81 FR 74730 - Minority and Women Inclusion Amendments

FEDERAL HOUSING FINANCE AGENCY

Federal Register Volume 81, Issue 208 (October 27, 2016)

The Federal Housing Finance Agency (FHFA or Agency) is issuing notice and providing an opportunity for the public to comment on proposed amendments to its regulations on minority and women inclusion. Those regulations, require the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) (together, Enterprises), and the Federal Home Loan Banks (Banks or Bank System) (collectively, the regulated entities) and the Bank System's Office of Finance to promote diversity and ensure the inclusion and utilization of minorities, women, and individuals with disabilities and minority-, women-, and disabled-owned businesses in all business and activities at all levels, including management, employment, and contracting. The proposed amendments would clarify the scope of the regulated entities' obligation to promote diversity and ensure the inclusion and utilization of minorities, women, and individuals with disabilities in all business and activities; require each regulated entity to develop and adopt strategies for promoting diversity and ensuring the inclusion of minorities, women, and individuals with disabilities; and improve the usefulness and comparability of the information the regulated entities report to FHFA about their efforts to advance diversity and inclusion.

[Federal Register Volume 81, Number 208 (Thursday, October 27, 2016)]
[Proposed Rules]
[Pages 74730-74738]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-25726]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1207

RIN 2590-AA78


Minority and Women Inclusion Amendments

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Housing Finance Agency (FHFA or Agency) is issuing 
notice and providing an opportunity for the public to comment on 
proposed amendments to its regulations on minority and women inclusion. 
Those regulations, require the Federal National Mortgage Association 
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) 
(together, Enterprises), and the Federal Home Loan Banks (Banks or Bank 
System) (collectively, the regulated entities) and the Bank System's 
Office of Finance to promote diversity and ensure the inclusion and 
utilization of minorities, women, and individuals with disabilities and 
minority-, women-, and disabled-owned businesses in all business and 
activities at all levels, including management, employment, and 
contracting. The proposed amendments would clarify the scope of the 
regulated entities' obligation to promote diversity and ensure the 
inclusion and utilization of minorities, women, and individuals with 
disabilities in all business and activities; require each regulated 
entity to develop and adopt strategies for promoting diversity and 
ensuring the inclusion of minorities, women, and individuals with 
disabilities; and improve the usefulness and comparability of the 
information the regulated entities report to FHFA about their efforts 
to advance diversity and inclusion.

DATES: Written comments must be received on or before December 27, 
2016.

ADDRESSES: You may submit your comments, identified by Regulatory 
Information Number (RIN) 2590-AA78, by any of the following methods:
     Agency Web site: www.fhfa.gov/open-for-comment-or-input.
     Federal eRulemaking Portal: http://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 [email protected] to ensure timely receipt by the Agency. 
Please include Comments/RIN 2590-AA78 in the subject line of the 
message.
     Courier/Hand Delivery: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA78, 
Federal Housing Finance Agency, 400 Seventh Street SW., Eighth Floor, 
Washington, DC 20219. Deliver the package to the Seventh Street 
entrance Guard Desk, First Floor, on business days between 9 a.m. to 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-AA78, Federal Housing 
Finance Agency, 400 Seventh Street SW., Eighth Floor, Washington, DC 
20219.

FOR FURTHER INFORMATION CONTACT: Sharron P. A. Levine, Director, Office 
of Minority and Women Inclusion, [email protected], (202) 649-
3496; Eric Howard, Deputy Director, Office of Minority and Women 
Inclusion, [email protected], (202) 649-3009; or James Jordan, 
Assistant General Counsel, [email protected], (202) 649-3075 (not 
toll-free numbers), Federal Housing Finance Agency, 400 Seventh Street 
SW., Washington, DC 20219. 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 proposed amendments and 
will take all comments into consideration before issuing a final rule. 
Copies of all comments received will be posted without change on the 
FHFA Web site at http://www.fhfa.gov and will include any personal 
information you provide, such as your name, address, email address, and 
telephone number. Copies of all comments received will be made 
available for examination by the public on business days between the 
hours of l0 a.m. and 3 p.m., at the Federal Housing Finance Agency, 400 
Seventh Street SW., Eighth Floor, Washington, DC 20219. To make an 
appointment to

[[Page 74731]]

inspect comments, please call the Office of General Counsel at (202) 
649-3804.

II. Objectives

    The objectives of the proposed amendments are to:
     Ensure that the regulated entities \1\ fulfill the letter 
and spirit of their legal obligation to promote diversity and ensure 
the inclusion and utilization of minorities, women, and individuals 
with disabilities as well as minority-, women-, and disabled-owned 
businesses, in all their business and activities;
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    \1\ For readability, where the preamble refers to a ``regulated 
entity'' or the ``regulated entities'' the provisions apply equally 
to the Office of Finance, unless such application would conflict 
with a statute or regulation that specifically distinguishes the 
treatment of the Office of Finance from the regulated entities.
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     Clarify that the requirement to promote diversity and 
inclusion applies to all the regulated entities' operational, 
commercial and economic endeavors, including management, employment, 
contracting, capital market transactions, and affordable housing and 
community investment programs;
     Require the regulated entities to develop a stand-alone 
diversity and inclusion strategic plan or incorporate diversity and 
inclusion into its existing strategic planning process and adopt 
strategies for promoting diversity and ensuring the inclusion of 
minorities, women, and individuals with disabilities as well as 
minority-, women-, and disabled-owned businesses;
     Require the regulated entities to amend their policies on 
equal opportunity in employment and contracting to include sexual 
orientation, gender identity, and status as a parent to the list of 
protected classifications;
     Encourage the regulated entities to expand contracting 
opportunities for minorities, women, and individuals with disabilities 
by working with prime contractors (tier 1) to provide subcontracting 
(tier 2) opportunities to minority-, women-, and disabled-owned 
businesses;
     Affirm that the regulated entities are authorized to 
expand the scope of their outreach and inclusion programs beyond the 
requirements of the Rule, which focuses on minorities, women, and 
individuals with disabilities; and
     Improve the usefulness and comparability of the annual 
reports to FHFA by requiring that the regulated entities provide 
information about their efforts to advance diversity and inclusion 
through capital market transactions, affordable housing and community 
investment programs, initiatives to improve access to mortgage credit, 
and strategies for promoting the diversity of supervisors and managers.

