[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Rules and Regulations]
[Pages 72501-72522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33461]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1780

RIN 2550-AA04


Rules of Practice and Procedure

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Final rule.

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SUMMARY: The Office of Federal Housing Enterprise Oversight (OFHEO) is 
issuing a final rule that establishes the rules of procedure to be 
followed when OFHEO conducts hearings on the record and rules of 
practice before OFHEO. The rule implements the provisions of title XIII 
of the Housing and Community Development Act of 1992, known as the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 
regarding hearings on the record in certain enforcement actions against 
the Federal National Mortgage Association, the Federal Home Loan 
Mortgage Corporation, or directors or executive officers of the 
Enterprises. The rule provides OFHEO personnel, the Enterprises, the 
Enterprises' directors and executive officers, and other interested 
parties with the guidance necessary to prepare for and participate in 
such hearings.

EFFECTIVE DATE: January 27, 2000.

FOR FURTHER INFORMATION CONTACT: David A. Felt, Associate General 
Counsel, Office of Federal Housing Enterprise Oversight, 1700 G Street, 
NW., Fourth Floor, Washington, DC 20552, telephone (202) 414-3829 (not 
a toll-free number). The telephone number for the Telecommunications 
Device for the Deaf is: (800) 877-8339.

SUPPLEMENTARY INFORMATION: The Supplementary Information is organized 
according to this table of contents:

I. Background
II. Comments on the Proposed Rules of Practice and Procedures
III. Synopsis of the Final Rule
IV. Regulatory Impact

I. Background

    Title XIII of the Housing and Community Development Act of 1992, 
Pub. L. No. 102-550, known as the Federal Housing Enterprises Financial

[[Page 72502]]

Safety and Soundness Act of 1992 (1992 Act), established OFHEO as an 
independent office within the Department of Housing and Urban 
Development (HUD) to ensure that the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac) (collectively, the Enterprises) are capitalized 
adequately and operated in a safe and sound manner. Subsection 1313(b) 
of the 1992 Act refers to certain authorities that the Director of 
OFHEO (Director) may exercise exclusive of the Secretary of HUD 
(Secretary) \1\ and other authorities that are subject to review and 
approval by the Secretary.\2\ The Secretary's roles, duties, and 
responsibilities may be delegated to the Director. Among the exclusive 
authorities of the director is the authority to issue regulations to 
carry out the duties of the Director under Subtitle C of the Act.\3\ 
Prior to issuing a cease-and-desist order, OFHEO must conduct hearings 
on the record and provide the subjects of the order with notice and the 
opportunity to participate in such hearings.\4\ Prior to imposing civil 
money penalties, OFHEO must provide notice and the opportunity for a 
hearing to the persons subject to the penalties.\5\ This final rule 
provides the rules of practice and procedure that will be applied in 
these hearings and any other hearings on the record that may be 
conducted by the Director.
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    \1\ 12 U.S.C. 4513(b).
    \2\ Any determinations, actions or functions of the Director 
that are not referred to in subsection 1313(b) are subject to the 
review and approval of the Secretary. 1992 Act, section 1313(c) (12 
U.S.C. 4513(c)).
    \3\ 1992 Act, section 1313(b) (12 U.S.C. 4513(b)).
    \4\ 1992 Act, section 1371 (12 U.S.C. 4631).
    \5\ 1992 Act, section 1376 (12 U.S.C. 4636).
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    Fannie Mae and Freddie Mac are Government-sponsored enterprises 
with important public purposes. These purposes include providing 
liquidity to the residential mortgage market and increasing the 
availability of mortgage credit benefiting low- and moderate-income 
families, rural areas, central cities, and areas that are underserved 
by lending institutions. The Enterprises engage in two principal 
businesses: investing in residential mortgages and guaranteeing 
residential mortgage securities. The securities they guarantee and the 
debt instruments they issue are not backed by the full faith and credit 
of the United States.\6\ Despite the absence of such Federal backing, 
prices of Enterprise debt securities reflect a market perception that 
the U.S. Government has a strong interest in preventing a default by 
either Enterprise. This perception principally arises from the public 
purposes of the Enterprises, their Federal charters, their potential 
access to a U.S. Treasury line of credit and the statutory exemptions 
of their debt and mortgage-backed securities from otherwise mandatory 
investor protection provisions.\7\ This perception is bolstered by 
concern that the insolvency of either Enterprise would have serious 
consequences for the nation's housing markets and financial system.
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    \6\ Federal Home Loan Mortgage Corporation act, sections 301(4) 
and 306(h)(2), (12 U.S.C. 1451 note (b)(3)-(4), 12 U.S.C. 
1455(h)(2)); Federal National Mortgage Association Charter Act, 
sections 301(4) and 304(b) (12 U.S.C. 1716(3)-(4), 12 U.S.C. 
1719(b)); and 1992 Act, section 1302(4) (12 U.S.C. 4501(4)).
    \7\ See, e.g., 12 U.S.C. 24 (authorizing unlimited investment by 
national banks in obligations of, or issued by, the Enterprises); 12 
U.S.C. 1455(g), 1719(d) and 1723c (exempting Enterprise securities 
from oversight from Federal regulators); 15 U.S.C. 77r-l(a) 
(preempting State law that would treat Enterprise securities 
differently from obligations of the United States for investment 
purposes); and 15 U.S.C. 77r-l(c) (exempting Enterprise securities 
from State securities laws).
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    On September 24, 1998 (63 FR 51031), OFHEO published a Notice of 
Proposed Rulemaking (NPR) that included proposed Rules of Practice and 
Procedure. The NPR proposed rules of procedure for hearings on the 
record before OFHEO and rules of practice governing individuals who 
practice before OFHEO. The comment period closed December 23, 1998.
    OFHEO received comments from each Enterprise in response to the 
proposed rulemaking. A discussion of those comments follows.

II. Comments on the Proposed Rules of Practice and Procedure

General Comments

    Fannie Mae fully supported OFHEO's efforts to formalize the rules 
of practice and procedure governing the conduct of hearings on the 
record. Fannie Mae stated its belief that any such hearing in the 
future would occur only in the most extraordinary of circumstances and 
emphasized its commitment to working with OFHEO in a good faith, 
constructive relationship. Fannie Mae offered various comments and 
recommended a number of changes that Fannie Mae asserts would make the 
rules more consistent with the Administrative Procedure Act (APA) \8\ 
and with the practices in place at the Federal banking agencies. 
Although, as explained below, OFHEO does not share the view that 
anything in the proposed rule was inconsistent with the APA, OFHEO 
found that some of the recommended changes added clarity to the rule 
and has incorporated them. Each of the recommendations is discussed in 
detail below.
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    \8\ 5 U.S.C. 500-559.
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    Freddie Mac expected that administrative enforcement proceedings 
would occur rarely, if ever, and that OFHEO would not consider 
initiating such a proceeding until both sides have sought cooperatively 
to resolve the matters at issue through alternative means. Freddie Mac 
stated that if OFHEO were to initiate a hearing on the record, the 
rules of practice and procedure should conform with OFHEO's statutory 
enforcement authority and be suited to the potential issues and parties 
to such a proceeding. In this regard, Freddie Mac recommended a number 
of changes that would, in its view, improve the rules by fostering 
early resolution, streamlining the provisions addressing sanctions to 
limit sanctions against individuals to those necessary to conduct an 
adjudicatory hearing or related proceedings, and ensuring fairness and 
due process. As explained below, OFHEO has considered each of these 
recommendations and, in response to some of them, has made changes in 
the final rule.

Utilize Pre-Filing Submissions To Foster Early Resolution

    Freddie Mac's comments encouraged OFHEO to adopt a procedure that 
would allow a potential respondent to submit a written statement of its 
position, prior to filing a formal notice of charges. Freddie Mac felt 
that a prior submission could provide the agency with additional facts, 
allow prompt and early correction of any miscommunication and point out 
weaknesses in the agency's preliminary position. In these and other 
ways, Freddie Mac suggests, the submission would assist OFHEO in making 
a well-reasoned decision about whether to pursue an alternative 
resolution or initiate a formal enforcement action. Freddie Mac cited a 
statement by the Securities and Exchange Commission (SEC) as an example 
of successful use of such prior submissions, which that agency has used 
for more than 20 years to help determine whether to file or otherwise 
initiate a formal proceeding.\9\
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    \9\ Securities Act Release No. 5310, 38 FR 5457, Mar. 1, 1973.
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    OFHEO shares Freddie Mac's desire to foster early resolution of 
enforcement matters and to ensure well-reasoned decision-making in 
determining whether to pursue formal enforcement actions. OFHEO has 
reviewed the cited SEC release and the practices of other

[[Page 72503]]

agencies. None of those agencies has published a regulation providing 
for submissions prior to a notice of charges. OFHEO will permit persons 
involved in an investigation to present a statement to OFHEO setting 
forth their interests and position. However, OFHEO cannot put itself in 
a position where, as a result of the establishment of formal procedural 
requirements, it would lose its ability to respond timely to actionable 
activities or conditions. Accordingly, OFHEO will not include among its 
procedural regulations a requirement that OFHEO obtain or solicit views 
or statements from persons against which notices of charges are soon to 
be issued.

Section 1780.1 Scope

    Fannie Mae recommended that the term ``director of any Enterprise'' 
at Sec. 1780.1(b) be defined in order to ``clarify that the term 
`directors' means members of the board of directors.'' The term, as 
used in this section of the final rule, refers to sections 1371 and 
1376 of the 1992 Act and is intended to have the same meaning as the 
same term in the Act. Accordingly, OFHEO found it unnecessary to define 
the term in the final rule.
    Freddie Mac recommended that Sec. 1780.1 be amended to list civil 
money penalty hearings under section 102 of the Flood Disaster 
Protection Act of 1973, as amended, 42 U.S.C. 4012a, among the hearings 
subject to the regulation. Although, as Freddie Mac noted, such 
hearings would be covered by the catchall provision in the section, 
OFHEO has incorporated the recommended change to make that coverage 
explicit.

Section 1780.3 Definitions

    Both Enterprises commented about proposed Sec. 1780.3(h), which 
defined the term ``presiding officer'' to be ``an administrative law 
judge or any other person designated by the Director to conduct a 
hearing.'' Fannie Mae recommended that OFHEO specify that only an ALJ 
should be permitted to conduct administrative hearings. Fannie Mae 
included a description of the administrative law judge (ALJ) program 
and opined that the APA does not contemplate that an agency head 
appoint ``any person'' to preside over hearings conducted on the 
record. Fannie Mae stated that the rule does ``not set forth any 
justification for OFHEO's departure from the commonly understood rules 
of the APA or from the practice of other safety and soundness 
regulators.'' Fannie Mae asserts that allowing persons other than ALJs 
to preside over hearings under the APA is inconsistent with accepted 
APA principles and with the uniform practice of the Federal banking 
agencies and HUD.
    The use of the term ``any other person'' in Sec. 1780.3(h) of the 
proposed rules was not intended to suggest that the Director might 
ignore the APA or other applicable law in appointing presiding 
officers. It was intended as a recognition that the APA includes 
exceptions to the general rule that the agency (in the case of boards 
or commissions), the agency head or an ALJ shall preside at a 
hearing.\10\ For example, the regulations of the United States Office 
of Personnel Management relating to ALJs also allow temporary 
appointment of qualified Federal annuitants, described as ``senior 
administrative law judges'' under certain circumstances.\11\ However, 
in addressing Fannie Mae's comment, OFHEO has modified the language 
permitting persons other than ALJs to act as presiding officers, as 
discussed below.
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    \10\ 12 U.S.C. 556(a).
    \11\ 5 CFR 930.216.
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    The use of the term ``any other person'' was not intended to imply 
that the circumstances that would require these other types of 
presiding officers are likely to occur in OFHEO enforcement 
proceedings. Neither was it intended to take a legal position that 
OFHEO did not consider its hearings to be governed by the APA or other 
applicable laws (such as those listed at Sec. 1780.1). However, because 
these rules are intended to have broad applicability to any hearings 
that are required to be on the record, including any that might be 
added by future legislation, OFHEO chose to provide maximum flexibility 
under whatever law is applicable, now or in the future. To clarify this 
point, OFHEO has replaced the phrase ``designated by the Director'' 
with ``appointed by the Director under applicable law.''
    OFHEO agrees that the practice of the agencies cited by Fannie Mae 
is to utilize ALJs. That would generally be OFHEO's practice also. 
However, in drafting the definition of presiding officer, OFHEO looked 
to the Uniform Rules of the Federal bank and thrift regulators. The 
Uniform Rules, which use the term ``administrative law judge'' where 
the OFHEO rules use ``presiding officer,'' define ``administrative law 
judge'' to mean ``one who presides at an administrative hearing under 
authority set forth at 5 U.S.C. 556.'' As explained above, that person 
or body of persons need not always be an administrative law judge. 
OFHEO has followed the same general approach, allowing for persons 
other than an administrative law judge to preside, but only where they 
can be appointed under applicable law.
    Freddie Mac recommended that, to help ensure the fairness and 
impartiality of administrative proceedings, the rule be changed to 
insert the word ``neutral'' to describe the ALJ or other person. OFHEO 
concurs with the Enterprises that any presiding officer should be 
impartial and fair. However, OFHEO disagrees with Freddie Mac that 
adding the word ``neutral'' to the regulation would further this goal. 
The provisions of the APA that govern selection of presiding officers 
and the conduct of hearings apply to proceedings under this final rule 
and are sufficient to insure impartiality and fairness.

