Suspended Counterparty Program, 63007-63015 [2013-24730]

Agencies

• FEDERAL HOUSING FINANCE AGENCY

[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Rules and Regulations]
[Pages 63007-63015]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24730]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1227

RIN 2590-AA60


Suspended Counterparty Program

AGENCY: Federal Housing Finance Agency.

ACTION: Interim final rule with request for comments.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing an 
interim final rule with request for comments that generally codifies 
the procedures FHFA follows under its existing Suspended Counterparty 
Program, established in June, 2012. The interim final rule requires the 
Federal National Mortgage Association (Fannie Mae), the Federal Home 
Loan Mortgage Corporation (Freddie Mac), and the twelve Federal Home 
Loan Banks (Banks) (hereafter, collectively, ``regulated entities'' or 
individually, ``regulated entity'') to submit reports to FHFA when they 
become aware that an individual or institution and any affiliates 
thereof with which they are doing or have done business has committed 
fraud or other financial misconduct during the time period specified in 
the rule. The interim final rule sets forth the procedures for FHFA 
issuance of proposed and final suspension orders. Proposed suspension 
orders include an opportunity for response by the affected individual 
or institution and by the regulated entities. A final suspension order 
may be issued if FHFA determines that the covered misconduct is of a 
type that would be likely to cause significant financial or 
reputational harm to a regulated entity or otherwise threaten the safe 
and sound operation of a regulated entity. Final suspension orders 
direct the regulated entities to cease or refrain from doing business 
with the individuals or institutions for a specified period of time or 
permanently.

DATES: The interim final rule is effective on October 23, 2013. FHFA 
will accept written comments on the interim final rule on or before 
December 23, 2013. For additional information, see SUPPLEMENTARY 
INFORMATION.

ADDRESSES: You may submit your comments on the interim final rule, 
identified by regulatory information number (RIN) 2590-AA60, by any of 
the following methods:
     Email: Comments to Alfred M. Pollard, General Counsel, may 
be sent by email to RegComments@fhfa.gov. Please include ``RIN 2590-
AA60'' in the subject line of the message.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by email 
to FHFA at RegComments@fhfa.gov to ensure timely receipt by FHFA. 
Include the following information in the subject line of your 
submission: Comments/RIN 2590-AA60.
     Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA60, 
Federal Housing Finance Agency, Constitution Center, Eighth Floor 
(OGC), 400 Seventh Street SW., Washington, DC 20024. Deliver the 
package at the Seventh Street entrance 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-AA60, Federal 
Housing Finance Agency, Constitution Center, Eighth Floor (OGC), 400 
Seventh Street SW., Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Kevin Sheehan, Assistant General 
Counsel, at (202) 649-3086 (not a toll-free number), Federal Housing 
Finance Agency, Constitution Center, Eighth Floor (OGC), 400 Seventh 
Street SW., Washington, DC 20024. The telephone number for the 
Telecommunications Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comments on all aspects of the interim final rule, and 
will take all comments into consideration before issuing the final 
regulation. Copies of all comments will be posted without change, 
including any personal information you provide, such as your name, 
address, email address, and telephone number, on the FHFA 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, 
Constitution Center, Eighth Floor, 400 Seventh Street SW., Washington, 
DC 20024. To make an appointment to inspect comments, please call the 
Office of General Counsel at (202) 649-3804.

II. Background and Summary of Interim Final Rule

A. Summary of Interim Final Rule

    FHFA established the Suspended Counterparty Program in June, 2012 
by letter to the regulated entities. The Suspended Counterparty Program 
requires each regulated entity to report to FHFA when it becomes aware 
that an individual or institution with which it is doing or has done 
business has committed fraud or other financial misconduct within a 
specified time period. FHFA reviews the reports submitted by the 
regulated entities to determine whether additional action is needed by 
FHFA to limit the risk of the regulated entities continuing to do 
business with the individual or institution, in order to protect the 
safe and sound operation of the regulated entities. In appropriate 
cases, FHFA will issue suspension orders directing the regulated 
entities to cease or refrain from doing business with the individual or 
institution for a specified period of time or permanently. Before 
issuing a final suspension order, FHFA will provide notice and an 
opportunity to respond to the affected individual or institution and to 
each of the regulated entities.
    The interim final rule generally codifies the existing procedures 
under which the Suspended Counterparty Program operates in new 12 CFR 
part 1227. The specific procedures for reporting of covered misconduct 
and issuance of proposed and final suspension orders are further 
discussed below in the Section-by-Section Analysis. The Suspended 
Counterparty Program is intended to complement and support the risk 
management practices of the regulated entities. The Suspended 
Counterparty Program is not designed as

[[Page 63008]]

a comprehensive system for addressing the risks presented by fraud and 
other misconduct. However, FHFA will continue to evaluate the scope of 
the Suspended Counterparty Program and will consider expanding its 
coverage as the agency develops more experience with the program.