III. Background

    Section 1116 of the Housing and Economic Recovery Act of 2008 
(HERA) amended section 1319A of the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), 
(12 U.S.C. 4520), to require, in part, that the regulated entities 
establish or designate an office to carry out the requirements of an 
Office of Minority and Women Inclusion (OMWI). That office is 
responsible for: Fulfilling the requirements of section 1116 of HERA 
that include all matters relating to diversity in the entity's 
management, employment, and business activities; developing and 
implementing standards and procedures to promote diversity in all 
business and activities of the regulated entity; and submitting an 
annual report to FHFA detailing the actions taken to promote diversity 
and inclusion. Furthermore, 12 U.S.C. 1833e,\1\ and Executive Order 
11478,\2\ which is made applicable to FHFA and its regulated entities 
by 12 U.S.C. 1833e, generally require FHFA and the regulated entities 
to promote equal opportunity in employment.
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    \1\ See Public Law 101-73, title XII, sec. 1216, Aug. 9, 1989, 
103 Stat. 529; Public Law 102-233, title III, sec. 302(a), Dec. 12, 
1991; Public Law 110-289, div. A, title II, sec. 1216(g), July 30, 
2008, 122 Stat. 2793; Public Law 111-203, title III, sec. 367(9), 
July 21, 2010, 124 Stat. 1557.
    \2\ Executive Order 11478--Equal Employment Opportunity in the 
Federal Government, August 8, 1969, as amended.
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    FHFA has adopted regulations to implement section 1116 of HERA, 12 
U.S.C. 1833e, and in conformance with Executive Order 11478, as 
amended, to set forth the minimum requirements for the affirmative 
program for equal opportunity and reporting requirements for the 
regulated entities.\3\ Those regulations, located at 12 CFR part 1207, 
require each regulated entity to establish an OMWI office, or to 
designate another office, that would be responsible for fulfilling the 
entity's OMWI responsibilities under the statute and the Rule. Each of 
these entities must implement policies and procedures to ensure, to the 
maximum extent possible consistent with financially safe and sound 
business practices, the inclusion and utilization of minorities, women, 
individuals with disabilities, and minority-, women-, and disabled-
owned businesses in all business and activities and at all levels of 
the regulated entity, including in management, employment, procurement, 
insurance, and all types of contracts.\4\ Part 1207 also requires each 
regulated entity to submit to the FHFA Director, on or before March 1 
of each year, a detailed annual report summarizing their activities 
during the reporting year (January 1 through December 31 of the 
preceding year) to comply with the OMWI regulatory requirements.\5\
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    \3\ See 75 FR 1289 (January 11, 2010), 75 FR 81395 (December 28, 
2010), 79 FR 35960 (June 25, 2014), and 80 FR 25209 (May 4, 2015).
    \4\ 12 CFR 1207.21(b).
    \5\ 12 CFR 1207.23.
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    In addition, part 1207 provides that the FHFA Director has broad 
enforcement authority in that he or she may enforce this Rule and 
standards issued under it in any manner and through any means within 
his or her authority, including through identifying matters requiring 
attention, corrective action orders, directives, or enforcement actions 
under 12 U.S.C. 4513b and 4514.\6\ To that end, the FHFA Director may 
conduct examinations of a regulated entity's activities under, and in 
compliance with, this part pursuant to 12 U.S.C. 4517.\7\
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    \6\ 12 CFR 1207.24.
    \7\ Id.
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IV. Existing Examination Guidance and Regulatory Requirements for 
Strategic Planning

    Strategic planning is critical to the success of any organization, 
including the regulated entities. As noted in FHFA's Examination Manual 
(EM) module entitled, Strategic Planning, ``in its most fundamental 
form, strategic planning is the process of evaluating where the 
institution is, determining where the board would like the institution 
to go and which risks it is willing to accept, and developing a plan to 
get there.'' \8\ The EM also notes that, ``strategic planning is the 
process of establishing goals and developing a roadmap for achieving 
those goals.'' \9\ A strategic plan serves as the primary means to 
communicate the board of directors' long-term vision for the 
organization and establish measurable goals and objectives for 
achieving this vision. The EM also identifies the following as 
components of an effective strategic planning process:
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    \8\ FHFA Examination Manual, Strategic Planning Module, March 
2013, http://www.fhfa.gov/SupervisionRegulation/Documents/Strategic_Planning_Module_Final_Version_1.0-508.pdf.
    \9\ Id.
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     An analysis of the regulated entity's financial and 
operational condition;
     An assessment of internal and external risks to the 
regulated entity;
     An evaluation of the regulated entity's strengths and 
weaknesses;

[[Page 74732]]

     An evaluation of opportunities or potential threats facing 
the regulated entity;
     The financial and operational goals and realistic 
projections that serve as benchmarks for achieving desired results 
within a defined time frame;
     The process by which the regulated entity plans to reach 
its financial and operational goals;
     The identification of those responsible for achieving the 
goals; and
     A means to monitor the results on an ongoing basis.
    The regulated entities are also subject to the Agency's Prudential 
Management and Operations Standards (PMOS) found in part 1236 of FHFA's 
regulations. Pursuant to the PMOS guidelines, the board of directors of 
each regulated entity is responsible for adopting appropriate business 
strategies, policies, and procedures. The PMOS guidelines also 
establish standards by which the board of directors is to review and 
approve all major strategies and policies at least annually, and make 
any necessary revisions to ensure consistency with the overall business 
plan.
    FHFA regulations at 12 CFR 1239.31 provide detailed information on 
the strategic planning requirements for each Bank including a 
requirement that their board of directors have a strategic business 
plan in effect at all times. FHFA regulation 12 CFR 1239.31(b) requires 
the board of directors to (1) review the strategic business plan at 
least annually; (2) amend the plan as appropriate; (3) re-adopt the 
plan at least every three years; and (4) establish management reporting 
requirements and monitor implementation of the strategic business plan 
and the operating goals and objectives contained in it.

V. Importance of Diversity and Inclusion Strategic Planning

    A significant and growing body of research provides evidence that 
having a diverse and inclusive workforce and leadership team benefits 
an organization by increasing its ability to be creative, innovative, 
and solutions-oriented.\10\ Many organizations, however, fail to 
recognize that diversity and inclusion are vital components of long-
term business viability and success and, as a result, have strictly 
limited them solely to the human resource function. Organizations that 
effectively manage diversity and inclusion have integrated the practice 
into all of their processes by developing and implementing 
comprehensive diversity and inclusion strategies. Their path to success 
starts with senior leadership's commitment to integrate diversity and 
inclusion into the business, at all levels, and to manage it in the 
same way as any other business strategy.
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    \10\ Page, Scott E., The Difference: How the Power of Diversity 
Creates Better Groups, Firms, Schools, and Societies, Princeton; 
Princeton UP, 2007. Print. https://books.google.com/books?id=FAFVHnJ7uK0C&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false; Global Diversity and Inclusion Fostering 
Innovation Through a Diverse Workforce, Forbes, July 2011, http://www.forbes.com/forbesinsights/innovation_diversity/index.html; and 
Barta, T., Kleiner, M., and Neumann, T., McKinsey Quarterly, Is 
There a payoff from top-team diversity?, April 2012, http://www.mckinsey.com/business-functions/organization/our-insights/is-there-a-payoff-from-top-team-diversity.
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    Effective strategic business planning, executive sponsorship, 
communication, change management, project management, day-to-day 
execution, and measurement are all regarded as business fundamentals 
for most functional areas in an organization. The research supports the 
premise that the ability to assess the current state and measure the 
progress of its diversity and inclusion efforts is also a fundamental 
and prudent business practice.