Sections 1780.5 Authority of the Presiding Officer and 1780.6 Public 
Hearings

    Each Enterprise commented that Sec. 1780.6(c) should be modified to 
allow any party to request that documents be filed under seal. Fannie 
Mae explained its view that confidentiality goes to the heart of the 
fairness of a hearing and that allowing an agency, but not the other 
parties, to file confidential documents is unfair. Freddie Mac also 
felt that a change to allow all parties to request that a document be 
filed under seal was necessary to ensure fairness to all parties.
    OFHEO concurs with the need to ensure confidentiality of some 
documents and testimony in adjudicatory proceedings and agrees that all 
parties should be able to request confidentiality. Moreover, OFHEO 
believes that the authority to order documents to be filed under seal 
is among the inherent powers of the presiding officer under Sec. 1780.5 
to conduct a hearing and to rule on motions or procedural matters. 
However, in response to the comments, OFHEO has included some 
additional language in the final rule. This language, which is drawn 
from the Uniform Rules of the Federal financial institution regulatory 
agencies, emphasizes the authority of the presiding officer to maintain 
confidentiality of documents where appropriate. Specifically, 
Sec. 1780.5(b)(5) now includes expressly the authority to issue 
protective orders and Sec. 1780.5(b)(15) now includes expressly the 
authority to establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing. These 
changes clarify that the presiding officer may issue a protective order 
to maintain

[[Page 72504]]

confidentiality of documents a party seeks to file or is required to 
disclose in discovery. Further, these changes make explicit the 
authority of the presiding officer to maintain confidentiality of those 
documents by excluding the public from portions of a hearing where 
those documents may be introduced or discussed.

Section 1780.10  Service of Papers

    The Enterprises each commented upon proposed Sec. 1780.10. Freddie 
Mac recommended that OFHEO customize the language of this section to 
the Enterprises by requiring service by OFHEO upon the Enterprises or 
other respondents at a designated office within each Enterprise. 
Freddie Mac suggested that language in the rule that allows service by 
delivery to a person of suitable age and discretion at the physical 
location where the individual resides or works was unnecessary, because 
service of all such individuals could be made at the designated office 
of the appropriate Enterprise. Freddie Mac further recommended that 
OFHEO designate a hearing clerk to receive and log in papers in 
situations where a presiding officer has not yet been assigned. Fannie 
Mae asked that OFHEO clarify proposed Sec. 1780.10(f), asserting that 
the following language was confusing: ``Failure to make proof of 
service shall not affect the validity of service. The presiding officer 
may allow the proof to be amended or supplied, unless to do so would 
result in material prejudice to a party.'' Fannie Mae asked why it was 
necessary to supply proof of service at all if failure to do so does 
not affect validity of service.
    OFHEO does not believe it necessary to adopt the service rules 
recommended by Freddie Mac. OFHEO retains discretion to determine how 
best to serve a notice of charges against an Enterprise under 
particular circumstances. After initial service, OFHEO anticipates that 
counsel for the Enterprise would enter an appearance and service of all 
documents would be upon counsel. With respect to service upon 
individuals against whom charges are brought, the service rules are 
tailored to make reasonably certain that the individual receives notice 
of the documents served. OFHEO's enforcement authorities are not 
limited to current Enterprise employees and the service rules must 
reach all possible recipients of documents in an enforcement action, 
including those who might seek to avoid service. Moreover, OFHEO does 
not wish to preclude service by various reasonable means should 
circumstances require it. Therefore, OFHEO has not modified the 
language in the final rule to allow the Enterprises to designate a 
particular office for service upon the Enterprise and individuals.
    OFHEO finds it unnecessary to specify by rule an individual or an 
office within OFHEO for service or filing of documents related to a 
hearing. In enforcement proceedings, the Director will be represented 
by enforcement counsel upon whom service may be made. If a presiding 
officer is not named in the notice of charges, an appropriate address 
for filing of an answer to the notice will be provided in the notice.
    OFHEO concurs with Fannie Mae that Sec. 1780.10(f) of the proposed 
rules could be clarified. The final rule, therefore, makes clear that a 
party may contest service only by claiming that actual service was not 
made. The term ``proof of service'' is used to mean an affidavit by a 
nonattorney or a declaration of counsel, filed and served with the 
pleading or other document, stating when and by what means the document 
was served. Such an affidavit or declaration establishes prima facie 
that service was made and shifts the burden to a party contesting 
service to come forward with evidence that service did not occur. The 
failure of a party to include a proof of service with the document 
would not alone be sufficient to prove lack of service or cause the 
filing of such a document to be ineffective. Service could, if 
necessary, be proven by other means. However, a proof of service must 
be filed before the presiding officer can take action upon a filing, 
such as a motion, that seeks such action. This rule prevents action 
being taken without notice being provided to the nonmoving parties.

Section 1780.15  OFHEO's Right To Conduct Examinations

    Freddie Mac recommended that Sec. 1780.15 be revised to provide 
that OFHEO's examination authority not be used for after-the-fact 
gathering of evidence to support a notice of charges that has already 
been issued. Freddie Mac stated that the Director must have reasonable 
cause to believe that grounds exist for initiating an action by the 
time the Director serves the notice.
    OFHEO decided not to accept Freddie Mac's recommendation to modify 
Sec. 1780.15 for a number of reasons. First, it would be inappropriate 
and unprecedented for a Federal financial institution regulatory agency 
to prevent itself from using the most recent factual information 
available. The language in Sec. 1780.15 is drawn directly from the 
Uniform Rules of the bank and thrift regulators and reflects normal 
examination and enforcement practices. As a matter of practice, Federal 
financial institution regulatory agencies generally do not issue 
notices of charges until a supporting factual record is adequately 
developed. In this regard, OFHEO would be no different from these other 
regulatory agencies. However, OFHEO does not consider it unfair or 
improper to allow relevant information to be introduced at hearing that 
may have come to light from an examination conducted after the notice 
of charges. Any such information would be available to all parties 
through discovery. OFHEO's rules anticipate that additional facts may 
come to light during the prehearing phase and the rules allow for 
liberal amendments to notices of charges and answers to reflect those 
newly discovered facts.
    Further, because the purpose of cease and desist orders is largely 
remedial, it is especially important in fashioning such an order that 
the presiding officer and the Director understand any steps an 
Enterprise may have undertaken (or not undertaken) to deal with the 
problems at issue since the filing of the notice of charges. Current 
practices at an Enterprise could also be relevant in determining the 
appropriateness and size of civil money penalties. Examinations are an 
important means of providing current information.
    OFHEO is also concerned that any rule that limits the use of 
current examination findings at hearing could tend to chill the 
examination process. Examiners might be reluctant to examine areas at 
issue in the hearing out of concern that their work might raise issues 
about whether facts introduced at hearing were discovered after service 
of the notice of charges. The result could be that OFHEO would be 
hindered in its ability to examine those areas that were experiencing 
the worst problems at the Enterprise.
    Finally, a rule such as Freddie Mac suggests would require 
discovery and collateral hearings to determine the source of much of 
OFHEO's evidence. In OFHEO's view, such collateral proceedings would be 
inappropriate, because the proper issue is whether parties have had 
sufficient time to consider new evidence, not whether OFHEO obtained it 
in an examination after a notice of charges was filed. Further, the 
appropriate remedy in the event that there has been insufficient time 
is to extend the hearing date, not to exclude the evidence.

[[Page 72505]]

Section 1780.20  Commencement of Proceeding and Contents of Notice of 
Charges

    Fannie Mae and Freddie Mac each recommended that OFHEO modify 
Sec. 1780.20(b) to delete the proposed language requiring the notice of 
charges to state ``the matters of fact or law showing that OFHEO is 
entitled to relief'' and replace it with a requirement that the notice 
of charges include ``a statement of the facts constituting the alleged 
conduct or violation.'' Fannie Mae stated that the recommended 
language, which is drawn directly from the 1992 Act, 12 U.S.C. 4631(c), 
would require greater specificity in the initial notice, ensure more 
fairness, and better enable the respondent to answer the charges.
    OFHEO decided not to modify the language of Sec. 1780.20(b). This 
NPR language is virtually identical to the Uniform Rules of the Federal 
bank and thrift regulators.\12\ The governing statute for those 
regulatory agencies, 12 U.S.C. 1818(b)(1), uses language identical in 
relevant part to that of the 1992 Act. OFHEO intends its procedures in 
regard to notices of charges to be the same as those of the Federal 
bank and thrift regulators and, accordingly, is utilizing the same 
language to describe the requirements for those notices.
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    \12\ See 12 CFR 19.18(b)(2).
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    Further, OFHEO does not understand the language of Sec. 1780.20(b) 
to be narrower than the statutory language. The regulatory language 
merely clarifies a level of specificity that is adequate to meet the 
statutory requirement. The notice of charges is not intended to provide 
a full and complete factual explication of the case against a 
respondent. Respondents may use discovery to obtain additional details. 
The notice of charges is intended simply to place respondents on notice 
of the nature of the charges against them, with sufficient specificity 
to allow them to prepare an answer and frame discovery requests. More 
complex and technical pleading requirements would, in OFHEO's view, add 
unnecessary and inefficient burden to the hearing process.
    Fannie Mae recommended that Sec. 1780.20(d) be amended to include 
language from section 1373(a)(2) of the 1992 Act (12 U.S.C. 4633(a)(2)) 
that requires hearings on cease and desist orders to be fixed for a 
date not earlier than 30 days nor later than 60 days after service of 
notice of charges. OFHEO disagrees with this recommendation. Like the 
Uniform Rules, OFHEO's rule covers proceedings that arise under various 
statutory provisions. It is not the purpose of this rule to catalogue 
the requirements of all these statutes. It would also be inappropriate, 
and potentially misleading, to include the requirements of only one.The 
language of Sec. 1780.20(d) is virtually identical to that of the 
Uniform Rules. That language does not negate section 1373(a)(2) of the 
1992 Act any more than the Uniform Rules negate identical requirements 
in 12 U.S.C. 1818(b)(1), which govern cease and desist proceedings 
involving banks and thrifts.