B. Authority for Suspended Counterparty Program

    The existing Suspended Counterparty Program involves two kinds of 
FHFA action. FHFA requires the regulated entities to submit reports to 
FHFA pursuant to specific criteria, and in appropriate cases, FHFA may 
issue suspension orders to the regulated entities directing them to 
cease or refrain from doing business with particular individuals or 
institutions for a specified period of time or permanently. Both kinds 
of agency action are authorized under provisions of the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992, as amended 
(Safety and Soundness Act).
    The reporting that is required under the Suspended Counterparty 
Program is within FHFA's authority under sections 1314 and 1313 of the 
Safety and Soundness Act. Section 1314(a) of the Safety and Soundness 
Act authorizes FHFA to require the regulated entities to submit regular 
reports on their activities and operations, as the Director considers 
appropriate. See 12 U.S.C. 4514(a). Section 1313(a)(2) of the Safety 
and Soundness Act authorizes FHFA to exercise such incidental powers as 
may be necessary in the supervision and regulation of each regulated 
entity. See 12 U.S.C. 4513(a)(2). In this case, FHFA is requiring each 
regulated entity to submit reports to FHFA on any individuals or 
institutions that are doing or have done business with the regulated 
entity and that meet specific criteria, in order to protect the safety 
and soundness of the regulated entities.
    The orders that would be issued under the Suspended Counterparty 
Program fall within FHFA's general supervisory authority over the 
regulated entities, and specifically its authority under sections 
1313B, 1319G, and 1313 of the Safety and Soundness Act. Section 1313B 
of the Safety and Soundness Act authorizes FHFA to establish standards, 
by regulation or guideline, for each regulated entity regarding 
prudential management of risks. See 12 U.S.C. 4513b. The Director may 
also require by order that the regulated entities take any action that 
will best carry out the purposes of that section. See 12 U.S.C. 
4513b(b)(2)(B)(iii). Section 1319G(a) of the Safety and Soundness Act 
authorizes FHFA to issue any regulations, guidelines, or orders 
necessary to ensure that the purposes of the Safety and Soundness Act 
and the charter acts are accomplished. See 12 U.S.C. 4526(a). Finally, 
section 1313(a)(2) of the Safety and Soundness Act authorizes FHFA to 
exercise such incidental powers as may be necessary in the supervision 
and regulation of each regulated entity. See 12 U.S.C. 4513(a)(2).
    FHFA has established standards under the existing Suspended 
Counterparty Program to mitigate the risk that a regulated entity will 
be harmed by an individual or institution with which it is doing or has 
done business that has committed fraud or other financial misconduct 
during a specified time period. FHFA reviews any reports submitted by 
the regulated entity on individuals or institutions that meet the 
specified criteria, as well as any information submitted by other 
regulated entities, and any response that the individual or institution 
chooses to submit. FHFA also reviews any referrals to the Suspended 
Counterparty Program submitted by FHFA's Office of Inspector General. 
In appropriate cases, FHFA will issue suspension orders to the 
regulated entities directing them to cease or refrain from doing 
business with the individuals or institutions for a specified period of 
time or permanently.

C. Relationship of Suspended Counterparty Program to Other Authorities 
and Actions

1. Federal Government-Wide Suspension and Debarment and Other 
Administrative Sanctions
    Although the Suspended Counterparty Program uses some terms and 
procedures that are the same as or similar to terms and procedures used 
in the Federal government-wide system for suspensions and debarments, 
the Suspended Counterparty Program is both different and separate from 
administrative sanctions that may be imposed by other agencies, and 
some of its terms and procedures are defined differently.
    The Suspended Counterparty Program was created to protect the 
safety and soundness of the regulated entities. A suspension order 
issued by FHFA under the Suspended Counterparty Program has no impact 
on a person's ability to do business directly with the Federal 
government (including FHFA itself), which is subject to a separate 
decision-making process. Conversely, a person that has been excluded 
from doing business with part or all of the Federal government may be 
able to continue to do business with the regulated entities. However, 
FHFA may consider administrative sanctions imposed by other agencies in 
determining whether FHFA should issue a suspension order.
2. Relationship to Other FHFA Authorities
    The Suspended Counterparty Program is not intended to take the 
place of any existing authority or process that FHFA might use to 
address fraud or other financial misconduct by individuals or 
institutions that have done or are doing business with the regulated 
entities, or any other safety and soundness issue. If FHFA receives 
information under the Suspended Counterparty Program that would be more 
appropriately dealt with through another administrative process, 
nothing in part 1227 would limit FHFA from choosing to do so. For 
example, FHFA has specific authority to suspend or remove an entity-
affiliated party in certain circumstances pursuant to section 1377(h) 
of the Safety and Soundness Act and subpart F of 12 CFR part 1209 
(Rules of Practice and Procedure). Other provisions of the Safety and 
Soundness Act allow FHFA to take a variety of different actions to 
ensure the safe and sound operation of the regulated entities.
3. Relationship to Other Action by a Regulated Entity
    The Suspended Counterparty Program is not intended to take the 
place of any actions that a regulated entity might use to address 
safety and soundness risks presented by fraud or other financial 
misconduct. Each regulated entity should continue to adopt and 
implement prudent measures to identify areas where fraud or financial 
misconduct may present a risk to the regulated entity, and to take all 
appropriate measures to address any such risks. However, regulated 
entities shall abide by FHFA's determinations under the Suspended 
Counterparty Program.

D. Due Process Considerations

    Suspension orders issued by FHFA under part 1227 are based on 
FHFA's supervisory authority to ensure the safe and sound operation of 
the regulated entities and to ensure compliance with appropriate 
prudential risk management standards. Because these authorities do not 
explicitly require hearings on the record for this type of 
determination, it is not necessary for FHFA to adhere to the specific 
procedural requirements for hearings under the Administrative Procedure 
Act. See 5 U.S.C. 554-558.

[[Page 63009]]

However, because a suspension order under the Suspended Counterparty 
Program could have a significant impact on the regulated entities and 
the individual or institution that is the subject of the order, the 
procedures under part 1227 provide that all affected parties shall 
receive notice of any proposed suspension order and an opportunity to 
respond before issuance of any final suspension order. A final 
suspension order issued by FHFA would be issued only after 
consideration of all available information.

III. Section-by-Section Analysis

A. Purpose--Sec.  1227.1

    Section 1227.1 of the interim final rule states that the purpose of 
part 1227 is to set forth the procedures FHFA follows under its 
Suspended Counterparty Program, the purpose of which is to protect the 
safety and soundness of the regulated entities. The procedures include 
a requirement that a regulated entity report to FHFA when it becomes 
aware that a person with whom it is doing or has done business has 
committed fraud or other financial misconduct within the specified time 
period in this part. The procedures set forth a process by which FHFA 
will issue suspension orders directing the regulated entities to cease 
or refrain from doing business with such persons and any affiliates 
thereof for a specified period of time or permanently. A suspension 
order is not intended to be, and may not be issued as, a form of 
punishment for the party affected.

B. Definitions--Sec.  1227.2

    Section 1227.2 sets forth definitions of various terms used in part 
1227. Specific definitions are discussed below where used in the 
applicable sections. Definitions of certain other terms used in part 
1227, such as Director and FHFA, that are also used throughout other 
FHFA regulations, are set forth in 12 CFR 1201.1.

