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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules
with a core business line that the thirdparty provider performs or provides, the criticality of the connection, the resilience of the connection, and provisions or actions needed to ensure the continued availability of the operation, service, function, or support through the receivership process. For example, the securitization platform provided by CSS is a critical operation for the securitization of single-family mortgages for which there is no substitute. An Enterprises resolution plan should therefore include provisions for ensuring the continued viability of the common securitization platform, such as prepositioning of working capital. Alternatively, where substitution among providers is feasible, provisions and procedures for affecting such substitutions in the wake of FHFAs appointment as receiver should be noted or developed.
The Enterprises would be required to report on their credit risk exposures to counterparties identified in the proposed rule, including significant sellers of mortgage loans to an Enterprise, significant servicers, and providers of loan-level mortgage insurance. Enterprise resolution plans would be required to analyze whether the failure of a third-party provider would likely have an adverse impact on the Enterprise or likely result in the Enterprise becoming in danger of default or in default. Finally, each Enterprise would be required to identify trading, payment, clearing, and settlement systems of which the Enterprise, directly or indirectly, is a member and on which the Enterprise conducts a material number or material value amount of trades and transactions.
Certain proposed provisions on organizational structure, interconnections, and related information to be included in an Enterprise resolution plan use the term third-party provider. FHFA has not proposed a definition of that term.
When considering the concept of a third-party provider in the context of the proposed rules provisions that use it, FHFA concluded that third-party providers would be identified through application of those rule provisions, such as provisions that would require each Enterprise to identify the entity performing or providing operations, services, functions, or supports associated with core business lines. In that context, where an appropriate rule definition of third-party providers would likely refer to aspects of the rule which, when applied, would result in their identification, FHFA considered that a rule definition of third-party provider would not add to the
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understanding of the rule. FHFA was concerned that a rule definition of third-party provider could inadvertently limit application of rule provisions that are intended to be broadly applied. Finally, FHFA notes that the DFA section 165 rule uses the term major counterparty, which that rule does not define, to somewhat similar effect as third-party provider in FHFAs proposed rule. FHFA chose the term third-party provider in this instance to avoid implying that a contractual relationship, financial or otherwise, was required.
Notwithstanding these considerations, FHFA requests comment on whether a definition of third-party provider should be included in any final rule.
Management information systems.
FHFA proposes to require each Enterprise to provide information in its resolution plan about the key management information systems and applications supporting its core business lines, including systems and applications for risk management, automated underwriting, valuation, accounting, and financial and regulatory reporting, and systems and applications containing records used to manage all qualified financial contracts. Each resolution plan would be required to include information on the legal ownership of such systems and associated software, licenses, or other intellectual property. Each Enterprise would be required to map key management information systems and applications to core business lines that use or rely on them and to include information on the key internal reports used to monitor the financial health, risks, and operation of the Enterprise and core business lines.
The proposed rule would require each resolution plan to include a description of the capabilities of the Enterprises management information systems to collect, maintain, and report the information and other data underlying the resolution plan, in a timely manner to Enterprise management to FHFA.
Each Enterprise would be required to identity in its resolution plan deficiencies, gaps, or weaknesses in the capabilities of its management information systems and describe actions the Enterprise plans to undertake, including the associated timelines for implementation, to address such deficiencies, gaps, or weaknesses.
The goal of the analysis, and any practical steps identified by the Enterprise, is to confirm the continued availability of the key management information systems that support core business lines through resolution, including their availability to the LLRE.

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Finally, each Enterprise resolution plan would be required to describe the process for FHFA to access the management information systems and applications required to be identified.
Executive summary. The proposed rule would require each resolution plan to include an executive summary, addressing the key elements of the Enterprises strategic analysis;
identifying material changes that occurred since the Enterprises prior resolution plan, if any; and, describing changes to the previously submitted resolution plan because of any change in law or regulation, guidance or supervisory feedback from FHFA, or any identified material change. The executive summary should also describe actions taken by the Enterprise to improve the feasibility or effectiveness of the resolution plan or remediate, or otherwise mitigate, any material weaknesses or impediments to a rapid and orderly resolution.
Enterprise point-of-contact. The proposed rule would require each Enterprise to identify a senior management official responsible for serving as a point-of-contact regarding the resolution plan, in the resolution plan.
Public section of the resolution plan;
confidentiality of other parts. The proposed rule would require each resolution plan to include an identified public sectionin essence, a second executive summary that describes the business of the Enterprise and its identified core business lines and associated operations and services. The public section would address as well financial information regarding assets, liabilities, capital and major funding sources; derivative activities, hedging activities, and CRT instruments; listing memberships in material payment, clearing or settlement systems;
identifying the Enterprises principal officers; the Enterprises corporate governance structure and processes related to resolution planning, including the identification of core business lines;
and, material management information systems. The public section would include a high-level description of the Enterprises strategies to facilitate its resolution by FHFA as receiver, such as the types of potential purchasers of the Enterprises core business lines and other significant assets, and steps that, if taken by the Enterprise, could minimize the risk that its resolution would have serious adverse effects on the national housing finance markets and the amount of potential loss to the Enterprises investors and creditors. The proposed rule would require that the public section clearly reflect the
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