Alternatives to Use of Credit Ratings in Regulations Governing the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Federal Home Loan Banks, 5292-5296 [2011-2041]

Download as PDF 5292 Proposed Rules Federal Register Vol. 76, No. 20 Monday, January 31, 2011 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. FEDERAL HOUSING FINANCE BOARD 12 CFR Parts 932, 955, 956, and 966 FEDERAL HOUSING FINANCE AGENCY 12 CFR Parts 1269 and 1273 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Federal Housing Enterprise Oversight 12 CFR Parts 1720 and 1750 RIN 2590–AA40 Alternatives to Use of Credit Ratings in Regulations Governing the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Federal Home Loan Banks Federal Housing Finance Board; Federal Housing Finance Agency; and Office of Federal Housing Enterprise Oversight. ACTION: Advance notice of proposed rulemaking; request for comment. AGENCIES: A number of regulations applicable to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (collectively, the Enterprises), and the Federal Home Loan Banks (Banks), contain specific references to, or requirements based on, credit ratings issued by credit rating organizations registered with the Securities and Exchange Commission as nationally recognized statistical rating organizations (NRSROs). Section 939A of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) provides Federal agencies with one-year to review regulations that require the use of an assessment of the credit-worthiness of a security or money market instrument and any references to, or requirements in, such regulations regarding credit emcdonald on DSK2BSOYB1PROD with PROPOSALS SUMMARY: VerDate Mar<15>2010 15:59 Jan 28, 2011 Jkt 223001 ratings, and to remove such references or requirements. In this advance notice of proposed rulemaking (ANPR), the Federal Housing Finance Agency (FHFA) describes the relevant regulations affected by this provision of the Dodd-Frank Act and requests comments on potential alternatives to the use of credit ratings in these regulations. DATES: Comments on the proposed rule must be received on or before March 17, 2011. ADDRESSES: You may submit your comments on the proposed rule, identified by regulatory information number (RIN) 2590–AA40 by any of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. If you submit your comments 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. Please include ‘‘RIN 2590–AA40’’ in the subject line of the message. • E-mail: Comments to Alfred M. Pollard, General Counsel may be sent by e-mail to RegComments@FHFA.gov. Please include ‘‘RIN 2590–AA40’’ in the subject line of the message. • Hand Delivery/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/ RIN 2590–AA40, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The package should be logged at the Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m. • U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590–AA40, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. FOR FURTHER INFORMATION CONTACT: Scott Smith, Associate Director, Office of Capital Supervision, 202–414–8922, Federal Housing Finance Agency; Thomas E. Joseph, Senior AttorneyAdvisor, 202–414–3095; or Jamie Schwing, Associate General Counsel, 202–414–3787, Office of General Counsel, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552; or Amy Bogdon, Associate Director for PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 Regulatory Policy and Programs, Division of Federal Home Loan Bank Regulation, 202–408–2546 (these are not toll-free numbers), Federal Housing Finance Agency, 1625 Eye Street, NW., Washington, DC 20006. The telephone number for the Telecommunications Device for the Deaf is 800–877–8339. SUPPLEMENTARY INFORMATION: I. Comments FHFA invites comments on all aspects of the ANPR, and will develop proposed regulations after taking all comments into consideration. Copies of all comments will be posted on the internet Web site at https://www.fhfa.gov. 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, Fourth Floor, 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. Creation of the Federal Housing Finance Agency and Recent Legislation Effective July 30, 2008, the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110–289, 122 Stat. 2654, created FHFA as a new independent agency of the Federal Government, and transferred to FHFA the supervisory and oversight responsibilities of the Office of Federal Housing Enterprise Oversight (OFHEO) over the Enterprises, the supervisory and oversight responsibilities of the Federal Housing Finance Board (Finance Board) over the Banks and the Office of Finance (OF) (which acts as the Banks’ fiscal agent) and certain functions of the Department of Housing and Urban Development. See id. at section 1101, 122 Stat. 2661–62. FHFA is responsible for ensuring that the Enterprises and the Banks operate in a safe and sound manner, including that they maintain adequate capital and internal controls, that their activities foster liquid, efficient, competitive and resilient national housing finance markets, and that they carry out their public policy missions through authorized activities. See id. at section 1102, 122 Stat. 2663–64. The Enterprises, the Banks, and the OF continue to operate under regulations E:\FR\FM\31JAP1.SGM 31JAP1 Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Proposed Rules promulgated by OFHEO and the Finance Board until such regulations are superseded by regulations issued by FHFA. See id. at sections 1302, 1312, 122 Stat. 2795, 2798. emcdonald on DSK2BSOYB1PROD with PROPOSALS B. The Enterprises The Enterprises are chartered by Congress for the purpose of establishing secondary market facilities for residential mortgages. See 12 U.S.C. 1716 et seq.; 12 U.S.C. 1451 et seq. Congress established the Enterprises to provide stability in the secondary mortgage market for residential mortgages, to respond appropriately to the private capital market, to provide ongoing assistance to the secondary market for residential mortgages, and to promote access to mortgage credit throughout the nation. Id. On September 6, 2008, the Director of FHFA appointed FHFA as conservator of the Enterprises in accordance with the Safety and Soundness Act, as amended by HERA. The Enterprises remain under conservatorship at this time. Although the Enterprises’ substantial market presence has been important to restoring market stability, neither company would be capable of serving the mortgage market today without the ongoing financial support provided by the United States Department of Treasury. The Administration has announced its intention to develop and present to Congress a proposal for the future of the nation’s housing finance system that will include a proposal for the ultimate resolution of the Enterprises in conservatorship. While reliance on the Treasury Department’s backing will continue until legislation produces a final resolution to the Enterprises’ future, FHFA is monitoring the activities of the Enterprises to: (a) limit their risk and exposure by avoiding new lines of business; (b) ensure profitability in their new books of business without deterring market participation or hindering market recovery; and (c) minimize losses on the mortgages already on their books. C. The Bank System The twelve Banks are instrumentalities of the United States organized under the Federal Home Loan Bank Act (Bank Act).1 See 12 U.S.C. 1423, 1432(a). The Banks are 1 Each Bank is generally referred to by the name of the city in which it is located. The twelve Banks are located in: Boston, New York, Pittsburgh, Atlanta, Cincinnati, Indianapolis, Chicago, Des Moines, Dallas, Topeka, San Francisco, and Seattle. The twelve Banks and the OF are collectively referred to as, and considered to make up, the Bank System. VerDate Mar<15>2010 15:59 Jan 28, 2011 Jkt 223001 cooperatives; only members of a Bank may purchase the capital stock of a Bank, and only members or certain eligible housing associates (such as state housing finance agencies) may obtain access to secured loans, known as advances, or other products provided by a Bank. See 12 U.S.C. 1426(a)(4), 1430(a), 1430(b). Each Bank is managed by its own board of directors and serves the public interest by enhancing the availability of residential credit through its member institutions. See 12 U.S.C. 1427. Any eligible institution (generally a federally insured depository institution or state-regulated insurance company) may become a member of a Bank if it satisfies certain criteria and purchases a specified amount of the Bank’s capital stock. See 12 U.S.C. 1424; 12 CFR part 1263. As government-sponsored enterprises, the Banks are granted certain privileges under federal law. In light of those privileges, the Banks typically can borrow funds at spreads over the rates on U.S. Treasury securities of comparable maturity lower than most other entities. The Banks pass along a portion of their funding advantage to their members—and ultimately to consumers—by providing advances and other financial services at rates that would not otherwise be available to their members. Consolidated obligations (COs), consisting of bonds and discount notes, are the principal funding source for the Banks. The OF issues all COs on behalf of the twelve Banks. Although each Bank is primarily liable for the portion of COs corresponding to the proceeds received by that Bank, each Bank is also jointly and severally liable with the other eleven Banks for the payment of principal and interest on all COs. 12 CFR 966.9. D. Dodd-Frank Act Provisions Section 939A of the recently enacted Dodd-Frank Act requires Federal agencies within one-year to: (i) Review regulations that require the use of an assessment of the credit-worthiness of a security or money market instrument; and (ii) to the extent those regulations contain any references to, or requirements regarding credit ratings, remove such references or requirements. See section 939A, Public Law 111–203, 124 Stat. 1887 (July 21, 2010). In place of such credit-rating based requirements, agencies are instructed to substitute appropriate standards for determining credit-worthiness. The new law further provides that, to the extent feasible, an agency should adopt a uniform standard of credit-worthiness for use in its regulations, taking into account the entities regulated by it and PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 5293 the purposes for which such regulated entities would rely on the creditworthiness standard. At the conclusion of the review, each agency is required to transmit a report to Congress describing the modifications to its regulations that were made. A number of regulations applicable to the Enterprises or the Bank System (which were previously adopted by OFHEO or the Finance Board, but remain in effect, or more recently adopted by FHFA) contain specific references to credit ratings issued by NRSROs for purposes of assigning capital requirements or setting investment or counterparty exposure limits. FHFA is issuing this ANPR to help it assess how it can change these regulations and to identify standards that may be appropriate as replacements for credit ratings issued by NRSROs. Federal banking agencies have also issued ANPRs as part of their process to address similar issues with regard to references to credit ratings in their capital regulations and prudential standards. See 75 FR 49423 (Aug. 13, 2010), and 75 FR 52283 (Aug. 25, 2010). The specific FHFA regulations at issue are discussed more fully below. E. Considerations of Differences Between the Banks and the Enterprises Section 1201 of HERA requires the Director, when promulgating regulations relating to the Banks, to consider the following differences between the Banks and the Enterprises: cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; and joint and several liability. See section 1201 Public Law 110–289, 122 Stat. 2782–83 (amending 12 U.S.C. 4513). The Director also may consider any other differences that are deemed appropriate. While the Dodd-Frank Act mandates that each agency try, to the extent feasible, to develop uniform standards of credit-worthiness for use in its regulations in preparing any proposed rules, FHFA also will consider the differences between the Banks and the Enterprises as they relate to the above factors and how such factors may lead to differences between any standards ultimately adopted. To aid it in developing proposed regulations, FHFA requests comments from the public about whether or how differences related to these factors should be reflected in any possible regulations. E:\FR\FM\31JAP1.SGM 31JAP1 5294 Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Proposed Rules III. Request for Comments A. Description of Applicable Regulations The regulations in question can be divided into two broad categories. The first category contains regulations that relate to capital requirements and apply specific capital charges based on NRSRO ratings of financial instruments or counterparties. The second category involves prudential standards and limits that may be applied to a regulated entity or on a regulated entity’s investment or other business activities that reference or are otherwise based on credit ratings issued by NRSROs. 