C. Scope of Suspension Orders--Sec.  1227.3

    Section 1227.3 provides that a suspending official may issue a 
final suspension order to the regulated entities directing them to 
cease or refrain from engaging in any covered transactions with a 
particular person or any affiliates thereof for a specified period of 
time or permanently, pursuant to the requirements of part 1227. Section 
1227.3 also provides that any actions taken under part 1227 are 
independent of, and have no effect on, any other actions that may be 
taken by either FHFA or by a regulated entity.
    A ``suspending official'' is defined in Sec.  1227.2 as the 
Director of FHFA, or any other FHFA official with delegated authority 
to sign an order imposing suspension. ``Person'' is defined broadly in 
Sec.  1227.2 to mean an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, organization, or other entity. ``Suspension'' is defined in 
Sec.  1227.2 as an action taken by a suspending official pursuant to a 
final suspension order that requires a regulated entity to cease or 
refrain from engaging in any covered transactions with a person or any 
affiliates thereof for a specified period of time or permanently.
    A ``covered transaction'' is defined in Sec.  1227.2 as a contract, 
agreement or financial or business relationship between a regulated 
entity and a person or any affiliates thereof. FHFA may provide 
additional guidance to the regulated entities from time to time on 
whether a particular kind of transaction is to be treated as a covered 
transaction. FHFA considered including in the rule more explicit 
standards for the kinds of transactions that should be treated as 
covered transactions. For example, the interim final rule could be 
revised to incorporate a definition of ``lower tier covered 
transactions'' similar to the definition used in the government-wide 
debarment and suspension rules. Such an approach could require the 
regulated entities to develop procedures and contractual requirements 
that will ensure that a suspended party will not continue to do 
business indirectly with a regulated entity through lower tier covered 
transactions, such as by serving as a subcontractor or service provider 
for a person that does business directly with the regulated entity. 
FHFA invites comment on whether such an approach would further the 
goals of the Suspended Counterparty Program and on any operational 
issues such an approach may present for the regulated entities.

D. Regulated Entity Reports on Covered Misconduct--Sec.  1227.4

    Section 1227.4(a) requires a regulated entity to submit a report to 
FHFA when the regulated entity becomes aware that a person or any 
affiliates thereof with which the regulated entity is engaging or has 
engaged in a covered transaction within the past three years has 
engaged in covered misconduct. A regulated entity is considered to be 
aware of covered misconduct when the regulated entity has reliable 
information that such misconduct has occurred.
    ``Covered misconduct'' is defined in Sec.  1227.2 as any conviction 
or administrative sanction within the past three years if the basis of 
such action involved fraud, embezzlement, theft, conversion, forgery, 
bribery, perjury, making false statements or claims, tax evasion, 
obstruction of justice, or any similar offense that took place in 
connection with a mortgage, mortgage business, mortgage securities, or 
other lending product.
    The terms ``conviction'' and ``administrative sanction'' are 
defined broadly in Sec.  1227.2 and are intended to encompass 
government actions that include an opportunity for a person to contest 
the basis of the sanction or conviction. FHFA will only consider 
instances of covered misconduct that are supported by factual 
determinations by another government entity, whether in the form of a 
conviction or administrative sanction. The regulated entities are not 
required to engage in any independent investigation of the underlying 
conduct. The definition of ``administrative sanction'' refers 
specifically to several different types of administrative sanctions. 
FHFA invites comment on whether additional types of administrative 
sanctions, such as enforcement actions by other financial institution 
regulatory agencies, should be included in this definition.
    The definition of ``covered misconduct'' further provides that FHFA 
may impute conduct among affiliates. The imputation of conduct is 
necessary to ensure that the regulated entities are protected from the 
risk of fraud and other financial misconduct by all persons that may 
have been involved in or otherwise responsible for the covered 
misconduct.
    The interim final rule does not specify the internal procedures 
that each regulated entity must establish to ensure compliance with the 
reporting requirement. FHFA expects each regulated entity to have 
procedures in place to ensure that any relevant information will be 
gathered and reviewed by appropriate personnel at the regulated entity 
to determine whether it is necessary to submit a report on a particular 
person to FHFA.
    Paragraphs (b) and (c) set forth the required content and timing of 
reports of covered misconduct submitted to FHFA.
    The submission of a report under the Suspended Counterparty Program 
does not prevent a regulated entity from taking appropriate action to 
address any risks presented by the person in question. The regulated 
entity should not delay any appropriate risk-reduction measures pending 
a determination by

[[Page 63010]]

FHFA under the Suspended Counterparty Program.

E. Proposed Suspension Order--Sec.  1227.5

    Section 1227.5(a) makes clear that the suspending official may 
issue a proposed suspension based on any source of information that 
meets the criteria for suspending a person. Section 1227.5(b) sets 
forth the grounds for issuance of a proposed suspension order. A 
suspending official may issue a proposed suspension order with respect 
to a particular person and any affiliates thereof if the suspending 
official determines that there is evidence that: (1) The regulated 
entity is engaging or has engaged in a covered transaction with the 
person or affiliates thereof within the past three years and the person 
or affiliates thereof have engaged in covered misconduct; and (2) the 
covered misconduct is of a type that would be likely to cause 
significant financial or reputational harm to a regulated entity or 
otherwise threaten the safe and sound operation of a regulated entity.
    Paragraph (c) requires the suspending official to provide written 
notice to each person and any affiliates thereof for whom suspension is 
proposed, and to provide a copy of such notice to the regulated entity 
and to all of the other regulated entities. Paragraph (d) sets forth 
the required content of such notices. Paragraph (e) states the method 
of sending the notice to the affected person and any affiliates 
thereof. Paragraph (f) describes the required timing and content of any 
response from the affected person and any affiliates thereof (referred 
to as ``respondents'').
    Paragraph (g) describes the required timing and content of any 
response from the regulated entities. The regulated entities are 
required to submit any information that would indicate that suspending 
a particular person or affiliates thereof could reasonably be expected 
to have a negative financial impact or other significant adverse effect 
on the financial or operating performance of the regulated entity. The 
regulated entities are also required to submit information on any 
existing contractual relationships with the person or affiliates 
thereof for which the regulated entities might request a limitation or 
qualification. A regulated entity may also submit any other information 
that it believes would be relevant to the proposed suspension 
determination, such as recommendations for alternatives to suspension 
that could mitigate the risks presented by engaging in covered 
transactions with the person or affiliates thereof, or recommendations 
for limitations or qualifications on the scope of the proposed 
suspension.
    The interim final rule does not prohibit a regulated entity from 
taking independent action to limit its exposure to a person and any 
affiliate thereof that has been proposed for suspension. A regulated 
entity may conduct its own assessment of a person and its affiliates 
that is brought to the attention of the regulated entity through the 
Suspended Counterparty Program and take any action that it determines 
is appropriate. However, a regulated entity should not take any such 
action based solely on a notice of proposed suspension that is received 
from FHFA.