VI. Ongoing Efforts by the Regulated Entities To Advance Diversity and 
Ensure Inclusion

    The Rule became effective on January 27, 2011, and set forth the 
minimum requirements for the regulated entities' diversity and 
inclusion programs and reporting requirements. They responded to the 
new regulatory requirements by establishing an OMWI office or 
designating another office responsible for fulfilling the entity's OMWI 
responsibilities. They implemented policies, procedures, and programs 
to improve human resource processes for recruiting, hiring, and 
promoting minorities, women, and individuals with disabilities. They 
also focused attention on identifying diverse suppliers and improving 
outreach efforts to increase participation opportunities for diverse 
businesses. These efforts have resulted in improvements in workforce 
diversity and the utilization of diverse vendors. In order to advance 
and promote diversity and inclusion, the regulated entities currently 
engage in one or more of the following activities and initiatives:
     Conducting diversity and inclusion education and training 
sessions for their directors, managers, and employees;
     Establishing mentoring programs for employees, 
particularly minorities and women;
     Partnering with minority youth development organizations;
     Sponsoring internship programs for high school and college 
students;
     Sponsoring and/or supporting community events and 
celebrations;
     Establishing diversity and inclusion councils;
     Establishing and/or sponsoring employee resource or 
affinity groups;
     Expanding the scope of outreach activities and initiatives 
to target and recruit minorities, women, and individuals with 
disabilities for employment;
     Expanding the scope of outreach activities and initiatives 
to target minority-, women-, and disabled-owned businesses for 
contracting opportunities; and
     Marketing to diverse communities.
    Many of these efforts and initiatives have enabled or enhanced the 
ability of the regulated entities to promote opportunities for 
minorities, women, and individuals with disabilities. While each has 
worked to build and improve the foundation for advancing diversity and 
inclusion within its organization, more can be done to expand the 
breadth, scope, and impact of its existing program. Gaps remain in the 
regulated entities' processes and approaches for assessing, planning, 
and executing diversity and inclusion programs that fulfill the letter 
and spirit of section 1116 of HERA.

VII. The Proposed Amendments

    The proposed amendments would revise the Rule to require each 
regulated entity to engage in diversity and inclusion strategic 
planning. They would either develop a stand-alone diversity and 
inclusion strategic plan or incorporate diversity and inclusion into 
their existing strategic planning process. Under the proposal, their 
board of directors must establish an organizational tone for enhanced 
focus on, and commitment to, diversity and inclusion. The board of 
director's ongoing oversight assists in creating the conditions for 
success by ensuring alignment with the overall strategic and 
operational direction of the regulated entity. Senior management teams 
also play an important role in the development and execution of the 
diversity and inclusion strategic plan.
    The regulated entities have mainly focused on workforce and 
supplier diversity to date, largely as a result of the Rule's primary 
focus on requirements for establishing an OMWI, ensuring equal 
opportunity in employment and contracting, and developing and 
submitting reports on the efforts taken to promote diversity and ensure 
inclusion in employment and contracting. The proposed amendments 
emphasize the need to expand the scope of diversity and

[[Page 74733]]

inclusion considerations to their other business and operational areas. 
The proposed revision would require the regulated entities to broaden 
the focus of their existing diversity and inclusion goals and 
strategies to address all aspects of their business and operations 
beyond workforce and supplier diversity only, consistent with section 
1116 of HERA.
    The proposed amendments would encourage the regulated entities to 
develop and implement procurement programs and initiatives that expand 
contracting opportunities for minorities, women, and individuals with 
disabilities and minority-, women-, and disabled-owned businesses 
beyond contracting with prime contractors (tier 1) by using 
subcontracting arrangements (tier 2). This could entail negotiating 
subcontracting opportunities for minorities, women, and individuals 
with disabilities in contracts between a regulated entity and prime 
contractors. This could also involve entering into contracts with 
majority-owned businesses that advance opportunities for minorities, 
women, and individuals with disabilities. A new annual reporting 
requirement would include additional information about the number of 
contracts and the amounts paid to prime contractors (tier 1) for 
subcontracts (tier 2) with minorities or minority-owned businesses, 
women or women-owned businesses, and individuals with disabilities or 
disabled-owned businesses during the reporting year and the diverse 
spend with non-diverse-owned businesses.
    The Rule implements 12 U.S.C. 1833e and conforms with Executive 
Order 11478, as amended, to require the regulated entities to commit to 
the principles of equal opportunity in employment and prohibit 
discrimination on the basis of race, color, national origin, sex, 
religion, age, disability status, or genetic information. Executive 
Orders 13087 and 13152 amended Executive Order 11478 to add sexual 
orientation and status as a parent to the list of protected bases.\11\ 
Executive Order 13672, signed on July 21, 2014, amended Executive 
Orders 11478 and 11246 to extend protection against discrimination in 
hiring and employment in the civilian federal workforce on the basis of 
gender identity and in hiring by federal contractors on the basis of 
both sexual orientation and gender identity.\12\ The proposed 
amendments would require the regulated entities to amend their policies 
on equal opportunity in employment and contracting to prohibit 
discrimination on the basis of sexual orientation, gender identity, and 
status as a parent.
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    \11\ Executive Order 13087--Further Amendments to Executive 
Order 11478, Equal Employment Opportunity in the Federal Government, 
May 28, 1998, https://www.thefederalregister.org/fdsys/pkg/FR-1998-06-02/pdf/98-14689.pdf and Executive Order 13152; Executive Order 13152--Further 
Amendments to Executive Order 11478, Equal Employment Opportunity in 
the Federal Government, May 2, 2000, https://www.thefederalregister.org/fdsys/pkg/WCPD-2000-05-08/pdf/WCPD-2000-05-08-Pg977.pdf.
    \12\ Executive Order 13672--Further Amendments to Executive 
Order 11478, Equal Employment Opportunity in the Federal Government, 
and Executive Order 11246, Equal Employment Opportunity, July 21, 
2014, https://www.thefederalregister.org/fdsys/pkg/CFR-2015-title3-vol1/pdf/CFR-2015-title3-vol1-eo13672.pdf.
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    The scope of the diversity and inclusion obligations to be 
satisfied by the regulated entities varies depending on the source of 
the authority. As previously noted, FHFA's Rule implements 12 U.S.C. 
1833e, which applies the requirements of sections 1 and 2 of Executive 
Order 11478 to the regulated entities. Section 1 requires the regulated 
entities to provide equal employment opportunity for all persons, 
prohibit employment discrimination, and promote equal employment 
opportunity through a continuing affirmative program. Section 2 
describes the elements of an affirmative program of equal employment 
opportunity, which include providing sufficient resources for 
administering the program in a positive and effective manner; engaging 
in recruitment activities that reach all sources of job candidates; 
fully utilizing the skills of all employees; providing employees 
opportunities to enhance their skills so they may perform at their 
fullest potential and advance in accordance with their abilities; 
providing training and advice to managers and supervisors to assure 
their understanding and implementation of the program; assuring 
participation at the local level with other employers, schools, and 
public and private groups in cooperative efforts to improve community 
conditions that affect employability; and providing for periodic 
evaluations of the effectiveness of the program.
    FHFA acknowledges that diversity encompasses the broad range of 
demographic characteristics identified in Executive Order 11478. 
However, section 1116 of HERA only focuses on the responsibility of the 
regulated entities to promote diversity and ensure the inclusion of 
minorities and women. Therefore, in accordance with the statutory 
requirements, the primary focus of the regulatory text amendments is on 
advancing and promoting opportunities for minorities, women, and 
individuals with disabilities as well as minority-, women-, and 
disabled-owned businesses. Nonetheless, FHFA affirms that each 
regulated entity is authorized to expand the scope of its diversity 
program beyond the requirements of Executive Order 11478, section 1116 
of HERA, and the regulations at 12 CFR part 1207. As a result, each 
regulated entity is encouraged to incorporate other aspects of 
diversity and inclusion (e.g., Lesbian, Gay, Bisexual, and Transgender 
(LGBT)-owned and veteran-owned businesses) into their respective OMWI 
outreach and inclusion programs, and in turn, their strategic planning 
processes as long as the broader focus does not detract from or 
diminish efforts to promote opportunities for minorities, women, and 
individuals with disabilities and minority-, women-, and disabled-owned 
businesses.

