31602 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1253 

RIN 2590–AA17 

Prior Approval for Enterprise Products 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Interim final rule; request for 

comments. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA or Agency) is 

promulgating and seeking comment on 

an interim final regulation to implement 

section 1321 of the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992, as amended by 

section 1123 of the Housing and 

Economic Recovery Act of 2008. The 

regulation establishes a process for the 

Federal National Mortgage Association 

(Fannie Mae) and the Federal Home 

Loan Mortgage Corporation (Freddie 

Mac) (collectively, the Enterprises) to 

obtain prior approval from the FHFA 

Director for a new product and provide 

prior notice to the Director of a new 

activity. Specifically, the interim final 

regulation implements section 1321 and 

is designed to ensure that the FHFA 

Director has the opportunity to 

determine prior to an Enterprise 

commencing a new activity whether the 

new activity is a new product, and if it 

is a new product, to determine whether 

the new product is authorized by the 

Enterprise’s charter, is in the public 

interest, and is consistent with the 

safety and soundness of the Enterprise 

or the mortgage finance or financial 

system. FHFA invites public comment 

on all aspects of the regulation. 

DATES: Effective Date: July 2, 2009. 

Comment Date: FHFA will accept 

written comments on the interim final 

regulation on or before August 31, 2009. 

ADDRESSES: Submit comments to FHFA 

using any one of the following methods: 

• E-mail: regcomments@fhfa.gov. 

Please include ‘‘Public Comment—RIN 

2590–AA17 (Prior Approval for 

Enterprise Products)’’ in the subject line 

of the message. 

• Mail/Hand Delivery: Federal 

Housing Finance Agency, 1700 G Street, 

NW., Washington, DC 20552, Attention: 

Public Comment—RIN 2590–AA17 

(Prior Approval for Enterprise 

Products). The package should be 

logged at the Guard Desk, First Floor, on 

business days between 9 a.m. and 5 p.m. 

• Federal eRulemaking: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by e-mail to FHFA at 

regcomments@fhfa.gov to ensure timely 

receipt by the Agency. Include the 

following information in the subject line 

of your submission: ‘‘Public Comment— 

RIN 2590–AA17 (Prior Approval for 

Enterprise Products)’’. 

We will post all public comments we 

receive without change, including any 

personal information you provide, such 

as your name and address, on the FHFA 

Web site at http://www.fhfa.gov. 

FOR FURTHER INFORMATION CONTACT: 

Carol Connelly, 202–414–8910 (not a 

toll-free number), e-mail: 

carol.connelly@fhfa.gov, Office of 

Supervision—Office of Supervision 

Infrastructure; or Ming-Yuen MeyerFong, 202–414–3798 (not a toll-free 

number), e-mail: ming-yuen.meyerfong@fhfa.gov, Office of General 

Counsel, Federal Housing Finance 

Agency, 1700 G Street, NW., 

Washington, DC 20552. The telephone 

number for the Telecommunications 

Device for the Deaf is: 800–877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Comments and Access 

This interim final regulation as well 

as any comments posted may be 

accessed via the Internet. Users can 

access the FHFA Web page at http:// 

www.fhfa.gov; select Supervision and 

Regulations Tab; select Regulations, 

Notices and Public Comments; then, 

select the link titled ‘‘Prior Approval for 

Enterprise Products.’’ In addition, 

copies of all comments received will be 

available for examination by the public 

on business days between the hours of 

10 a.m. and 3 p.m., at the Federal 

Housing Finance Agency, 1700 G Street, 

NW., Washington, DC 20552. To make 

an appointment to inspect comments, 

please call the Office of General Counsel 

at 202–414–6924. 

II. Background 

A. Establishment of the Federal Housing 

Finance Agency 

On July 30, 2008, the President signed 

the Housing and Economic Recovery 

Act (Pub. L. 110–289, 122 Stat. 2654) 

(HERA). Among other things, HERA 

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 a new independent agency of 

the Federal Government known as the 

Federal Housing Finance Agency 

(FHFA) and transferred the supervisory 

and oversight responsibilities for Fannie 

Mae and Freddie Mac (the Enterprises) 

from the Office of Federal Housing 

Enterprise Oversight (OFHEO) and 

components of the Department of 

Housing and Urban Development to 

FHFA. The Enterprises are governmentsponsored enterprises chartered by 

Congress for the purposes of 

establishing secondary market facilities 

for residential mortgages. 12 U.S.C. 1716 

et seq. (Fannie Mae Charter Act) and 12 

U.S.C. 1451 et seq. (Freddie Mac 

Corporation Act) (the authorizing 

statutes). 

Congress established FHFA, among 

other things, to oversee the prudential 

operations of the Enterprises, and to 

ensure that: (1) The Enterprises operate 

in a safe and sound manner, including 

maintenance of adequate capital and 

internal controls; (2) The activities of 

the Enterprises foster liquid, efficient, 

competitive, and resilient national 

housing finance markets; (3) The 

Enterprises comply with the Safety and 

Soundness Act and the rules, 

regulations, guidelines, and orders 

issued under the Safety and Soundness 

Act and the authorizing statutes; and (4) 

The Enterprises carry out their public 

missions through activities and 

operations that are authorized by and 

consistent with the Safety and 

Soundness Act, their respective 

authorizing statutes, and the public 

interest. See section 1313(a)(1)(B) of the 

Safety and Soundness Act, as amended 

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

B. Prior Approval Authority for Products 

and Activities 

Through products offered to the 

marketplace and their activities in the 

housing finance system, Freddie Mac 

and Fannie Mae, together, own or 

guarantee nearly $5.4 trillion of 

residential mortgages in the United 

States. Their products play a key role in 

housing finance and the U.S. economy. 