F. Final Suspension Order--Sec.  1227.6

    Section 1227.6(a) sets forth the grounds for issuance of a final 
suspension order. A suspending official may issue a final suspension 
order with respect to a respondent if, based solely on the written 
record, the suspending official determines that there is adequate 
evidence that: (1) The regulated entity is engaging or has engaged in a 
covered transaction with the respondent within the past three years, 
and the respondent engaged in covered misconduct; and (2) the covered 
misconduct is of a type that would be likely to cause significant 
financial or reputational harm to a regulated entity or otherwise 
threaten the safe and sound operation of a regulated entity. As FHFA 
develops more experience with the Suspended Counterparty Program, FHFA 
may consider expanding the grounds on which a suspension may be issued.
    Paragraph (b) provides that the written record shall include any 
material submitted by the respondent or by the regulated entities, as 
well as any other material that was considered by the suspending 
official in making the final determination, including any information 
related to the factors in paragraph (c) discussed below. In addition, 
FHFA may independently obtain information relevant to the suspension 
determination for inclusion in the written record. Because any 
suspension would be based on a conviction or administrative sanction, 
the suspending official may proceed solely on the basis of the written 
record. Limiting the extent to which a person may appeal under Sec.  
1227.8 is appropriate in these circumstances because an impartial fact-
finder has already determined the facts underlying the conviction or 
administrative sanction. However, FHFA will only proceed on this basis 
if the resulting conviction, administrative sanction order or other 
documents clearly set forth the underlying factual basis for the 
action.
    Paragraph (c) sets forth a non-exclusive list of factors that a 
suspending official may consider in determining whether to issue a 
final suspension order where the grounds for suspension are satisfied. 
These factors may also provide guidance on the kinds of evidence that 
would be relevant to a determination on a suspension order if submitted 
by a respondent. Many of the factors listed are intended to focus 
attention on particular issues that may be relevant to assessing the 
likelihood that continuing to do business with a particular respondent 
will result in harm to the safety and soundness of a regulated entity. 
Other factors are intended to highlight issues that may be relevant in 
determining the extent to which the conduct of an individual should be 
attributed to the individual's employer or organization, and also the 
extent to which misconduct by an organization should be attributed to 
the owners, partners and managers of the organization.
    Each regulated entity must abide by the terms of any final 
suspension order that the regulated entity receives. In general, a 
final suspension order will prohibit a regulated entity from entering 
into or extending any contract, agreement, or financial or business 
relationship with a suspended person. A regulated entity should 
consider whether to terminate any existing contractual relationship 
with the suspended person, taking into account possible litigation 
risks. The regulated entities can facilitate this by including terms in 
contracts going forward that provide for termination if FHFA determines 
that a final order of suspension is appropriate.
    Paragraph (d) provides that the suspending official shall make a 
determination on whether to issue a final suspension order with respect 
to the respondent within 30 calendar days of the deadline given for the 
respondent's response in the notice of proposed suspension order. The 
suspending official may extend this deadline if necessary, in which 
case the suspending official shall provide written notice of the 
extension to the respondent.
    Paragraph (e) provides that the suspending official shall promptly 
notify the respondent, the regulated entity, and all of the other 
regulated entities of any determination that a final suspension order 
should not be issued. A determination by FHFA that a final suspension 
order should not be issued does not prevent a regulated entity from

[[Page 63011]]

taking any action that it deems appropriate with respect to the person, 
even if the action is based on the same facts that were considered by 
FHFA.
    Paragraph (f)(1) provides that if the suspending official makes a 
final determination to suspend the respondent, the suspending official 
shall issue a final suspension order applicable to each regulated 
entity. Paragraph (f)(2) sets forth the required content of final 
suspension orders. In most cases, the final suspension orders for each 
regulated entity will be identical. However, in appropriate cases, the 
suspending official may tailor individual suspension orders to address 
issues that may be particular to one or more regulated entities. For 
example, if one regulated entity relies on a particular service 
provider for a significant number of transactions, it may be 
appropriate to delay or otherwise modify a suspension order to enable 
that regulated entity to smoothly transition to other service 
providers.
    The suspending official generally has wide discretion to determine 
the appropriate scope of the final suspension order, including any 
limitations or qualifications that should apply. FHFA expects that the 
regulated entities will submit responses to proposed suspensions that 
describe with particularity any adverse effects that the regulated 
entity may experience if a respondent is suspended. The suspending 
official may choose to adjust the scope of the final suspension order 
to address such concerns, or the suspending official may determine that 
the safety and soundness of the regulated entities would be better 
served by proceeding with a final suspension order that does not 
include such limitations or qualifications.
    Paragraph (f)(3) requires the suspending official to promptly 
notify the respondent of the final suspension order issued with respect 
to the respondent. Paragraph (f)(4) sets forth the required contents of 
the notice. A separate notice to the regulated entities is not required 
because the final suspension order itself will be directed to each 
regulated entity and will serve as notice of the order's terms.
    Paragraph (g) provides that a final suspension order shall take 
effect on the date specified in the order, which shall be at least 45 
calendar days after the date on which the order is signed by the 
suspending official. This delay in the effective date of a final 
suspension order is intended to provide the respondent with an 
opportunity to appeal to the Director as provided in Sec.  1227.7.

G. Appeal to the Director--Sec.  1227.7

    Section 1227.7(a) provides that a respondent who is subject to a 
final suspension order may submit an appeal to the Director within 30 
calendar days after the date the order was signed. In cases where the 
Director signed the final suspension order as the suspending official, 
the respondent would not be able to revisit the determination by 
submitting an appeal under this section.
    Paragraph (b) provides that if the Director does not take action on 
an appeal prior to the effective date of the order, the order shall 
take effect as if it had been affirmed by the Director, on the date 
specified in the order. Paragraph (c) provides that the Director's 
written final decision on an appeal shall be the final agency action, 
and if the Director does not take action on an appeal, the order shall 
be the final agency action.
    Paragraph (d) provides that in order to fulfill the requirement to 
exhaust administrative remedies, a respondent must appeal a final 
suspension order to the Director as provided in this section prior to 
seeking judicial review of such order. This provision is intended to 
ensure that the Director has an opportunity to review each action that 
might later be challenged in court. If a respondent fails to appeal a 
final suspension order to the Director, no further appeals or 
challenges will be available to the respondent.

