[Federal Register Volume 59, Number 243 (Tuesday, December 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30912]


[[Page Unknown]]

[Federal Register: December 20, 1994]


      
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Part VII





Department of Housing and Urban Development





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Office of the Secretary



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24 CFR Parts 25 and 26




Mortgagee Review Board; Proceedings Before a Hearing Officer; Proposed 
Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Parts 25 and 26

[Docket No. R-94-1563; FR-3065-P-02]
RIN 2501-AB24

 
Mortgagee Review Board; Proceedings Before a Hearing Officer

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make changes in the Department's 
regulations governing sanctions imposed by the Mortgagee Review Board. 
The proposed rule would also make conforming changes to the regulations 
concerning HUD's hearing officers, consistent with the revisions 
proposed herein and in the proposed revision to 24 CFR part 24 
published elsewhere in today's Federal Register. The changes to the 
Mortgagee Review Board actions are intended to follow more closely the 
statutory provisions set forth at 12 U.S.C. 1708(c). The Department 
considers these proposed revisions necessary to comply with the 
President's directive to streamline agency operations throughout the 
Executive Branch. The proposed revisions are also an element in the 
Government reinvention process at the Department.

DATES: Comment due date. Comments must be submitted on or before 
February 21, 1995.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
S.W., Washington, D.C. 20410. Communications should refer to the above 
docket number and title. A copy of each communication submitted will be 
available for public inspection and copying between 7:30 a.m. and 5:30 
p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: Emmett N. Roden, Assistant General 
Counsel for Administrative Proceedings, Office of General Counsel, U.S. 
Department of Housing and Urban Development, 451 7th Street, S.W., Room 
10251, Washington, D.C. 20410, telephone (202) 708-2350. The telephone 
number for the hearing impaired (TDD) is (202) 708-9300. These are not 
toll-free numbers.

SUPPLEMENTARY INFORMATION: Section 202 of the National Housing Act (12 
U.S.C. 1708 (c) and (d)) established the Mortgagee Review Board 
(``Board''). Section 202(c)(4) directs the Board to ``hold a hearing on 
the record'' concerning sanctions it has taken against a mortgagee, if 
the mortgagee so requests within 30 days notice of the Board's action. 
However, HUD's current regulations delegate the Board's authority to 
hold hearings to hearing officers (administrative law judges and Board 
of Contract Appeals judges). These proceedings have proven extremely 
time-consuming and expensive. Accordingly, this proposed rule will 
return the hearing function to the Board, thereby streamlining the 
hearing process.
    The proposed rule also implements the 1992 amendments to Section 
202. These amendments limited a suspension issued by the Board to not 
more than one year, unless extended for not more than six additional 
months, to protect the public interest, or unless extended with the 
mortgagee's agreement. The amendments also clarified that the term 
``mortgagee'' included lenders or loan correspondents approved under 
the National Housing Act.
    The proposed rule also would make conforming changes to HUD's 
regulations governing hearing officers, consistent with the proposed 
revisions both to the Board's regulations and to 24 CFR part 24, 
published elsewhere in today's Federal Register.
    Written comments from the public will be considered prior to 
issuance of a final rule. No hearing will be conducted with respect to 
this proposed rule.

Findings and Other Matters

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
required by the National Environmental Policy Act of 1969 (42 U.S.C. 
4331) is unnecessary since the rule addresses administrative decisions 
whose content does not constitute a development decision nor affect the 
physical condition of a project area or building.

The Regulatory Flexibility Act

    Under 5 U.S.C. 605(b) (the Regulatory Flexibility Act), the 
Secretary by his approval of this rule certifies that this rule would 
not have a significant economic impact on a substantial number of small 
entities. The rule would implement statutory authority that is intended 
to protect the Department's programs from abusive practices, but it 
should have no adverse or disproportionate economic impact on small 
businesses.

Executive Order 12866, Regulatory Planning and Review

    This rule was reviewed and approved by the Office of Management and 
Budget as a significant rule, as this term is defined in Executive 
Order 12866, which was signed by the President on September 30, 1993. 
Any changes to the rule as a result of that review are contained in the 
public file for the rule in the Department's Office of the Rules Docket 
Clerk.

Executive Order 12606, The Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule does not have 
potential for significant impact on family formation, maintenance, and 
general well-being, and, thus, is not subject to review under the 
Order. The rule alters the administrative procedures associated with 
the prosecution of abuses of HUD programs, but it has no impact on 
family-related concerns.

Executive Order 12612, Federalism

    The General Counsel, as the designated Official under Section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this rule will not have substantial direct effects on 
States or their political subdivisions, or the relationship between the 
Federal government and the States, or on the distribution of power and 
responsibilities between them and other levels of government. The 
rule's major effects are on individuals and businesses.

Semiannual Agenda of Regulations

    This rule was listed as sequence number 1718 in the Department's 
Semiannual Agenda of Regulations published on November 14, 1994 (59 FR 
57632, 57640) pursuant to Executive Order 12866 and the Regulatory 
Flexibility Act.

