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Federal Register / Vol. 86, No. 84 / Tuesday, May 4, 2021 / Rules and Regulations
1242.2 Definitions.
1242.3 Identification of core business lines.
1242.4 Credible resolution plan required;
other notices to FHFA.
1242.5 Informational content of a resolution plan; required and prohibited assumptions.
1242.6 Form of resolution plan;
confidentiality.
1242.7 Review of resolution plans;
resubmission of deficient resolution plans.
1242.8 No limiting effect or private right of action.
Authority: 12 U.S.C. 4511; 12 U.S.C. 4513;
12 U.S.C. 4513b; 12 U.S.C. 4514; 12 U.S.C.
4517; 12 U.S.C. 4526; and 12 U.S.C. 4617.

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1242.1 Purpose; identification as a prudential standard.

a Purpose. The purpose of this part is to require each Enterprise to develop a plan for submission to FHFA that would assist FHFA in planning for the rapid and orderly resolution of an Enterprise using FHFAs receivership authority at 12 U.S.C. 4617, in a manner that:
1 Minimizes disruption in the national housing finance markets by providing for the continued operation of the core business lines of an Enterprise in receivership by a newly constituted limited-life regulated entity;
2 Preserves the value of an Enterprises franchise and assets;
3 Facilitates the division of assets and liabilities between the limited-life regulated entity and the receivership estate;
4 Ensures that investors in mortgagebacked securities guaranteed by the Enterprises and in Enterprise unsecured debt bear losses in accordance with the priority of payments established in the Safety and Soundness Act while minimizing unnecessary losses and costs to these investors; and 5 Fosters market discipline by making clear that no extraordinary government support will be available to indemnify investors against losses or fund the resolution of an Enterprise.
b Identification as a prudential standard; effect of identification. This part is a prudential standard pursuant to section 1313B of the Safety and Soundness Act, 12 U.S.C. 4513b, and is subject to 12 CFR part 1236. In its discretion, FHFA may deem:
1 The determination of a deficiency in a resolution plan; or 2 The failure to undertake actions or changes identified by FHFA in the notice provided pursuant to 1242.7b1, to be a failure to meet a standard for purposes of 1236.4 of this chapter. In its discretion, FHFA may also deem a revised, resubmitted resolution plan to be a corrective plan for purposes of 1236.4 of this chapter.

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1242.2

Definitions.

Unless otherwise indicated, terms used in this part have the meanings that they have in 12 CFR part 1201 and in the Federal Housing Enterprises Financial Safety and Soundness Act 12
U.S.C. 4501 et seq..
Core business line means a business line of the Enterprise that plausibly would continue to operate in a limitedlife regulated entity, considering the purposes, mission, and authorized activities of the Enterprise as set forth in its authorizing statute and the Safety and Soundness Act. Core business line includes associated operations, services, functions, and supports necessary for any identified core business line to be continued, such as servicing, credit enhancement, securitization support, information technology support and operations, and human resources and personnel.
Credible, with regard to a resolution plan, means a resolution plan that:
1 Demonstrates consideration of required and prohibited assumptions set forth at 1242.5b;
2 Provides strategic analysis and detailed information as required by 1242.5c through g that is wellfounded and based on information and data related to the Enterprise that are observable or otherwise verifiable and employ reasonable projections from current and historical conditions within the broader financial markets; and 3 Plausibly achieves the purposes of 1242.1a.
Material change means an event, occurrence, change in conditions or circumstances, or other change that results in, or could reasonably be foreseen to have, a material effect on:
1 The resolvability of the Enterprise;
2 The Enterprises resolution strategy; or 3 How the Enterprises resolution plan is implemented. Material changes may include the identification of a new core business line or significant increases or decreases in business, operations, funding, or interconnections.
Rapid and orderly resolution means a process for establishing a limited-life regulated entity as successor to the Enterprise under section 1367 of the Safety and Soundness Act 12 U.S.C
4617, including transferring Enterprise assets and liabilities to the limited-life regulated entity, such that succession by the limited-life regulated entity can be accomplished promptly and in a manner that substantially mitigates the risk that the failure of the Enterprise would have serious adverse effects on national housing finance markets.

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1242.3
lines.

Identification of core business
a Enterprise preliminary identification; notice to FHFA; timing.
1 Each Enterprise shall conduct periodic reviews of its business lines to identify core business lines, consistent with the requirements of paragraph a2 of this section.
2 Each Enterprise shall establish and implement a process to identify each of its core business lines. The process shall include a methodology for evaluating the Enterprises participation in activities and markets that may be critical to the stability of the national housing finance markets or carrying out the statutory mission and purpose of the Enterprise. The methodology shall be designed, taking into account the nature, size, complexity, and scope of the Enterprises operations, to identify and assess:
i The markets and activities in which the Enterprise participates or has operations;
ii The significance of those markets and activities with respect to the national housing finance markets or the Enterprises obligation to carry out its statutory mission and purpose; and iii The significance of the Enterprise as a provider or other participant in those markets and activities.
3 Enterprise identification of any business line as a core business line is preliminary and is subject to review by FHFA. Each Enterprise must provide a notice of its preliminary identification of core business lines to FHFA, including a description of its methodology and the basis for identification of each core business line.
4 The board of directors of the Enterprise shall approve each notice of preliminary identification of core business lines before submission to FHFA, with such approval noted in board minutes.
5 Each Enterprise must conduct its initial identification process and submit its initial identification of core business lines to FHFA by the date that is three months after the effective date of the final rule. Thereafter, each Enterprise shall conduct periodic identification processes, determining the timing of each periodic process to ensure that the process for identification, including FHFA review and determination required by paragraph b of this section, can be complete in sufficient time for each succeeding required resolution plan to include the information required under 1242.5 for each core business line. FHFA may also direct an Enterprise as to the timeframe for conducting any subsequent identification process.

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