​SUMMARY: Title XIII of the Housing and Community Development Act of 1992, known as the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (1992 Act), requires the Office of Federal Housing Enterprise Oversight (OFHEO) to develop a risk-based capital regulation for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). The regulation will specify a risk-based capital stress test (stress test) that, when applied to the Enterprises, determines the amount of capital that an Enterprise must hold to maintain positive capital throughout a 10-year period of economic stress. On February 8, 1995, OFHEO published an Advance Notice of Proposed Rulemaking (ANPR), which solicited public comment on a variety of issues concerning the development of the risk-based capital regulation. In light of the complex issues and decisions that OFHEO must address prior to issuing proposed risk-based capital standards and the challenge of developing the risk-based capital stress test, OFHEO has decided to issue the proposed risk-based capital regulation in two parts.

This first Notice of Proposed Rulemaking (NPR) addresses two key components of the stress test. The first is OFHEO’s proposal of the procedures for establishing the ''benchmark loss experience,'' which is the basis for determining the extent of Enterprise credit losses during the stress test. This NPR describes the methodology and rationale OFHEO used to identify the proposed benchmark loss experience, responds to relevant ANPR comments, and describes how the benchmark loss experience will influence the risk-based capital stress test. In this NPR, OFHEO also proposes to use its House Price Index (HPI) in the stress test to estimate changes over time in the values of single-family properties securing Enterprise mortgages.

A second NPR will: specify the timing and content of risk-based capital reports to be submitted by the Enterprises; specify all of the remaining aspects of the risk-based capital stress test; and describe how the stress test will be used to determine the Enterprises’ risk-based capital requirements.

DATES: Comments regarding this NPR must be received in writing on or before September 9, 1996.

ADDRESSES: Send written comments to Anne E. Dewey, General Counsel, Office of General Counsel, Office of Federal Housing Enterprise Oversight, 1700 G Street, NW., Fourth Floor, Washington, DC 20552.