1. Risk-Based Capital Requirements emcdonald on DSK2BSOYB1PROD with PROPOSALS a. Enterprises The risk-based capital requirements applicable to the Enterprises apply capital charges in part based on reference to credit ratings issued by NRSROs. Soon after placing the Enterprises in conservatorship, FHFA announced that, although it would closely monitor Enterprise capital levels, existing statutory and FHFAdirected regulatory capital requirements would not be binding on the Enterprises during the conservatorship. Even though not currently binding, the regulations for the Enterprises described below are still in effect, and FHFA might need to adopt new risk-based requirements for the Enterprises or their successors in a post-conservatorship environment. Thus, the question of credit-worthiness in applying a riskbased credit charge is relevant in considering risk-based capital requirements. The current Enterprise risk-based capital regulations set forth detailed criteria for a stress test that is used to estimate losses for an Enterprise over a specific period. Under the requirements, an Enterprise’s total capital must be sufficient so that it would remain positive during the entire stress period. See 12 CFR 1750.13. One component of the test, the Counterparty Default component, accounts for the risk of default by credit enhancement and derivative contract counterparties, and by corporate, municipal and mortgagerelated securities. 12 CFR part 1750, subpart B, Appendix A, section 3.5. In calculating the Counterparty Default component, the regulations establish five rating categories, and slot counterparties and securities into these categories by reference to ratings issued by an NRSRO for the counterparty or security. The regulations, in turn, specify the maximum reduction in cash flows during the stress period to reflect VerDate Mar<15>2010 15:59 Jan 28, 2011 Jkt 223001 the risk of default by a counterparty or for a specific security based in part on the assigned ratings category. Id. The reduced cash flows decrease earnings, or increase losses, which then translate to lower equity during the stress test. The difference between equity during the binding month of the stress test and starting equity forms the basis of an Enterprise’s risk-based capital requirement. b. Banks Similarly, the risk-based capital requirements applicable to the Banks require the Banks to hold risk-based capital sufficient to meet the credit risk capital requirement for all assets, offbalance sheet items, and derivative contracts. See 12 CFR 932.4. The credit risk capital requirement is calculated in large part based on the credit ratings assigned by the NRSROs to a particular counterparty or to a specific financial instrument, and on maturity. Id. 2. Prudential Requirements The other area of FHFA regulations that may reference or otherwise be based on credit ratings issued by NRSROs involves prudential standards or limits that may be applied to a regulated entity or to its investment activity. This is especially true for the Banks, for which a number of regulations reference such ratings. a. Enterprises With regard to the Enterprises, the references to credit ratings are found in guidance on non-mortgage liquidity investments set forth in Appendix B to part 1720. 12 CFR part 1720, Appendix B. Specifically, the guidance states that, as a safety and soundness matter, the Enterprises should establish minimum credit standards for any security eligible for purchase, and if such standards involve or cite credit ratings, NRSRO ratings should be used. Id. at section C(3)(c)(i). The policy also provides that sound risk management practices include disclosure about the risk of nonmortgage liquidity investments, including disclosure concerning credit quality or ratings of investments. Id. at section D(1). These provisions, however, unlike many of the requirements that apply to the Banks, do not necessarily require the Enterprises to take or refrain from specific actions based on NRSRO ratings or to use NRSRO ratings for specific purposes and therefore may be outside the scope of section 939A of the Dodd-Frank Act. b. Banks There are currently six regulations that apply to the Banks which contain PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 various provisions that reference credit ratings or impose limitations or other requirements on the Banks based on ratings issued by NRSROs. A brief description of these regulations follows. Bank Capital, 12 CFR part 932. In addition to the specific credit risk capital charge provisions discussed above, other prudential provisions in the part 932 capital regulations reference NRSRO ratings and establish limits on Bank activity based on such ratings. First, a Bank, with the permission of FHFA, is allowed to reduce the operations risk component of its risk-based capital charge if the Bank obtains insurance to cover operations risk from an insurer with a credit rating no lower than the second highest investment grade rating from an NRSRO. 12 CFR 932.6(b)(2). To date, however, no Bank has ever relied on this provision or sought the regulator’s approval to reduce its operations risk capital charge by obtaining insurance. The capital provisions also impose limits on a Bank’s unsecured credit exposure to a single counterparty and group of affiliated counterparties, and set those limits based on credit ratings issued by an NRSRO. 12 CFR 932.9. The limits become more restrictive as the credit rating declines.2 Acquired Member Assets, 12 CFR part 955. The acquired member asset regulations authorize Banks to purchase certain mortgage loans from their members, subject to a number of conditions. Among these conditions, is one that requires pools of loans to be credit enhanced by the member to the equivalent of an instrument having at least the fourth highest credit rating from an NRSRO, or such higher rating as the Bank may require. 12 CFR 955.3(a) and (b). The Bank rating must be determined using a methodology that is comparable to one used by an NRSRO, and the Bank must obtain written confirmation from the NRSRO that its methodology is equivalent. Id.; 12 CFR 955.3(b)(4) and (c). In addition, the regulation requires that, to the extent a Bank allows supplemental loanlevel mortgage insurance as part of its AMA credit enhancement, such 2 In addition, regulations require that, before first implementing the capital structure plan required by the Gramm-Leach-Bliley Act (GLB Act), Public Law 106–102, 113 Stat. 1338 (1999), each Bank was to obtain a review from an NRSRO to determine whether implementation of the plan would affect the credit rating of the Bank. 12 CFR 933.3. Because eleven of the twelve Banks have implemented their capital structure plans, only one Bank remains subject to this provision. More importantly, this regulation implements a Bank Act provision that specifically requires this review, and therefore cannot be altered without a change to the statute, which the Dodd-Frank Act did not amend. 12 U.S.C. 1426(c)(6)(B). E:\FR\FM\31JAP1.SGM 31JAP1 Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Proposed Rules insurance must be from an insurer rated no lower than the second highest credit rating category by an NRSRO. 12 CFR 955.3(b)(1)(ii)(A). These provisions are all meant to assure that the Banks only buy pools of high quality mortgages and to limit the Banks’ exposure to credit losses from these pools.3 Investments, 12 CFR part 956.4 A number of provisions in the investment regulation limit Bank investments by reference to the rating issued by an NRSRO for a particular instrument. First, the Banks are prohibited from investing in any debt instrument that is rated below investment grade by an NRSRO at the time the investment is made. 12 CFR 956.3(a)(3). Another provision, which sets forth exceptions to a general prohibition on a Bank’s investment in mortgages or other whole loans, specifically allows for investment in marketable direct obligations of state, local, or tribal government units or agencies, having at least the second highest credit rating from an NRSRO where the purchase would generate customized terms, necessary liquidity, or favorable pricing for the issuer’s funding of housing or community lending. 12 CFR 956.3(a)(4)(iii). As with other prudential requirements, these regulatory provisions are intended to limit a Bank’s exposure to credit and other risks, arising from its investment activities.5 Consolidated Obligations, 12 CFR part 966. The regulations in part 966 governing COs contain a number of references to and requirements based on NRSRO ratings. FHFA already has identified these provisions and sought comment both on potential creditworthiness standards that could be applied to replace these provisions and on other action FHFA could take with regard to them, when it proposed emcdonald on DSK2BSOYB1PROD with PROPOSALS 3 In addition to these provisions, the AMA regulation also contains a capital provision which is applicable only to Banks that have not converted to the GLB Act capital structure. This provision sets capital charges on AMA pools whose credit risk is estimated by the Bank to be greater than that of an instrument receiving the second highest investment grade rating from an NRSRO. 12 CFR 955.6. Because eleven of the twelve Banks have converted to the GLB Act capital structure, only one Bank remains subject to this provision. 4 In May 2010, FHFA proposed re-organizing the investment regulations in part 956 and transferring the regulations to 12 CFR part 1267. 75 FR 23631 (May 4, 2010). 5 In addition to these provisions, the investment regulation also contains a capital provision which is applicable only to Banks that have not converted to the GLB Act capital structure. This provision sets capital charges on investments that have a putative rating below the second highest investment grade or are not rated by an NRSRO. 