risk posed 

by the Enterprises. Commenters also 

suggested that transferring credit risk 

away from the Enterprises strengthens 

their safety and soundness and supports 

the overall mortgage market, including 

by promoting greater private market 

participation without an adverse impact 

on affordability. Several commenters 

supported the 5 percent floor because it 

represents a more market-sensitive 

treatment of CRT and better aligns 

capital to risk. In this regard, one 

commenter suggested that unduly high 

capital requirements will hamper an 

Enterprise’s ability to fulfill its statutory 

mission of facilitating loans to lowincome and very low-income borrowers 

and communities. In addition, 

commenters suggested that the 5 percent 

floor would provide reasonable 

protection from model risk while 

maintaining a conservative discount to 

equity capital, which has flexibility and 

fungibility advantages. 

Furthermore, several commenters 

recommended lowering the CRT risk 

weight floor below 5 percent or 

eliminating it altogether. Commenters 

suggested that the floor is not 

analytically supported and provides 

excessive protection against CRT-related 

risks. One commenter’s analysis 

suggested that CRT requirements are too 

stringent even if the floor is removed 

and recommended that FHFA calibrate 

the risk-based capital requirements for 

retained CRT exposures to be consistent 

with the economics of CRT transactions. 

A few commenters recommended 

rejecting the proposed amendment in 

favor of the 10 percent risk weight floor. 

Several commenters claimed that the 

proposed amendment weakens the 

financial resilience of the Enterprises. 

These commenters suggested that the 

amendments will increase leverage at 

the Enterprises which will increase 

insolvency risk, and that FHFA should 

not balance incentivizing CRT with 

safety and soundness when considering 

capital standards. 

Some commenters generally 

supported FHFA’s proposal to lower the 

CRT risk weight floor but offered 

alternatives to the 5 percent floor in the 

proposed rule. A few commenters 

recommended that FHFA apply the CRT 

risk weight floor on a sliding scale such 

that the risk weight floor decreases as 

credit risk becomes more remote. A few 

commenters suggested that the floor 

should reflect an exposure-level 

analysis and perhaps be functionally 

related to economic variables such as 

seasoning or house price appreciation. 

One commenter recommended 

removing the floor and using an 

econometric approach that requires 

capital above the risk-based capital 

amount and provides a marginal benefit 


jspears on DSK121TN23PROD with RULES1
Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 14769 

to risk reduction activities beyond stress 

loss. 

The final rule adopts the prudential 

floor of 5 percent on the risk weight 

assigned to any retained CRT exposure 

as proposed. In consideration of the 

public comments on the proposed rule, 

FHFA continues to believe that a 

prudential risk weight of 5 percent 

sufficiently ensures the viability of 

CRTs while mitigating their safety and 

soundness, mission, and housing 

stability risks. The final rule does not 

eliminate the CRT risk weight floor, as 

recommended by some commenters, 

because the prudential floor for a 

retained CRT exposure avoids treating 

that exposure as posing no credit risk, 

which continues to be an important 

policy objective for FHFA. In addition, 

FHFA has determined to finalize the 5 

percent risk weight floor as proposed 

rather than adopting one of the 

alternatives suggested by commenters in 

order to maintain consistency with 

other aspects of the CRT securitization 

framework that were designed with a 

static risk weight floor in mind. 

Overall Effectiveness Adjustment 

In the proposed rule, FHFA presented 

rationale for eliminating the overall 

effectiveness adjustment due to the 

duplicative nature of the adjustment 

within the risk-based capital 

requirements for retained CRT 

exposures. Unlike the counterparty and 

loss-timing effectiveness adjustments in 

the CRT securitization framework, the 

overall effectiveness adjustment does 

not target specific risks. Rather, similar 

to the risk weight floor on retained CRT 

exposures and the CRT operational 

criteria, the overall effectiveness 

adjustment was designed to address 

risks that are difficult to measure, such 

as model risk and the loss-absorbing 

benefits of equity capital relative to 

CRT. FHFA reasoned that, considering 

the additional elements of the CRT 

securitization framework that also target 

these difficult-to-measure risks, the 

overall effectiveness adjustment is 

duplicative and creates an unnecessary 

disincentive for the Enterprises to 

engage in CRT. 

The vast majority of comments 

supported FHFA’s proposed 

amendment to eliminate the overall 

effectiveness adjustment from the CRT 

securitization framework. Several 

commenters contended that the overall 

effectiveness adjustment was redundant 

and was not analytically supported. 