Section 1207.1 Definitions

    FHFA proposes to add, revise, or remove several definitions in 
Sec.  1207.1 to clarify the existing and new regulatory requirements 
under part 1207. Where FHFA proposes to add or revise terms, FHFA has 
reviewed several external sources in search of industry standard 
definitions. FHFA has determined that there is no uniformly accepted 
term of art or single source for the newly proposed terms, so FHFA has 
adapted the substance found in multiple external definitions \13\ to 
account for the nature and needs of FHFA's regulated entities.
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    \13\ For example, the proposed definition of ``Subcontractor 
(Tier II)'' was adapted from definitions found in regulations 
implementing the Small Business Act, Title 41 of the CFR addressing 
Public Contracts and Property Management, and the Federal 
Acquisition Regulations as well as definitions implemented by the 
National Association of Women in Construction and financial 
institutions such as Citi and KeyBank.
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    FHFA proposes to add definitions for ``Applicant'' and 
``Promotion'' to clarify the scope of the information the regulated 
entities are required to report to FHFA under existing Sec.  
1207.23(b)(3) and Sec.  1207.23(b)(7). FHFA is proposing a new 
definition of ``Diversity and inclusion strategic planning'' that would 
describe the process the regulated entities must engage in to develop 
strategies for promoting diversity and ensuring the inclusion of 
minorities, women, and individuals with disabilities.
    FHFA proposes to add definitions for ``Prime contractor (tier 1)'' 
and ``Subcontractor (tier 2)'' to identify two types of contracting 
arrangements available to the regulated entities to promote diversity 
and the inclusion of minorities, women, and individuals with 
disabilities and minority-,

[[Page 74734]]

women-, and disabled-owned businesses. FHFA also proposes to add a 
definition for ``Diversity spend with non-diverse-owned businesses'' to 
describe the dollar amount a regulated entity pays to a firm that is 
not owned by a minority, woman, or individual with a disability, for 
professional services provided by a partner, member, or other equity 
owner who is a minority, woman, or individual with a disability. This 
type of arrangement can occur when an organization bases its decision 
to engage a majority-owned law practice or consulting firm based upon 
its interactions with a specific partner(s) or non-controlling owner(s) 
who is also a minority, woman, or individual with a disability.
    FHFA proposes to add a definition for ``Minority-serving financial 
institution'' that would be used by the regulated entities in their 
efforts to promote access to single- and multi-family mortgage credit, 
including an assessment of the challenges and impediments financial 
institutions that primarily serve minorities face in their efforts to 
access the secondary mortgage market. The proposed definition closely 
follows the Federal Deposit Insurance Corporation's (FDIC) Policy 
Statement Regarding Minority Depository Institutions \14\ and 
encompasses depository and non-depository financial institutions.
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    \14\ FDIC Policy Statement Regarding Minority Depository 
Institutions, April 9, 2002, https://www.fdic.gov/regulations/resources/minority/policy.html.
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    FHFA is proposing to revise the definition of ``Women-owned 
business'' by removing one of the standards used to determine whether a 
business qualifies as a women-owned business. The existing definitions 
for minority-, women-, and disabled-owned businesses include criteria 
for determining the diverse status of a business based on who owns or 
controls the business as well as who accrues the profits or losses 
generated by the business. The existing definition of ``Women-owned 
business'' also includes a criterion based on the percentage of senior 
management positions held by one or more women. FHFA believes this 
criterion is unnecessary due to the emphasis the existing definition 
places on ownership and control. The proposed removal of this criterion 
for women-owned businesses would bring consistency to the Rule's 
standards for determining ownership and control of minority- and 
disabled-owned businesses. FHFA is also proposing to revise the 
definitions of ``Disabled-owned business,'' ``Minority-owned 
business,'' and ``Women-owned business'' by clarifying that ownership 
can be direct or indirect. By revising the definition, FHFA wishes to 
encourage each regulated entity to develop and implement procurement 
programs and initiatives without regard to the distinction between 
businesses owned by individuals/natural persons and legal persons, such 
as corporations, as long as the ultimate ownership benefits are held by 
predominantly disabled, minority, or women owners.
    Finally, FHFA is proposing to remove the definitions for 
``Director,'' ``FHFA,'' ``Office of Finance,'' and ``regulated entity'' 
because they are now defined in 12 CFR part 1201, which defines terms 
that apply to all FHFA regulations.

Section 1207.2 Policy, Purpose, and Scope

    FHFA proposes to revise Sec.  1207.2(c) to address the scope of 
each regulated entity's responsibility to promote diversity and ensure 
the inclusion and utilization of minorities, women, and individuals 
with disabilities and minority-, women-, and disabled-owned businesses. 
The proposed regulatory language would place emphasis on the 
requirement to promote diversity and ensure inclusion when awarding 
contracts for goods and services.