12 CFR 956.4. Because eleven of the twelve Banks have converted to the GLB Act capital structure, only one Bank remains subject to this provision. VerDate Mar<15>2010 15:59 Jan 28, 2011 Jkt 223001 amending and transferring the regulations in part 966 in conjunction with the recent proposed rule on Bank liabilities. See Proposed Rule: Federal Home Loan Bank Liabilities, 75 FR 68534, 68536–37 (Nov. 8, 2010). FHFA will consider the relevant comments received on the proposed Bank liability rule, along with the comments on this ANPR. Letters of Credit, 12 CFR part 1269.6 The regulation provides that a standby letter of credit issued or confirmed by a Bank on behalf of a member to assist the member in facilitating residential housing finance or community lending may be collateralized by obligations of a state or local government unit or agency, if the obligation is rated investment grade by an NRSRO. 12 CFR 1269.2(c)(2). Office of Finance, 12 CFR part 1273.7 The regulation assigns to OF the responsibility to manage the Bank System’s relationship with NRSROs with regard to NRSRO ratings for COs. Because this provision does not impose a substantive requirement based on credit ratings issued by an NRSRO, but instead only assigns to OF the responsibility to manage the Bank System’s relationship with NRSROs in connection with the rating of COs, the provision may be outside the scope of the Dodd-Frank Act. B. Questions on Potential Changes to Credit-Worthiness Standards 1. Principles for a New Approach Using NRSRO ratings in the regulations provided a supposedly objective, and neutral, third-party assessment of the credit risk of particular instruments and counterparties. The ratings also were transparent in that they were readily available to regulators, the regulated entities and the public at large, and information about changes in ratings was quickly made available. The use of NRSRO ratings also helped assure consistency in credit risk capital charges across regulated entities that were subject to the same rules with regard to a particular counterparty or financial instrument. The NRSRO ratings approach was also fairly straightforward to apply and did not create an undue burden on the regulated entities. Ideally, these general principles would carry over to any new approach, but now such 6 The Letters of credit regulations were transferred from 12 CFR part 960 to 12 CFR part 1269, effective March 26, 2010. 75 FR 8239 (Feb. 24, 2010). 7 The regulations governing the OF were transferred from 12 CFR part 985 to 12 CFR part 1273, effective June 2, 2010. 75 FR 23152 (May 3, 2010). PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 5295 principles must be achieved without reference to a third-party ratings system such as those developed by the NRSROs. Specifically, FHFA believes that any new standard of credit-worthiness should: (i) Distinguish between different levels of credit risk, in an accurate and meaningful manner; (ii) be a transparent approach; (iii) be able to be applied consistently across regulated entities to the extent that they are subject to the same regulatory requirements; (iv) be straightforward and not unduly burdensome to apply; and (v) not be readily subject to manipulation. FHFA recognizes that there may be trade-offs among these principles. For example, an approach that is fairly standard and easy to apply may not sufficiently capture differences between high and low risk exposure and thereby may create perverse investment incentives. On the other hand, an approach that attempts to differentiate levels of credit risk may be complex or burdensome to apply and may not be readily transparent. In consideration of the alternative standards for determining creditworthiness, we request comments on the following questions. Question 1: What core principles would be most important in FHFA’s development of new standards of creditworthiness? Which principles are least important to developing robust new standards? Are there principles in addition to those above that should be incorporated into new standards? Do differences in the business models, structures and core mission and activities of the Banks and the Enterprises justify or compel developing approaches that may emphasize different core principles depending on whether the rule applies to the Banks or the Enterprises? 2. Alternative Approaches for RiskBased Capital Requirements In order for FHFA to eliminate the use of NRSRO ratings in calculating riskbased capital charges for regulated entities, it would need to develop an alternative basis on which it could assess credit risk capital charges. One approach would be to identify objective criteria that could be applied by each regulated entity in order to categorize credit exposures into different ‘‘buckets’’ and assess credit charges accordingly. The criteria could be broadly designated. For example, credit exposures could be divided into government and non-government, secured and un-secured, or other such categories, including maturity. Such a broad approach, however, may not be able to sufficiently and consistently E:\FR\FM\31JAP1.SGM 31JAP1 emcdonald on DSK2BSOYB1PROD with PROPOSALS 5296 Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Proposed Rules account for difference in riskiness among exposures that fall into the same category. FHFA could also consider adopting criteria that reference certain financial or other metrics related to the obligor or counterparty. To be meaningful, the criteria would need to account for or bear a reasonable correlation to the potential riskiness of default among different obligors or counterparties. Any criteria would also need to be readily obtainable by both FHFA and the regulated entities if this approach is to be workable. Question 2: What types of objective criteria could be used to differentiate credit exposures and apply meaningful credit risk capital charges? Should different criteria be used for different broad classes of investments or exposures? Could there be perverse incentives or other ‘‘downsides’’ to this approach? What might be the problems with this approach? Another approach could be to build on each regulated entity’s internal credit review process and allow an entity to assign exposure to various categories and assess risk charges based on qualitative and quantitative standards set by FHFA. For example, FHFA could assign limits or capital requirements based on regulated entities’ internal ratings or some modification of such, as reviewed or approved by FHFA. This approach would be more subjective than the alternative discussed above but could allow FHFA to leverage the data collection and analysis already performed by the regulated entities. Question 3: What qualitative and quantitative standards would FHFA need to set to implement an approach that relied on the regulated entities to generate internal estimates of credit risk exposures? What are the strengths and weaknesses of such an approach? What would be the strengths and weaknesses of having FHFA itself set credit risk capital charges based on its own estimates of risk? Question 4: In order to apply a meaningful risk-based capital charge, FHFA needs to set forth requirements for the regulated entities to estimate the credit risk of their various exposures. Could an approach be developed that estimates a meaningful risk-based capital charge that avoids requiring a specific credit risk charge or specifying criteria to estimate credit risk? What might such an approach be? 3. Alternative Approaches to Prudential Regulations FHFA could follow various approaches in replacing the NRSROreferenced requirements in the VerDate Mar<15>2010 15:59 Jan 28, 2011 Jkt 223001 regulations described above. One approach could be to require a regulated entity to analyze and document compliance with certain specific creditworthiness standards or metrics set forth by FHFA. These standards would need to assure that the investment or activity is not speculative in nature, and instead carries credit risk appropriate for the regulated entity’s risk profile and risk management practices. FHFA could also require the regulated entity to consider specific, broader investment criteria that go beyond credit-worthiness considerations in its analysis. FHFA could also rely on the regulated entity’s internal credit assessment process and let the regulated entities decide on what specific investments or exposures may be appropriate. Under this approach, FHFA would likely need to provide regulatory and policy guidance on how any internal credit assessment process is to be structured and to rely heavily on the supervisory process to make sure that the regulated entities are strictly following their own guidelines and are not assuming high levels of credit risk. Finally, some of the regulations described in this ANPR could be deleted without necessarily exposing the regulated entities to significant risks. At the same time, FHFA could consider other approaches, such as a prohibition on investment in broad categories of instruments or on assumption of particular types of exposures to replace the ratings based requirements. Question 5: What are the strengths and weaknesses of these various approaches? Are there any existing, objective tools or approaches that could readily replace references to ratings issued by NRSROs in the regulations discussed in this ANPR? Are there other approaches not discussed above that may be appropriate? Question 6: What specific creditworthiness or investment criteria should FHFA incorporate into a new regulation, if it decided to adopt such a regulation? For example, should FHFA limit investments by regulated entities to securities that would be eligible investments for money market funds, or to securities with original maturities of one-year or less, or based on other objective criteria? What principles would FHFA need to incorporate into any regulation or policy that was meant to govern a regulated entity’s internal credit assessment process? Question 7: Can any of the current prudential requirements that reference NRSROs or credit ratings be eliminated without compromising FHFA’s ability to monitor and promote the safe or sound operations of the regulated entities? PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 Question 8: Is it important that FHFA’s approach to replacing requirements in its regulations that reference credit ratings issued by NRSROs be consistent with that of other financial regulators, especially federal banking agencies? Question 9: What are some other safeguards or requirements (not necessarily based on credit-worthiness standards) that might provide protections similar to those afforded under FHFA’s current regulations that reference ratings issued by NRSROs? Dated: January 25, 2011. Edward J. DeMarco, Acting Director, Federal Housing Finance Agency. [FR Doc. 2011–2041 Filed 1–28–11; 8:45 am] BILLING CODE 8070–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Parts 5 and 119 [Docket No. FAA–2009–0671; Notice No. 10– 15] RIN 2120–AJ86 Safety Management System for Part 121 Certificate Holders; Extension of Comment Period Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM); Extension of comment period. AGENCY: This action extends the comment period for an NPRM that was published on November 5, 2010. In that document, the FAA proposed to require each certificate holder operating under 14 CFR part 121 to develop and implement a safety management system (SMS) to improve its aviation related activities. Several trade and membership organizations representing various aviation industry segments have requested that the FAA extend the comment period closing date to allow time to adequately analyze the NPRM and prepare comments. DATES: The comment period for the NPRM published on November 5, 2010, closing on February 3, 2011, is extended until March 7, 2011. ADDRESSES: You may send comments identified by docket number FAA– 2010–0997 using any of the following methods: • Federal eRulemaking Portal: Go to http://www.regulations.gov and follow the online instructions for sending your comments electronically. SUMMARY: E:\FR\FM\31JAP1.SGM 31JAP1