However, the Enterprises also take on 

risks, and create risks for themselves 

and the mortgage finance and financial 

system, through their activities and 

product offerings. The configuration of 

particular products may also raise 

questions of how successfully such 

products achieve the Enterprises’ public 

missions while balancing the risks 

borne or created through such products. 

Because of the significant effects 

Enterprise products and activities have 

and could have on the market and 

market participants, the Safety and 

Soundness Act empowered the FHFA 

Director to review products prior to 

being offered. Specifically, the Safety 

and Soundness Act requires ‘‘each 

Enterprise to obtain the approval of the 

Director for any product of the 

enterprise before initially offering the 

product.’’ See section 1321(a) of the 

Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31603 

Safety and Soundness Act (12 U.S.C. 

4541(a)). 

Before commencing a new activity 

that an Enterprise does not consider to 

be a new product, the Safety and 

Soundness Act requires an Enterprise to 

provide ‘‘written notice’’ to the Director 

for a determination of whether such a 

new activity is a new product subject to 

prior approval under section 1321. See 

section 1321(e)(2) of the Safety and 

Soundness Act (12 U.S.C. 4541(e)(2)). If 

the Director determines such a new 

activity to be a new product, the 

Enterprise shall ‘‘obtain the approval of 

the Director for any product of the 

enterprise before initially offering the 

product.’’ See id. at section 1321(a) of 

the Safety and Soundness Act (12 U.S.C. 

4541(a)). 

III. Analysis of the Interim Final Rule 

A. Synopsis of the Interim Final Rule 

The structure of the statute 

superficially suggests that an Enterprise 

has a choice of two types of submission 

to make to FHFA: First, a request for 

prior approval of a new product; and 

second, a notice of a new activity that 

the Enterprise does not believe to be a 

new product. However, the statute does 

not define either ‘‘product’’ or 

‘‘activity,’’ nor does it direct the agency 

to define those terms. The standards for 

determining when an activity must be 

published for public notice and 

comment—thereby constituting a new 

product—include considerations of 

charter compliance, safety and 

soundness, and the public interest. 

These factors are of a high-level 

character, implicating many 

considerations in each case that may be 

difficult to define or identify in 

advance. FHFA concludes that the 

determination whether a new activity is 

a new product in specific instances is 

committed to agency discretion by law. 

The agency does not believe that it is 

practical to require an Enterprise to 

identify a new product—as distinct from 

a new activity that is not a product—in 

advance for purposes of determining 

which type of submission to make to the 

agency. For that reason, the regulation 

meets the statutory mandate through 

employing a streamlined ‘‘notice’’ 

process. It requires an Enterprise to 

make a single form of submission—a 

notice of new activity. The Director will 

then decide whether the new activity is 

a new product that must be published 

for public notice and comment. In 

exigent circumstances, the Director may 

decide to allow an Enterprise to 

undertake a new product before the 

public notice and comment period. 

To avoid duplication of review, a 

product undertaken by an Enterprise 

which is substantially similar to a 

product previously approved under this 

part for either Enterprise is not a new 

product. The definition of new product 

also does not include a product that is 

substantially similar to a product that 

has been continuously undertaken by 

either Enterprise since prior to the 

effective date of HERA of July 30, 2008. 

However, in either case, an Enterprise 

seeking to undertake such a product for 

the first time must provide notice to 

FHFA of the product as a new activity 

and obtain the Director’s approval. 

FHFA reserves its authority to review 

such a new activity to ensure 

compliance with the Enterprise’s 

authorizing statute, safety and 

soundness considerations, and the 

public interest, and to deny or to impose 

any terms, conditions, or limitations on 

the Enterprise’s ability to undertake 

such a new activity. We note that 12 

CFR part 1750, Subpart B, App. A (Riskbased capital) provides for a definition 

for new activity which applies to the 

relevant section of that appendix, and is 

not controlling for purposes of 12 CFR 

part 1253. 

The Director’s exercise of his 

authority under the regulations in this 

part in no way restricts his safety and 

soundness authority over all new and 

existing products or activities of an 

Enterprise, or his authority to review all 

new and existing products or activities 

to determine that such products or 

activities are consistent with the 

statutory mission of an Enterprise. 

B. Section-by-Section Analysis 

Section 1253.1 sets forth the purpose 

and authority of this part. 

Section 1253.2 sets forth definitions 

of terms used in this part which are 

discussed further below in the context 

that they are used. 

Section 1253.3 establishes that before 

commencing any new activity, an 

Enterprise must submit to FHFA a 

written Notice. As part of its 

submission, an Enterprise must 

complete the FHFA Notice of New 

Activity Form (Notice Form) and submit 

it to FHFA in the manner described in 

the Instructions for the Notice Form 

established through the appendix to this 

part, and which may be modified from 

time to time by written direction of the 

Director. The Notice Form provides a 

mechanism for the Director to determine 

whether the new activity is a new 

product in accordance with 12 U.S.C. 

4541 and 12 CFR part 1253. The Notice 

Form also serves, where the Director 

determines the activity is not a new 

product, to provide information to 

FHFA necessary in exercising its 

authorities as safety and soundness 

regulator. A Notice will not be 

considered complete and received for 

processing until all of the information 

required by the Notice Form, along with 

any follow-up information required by 

FHFA upon review of the initially 

submitted information to enable a 

determination whether the new activity 

is a new product, has been submitted. 

FHFA will notify the Enterprise once a 

Notice Form is deemed complete and 

accepted for review. 

An Enterprise may not commence a 

new activity unless the Director makes 

a written determination that the new 

activity is not a new product, or at least 

15 business-days have elapsed since the 

Enterprise was notified that a Notice 

was complete and received for 

processing without the Director having 

made a determination. If the Director 

determines that the new activity is a 

new product, the Enterprise must await 

approval of the new product under 

§ 1253.4. 