H. Posting of Final Suspension Orders--Sec.  1227.8

    Section 1227.8 requires FHFA to publish on its Web site all final 
suspension orders issued by FHFA on the effective date of the order. 
Maintaining a publicly accessible list of all persons who have been 
suspended by FHFA will provide a readily accessible reference tool for 
the regulated entities and persons who may do business with them. FHFA 
will remove from the Web site all references to the suspension of a 
person and any affiliates thereof at such time as the suspension 
expires or is otherwise vacated.

I. Request for Reconsideration--Sec.  1227.9

    Section 1227.9 provides that a suspended person may submit a 
request to the Director for reconsideration of a final suspension order 
at any time after the expiration of a 12-month period from the date the 
final suspension order took effect, but no such request may be made 
within 12 months of a previous request for reconsideration. The 
opportunity for reconsideration is limited to new information that may 
indicate that the suspended person's engaging in covered transactions 
with a regulated entity would no longer present a risk of significant 
financial or reputational harm or threat to the safe and sound 
operation of a regulated entity.

J. Exception to Final Suspension Order in Effect--Sec.  1227.10

    Section 1227.10(a) provides that a regulated entity may request an 
exception from a final suspension order in effect that is applicable to 
the regulated entity in order to allow it to engage in a particular 
covered transaction with a suspended person and any affiliates thereof. 
A request for an exception shall state any reasons supporting the 
exception, as well as any steps the regulated entity plans to take to 
mitigate any risks presented by doing business with the suspended 
person. An exception for a particular covered transaction may not be 
requested by a suspended person or any affiliates thereof.
    Paragraph (b) provides that exceptions may be approved or denied in 
the discretion of the suspending official, and any such decision is not 
subject to further appeal. Exceptions may be approved for reasons 
similar to any of the reasons given above for which the suspending 
official might limit or qualify the scope or effect of the final 
suspension order itself under Sec.  1227.6(f)(2)(iv).
    Paragraph (c) provides that FHFA shall provide written notice in a 
timely manner to the regulated entity, the suspended person and any 
affiliates thereof, and the other regulated entities of any exception 
approved for a particular covered transaction. The notice to the other 
regulated entities is intended to ensure equitable treatment of all of 
the regulated entities.

IV. Notice and Public Participation

    FHFA has determined under 5 U.S.C. 553(b)(A) and (d)(3) that a 
prior notice-and-comment period, and delayed effective date, are 
unnecessary for this interim final rule. First, in part, this rule 
pertains to the practices and procedures of the agency. Further, FHFA 
has already implemented procedures for the Suspended Counterparty 
Program, pursuant to its authority to ensure that each regulated entity 
operates in a safe and sound manner. Because that program is already 
operating, it is in the interest of the regulated entities and the 
members of the public who do business with them to have the benefit of 
immediately effective procedures and standards provided in this rule. 
However, because FHFA believes that

[[Page 63012]]

public comments are valuable, it invites comments on all aspects of the 
interim final rule, and will consider all comments received on or 
before December 23, 2013 in adopting a final regulation.

V. Consideration of Differences Between the Banks and the Enterprises

    Section 1313(f) of the Safety and Soundness Act, as amended, 
requires the Director, when promulgating regulations relating to the 
Banks, to consider the differences between Fannie Mae and Freddie Mac 
(collectively, the Enterprises) and the Banks with respect to: the 
Banks' cooperative ownership structure; mission of providing liquidity 
to members; affordable housing and community development mission; 
capital structure; joint and several liability; and any other 
differences the Director considers appropriate. See 12 U.S.C. 4513(f). 
In preparing this interim final rule, the Director considered the 
differences between the Banks and the Enterprises as they relate to the 
above factors, and determined that the Banks should not be treated 
differently from the Enterprises for purposes of the interim final 
rule. Nonetheless, FHFA requests comments on whether these factors 
should result in a revision of the interim final rule as it relates to 
the Banks.

VI. Paperwork Reduction Act

    The interim final rule does not contain any information collection 
requirement that requires the approval of the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et 
seq.). Therefore, FHFA has not submitted any information to OMB for 
review.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the 
interim final rule under the Regulatory Flexibility Act. The General 
Counsel of FHFA certifies that the interim final rule is not likely to 
have a significant economic impact on a substantial number of small 
entities because the regulation applies primarily to Fannie Mae, 
Freddie Mac, and the 12 Banks, which are not small entities for 
purposes of the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1227

    Administrative practice and procedure, Federal home loan banks, 
Government-sponsored enterprises, Reporting and recordkeeping 
requirements.

Authority and Issuance

0
Accordingly, for the reasons stated in the SUPPLEMENTARY INFORMATION, 
under the authority of 12 U.S.C. 4513, 4513b, 4514, and 4526, FHFA is 
amending subchapter B of Chapter XII of Title 12 of the Code of Federal 
Regulations by adding part 1227 to subchapter B to read as follows:

PART 1227--SUSPENDED COUNTERPARTY PROGRAM

Subpart A--General
Sec.
1227.1 Purpose.
1227.2 Definitions.
1227.3 Scope of suspension orders.
1227.4 Regulated entity reports on covered misconduct.
1227.5 Proposed suspension order.
1227.6 Final suspension order.
1227.7 Appeal to the Director.
1227.8 Posting of final suspension orders.
1227.9 Request for reconsideration.
1227.10 Exception to final suspension order in effect.

Subpart B--[Reserved]

    Authority: 12 U.S.C. 4513, 4513b, 4514, 4526.

Subpart A--General


Sec.  1227.1  Purpose.