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[Federal Register Volume 76, Number 20 (Monday, January 31, 2011)]
[Proposed Rules]
[Pages 5292-5296]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2041]



[[Page 5433]]



Vol. 76

Monday,

No. 20

January 31, 2011

Part II





Readers Aid





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Cumulative List of Public Laws



111th Congress, Second Session

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CUMULATIVE LIST OF PUBLIC LAWS

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   Public Law                                Title                                    Approved         124 Stat.
 
111-126.........  To accelerate the income tax benefits for charitable cash    Jan. 22, 2010........  3
                   contributions for the relief of victims of the earthquake
                   in Haiti.
111-127*........  Emergency Aid to American Survivors of the Haiti Earthquake  Jan. 27, 2010........  4
                   Act.
111-136*........  To provide for an additional temporary extension of          Jan. 29, 2010........  6
                   programs under the Small Business Act and the Small
                   Business Investment Act of 1958, and for other purposes.
111-138.........  To provide that claims of the United States to certain       Feb. 1, 2010.........  7
                   documents relating to Franklin Delano Roosevelt shall be
                   treated as waived and relinquished in certain
                   circumstances.
111-139.........  Increasing the statutory limit on the public debt..........  Feb. 12, 2010........  8
111-140.........  Nuclear Forensics and Attribution Act......................  Feb. 16, 2010........  31
111-141.........  To extend expiring provisions of the USA PATRIOT             Feb. 27, 2010........  37
                   Improvement and Reauthorization Act of 2005 and
                   Intelligence Reform and Terrorism Prevention Act of 2004
                   until February 28, 2011.
111-142.........  Social Security Disability Applicants' Access to             Feb. 27, 2010........  38
                   Professional Representation Act of 2010.
111-143.........  Criminal History Background Checks Pilot Extension Act of    Mar. 1, 2010.........  41
                   2009.
111-144.........  Temporary Extension Act of 2010............................  Mar. 2, 2010.........  42
111-145.........  United States Capitol Police Administrative Technical        Mar. 4, 2010.........  49
                   Corrections Act of 2009.
111-146.........  Trademark Technical and Conforming Amendment Act of 2010...  Mar. 17, 2010........  66
111-147.........  Hiring Incentives to Restore Employment Act................  Mar. 18, 2010........  71
111-148.........  Patient Protection and Affordable Care Act.................  Mar. 23, 2010........  119
111-149.........  To amend the North American Wetlands Conservation Act to     Mar. 25, 2010........  1025
                   establish requirements regarding payment of the non-
                   Federal share of the costs of wetlands conservation
                   projects in Canada that are funded under that Act, and for
                   other purposes.
111-150.........  To permit the use of previously appropriated funds to        Mar. 26, 2010........  1026
                   extend the Small Business Loan Guarantee Program, and for
                   other purposes.
111-151.........  Satellite Television Extension Act of 2010.................  Mar. 26, 2010........  1027
111-152.........  Health Care and Education Reconciliation Act of 2010.......  Mar. 30, 2010........  1029
111-153.........  Federal Aviation Administration Extension Act of 2010......  Mar. 31, 2010........  1084
111-154.........  Prevent All Cigarette Trafficking Act of 2009..............  Mar. 31, 2010........  1087
111-155.........  Prevent Deceptive Census Look Alike Mailings Act...........  Apr. 7, 2010.........  1112
111-156.........  Recognizing and honoring the Blinded Veterans Association    Apr. 7, 2010.........  1114
                   on its 65th anniversary of representing blinded veterans
                   and their families.
111-157.........  Continuing Extension Act of 2010...........................  Apr. 15, 2010........  1116
111-158.........  Haiti Debt Relief and Earthquake Recovery Act of 2010......  Apr. 26, 2010........  1121
111-159.........  TRICARE Affirmation Act....................................  Apr. 26, 2010........  1123
111-160.........  Granting the consent and approval of Congress to amendments  Apr. 26, 2010........  1124
                   made by the State of Maryland, the Commonwealth of
                   Virginia, and the District of Columbia to the Washington
                   Metropolitan Area Transit Regulation Compact.
111-161.........  Airport and Airway Extension Act of 2010...................  Apr. 30, 2010........  1126
111-162.........  To provide for an additional temporary extension of          Apr. 30, 2010........  1129
                   programs under the Small Business Act and the Small
                   Business Investment Act of 1958, and for other purposes.
111-163.........  Caregivers and Veterans Omnibus Health Services Act of 2010  May 5, 2010..........  1130
111-164.........  To designate the Department of Veterans Affairs blind        May 7, 2010..........  1184
                   rehabilitation center in Long Beach, California, as the
                   ``Major Charles Robert Soltes, Jr., O.D. Department of
                   Veterans Affairs Blind Rehabilitation Center''.
111-165.........  To provide that Members of Congress shall not receive a      May 14, 2010.........  1185
                   cost of living adjustment in pay during fiscal year 2011.
111-166.........  Daniel Pearl Freedom of the Press Act of 2009..............  May 17, 2010.........  1186
111-167.........  Blue Ridge Parkway and Town of Blowing Rock Land Exchange    May 24, 2010.........  1188
                   Act of 2009.
111-168.........  To provide for the sale of the Federal Government's          May 24, 2010.........  1190
                   reversionary interest in approximately 60 acres of land in
                   Salt Lake City, Utah, originally conveyed to the Mount
                   Olivet Cemetery Association under the Act of January 23,
                   1909.
111-169.........  To provide for an extension of the legislative authority of  May 24, 2010.........  1192
                   the Adams Memorial Foundation to establish a commemorative
                   work in honor of former President John Adams and his
                   legacy, and for other purposes.
111-170.........   To amend title 39, United States Code, to clarify the       May 24, 2010.........  1193
                   instances in which the term ``census'' may appear on
                   mailable matter.
111-171.........  Haiti Economic Lift Program Act of 2010....................  May 24, 2010.........  1194
111-172.........  Lord's Resistance Army Disarmament and Northern Uganda       May 24, 2010.........  1209
                   Recovery Act of 2009.
111-173.........  To clarify the health care provided by the Secretary of      May 27, 2010.........  1215
                   Veterans Affairs that constitutes minimum essential
                   coverage.
111-174.........  Federal Judiciary Administrative Improvements Act of 2010..  May 27, 2010.........  1216
111-175.........  Satellite Television Extension and Localism Act of 2010....  May 27, 2010.........  1218
111-176.........  To designate the United States Department of the Interior    June 8, 2010.........  1259
                   Building in Washington, District of Columbia, as the
                   ``Stewart Lee Udall Department of the Interior Building''.
111-177.........  Extending Immunities to the Office of the High               June 8, 2010.........  1260
                   Representative in Bosnia and Herzegovina and the
                   International Civilian Office in Kosovo Act of 2010.

[[Page 5435]]

 
111-178.........  Special Agent Samuel Hicks Families of Fallen Heroes Act...  June 9, 2010.........  1262
111-179.........  To designate the facility of the United States Postal        June 9, 2010.........  1264
                   Service located at 1210 West Main Street in Riverhead, New
                   York, as the ``Private First Class Garfield M. Langhorn
                   Post Office Building''.
111-180.........  To designate the facility of the United States Postal        June 9, 2010.........  1265
                   Service located at 109 Main Street in Swifton, Arkansas,
                   as the ``George Kell Post Office''.
111-181.........  To designate the facility of the United States Postal        June 9, 2010.........  1266
                   Service located at 101 West Highway 64 Bypass in Roper,
                   North Carolina, as the ``E.V. Wilkins Post Office''.
111-182.........  To designate the facility of the United States Postal        June 9, 2010.........  1267
                   Service located at 43 Maple Avenue in Shrewsbury,
                   Massachusetts, as the ``Ann Marie Blute Post Office''.
111-183.........  To designate the facility of the United States Postal        June 9, 2010.........  1268
                   Service located at 9727 Antioch Road in Overland Park,
                   Kansas, as the ``Congresswoman Jan Meyers Post Office
                   Building''.
111-184.........  To designate the facility of the United States Postal        June 9, 2010.........  1269
                   Service located at 7464 Highway 503 in Hickory,
                   Mississippi, as the ``Sergeant Matthew L. Ingram Post
                   Office''.
111-185.........  To designate the facility of the United States Postal        June 9, 2010.........  1270
                   Service located at 45300 Portola Avenue in Palm Desert,
                   California, as the ``Roy Wilson Post Office''.
111-186.........  To designate the facility of the United States Postal        June 9, 2010.........  1271
                   Service located at 930 39th Avenue in Greeley, Colorado,
                   as the ``W.D. Farr Post Office Building''.
111-187.........  To designate the facility of the United States Postal        June 9, 2010.........  1272
                   Service located at 2-116th Street in North Troy, New York,
                   as the ``Martin G. `Marty' Mahar Post Office''.
111-188.........  To designate the facility of the United States Postal        June 9, 2010.........  1273
                   Service located at 119 Station Road in Cheyney,
                   Pennsylvania, as the ``Captain Luther H. Smith, U.S. Army
                   Air Forces Post Office''.
111-189.........  To designate the facility of the United States Postal        June 9, 2010.........  1274
                   Service located at 216 Westwood Avenue in Westwood, New
                   Jersey, as the ``Sergeant Christopher R. Hrbek Post Office
                   Building''.
111-190.........  To amend the Antitrust Criminal Penalty Enhancement and      June 9, 2010.........  1275
                   Reform Act of 2004 to extend the operation of such Act,
                   and for other purposes.
111-191.........  To amend the Oil Pollution Act of 1990 to authorize          June 15, 2010........  1278
                   advances from Oil Spill Liability Trust Fund for the
                   Deepwater Horizon oil spill.
111-192.........  Preservation of Access to Care for Medicare Beneficiaries    June 25, 2010........  1280
                   and Pension Relief Act of 2010.
111-193.........  To designate the facility of the United States Postal        June 28, 2010........  1308
                   Service located at 2000 Louisiana Avenue in New Orleans,
                   Louisiana, as the ``Roy Rondeno, Sr. Post Office
                   Building''.
111-194.........  To provide for the reconsideration and revision of the       June 30, 2010........  1309
                   proposed constitution of the United States Virgin Islands
                   to correct provisions inconsistent with the Constitution
                   and Federal law.
111-195.........  Comprehensive Iran Sanctions, Accountability, and            July 1, 2010.........  1312
                   Divestment Act of 2010.
111-196.........  National Flood Insurance Program Extension Act of 2010.....  July 2, 2010.........  1352
111-197.........  Airport and Airway Extension Act of 2010, Part II..........  July 2, 2010.........  1353
111-198.........  Homebuyer Assistance and Improvement Act of 2010...........  July 2, 2010.........  1356
111-199.........  Formaldehyde Standards for Composite Wood Products Act.....  July 7, 2010.........  1359
111-200.........  Congressional Award Program Reauthorization Act of 2009....  July 7, 2010.........  1368
111-201.........  Recognizing the 60th anniversary of the outbreak of the      July 7, 2010.........  1371
                   Korean War and reaffirming the United States-Korea
                   alliance.
111-202.........  To permanently authorize Radio Free Asia, and for other      July 13, 2010........  1373
                   purposes.
111-203.........  Dodd-Frank Wall Street Reform and Consumer Protection Act..  July 21, 2010........  1376
111-204.........  Improper Payments Elimination and Recovery Act of 2010.....  July 22, 2010........  2224
111-205.........  Unemployment Compensation Extension Act of 2010............  July 22, 2010........  2236
111-206.........  Shasta-Trinity National Forest Administrative Jurisdiction   July 27, 2010........  2240
                   Transfer Act.
111-207.........  Cruise Vessel Security and Safety Act of 2010..............  July 27, 2010........  2243
111-208.........  To designate the facility of the United States Postal        July 27, 2010........  2253
                   Service located at 1981 Cleveland Avenue in Columbus,
                   Ohio, as the ``Clarence D. Lumpkin Post Office''.
111-209.........  To amend the effective date of the gift card provisions of   July 27, 2010........  2254
                   the Credit Card Accountability Responsibility and
                   Disclosure Act of 2009.
111-210.........  Approving the renewal of import restrictions contained in    July 27, 2010........  2256
                   the Burmese Freedom and Democracy Act of 2003, and for
                   other purposes.
111-211.........  To protect Indian arts and crafts through the improvement    July 29, 2010........  2258
                   of applicable criminal proceedings, and for other purposes.
111-212.........  Supplemental Appropriations Act, 2010......................  July 29, 2010........  2302
111-213.........  Independent Living Centers Technical Adjustment Act........  July 29, 2010........  2343
111-214.........  To provide for an additional temporary extension of          July 30, 2010........  2346
                   programs under the Small Business Act and the Small
                   Business Investment Act of 1958, and for other purposes.
111-215.........  To modify the date on which the Administrator of the         July 30, 2010........  2347
                   Environmental Protection Agency and applicable States may
                   require permits for discharges from certain vessels.
111-216.........  Airline Safety and Federal Aviation Administration           Aug. 1, 2010.........  2348
                   Extension Act of 2010.
111-217.........  To designate the facility of the United States Postal        Aug. 3, 2010.........  2369
                   Service located at 1343 West Irving Park Road in Chicago,
                   Illinois, as the ``Steve Goodman Post Office Building''.
111-218.........  To designate the facility of the United States Postal        Aug. 3, 2010.........  2370
                   Service located at 23 Genesee Street in Hornell, New York,
                   as the ``Zachary Smith Post Office Building''.
111-219.........  To designate the facility of the United States Postal        Aug. 3, 2010.........  2371
                   Service located at 15 South Main Street in Sharon,
                   Massachusetts, as the ``Michael C. Rothberg Post Office''.
111-220.........  Fair Sentencing Act of 2010................................  Aug. 3, 2010.........  2372
111-221.........  National September 11 Memorial & Museum Commemorative Medal  Aug. 6, 2010.........  2376
                   Act of 2010.
111-222.........  To amend the National Law Enforcement Museum Act to extend   Aug. 6, 2010.........  2379
                   the termination date.
111-223.........  Securing the Protection of our Enduring and Established      Aug. 10, 2010........  2380
                   Constitutional Heritage Act.
111-224.........  United States Patent and Trademark Office Supplemental       Aug. 10, 2010........  2385
                   Appropriations Act, 2010.
111-225.........  Cell Phone Contraband Act of 2010..........................  Aug. 10, 2010........  2387
111-226.........  To modernize the air traffic control system, improve the     Aug. 10, 2010........  2389
                   safety, reliability, and availability of transportation by
                   air in the United States, provide for modernization of the
                   air traffic control system, reauthorize the Federal
                   Aviation Administration, and for other purposes.
111-227.........  United States Manufacturing Enhancement Act of 2010........  Aug. 11, 2010........  2409
111-228.........  General and Special Risk Insurance Funds Availability Act    Aug. 11, 2010........  2482
                   of 2010.

