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Federal Register / Vol. 86, No. 84 / Tuesday, May 4, 2021 / Rules and Regulations
whatever manner those activities are carried out, was meant to be comprehensive, and creating segmentation in the rulee.g., removing supports provided by third parties from the CBL definition and creating a separate definition and process for third party identificationcould undercut that comprehensive understanding.
Although FHFA is not changing the CBL definition, it should also be noted that the rule would not prevent an Enterprise, in developing its resolution plan, from characterizing some operations or services as critical, or from distinguishing services necessary for the continuation of a CBL in an LLRE provided by a third party from those provided by a business unit or affiliate. FHFA believes this approach permitting the use of such categories without requiring itcreates flexibility for the Enterprises and reduces burden on the Enterprises and FHFA.
Finally, FHFA agrees that an Enterprise is not responsible for continuation in business of third parties that provide associated supports.
Rather, an Enterprise resolution plan should address its strategy for ensuring the continuation of the business support that the third party provides, which is necessary to the continuation of the CBL. This may include renegotiating contracts with third-party providers to be more resolution-friendly, considering strategies for maintaining the ability to pay third parties during Enterprise resolution, and considering the ability of other parties to provide the same type of support and the feasibility of substitution.
Process for Identifying Core Business Lines. The proposed rule set forth a process by which the Enterprises would make a preliminary identification of their CBLs, subject to FHFA review.
Thereafter, FHFA would provide notice to each Enterprise of its CBLs.31 The entire identification process would be completed within six months, with three months for Enterprise preliminary identification.32
Some commenters objected to FHFAs discretion to determine Enterprise CBLs, with one commenter remarking that it was unnecessary to have an Enterprise process for identification in light of FHFAs discretion, and intention, to determine CBLs. Instead, that commenter suggested that FHFA should determine Enterprise CBLs in consultation with the Enterprises, and the CBLs should be the same for each 31 See 12 CFR 1242.3a1 and 3 and 1242.3b, 86 FR at 1343.
32 Id. 1242.3a5 and b1, 86 FR at 1343.

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Enterprise. Two commenters opined that all Enterprise charter-compliant activities should be deemed CBLs. One commenter questioned whether three months was adequate for the Enterprises to complete their preliminary review, including engagement with senior management and their respective boards of directors. One commenter expressed support for FHFAs providing notice to each Enterprise of all CBLs identified or any removal of a CBL identification, across both Enterprises.
After considering these comments, FHFA is not changing the proposed process for identifying of CBLs. It is appropriate for FHFA to determine Enterprise CBLs, considering FHFAs statutory duties to ensure that the Enterprises meet their statutory purposes and that the LLRE established for an Enterprise in receivership preserves and continues the Enterprises statutory function and mission in the housing finance market. However, given the Enterprises greater understanding of their business operations, it is also appropriate for the Enterprises to identify associated operations, services, functions, and supports, which are included in the CBL definition.
FHFA does not agree that it should simply deem all charter-compliant activities to be CBLs. One purpose of the rule is to consider, and then identify, those Enterprise business lines that plausibly would continue to operate in an LLRE in light of the Enterprises purposes, mission, and authorized activities. That purpose is not achieved by simply assuming that all chartercompliant activities are CBLs. While all CBLs transferred to the LLRE will be charter-compliant activities, not all charter-compliant activities may be identified as core.
At this time, FHFA is also not establishing a rule process or requirement for deeming a CBL at one Enterprise to be a CBL of the other Enterprise. While FHFA anticipates there will be substantial or even complete alignment of CBLs across the Enterprises, after additional consideration FHFA believes it would be appropriate to consider the CBLs of each Enterprise independently of the other, implementing the rules CBL
identification process, before making any decision that would require alignment.
Finally, FHFA does not propose to change the three-month time period for the Enterprises initial preliminary identification of CBLs, because the Enterprises did not object to it. FHFA
also notes that, after the Enterprises provide preliminary notices of identification to FHFA, there is an
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additional three-month period for FHFA
to review each Enterprises notice and follow up as appropriate. That second three-month period and the opportunity it creates for Enterprise and FHFA
collaboration provide flexibility to ensure CBLs are identified within six months after the effective date of the rule.
D. Content and Form of an Enterprise Resolution Plan Prohibited Assumption of Extraordinary Government Support.
FHFA proposed to prohibit the Enterprises, when developing their resolution plans, from assuming the provision or continuation of extraordinary support by the United States to the Enterprise to prevent either its becoming in danger of default or in default including, in particular, support obtained or negotiated on behalf of the Enterprise by FHFA in its capacity as supervisor, conservator, or receiver of the Enterprise, including the Senior Preferred Stock Purchase Agreements PSPAs entered into by FHFA and the U.S. Department of the Treasury on September 7, 2008 and any amendments thereto. 33 This prohibition received a considerable amount of input from commenters.
Some commenters supported the proposed prohibited assumption, while others did not. Among the former, one commenter viewed it as critical that Enterprise resolution planning not include the support currently provided by the PSPAs. In contrast, another commenter viewed the the denial that the PSPAs for the Enterprises exist
and can be relied upon, and . . . the requirement that the Enterprises plan to continue operations in receivership without that support, despite its being necessary and integral to their business model as fatal flaws that vitiate the entire rule. A third commenter called it impractical to require the Enterprises to continue operations in receivership without any government support. Some commenters suggested FHFA reserve authority to waive provisions of the rule and offered the treatment of the PSPAs as an example of an area where FHFA could use waiver authority. Similar comments suggested FHFA expressly retain discretion in the rule, such as discretion to permit, if FHFA deems it useful, the Enterprises to assume the continuation of the PSPAs on a transitional basis or, more pointedly, suggested that FHFA
clarify that it retains the discretion to allow the Enterprises to assume the continuation of any government support 33 See
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12 CFR 1242.5b2, 86 FR at 1344.

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