Section 1780.22  Amended Pleadings

    Fannie Mae recommended that certain language from the Uniform Rules 
be added to the second sentence in Sec. 1780.22(b). However, OFHEO 
modified the language of the Uniform Rules \13\ by splitting one long 
sentence into two sentences. No language from the Uniform Rules has 
been dropped in this modification. OFHEO did not intend to change the 
meaning of the Uniform Rules, but to clarify that the presiding officer 
will admit evidence freely if it will assist in the adjudication of the 
merits and will not prejudice an objecting party's action or defense on 
the merits.
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    \13\ See 12 CFR 19.20(b).
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    Accordingly, OFHEO found it unnecessary to change the language in 
the proposed rule.

Section 1780.26  Discovery

    Both Enterprises recommended that OFHEO modify the rule to provide 
for interrogatories and discovery depositions, in addition to document 
discovery. Freddie Mac pointed out that there is a split among the 
regulations of the Federal financial institution regulatory agencies on 
the availability of these discovery tools. Fannie Mae believes that 
discovery depositions of experts and factual witnesses would promote 
efficiency in any hearing, improve fact finding and lead to earlier 
resolution of complex matters.
    OFHEO recognizes that some regulatory agencies allow for discovery 
depositions and interrogatories and some do not. The experiences of the 
Office of the Comptroller of the Currency (OCC), the Office of Thrift 
Supervision (OTS) and the Board of Governors of the Federal Reserve 
System (Board of Governors) led those agencies to find that discovery 
depositions served a useful purpose by promoting fact finding and 
encouraging settlements. However, even at those agencies, discovery 
depositions are limited to witnesses that have factual, direct and 
personal knowledge of matters at issue and expert witnesses. The 
Federal Deposit Insurance Corporation (FDIC) and the National Credit 
Union Administration (NCUA) determined that the interests of 
respondents in further pretrial disclosure were satisfied by the 
availability of extensive document discovery that complements the 
document intensive nature of those agencies' proceedings.\14\
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    \14\ See 56 FR 37969, Aug. 9, 1991.
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    OFHEO considered carefully the scope of discovery that would be 
permitted under its regulations. OFHEO has determined that broad 
document discovery should be permitted, but has recognized that there 
is no constitutional right to prehearing discovery, including 
deposition discovery, in Federal administrative proceedings.\15\ 
Further, the APA contains no provisions for prehearing discovery, and 
the discovery provisions of the Federal Rules of Civil Procedure are 
inapplicable to administrative proceedings.\16\ Instead, each agency 
determines the extent of discovery to which a party in an 
administrative hearing is entitled.\17\
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    \15\ Sims v. National Transportation Safety Board, 662 F.2d 668, 
671 (10th Cir. 1981); P.S.C. Resources, Inc. v. N.L.R.B., 576 F.2d 
380, 386 (1st Cir. 1978); Silverman v. Commodity Futures Trading 
Comm., 549 F.2d 28, 33 (7th Cir. 1977).
    \16\ Kenwich Petrochemicals, Inc. v. N.L.R.B., 893 F.2d 1468, 
1484 (3d Cir. 1990); N.L.R.B. v. Valley Mold Co., Inc., 503 F.2d 
693, 695 (6th Cir. 1976); Frillette v. Kimberlin, 508 F.2d 205 (3d 
Cir. 1974) cert. denied, 421 U.S. 980 (1975).
    \17\ McClelland v. Andrus, 606 F.2d 1278, 1285 (D.C. Cir. 1979).
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    OFHEO's regulations strike a balance between the due process 
interest of respondents in obtaining pretrial disclosure, including 
discovery depositions, and OFHEO's need for swift adjudication while 
preserving its limited resources. Further, OFHEO believes that, like 
the FDIC and the NCUA, its enforcement actions generally would be 
document-intensive and that respondents could, therefore, obtain 
sufficient discovery through document requests.

Section 1780.28  Document Subpoenas to Nonparties

    Fannie Mae commented that Sec. 1780.28(a)(3) gives too much 
discretion to the presiding officer to refuse to issue or to modify a 
document subpoena. That provision governs applications for subpoenas 
that do not set forth a valid basis for the issuance of a subpoena or 
that request subpoenas with terms that are unreasonable, oppressive, 
excessive in scope, or unduly burdensome. If presented with such an 
application, the presiding

[[Page 72506]]

officer may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions ``as may be determined by the presiding 
officer.'' Fannie Mae preferred the language of the Uniform Rules, 
which is virtually identical except that, in lieu of the quoted 
language, they state ``as may be consistent with the Uniform Rules.'' 
In a subsequent telephone conversation initiated by OFHEO to seek 
clarification of this comment, Fannie Mae explained that it hoped that 
OFHEO rules could go farther than the Uniform Rules and provide more 
specific standards governing the modification of or refusal to issue 
subpoenas.
    OFHEO declines to modify the language. Although OFHEO does not 
intend any meaning different from the Uniform Rules, OFHEO does not 
find a general reference to the practice and procedure rules to be 
helpful. Any ruling by the presiding officer should be consistent with 
the practice and procedure rules. The wording chosen by OFHEO clarifies 
that the presiding officer has discretion under the rule to make 
modifications to a subpoena and to place conditions upon its issuance. 
The language in the rule does not grant unlimited discretion to the 
presiding officer, but conditions action upon a determination that no 
valid basis for the subpoena has been set forth or that the terms of 
the subpoena are unreasonable, oppressive, excessive in scope or unduly 
burdensome. To OFHEO's knowledge this language has not led to 
unreasonable suppression of discovery requests in hearings conducted by 
other Federal financial institution regulatory agencies. For these 
reasons, OFHEO sees no need to add additional conditions or 
requirements to guide the rulings of presiding officers.

Section 1780.30  Interlocutory Review

    Fannie Mae commented that the sentence in Sec. 1780.30(c) that 
expressly allows the presiding officer to indicate an opinion about the 
appropriateness of interlocutory review is highly prejudicial. Fannie 
Mae stated that it is equivalent to allowing a trial court to express 
an opinion to an appellate court on the arguments of a party that 
brings an interlocutory appeal during a trial. Fannie Mae asserted that 
the Federal financial institution regulatory agencies and HUD do not 
allow presiding officers to comment upon the appropriateness of 
interlocutory review.
    OFHEO finds nothing prejudicial about allowing the presiding 
officer to comment upon whether a motion for interlocutory appeal meets 
the standards for such review. Except in a very narrow class of 
interlocutory appeals,\18\ interlocutory appeals are available in the 
Federal courts (and most State courts): (1) only at the discretion of 
the appellate court and (2) only if the trial judge is of the opinion 
that such an appeal is appropriate \19\ and so certifies in an 
order.\20\ The purpose of this requirement is to prevent piecemeal 
review of actions. OFHEO's rules do not go this far, but merely allow 
the presiding officer to opine as to whether an interlocutory appeal is 
appropriate. Unlike in the Federal courts, parties are free to request 
interlocutory review even if the presiding officer believes the review 
would not be appropriate.
---------------------------------------------------------------------------

    \18\ 28 U.S.C. 1292(a).
    \19\ 28 U.S.C. 1292(b).
    \20\ Fed. R. Civ. P. 5(a).
---------------------------------------------------------------------------

    OFHEO disagrees with Fannie Mae's view that the Uniform Rules 
prohibit an administrative law judge from opining upon the 
appropriateness of a motion for interlocutory review. Nothing in those 
rules can be read to prohibit such an opinion. As in OFHEO's rules, 
under the Uniform Rules, parties file their motions and responses for 
interlocutory review with the ALJ, who ``refers'' them to the agency 
head. The ALJ may use this referral as an opportunity to state views 
upon whether particular issues merit that review.
    It is important to distinguish between the presiding officer's 
opining on the appealability of a matter and opining on its merits. 
Parties seeking interlocutory review are appealing from a matter on 
which the presiding officer has ruled and, presumably, placed an 
opinion on the record. Section 1780.30(c) provides the Director 
discretion to consider the matter prior to the review of the entire 
hearing if (1) the ruling involves a controlling question of law or 
policy as to which substantial grounds exist for a difference of 
opinion, (2) immediate review of the ruling may materially advance the 
ultimate termination of the proceeding, (3) subsequent modification of 
the ruling at the conclusion of the proceeding would be an inadequate 
remedy, or (4) subsequent modification of the ruling would cause 
unusual delay or expense. The presiding official is in an excellent 
position to advise the Director on whether these grounds for 
interlocutory review are met and it is no more prejudicial to allow him 
to express an opinion than for judges in the courts to do so. The fact 
that a presiding officer has decided an issue against a particular 
party does not mean that the presiding officer will feel that the issue 
does not warrant interlocutory review. Where a novel legal issue is 
involved or a final decision on the matter could clearly expedite the 
resolution of the entire case, the presiding officer could have a 
strong interest in supporting interlocutory review.
    Fannie Mae also requested that the text of Sec. 1780.30(c) be 
clarified to indicate that a party opposing a motion for interlocutory 
review may file a response to such a motion. In OFHEO's view, such 
clarification is unnecessary, because Sec. 1780.25(d), which governs 
motions generally, applies. Section 1780.25(d) provides for responses 
to all motions, except as otherwise provided. Section 1780.30 does not 
contain an exception to Sec. 1780.25(d).

Section 1780.50  Conduct of Hearings

    Freddie Mac commented that OFHEO should include a reference to 
either the 1992 Act or, more generally, to applicable law in the rules 
for conduct of hearings in Sec. 1780.50. Freddie Mac observed that laws 
other than the APA may govern the conduct of hearings under the rules.
    OFHEO concurs with this comment and has therefore added a reference 
to ``other applicable law'' at Sec. 1780.50(a).

Subpart D--General Comments

    Both Enterprises provided detailed comments regarding subpart D--
Rules of Practice Before the Office of Federal Housing Enterprise 
Oversight. This subpart contains rules governing practice by parties or 
their representatives before OFHEO. These rules include sanctions that 
may be imposed in the course of an adjudicatory proceeding and censure, 
suspension, and disbarment proceedings that may be brought against 
individual practitioners.
    Fannie Mae recognized and supported OFHEO's need to conduct orderly 
hearings on the record. However, Fannie Mae felt that most of the 
provisions of subpart D are outside the scope of OFHEO's authority to 
conduct orderly hearings on the record. In addition, Fannie Mae 
commented that many provisions were vague and confusing and that OFHEO 
had not provided any ``legal explanation'' for this subpart. For these 
reasons, Fannie Mae believes that subpart D ``is fraught with potential 
for abuse and misunderstanding.'' Fannie Mae requested that OFHEO 
clarify the scope of the subpart's applicability, provide specific 
definitions for certain unspecified terms in the subpart and provide an 
analysis of the statutory justification for the provisions in the 
subpart, in particular those that do not relate to enforcement 
proceedings under the 1992 Act. Fannie Mae believed that ``virtually 
any conduct'' could be characterized by a presiding officer as

[[Page 72507]]

``contemptuous'' and that a presiding officer could find any sanction 
``appropriate'' under this regulation.
    Freddie Mac stated that the presiding officer must be able to 
maintain order to accomplish the purposes of an adjudicatory hearing 
and related proceedings. Freddie Mac agreed with the subpart in the 
sense that the existence of sanctions would be helpful to accomplishing 
those purposes. However, Freddie Mac stated that the scope of the 
subpart should be limited to adjudicatory hearings and related 
proceedings and to conduct by the parties and their representatives in 
those hearings. Freddie Mac also recommended that lack of competence be 
eliminated as a ground for sanctions and that the definition of 
``practice before OFHEO'' be deleted.
    Fannie Mae's comment suggests that OFHEO may lack authority to 
issue rules governing practice beyond those necessary to control the 
conduct of adjudicatory proceedings. OFHEO disagrees. OFHEO has an 
interest in ensuring that individuals that it permits to represent the 
interests of others before it can do so ethically and competently. The 
authority to do so is incident to the authority of any agency to 
control its internal operations, to insure that issues that must be 
resolved by the agency are presented competently, that facts and law 
are represented accurately, and that persons purporting to represent 
others have appropriate authority. Further, OFHEO has chosen to allow 
persons to practice before it who are not attorneys or other licensed 
professionals subject to professional codes of conduct. Particularly as 
to such individuals, who could not be referred to a licensing authority 
for sanctions, OFHEO needs a means to ensure that their conduct and 
competence meets normal professional standards.
    OFHEO does not share the view of the Enterprises that the rules of 
practice are too vague and too broad. OFHEO based its rules of practice 
on those of the other Federal financial institution regulatory 
agencies. Sections 1780.72 and 1780.73, which govern appearance and 
practice in adjudicatory proceedings and conflicts of interest, are 
modeled upon the Uniform Rules. The Enterprises raised no objection to 
these sections. However, the Uniform Rules do not address expressly the 
subjects of sanctions ordered in the course of a hearing or of censure, 
suspension and disbarment. Each of the Federal financial institution 
regulatory agencies that is subject to the Uniform Rules found it 
necessary to address these subjects in separate Local Rules. Most of 
these rules are similar to Secs. 1780.74 and 1780.75 of OFHEO's rules 
of practice.\21\ Likewise, the Local Rules of most of these regulators 
define the term ``practice,'' which OFHEO defines at Sec. 1780.71.\22\
---------------------------------------------------------------------------