Section 1207.3 Limitations

    FHFA is proposing to revise existing Sec.  1207.3(b), which 
currently requires each regulated entity's contracts for goods over 
$10,000 to include a material clause that commits the contractor to 
practice the principles of equal employment opportunity and 
nondiscrimination and to submit demographic data reports with respect 
to their workforce. FHFA proposes to increase the material clause 
threshold to $25,000 to alleviate administrative burdens the regulated 
entities encounter when routinely purchasing lower-value goods such as 
materials and supplies necessary for day-to-day operations. However, 
FHFA welcomes comments on the potential impact the proposed threshold 
change could have on small businesses and, specifically, on the dollar 
amount of the threshold.
    FHFA is also proposing to add paragraphs (c) and (d) to existing 
Sec.  1207.3. Proposed Sec.  1207.3(c) would require each regulated 
entity to submit to FHFA within 90 days after the effective date of the 
amended Rule, a list of the types of contracts it considers exempt 
under Sec.  1207.3(b) and any thresholds, exceptions, and limitations 
it establishes for implementing Sec.  1207.21(c)(2). Proposed Sec.  
1207.3(d) would then require each regulated entity to notify FHFA 
within 30 days after any additional changes to the list.

Section 1207.20 Office of Minority and Women Inclusion

    FHFA is proposing to revise paragraphs (b) and (c) of Sec.  1207.20 
to clarify that a regulated entity's board of directors has ultimate 
responsibility for achieving the requirements of part 1207--not the 
regulated entity's OMWI (or office designated to perform the 
responsibilities of part 1207). The proposed revision would clarify 
that the OMWI is responsible for leading the regulated entity's efforts 
to promote diversity and inclusion, and that any officer(s) designated 
to direct and oversee the diversity and inclusion programs has/have the 
necessary qualifications to effectively administer the requirements of 
part 1207.

Section 1207.21 Promoting Diversity and Ensuring Inclusion in All 
Business and Activities

    FHFA is proposing to revise the title of existing Sec.  1207.21 
from ``Equal opportunity in employment and contracting'' to ``Promoting 
diversity and ensuring inclusion in all business and activities'' to 
accurately reflect the scope of requirements for advancing diversity 
and ensuring inclusion in all activities and at every level of the 
regulated entity, including management, employment and contracting.
    FHFA is proposing to amend Sec.  1207.21(a) to add sexual 
orientation, gender identity, and status as a parent to the list of 
bases covered under each regulated entity's equal opportunity statement 
as required by 12 U.S.C. 1833e, and in conformance with Executive Order 
11478.
    FHFA is proposing to add a new paragraph to Sec.  1207.21(b)(3) to 
address the statutory requirement in section 1116(b) of HERA that the 
regulated entities establish processes that give consideration to the 
diversity of an applicant when reviewing and evaluating contract 
proposals and hiring service providers. The proposed rule would require 
them to develop procedures it would implement for giving consideration 
to diversity when reviewing and considering contract proposals and 
hiring service providers.
    Proposed Sec.  1207.21(b)(7) would require each regulated entity to 
establish effective procedures for engaging in diversity and inclusion 
strategic planning. FHFA is also proposing to revise its allowance that 
the regulated entities may establish, where commercially reasonable, 
thresholds, exceptions, and limitations for implementing Sec.  
1207.21(b)(7) (proposed

[[Page 74735]]

Sec.  1207.21(b)(9)). Under Sec.  1207.3(b), the regulated entities 
would consider any negative or adverse effects the thresholds, 
exceptions, and limitations would likely have on contracting 
opportunities for minorities, women, and individuals with disabilities 
and minority-, women-, and disabled-owned businesses. The proposal 
would also ensure that the rationale used to support the thresholds, 
exceptions, and limitations would not be used to frustrate the intent 
of the statutory or regulatory requirements to promote diversity and 
inclusion.
    Proposed Sec.  1207.21(d) would require each regulated entity to 
develop and implement strategies for promoting diversity and ensuring 
the inclusion of minorities, women, and individuals with disabilities 
and minority-, women-, and disabled-owned businesses. The board-
approved strategies would cover three years and be reviewed and 
affirmed by the board of directors annually.
    Proposed Sec.  1207.21(e)(1) through (e)(3) would establish the 
minimum requirements for developing a diversity and inclusion strategic 
plan. The requirements would complement the guidance that has been 
provided in FHFA's EM, Strategic Planning, as well as regulatory 
requirements and the PMOS guidelines. The proposed amendments would 
require the regulated entities to include the following components in 
their diversity and inclusion strategic plans:
     A vision and/or mission statement for fulfilling Sec.  
1207.2;
     Measurable goals and objectives for achieving the vision 
and/or mission statement; and
     A requirement that senior management develop and implement 
action plans for monitoring and achieving the measurable goals and 
objectives.

Section 1207.23 Annual Reports--Format and Contents

    FHFA is proposing to revise Sec.  1207.23(b)(3) and (b)(7) to 
substitute the word ``applicants'' as defined in Sec.  1207.1 for the 
words ``individuals applying'' to clarify the scope of information the 
regulated entities are required to report to FHFA.
    Proposed Sec.  1207.23(b)(9) through (b)(23) revises and/or 
supplements the minimum requirements for the annual report submitted by 
each regulated entity. Proposed Sec.  1207.23(b)(9) would require them 
to report on the diversity of their supervisors and managers as well as 
provide a description of the strategies and activities it implemented 
to promote diverse individuals to supervisory or managerial roles. 
Proposed Sec.  1207.23(b)(12) would require each regulated entity to 
provide a description of the strategies, initiatives, and activities it 
implemented to advance diversity and inclusion in conjunction with 
capital market or financial transactions, efforts to promote access to 
credit, and affordable housing and community investment programs. 
Proposed Sec.  1207.23(b)(16) and Sec.  1207.23(b)(17) would require 
each regulated entity to report the number and dollar amounts of 
contracts entered into during the preceding year that it considered 
exempt under Sec.  1207.3(b). The proposed amendments would also 
require reporting on the number and dollar amounts of prime contracts 
and subcontracts that prime contractors had with minorities, women, and 
individuals with disabilities and minority-, women-, and disabled-owned 
businesses. Proposed Sec.  1207.23(b)(18) would require that the 
regulated entity report on diversity spend with non-diverse-owned 
businesses. Proposed Sec.  1207.23(b)(19) would require the regulated 
entity to provide the total amounts paid to prime contractors and 
subcontractors and the percentage that was paid to diverse vendors.
    Finally, the proposed amendments would remove most references to 
the ``Office of Finance'' found in the existing regulation. The 
proposed change would neither alter nor reduce the Office of Finance's 
responsibility to promote diversity and inclusion and would serve to 
streamline the text of the regulatory requirements. Therefore, FHFA is 
proposing to add Sec.  1207.25 to explain that any reference to the 
regulated entities in part 1207 also applies to the Office of Finance, 
unless the Office of Finance is otherwise specifically addressed or 
excluded.