    This part sets forth the procedures FHFA follows under its 
Suspended Counterparty Program, the purpose of which is to protect the 
safety and soundness of the regulated entities. The procedures require 
the regulated entities to submit reports when they become aware that a 
person with whom they have engaged or are engaging in a covered 
transaction within the past three (3) years has engaged in covered 
misconduct. The procedures set forth a process for FHFA to issue 
suspension orders directing the regulated entities to cease or refrain 
from engaging in covered transactions with such persons and any 
affiliates thereof for a specified period of time or permanently. A 
suspension order is not intended to be, and may not be issued as, a 
form of punishment for the suspended person. The procedures include 
options for:
    (a) Appeal of a final suspension order to the Director;
    (b) Request for reconsideration of a final suspension order after 
twelve (12) months have elapsed; and
    (c) Request for an exception to a final suspension order in effect 
in order to engage in a particular covered transaction with the 
suspended person.


Sec.  1227.2  Definitions.

    For purposes of this part:
    Administrative sanction means debarment or suspension imposed by 
any Federal agency, or any similar administrative action that has the 
effect of limiting the ability of a person to do business with a 
Federal agency, including Limited Denials of Participation, Temporary 
Denials of Participation, or settlements of proposed administrative 
sanctions if the terms of the settlement restrict the person's ability 
to do business with the Federal agency in question.
    Affiliate means a party that either controls or is controlled by 
another person, whether directly or indirectly, including one or more 
persons that are controlled by the same third person.
    Conviction means:
    (1) A judgment or any other determination of guilt of a criminal 
offense by any court of competent jurisdiction, whether entered upon a 
verdict or plea; or
    (2) Any other resolution that is the functional equivalent of a 
judgment of guilt of a criminal offense, including probation before 
judgment and deferred prosecution. A disposition without the 
participation of the court is the functional equivalent of a judgment 
only if it includes an admission of guilt.
    Covered misconduct means:
    (1) Any conviction or administrative sanction within the past three 
(3) years if the basis of such action involved fraud, embezzlement, 
theft, conversion, forgery, bribery, perjury, making false statements 
or claims, tax evasion, obstruction of justice, or any similar offense, 
in each case in connection with a mortgage, mortgage business, mortgage 
securities or other lending product.
    (2) FHFA may impute covered misconduct among affiliates as follows:
    (i) Conduct imputed from an individual to an organization. FHFA may 
impute the covered misconduct of any officer, director, shareholder, 
partner, employee, or other individual associated with an organization, 
to that organization when the conduct occurred in connection with the 
individual's performance of duties for or on behalf of that 
organization, or with the organization's knowledge, approval, or 
acquiescence. The organization's

[[Page 63013]]

acceptance of the benefits derived from the conduct is evidence of 
knowledge, approval, or acquiescence.
    (ii) Conduct imputed from an organization to an individual, or 
between individuals. FHFA may impute the covered misconduct of any 
organization to an individual, or from one individual to another 
individual, if the individual to whom the conduct is imputed either 
participated in, had knowledge of, or had reason to know of the 
conduct.
    (iii) Conduct imputed from one organization to another 
organization. FHFA may impute the covered misconduct of one 
organization to another organization when the conduct occurred in 
connection with a partnership, joint venture, joint application, 
association, or similar arrangement, or when the organization to whom 
the conduct is imputed has the power to direct, manage, control, or 
influence the activities of the organization responsible for the 
conduct. Acceptance of the benefits derived from the conduct is 
evidence of knowledge, approval, or acquiescence and hence is a basis 
for imputation of conduct.
    Covered transaction means a contract, agreement, or financial or 
business relationship between a regulated entity and a person and any 
affiliates thereof.
    Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, organization, or other entity.
    Respondent means a person and any affiliate thereof that is the 
subject of a proposed or final suspension order.
    Suspending official means the Director, or any other FHFA official 
with delegated authority to sign proposed and final suspension orders 
and their accompanying notices.
    Suspension means an action taken by a suspending official pursuant 
to a final suspension order that requires a regulated entity to cease 
or refrain from engaging in any covered transactions with a person and 
any affiliates thereof for a specified period of time or permanently.


Sec.  1227.3  Scope of suspension orders.

    (a) General. A suspending official may issue a final suspension 
order to the regulated entities directing them to cease or refrain from 
engaging in any covered transactions with a particular person and any 
affiliates thereof for a specified period of time or permanently, 
pursuant to the requirements of this part.
    (b) No effect on other actions by FHFA. Nothing in this part shall 
limit the authority of FHFA to pursue any other regulatory or 
supervisory action with respect to any regulated entity or any other 
person and any affiliates thereof, whether instead of or in addition to 
any action taken under this part.
    (c) No effect on other actions by a regulated entity. Nothing in 
this part shall limit the authority of any regulated entity to take any 
action it determines appropriate to address risks from any person and 
any affiliates thereof with which it engages in covered transactions.


Sec.  1227.4  Regulated entity reports on covered misconduct.

    (a) General. A regulated entity shall submit a report to FHFA when 
the regulated entity becomes aware that a person or any affiliates 
thereof with which the regulated entity is engaging or has engaged in a 
covered transaction within the past three (3) years has engaged in 
covered misconduct. A regulated entity is aware of covered misconduct 
when the regulated entity has reliable information that such misconduct 
has occurred.
    (b) Content of reports. Each report on covered misconduct shall:
    (1) Include sufficient information for FHFA to identify the person 
or persons that are the subject of the report, as well as any 
affiliates thereof if such affiliates are known to the regulated 
entity;
    (2) Describe the nature and extent of any covered transaction that 
the regulated entity has or had with any persons and any affiliates 
thereof identified in the report; and
    (3) Include a description of the covered misconduct, including the 
date of the covered misconduct, documents evidencing the covered 
misconduct if in the possession of the regulated entity, and any other 
relevant information that the regulated entity chooses to submit.
    (c) Timing of reports. (1) A regulated entity shall submit a report 
to FHFA on covered misconduct no later than ten (10) business days 
after the regulated entity becomes aware of such misconduct, even if 
the regulated entity lacks sufficient information to submit a complete 
report.
    (2) A regulated entity may supplement the submission of any covered 
misconduct report by submitting additional relevant information to FHFA 
at any time.


Sec.  1227.5  Proposed suspension order.