List of Subjects

24 CFR Part 25

    Administrative practice and procedure, Loan programs--housing and 
community development, Organization and functions (Government 
agencies).

24 CFR Part 26

    Administrative practice and procedure.

    Accordingly, 24 CFR parts 25 and 26 would be amended as follows:

PART 25--MORTGAGEE REVIEW BOARD

    1. The authority citation for part 25 would be revised to read as 
follows:

    Authority: 12 U.S.C. 1708 (c) and (d), 1709(s), 1715b and 
1735(f)-14; 42 U.S.C. 3535(d).

    2. Section 25.2 would be revised to read as follows:


Sec. 25.2  Establishment of Board.

    The Mortgagee Review Board was established in the Federal Housing 
Administration, which is in the Office of the Assistant Secretary for 
Housing--Federal Housing Commissioner, by section 202(c)(1) of the 
National Housing Act, (12 U.S.C. 1708(c)(1)), as added by section 142 
of the Department of Housing and Urban Development Reform Act of 1989 
(Pub. L. 101-235, 103 Stat. 1987). Except as limited by this part, the 
Mortgagee Review Board shall exercise all of the functions of the 
Secretary with respect to administrative actions against mortgagees and 
lenders and such other functions as are provided in this part. The 
Mortgagee Review Board may, in its discretion, approve the initiation 
of a suspension or debarment action against a mortgagor or lender by 
any Suspending or Debarring Official under part 24 of this title. The 
Mortgagee Review Board shall have all powers necessary and incident to 
the performance of these functions. The Mortgagee Review Board may 
redelegate its authority to impose administrative sanctions on the 
grounds specified in Secs. 25.9 (e), (h), and (u), to take all other 
nondiscretionary acts, and to review submissions and conduct hearings 
in accordance with Sec. 25.8. With respect to actions taken against 
Title I lenders, the Mortgagee Review Board may redelegate its 
authority to take administrative actions on the grounds specified in 24 
CFR 202.3(j), 202.5(a), and 202.5(c) of this title (as incorporated in 
Sec. 202.6(b)(1) of this title).
    3. In Sec. 25.3, a definition for Hearing official would be added 
after the definition for Cease and desist order, a definition for Loan 
correspondent would be added after the definition for Letter of 
reprimand and the definition of Mortgagee would be revised to read as 
follows:


Sec. 25.3  Definitions.

* * * * *
    Hearing official. The hearing official is a Departmental official 
designated by the Board to conduct hearings under Sec. 25.8.
* * * * *
    Loan correspondent. A financial institution approved by the 
Secretary to originate direct loans under Title I of the National 
Housing Act, 12 U.S.C. 1702 et seq., for sale or transfer to a 
sponsoring lending institution which holds a valid Title I contract of 
insurance and which is not under suspension.
* * * * *
    Mortgagee. (1) For purposes of this part, the term ``mortgagee'' 
includes:
    (i) The original lender under the mortgage, as that term is defined 
at sections 201(a) and 207(a)(1) of the National Housing Act, 12 U.S.C. 
1707(a) and 1713(a)(1);
    (ii) A lender or loan correspondent as defined in this section; or
    (iii) A branch office or subsidiary of the mortgagee, lender or 
loan correspondent.
    (2) The term ``mortgagee'' also includes successors and assigns of 
the mortgagee, lender or loan correspondent, as are approved by the 
Commissioner.
* * * * *
    4. In Sec. 25.5, paragraphs (c)(1), (c)(2) and (d)(4)(iii) would be 
revised to read as follows:


Sec. 25.5  Administrative actions.

* * * * *
    (c) Suspension--(1) General. The Board may issue an order 
temporarily suspending a mortgagee's HUD/FHA approval if there exists 
adequate evidence of a violation(s) under Sec. 25.9 and continuation of 
the mortgagee's HUD/FHA approval, pending or at the completion of, any 
audit, investigation, or other review, or such administrative or other 
legal proceedings as may ensue, would not be in the public interest or 
in the best interests of the Department. Suspension shall be based upon 
adequate evidence.
    (2) Duration. A suspension shall last for a specified period of 
time, but not less than 6 months and generally not more than 1 year. 
The Board may extend the suspension for an additional 6 months it if 
determines that the extension is in the public interest. These time 
limits may also be extended upon the voluntary written agreement of the 
mortgagee.
* * * * *
    (d) * * *
    (4) * * *
    (iii) Upon receipt of the hearing official's decision under 
Sec. 25.8.
* * * * *
    5. Section 25.7 would be revised to read as follows:


Sec. 25.7  Notice of administrative action.