Commenters also reasoned that the 

proposed amendment produces a CRT 

treatment that better recognizes the risk 

reduction in CRT through improved 

CRT economics, provides appropriate 

incentives for the transfer of credit risk, 

and that even after removing the overall 

effectiveness adjustment, the capital 

relief provided by the framework is 

conservative. One commenter 

maintained that the overall effectiveness 

adjustment can be removed without 

sacrificing the Enterprises’ safety and 

soundness. Multiple commenters 

suggested that the elimination of the 

overall effectiveness adjustment would 

encourage the Enterprises to disperse 

credit risk among investors rather than 

retaining that risk where taxpayers are 

ultimately liable, and that the proposed 

amendment would facilitate the 

Enterprises to carry out their mission 

throughout the economic cycle. 

Several commenters supported 

keeping the overall effectiveness 

adjustment. These commenters 

contended that the proposal to eliminate 

the overall effectiveness adjustment 

further weakens the financial resilience 

of the Enterprises to withstand future 

credit losses that may occur during an 

economic stress and that FHFA should 

keep the adjustment because it accounts 

for differences in loss-absorbing 

capacity between CRT and equity 

capital. Several other commenters 

recommended FHFA keep the overall 

effectiveness adjustment in the CRT 

securitization framework, but their 

support for this aspect of the framework 

was conditional on either eliminating 

the CRT risk weight floor or making 

substantive reductions to the proposed 

risk weight floor. 

The final rule adopts the removal of 

the overall effectiveness adjustment as 

proposed. In consideration of the public 

comments on the proposed rule, FHFA 

continues to believe that the overall 

effectiveness adjustment should be 

eliminated from the risk-based capital 

requirements for retained CRT 

exposures. FHFA believes that the risk 

weight floor, loss timing effectiveness 

adjustment, counterparty effectiveness 

adjustments, and CRT operational 

criteria, including FHFA’s authority to 

review and approve CRT transactions as 

effective in transferring credit risk, 

sufficiently protect the Enterprises from 

the potential safety and soundness risks 

posed by CRT. 

VI. ERCF Technical Corrections 

The proposed rule would make 

technical corrections to the ERCF 

related to definitions, variable names, 

the single-family countercyclical 

adjustment, and CRT formulas that were 

not accurately reflected in the final rule 

published on December 17, 2020. These 

technical corrections would revise the 

ERCF for the following items: 

• In § 1240.2, the definition of 

‘‘Multifamily mortgage exposure’’ 

would be moved from its current 

location to a location that follows 

alphabetical order relative to the other 

definitions within the section. The 

definition of a multifamily mortgage 

exposure would not change. 

• In § 1240.33, the definition of 

‘‘Long-term HPI trend’’ would be 

updated to correct a typographical error 

that resulted in only the coefficient of 

the trendline formula, 0.66112295, 

being published. The corrected 

trendline formula would be 

0.66112295e (0.002619948*t)

. The 

Enterprises use the long-term HPI trend 

as the basis for calculating the singlefamily countercyclical adjustment. As 

published in the ERCF, the trendline 

would be a time-invariant horizontal 

line rather than a time-varying 

exponential function. 

• In § 1240.33, the definition of OLTV 

for single-family mortgage exposures 

would be amended to include the 

parenthetical (original loan-to-value) 

after the acronym to provide additional 

clarity as to the meaning of OLTV. 

Single-family OLTV would continue to 

be based on the lesser of the appraised 

value and the sale price of the property 

securing the single-family mortgage. 

• In § 1240.37, the second paragraph 

(d)(3)(iii) would be redesignated as 

(d)(3)(iv) to correct a typographical 

error. 

• In § 1240.43(b)(1), the term ‘‘KG’’ 

would be replaced to correct a 

typographical error. 

• In § 1240.44 we correct the 

following typographical errors: 

Æ In paragraph (b)(9)(i)(C), the term 

‘‘(LTFUPB%)’’; 

Æ In paragraph (b)(9)(i)(D), the term 

‘‘LTF%’’; 

Æ In paragraph (b)(9)(ii), the term 

‘‘LTF%’’; 

Æ In paragraph (b)(9)(ii)(B), the term 

‘‘(CRTF15%)’’; 

Æ In paragraph (b)(9)(ii)(C), the term 

‘‘(CRT80NotF15%)’’; 

Æ In paragraph (b)(9)(ii)(E)(2)(i), the 

equation would be revised to correct 

typographical errors in the names of two 

variables within the equation; 

Æ In paragraph (b)(9)(ii)(E)(2)(iii), the 

term ‘‘LTF%’’; 

Æ In paragraph (c) introductory text, 

the term ‘‘RW%’’; 

Æ In paragraph (c)(1), the term 

‘‘AggEL%’’; 

Æ In paragraph (g), the first three 

equations would be combined into one 

equation to correct a typographical error 

that erroneously split the equation into 

three distinct parts. 