    (a) A suspending official may base a proposed suspension order upon 
evidence of covered misconduct from any of the following sources:
    (1) A required report submitted by a regulated entity;
    (2) A referral submitted by FHFA's Office of Inspector General; or
    (3) Any other source of information.
    (b) Grounds for issuance. A suspending official may issue a 
proposed suspension order with respect to a particular person and any 
affiliates thereof if the suspending official determines that there is 
evidence that:
    (1) The regulated entity is engaging or engaged in a covered 
transaction with the person or any affiliates thereof within the past 
three (3) years and the person or any affiliates thereof has engaged in 
covered misconduct, which evidence may include copies of any order or 
other documents documenting a conviction or administrative sanction for 
such conduct; and
    (2) The covered misconduct is of a type that would be likely to 
cause significant financial or reputational harm to a regulated entity 
or otherwise threaten the safe and sound operation of a regulated 
entity.
    (c) Notice required. If a suspending official determines that 
grounds exist under paragraph (b) of this section for issuance of a 
proposed suspension order with respect to a particular person and any 
affiliates thereof, the suspending official may issue a written notice 
of proposed suspension to the person and any affiliates thereof, and 
shall provide a copy of such notice to the regulated entity and to all 
of the other regulated entities.
    (d) Content of notice. The notice of proposed suspension shall 
include:
    (1) The time period during which the suspension will apply;
    (2) A statement of the suspending official's proposed suspension 
determination and supporting grounds;
    (3) The proposed suspension order;
    (4) Instructions on how to respond; and
    (5) The date by which any response must be received, which must be 
at least thirty (30) calendar days after the date on which the notice 
is sent.
    (e) Method of sending notice. The suspending official shall send 
the notice of proposed suspension to the last known street address, 
facsimile number, or email address of the person, the person's counsel, 
any affiliates of the person, and the counsel for those affiliates, if 
known, or an agent for service of process.
    (f) Response from respondent.--(1) Timing of response. Any response 
from the affected person and any affiliates thereof must be submitted 
to FHFA within the time period specified in the notice. If a response 
is submitted after the specified deadline, the suspending official may 
consider or disregard such

[[Page 63014]]

response, in the suspending official's discretion.
    (2) Content of response. The response shall identify:
    (i) Any information and argument in opposition to the proposed 
suspension;
    (ii) Any specific facts that contradict the statements contained in 
the notice of proposed suspension. A general denial is insufficient to 
raise a genuine dispute over facts material to the suspension;
    (iii) All criminal and civil proceedings not included in the notice 
of proposed suspension that grew out of facts relevant to the bases for 
the proposed suspension stated in such notice;
    (iv) All existing, proposed, or prior exclusions under regulations 
implementing Executive Order 12549 and all similar actions taken by 
Federal, state, or local agencies, including administrative agreements 
that affect only those agencies; and
    (v) The names and identifying information for any affiliates of the 
affected person.
    (g) Response from regulated entities.--(1) Timing of response. Any 
response from the regulated entities must be submitted to FHFA within 
the time period specified in the notice. If a response is submitted 
after the specified deadline, the suspending official may consider or 
disregard such response, in the suspending official's discretion.
    (2) Content of response. (i) The response shall include:
    (A) Any information that would indicate that suspension of the 
person in question could reasonably be expected to have a negative 
financial impact or other significant adverse effect on the financial 
or operating performance of the regulated entity; and
    (B) Any existing contractual relationship with the person in 
question for which the regulated entity might request a limitation or 
qualification.
    (ii) The response may include any other information that the 
regulated entity believes would be relevant to the proposed suspension 
determination, including but not limited to:
    (A) Any information related to the factual basis for the proposed 
suspension;
    (B) Any information about other known affiliates of the person;
    (C) Recommendations for alternatives to suspension that could 
mitigate the risks presented by engaging in covered transactions with 
the respondent; and
    (D) Recommendations for limitations or qualifications on the scope 
of the proposed suspension.


Sec.  1227.6  Final suspension order.

    (a) Grounds for issuance. A suspending official may issue a final 
suspension order with respect to a respondent proposed for suspension 
if, based solely on the written record, the suspending official 
determines that there is adequate evidence that:
    (1) The regulated entity is engaging or has engaged in a covered 
transaction within the past three (3) years with the respondent, and 
the respondent engaged in covered misconduct; and
    (2) The covered misconduct is of a type that would be likely to 
cause significant financial or reputational harm to a regulated entity 
or otherwise threaten the safe and sound operation of a regulated 
entity.
    (b) Written record. The written record shall include any material 
submitted by the respondent and any material submitted by the regulated 
entities, as well as any other material that was considered by the 
suspending official in making the final determination, including any 
information related to the factors in paragraph (c) of this section. 
FHFA may independently obtain information relevant to the suspension 
determination for inclusion in the written record.
    (c) Factors that may be considered by the suspending official. In 
determining whether or not to issue a final suspension order with 
respect to the respondent where the grounds for suspension are 
satisfied, the suspending official may also consider any factors that 
the suspending official determines may be relevant in light of the 
circumstances of the particular case, including but not limited to:
    (1) The actual or potential harm or impact that results or may 
result from the covered misconduct;
    (2) The frequency of incidents or duration of the covered 
misconduct;
    (3) Whether there is a pattern of prior covered misconduct;
    (4) Whether and to what extent the respondent planned, initiated, 
or carried out the covered misconduct;
    (5) Whether the respondent has accepted responsibility for the 
covered misconduct and recognizes its seriousness;
    (6) Whether the respondent has paid or agreed to pay all criminal, 
civil and administrative penalties or liabilities for the covered 
misconduct, including any investigative or administrative costs 
incurred by the government, and has made or agreed to make full 
restitution;
    (7) Whether the covered misconduct was pervasive within the 
respondent's organization;
    (8) The kind of positions held by the individuals involved in the 
covered misconduct;
    (9) Whether the respondent's organization took appropriate 
corrective action or remedial measures, such as establishing ethics 
training and implementing programs to prevent recurrence of the covered 
misconduct;
    (10) Whether the respondent brought the covered misconduct to the 
attention of the appropriate government agency in a timely manner;
    (11) Whether the respondent has fully investigated the 
circumstances surrounding the covered misconduct and, if so, made the 
result of the investigation available to the suspending official;
    (12) Whether the respondent had effective standards of conduct and 
internal control systems in place at the time the covered misconduct 
occurred;
    (13) Whether the respondent has taken appropriate disciplinary 
action against the individuals responsible for the covered misconduct; 
or
    (14) Whether the respondent has had adequate time to eliminate the 
circumstances within the organization that led to the covered 
misconduct.
    (d) Deadline for decision. The suspending official shall make a 
determination on whether to issue a final suspension order with respect 
to the respondent within thirty (30) calendar days of the deadline 
given for the respondent's response in the notice of proposed 
suspension, unless the suspending official notifies the respondent in 
writing that additional time is needed.
    (e) Determination not to issue final suspension order. If the 
suspending official determines that suspension is not appropriate with 
respect to the respondent, the suspending official shall provide prompt 
written notice of that determination to the respondent, the regulated 
entity, and all of the other regulated entities.
    (f) Issuance of final suspension order.--(1) General. If the 
suspending official makes a final determination to suspend the 
respondent, the suspending official shall issue a final suspension 
order to each regulated entity regarding the respondent.
    (2) Content of final suspension order. A final suspension order 
shall include:
    (i) A statement of the suspension determination and supporting 
grounds, including a discussion of any relevant information submitted 
by the respondent or regulated entities;
    (ii) Identification of each person and any affiliates thereof to 
which the suspension applies;
    (iii) A description of the scope of the suspension, including the 
time period to which the suspension applies; and
    (iv) A description of any limitations or qualifications that apply 
to the scope of the suspension, including

