Federal National Mortgage Association; Continuation of Regulations for Book-Entry Securities

SUMMARY: The final rule continues in effect without change 24 CFR 81.41

through 81.49, the book entry provisions of the Secretary's regulations

governing the Federal National Mortgage Association (Fannie Mae). This

final rule authorizes the issuance and trading in book-entry form of

mortgage-backed and debt securities of Fannie Mae. The Federal Housing

Enterprises Financial Safety and Soundness Act of 1992 (``the 1992

Act'') provides for a transition period during which all rules

promulgated by the Secretary under the Fannie Mae Charter Act prior to

October 28, 1992, are to remain in effect. Under the 1992 Act, the

transition period expires November 28, 1994, which is 18 months

following the appointment of the Director of the Office of Federal

Housing Enterprises Oversight. Today's action is an emergency

regulation to continue the existing book-entry provisions of the

regulations in order to avoid disruption to Fannie Mae's continued

authority for book-entry issuance and trading of Fannie Mae securities.

EFFECTIVE DATE: Effective November 28, 1994, 24 CFR part 81, subpart E,

continues in effect.

FOR FURTHER INFORMATION CONTACT: Harold Bunce, Acting Director,

Financial Institutions Regulation, Office of Policy Development and

Research, telephone (202) 708-2770 or (202) 708-0770 (TDD). For legal

questions, contact Kenneth A. Markison, Assistant General Counsel for

Government-Sponsored Enterprises/RESPA, Office of General Counsel,

telephone (202) 708-3137. The address for both of these persons is:

Department of Housing and Urban Development, 451 Seventh Street, SW,

Washington, DC 20410. A telecommunications device for deaf persons

(TDD) is available at (202) 708-9300. (These are not toll-free

telephone numbers.)

SUPPLEMENTARY INFORMATION:

I. Justification for Final Rulemaking

In general, the Department publishes a rule for public comment

before issuing a rule for effect, in accordance with its own

regulations on rulemaking, 24 CFR part 10. However, part 10 does

provide for exceptions from that general rule where the agency finds

good cause to omit advance notice and public participation. The good

cause requirement is satisfied when prior public procedure is

``impracticable, unnecessary, or contrary to the public interest.'' (24

CFR 10.1) The Department finds that good cause exists to publish this

rule for effect without first soliciting public comment, in that prior

public procedure is impracticable, unnecessary, and contrary to public

interest.

No new substantive regulations are being adopted through this

rulemaking; rather, the Secretary is merely continuing in effect rules

that were not affected by any substantive statutory change under the

Federal Housing Enterprises Financial Safety and Soundness Act of 1992

(``1992 Act''), enacted as Title XIII of the Housing and Community

Development Act of 1992 (Pub. L. 102-550, approved October 28, 1992;

codified generally at 12 U.S.C. 4501-4641). The rules continued in

effect do not include any changes in the statutory authority of the

Secretary made by the 1992 Act. This rule serves the critical need to

ensure continued authority for book-entry trading of the large volume

of Fannie Mae debt and mortgage-backed securities issues. At the same

time, the rule does not impose any additional burden on the public.

II. Background

The 1992 Act significantly revised the regulatory requirements and

structure for the Federal National Mortgage Association (Fannie Mae),

including its Charter Act (the Federal National Mortgage Association

Charter Act, 12 U.S.C. 1716 et seq.). Section 1356 of the 1992 Act

includes provisions for a transition period during which all rules

promulgated by the Secretary under the Fannie Mae Charter Act prior to

October 28, 1992, the date of enactment of the Act, are to remain in

effect. The transition period is to expire 18 months following the

appointment of the Director of the Office of Federal Housing

Enterprises Oversight; at such time, both the Secretary's and the

Director's rules under the Act were to have been proposed for public

comment and completed in final. The OFHEO Director's appointment was

confirmed by the Senate May 28, 1993; therefore, the 18-month period

referenced in Section 1356 expires November 28, 1994.

The Secretary will soon propose comprehensive regulations

implementing the Secretary's responsibilities under the 1992 Act, but

such regulations will not be effective until after the expiration of

the 18-month transition period. The rules due for automatic expiration

on November 28, 1994, include regulations promulgated by the Secretary

in 1978 that authorize book-entry procedures for issuance and trading

of securities of Fannie Mae (24 CFR 81.41-81.49).

Today, virtually all of Fannie Mae's debt and mortgage-backed

securities (MBS) issuances and trading market depend on book-entry

procedures. As of September 30, 1994, Fannie Mae debt outstanding was

$239.3 billion and Fannie Mae MBS were $523.5 billion.

The 1978 book-entry rules assure the efficient trading of Fannie

Mae securities and enhance the secondary mortgage market. To ensure

that Fannie Mae may use book-entry procedures, the Secretary issues

this emergency regulation to continue in effect the 1978 book-entry

rules. The Department of the Treasury requires that book-entry

regulations be in force for agencies whose securities are recorded

under the book-entry procedures of the Federal Reserve System. This

recodification is required, therefore, to assure continued authority

for trading of Fannie Mae securities in book-entry form after November

28, 1994. Failure to extend these regulations may be disruptive to the

financial markets.

Prior to the issuance of book-entry regulations, Fannie Mae,

investors, brokers, and dealers incurred increased administrative

expenses because of the lack of such authority. Accordingly, the 1978

regulations imposed book-entry requirements that enhance Fannie Mae's

charter purpose of assisting the secondary mortgage market by improving

the distribution of investment capital available for home financing (12

U.S.C. 1716(3)-(4)).

The Secretary is empowered to recodify these regulations under

section 1321(a) of the 1992 Act (12 U.S.C. 4541), which confers on the

Secretary general regulatory authority and the authority to ``make such

rules and regulations as shall be necessary and proper'' to ensure that

the purposes of the 1992 Act and the Fannie Mae Charter Act are

accomplished.

Accordingly, effective November 28, 1994, 24 CFR part 81, subpart

E, continues in effect.

Dated: October 24, 1994.

Henry G. Cisneros,

Secretary.

[FR Doc. 94-26722 Filed 10-27-94; 8:45 am]

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