[[Page 5436]]

 
111-229.........  To increase the flexibility of the Secretary of Housing and  Aug. 11, 2010........  2483
                   Urban Development with respect to the amount of premiums
                   charged for FHA single family housing mortgage insurance,
                   and for other purposes.
111-230.........  Making emergency supplemental appropriations for border      Aug. 13, 2010........  2485
                   security for the fiscal year ending September 30, 2010,
                   and for other purposes.
111-231.........  To authorize the Secretary of Agriculture to terminate       Aug. 16, 2010........  2489
                   certain easements held by the Secretary on land owned by
                   the Village of Caseyville, Illinois, and to terminate
                   associated contractual arrangements with the Village.
111-232.........  Star-Spangled Banner Commemorative Coin Act................  Aug. 16, 2010........  2490
111-233.........  Agricultural Credit Act of 2010............................  Aug. 16, 2010........  2493
111-234.........  To designate the annex building under construction for the   Aug. 16, 2010........  2494
                   Elbert P. Tuttle United States Court of Appeals Building
                   in Atlanta, Georgia, as the ``John C. Godbold Federal
                   Building''.
111-235.........  To designate the facility of the United States Postal        Aug. 16, 2010........  2495
                   Service located at 405 West Second Street in Dixon,
                   Illinois, as the ``President Ronald W. Reagan Post Office
                   Building''.
111-236.........  To designate the facility of the United States Postal        Aug. 16, 2010........  2496
                   Service located at 151 North Maitland Avenue in Maitland,
                   Florida, as the ``Paula Hawkins Post Office Building''.
111-237.........  Firearms Excise Tax Improvement Act of 2010................  Aug. 16, 2010........  2497
111-238.........  To amend the National Defense Authorization Act for Fiscal   Sept. 27, 2010.......  2500
                   Year 2010 to extend the authority of the Secretary of the
                   Navy to enter into multiyear contracts for F/A-18E, F/A-
                   18F, and EA-18G aircraft.
111-239.........  Mandatory Price Reporting Act of 2010......................  Sept. 27, 2010.......  2501
111-240.........  Small Business Jobs Act of 2010............................  Sept. 27, 2010.......  2504
111-241.........  Multinational Species Conservation Funds Semipostal Stamp    Sept. 30, 2010.......  2605
                   Act of 2010.
111-242.........  Continuing Appropriations Act, 2011........................  Sept. 30, 2010.......  2607
111-243.........  To designate the federally occupied building located at      Sept. 30, 2010.......  2617
                   1220 Echelon Parkway in Jackson, Mississippi, as the
                   ``James Chaney, Andrew Goodman, Michael Schwerner, and Roy
                   K. Moore Federal Building''.
111-244.........  To clarify the availability of existing funds for political  Sept. 30, 2010.......  2618
                   status education in the Territory of Guam, and for other
                   purposes.
111-245.........  First Responder Anti-Terrorism Training Resources Act......  Sept. 30, 2010.......  2620
111-246.........  To enable State homes to furnish nursing home care to        Sept. 30, 2010.......  2622
                   parents any of whose children died while serving in the
                   Armed Forces.
111-247.........  Veterans' Compensation Cost-of-Living Adjustment Act of      Sept. 30, 2010.......  2623
                   2010.
111-248.........   To improve the operation of certain facilities and          Sept. 30, 2010.......  2625
                   programs of the House of Representatives, and for other
                   purposes.
111-249.........  Airport and Airway Extension Act of 2010, Part III.........  Sept. 30, 2010.......  2627
111-250.........  National Flood Insurance Program Reextension Act of 2010...  Sept. 30, 2010.......  2630
111-251.........  To provide for an additional temporary extension of          Sept. 30, 2010.......  2631
                   programs under the Small Business Act and the Small
                   Business Investment Act of 1958, and for other purposes.
111-252.........  To allow certain U.S. Customs and Border Protection          Oct. 5, 2010.........  2632
                   employees who serve under an overseas limited appointment
                   for at least 2 years, and whose service is rated fully
                   successful or higher throughout that time, to be converted
                   to a permanent appointment in the competitive service.
111-253.........  To award a congressional gold medal to Dr. Muhammad Yunus,   Oct. 5, 2010.........  2635
                   in recognition of his contributions to the fight against
                   global poverty.
111-254.........  To grant the congressional gold medal, collectively, to the  Oct. 5, 2010.........  2637
                   100th Infantry Battalion and the 442nd Regimental Combat
                   Team, United States Army, in recognition of their
                   dedicated service during World War II.
111-255.........  Improving Access to Clinical Trials Act of 2009............  Oct. 5, 2010.........  2640
111-256.........  Rosa's Law.................................................  Oct. 5, 2010.........  2643
111-257.........  To amend the Securities Exchange Act of 1934, the            Oct. 5, 2010.........  2646
                   Investment Company Act of 1940, and the Investment
                   Advisers Act of 1940 to provide for certain disclosures
                   under section 552 of title 5, United States Code,
                   (commonly referred to as the Freedom of Information Act),
                   and for other purposes.
111-258.........  Reducing Over-Classification Act...........................  Oct. 7, 2010.........  2648
111-259.........  Intelligence Authorization Act for Fiscal Year 2010........  Oct. 7, 2010.........  2654
111-260.........  Twenty-First Century Communications and Video Accessibility  Oct. 8, 2010.........  2751
                   Act of 2010.
111-261.........  To authorize the Secretary of the Interior to lease certain  Oct. 8, 2010.........  2777
                   lands in Virgin Islands National Park, and for other
                   purposes.
111-262.........  5-Star Generals Commemorative Coin Act.....................  Oct. 8, 2010.........  2780
111-263.........  Federal Supply Schedules Usage Act of 2010.................  Oct. 8, 2010.........  2787
111-264.........  Stem Cell Therapeutic and Research Reauthorization Act of    Oct. 8, 2010.........  2789
                   2010.
111-265.........  To make technical corrections in the Twenty-First Century    Oct. 8, 2010.........  2795
                   Communications and Video Accessibility Act of 2010 and the
                   amendments made by that Act.
111-266.........  Security Cooperation Act of 2010...........................  Oct. 8, 2010.........  2797
111-267.........  National Aeronautics and Space Administration Authorization  Oct. 11, 2010........  2805
                   Act of 2010.
111-268.........  Combat Methamphetamine Enhancement Act of 2010.............  Oct. 12, 2010........  2847
111-269.........  Indian Veterans Housing Opportunity Act of 2010............  Oct. 12, 2010........  2850
111-270.........  To provide for an extension of the legislative authority of  Oct. 12, 2010........  2851
                   the Vietnam Veterans Memorial Fund, Inc. to establish a
                   Vietnam Veterans Memorial visitor center, and for other
                   purposes.
111-271.........  Redundancy Elimination and Enhanced Performance for          Oct. 12, 2010........  2852
                   Preparedness Grants Act.
111-272.........  Law Enforcement Officers Safety Act Improvements Act of      Oct. 12, 2010........  2855
                   2010.
111-273.........  Secure and Responsible Drug Disposal Act of 2010...........  Oct. 12, 2010........  2858
111-274.........  Plain Writing Act of 2010..................................  Oct. 13, 2010........  2861
111-275.........  Veterans' Benefits Act of 2010.............................  Oct. 13, 2010........  2864
111-276.........  To designate the facility of the United States Postal        Oct. 13, 2010........  2899
                   Service located at 4285 Payne Avenue in San Jose,
                   California, as the ``Anthony J. Cortese Post Office
                   Building''.
111-277.........  To designate the facility of the United States Postal        Oct. 13, 2010........  2900
                   Service located at 100 Orndorf Drive in Brighton,
                   Michigan, as the ``Joyce Rogers Post Office Building''.
111-278.........  To designate the facility of the United States Postal        Oct. 13, 2010........  2901
                   Service located at 13301 Smith Road in Cleveland, Ohio, as
                   the ``David John Donafee Post Office Building''.