[[Page 63015]]

modification of the conduct of covered transactions that may be engaged 
in with the respondent.
    (3) Notice to respondent required. The suspending official shall 
provide prompt written notice to the respondent of the final suspension 
order issued to the regulated entities with respect to such respondent.
    (4) Content of notice. The notice of a final suspension order shall 
include:
    (i) A statement of the suspension determination and supporting 
grounds, including a discussion of any relevant information submitted 
by the respondent; and
    (ii) A copy of the final suspension order.
    (g) Effective date. A final suspension order shall take effect on 
the date specified in the order, which shall be at least forty-five 
(45) calendar days after the date on which the order is signed by the 
suspending official.


Sec.  1227.7  Appeal to the Director.

    (a) Opportunity to appeal. A respondent may submit an appeal to the 
Director within thirty (30) calendar days after the date a final 
suspension order has been signed. If the Director signed the final 
suspension order as the suspension official, the respondent has no 
appeal right under this section. The appeal shall be accompanied by a 
written brief specifically identifying the respondent's objections to 
the final suspension order and the supporting reasons for such 
objections.
    (b) Decision on appeal. The Director shall issue a written final 
decision on an appeal of a final suspension order based on the record 
submitted by the suspending official, together with any material 
submitted with an appeal. The Director may affirm, vacate or amend the 
suspension, or remand to the suspending official for further 
proceedings, in the discretion of the Director. If the Director does 
not take action on an appeal prior to the effective date of the order, 
the order shall take effect as if it had been affirmed by the Director, 
on the date specified in the order.
    (c) Final agency action. The written final decision of the Director 
on an appeal of a final suspension order shall be the final agency 
action. If the Director does not take action on an appeal prior to the 
effective date of the order, the order shall be the final agency 
action.
    (d) Exhaustion of administrative remedies. In order to fulfill the 
requirement to exhaust administrative remedies, a respondent must 
appeal a final suspension order to the Director as provided in this 
section prior to seeking judicial review of such order.


Sec.  1227.8  Posting of final suspension orders.

    (a) Required posting. FHFA will publish on its Web site all final 
suspension orders issued by FHFA on the effective date of the order.
    (b) Content of posting. Each posting on FHFA's Web site shall 
include:
    (1) The full name (where available) of each suspended person and 
any affiliates thereof subject to the final suspension order, in 
alphabetical order;
    (2) A description of the time period for which the suspension 
applies; and
    (3) A copy of each final suspension order applicable to the person 
and any affiliates thereof.
    (c) Removal of names. FHFA will remove from the Web site all 
references to the suspension of a person and any affiliates thereof at 
such time as the suspension expires or is otherwise vacated.


Sec.  1227.9  Request for reconsideration.

    (a) Time period for request. A suspended person may submit a 
request to the Director for reconsideration of a final suspension order 
at any time after the expiration of a twelve (12)-month period from the 
date the order took effect, but no such request may be made within 
twelve (12) months of a previous request for reconsideration from such 
person.
    (b) Content of request. A request for reconsideration must be 
submitted in writing and state the specific grounds for relief from the 
final suspension order, which shall be limited to any new information 
that may indicate that engaging in covered transactions with a 
regulated entity would no longer present a risk of significant 
financial or reputational harm or threat to the safe and sound 
operation of a regulated entity.
    (c) Decision on request. The Director may approve a request for 
reconsideration if the Director determines that engaging in covered 
transactions with a regulated entity is no longer likely to result in 
significant financial or reputational harm to a regulated entity or 
otherwise threaten the safe and sound operation of a regulated entity. 
The Director will inform the requestor of the decision on the request 
for reconsideration in a timely manner. A decision on a request for 
reconsideration shall not constitute an appealable order.


Sec.  1227.10  Exception to final suspension order in effect.

    (a) Request for exception. A regulated entity to which a final 
suspension order in effect is applicable may request an exception from 
such order to allow it to engage in a particular covered transaction 
with a suspended person and any affiliates thereof. Any such request 
shall clearly state any reasons supporting an exception, as well as any 
steps the regulated entity will take to mitigate any risks presented by 
the exception. An exception may not be requested by a suspended person 
or any affiliates thereof.
    (b) Decision on exception. A suspending official may approve an 
exception from a final suspension order in effect to permit a regulated 
entity to engage in a particular covered transaction with a suspended 
person and any affiliates thereof for reasons consistent with those for 
which the suspending official may limit or qualify the scope or effect 
of a final suspension order under Sec.  1227.6(f)(2)(iv) of this part. 
The decision on a request for an exception shall not constitute an 
appealable order.
    (c) Notice required. FHFA shall provide written notice in a timely 
manner to the regulated entity, the suspended person and any affiliates 
thereof, and the other regulated entities of any exception approved for 
a particular covered transaction.

    Dated: October 15, 2013.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2013-24730 Filed 10-22-13; 8:45 am]
BILLING CODE 8070-01-P