Section 1253.4 provides for public 

notice and comment of a new product 

to enable the Director to determine 

whether the new product is: (1) 

Authorized by the Charter Act (Fannie 

Mae) or Corporation Act (Freddie Mac); 

(2) In the public interest; and (3) 

Consistent with the safety and 

soundness of the Enterprise or the 

mortgage finance and financial system. 

Among the factors that the Director may 

consider when determining whether a 

new product is in the public interest 

are: (1) The degree to which the new 

product might reasonably be expected to 

advance any of the charter purposes of 

Fannie Mae or Freddie Mac; (2) The 

degree to which the new product serves 

underserved markets as set forth in 

section 1335 of the Safety and 

Soundness Act (12 U.S.C. 4565); (3) The 

degree to which the new product is 

being supplied or could be supplied by 

non-government-sponsored-enterprise 

firms; (4) Other alternatives for 

providing the new product to the 

market; (5) The degree to which the new 

product promotes competition in the 

marketplace or, to the contrary, would 

result in less competition and greater 

concentration of economic activity or 

risk; (6) The degree to which Enterprise 

provision of the service overcomes 

natural market barriers or inefficiencies; 

(7) The degree to which Enterprise 

provision of the new product might 

raise or mitigate systemic risks to the 

mortgage, mortgage finance or financial 

markets; (8) the degree to which the new 

product furthers fair housing; and (9) 

such other factors determined to be 

appropriate by the Director. 

31604 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 

Section 1321(c) of the Safety and 

Soundness Act (12 U.S.C. 4541(c)) 

authorizes the Director to grant 

‘‘temporary approval’’ of the new 

product if a delay associated with 

seeking public comment is contrary to 

public interest. See id. at section 1321 

paragraphs (c)(2) through (c)(4) (12 

U.S.C. 4541(c)(2) through (c)(4)). 

Accordingly, once FHFA determines 

that a new activity is a new product, 

FHFA will publish notice along with a 

description of the new product for a 30- 

day public comment period, unless the 

Director determines that delay 

associated with first seeking public 

comment is contrary to public interest. 

Where the Director determines that 

exigent circumstances exist such that 

delay associated with seeking public 

comment is contrary to public interest, 

the Director may consider and 

temporarily approve the new product 

without providing an advance public 

comment period. In such circumstances, 

the Director will provide for a public 

comment period after granting the 

Temporary Approval. 

In making a determination, the 

Director will consider all public 

comments received by the closing date 

of the comment period. The Director 

will make a determination on the new 

product no later than 30 calendar-days 

after the close of the public comment 

period. If the Director fails to make a 

determination on the new product 

within the 30-day time period, the 

Enterprise may offer the new product. If 

the Director approves the new product, 

the Director may condition such 

approval upon terms, conditions, and 

limitations with which the Enterprise 

must comply. If the Director denies a 

new product, the Enterprise may not 

offer the new product. 

Where, as a result of public comment 

or otherwise in the course of 

considering the new product, FHFA 

believes that any information in 

addition to that supplied by the 

Enterprise is necessary for its decision, 

FHFA may request such information. 

FHFA may deny a new product if it 

does not receive the information 

requested from the Enterprise in 

sufficient time to permit adequate 

evaluation of the information. 

Section 1253.5 states that confidential 

information submitted in support of 

either a Notice or a public comment 

submission, is presumed public. An 

Enterprise or commenter may request 

confidential treatment, and FHFA will 

consider such requests upon Enterprise 

or commenter compliance with the 

specified requirements. 

Section 1253.6 sets forth certification 

requirements and grounds to nullify an 

approval. The Notice, any applicable 

Forms, and supporting information 

must be certified by an executive officer 

as that term is defined by 12 CFR 

1770.3(g). We note that 12 CFR 

1770.3(g) is in the process of being 

replaced, and § 1230.2 will become the 

relevant reference. 74 FR 26989 (June 5, 

2009). If FHFA discovers a material 

misrepresentation or omission after the 

Director has rendered a decision, FHFA 

may nullify any approval, or terms, 

conditions, and limitations to such 

approval. Any person responsible for 

any material misrepresentation or 

omission in a filing or supporting 

materials may be subject to enforcement 

action and other penalties, including 

criminal penalties provided in 18 U.S.C. 

1001. 

Section 1253.7 states penalties for 

failure to comply. If an Enterprise: (1) 

Offers a new product or commences a 

new activity without submitting a 

Notice; (2) offers a new product or 

commences a new activity after 

submitting a Notice before the 

expiration of time provided for the 

Director to make a determination; (3) 

offers a new product after the Director 

disapproves it; or (4) fails to adhere to 

any terms, conditions, or limitations 

established by the Director, the 

Enterprise must cease offering the new 

product or engaging in the new activity 

immediately upon discovery or notice of 

the events described in this section, 

unless otherwise informed by the 

Director in writing. 

Upon discovery or notice of any one 

of these occurrences, the Enterprise 

must provide the FHFA Director and its 

board of directors, chief risk officer, 

internal audit, and compliance officer, a 

written description of the failure or 

failures of controls that resulted in the 

offering of the new product or 

commencement of new activity in 

contravention of regulations in this part. 

The Enterprise must also provide 

information regarding the steps it has 

taken and will take to remediate the 

control failures. Failure to comply with 

these steps may result in FHFA taking 

enforcement action. 

Section 1253.8 provides that, if the 

Director approves a new product for one 

Enterprise, or the new product is 

otherwise available to that Enterprise 

under § 1253.4, the other Enterprise may 

also offer that new product, subject to 

submitting a request to the Director in 

the form of a Notice under § 1253.3 and 

approval by the Director. 