[[Page 5437]]

 
111-279.........  To designate the facility of the United States Postal        Oct. 13, 2010........  2902
                   Service located at 3894 Crenshaw Boulevard in Los Angeles,
                   California, as the ``Tom Bradley Post Office Building''.
111-280.........  WIPA and PABSS Extension Act of 2010.......................  Oct. 13, 2010........  2903
111-281.........  Coast Guard Authorization Act of 2010......................  Oct. 15, 2010........  2905
111-282.........  United States Secret Service Uniformed Division              Oct. 15, 2010........  3033
                   Modernization Act of 2010.
111-283.........  Pre-Election Presidential Transition Act of 2010...........  Oct. 15, 2010........  3045
111-284.........  Mount Stevens and Ted Stevens Icefield Designation Act.....  Oct. 18, 2010........  3050
111-285.........  To extend the deadline for Social Services Block Grant       Nov. 24, 2010........  3054
                   expenditures of supplemental funds appropriated following
                   disasters occurring in 2008.
111-286.........  The Physician Payment and Therapy Relief Act of 2010.......  Nov. 30, 2010........  3056
111-287.........  International Adoption Simplification Act..................  Nov. 30, 2010........  3058
111-288.........  To designate the facility of the United States Postal        Nov. 30, 2010........  3061
                   Service located at 100 Broadway in Lynbrook, New York, as
                   the ``Navy Corpsman Jeffrey L. Wiener Post Office
                   Building''.
111-289.........  Appointing the day for the convening of the first session    Nov. 30, 2010........  3062
                   of the One Hundred Twelfth Congress.
111-290.........  Making further continuing appropriations for fiscal year     Dec. 4, 2010.........  3063
                   2011, and for other purposes.
111-291.........  Claims Resolution Act of 2010..............................  Dec. 8, 2010.........  3064
111-292.........  Telework Enhancement Act of 2010...........................  Dec. 9, 2010.........  3165
111-293.........  Help Haitian Adoptees Immediately to Integrate Act of 2010.  Dec. 9, 2010.........  3175
111-294.........  Animal Crush Video Prohibition Act of 2010.................  Dec. 9, 2010.........  3177
111-295.........  Copyright Cleanup, Clarification, and Corrections Act of     Dec. 9, 2010.........  3180
                   2010.
111-296.........  Healthy, Hunger-Free Kids Act of 2010......................  Dec. 13, 2010........  3183
111-297.........  To designate the Federal building located at 100 North       Dec. 14, 2010........  3267
                   Palafox Street in Pensacola, Florida, as the ``Winston E.
                   Arnow Federal Building''.
111-298.........  To designate the Federal building and United States          Dec. 14, 2010........  3268
                   courthouse located at 515 9th Street in Rapid City, South
                   Dakota, as the ``Andrew W. Bogue Federal Building and
                   United States Courthouse''.
111-299.........  To designate the building occupied by the Government         Dec. 14, 2010........  3269
                   Printing Office located at 31451 East United Avenue in
                   Pueblo, Colorado, as the ``Frank Evans Government Printing
                   Office Building''.
111-300.........  To designate the facility of the United States Postal        Dec. 14, 2010........  3270
                   Service located at 2 Government Center in Fall River,
                   Massachusetts, as the ``Sergeant Robert Barrett Post
                   Office Building''.
111-301.........  To designate the Federal building located at 6401 Security   Dec. 14, 2010........  3271
                   Boulevard in Baltimore, Maryland, commonly known as the
                   Social Security Administration Operations Building, as the
                   ``Robert M. Ball Federal Building''.
111-302.........  Coin Modernization, Oversight, and Continuity Act of 2010..  Dec. 14, 2010........  3272
111-303.........  American Eagle Palladium Bullion Coin Act of 2010..........  Dec. 14, 2010........  3275
111-304.........  To designate the facility of the United States Postal        Dec. 14, 2010........  3278
                   Service located at 1351 2nd Street in Napa, California, as
                   the ``Tom Kongsgaard Post Office Building''.
111-305.........  To designate the facility of the United States Postal        Dec. 14, 2010........  3279
                   Service located at 337 West Clark Street in Eureka,
                   California, as the ``Sam Sacco Post Office Building''.
111-306.........  To require the accreditation of English language training    Dec. 14, 2010........  3280
                   programs, and for other purposes.
111-307.........  Asian Carp Prevention and Control Act......................  Dec. 14, 2010........  3282
111-308.........  Federal Buildings Personnel Training Act of 2010...........  Dec. 14, 2010........  3283
111-309.........  Medicare and Medicaid Extenders Act of 2010................  Dec. 15, 2010........  3285
111-310.........  To designate the facility of the United States Postal        Dec. 15, 2010........  3293
                   Service located at 2 Massachusetts Avenue, NE, in
                   Washington, D.C., as the ``Dorothy I. Height Post Office''.
111-311.........  Commercial Advertisement Loudness Mitigation Act...........  Dec. 15, 2010........  3294
111-312.........  Tax Relief, Unemployment Insurance Reauthorization, and Job  Dec. 17, 2010........  3296
                   Creation Act of 2010.
111-313.........  Truth in Fur Labeling Act of 2010..........................  Dec. 18, 2010........  3326
111-314.........  To enact certain laws relating to national and commercial    Dec. 18, 2010........  3328
                   space programs as title 51, United States Code, ``National
                   and Commercial Space Programs''.
111-315.........  To amend the Water Resources Development Act of 2000 to      Dec. 18, 2010........  3450
                   extend and modify the program allowing the Secretary of
                   the Army to accept and expend funds contributed by non-
                   Federal public entities to expedite the evaluation of
                   permits, and for other purposes.
111-316.........  To improve certain administrative operations of the Office   Dec. 18, 2010........  3452
                   of the Architect of the Capitol, and for other purposes.
111-317.........  Making further continuing appropriations for fiscal year     Dec. 18, 2010........  3454
                   2011, and for other purposes.
111-318.........  Social Security Number Protection Act of 2010..............  Dec. 18, 2010........  3455
111-319.........  Red Flag Program Clarification Act of 2010.................  Dec. 18, 2010........  3457
111-320.........  CAPTA Reauthorization Act of 2010..........................  Dec. 20, 2010........  3459
111-321.........  Don't Ask, Don't Tell Repeal Act of 2010...................  Dec. 22, 2010........  3515
111-322.........  Continuing Appropriations and Surface Transportation         Dec. 22, 2010........  3518
                   Extensions Act, 2011.
111-323.........  Hoh Indian Tribe Safe Homelands Act........................  Dec. 22, 2010........  3532
111-324.........  To reauthorize and enhance Johanna's Law to increase public  Dec. 22, 2010........  3536
                   awareness and knowledge with respect to gynecologic
                   cancers.
111-325.........  Regulated Investment Company Modernization Act of 2010.....  Dec. 22, 2010........  3537
111-326.........  To designate the airport traffic control tower located at    Dec. 22, 2010........  3556
                   Spokane International Airport in Spokane, Washington, as
                   the ``Ray Daves Airport Traffic Control Tower''.
111-327.........  Bankruptcy Technical Corrections Act of 2010...............  Dec. 22, 2010........  3557
111-328.........  Kingman and Heritage Islands Act of 2010...................  Dec. 22, 2010........  3564
111-329.........  Airport and Airway Extension Act of 2010, Part IV..........  Dec. 22, 2010........  3566
111-330.........  To make technical corrections to provisions of law enacted   Dec. 22, 2010........  3569
                   by the Coast Guard Authorization Act of 2010..
111-331.........  Truth in Caller ID Act of 2009.............................  Dec. 22, 2010........  3572
111-332.........  National Foundation on Fitness, Sports, and Nutrition        Dec. 22, 2010........  3576
                   Establishment Act.
111-333.........  Longfellow House-Washington's Headquarters National          Dec. 22, 2010........  3581
                   Historic Site Designation Act.
111-334.........  To amend the Act of August 9, 1955, to authorize the         Dec. 22, 2010........  3582
                   Coquille Indian Tribe, the Confederated Tribes of Siletz
                   Indians, the Confederated Tribes of the Coos, Lower
                   Umpqua, and Siuslaw, the Klamath Tribes, and the Burns
                   Paiute Tribe to obtain 99-year lease authority for trust
                   land.
111-335.........  Longline Catcher Processor Subsector Single Fishery          Dec. 22, 2010........  3583
                   Cooperative Act.

[[Page 5438]]