    \21\ Rules of practice for these agencies are found at 12 CFR 
19.190-19.201 (OCC); 12 CFR 263.90-263.99 (Board of Governors); 12 
CRF 308.108-308.109 (FDIC); 12 CFR 513.1-513.7 (OTS); 12 CFR 747.302 
(NCUA--limited to certain suspension and prohibition proceedings).
    \22\ 12 CFR 19.191(a) (OCC); 12 CFR 263.92(b)(1) (Board of 
Governors); 12 CFR 308.109(e) (FDIC); 12 CFR 513.2(e) (OTS). NCUA 
does not define ``practice'' in its regulations.
---------------------------------------------------------------------------

    Although it is difficult to draw bright lines to describe what 
conduct is contemptuous and what level of competence is sufficient, 
OFHEO believes that the rule provides sufficient guidance in these 
areas. If it should be necessary to impose sanctions under subpart D, 
OFHEO will look to case law and the practices of other Federal 
agencies, as well as any of OFHEO's own precedents that may exist, in 
determining the appropriateness of particular sanctions.

Section 1780.70  Scope

    Freddie Mac recommended that OFHEO limit the scope of subpart D to 
practice in adjudicatory proceedings. Fannie Mae likewise commented 
that parts of subpart D are outside the scope of OFHEO's authority to 
conduct orderly hearings on the record. Freddie Mac suggested deleting 
the phrase ``any other matters connected with presentations to OFHEO 
relating to a client's or other principal's rights, privileges, or 
liabilities'' in describing the scope of the subpart. Freddie Mac also 
commented that the rules lack a bright line to determine what matters 
are covered by subpart D.
    OFHEO disagrees that its rules of practice should be more limited. 
The quoted language is typical of that used by other Federal financial 
institution regulatory agencies to describe the scope of their practice 
rules.\23\ OFHEO chose the language in recognition of the fact that 
counsel and other professionals frequently represent clients before 
regulatory agencies in numerous types of matters. These matters include 
rulemakings, investigations, and review of executive compensation 
matters. OFHEO has an interest in insuring that the individuals with 
whom it deals on such matters, in addition to formal adjudications, 
meet minimal professional standards of competency and conduct. 
Moreover, the conduct of individuals in these other types of 
proceedings is relevant to their fitness to practice before OFHEO in 
formal adjudications. Accordingly, OFHEO has not changed the scope of 
subpart D. Although a ``bright line'' test, such as limiting the scope 
to adjudications, might be simpler to administer, it would be, in 
OFHEO's view, too narrow and rigid. Therefore, OFHEO prefers to define 
the scope more broadly, to encompass various types of matters and 
various types of representation.
---------------------------------------------------------------------------

    \23\ See 12 CFR 19.190 (OCC); 12 CFR 263.90, 253.92(b)(1) (Board 
of Governors); 12 CFR 513.1 (OTS).
---------------------------------------------------------------------------

Section 1780.71  Definitions

    Freddie Mac stated that ``the expansive definition of `practice 
before OFHEO' contained in Subpart D * * * is unclear.'' This statement 
was made in the context of Freddie Mac's broader comment that the scope 
of subpart D is overbroad and unclear and that the NPR ``fails to 
address the potential problems that this expanded scope is best suited 
to address.'' Freddie Mac suggested that OFHEO may seek to test every 
presenter for the presence of adequate qualifications or subject every 
presenter to potential sanctions based upon his character. Freddie Mac 
states that such a process ``would serve no useful purpose and could 
tend to impair what has been an open cooperative working relationship 
between Freddie Mac and OFHEO.''
    OFHEO likewise seeks open, cooperative working relationships with 
the Enterprises, but does not interpret subpart D in a way that would 
impair such relationships. It is not OFHEO's intention to require 
everyone who conducts a presentation to OFHEO personnel to demonstrate 
adequate qualifications. Rather, OFHEO intends to apply its practice 
regulations in a manner similar to the practices of other Federal 
financial institution regulatory agencies. Accordingly, OFHEO has made 
no changes to Sec. 1780.71.

Section 1780.74  Sanctions

    Fannie Mae stated that the conduct and sanctions specified in 
proposed Sec. 1780.75(g) appeared redundant to similar conduct and 
sanctions in proposed Sec. 1780.74. The provisions are not intended to 
be redundant. Proposed Sec. 1780.75(g) specified that representatives 
or individuals representing themselves who engage in contemptuous 
conduct could be summarily suspended from a proceeding or subjected to 
any other appropriate sanction. By contrast, proposed Sec. 1780.74 
provided for sanctions that would be imposed after a hearing. However, 
OFHEO found that the two provisions were better placed in the same 
section, because they dealt with sanctions imposed by a presiding

[[Page 72508]]

officer during the course of an adjudicatory proceeding. Therefore, in 
response to the comment, OFHEO has clarified the purposes of the two 
provisions by combining them, incorporating the language from 
Sec. 1780.75(g) into Secs. 1780.74(a)(1) and 1780.74(d).
    Fannie Mae recommended that the summary procedure be eliminated 
altogether and Freddie Mac recommended that any summary sanction occur 
only after a written finding by the presiding officer that the 
particular sanction is necessary. OFHEO believes that the authority to 
expel individuals summarily from a hearing is inherent in and necessary 
to the role and duties of presiding officer. Contemptuous conduct may 
undermine the ability of the presiding officer to conduct a hearing. To 
be effective, a presiding officer must have the ability to sanction 
immediately anyone who engages in such conduct. Section 1780.74(d), 
therefore, makes explicit an authority that is implicit in any event. 
Requiring prior written findings by a presiding officer is inconsistent 
with this type of authority, because these sanctions ordinarily would 
be imposed immediately upon the occurrence of the contemptuous conduct. 
Moreover, written findings may be unnecessary because hearings 
ordinarily would be transcribed.

Section 1780.75  Censure, Suspension, Disbarment and Reinstatement

    Freddie Mac recommended that OFHEO eliminate character and 
incompetence as grounds for censure, suspension or disbarment. Freddie 
Mac commented further that OFHEO should limit the scope of Sec. 1780.75 
to adjudicatory hearings and related proceedings and to conduct by the 
parties and their representatives in those hearings. Freddie Mac 
explained:

    As drafted, Sec. 1780.75 of the Proposed Rules would provide for 
censure, suspension or disbarment of an individual based on a wide 
variety of failings or prior conduct without any showing that the 
underlying failing or conduct had resulted in, or would be likely to 
result in, any adverse impact to an OFHEO adjudicatory hearing or 
related proceeding. As such, it goes well beyond the disciplinary 
authority that is a necessary incident to the authority to conduct 
adjudicatory hearings and related proceedings (unnecessary sanctions 
are simply punishment), and the exercise of that authority would 
likely create a substantial burden [on] the proceedings and OFHEO.

    OFHEO disagrees with Freddie Mac that character and prior conduct 
of an individual is not relevant to that person's fitness to practice. 
OFHEO has a major interest in ensuring that individuals who represent 
others before it are honest and competent and have proper authority. 
Moreover, as explained above, ``practice'' before OFHEO encompasses 
more than appearances in adjudicatory proceedings. OFHEO can see no 
reason to limit sanctions to conduct that impacts a specific 
adjudicatory proceeding, as suggested by Freddie Mac. OFHEO should not 
be required to review the same issues each time an individual whose 
conduct warrants a suspension or disbarment appears. For these reasons, 
OFHEO has chosen the approach of most other Federal financial 
institution regulatory agencies and adopted a procedure that allows 
persons who appear before OFHEO to be censured, suspended or disbarred.
    Freddie Mac agreed with OFHEO that individuals appearing in an 
adjudicatory hearing or related proceedings should be competent. 
However Freddie Mac recommended that OFHEO rely upon the qualifications 
requirements in Sec. 1780.72 to ensure competency, rather than allowing 
incompetent representatives to be sanctioned. OFHEO has not accepted 
this recommendation, because that section provides no effective means 
to regulate the competence of individuals who appear. Section 1780.72 
is intended primarily to ensure that individuals purporting to 
represent other persons before OFHEO have the requisite authority. It 
includes no requirement that representatives be competent nor any means 
to deal with representatives who are incompetent.
    Freddie Mac also argues that sanctions such as censure, suspension 
and disbarment ``could effectively impose punishment beyond that 
authorized by Congress for [violations of an Enterprise charter, the 
1992 Act or any other law or regulation governing Enterprise 
operations].'' According to Freddie Mac, because Congress gave OFHEO 
authority to bring civil money penalties only against directors and 
executive officers, OFHEO lacks authority to levy sanctions upon other 
individuals. Under this theory, preventing an individual from practice 
before OFHEO amounts to ``severe substantive punishment'' that goes 
beyond actions necessary to control a particular hearing.
    OFHEO disagrees with this interpretation of the 1992 Act. Incident 
to the authority to manage its operations, any Federal agency has the 
inherent authority to regulate reasonably the authority, qualifications 
and competence of individuals who represent other persons before the 
agency. As to adjudicatory proceedings involving individuals 
representing themselves, the authority to maintain order and integrity 
in those proceedings is inherent in the agency and the presiding 
officer. This authority necessarily includes the authority to levy 
appropriate sanctions. There is no legal basis to assert that these 
authorities may only be used on a case by case basis. If the evidence 
is sufficient to convince the Director that an individual should be 
suspended from practice for a period of time or disbarred permanently 
from appearing before OFHEO, the Director has the same inherent 
authority to prevent that individual from practicing before OFHEO on 
future matters as to suspend the individual from a current proceeding.