Section 1253.9 states that the 

Director’s authority is preserved. The 

Director’s exercise of the Safety and 

Soundness Act’s provisions on prior 

approval authority for products in no 

way restricts the safety and soundness 

authority of the Director over all new 

and existing products or activities, or 

the authority of the Director to review 

all new and existing products or 

activities to determine that such 

products or activities are consistent 

with the statutory mission of an 

Enterprise. See section 1321(f) of the 

Safety and Soundness Act (12 U.S.C. 

4541(f)). 

IV. Notice and Public Participation 

The notice and comment procedure 

required by the Administrative 

Procedure Act is inapplicable to this 

interim final regulation because it is in 

the public interest to implement section 

1123 of HERA that amends section 1321 

of the Safety and Soundness Act (12 

U.S.C. 4541) immediately. See 5 U.S.C. 

553(b)(B). The regulation facilitates the 

Enterprises’ continued ability to meet 

their public mission in conservatorship, 

enabling them to contribute to 

combating the continuing deterioration 

and volatility of the residential mortgage 

market. Also, the regulation establishes 

procedures for the Enterprises to submit 

notices of new activities and new 

products for approval. However, 

because FHFA believes that public 

comments are valuable, it encourages 

comments on all aspects of the interim 

final regulation, and will consider all 

comments received on or before August 

31, 2009 in adopting a final regulation. 

V. Effective Date 

For the reasons stated in section IV., 

above, the FHFA for good cause finds 

that the interim final regulation is 

immediately effective on July 2, 2009. 

See id. at para. (d)(3). 

VI. Regulatory Flexibility Act 

FHFA is promulgating this regulation 

in the form of an interim final regulation 

and not as a proposed regulation. 

Therefore, the provisions of the 

Regulatory Flexibility Act do not apply. 

See 5 U.S.C. 601(2) and 603(a). 

VII. Paperwork Reduction Act 

The interim 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.). 

List of Subjects in 12 CFR Part 1253 

Government-sponsored enterprises; 

Mortgages; New activities; New 

products. 

Authority and Issuance 

■ Accordingly, for the reasons stated in 

the preamble, under the authorities of 

Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31605 

12 U.S.C. 4526 and 12 U.S.C. 4541, the 

Federal Housing Finance Agency hereby 

amends Chapter XII of Title 12, Code of 

Federal Regulations as follows: 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

Subchapter C—Enterprises 

■ 1. Add part 1253 to subchapter C to 

read as follows: 

PART 1253—PRIOR APPROVAL FOR 

ENTERPRISE PRODUCTS 

Sec. 

1253.1 Purpose and authority. 

1253.2 Definitions. 

1253.3 Notice of new activity. 

1253.4 New product approval. 

1253.5 Confidential information. 

1253.6 Certifying and nullifying an 

approval. 

1253.7 Failure to comply. 

1253.8 Availability of new product to an 

Enterprise after it has been approved for 

the other Enterprise. 

1253.9 Preservation of authority. 

Appendix to Part 1253—Prior Approval for 

Enterprise Products: Instructions and 

Notice of New Activity Form 

Authority: 12 U.S.C. 4526; 12 U.S.C. 4541. 

§ 1253.1 Purpose and authority. 

The purpose of this part is to establish 

policies and procedures implementing 

the prior approval authority for 

enterprise products, in accordance with 

section 1321 of the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992 (Safety and 

Soundness Act) (12 U.S.C. 4541), as 

amended. 

§ 1253.2 Definitions. 

For purposes of this part: 

Authorizing statute means, in the case 

of Fannie Mae, the Federal National 

Mortgage Association Charter Act (12 

U.S.C. 1716 et seq.) and, in the case of 

Freddie Mac, the Federal Home Loan 

Mortgage Corporation Act (12 U.S.C. 

1451 et seq.). 

Director means the Director of the 

Federal Housing Finance Agency or his 

or her designee. 

Enterprise means the Federal National 

Mortgage Association (Fannie Mae) or 

the Federal Home Loan Mortgage 

Corporation (Freddie Mac). 

FHFA means the Federal Housing 

Finance Agency. 

New activity means with respect to an 

Enterprise, any business line, business 

practice, or service, including guarantee, 

financial instrument, consulting, or 

marketing, that is proposed to be 

undertaken by the Enterprise either on 

a standalone basis or as an incident to 

providing one or more Enterprise 

products to the market, and which 

was— 

(a) Not initially engaged in prior to 

July 30, 2008; 

(b) Commenced by the Enterprise 

prior to July 30, 2008, but which, after 

July 30, 2008, the Enterprise ceased to 

engage in, and presently intends to 

resume; or 

(c) Offered or engaged in by the 

Enterprise after July 30, 2008, at a 

significantly different level, or in a 

significantly different manner, in terms 

of the activity’s effect on public interest 

or risk to the Enterprise or the mortgage 

finance or financial system. 

The term ‘‘new activity’’ does not 

include— 

(1) Any Enterprise business practice, 

transactions, or conduct performed 

solely as an incident to the 

administration of the Enterprise’s 

internal affairs to conduct its business; 

or 

(2) Any business practice or service 

undertaken by an Enterprise that is de 

minimis in scope, volume, risk, or 

duration. 