 
111-336.........  To amend the Act of August 9, 1955, to modify a provision    Dec. 22, 2010........  3587
                   relating to leases involving certain Indian tribes.
111-337.........  Early Hearing Detection and Intervention Act of 2010.......  Dec. 22, 2010........  3588
111-338.........  Formerly Owned Resources for Veterans to Express Thanks for  Dec. 22, 2010........  3590
                   Service Act of 2010.
111-339.........  To require reports on the management of Arlington National   Dec. 22, 2010........  3591
                   Cemetery.
111-340.........  Museum and Library Services Act of 2010....................  Dec. 22, 2010........  3594
111-341.........  Criminal History Background Checks Pilot Extension Act of    Dec. 22, 2010........  3606
                   2010.
111-342.........  Preserving Foreign Criminal Assets for Forfeiture Act of     Dec. 22, 2010........  3607
                   2010.
111-343.........  To require the Federal Deposit Insurance Corporation to      Dec. 29, 2010........  3609
                   fully insure Interest on Lawyers Trust Accounts.
111-344.........  Omnibus Trade Act of 2010..................................  Dec. 29, 2010........  3611
111-345.........  Restore Online Shoppers' Confidence Act....................  Dec. 29, 2010........  3618
111-346.........  Helping Heroes Keep Their Homes Act of 2010................  Dec. 29, 2010........  3622
111-347.........  James Zadroga 9/11 Health and Compensation Act of 2010.....  Jan. 2, 2011.........  3623
111-348.........  To amend the High Seas Driftnet Fishing Moratorium           Jan. 4, 2011.........  3668
                   Protection Act and the Magnuson-Stevens Fishery
                   Conservation and Management Act to improve the
                   conservation of sharks.
111-349.........  To establish a pilot program in certain United States        Jan. 4, 2011.........  3674
                   district courts to encourage enhancement of expertise in
                   patent cases among district judges.
111-350.........  To enact certain laws relating to public contracts as title  Jan. 4, 2011.........  3677
                   41, United States Code, ``Public Contracts''.
111-351.........  Predisaster Hazard Mitigation Act of 2010..................  Jan. 4, 2011.........  3863
111-352.........  GPRA Modernization Act of 2010.............................  Jan. 4, 2011.........  3866
111-353.........  FDA Food Safety Modernization Act..........................  Jan. 4, 2011.........  3885
111-354.........  Indian Pueblo Cultural Center Clarification Act............  Jan. 4, 2011.........  3974
111-355.........   To designate the facility of the United States Postal       Jan. 4, 2011.........  3975
                   Service located at 1332 Sharon Copley Road in Sharon
                   Center, Ohio, as the ``Emil Bolas Post Office''.
111-356.........  Northern Border Counternarcotics Strategy Act of 2010......  Jan. 4, 2011.........  3976
111-357.........  National Wildlife Refuge Volunteer Improvement Act of 2010.  Jan. 4, 2011.........  3979
111-358.........  America COMPETES Reauthorization Act of 2010...............  Jan. 4, 2011.........  3982
111-359.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4050
                   Service located at 331 1st Street in Carlstadt, New
                   Jersey, as the ``Staff Sergeant Frank T. Carvill and Lance
                   Corporal Michael A. Schwarz Post Office Building''.
111-360.........  To exclude an external power supply for certain security or  Jan. 4, 2011.........  4051
                   life safety alarms and surveillance system components from
                   the application of certain energy efficiency standards
                   under the Energy Policy and Conservation Act.
111-361.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4053
                   Service located at 47 East Fayette Street in Uniontown,
                   Pennsylvania, as the ``George C. Marshall Post Office''.
111-362.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4054
                   Service located at 47 South 7th Street in Indiana,
                   Pennsylvania, as the ``James M. `Jimmy' Stewart Post
                   Office Building''.
111-363.........  To designate the Little River Branch facility of the United  Jan. 4, 2011.........  4055
                   States Postal Service located at 140 NE 84th Street in
                   Miami, Florida, as the ``Jesse J. McCrary, Jr. Post
                   Office''.
111-364.........  Diesel Emissions Reduction Act of 2010.....................  Jan. 4, 2011.........  4056
111-365.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4062
                   Service located at 655 Centre Street in Jamaica Plain,
                   Massachusetts, as the ``Lance Corporal Alexander Scott
                   Arredondo, United States Marine Corps Post Office
                   Building''.
111-366.........  To amend the Internal Revenue Code of 1986 to authorize the  Jan. 4, 2011.........  4063
                   tax court to appoint employees.
111-367.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4066
                   Service located at 5003 Westfields Boulevard in
                   Centreville, Virginia, as the ``Colonel George Juskalian
                   Post Office Building''.
111-368.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4067
                   Service located at 111 North 6th Street in St. Louis,
                   Missouri, as the ``Earl Wilson, Jr. Post Office''.
111-369.........  Access to Criminal History Records for State Sentencing      Jan. 4, 2011.........  4068
                   Commissions Act of 2010.
111-370.........  To direct the Administrator of General Services to convey a  Jan. 4, 2011.........  4069
                   parcel of real property in Houston, Texas, to the Military
                   Museum of Texas, and for other purposes.
111-371.........  Local Community Radio Act of 2010..........................  Jan. 4, 2011.........  4072
111-372.........  Section 202 Supportive Housing for the Elderly Act of 2010.  Jan. 4, 2011.........  4077
111-373.........  Pedestrian Safety Enhancement Act of 2010..................  Jan. 4, 2011.........  4086
111-374.........  Frank Melville Supportive Housing Investment Act of 2010...  Jan. 4, 2011.........  4089
111-375.........  National Alzheimer's Project Act...........................  Jan. 4, 2011.........  4100
111-376.........  Anti-Border Corruption Act of 2010.........................  Jan. 4, 2011.........  4104
111-377.........  Post-9/11 Veterans Educational Assistance Improvements Act   Jan. 4, 2011.........  4106
                   of 2010.
111-378.........  To amend the Federal Water Pollution Control Act to clarify  Jan. 4, 2011.........  4128
                   Federal responsibility for stormwater pollution.
111-379.........  To designate the facility of the United States Postal        Jan. 4, 2011.........  4130
                   Service located at 100 Commerce Drive in Tyrone, Georgia,
                   as the ``First Lieutenant Robert Wilson Collins Post
                   Office Building''.
111-380.........  Reduction of Lead in Drinking Water Act....................  Jan. 4, 2011.........  4131
111-381.........  To authorize leases of up to 99 years for lands held in      Jan. 4, 2011.........  4133
                   trust for Ohkay Owingeh Pueblo.
111-382.........  To clarify the National Credit Union Administration          Jan. 4, 2011.........  4134
                   authority to make stabilization fund expenditures without
                   borrowing from the Treasury.
111-383.........  Ike Skelton National Defense Authorization Act for Fiscal    Jan. 7, 2011.........  4137
                   Year 2011.
 


----------------
 
  *Note: Public Laws 111-128 through 111-135 and 111-137 appeared in the
 Cumulative List of Public Laws for the 111th Congress, First Session.
 

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / 
Proposed Rules

[[Page 5292]]



FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 932, 955, 956, and 966

FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1269 and 1273

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Parts 1720 and 1750

RIN 2590-AA40


Alternatives to Use of Credit Ratings in Regulations Governing 
the Federal National Mortgage Association, the Federal Home Loan 
Mortgage Corporation and the Federal Home Loan Banks

AGENCIES: Federal Housing Finance Board; Federal Housing Finance 
Agency; and Office of Federal Housing Enterprise Oversight.

ACTION: Advance notice of proposed rulemaking; request for comment.

-----------------------------------------------------------------------

SUMMARY: A number of regulations applicable to the Federal National 
Mortgage Association and the Federal Home Loan Mortgage Corporation 
(collectively, the Enterprises), and the Federal Home Loan Banks 
(Banks), contain specific references to, or requirements based on, 
credit ratings issued by credit rating organizations registered with 
the Securities and Exchange Commission as nationally recognized 
statistical rating organizations (NRSROs). Section 939A of the recently 
enacted Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) provides Federal agencies with one-year to review 
regulations that require the use of an assessment of the credit-
worthiness of a security or money market instrument and any references 
to, or requirements in, such regulations regarding credit ratings, and 
to remove such references or requirements. In this advance notice of 
proposed rulemaking (ANPR), the Federal Housing Finance Agency (FHFA) 
describes the relevant regulations affected by this provision of the 
Dodd-Frank Act and requests comments on potential alternatives to the 
use of credit ratings in these regulations.

DATES: Comments on the proposed rule must be received on or before 
March 17, 2011.

ADDRESSES: You may submit your comments on the proposed rule, 
identified by regulatory information number (RIN) 2590-AA40 by any of 
the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comments 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. Please include ``RIN 2590-AA40'' in the subject line of the 
message.
     E-mail: Comments to Alfred M. Pollard, General Counsel may 
be sent by e-mail to RegComments@FHFA.gov. Please include ``RIN 2590-
AA40'' in the subject line of the message.
     Hand Delivery/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA40, 
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. The package should be logged at the Guard Desk, 
First Floor, on business days between 9 a.m. and 5 p.m.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA40, Federal 
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, 
DC 20552.

FOR FURTHER INFORMATION CONTACT: Scott Smith, Associate Director, 
Office of Capital Supervision, 202-414-8922, Federal Housing Finance 
Agency; Thomas E. Joseph, Senior Attorney-Advisor, 202-414-3095; or 
Jamie Schwing, Associate General Counsel, 202-414-3787, Office of 
General Counsel, Federal Housing Finance Agency, Fourth Floor, 1700 G 
Street, NW., Washington, DC 20552; or Amy Bogdon, Associate Director 
for Regulatory Policy and Programs, Division of Federal Home Loan Bank 
Regulation, 202-408-2546 (these are not toll-free numbers), Federal 
Housing Finance Agency, 1625 Eye Street, NW., Washington, DC 20006. The 
telephone number for the Telecommunications Device for the Deaf is 800-
877-8339.

SUPPLEMENTARY INFORMATION: 

I. Comments

    FHFA invites comments on all aspects of the ANPR, and will develop 
proposed regulations after taking all comments into consideration. 
Copies of all comments will be posted on the internet Web site at 
https://www.fhfa.gov. 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, 
Fourth Floor, 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. Creation of the Federal Housing Finance Agency and Recent 
Legislation

    Effective July 30, 2008, the Housing and Economic Recovery Act of 
2008 (HERA), Public Law 110-289, 122 Stat. 2654, created FHFA as a new 
independent agency of the Federal Government, and transferred to FHFA 
the supervisory and oversight responsibilities of the Office of Federal 
Housing Enterprise Oversight (OFHEO) over the Enterprises, the 
supervisory and oversight responsibilities of the Federal Housing 
Finance Board (Finance Board) over the Banks and the Office of Finance 
(OF) (which acts as the Banks' fiscal agent) and certain functions of 
the Department of Housing and Urban Development. See id. at section 
1101, 122 Stat. 2661-62. FHFA is responsible for ensuring that the 
Enterprises and the Banks operate in a safe and sound manner, including 
that they maintain adequate capital and internal controls, that their 
activities foster liquid, efficient, competitive and resilient national 
housing finance markets, and that they carry out their public policy 
missions through authorized activities. See id. at section 1102, 122 
Stat. 2663-64. The Enterprises, the Banks, and the OF continue to 
operate under regulations

[[Page 5293]]

promulgated by OFHEO and the Finance Board until such regulations are 
superseded by regulations issued by FHFA. See id. at sections 1302, 
1312, 122 Stat. 2795, 2798.