III. Synopsis of the Final Rule

    The 1992 Act \24\ requires OFHEO to conduct its hearings pertaining 
to cease-and-desist orders and civil money penalties in accordance with 
the APA.\25\ Thus, the rules of practice and procedure supplement the 
APA provisions governing agency adjudications and include provisions 
unique to OFHEO's mission. These rules apply not only to enforcement 
hearings, but also to any other adjudication required by statute to be 
determined by the Director on the record after opportunity for hearing.
---------------------------------------------------------------------------

    \24\ 1992 Act, section 1373(a)(3) (42 U.S.C. 4633(a)(3)).
    \25\ 5 U.S.C. 500-559.
---------------------------------------------------------------------------

    The final rule includes provisions relating to prehearing 
procedures and activities, the conduct of the hearing itself, and the 
qualifications and disciplinary rules for practice before OFHEO. The 
rule establishes that hearings are open to the public unless the 
Director determines that a public hearing would be contrary to the 
public interest. The disciplinary rules of practice in subpart D apply 
not only to adjudicatory hearings under the APA, but also to all 
matters that involve representation of others before OFHEO. The rules 
also define important terms and describe the authority of the Director 
and the presiding officer.
    Under subparts A, B, and C of this part, the Director commences the 
hearing process by issuing and serving a notice of charges on a 
respondent. A presiding officer, appointed by the Director, presides 
over the course of the hearing from the time of the appointment until 
the presiding officer files a recommended decision and order, along 
with the hearing record, with the Director for a final decision. During 
the course of the hearing, the

[[Page 72509]]

presiding officer controls virtually all aspects of the proceeding. The 
presiding officer: determines the hearing schedule; presides over any 
prehearing conferences; rules on motions, discovery, and evidentiary 
issues; and ensures that the proceeding is fair, equitable, and 
impartial. The presiding officer does not, however, have the authority 
to make a ruling that disposes of the proceeding. Only the Director has 
the authority to dismiss the proceeding or to make a final 
determination of the merits of the proceeding.
    Under this rule, the parties to the proceeding have the right to 
present evidence and witnesses at the hearing and to examine and cross-
examine the witnesses. At the completion of the hearing, the parties 
may submit proposed findings of fact and conclusions of law and a 
proposed order. The presiding officer then submits the complete record 
to the Director for consideration and action. The record includes the 
presiding officer's recommended decision, recommended findings of fact 
and conclusions of law, and proposed order. The record also includes 
all prehearing and hearing transcripts, exhibits, rulings, motions, 
briefs and memoranda, and all supporting papers filed in connection 
with the hearing. The Director shall issue a final ruling within 90 
days of the date the Director serves notice on the parties that the 
record is complete and the case has been submitted for final decision.
    Subpart D of this rule contains rules governing practice by parties 
or their representatives before OFHEO. This subpart addresses the 
imposition of sanctions by the presiding officer or the Director 
against parties or their representatives in an adjudicatory proceeding 
under this part. This subpart also covers other disciplinary 
sanctions--censure, suspension or disbarment--against individuals who 
appear before OFHEO in a representational capacity either in an 
adjudicatory proceeding under part 1780 or in any other matters 
connected with presentations to OFHEO relating to a client's or other 
principal's rights, privileges, or liabilities. This representation 
includes, but is not limited to, the practice of attorneys and 
accountants. Employees of OFHEO are not subject to disciplinary 
proceedings under this subpart.
    The final rule incorporates certain changes from the proposed 
regulation. Section 1780.1 has been modified to include, among the 
examples of proceedings covered by the rule, civil money penalty 
assessment proceedings under section 102 of the Flood Disaster 
Protection Act of 1973. The definition of ``presiding officer'' at 
Sec. 1780.3(h) has been clarified in response to a comment discussed 
above. Section 1780.5 has been modified to list among the express 
authorities of the presiding officer, the authority to issue protective 
orders and regulate public and media access to hearings. Section 
1780.10(f) has been modified to clarify the purpose of a proof of 
service declaration or affidavit. Section 1780.50 was modified to 
clarify that hearings would be conducted not only in accordance with 
the APA, but also any other applicable law. Section 1780.74 was 
modified to incorporate the provisions of Sec. 1780.75(g) and to 
clarify that the presiding officer may decide what notice and responses 
are appropriate where sanctions are at issue in an adjudicatory 
proceeding. Slight modifications were made to the language of 
Sec. 1780.75(a) to clarify which individuals may be subject to 
sanctions under the section. Section 1780.75(g) was deleted and its 
provisions incorporated into Sec. 1780.74. In addition, the final rule 
includes a number of minor corrections that create no substantive 
change in the rule.

IV. Regulatory Impact

Executive Order 13132, Federalism

    Executive Order 13132 requires that Executive departments and 
agencies identify regulatory actions that have significant federalism 
implications. ``Federalism implications'' is defined to specify 
regulations or actions that have substantial, direct effects on the 
States, on the relationship between the national Government and the 
States, or on the distribution of power and responsibilities between 
Federal and State Government. OFHEO has determined that this final rule 
has no federalism implications that warrant the preparation of a 
Federalism Assessment in accordance with Executive Order 13132.

Executive Order 12866, Regulatory Planning and Review

    OFHEO has determined that this final rule is not a significant 
regulatory action as such term is defined in Executive Order 12866, has 
so indicated to the Office of Management and Budget (OMB) and was not 
notified by OMB that the rule must be reviewed by OMB.

Executive Order 12988, Civil Justice Reform

    Executive Order 12988 sets forth guidelines to promote the just and 
efficient resolution of civil claims and to reduce the risk of 
litigation to the Federal Government. This final rule meets the 
applicable standards of sections 3(a) and 3(b) of Executive Order 
12988.

Unfunded Mandates Reform Act of 1995

    This rule does not include a Federal mandate that may result in the 
expenditure by State, local and tribal governments, in the aggregate, 
or by the private sector, of $100,000,000 or more (adjusted annually 
for inflation) in any one year. Consequently, the final rule does not 
warrant the preparation of an assessment statement in accordance with 
the Unfunded Mandates Reform Act of 1995.

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 must include a regulatory flexibility analysis 
describing the rule's impact on small entities. Such an analysis need 
not be undertaken if the agency head certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b).
    OFHEO has considered the impacts of the rule under the Regulatory 
Flexibility Act. The rule does not have a significant economic impact 
on a substantial number of small entities, because it is applicable 
only to the Enterprises, which are not small entities. Therefore, 
OFHEO's General Counsel, acting under delegated authority, has 
certified that the rule would not have a significant economic impact on 
a substantial number of small entities.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) requires 
that regulations involving the collection of information receive 
clearance from OMB. This rule contains no such collection of 
information requiring OMB approval under the Paperwork Reduction Act. 
Consequently, no information has been submitted to OMB for review.

List of Subjects in 12 CFR Part 1780

    Administrative practice and procedure, Penalties.

    Accordingly, for the reasons set forth in the preamble, OFHEO is 
amending 12 CFR part 1780 as follows:

PART 1780--RULES OF PRACTICE AND PROCEDURE

    1. Revise the heading for part 1780 to read as set forth above.
    2. Revise the authority citation for part 1780 to read as follows:


[[Page 72510]]


    Authority: 12 U.S.C. 4513, 4631-4641.
    Subpart E also issued under 28 U.S.C. 2461 note.

Subpart E--[Amended]

    3. Redesignate Secs. 1780.70 and 1780.71 as Secs. 1780.80 and 
1780.81, respectively.
    4. Add subparts A through D to part 1780 to read as follows:

Subpart A--General Rules

Sec.
1780.1  Scope.
1780.2  Rules of construction.
1780.3  Definitions.
1780.4  Authority of the Director.
1780.5  Authority of the presiding officer.
1780.6  Public hearings.
1780.7  Good faith certification.
1780.8  Ex parte communications.
1780.9  Filing of papers.
1780.10  Service of papers.
1780.11  Computing time.
1780.12  Change of time limits.
1780.13  Witness fees and expenses.
1780.14  Opportunity for informal settlement.
1780.15  OFHEO's right to conduct examination.
1780.16  Collateral attacks on adjudicatory proceeding.

Subpart B--Prehearing Proceedings

1780.20  Commencement of proceeding and contents of notice of 
charges.
1780.21  Answer.
1780.22  Amended pleadings.
1780.23  Failure to appear.
1780.24  Consolidation and severance of actions.
1780.25  Motions.
1780.26  Discovery.
1780.27  Request for document discovery from parties.
1780.28  Document subpoenas to nonparties.
1780.29  Deposition of witness unavailable for hearing.
1780.30  Interlocutory review.
1780.31  Summary disposition.
1780.32  Partial summary disposition.
1780.33  Scheduling and prehearing conferences.
1780.34  Prehearing submissions.
1780.35  Hearing subpoenas.

Subpart C--Hearing and Posthearing Proceedings

1780.50  Conduct of hearings.
1780.51  Evidence.
1780.52  Post hearing filings.
1780.53  Recommended decision and filing of record.
1780.54  Exceptions to recommended decision.
1780.55  Review by Director.
1780.56  Exhaustion of administrative remedies.
1780.57  Stays pending judicial review.

Subpart D--Rules of Practice Before the Office of Federal Housing 
Enterprise Oversight

1780.70  Scope.
1780.71  Definitions.
1780.72  Appearance and practice in adjudicatory proceedings.
1780.73  Conflicts of interest.
1780.74  Sanctions.
1780.75  Censure, suspension, disbarment and reinstatement.

Subpart A--General Rules


Sec. 1780.1  Scope.

    This subpart prescribes rules of practice and procedure applicable 
to the following adjudicatory proceedings:
    (a) Cease and desist proceedings under sections 1371 and 1373, 
title XIII of the Housing and Community Development Act of 1992, Pub. 
L. No. 102-550, known as the Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992 (1992 Act) (12 U.S.C. 4631, 4633).
    (b) Civil money penalty assessment proceedings against the Federal 
National Mortgage Association, the Federal Home Loan Mortgage 
Corporation (collectively, the Enterprises), or any executive officer 
or director of any Enterprise under sections 1373 and 1376 of the 1992 
Act (12 U.S.C. 4633, 4636).
    (c) Civil money penalty assessment proceedings under section 102 of 
the Flood Disaster Protection Act of 1973, as amended, 42 U.S.C. 4012a.
    (d) All other adjudications required by statute to be determined on 
the record after opportunity for hearing, except to the extent 
otherwise provided in the regulations specifically governing such an 
adjudication.


Sec. 1780.2  Rules of construction.

    For purposes of this part--
    (a) Any term in the singular includes the plural and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate; and
    (c) Unless the context requires otherwise, a party's representative 
of record, if any, may, on behalf of that party, take any action 
required to be taken by the party.


Sec. 1780.3  Definitions.

    For purposes of this part, unless explicitly stated to the 
contrary--
    (a) Adjudicatory proceeding means a proceeding conducted pursuant 
to these rules and leading to the formulation of a final order other 
than a regulation;
    (b) Decisional employee means any member of the Director's or the 
presiding officer's staff who has not engaged in an investigative or 
prosecutorial role in a proceeding and who may assist the Director or 
the presiding officer, respectively, in preparing orders, recommended 
decisions, decisions and other documents under this subpart.
    (c) Director means the Director of OFHEO.
    (d) Enterprise means the Federal National Mortgage Association and 
any affiliate thereof and the Federal Home Loan Mortgage Corporation 
and any affiliate thereof.
    (e) OFHEO means the Office of Federal Housing Enterprise Oversight 
of the Department of Housing and Urban Development.
    (f) Party means OFHEO and any person named as a party in any 
notice.
    (g) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency, or other entity or organization.
    (h) Presiding officer means an administrative law judge or any 
other person appointed by the Director under applicable law to conduct 
a hearing.
    (i) Representative of record means an individual who is authorized 
to represent a person or is representing himself and who has filed a 
notice of appearance in accordance with Sec. 1780.72.
    (j) Respondent means any party other than OFHEO.
    (k) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.
    (l) The 1992 Act is title XIII of the Housing and Community 
Development Act of 1992, Pub. L. No. 102-550, known as the Federal 
Housing Enterprises Financial Safety and Soundness Act of 1992 (1992 
Act) (12 U.S.C. 4501-4641).


Sec. 1780.4  Authority of the Director.

    The Director may, at any time during the pendency of a proceeding, 
perform, direct the performance of, or waive performance of any act 
that could be done or ordered by the presiding officer.


Sec. 1780.5  Authority of the presiding officer.