New product means any activity that 

the Director determines merits public 

notice and comment on matters of 

compliance with the applicable 

authorizing statute, safety and 

soundness, or public interest. ‘‘New 

product’’ does not include— 

(a) The automated loan underwriting 

system of an Enterprise in existence as 

of July 30, 2008, including any upgrade 

to the technology, operating system, or 

software to operate the underwriting 

system; 

(b) Any modification to the mortgage 

terms and conditions or mortgage 

underwriting criteria relating to the 

mortgages that are purchased or 

guaranteed by the Enterprise, provided 

that such modifications do not alter the 

underlying transaction so as to include 

services or financing, other than 

residential mortgage financing; 

(c) Any activity that is substantially 

similar to the activities described in 

paragraphs (a) or (b) of this section; 

(d) Any activity that is substantially 

similar to an activity or product that has 

been approved in accordance with this 

part for either Enterprise; or 

(e) Any activity that is substantially 

similar to an activity or product 

continuously undertaken by the other 

Enterprise since prior to July 30, 2008. 

Substantially similar. In considering 

whether an activity is ‘‘substantially 

similar’’ to any activity described in 

section 1321(e)(1)(A) and (B) of the 

Safety and Soundness Act, 12 U.S.C. 

4541(e)(1)(A) and in paragraphs (a) or 

(b) of this section under the definition 

of new product, or to any activity 

approved in accordance with this part, 

or continuously engaged in by the other 

Enterprise as referenced in paragraphs 

(d) and (e) of this section under the 

definition of new product, the Director 

may consider if the activity in 

question— 

(1) Is a product; 

(2) Is authorized under the applicable 

authorizing statute; 

(3) Represents an upgrade to the way 

an approved product is delivered; 

(4) Poses a significant change in risk 

to the Enterprise or the mortgage finance 

system from a previously approved 

product or activity; 

(5) Involves a significant change in 

terms, conditions, or limitations 

expressly contained in any prior 

approval granted under this part; 

(6) Poses a significant change in its 

effect on the public interest compared to 

a previously approved product or 

activity; 

(7) Poses a significant change from a 

previously approved product or activity 

and if so, does a tradeoff exist in the 

composite of risk, public interest, and 

safety and soundness elements in the 

proposed new activity; 

(8) Is likely to have significantly more 

enterprise resources dedicated to it; 

(9) Requires approval by regulators 

other than FHFA, including Federal, 

State, or local regulators; 

(10) Involves new classes or types of 

borrowers, investors, or counterparties; 

(11) Involves new classes or types of 

collateral; or 

(12) Such other factor as the Director 

determines to be appropriate. 

§ 1253.3 Notice of new activity. 

(a) Before commencing a new activity, 

an Enterprise must submit a Notice of 

New Activity (Notice) to the FHFA, and 

either receive a determination that the 

new activity is not a new product, await 

passage of the 15 business-day period as 

described in paragraph (d) of this 

section, or, where FHFA determines the 

new activity to be a new product, await 

approval of the new product under 

§ 1253.4. In addition, for any new 

activity that an Enterprise seeks to 

engage in which FHFA had previously 

approved in accordance with this part 

for the other Enterprise, or in which the 

other Enterprise had engaged 

continuously since prior to July 30, 

2008, the Enterprise must submit a 

Notice to FHFA. In support of its Notice, 

the Enterprise shall submit information 

sufficient to allow the Director to make 

a determination on the Notice pursuant 

to section 1321 of the Safety and 

Soundness Act (12 U.S.C. 4541), as 

amended, including any information 

required by FHFA by regulation or 

otherwise. The Enterprise shall provide 

a thorough, meaningful, complete and 

31606 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 

specific description of the new activity 

such that the public will be able to 

provide fully informed comment on the 

new activity if FHFA determines the 

new activity to be a new product. Such 

information shall include that contained 

in the FHFA Notice Form and the 

Instructions for the FHFA Notice of New 

Activity Form (Notice Form 

Instructions) that appear in the 

appendix of this part. The Notice Form 

and Notice Form Instructions may be 

amended from time to time by written 

direction of the Director. Requests for 

confidential treatment for any portion of 

an Enterprise’s submission must be 

made consistent with § 1253.5. 

(b) FHFA will evaluate a Notice to 

establish whether the submission 

contains sufficient information for 

FHFA to make a determination whether 

the new activity is a new product 

subject to prior approval. Upon 

establishing that the Notice contains 

sufficient information, FHFA shall deem 

the submission complete and 

‘‘received’’ for purposes of section 

1321(e)(2)(B) of the Safety and 

Soundness Act (12 U.S.C. 4541(e)(2)(B)), 

and shall notify the Enterprise 

accordingly. 

(c) No later than 15 business-days 

after the Notice is deemed completed 

and ‘‘received’’ for purposes of section 

1321(e)(2)(B) of the Safety and 

Soundness Act (12 U.S.C. 4541(e)(2)(B)), 

the Director will make a written 

determination on the Notice, and shall 

notify the Enterprise accordingly. The 

Director may also approve the new 

activity subject to such terms, 

conditions, or limitations on the 

Enterprise’s engagement in the new 

activity as the Director determines to be 

appropriate. 

(d) If the Director fails to make a 

determination within the 15 businessday period specified in paragraph (c) of 

this section, the Enterprise may 

commence the new activity. The 

Director’s failure to make a 

determination within the 15-day period 

does not limit or restrict the Director’s 

safety and soundness authority or the 

authority of the Director to review the 

new activity to determine whether the 

activity is consistent with the statutory 

mission of the Enterprise. 

§ 1253.4 New product approval. 

(a) Public notice. If the Director 

determines that the new activity is a 

new product, FHFA shall publish a 

public notice soliciting comments on 

the proposed product for a 30 calendarday period. 

(1) The public notice will describe the 

new product and state the closing date 

of the public comment period. The 

public notice will provide instructions 

for submission of public comment. 

(2) The Director will consider all 

public comments received by the 

closing date of the comment period. 

(3) In computing the 30 calendar-day 

public comment period, FHFA excludes 

the day on which the public notice is 

published in the Federal Register, from 

which the period begins to run, and 

includes the last day of the period, 

regardless of whether it is a Saturday, 

Sunday, or legal holiday. 