VIII. Consideration of Differences Between the Banks and the 
Enterprises

    Section 1313(f) of the Safety and Soundness Act, as amended by 
section 1201 of HERA, requires the Director, when promulgating 
regulations relating to the Banks, to consider the differences between 
the Banks and the Enterprises with respect to the Banks' cooperative 
ownership structure; mission of providing liquidity to members; 
affordable housing and community development mission; capital 
structure; and joint and several liability. The Director may also 
consider any other differences that are deemed appropriate. In 
preparing this proposed rule, the Director has considered the 
differences between the Banks and the Enterprises as they relate to the 
above factors and has determined that the proposed rule would not 
adversely affect the Banks taking into account all of the above 
factors.

IX. Regulatory Impacts

Paperwork Reduction Act

    The proposed regulation does not contain any information collection 
requirement that requires the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

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 
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 
proposed amendments under the Regulatory Flexibility Act and certifies 
that the proposed amendments, if adopted, are not likely to have a 
significant economic impact on a substantial number of small business 
entities because the regulation is only applicable to FHFA and the 
regulated entities, which are not small entities for purposes of the 
Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1207

    Disability, Discrimination, Diversity, Equal employment 
opportunity, Government contracts, Minority businesses, Office of 
Finance, Outreach, Regulated entities.

Authority and Issuance

    For the reasons stated in the preamble, under the authority of 12 
U.S.C. 4526, FHFA proposes to amend part 1207 of title 12 of the Code 
of Federal Regulations as follows:

PART 1207--MINORITY AND WOMEN INCLUSION

0
1. The authority citation for part 1207 continues to read as follows:

    Authority:  12 U.S.C. 4520 and 4526; 12 U.S.C. 1833e; E.O. 
11478.


Sec.  1207.1  [Amended]

0
2. Amend Sec.  1207.1 by:
0
a. Adding a definition for ``Applicant'' in alphabetical order;
0
b. Removing the definition of ``Director'';

[[Page 74736]]

0
c. Revising the definition of ``Disabled-owned business'';
0
d. Adding definitions for ``Diversity and inclusion strategic 
planning'' and ``Diversity spend with non-diverse-owned businesses'' in 
alphabetical order;
0
e. Removing the definition of ``FHFA'';
0
f. Revising the definition of ``Minority-owned business'';
0
g. Adding a definition for ``Minority-serving financial institution'' 
in alphabetical order;
0
h. Removing the definition of ``Office of Finance'';
0
i. Adding a definition for ``Prime contractor (tier 1)'' and 
``Promotion'' in alphabetical order;
0
j. Removing the definition of ``Regulated entity'';
0
k. Adding a definition for ``Subcontractor (tier 2)'' in alphabetical 
order; and
0
l. Revising the definition of ``Women-owned business''.
    The revisions and additions read as follows:


Sec.  1207.1  Definitions.

* * * * *
    Applicant means an individual who submits an expression of interest 
in employment in conjunction with all of the following:
    (1) The regulated entity acted to fill a particular position;
    (2) The individual followed the regulated entity's standard process 
for submitting an application;
    (3) The individual's expression of interest indicates that the 
individual possesses the basic qualifications for the position; and
    (4) The individual has not removed him or herself from 
consideration or otherwise indicated that he or she is no longer 
interested in the position.
* * * * *
    Disabled-owned business means a business, and includes, but is not 
limited to, financial institutions, mortgage banking firms, investment 
banking firms, investment consultants or advisors, financial services 
entities, asset management entities, underwriters, accountants, 
brokers, brokers-dealers, and providers of legal services--
    (1) Qualified as a Service-Disabled Veteran-Owned Small Business 
Concern as defined in 13 CFR 125.8 through 125.13; or
    (2) More than fifty percent (50%) of the ownership or control of 
which is held, directly or indirectly by one or more persons with a 
disability; and
    (3) More than fifty percent (50%) of the net profit or loss of 
which accrues to one or more persons with a disability.
    Diversity and inclusion strategic planning is the process of 
analyzing the business and activities of a regulated entity to develop 
strategies for promoting diversity and ensuring the inclusion of 
minorities, women, and individuals with disabilities in all activities 
and at every level of the organization, including management, 
employment, and contracting. A diversity and inclusion strategic plan 
serves as the primary means to communicate the board of director's 
long-term diversity and inclusion vision for the organization, to 
establish measurable goals and objectives for achieving the vision, and 
to ensure accountability for achieving the goals and objectives.
    Diversity spend with non-diverse-owned businesses means the dollar 
amount(s) paid by a regulated entity to a prime contractor that is not 
a minority-, women-, or disabled-owned business for professional 
services (i.e., the amount paid for work performed, as may be adjusted, 
in connection with providing legal, accounting, or other professional 
or consulting services) provided by or allocated to a partner, member 
or other equity owner who is a minority, woman, or an individual with a 
disability.
* * * * *
    Minority-owned business means a business, and includes, but is not 
limited to, financial institutions, mortgage banking firms, investment 
banking firms, investment consultants or advisors, financial services 
entities, asset management entities, underwriters, accountants, 
brokers, broker-dealers and providers of legal services--
    (1) More than fifty percent (50%) of the ownership or control of 
which is held, directly or indirectly, by one or more minority 
individuals; and
    (2) More than fifty percent (50%) of the net profit or loss of 
which accrues to one or more minority individuals.
    Minority-serving financial institution means a financial 
institution that serves minority populations primarily, including 
depository and nondepository institutions where fifty-one percent (51%) 
or more of the stock is owned by one or more minority individuals or 
where a majority of the members of the board of directors are minority.
    Prime contractor (tier 1) means a supplier that enters into a 
contract with a regulated entity to provide goods and/or services 
directly to that regulated entity.
    Promotion means the advancement of an employee within a regulated 
entity and may be the result of an employee's proactive pursuit of a 
higher job ranking or a reward for good performance. A promotion is 
typically associated with an increase in an employee's pay due to 
additional or enhanced job responsibilities.
* * * * *
    Subcontractor (tier 2) means a supplier that enters into a contract 
with a prime contractor (tier 1) of a regulated entity to provide goods 
and/or services to that prime contractor (tier 1) for the benefit of 
the regulated entity.
    Women-owned business means a business and includes, but is not 
limited to, financial institutions, mortgage banking firms, investment 
banking firms, investment consultants or advisors, financial services 
entities, asset management entities, underwriters, accountants, 
brokers, broker-dealers and providers of legal services--
    (1) More than fifty percent (50%) of the ownership or control of 
which is held, directly or indirectly, by one or more women; and
    (2) More than fifty percent (50%) of the net profit or loss of 
which accrues to one or more women.