    (a) General rule. All proceedings governed by this subpart shall be 
conducted in accordance with the provisions of 5 U.S.C. chapter 5. The 
presiding officer shall have complete charge of the hearing, conduct a 
fair and impartial hearing, avoid unnecessary delay and assure that a 
record of the proceeding is made.
    (b) Powers. The presiding officer shall have all powers necessary 
to conduct the proceeding in accordance with paragraph (a) of this 
section and 5 U.S.C. 556(c). The presiding officer is authorized to--

[[Page 72511]]

    (1) Set and change the date, time and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas, subpoenas duces tecum, and protective orders, 
as authorized by this part, and to revoke, quash, or modify such 
subpoenas;
    (6) Take and preserve testimony under oath;
    (7) Rule on motions and other procedural matters appropriate in an 
adjudicatory proceeding, except that only the Director shall have the 
power to grant any motion to dismiss the proceeding or make a final 
determination of the merits of the proceeding;
    (8) Regulate the scope and timing of discovery;
    (9) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (10) Examine witnesses;
    (11) Receive, exclude, limit, or otherwise rule on evidence;
    (12) Upon motion of a party, take official notice of facts;
    (13) Recuse himself upon motion made by a party or on his own 
motion;
    (14) Prepare and present to the Director a recommended decision as 
provided in this part;
    (15) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (16) Do all other things necessary and appropriate to discharge the 
duties of a presiding officer.


Sec. 1780.6  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Director, in his discretion, determines that holding an open 
hearing would be contrary to the public interest. The Director may make 
such determination sua sponte at any time by written notice to all 
parties.
    (b) Motion for closed hearing. Within 20 days of service of the 
notice of charges, any party may file with the presiding officer a 
motion for a private hearing and any party may file a pleading in reply 
to the motion. The presiding officer shall forward the motion and any 
reply, together with a recommended decision on the motion, to the 
Director, who shall make a final determination. Such motions and 
replies are governed by Sec. 1780.25.
    (c) Filing documents under seal. OFHEO's counsel of record, in his 
discretion, may file any document or part of a document under seal if 
such counsel makes a written determination that disclosure of the 
document would be contrary to the public interest. The presiding 
officer shall take all appropriate steps to preserve the 
confidentiality of such documents or parts thereof, including closing 
portions of the hearing to the public.


Sec. 1780.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice by the Director shall be signed by 
at least one representative of record in his individual name and shall 
state that representative's address and telephone number and the names, 
addresses and telephone numbers of all other representatives of record 
for the person making the filing or submission.
    (b) Effect of signature. (1) By signing a document, the 
representative of record or party certifies that--
    (i) The representative of record or party has read the filing or 
submission of record;
    (ii) To the best of his knowledge, information and belief formed 
after reasonable inquiry, the filing or submission of record is well-
grounded in fact and is warranted by existing law or a good faith, 
nonfrivolous argument for the extension, modification, or reversal of 
existing law; and
    (iii) The filing or submission of record is not made for any 
improper purpose, such as to harass or to cause unnecessary delay or 
needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
presiding officer shall strike the filing or submission of record, 
unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any representative or party shall 
constitute a certification that to the best of his knowledge, 
information, and belief, formed after reasonable inquiry, his 
statements are well-grounded in fact and are warranted by existing law 
or a good faith, nonfrivolous argument for the extension, modification, 
or reversal of existing law and are not made for any improper purpose, 
such as to harass or to cause unnecessary delay or needless increase in 
the cost of litigation.


Sec. 1780.8  Ex parte communications.

    (a) Definition. (1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior 
notice to all parties that takes place between--
    (i) An interested person outside OFHEO (including the person's 
representative); and
    (ii) The presiding officer handling that proceeding, the Director, 
a decisional employee assigned to that proceeding, or any other person 
who is or may reasonably be expected to be involved in the decisional 
process.
    (2) A communication that does not concern the merits of an 
adjudicatory proceeding, such as a request for status of the 
proceeding, does not constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the 
notice commencing the proceeding is issued by the Director until the 
date that the Director issues his final decision pursuant to 
Sec. 1780.55, no person referred to in paragraph (a)(1)(i) of this 
section shall knowingly make or cause to be made an ex parte 
communication. The Director, presiding officer, or a decisional 
employee shall not knowingly make or cause to be made an ex parte 
communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by any person identified in paragraph 
(a) of this section, that person shall cause all such written 
communications (or, if the communication is oral, a memorandum stating 
the substance of the communication) to be placed on the record of the 
proceeding and served on all parties. All parties to the proceeding 
shall have an opportunity, within ten days of receipt of service of the 
ex parte communication, to file responses thereto and to recommend any 
sanctions, in accordance with paragraph (d) of this section, that they 
believe to be appropriate under the circumstances.
    (d) Sanctions. Any party or representative for a party who makes an 
ex parte communication, or who encourages or solicits another to make 
any such communication, may be subject to any appropriate sanction or 
sanctions imposed by the Director or the presiding officer, including, 
but not limited to, exclusion from the proceedings and an adverse 
ruling on the issue that is the subject of the prohibited 
communication.
    (e) Consultations by presiding officer. Except to the extent 
required for the disposition of ex parte matters as authorized by law, 
the presiding officer may not consult a person or party on any matter 
relevant to the merits of the adjudication, unless on notice and 
opportunity for all parties to participate.

[[Page 72512]]

    (f) Separation of functions. An employee or agent engaged in the 
performance of investigative or prosecuting functions for OFHEO in a 
case may not, in that or a factually related case, participate or 
advise in the decision, recommended decision, or Director review under 
Sec. 1780.55 of the recommended decision, except as witness or counsel 
in public proceedings.


Sec. 1780.9  Filing of papers.

    (a) Filing. Any papers required to be filed shall be addressed to 
the presiding officer and filed with OFHEO, 1700 G Street, NW., Fourth 
Floor, Washington, DC 20552.
    (b) Manner of filing. Unless otherwise specified by the Director or 
the presiding officer, filing shall be accomplished by:
    (1) Personal service;
    (2) Delivery to the U.S. Postal Service or to a reliable commercial 
delivery service for same day or overnight delivery;
    (3) Mailing by first class, registered, or certified mail; or
    (4) Transmission by electronic media, only if expressly authorized 
by and upon any conditions specified by the Director or the presiding 
officer. All papers filed by electronic media shall also concurrently 
be filed in accordance with paragraph (c) of this section.
    (c) Formal requirements as to papers filed. (1) Form. All papers 
must set forth the name, address and telephone number of the 
representative or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11-inch paper and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 1780.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of OFHEO and of the filing party, the title 
and docket number of the proceeding and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Director or 
the presiding officer, an original and one copy of all documents and 
papers shall be filed, except that only one copy of transcripts of 
testimony and exhibits shall be filed.


Sec. 1780.10  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers or serving a subpoena shall serve a copy upon the representative 
of record for each party to the proceeding so represented and upon any 
party not so represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivery to the U.S. Postal Service or to a reliable commercial 
delivery service for same day or overnight delivery;
    (3) Mailing by first class, registered, or certified mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec. 1780.9(c).
    (c) By the Director or the presiding officer. (1) All papers 
required to be served by the Director or the presiding officer upon a 
party who has appeared in the proceeding in accordance with 
Sec. 1780.72 shall be served by any means specified in paragraph (b) of 
this section.
    (2) If a notice of appearance has not been filed in the proceeding 
for a party in accordance with Sec. 1780.72, the Director or the 
presiding officer shall make service upon the party by any of the 
following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where 
the individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or 
to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual 
notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where 
the individual resides or works;
    (3) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or 
to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party; or
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual 
notice.
    (e) Area of service. Service in any State, commonwealth, 
possession, territory of the United States or the District of Columbia 
on any person doing business in any State, commonwealth, possession, 
territory of the United States or the District of Columbia, or on any 
person as otherwise permitted by law, is effective without regard to 
the place where the hearing is held.
    (f) Proof of service. Proof of service of papers filed by a party 
shall be filed before action is taken thereon. The proof of service, 
which shall serve as prima facie evidence of the fact and date of 
service, shall show the date and manner of service and may be by 
written acknowledgment of service, by declaration of the person making 
service, or by certificate of a representative of record. However, 
failure to file proof of service contemporaneously with the papers 
shall not affect the validity of actual service. The presiding officer 
may allow the proof to be amended or supplied, unless to do so would 
result in material prejudice to a party.


Sec. 1780.11  Computing time.

    (a) General rule. In computing any period of time prescribed or 
allowed by this subpart, the date of the act or event that commences 
the designated period of time is not included. The last day so computed 
is included unless it is a Saturday, Sunday, or Federal holiday. When 
the last day is a Saturday, Sunday or Federal holiday, the period shall 
run until the end of the next day that is not a Saturday, Sunday, or 
Federal holiday. Intermediate Saturdays, Sundays and Federal holidays 
are included in the computation of time. However, when the time period 
within which an act is to be performed is 10 days or less, not 
including any additional time allowed for in paragraph (c) of this 
section, intermediate Saturdays, Sundays and Federal holidays are not 
included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective--
    (i) In the case of personal service or same day reliable commercial 
delivery service, upon actual service;
    (ii) In the case of U.S. Postal Service or reliable commercial 
overnight delivery service, or first class, registered, or certified 
mail, upon

[[Page 72513]]

deposit in or delivery to an appropriate point of collection; or
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing in the case of filing, and as 
agreed among the parties in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Director or the presiding 
officer in the case of filing or by agreement of the parties in the 
case of service.
    (c) Calculation of time for service and filing of responsive 
papers. Whenever a time limit is measured by a prescribed period from 
the service of any notice or paper, the applicable time limits shall be 
calculated as follows:
    (1) If service was made by first class, registered, or certified 
mail, or by delivery to the U.S. Postal Service for longer than 
overnight delivery service, add three calendar days to the prescribed 
period for the responsive filing.
    (2) If service was made by U.S. Postal Service or reliable 
commercial overnight delivery service, add 1 calendar day to the 
prescribed period for the responsive filing.
    (3) If service was made by electronic media transmission, add one 
calendar day to the prescribed period for the responsive filing, unless 
otherwise determined by the Director or the presiding officer in the 
case of filing, or by agreement among the parties in the case of 
service.


Sec. 1780.12  Change of time limits.

    Except as otherwise provided by law, the presiding officer may, for 
good cause shown, extend the time limits prescribed above or prescribed 
by any notice or order issued in the proceedings. After the referral of 
the case to the Director pursuant to Sec. 1780.53, the Director may 
grant extensions of the time limits for good cause shown. Extensions 
may be granted on the motion of a party after notice and opportunity to 
respond is afforded all nonmoving parties, or on the Director's or the 
presiding officer's own motion.


Sec. 1780.13  Witness fees and expenses.

    Witnesses (other than parties) subpoenaed for testimony or 
depositions shall be paid the same fees for attendance and mileage as 
are paid in the United States district courts in proceedings in which 
the United States is a party, provided that, in the case of a discovery 
subpoena addressed to a party, no witness fees or mileage shall be 
paid. Fees for witnesses shall be tendered in advance by the party 
requesting the subpoena, except that fees and mileage need not be 
tendered in advance where OFHEO is the party requesting the subpoena. 
OFHEO shall not be required to pay any fees to or expenses of any 
witness not subpoenaed by OFHEO.


Sec. 1780.14  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to OFHEO's counsel of record written offers or proposals for 
settlement of a proceeding without prejudice to the rights of any of 
the parties. No such offer or proposal shall be made to any OFHEO 
representative other than OFHEO's counsel of record. Submission of a 
written settlement offer does not provide a basis for adjourning or 
otherwise delaying all or any portion of a proceeding under this part. 
No settlement offer or proposal, or any subsequent negotiation or 
resolution, is admissible as evidence in any proceeding.


Sec. 1780.15  OFHEO's right to conduct examination.

    Nothing contained in this part limits in any manner the right of 
OFHEO to conduct any examination, inspection, or visitation of any 
Enterprise or affiliate, or the right of OFHEO to conduct or continue 
any form of investigation authorized by law.


Sec. 1780.16  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act 
as directed in the adjudicatory proceeding within the times prescribed 
in this subpart shall be excused based on the pendency before any court 
of any interlocutory appeal or collateral attack.

Subpart B--Prehearing Proceedings


Sec. 1780.20  Commencement of proceeding and contents of notice of 
charges.