(b) Director’s determination. (1) No 

later than 30 calendar-days after the end 

of the public comment period, the 

Director will provide the Enterprise 

with a written determination on 

whether it may proceed with the new 

product. The written determination will 

specify the grounds for the Director’s 

determination. 

(2) The Director will approve the new 

product if the Director determines that 

the new product complies with the 

applicable authorizing statute, is in the 

public interest, and is consistent with 

the safety and soundness of the 

Enterprise and the mortgage finance and 

financial system. The Enterprise may 

then offer the new product subject to 

any terms, conditions, or limitations as 

may be established by the Director. 

(3) Among the factors that the Director 

may consider when determining 

whether a new product is in the public 

interest are— 

(i) The degree to which the new 

product might reasonably be expected to 

advance any of the purposes of the 

Enterprise under the applicable 

authorizing statute; 

(ii) The degree to which the new 

product serves underserved markets as 

set forth in section 1335 of the Safety 

and Soundness Act (12 U.S.C. 4565); 

(iii) The degree to which the new 

product is being supplied or could be 

supplied by non-government-sponsoredenterprise firms; 

(iv) Other alternatives for providing 

the new product; 

(v) The degree to which the new 

product promotes competition in the 

marketplace or, to the contrary, would 

result in less competition and greater 

concentration of economic activity or 

risk; 

(vi) The degree to which Enterprise 

provision of the new product overcomes 

natural market barriers or inefficiencies; 

(vii) The degree to which Enterprise 

provision of the new product might 

raise or mitigate systemic risks to the 

mortgage, mortgage finance or other 

financial markets; 

(viii) The degree to which the new 

product furthers fair housing; and 

(ix) Such other factors determined 

appropriate by the Director. 

(4) The Director will disapprove the 

new product if the Director determines 

that approval is inconsistent with 

applicable law, regulation, or FHFA 

policy thereunder, or contrary to public 

interest or the safety and soundness of 

the Enterprise or the mortgage finance 

or financial system. If the Director 

disapproves the new product, the 

Enterprise may not offer the new 

product. 

(5) The Director may establish terms, 

conditions, or limitations on the 

Enterprise’s offering of the new product 

to ensure that the product offering is 

consistent with applicable statutory and 

regulatory standards, FHFA policies, 

public interest, or the safety and 

soundness of the Enterprise or the 

mortgage finance or financial system. 

(6) If the Director fails to make a 

determination within the 30 calendarday period that begins on the day after 

the end of the public comment period, 

the Enterprise may offer the new 

product. The Director’s failure to make 

a determination within such 30-day 

period does not limit or restrict the 

Director’s safety and soundness 

authority or the authority of the Director 

to review the new product to determine 

that the product is consistent with the 

statutory mission of the Enterprise. 

(c) Temporary approval. (1) FHFA 

may approve a new product without 

first seeking public comments as 

described in § 1253.4(c) if— 

(i) The Enterprise submits a specific 

request for Temporary Approval that 

describes the exigent circumstances that 

make the delay associated with the 30- 

day public comment period contrary to 

the public interest and the Director 

determines that exigent circumstances 

exist and that delay associated with first 

seeking public comment would be 

contrary to the public interest; or 

(ii) Notwithstanding the absence of a 

request by the Enterprise for Temporary 

Approval, the Director determines on 

his or her own initiative that there are 

exigent circumstances that make the 

delay associated with first seeking 

public comment contrary to the public 

interest. 

(2) The Director may impose terms, 

conditions, or limitations on the 

Temporary Approval to ensure that the 

new product offering is consistent with 

applicable statutory and regulatory 

standards, FHFA policies, public 

interest, and the safety and soundness of 

the Enterprise or the mortgage finance 

system. 

(3) If the Director grants Temporary 

Approval, the Director will notify the 

Enterprise in writing of the Director’s 

Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31607 

decision, and include the period for 

which it is effective and any terms, 

conditions or limitations. Upon granting 

of Temporary Approval, FHFA will also 

publish the request for public comment 

to begin the process for permanent 

approval. 

(4) If the Director denies a request for 

Temporary Approval, the Director will 

notify the Enterprise in writing of the 

Director’s decision, and will evaluate 

the new product in accordance with 

paragraphs (a) through (c) of this 

section. 

(d) Additional information. The 

Director may request any information in 

addition to that supplied in the 

completed Notice if, as a result of public 

comment or otherwise in the course of 

considering the Notice, the Director 

believes that the information is 

necessary for his or her decision. The 

Director may disapprove a new product 

if he or she does not receive the 

information requested from the 

Enterprise in sufficient time to permit 

adequate evaluation of the information 

within the time periods set forth in 

paragraph (c) of this section. 

§ 1253.5 Confidential information. 

(a) Information presumed public. 

FHFA will treat all information an 

Enterprise submits in a Notice as public 

information, except as provided in 

paragraphs (b) through (d) of this 

section. FHFA will also treat 

information provided by a commenter, 

in response to a notice requesting 

comment on an Enterprise new product, 

as public information, except as 

provided in paragraphs (b) through (d) 

of this section. 

(b) Confidential treatment request. An 

Enterprise or commenter may designate 

specific information as confidential and 

request that it not be made publicly 

available. For any information that an 

Enterprise or commenter seeks 

confidential treatment, the Enterprise or 

commenter is required to submit a 

complete copy of the Notice or 

comment, with a specific request for 

confidential treatment. Simultaneously, 

the Enterprise or commenter is required 

to submit a copy of the Notice or 

comment containing only those portions 

for which no request for confidential 

treatment is made, and from which 

those portions for which confidential 

treatment is requested have been 

redacted. The Enterprise or commenter 

must specify the bases for designated 

information not being made public as 

set forth in paragraph (c) of this section. 