Sec.  1207.2  [Amended]

0
3. Amend Sec.  1207.2 by:
0
a. Removing from paragraphs (a) and (b) the phrase ``and the Office of 
Finance'';
0
b. Adding in paragraph (b) a comma immediately following the phrase 
``to the maximum extent possible''; and
0
c. Revising paragraph (c).
    The revision reads as follows:


Sec.  1207.2  Policy, purpose, and scope.

* * * * *
    (c) Scope. This part applies to each regulated entity's 
development, implementation, and adherence to diversity, inclusion, and 
non-discrimination policies, practices, and principles, including 
opportunities to award contracts for goods and/or services.


Sec.  1207.3  [Amended]

0
4. Amend Sec.  1207.3 by:
0
a. In paragraph (a), removing the phrase ``or the Office of Finance''; 
and
0
b. Revising paragraph (b) and adding paragraphs (c) and (d) to read as 
follows:


Sec.  1207.3  Limitations.

* * * * *
    (b) The contract clause required by Sec.  1207.21(b)(6) and the 
itemized data reporting on numbers of contracts and amounts involved 
required under Sec. Sec.  1207.22 and 1207.23(b)(13) through (22) apply 
only to contracts for services in any amount and to contracts for

[[Page 74737]]

goods that equal or exceed $25,000 in annual value, whether in a single 
contract, multiple contracts, a series of contracts or renewals of 
contracts, with a single vendor.
    (c) Within ninety (90) days after the effective date of this 
regulation each regulated entity shall submit to FHFA a list of the 
types of contracts it considers exempt under Sec.  1207.3(b) and any 
thresholds, exceptions, and limitations the regulated entity 
establishes for the implementation of Sec.  1207.21(c)(2). The 
submission shall address the criteria identified in Sec.  
1207.21(b)(9).
    (d) Each regulated entity shall notify FHFA within thirty (30) days 
after any change in the types of contracts it considers exempt under 
Sec.  1207.3(b) or any change in the thresholds, exceptions, and 
limitations the regulated entity establishes for the implementation of 
Sec.  1207.21(c)(2).

Subpart C--[Amended]

0
5. Amend the heading of subpart C by removing ``and the Office of 
Finance''.


Sec.  1207.20  [Amended]

0
6. Amend Sec.  1207.20 by:
0
a. Removing the phrases ``and the Office of Finance'' and ``or the 
Office of Finance'' wherever they appear in paragraph (a); and
0
b. Revising paragraphs (b) and (c) to read as follows:


Sec.  1207.20  Office of Minority and Women Inclusion.

* * * * *
    (b) Adequate resources. The board of directors of each regulated 
entity will ensure that the Office of Minority and Women Inclusion, or 
office designated to lead the regulated entity in performing the 
responsibilities of this part, is provided relevant resources, 
including, but not limited to, human, technological, and financial 
resources sufficient to fulfill the requirements of this part. The 
regulated entity will also ensure that any officer(s) designated to 
direct and oversee its diversity and inclusion programs has the 
necessary knowledge, skills, competencies, and abilities to effectively 
implement the minimum standards and requirements found in this part.
    (c) Responsibilities. Each Office of Minority and Women Inclusion, 
or the office designated to perform the responsibilities of this part, 
is responsible for leading the regulated entity's board-approved 
strategies, for fulfilling the requirements of this part, 12 U.S.C. 
1833e(b) and 4520, and such standards and requirements as the Director 
may issue hereunder.
0
6. Amend Sec.  1207.21 by:
0
a. Revising the section heading;
0
b. Removing the phrases ``and the Office of Finance'', ``and Office of 
Finance'', ``or the Office of Finance'' and ``and the Office of 
Finance's'' wherever they appear;
0
c. Revising the first sentence of paragraph (a);
0
d. Revising the last sentence of paragraph (b) introductory text;
0
e. Revising paragraph (b)(2);
0
f. Redesignating paragraphs (b)(6) through (9) as paragraphs (b)(8) 
through (11), respectively;
0
g. Redesignating paragraphs (b)(3) through (5) as paragraphs (b)(4) 
through (6), respectively;
0
h. Adding new paragraphs (b)(3) and (7);
0
i. Revising newly redesignated paragraphs (b)(4), (5), (9), and (10); 
and
0
j. Adding paragraphs (d) and (e).
    The revisions and additions read as follows:


Sec.  1207.21  Promoting diversity and ensuring inclusion in all 
business and activities.

    (a) Equal opportunity notice. Each regulated entity and the Office 
of Finance shall publish a statement, endorsed by its Chief Executive 
Officer and approved by its Board of Directors, confirming its 
commitment to the principles of equal opportunity in employment and in 
contracting, at a minimum regardless of race, color, religion, sex, 
national origin, disability status, genetic information, age, sexual 
orientation, gender identity, or status as a parent. * * *
    (b) * * * The policies and procedures of each regulated entity, at 
a minimum, shall:
* * * * *
    (2) Describe its practices and principles for prohibiting 
discrimination in employment and contracting;
    (3) Give consideration to minority-, women-, and disabled-owned 
businesses when reviewing and evaluating contract proposals as required 
under Sec.  1207.2(c);
    (4) Attempt to resolve complaints of discrimination in employment 
and in contracting. Publication will include at a minimum making the 
procedure conspicuously accessible to employees and applicants through 
print, electronic, or alternative media formats, as necessary, and 
through the regulated entity's Web site;
    (5) Accept, review, and grant or deny requests for reasonable 
accommodations of disabilities from employees or applicants for 
employment;
* * * * *
    (7) Develop a stand-alone diversity and inclusion strategic plan or 
incorporate into its existing strategic plan a diversity and inclusion 
plan that proactively focuses on promoting the advancement of diversity 
and inclusion. The stand-alone diversity and inclusion strategic plan 
and the incorporated diversity and inclusion plan are hereinafter 
referred to as the diversity and inclusion strategic plan;
* * * * *
    (9) Identify the types of contracts the regulated entity considers 
exempt under Sec.  1207.3(b) and any thresholds, exceptions, and 
limitations the regulated entity establishes for the implementation of 
Sec.  1207.21(c)(2). The policies and procedures must describe the 
following:
    (i) The rationale and need for the thresholds, exceptions, or 
limitations;
    (ii) The criteria used to implement the thresholds, exceptions, or 
limitations; and
    (iii) Any negative or adverse impact the implementation of the 
thresholds, exceptions, or limitations would likely have on contracting 
opportunities for minorities, women, and individuals with disabilities, 
and minority-, women-, and disabled-owned businesses.
    (10) Be published and made accessible to employees, applicants for 
employment, contractors, potential contractors, and members of the 
public through print, electronic, or alternative media formats, as 
necessary, and through the regulated entity's Web site; and
* * * * *
    (d) Diversity and inclusion strategic planning. No later than 45 
days after the commencement of each calendar year, the board of 
directors of each regulated entity shall adopt strategies for promoting 
diversity and inclusion of minorities, women, and individuals with 
disabilities, and minority-, women-, and disabled-owned businesses for 
at least the succeeding three years (i.e., a diversity and inclusion 
strategic plan). The board of directors of each regulated entity shall 
review and annually affirm that the diversity and inclusion strategic 
plan remains applicable and appropriate during the two-year period that 
follows the adoption of the plan.
    (e) Contents of the diversity and inclusion strategic plan. The 
diversity and inclusion strategic plan shall include the following:
    (1) A vision and/or mission statement that address the importance 
of promoting diversity and ensuring the inclusion of minorities, women, 
and individuals with disabilities in order to fulfill Sec.  1207.2;