    Proceedings under this subpart are commenced by the issuance of a 
notice of charges by the Director, which must be served upon the 
respondent. Such notice shall state all of the following:
    (a) The legal authority for the proceeding and for OFHEO's 
jurisdiction over the proceeding;
    (b) A statement of the matters of fact or law showing that OFHEO is 
entitled to relief;
    (c) A proposed order or prayer for an order granting the requested 
relief;
    (d) The time, place and nature of the hearing;
    (e) The time within which to file an answer;
    (f) The time within which to request a hearing; and
    (g) The address for filing the answer and/or request for a hearing.


Sec. 1780.21  Answer.

    (a) When. Unless otherwise specified by the Director in the notice, 
respondent shall file an answer within 20 days of service of the 
notice.
    (b) Content of answer. An answer must respond specifically to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has 
the effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice that is not denied in the answer is deemed admitted for purposes 
of the proceeding. A respondent is not required to respond to the 
portion of a notice that constitutes the prayer for relief or proposed 
order. The answer must set forth affirmative defenses, if any, asserted 
by the respondent.
    (c) Default. Failure of a respondent to file an answer required by 
this section within the time provided constitutes a waiver of such 
respondent's right to appear and contest the allegations in the notice. 
If no timely answer is filed, OFHEO's counsel of record may file a 
motion for entry of an order of default. Upon a finding that no good 
cause has been shown for the failure to file a timely answer, the 
presiding officer shall file with the Director a recommended decision 
containing the findings and the relief sought in the notice. Any final 
order issued by the Director based upon a respondent's failure to 
answer is deemed to be an order issued upon consent.


Sec. 1780.22  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended 
notice, whichever period is longer,

[[Page 72514]]

unless the Director or presiding officer orders otherwise for good 
cause shown.
    (b) Amendments to conform to the evidence. When issues not raised 
in the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
presiding officer may admit the evidence when admission is likely to 
assist in adjudicating the merits of the action. The presiding officer 
will do so freely when the determination of the merits of the action is 
served thereby and the objecting party fails to satisfy the presiding 
officer that the admission of such evidence would unfairly prejudice 
that party's action or defense upon the merits. The presiding officer 
may grant a continuance to enable the objecting party to meet such 
evidence.


Sec. 1780.23  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized representative constitutes a waiver of respondent's 
right to a hearing and is deemed an admission of the facts as alleged 
and consent to the relief sought in the notice. Without further 
proceedings or notice to the respondent, the presiding officer shall 
file with the Director a recommended decision containing the findings 
and the relief sought in the notice.


Sec. 1780.24  Consolidation and severance of actions.

    (a) Consolidation. On the motion of any party, or on the presiding 
officer's own motion, the presiding officer may consolidate, for some 
or all purposes, any two or more proceedings, if each such proceeding 
involves or arises out of the same transaction, occurrence or series of 
transactions or occurrences, or involves at least one common respondent 
or a material common question of law or fact, unless such consolidation 
would cause unreasonable delay or injustice. In the event of 
consolidation under this section, appropriate adjustment to the 
prehearing schedule must be made to avoid unnecessary expense, 
inconvenience, or delay.
    (b) Severance. The presiding officer may, upon the motion of any 
party, sever the proceeding for separate resolution of the matter as to 
any respondent only if the presiding officer finds that undue prejudice 
or injustice to the moving party would result from not severing the 
proceeding and such undue prejudice or injustice would outweigh the 
interests of judicial economy and expedition in the complete and final 
resolution of the proceeding.


Sec. 1780.25  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the presiding officer. Written memoranda, briefs, 
affidavits, or other relevant material or documents may be filed in 
support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the presiding officer directs that such motion be reduced to writing.
    (c) Filing of motions. Motions must be filed with the presiding 
officer, except that following the filing of a recommended decision, 
motions must be filed with the Director.
    (d) Responses. (1) Except as otherwise provided herein, any party 
may file a written response to a motion within ten days after service 
of any written motion, or within such other period of time as may be 
established by the presiding officer or the Director. The presiding 
officer shall not rule on any oral or written motion before each party 
has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the 
entry of an order substantially in the form of the order accompanying 
the motion.
    (e) Dilatory motions. Frivolous, dilatory, or repetitive motions 
are prohibited. The filing of such motions may form the basis for 
sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Secs. 1780.31 and 1780.32.


Sec. 1780.26   Discovery.

    (a) Limits on discovery. Subject to the limitations set out in 
paragraphs (b), (d), and (e) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic 
form, and other data compilations from which information can be 
obtained or translated, if necessary, by the parties through detection 
devices into reasonably usable form, as well as written material of all 
kinds.
    (b) Relevance. A party may obtain document discovery regarding any 
matter not privileged that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec. 1780.27.
    (c) Forms of discovery. Discovery shall be limited to requests for 
production of documents for inspection and copying. No other form of 
discovery shall be allowed. Discovery by use of interrogatories is not 
permitted. This paragraph shall not be interpreted to require the 
creation of a document.
    (d) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative process 
privilege and any other privileges provided by the Constitution, any 
applicable act of Congress, or the principles of common law.
    (e) Time limits. All discovery, including all responses to 
discovery requests, shall be completed at least 20 days prior to the 
date scheduled for the commencement of the hearing. No exception to 
this time limit shall be permitted, unless the presiding officer finds 
on the record that good cause exists for waiving the requirements of 
this paragraph.


Sec. 1780.27   Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. Copies of the request shall be served on all other parties. The 
request must identify the documents to be produced either by individual 
item or by category and must

[[Page 72515]]

describe each item and category with reasonable particularity. 
Documents must be produced as they are kept in the usual course of 
business or they shall be labeled and organized to correspond with the 
categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages 
is requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests more than 250 
pages of copying, the requesting party shall pay for copying and 
shipping charges. Copying charges are at the current rate per page 
imposed by OFHEO at Sec. 1710.22(b)(2) of this chapter for requests for 
documents filed under the Freedom of Information Act, 12 U.S.C. 552. 
The party to whom the request is addressed may require payment in 
advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request is not required to supplement the response, unless:
    (1) The responding party learns that in some material respect the 
information disclosed is incomplete or incorrect, and
    (2) The additional or corrective information has not otherwise been 
made known to the other parties during the discovery process or in 
writing.
    (d) Motions to strike or limit discovery requests. (1) Any party 
that objects to a discovery request may, within ten days of being 
served with such request, file a motion in accordance with the 
provisions of Sec. 1780.25 to strike or otherwise limit the request. If 
an objection is made to only a portion of an item or category in a 
request, the objection shall specify that portion. Any objections not 
made in accordance with this paragraph and Sec. 1780.25 are waived.
    (2) The party who served the request that is the subject of a 
motion to strike or limit may file a written response within five days 
of service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, all 
documents withheld on the grounds of privilege must be reasonably 
identified, together with a statement of the basis for the assertion of 
privilege. When similar documents that are protected by deliberative 
process, attorney work-product, or attorney-client privilege are 
voluminous, these documents may be identified by category instead of by 
individual document. The presiding officer has discretion to determine 
when the identification by category is insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec. 1780.25 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may, within five days of service of a motion for the 
issuance of a subpoena compelling production, file a written response 
to the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses to 
motions pursuant to this section has expired, the presiding officer 
shall rule promptly on all such motions. If the presiding officer 
determines that a discovery request or any of its terms calls for 
irrelevant material, is unreasonable, oppressive, excessive in scope, 
unduly burdensome, or repetitive of previous requests, or seeks to 
obtain privileged documents, he may deny or modify the request and may 
issue appropriate protective orders, upon such conditions as justice 
may require. The pendency of a motion to strike or limit discovery or 
to compel production shall not be a basis for staying or continuing the 
proceeding, unless otherwise ordered by the presiding officer. 
Notwithstanding any other provision in this part, the presiding officer 
may not release, or order a party to produce, documents withheld on 
grounds of privilege if the party has stated to the presiding officer 
its intention to file a timely motion for interlocutory review of the 
presiding officer's order to produce the documents, until the motion 
for interlocutory review has been decided.
    (h) Enforcing discovery subpoenas. If the presiding officer issues 
a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the presiding officer 
against a party who fails to produce or induces another to fail to 
produce subpoenaed documents.


Sec. 1780.28   Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the presiding officer 
for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and 
manner for production in response to the subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec. 1780.27. The party obtaining the document 
subpoena is responsible for serving it on the subpoenaed person and for 
serving copies on all parties. Document subpoenas may be served in any 
State, territory, or possession of the United States, the District of 
Columbia, or as otherwise provided by law.
    (3) The presiding officer shall issue promptly any document 
subpoena applied for under this section; except that, if the presiding 
officer determines that the application does not set forth a valid 
basis for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
may refuse to issue the subpoena or may issue it in a modified form 
upon such conditions as may be determined by the presiding officer.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such 
subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant shall serve the motion on all 
parties and any party may respond to such motion within ten days of 
service of the motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec. 1780.27 and during 
the same time limits during which such an objection could be filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order 
of the presiding officer that directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other

[[Page 72516]]

aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with the subpoena. A party's right to seek court enforcement 
of a document subpoena shall in no way limit the sanctions that may be 
imposed by the presiding officer on a party who induces a failure to 
comply with subpoenas issued under this section.


Sec. 1780.29   Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section to the presiding officer for the 
issuance of a subpoena, including a subpoena duces tecum, requiring the 
attendance of the witness at a deposition. The presiding officer may 
issue a deposition subpoena under this section upon a showing that--
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness, or infirmity, or will 
be otherwise unavailable;
    (ii) The witness' unavailability was not produced or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed anywhere within the 
United States and its possessions and territories in which that witness 
resides or has a regular place of employment or such other convenient 
place as the presiding officer shall fix.
    (3) Subpoenas must be issued promptly upon request, unless the 
presiding officer determines that the request fails to set forth a 
valid basis under this section for its issuance. Before making a 
determination that there is no valid basis for issuing the subpoena, 
the presiding officer shall require a written response from the party 
requesting the subpoena or require attendance at a conference to 
determine whether there is a valid basis upon which to issue the 
requested subpoena.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the presiding officer orders otherwise, no deposition under this 
section shall be taken on fewer than 10 days' notice to the witness and 
all parties. Deposition subpoenas may be served anywhere within the 
United States or its possessions or territories on any person doing 
business anywhere within the United States or its possessions or 
territories, or as otherwise permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion under Sec. 1780.25 with the 
presiding officer to quash or modify the subpoena prior to the time for 
compliance specified in the subpoena, but not more than 10 days after 
service of the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The 
motion must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure 
to object to questions or documents is not deemed a waiver except where 
the ground for objection might have been avoided if the objection had 
been presented timely. All questions, answers and objections must be 
recorded.
    (2) Any party may move before the presiding officer for an order 
compelling the witness to answer any questions the witness has refused 
to answer or submit any evidence that, during the deposition, the 
witness has refused to submit.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or 
the witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply 
with any subpoena issued pursuant to this section or with any order of 
the presiding officer made upon motion under paragraph (c)(2) of this 
section, the subpoenaing party or other aggrieved party may, to the 
extent authorized by applicable law, apply to an appropriate United 
States district court for an order requiring compliance with the 
portions of the subpoena that the presiding officer has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
presiding officer on a party who fails to comply with or induces a 
failure to comply with a subpoena issued under this section.


Sec. 1780.30   Interlocutory review.

    (a) General rule. The Director may review a ruling of the presiding 
officer prior to the certification of the record to the Director only 
in accordance with the procedures set forth in this section.
    (b) Scope of review. The Director may exercise interlocutory review 
of a ruling of the presiding officer if the Director finds that--
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any motion for interlocutory review shall be filed 
by a party with the presiding officer within ten days of his ruling. 
Upon the expiration of the time for filing all responses, the presiding 
officer shall refer the matter to the Director for final disposition. 
In referring the matter to the Director, the presiding officer may 
indicate agreement or disagreement with the asserted grounds for 
interlocutory review of the ruling in question.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Director under this 
section suspends or stays the proceeding unless otherwise ordered by 
the presiding officer or the Director.