B. The Enterprises

    The Enterprises are chartered by Congress for the purpose of 
establishing secondary market facilities for residential mortgages. See 
12 U.S.C. 1716 et seq.; 12 U.S.C. 1451 et seq. Congress established the 
Enterprises to provide stability in the secondary mortgage market for 
residential mortgages, to respond appropriately to the private capital 
market, to provide ongoing assistance to the secondary market for 
residential mortgages, and to promote access to mortgage credit 
throughout the nation. Id.
    On September 6, 2008, the Director of FHFA appointed FHFA as 
conservator of the Enterprises in accordance with the Safety and 
Soundness Act, as amended by HERA. The Enterprises remain under 
conservatorship at this time. Although the Enterprises' substantial 
market presence has been important to restoring market stability, 
neither company would be capable of serving the mortgage market today 
without the ongoing financial support provided by the United States 
Department of Treasury. The Administration has announced its intention 
to develop and present to Congress a proposal for the future of the 
nation's housing finance system that will include a proposal for the 
ultimate resolution of the Enterprises in conservatorship. While 
reliance on the Treasury Department's backing will continue until 
legislation produces a final resolution to the Enterprises' future, 
FHFA is monitoring the activities of the Enterprises to: (a) limit 
their risk and exposure by avoiding new lines of business; (b) ensure 
profitability in their new books of business without deterring market 
participation or hindering market recovery; and (c) minimize losses on 
the mortgages already on their books.

C. The Bank System

    The twelve Banks are instrumentalities of the United States 
organized under the Federal Home Loan Bank Act (Bank Act).\1\ See 12 
U.S.C. 1423, 1432(a). The Banks are cooperatives; only members of a 
Bank may purchase the capital stock of a Bank, and only members or 
certain eligible housing associates (such as state housing finance 
agencies) may obtain access to secured loans, known as advances, or 
other products provided by a Bank. See 12 U.S.C. 1426(a)(4), 1430(a), 
1430(b). Each Bank is managed by its own board of directors and serves 
the public interest by enhancing the availability of residential credit 
through its member institutions. See 12 U.S.C. 1427. Any eligible 
institution (generally a federally insured depository institution or 
state-regulated insurance company) may become a member of a Bank if it 
satisfies certain criteria and purchases a specified amount of the 
Bank's capital stock. See 12 U.S.C. 1424; 12 CFR part 1263.
---------------------------------------------------------------------------

    \1\ Each Bank is generally referred to by the name of the city 
in which it is located. The twelve Banks are located in: Boston, New 
York, Pittsburgh, Atlanta, Cincinnati, Indianapolis, Chicago, Des 
Moines, Dallas, Topeka, San Francisco, and Seattle. The twelve Banks 
and the OF are collectively referred to as, and considered to make 
up, the Bank System.
---------------------------------------------------------------------------

    As government-sponsored enterprises, the Banks are granted certain 
privileges under federal law. In light of those privileges, the Banks 
typically can borrow funds at spreads over the rates on U.S. Treasury 
securities of comparable maturity lower than most other entities. The 
Banks pass along a portion of their funding advantage to their 
members--and ultimately to consumers--by providing advances and other 
financial services at rates that would not otherwise be available to 
their members. Consolidated obligations (COs), consisting of bonds and 
discount notes, are the principal funding source for the Banks. The OF 
issues all COs on behalf of the twelve Banks. Although each Bank is 
primarily liable for the portion of COs corresponding to the proceeds 
received by that Bank, each Bank is also jointly and severally liable 
with the other eleven Banks for the payment of principal and interest 
on all COs. 12 CFR 966.9.

D. Dodd-Frank Act Provisions

    Section 939A of the recently enacted Dodd-Frank Act requires 
Federal agencies within one-year to: (i) Review regulations that 
require the use of an assessment of the credit-worthiness of a security 
or money market instrument; and (ii) to the extent those regulations 
contain any references to, or requirements regarding credit ratings, 
remove such references or requirements. See section 939A, Public Law 
111-203, 124 Stat. 1887 (July 21, 2010). In place of such credit-rating 
based requirements, agencies are instructed to substitute appropriate 
standards for determining credit-worthiness. The new law further 
provides that, to the extent feasible, an agency should adopt a uniform 
standard of credit-worthiness for use in its regulations, taking into 
account the entities regulated by it and the purposes for which such 
regulated entities would rely on the credit-worthiness standard. At the 
conclusion of the review, each agency is required to transmit a report 
to Congress describing the modifications to its regulations that were 
made.
    A number of regulations applicable to the Enterprises or the Bank 
System (which were previously adopted by OFHEO or the Finance Board, 
but remain in effect, or more recently adopted by FHFA) contain 
specific references to credit ratings issued by NRSROs for purposes of 
assigning capital requirements or setting investment or counterparty 
exposure limits. FHFA is issuing this ANPR to help it assess how it can 
change these regulations and to identify standards that may be 
appropriate as replacements for credit ratings issued by NRSROs. 
Federal banking agencies have also issued ANPRs as part of their 
process to address similar issues with regard to references to credit 
ratings in their capital regulations and prudential standards. See 75 
FR 49423 (Aug. 13, 2010), and 75 FR 52283 (Aug. 25, 2010). The specific 
FHFA regulations at issue are discussed more fully below.

E. Considerations of Differences Between the Banks and the Enterprises

    Section 1201 of HERA requires the Director, when promulgating 
regulations relating to the Banks, to consider the following 
differences between the Banks and the Enterprises: cooperative 
ownership structure; mission of providing liquidity to members; 
affordable housing and community development mission; capital 
structure; and joint and several liability. See section 1201 Public Law 
110-289, 122 Stat. 2782-83 (amending 12 U.S.C. 4513). The Director also 
may consider any other differences that are deemed appropriate. While 
the Dodd-Frank Act mandates that each agency try, to the extent 
feasible, to develop uniform standards of credit-worthiness for use in 
its regulations in preparing any proposed rules, FHFA also will 
consider the differences between the Banks and the Enterprises as they 
relate to the above factors and how such factors may lead to 
differences between any standards ultimately adopted. To aid it in 
developing proposed regulations, FHFA requests comments from the public 
about whether or how differences related to these factors should be 
reflected in any possible regulations.

[[Page 5294]]

III. Request for Comments

A. Description of Applicable Regulations

    The regulations in question can be divided into two broad 
categories. The first category contains regulations that relate to 
capital requirements and apply specific capital charges based on NRSRO 
ratings of financial instruments or counterparties. The second category 
involves prudential standards and limits that may be applied to a 
regulated entity or on a regulated entity's investment or other 
business activities that reference or are otherwise based on credit 
ratings issued by NRSROs.
1. Risk-Based Capital Requirements
a. Enterprises
    The risk-based capital requirements applicable to the Enterprises 
apply capital charges in part based on reference to credit ratings 
issued by NRSROs. Soon after placing the Enterprises in 
conservatorship, FHFA announced that, although it would closely monitor 
Enterprise capital levels, existing statutory and FHFA-directed 
regulatory capital requirements would not be binding on the Enterprises 
during the conservatorship. Even though not currently binding, the 
regulations for the Enterprises described below are still in effect, 
and FHFA might need to adopt new risk-based requirements for the 
Enterprises or their successors in a post-conservatorship environment. 
Thus, the question of credit-worthiness in applying a risk-based credit 
charge is relevant in considering risk-based capital requirements.
    The current Enterprise risk-based capital regulations set forth 
detailed criteria for a stress test that is used to estimate losses for 
an Enterprise over a specific period. Under the requirements, an 
Enterprise's total capital must be sufficient so that it would remain 
positive during the entire stress period. See 12 CFR 1750.13. One 
component of the test, the Counterparty Default component, accounts for 
the risk of default by credit enhancement and derivative contract 
counterparties, and by corporate, municipal and mortgage-related 
securities. 12 CFR part 1750, subpart B, Appendix A, section 3.5. In 
calculating the Counterparty Default component, the regulations 
establish five rating categories, and slot counterparties and 
securities into these categories by reference to ratings issued by an 
NRSRO for the counterparty or security. The regulations, in turn, 
specify the maximum reduction in cash flows during the stress period to 
reflect the risk of default by a counterparty or for a specific 
security based in part on the assigned ratings category. Id. The 
reduced cash flows decrease earnings, or increase losses, which then 
translate to lower equity during the stress test. The difference 
between equity during the binding month of the stress test and starting 
equity forms the basis of an Enterprise's risk-based capital 
requirement.
b. Banks
    Similarly, the risk-based capital requirements applicable to the 
Banks require the Banks to hold risk-based capital sufficient to meet 
the credit risk capital requirement for all assets, off-balance sheet 
items, and derivative contracts. See 12 CFR 932.4. The credit risk 
capital requirement is calculated in large part based on the credit 
ratings assigned by the NRSROs to a particular counterparty or to a 
specific financial instrument, and on maturity. Id.
2. Prudential Requirements
    The other area of FHFA regulations that may reference or otherwise 
be based on credit ratings issued by NRSROs involves prudential 
standards or limits that may be applied to a regulated entity or to its 
investment activity. This is especially true for the Banks, for which a 
number of regulations reference such ratings.
a. Enterprises
    With regard to the Enterprises, the references to credit ratings 
are found in guidance on non-mortgage liquidity investments set forth 
in Appendix B to part 1720. 12 CFR part 1720, Appendix B. Specifically, 
the guidance states that, as a safety and soundness matter, the 
Enterprises should establish minimum credit standards for any security 
eligible for purchase, and if such standards involve or cite credit 
ratings, NRSRO ratings should be used. Id. at section C(3)(c)(i). The 
policy also provides that sound risk management practices include 
disclosure about the risk of non-mortgage liquidity investments, 
including disclosure concerning credit quality or ratings of 
investments. Id. at section D(1). These provisions, however, unlike 
many of the requirements that apply to the Banks, do not necessarily 
require the Enterprises to take or refrain from specific actions based 
on NRSRO ratings or to use NRSRO ratings for specific purposes and 
therefore may be outside the scope of section 939A of the Dodd-Frank 
Act.
b. Banks
    There are currently six regulations that apply to the Banks which 
contain various provisions that reference credit ratings or impose 
limitations or other requirements on the Banks based on ratings issued 
by NRSROs. A brief description of these regulations follows.
    Bank Capital, 12 CFR part 932. In addition to the specific credit 
risk capital charge provisions discussed above, other prudential 
provisions in the part 932 capital regulations reference NRSRO ratings 
a