(c) Required information. The 

Enterprise or commenter is required to 

provide the following information in 

support of its request for confidential 

treatment of the designated 

information— 

(1) Identification of the specific 

information for which confidential 

treatment is sought, and the specific 

Notice for which the information is 

being submitted; 

(2) Explanation of the bases for the 

proposed confidential treatment 

including, but not limited to, why the 

information is ‘‘commercial or financial 

information obtained from a person and 

privileged or confidential’’ as that 

phrase is used in Exemption 4 of the 

Freedom of Information Act (FOIA), 5 

U.S.C. 552(b)(4), and § 1202.4(a)(4) of 

this chapter; 

(3) Explanation of the relevance and 

necessity of the information to whether 

the Notice should be approved or 

denied; 

(4) Explanation of how disclosure of 

the information would result in 

substantial harm to the competitive 

position of the Enterprise or commenter; 

(5) Explanation of whether the 

information is available to the public 

and the extent of any previous 

disclosure to third parties; 

(6) Justification of the time period 

during which the Enterprise or 

commenter asserts that the material 

should not be available for public 

disclosure; and 

(7) Any other information that the 

Enterprise or commenter seeking 

confidential treatment believes may be 

useful in assessing whether its request 

for confidentiality should be granted. 

(d) FHFA determination. FHFA will 

determine whether the designated 

information may be withheld from 

public disclosure and will notify the 

Enterprise or commenter of the 

determination. In the event that FHFA 

determines the information may not be 

withheld from public disclosure, the 

Enterprise or commenter may withdraw 

the information or consent to public 

disclosure. Requests for confidential 

treatment that do not comply with 

paragraphs (b) and (c) of this section 

will not be considered. 

§ 1253.6 Certifying and nullifying an 

approval. 

(a) An Enterprise shall certify, 

through an executive officer, as that 

term is defined by § 1770.3(g) of this 

title, that any filing or supporting 

material submitted to FHFA pursuant to 

regulations in this part contains no 

material misrepresentations or 

omissions. FHFA may review and verify 

any information filed in connection 

with a Notice. If FHFA discovers a 

material misrepresentation or omission 

after the Director has rendered a 

decision on the filing, FHFA may 

nullify any approval or modify the 

terms, conditions, and limitations to 

such approval. For purposes of this 

paragraph, an Enterprise’s authority to 

offer a new product or engage in a new 

activity by reason of the Director’s not 

having made an explicit determination 

within the statutory time period 

constitutes an approval. 

(b) Any person responsible for any 

material misrepresentation or omission 

in a submission or supporting materials 

may be subject to enforcement action 

and other penalties, including criminal 

penalties provided in 18 U.S.C. 1001. 

§ 1253.7 Failure to comply. 

(a) Unless the Director otherwise 

informs the Enterprise in writing, an 

Enterprise must cease offering a new 

product or engaging in a new activity 

immediately upon discovering or 

receiving notice from the Director that 

the Enterprise has— 

(1) Offered a new product or 

commenced a new activity without 

submitting a Notice; 

(2) Offered a new product or 

commenced a new activity after 

submitting a Notice but before approval 

is granted, and before the expiration of 

the time provided for the Director to 

make a determination under §§ 1253.3 

and 1253.4; 

(3) Offered a new product after the 

Director disapproved it; or 

(4) Failed to adhere to any terms, 

conditions or limitations established by 

the Director in his or her approval of a 

new product or activity. 

(b) Within five (5) business-days of 

the discovery or notice of any of the 

events described in paragraph (a) of this 

section, the Enterprise must provide the 

Director a written description of the 

failure or failures of controls that 

resulted in the offering of the new 

product or commencement of the new 

activity in contravention of this 

regulation, and the steps that the 

Enterprise has taken or will take to 

remediate the control failures. The 

Enterprise must provide the board of 

directors of the Enterprise and chief risk 

officer, internal audit, and compliance 

officer of the Enterprise with a copy of 

the written description on the same date 

the description is provided to the 

Director of FHFA. 

(c) In the event that the Enterprise 

elects to resubmit the Notice of a new 

product or new activity that was 

undertaken in contravention of this 

regulation, the resubmission must 

provide sufficient documentation of the 

effectiveness of the remediation efforts 

described in paragraph (b) of this 

section. 

31608 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 

(d) Failure to comply with paragraphs 

(a) or (b) of this section above may result 

in FHFA’s taking enforcement action, 

including pursuant to 12 U.S.C. 4631 

(orders to cease and desist), 12 U.S.C. 

4632 (temporary orders to cease and 

desist), and 12 U.S.C. 4636 (civil money 

penalties). 

§ 1253.8 Availability of new product to an 

Enterprise after it has been approved for 

the other Enterprise. 

(a) If the Director approves a new 

product for one Enterprise or the new 

product is otherwise available to that 

Enterprise under § 1253.4, the other 

Enterprise may also undertake that new 

product, subject to submitting a request 

to the Director in the form of a Notice 

under § 1253.3 and approval by the 

Director. 

(b) The Director may require such 

further information from the requesting 

Enterprise as he or she deems necessary 

to approve or deny the request. 

Approving the request does not require 

public notice and comment. 

§ 1253.9 Preservation of authority. 

(a) The Director’s exercise of his or 

her authority pursuant to the prior 

approval authority for products under 

section 1321 of the Safety and 

Soundness Act (12 U.S.C. 4541), and 

this regulation and other issuances in no 

way restricts— 

(1) The safety and soundness 

authority of the Director over all new 

and existing products or activities; or 

(2) The authority of the Director to 

review all new and existing products or 

activities to determine that such 

products or activities are consistent 

with the statutory mission of an 

Enterprise. 