[[Page 74738]]

    (2) Measurable strategic goals and objectives for accomplishing the 
agreed-upon priorities and intended outcomes developed to advance 
diversity and ensure the inclusion of minorities, women, and 
individuals with disabilities at the regulated entity in accordance 
with Sec.  1207.2; and
    (3) A requirement to create and implement action plans to achieve 
the strategic goals and objectives and management reporting 
requirements for monitoring the implementation of those goals and 
objectives.


Sec.  1207.22  [Amended]

0
7. Amend Sec.  1207.22 by removing the phrases ``and Office of 
Finance'', ``and the Office of Finance'', ``or the Office of Finance'', 
and ``the Office of Finance's'' from the section heading and from 
wherever else they appear.


Sec.  1207.23  [Amended]

0
8. Amend Sec.  1207.23 by:
0
a. Removing the phrases ``and the Office of Finance'', ``or the Office 
of Finance'', and ``or the Office of Finance's'' from all paragraphs;
0
b. In paragraphs (b)(3) and (7), removing the phrase ``individuals 
applying'' and adding in its place ``applicants'';
0
c. Adding ``and the Office of Finance'' after ``each Bank'' in 
paragraph (b)(9)(i); adding ``and the Office of Finance'' after ``each 
Bank'' in paragraph (b)(9)(i)(A); adding ``and the Office of Finance'' 
to the end of the sentence in paragraph (b)(9)(B)(ii); adding ``and the 
Office of Finance'' after ``by the Banks'' in paragraph (b)(10);
0
d. Redesignating paragraphs (b)(14) through (20) as paragraphs (b)(19) 
through (25), respectively;
0
e. Redesignating paragraphs (b)(11) through (13) as paragraphs (b)(13) 
through (15), respectively;
0
f. Redesignating paragraphs (b)(9) and (10) as paragraphs (b)(10) and 
(11), respectively;
0
g. Adding new paragraphs (b)(9) and (12);
0
h. Revising newly redesignated paragraphs (b)(14) and (15);
0
i. Adding new paragraphs (b)(16), (17), and (18); and
0
j. Revising newly redesignated paragraphs (b)(19) and (23).
    The revisions and additions read as follows:


Sec.  1207.23  Annual reports--format and content.

* * * * *
    (b) * * *
    (9) Data showing for the reporting year by minority, gender, and 
disability classification--
    (i) The number of individuals responsible for supervising employees 
and/or managing the functions or departments of the regulated entity; 
and
    (ii) A description of the strategies, initiatives, and activities 
executed during the preceding year to promote diverse individuals to 
supervisory and management roles;
* * * * *
    (12) A description of strategies, initiatives, and activities the 
regulated entity implemented to advance diversity and inclusion in 
conjunction with its efforts to--
    (i) Promote access to single- and multi-family mortgage credit by--
    (A) Assessing challenges and impediments minority-serving financial 
institutions face in accessing the secondary mortgage market and/or 
providing access to single- and multi-family mortgage credit for 
creditworthy borrowers; and
    (B) Supporting lenders who serve minority communities;
    (ii) Promote diversity in capital market transactions by--
    (A) Assessing challenges and impediments minority-, women-, and 
disabled-owned businesses face providing capital market or financial 
transaction services including, but not limited to, those identified in 
Sec.  1201.1; and
    (B) Identifying, considering, and selecting minority-, women-, and 
disabled-owned businesses to participate in capital market or financial 
transactions;
    (iii) Promote diversity and inclusion in affordable housing and 
community investment programs;
* * * * *
    (14) Cumulative data separately showing the total number of 
contracts in place at the beginning of the reporting year as well as 
those entered into during the reporting year;
    (15) Cumulative data separately showing the total amount paid for 
contracts in place at the beginning of the reporting year as well as 
those entered into during the reporting year;
    (16) Cumulative data separately showing the total number of 
contracts entered into during the reporting year that were--
    (i) Considered exempt under Sec.  1207.3(b);
    (ii) Prime contracts (tier 1) entered into with minorities or 
minority-owned businesses, women or women-owned businesses, and 
individuals with disabilities or disabled-owned businesses;
    (iii) Subcontractor (tier 2) contracts that prime contractors (tier 
1) entered into with minorities or minority-owned businesses, women or 
women-owned businesses, and individuals with disabilities or disabled-
owned businesses;
    (17) Cumulative data separately showing the total amount paid for 
contracts entered into during the reporting year that were--
    (i) Considered exempt under Sec.  1207.3(b);
    (ii) To prime contractors (tier 1) that are minorities or minority-
owned businesses, women or women-owned businesses, and individuals with 
disabilities or disabled-owned businesses in place at the beginning of 
the reporting year as well as those entered into during the reporting 
year;
    (iii) To subcontractors (tier 2) that are minorities or minority-
owned businesses, women or women-owned businesses, and individuals with 
disabilities or disabled-owned businesses in place at the beginning of 
the reporting year;
    (18) Cumulative data separately showing the total diversity spend 
with non-diverse-owned businesses during the reporting year;
    (19) The annual total of amounts paid to prime contractors (tier 1) 
and subcontractors (tier 2) and the percentage of which was paid 
separately through prime contracts and subcontracts to minorities or 
minority-owned businesses, women or women-owned businesses, and 
individuals with disabilities or disabled-owned businesses during the 
reporting year;
* * * * *
    (23) A comparison of the data reported under paragraphs (b)(13) 
through (19) of this section with the same information reported for the 
previous year;


Sec.  1207.24  [Amended]

0
9. Amend Sec.  1207.24 by removing the phrase ``or the Office of 
Finance's''.
0
10. Add Sec.  1207.25 to read as follows:


Sec.  1207.25  Office of Finance.

    All parts of this regulation and the standards issued under it 
shall apply to the Office of Finance, as defined in Sec.  1201.1, in 
the same manner in which it applies to the regulated entities, unless 
the Office of Finance is otherwise specifically addressed or excluded.

     Dated: October 18, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-25726 Filed 10-26-16; 8:45 am]
 BILLING CODE 8070-01-P