The final rule adopts the ERCF 

technical corrections as proposed. 


jspears on DSK121TN23PROD with RULES1
14770 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 

VII. Paperwork Reduction Act 

The Paperwork Reduction Act (PRA) 

(44 U.S.C. 3501 et seq.) requires that 

regulations involving the collection of 

information receive clearance from the 

Office of Management and Budget 

(OMB). The final rule contains no such 

collection of information requiring OMB 

approval under the PRA. Therefore, no 

information has been submitted to OMB 

for review. 

VIII. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

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

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. FHFA need not 

undertake such an analysis if the agency 

has certified that the regulation will not 

have a significant economic impact on 

a substantial number of small entities. 5 

U.S.C. 605(b). FHFA has considered the 

impact of the final rule under the 

Regulatory Flexibility Act. The General 

Counsel of FHFA certifies that the final 

rule will not have a significant 

economic impact on a substantial 

number of small entities because the 

final rule is applicable only to the 

Enterprises, which are not small entities 

for purposes of the Regulatory 

Flexibility Act. 

IX. Congressional Review Act 

In accordance with the Congressional 

Review Act (5 U.S.C. 801 et seq.), FHFA 

has determined that this final rule is a 

major rule and has verified this 

determination with the Office of 

Information and Regulatory Affairs of 

OMB. 

List of Subjects for 12 CFR Part 1240 

Capital, Credit, Enterprise, 

Investments, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

For the reasons stated in the 

Preamble, under the authority of 12 

U.S.C. 4511, 4513, 4513b, 4514, 4515– 

17, 4526, 4611–4612, 4631–36, FHFA 

amends part 1240 of Title 12 of the Code 

of Federal Regulation as follows: 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

SUBCHAPTER C—ENTERPRISES 

PART 1240—CAPITAL ADEQUACY OF 

ENTERPRISES 

■ 1. The authority citation for part 1240 

is revised to read as follows: 

Authority: 12 U.S.C. 4511, 4513, 4513b, 

4514, 4515, 4517, 4526, 4611–4612, 4631–36. 

■ 2. Amend § 1240.2 by removing the 

definition of ‘‘Multifamily mortgage 

exposure’’ and adding a new definition 

of ‘‘Multifamily mortgage exposure’’ in 

alphabetical order to read as follows: 

§ 1240.2 Definitions. 

* * * * * 

Multifamily mortgage exposure means 

an exposure that is secured by a first or 

subsequent lien on a property with five 

or more residential units. 

* * * * * 

■ 3. Revise § 1240.11(a)(6) as follows: 

§ 1240.11 Capital conservation buffer and 

leverage buffer. 

(a) * * * 

(6) Prescribed leverage buffer amount. 

An Enterprise’s prescribed leverage 

buffer amount is 50 percent of the 

Enterprise’s stability capital buffer 

calculated in accordance with subpart G 

of this part. 

* * * * * 

■ 4. Amend § 1240.33(a) by: 

■ a. In the definition of ‘‘Long-term HPI 

trend’’, removing ‘‘0.66112295’’ and 

adding ‘‘0.66112295e (0.002619948*t)’’ in its 

place; and 

■ b. Revising the definition of ‘‘OLTV’’. 

The revision reads as follows: 

§ 1240.33 Single-family mortgage 

exposures. 

(a) * * * 

OLTV (original loan-to-value) means, 

with respect to a single-family mortgage 

exposure, the amount equal to: 

(i) The unpaid principal balance of 

the single-family mortgage exposure at 

origination; divided by 

(ii) The lesser of: 

(A) The appraised value of the 

property securing the single-family 

mortgage exposure; and 

(B) The sale price of the property 

securing the single-family mortgage 

exposure. 

* * * * * 

§ 1240.37 [Amended] 

■ 5. Amend § 1240.37 by redesignating 

the second paragraph (d)(3)(iii) as 

(d)(3)(iv). 

§ 1240.43 [Amended] 

■ 6. Amend § 1240.43(b)(1) by removing 

the term ‘‘KG’’ and adding the term 

‘‘KG’’ in its place. 