Appendix to Part 1253—Prior Approval 

for Enterprise Products—Instructions 

and Notice of New Activity Form 

Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31609 


ER02JY09.000</GPH>
31610 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 


ER02JY09.001</GPH>
Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31611 


ER02JY09.002</GPH>
31612 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 


ER02JY09.003</GPH>
Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31613 


ER02JY09.004</GPH>
31614 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 


ER02JY09.005</GPH>
Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31615 


ER02JY09.006</GPH>
31616 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 


ER02JY09.007</GPH>
Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 31617 


ER02JY09.008</GPH>
31618 Federal Register / Vol. 74, No. 126 / Thursday, July 2, 2009 / Rules and Regulations 

Dated: June 22, 2009. 

James B. Lockhart III, 

Director, Federal Housing Finance Agency. 

[FR Doc. E9–15304 Filed 7–1–09; 8:45 am] 

BILLING CODE 8070–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Parts 26, 121, 125, and 129 

[Docket No. FAA–2005–22997; Amendment 

Nos. 26–3, 121–345, 125–57, and 129–47] 

RIN 2120–AI23 

Reduction of Fuel Tank Flammability in 

Transport Category Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule, correcting 

amendments. 

SUMMARY: The Federal Aviation 

Administration (FAA) is correcting 

inadvertent errors that appeared in a 

previously-published final rule. That 

final rule amended FAA regulations that 

require operators and manufacturers of 

transport category airplanes to take 

steps that, in combination with other 

required actions, should greatly reduce 

the chances of a catastrophic fuel tank 

explosion. In that final rule, erroneous 

compliance dates were shown. This 

document changes those compliance 

dates accordingly. It also corrects other 

non-substantive errors that have come to 

our attention. 

DATES: Effective July 2, 2009. 

FOR FURTHER INFORMATION CONTACT: If 

you have technical questions about this 

action, contact Michael E. Dostert, FAA, 

Propulsion/Mechanical Systems Branch, 

ANM–112, Transport Airplane 

Directorate, Aircraft Certification 

Service, 1601 Lind Avenue, SW., 

Renton, Washington 98057–3356; 

telephone (425) 227–2132, facsimile 

(425) 227–1320; e-mail: 

mike.dostert@faa.gov. Direct any legal 

questions to Doug Anderson, ANM–7, 

FAA, Office of Regional Counsel, 1601 

Lind Avenue, SW., Renton, WA 98057– 

3356; telephone (425) 227–2166; 

facsimile (425) 227–1007, e-mail 

Douglas.Anderson@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

The Federal Aviation Administration 

(FAA) published a final rule, request for 

comments entitled ‘‘Reduction of Fuel 

Tank Flammability in Transport 

Category Airplanes’’ in the Federal 

Register on July 21, 2008 (73 FR 42444). 

Recently, it was brought to our 

attention that the effective date shown 

in the document was inconsistent with 

the Congressional Review Act. This act 

specifies that, for major rules like this 

one, the effective date is no sooner than 

60 days after publication or 60 days 

after submission to Congress, whichever 

occurs later. Since this rule was not 

received by the Government Accounting 

Office until October 27, 2008, the 

effective date of the rule per the 

Congressional Review Act is December 

26, 2008, not September 19, 2008. 

Because compliance dates were 

calculated based on a September 19, 

2008 effective date, those dates are 

incorrect. This document makes the 

appropriate amendatory changes 

necessary to reflect the new compliance 

dates. We also found some minor errors 

in §§ 121.1117, 125.509 and 129.117 

and are correcting them in this 

document. 

List of Subjects 

14 CFR Part 26 

Aircraft, Aviation safety, Continued 

airworthiness. 

14 CFR Part 121 

Air carriers, Aircraft, Aviation safety, 

Reporting and recordkeeping 

requirements, Safety, Transportation. 

14 CFR Part 125 

Aircraft, Aviation safety, Reporting 

and recordkeeping requirements. 

14 CFR Part 129 

Air carriers, Aircraft, Aviation safety, 

Reporting and recordkeeping 

requirements, Security measures. 

The Amendment 

■ In consideration of the foregoing, the 

Federal Aviation Administration 

amends Chapter 1 of Title 14, Code of 

Federal Regulations (CFR) parts 26, 121, 

125, and 129, as follows: 

PART 26—CONTINUED 

AIRWORTHINESS AND SAFETY 

IMPROVEMENTS FOR TRANSPORT 

CATEGORY AIRPLANES 

■ 1. The authority citation for part 26 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701, 

44702 and 44704. 

■ 2. Revise § 26.5 to read as follows: 

§ 26.5 Applicability table. 

Table 1 of this section provides an 

overview of the applicability of this 

part. It provides guidance in identifying 

what sections apply to various types of 

entities. The specific applicability of 

each subpart and section is specified in 

the regulatory text. 

TABLE 1—APPLICABILITY OF PART 26 RULES

Applicable sections 

Subpart B Subpart D Subpart E 

EAPAS/FTS Fuel tank flammability 

Damage tolerance 

data 

Effective date of rule December 10, 2007 December 26, 2008 January 11, 2008 

Existing 1 TC Holders ............................................................................... 26.11 26.33 26.43, 26.45, 26.49 

Pending 1 TC Applicants .......................................................................... 26.11 26.37 26.43, 26.45 

Existing 1 STC Holders ............................................................................ N/A 26.35 26.47, 26.49 

Pending 1 STC/ATC Applicants ............................................................... 26.11 26.35 26.45, 26.47, 26.49 

Future 2 STC/ATC Applicants .................................................................. 26.11 26.35 26.45, 26.47, 26.49 

Manufacturers .......................................................................................... N/A 26.39 N/A 

1As of the effective date of the identified rule. 

2Application made after the effective date of the identified rule.