    Whenever the Board takes an action to issue a letter of reprimand, 
place a mortgagee on probation, or to suspend or withdraw a mortgagee's 
approval, the Board shall promptly notify the mortgagee in writing of 
the determination. Except for a letter of reprimand, the notice shall 
describe the nature and duration of the administrative action, shall 
specifically state the violations and shall set forth the findings of 
the Board. The notice shall inform the mortgagee of its right to a 
hearing regarding the administrative action (except for a letter of 
reprimand) and of the manner and time in which to request a hearing 
pursuant to Sec. 25.8. A supplemental notice may be issued in the 
discretion of the Board to add or modify the reasons for the action.
    6. Section 25.8 would be revised to read as follows:


Sec. 25.8  Hearings and hearing request.

    (a) Hearing request. In the case of probation, suspension or 
withdrawal action, a mortgagee is entitled to a hearing on the record 
before a hearing official designated by the Board. The mortgagee shall 
submit its request for a hearing within 30 days of receiving the 
Board's notice of administrative action. The request shall be addressed 
to the Board Docket Clerk, Department of Housing and Urban Development, 
451 7th Street, S.W., Washington, D.C. 20410. The request shall 
specifically respond to the violations set forth in the notice of 
administrative action. If the mortgagee fails to request a hearing 
within 30 days after receiving the notice of administrative action, the 
Board's action shall become final.
    (b) Procedural rules. The hearing official shall hold a de novo 
hearing within 30 days of HUD's receipt of the mortgagee's request, 
unless the mortgagee requests a later hearing date or requests an 
informal conference, under paragraph (e) of this section, in addition 
to the hearing. The mortgagee or its representative shall be afforded 
an opportunity to appear, submit documentary evidence, present 
witnesses and confront any witness the agency presents. The parties 
shall not be allowed to present members of the Board as witnesses. A 
transcribed record of the hearing shall be made available at cost to 
the mortgagee.
    (c) Hearing location. The hearing shall generally be held in 
Washington, D.C. However, upon a showing of undue hardship or other 
cause, the hearing official may, in his or her discretion, order the 
hearing to be held in a location other than Washington, D.C.
    (d) Hearing official's decision. The hearing official shall make a 
written decision within 45 days after the conclusion of the hearing, 
unless the hearing official extends this period for good cause. If 
there is any dispute as to material facts, the hearing official shall 
make written findings of fact. The decision shall be based upon the 
facts as found, together with any information and argument submitted by 
the parties and any other information in the administrative record. The 
hearing official's decision shall be mailed to the mortgagee, and shall 
serve as the final agency action concerning the mortgagee.
    (e) Informal conference. The mortgagee may request an informal 
conference with respect to a notice of withdrawal, suspension, or 
probation. The conference shall, at the option of the mortgagee, be in 
lieu of or precede the hearing on the Board action. The mortgagee must 
submit the request for an informal conference to the Board Docket Clerk 
within 30 days after receipt of the notice of Board action. If the 
mortgagee elects to request a hearing in addition to the conference, 
the mortgagee must include with the request for a conference and 
hearing an express waiver of the mortgagee's right to the hearing 
within 30 days after the Department's receipt of the request for 
hearing. The conference shall be conducted by the hearing official, or 
another designated official, within 15 days after receipt of the 
request for a conference.
    6. In Sec. 25.9, paragraphs (i) and (w) would be revised to read as 
follows:


Sec. 25.9  Grounds for an administrative action.

* * * * *
    (i) Failure or refusal of an approved mortgagee to comply with an 
order of the Board, the Secretary, or the hearing official;
* * * * *
    (w) Any other reasons the Board, the Secretary, or the hearing 
official, as appropriate, determines to be so serious as to justify an 
administrative sanction;
* * * * *


Sec. 25.12  [Amended]

    7. In Sec. 25.12(a), the words ``Hearing Officer'' would be removed 
and in their place, the words ``hearing official'' would be added, and 
the last sentence would be removed.
    8. Section 25.16 would be revised to read as follows:


Sec. 25.16  Prohibition against modification of Board orders.

    The hearing official shall not modify or otherwise disturb in any 
way an order or notice by the Board, except after having conducted a 
hearing in accordance with Sec. 25.8.


Sec. 25.17  [Removed]

    9. Section 25.17 would be removed.

PART 26--PROCEEDINGS BEFORE A HEARING OFFICER

    10. The authority citation for part 26 would be revised to read as 
follows:

    Authority: 42 U.S.C. 3535(d).

    11. In Sec. 26.1, the second sentence would be revised to read as 
follows:


Sec. 26.1  Purpose.

    * * * These rules of procedure apply to hearings with respect to 
determinations by the Multifamily Participation Review Committee 
pursuant to 24 CFR part 200, subpart H, and to hearings conducted 
pursuant to a referral by a debarring or suspending official of a 
dispute with respect to material facts at issue in an administrative 
sanction matter under 24 CFR part 24, unless such regulations at parts 
200 or 24 provide otherwise. * * *
    Dated December 8, 1994.
Henry G. Cisneros,
Secretary
[FR Doc. 94-30912 Filed 12-19-94; 8:45 am]
BILLING CODE 4210-32-P