■ 7. Amend § 1240.44 by: 

■ a. In paragraph (b)(9)(i)(C), removing 

the term ‘‘(LTFUPB%)’’ and adding the 

term ‘‘(LTFUPB%)’’ in its place; 

■ b. In paragraph (b)(9)(i)(D), removing 

the term ‘‘LTF%’’ and adding the term 

‘‘LTF%’’ in its place; 

■ c. In paragraph (b)(9)(ii) introductory 

text removing the term ‘‘LTF%’’ and 

adding the term ‘‘LTF%’’ in its place; 

■ d. In paragraph (b)(9)(ii)(B), removing 

the term ‘‘(CRTF15%)’’ and adding the 

term ‘‘(CRTF15%)’’ in its place; 

■ e. In paragraph (b)(9)(ii)(C), removing 

the term ‘‘(CRT80NotF15%)’’ and 

adding the term ‘‘(CRT80NotF15%)’’ in 

its place; 

■ f. Revising the equation in paragraph 

(b)(9)(ii)(E)(2)(i); 

■ g. In paragraph (b)(9)(ii)(E)(2)(iii), 

removing the term ‘‘LTF%’’ and adding 

the term ‘‘LTF%,’’ in its place; 

■ h. In paragraph (c) introductory text: 

■ i. Removing the term ‘‘RW%’’ and 

adding the term ‘‘RW%’’ in its place; and 

■ ii. Removing the term ‘‘10 percent’’ 

and adding the term ‘‘5 percent’’ in its 

place; 

■ i. In paragraph (c)(1), removing the 

term ‘‘AggEL%’’ and adding the term 

‘‘AggEL%’’ in its place; 

■ j. In paragraphs (c)(2) and (c)(3)(ii), 

removing the term ‘‘10 percent’’ and 

adding the term ‘‘5 percent’’ in its place; 

■ k. Revising the first equation in 

paragraph (d); 

■ l. In paragraph (e), removing the term 

‘‘10 percent’’ and adding the term ‘‘5 

percent’’ in its place; 

■ m. Revising paragraph (f)(2)(i); 

■ n. In paragraph (g), revising the first 

three equations; 

■ o. Revising the first equation in 

paragraph (h); and 

■ p. Removing and reserving paragraph 

(i). 

The revisions read as follows: 

§ 1240.44 Credit risk transfer approach 

(CRTA). 

* * * * * 

(b) * * * 

(9) * * * 

(ii) * * * 

(E) * * * 

(2) * * * 

(i) * * * 


jspears on DSK121TN23PROD with RULES1
Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 14771 

* * * * * (d) * * * 

* * * * * 

(f) * * * 

(2) Inputs—(i) Enterprise adjusted 

exposure. The adjusted exposure (EAE) 

of an Enterprise with respect to a 

retained CRT exposure is as follows: 

Where the loss timing effectiveness 

adjustments (LTEA) for a retained CRT 

exposure are determined under 

paragraph (g) of this section, and the 

loss sharing effectiveness adjustment 

(LSEA) for a retained CRT exposure is 

determined under paragraph (h) of this 

section. 

* * * * * 

(g) * * * 

* * * * * (h) * * * 


jspears on DSK121TN23PROD with RULES1ER16MR22.001</GPH> ER16MR22.002</GPH> ER16MR22.003</GPH> ER16MR22.004</GPH>
14772 Federal Register / Vol. 87, No. 51 / Wednesday, March 16, 2022 / Rules and Regulations 

* * * * * 

Sandra L. Thompson, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2022–04529 Filed 3–15–22; 8:45 am] 

BILLING CODE 8070–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2020–1120; Project 

Identifier 2019–SW–056–AD; Amendment 

39–21962; AD 2022–05–10] 

RIN 2120–AA64 

Airworthiness Directives; Goodrich 

Externally-Mounted Hoist Assemblies 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for various 

model helicopters with certain partnumbered Goodrich externally-mounted 

hoist assemblies (hoists) installed. This 

AD was prompted by hoists failing 

lower load limit inspections. This AD 

requires replacing unmodified hoists, 

installing placards, revising the existing 

Rotorcraft Flight Manual (RFM) for your 

helicopter, deactivating or removing a 

hoist if a partial peel out occurs, 

reviewing the helicopter’s hoist slip 

load test records, repetitively inspecting 

the hoist cable and overload clutch 

(clutch), and reporting information to 

the manufacturer. This AD also requires 

establishing operating limitations on the 

hoist and prohibits installing an 

unmodified hoist. The FAA is issuing 

this AD to address the unsafe condition 

on these products. 

DATES: This AD is effective April 20, 

2022. 

The Director of the Federal Register 

approved the incorporation by reference 

of a certain document listed in this AD 

as of April 20, 2022. 

ADDRESSES: For Goodrich service 

information identified in this final rule, 

contact Collins Aerospace; 2727 E 

Imperial Hwy., Brea, CA 92821; 

telephone (714) 984–1461; email GHW@

collins.com; or at https://

www.collinsaerospace.com/. You may 

view the referenced service information 

at the FAA, Office of the Regional 

Counsel, Southwest Region, 10101 

Hillwood Pkwy., Room 6N–321, Fort 

Worth, TX 76177. For information on 

the availability of this material at the 

FAA, call (817) 222–5110. It is also 

available at https://www.regulations.gov 

by searching for and locating Docket No. 

FAA–2020–1120. 

Examining the AD Docket 

You may examine the AD docket at 

https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2020–1120; or in person at Docket 

Operations between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The AD docket contains this 

final rule, the European Union Aviation 

Safety Agency (EASA) AD, any 

comments received, and other 

information. The street address for 

Docket Operations is U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

FOR FURTHER INFORMATION CONTACT: 

Kristi Bradley, Program Manager, COS 

Program Management Section, 

Operational Safety Branch, Compliance 

& Airworthiness Division, FAA, 10101 

Hillwood Pkwy., Fort Worth, TX 76177; 

telephone (817) 222–5110; email 

kristin.bradley@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

The FAA issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 by adding an AD that would 

apply to various model helicopters with 

certain part-numbered externallymounted Goodrich hoists installed. The 

NPRM published in the Federal 

Register on December 11, 2020 (85 FR 

79930). In the NPRM, the FAA proposed 

to require replacing unmodified hoists, 

installing placards, revising the existing 

RFM for your helicopter, deactivating or 

removing a hoist if a partial peel out 

occurs, reviewing the helicopter’s hoist 

slip load test records, repetitively 

inspecting the hoist cable and clutch, 

and reporting information to the 

manufacturer. The NPRM was prompted 

by a series of EASA ADs, the most 

recent at that time being EASA AD 

2015–0226R5, Revision 5, dated July 23, 

2020 (EASA AD 2015–0226R5), to 

correct an unsafe condition for various 

model helicopters with a Goodrich 

externally-mounted hoist with one of 

the following part numbers (P/Ns) or 

base P/Ns installed: 42315, 42325, 

44301–10–1, 44301–10–2, 44301–10–4, 

44301–10–5, 44301–10–6, 44301–10–7, 

44301–10–8, 44301–10–9, 44301–10–10, 

44301–10–11, 44311, 44312, 44314, 

44315, 44316, or 44318. EASA advised 

of an initial incident of a rescue hoist 

containing a dummy test load of 552 lbs. 

that reeled-out without command of the 

operator and impacted the ground 

during a maintenance check flight 

because the overload clutch had failed. 

EASA stated that this condition, if not 

detected and corrected, could lead to 

further cases of in-flight loss of the hoist 

load, possibly resulting in injury to 

persons on the ground or in a hoisting 

accident. 

Accordingly, EASA AD 2015–0226R5 

required a records review to determine 

if the cable had exceeded the allowable 

limit in previous load testing, a 

repetitive load check and test of the 

clutch slip value, removal or 

deactivation of a hoist that could not be 

tested due to lack of approved 

instructions, replacement of the old 

clutch P/N with a new clutch developed 

by Goodrich to mitigate some of the 

factors resulting in clutch degradation, 

periodic replacement of the hoist, 

reduction of the maximum allowable 

load on the hoist, addition of 

operational limitations to the RFM, and 

replacement of the hoist after a partial 

peel out. EASA AD 2015–0226R5 also 

prohibited the installation of a 

replacement cable that has exceeded the 

allowable limit in previous load testing. 

EASA considered AD 2015–0226R5 to 

be interim action and advised further 

AD action may follow. 

The FAA issued a supplemental 

notice of proposed rulemaking (SNPRM) 

to amend 14 CFR part 39 by adding an 

AD that would apply to various model 

helicopters with certain part-numbered 

externally-mounted Goodrich hoists 

installed. The SNPRM published in the 

Federal Register on September 30, 2021 

(86 FR 54129). The SNPRM proposed to 

revise the NPRM by adding a figure and 

revising certain requirements, including 

changes to the temperatures in the 


jspears on DSK121TN23PROD with RULES1ER16MR22.005</GPH>