Sec. 1780.31  Summary disposition.

    (a) In general. The presiding officer shall recommend that the 
Director issue a final order granting a motion for summary disposition 
if the undisputed pleaded facts, admissions, affidavits, stipulations, 
documentary evidence, matters as to which official notice may be taken 
and any other evidentiary materials properly submitted in

[[Page 72517]]

connection with a motion for summary disposition show that--
    (1) There is no genuine issue as to any material fact; and
    (2) The movant is entitled to a decision in its favor as a matter 
of law.
    (b) Filing of motions and responses. (1) Any party who believes 
there is no genuine issue of material fact to be determined and that 
such party is entitled to a decision as a matter of law may move at any 
time for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such motion or 
within such time period as allowed by the presiding officer, may file a 
response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of material facts as to which the movant contends there is no 
genuine issue. Such motion must be supported by documentary evidence, 
which may take the form of admissions in pleadings, stipulations, 
written interrogatory responses, depositions, investigatory 
depositions, transcripts, affidavits and any other evidentiary 
materials that the movant contends support its position. The motion 
must also be accompanied by a brief containing the points and 
authorities in support of the contention of the movant. Any party 
opposing a motion for summary disposition must file a statement setting 
forth those material facts as to which such party contends a genuine 
dispute exists. Such opposition must be supported by evidence of the 
same type as that submitted with the motion for summary disposition and 
a brief containing the points and authorities in support of the 
contention that summary disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his own 
motion, the presiding officer may hear oral argument on the motion for 
summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the presiding officer shall 
determine whether the movant is entitled to summary disposition. If the 
presiding officer determines that summary disposition is warranted, the 
presiding officer shall submit a recommended decision to that effect to 
the Director, under Sec. 1780.53. If the presiding officer finds that 
the moving party is not entitled to summary disposition, the presiding 
officer shall make a ruling denying the motion.


Sec. 1780.32  Partial summary disposition.

    If the presiding officer determines that a party is entitled to 
summary disposition as to certain claims only, he shall defer 
submitting a recommended decision to the Director as to those claims. A 
hearing on the remaining issues must be ordered. Those claims for which 
the presiding officer has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.


Sec. 1780.33  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as the parties may 
agree, the presiding officer shall direct representatives for all 
parties to meet with him in person at a specified time and place prior 
to the hearing or to confer by telephone for the purpose of scheduling 
the course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery and the 
exchange of any prehearing materials including witness lists, 
statements of issues, stipulations, exhibits and any other materials 
may also be determined at the scheduling conference.
    (b) Prehearing conferences. The presiding officer may, in addition 
to the scheduling conference, on his own motion or at the request of 
any party, direct representatives for the parties to meet with him (in 
person or by telephone) at a prehearing conference to address any or 
all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The presiding officer, in his discretion, may 
require that a scheduling or prehearing conference be recorded by a 
court reporter. A transcript of the conference and any materials filed, 
including orders, becomes part of the record of the proceeding. A party 
may obtain a copy of the transcript at such party's expense.
    (d) Scheduling or prehearing orders. Within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the presiding officer shall serve on each party an order 
setting forth any agreements reached and any procedural determinations 
made.


Sec. 1780.34  Prehearing submissions.

    (a) Within the time set by the presiding officer, but in no case 
later than 10 days before the start of the hearing, each party shall 
serve on every other party the serving party's--
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.


Sec. 1780.35  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other 
evidence sought, the presiding officer may issue a subpoena or a 
subpoena duces tecum requiring the attendance of a witness at the 
hearing or the production of documentary or physical evidence at such 
hearing. The application for a hearing subpoena must also contain a 
proposed subpoena specifying the attendance of a witness or the 
production of evidence from any State, commonwealth, possession, 
territory of the United States, or the District of Columbia, or as 
otherwise provided by law at any designated place where the hearing is 
being conducted. The party making the application shall serve a copy of 
the application and the proposed subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of or during a hearing. During a hearing, a party may make 
an application for a subpoena orally on the record before the presiding 
officer.
    (3) The presiding officer shall promptly issue any hearing subpoena 
applied for under this section; except that, if the presiding officer 
determines that the application does not set forth a valid basis for 
the issuance of the subpoena, or that any of its terms are

[[Page 72518]]

unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
may refuse to issue the subpoena or may issue the subpoena in a 
modified form upon any conditions consistent with this subpart. Upon 
issuance by the presiding officer, the party making the application 
shall serve the subpoena on the person named in the subpoena and on 
each party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
such subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but no more 
than 10 days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply 
with any subpoena issued pursuant to this section or any order of the 
presiding officer that directs compliance with all or any portion of a 
hearing subpoena, the subpoenaing party or any other aggrieved party 
may seek enforcement of the subpoena pursuant to Sec. 1780.28(c). A 
party's right to seek court enforcement of a hearing subpoena shall in 
no way limit the sanctions that may be imposed by the presiding officer 
on a party who induces a failure to comply with subpoenas issued under 
this section.

Subpart C--Hearing and Posthearing Proceedings


Sec. 1780.50  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted in accordance 
with 5 U.S.C. chapter 5 and other applicable law and so as to provide a 
fair and expeditious presentation of the relevant disputed issues. 
Except as limited by this subpart, each party has the right to present 
its case or defense by oral and documentary evidence and to conduct 
such cross examination as may be required for full disclosure of the 
facts.
    (2) Order of hearing. OFHEO's counsel of record shall present its 
case-in-chief first, unless otherwise ordered by the presiding officer 
or unless otherwise expressly specified by law or regulation. OFHEO's 
counsel of record shall be the first party to present an opening 
statement and a closing statement and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order 
or presentation of their cases, but if they do not agree, the presiding 
officer shall fix the order.
    (3) Examination of witnesses. Only one representative for each 
party may conduct an examination of a witness, except that in the case 
of extensive direct examination, the presiding officer may permit more 
than one representative for the party presenting the witness to conduct 
the examination. A party may have one representative conduct the direct 
examination and another representative conduct re-direct examination of 
a witness, or may have one representative conduct the cross examination 
of a witness and another representative conduct the re-cross 
examination of a witness.
    (4) Stipulations. Unless the presiding officer directs otherwise, 
all documents that the parties have stipulated as admissible shall be 
admitted into evidence upon commencement of the hearing.
    (b) Transcript. The hearing shall be recorded and transcribed. The 
transcript shall be made available to any party upon payment of the 
cost thereof. The presiding officer shall have authority to order the 
record corrected, either upon motion to correct, upon stipulation of 
the parties, or following notice to the parties upon the presiding 
officer's own motion.


Sec. 1780.51  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact that may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or State government agency.
    (2) All matters officially noticed by the presiding officer or the 
Director shall appear on the record.
    (3) If official notice is requested of any material fact, the 
parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible 
copy of the original.
    (2) Subject to the requirements of paragraph (a)(1) of this 
section, any document, including a report of examination, oversight 
activity, inspection, or visitation, prepared by OFHEO or by another 
Federal or State financial institutions regulatory agency is admissible 
either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines, or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the presiding officer's discretion, be used 
with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence 
must be timely made and rulings on all objections must appear in the 
record.
    (2) When an objection to a question or line of questioning is 
sustained, the examining representative of record may make a specific 
proffer on the record of what he expected to prove by the expected 
testimony of the witness. The proffer may be by representation of the 
representative or by direct interrogation of the witness.
    (3) The presiding officer shall retain rejected exhibits, 
adequately marked for identification, for the record and transmit such 
exhibits to the Director.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing and that witness has testified in a 
deposition in accordance with Sec. 1780.29, a party may offer as 
evidence all or any part of the transcript of the deposition, including 
deposition exhibits, if any.
    (2) Such deposition transcript is admissible to the same extent 
that testimony would have been admissible had that person testified at 
the hearing, provided that if a witness refused to answer proper 
questions during the

[[Page 72519]]

depositions, the presiding officer may, on that basis, limit the 
admissibility of the deposition in any manner that justice requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.


Sec. 1780.52  Post hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the presiding officer 
shall serve notice upon each party that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the presiding officer proposed findings of fact, proposed 
conclusions of law and a proposed order within 30 days after the 
parties have received notice that the transcript has been filed with 
the presiding officer, unless otherwise ordered by the presiding 
officer.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A posthearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document.
    (3) Any party is deemed to have waived any issue not raised in 
proposed findings or conclusions timely filed by that party.
    (b) Reply briefs. Reply briefs may be filed within 15 days after 
the date on which the parties' proposed findings and conclusions and 
proposed order are due. Reply briefs must be limited strictly to 
responding to new matters, issues, or arguments raised in another 
party's papers. A party who has not filed proposed findings of fact and 
conclusions of law or a posthearing brief may not file a reply brief.
    (c) Simultaneous filing required. The presiding officer shall not 
order the filing by any party of any brief or reply brief supporting 
proposed findings and conclusions in advance of the other party's 
filing of its brief.


Sec. 1780.53  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under 
Sec. 1780.52(b), the presiding officer shall file with and certify to 
the Director, for decision, the record of the proceeding. The record 
must include the presiding officer's recommended decision, recommended 
findings of fact and conclusions of law, and proposed order; all 
prehearing and hearing transcripts, exhibits and rulings; and the 
motions, briefs, memoranda and other supporting papers filed in 
connection with the hearing. The presiding officer shall serve upon 
each party the recommended decision, recommended findings and 
conclusions, and proposed order.
    (b) Filing of index. At the same time the presiding officer files 
with and certifies to the Director, for final determination, the record 
of the proceeding, the presiding officer shall furnish to the Director 
a certified index of the entire record of the proceeding. The certified 
index shall include, at a minimum, an entry for each paper, document or 
motion filed with the presiding officer in the proceeding, the date of 
the filing, and the identity of the filer. The certified index shall 
also include an exhibit index containing, at a minimum, an entry 
consisting of exhibit number and title or description for: Each exhibit 
introduced and admitted into evidence at the hearing; each exhibit 
introduced but not admitted into evidence at the hearing; each exhibit 
introduced and admitted into evidence after the completion of the 
hearing; and each exhibit introduced but not admitted into evidence 
after the completion of the hearing.


Sec. 1780.54  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, recommended findings and conclusions, and 
proposed order under Sec. 1780.53, a party may file with the Director 
written exceptions to the presiding officer's recommended decision, 
recommended findings and conclusions, or proposed order; to the 
admission or exclusion of evidence; or to the failure of the presiding 
officer to make a ruling proposed by a party. A supporting brief may be 
filed at the time the exceptions are filed, either as part of the same 
document or in a separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Director if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the presiding officer and failed to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in or omissions 
from the presiding officer's recommendations to which that party takes 
exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
presiding officer's recommendations to which exception is taken, the 
page or paragraph references to those portions of the record relied 
upon to support each exception and the legal authority relied upon to 
support each exception. Exceptions and briefs in support shall not 
exceed a total of 30 pages, except by leave of the Director on motion.
    (3) One reply brief may be submitted by each party within ten days 
of service of exceptions and briefs in support of exceptions. Reply 
briefs shall not exceed 15 pages, except by leave of the Director on 
motion.


Sec. 1780.55  Review by Director.

    (a) Notice of submission to the Director. When the Director 
determines that the record in the proceeding is complete, the Director 
shall serve notice upon the parties that the proceeding has been 
submitted to the Director for final decision.
    (b) Oral argument before the Director. Upon the initiative of the 
Director or on the written request of any party filed with the Director 
within the time for filing exceptions under Sec. 1780.54, the Director 
may order and hear oral argument on the recommended findings, 
conclusions, decision and order of the presiding officer. A written 
request by a party must show good cause for oral argument and state 
reasons why arguments cannot be presented adequately in writing. A 
denial of a request for oral argument may be set forth in the 
Director's final decision. Oral argument before the Director must be 
transcribed.
    (c) Director's final decision. (1) Decisional employees may advise 
and assist the Director in the consideration and disposition of the 
case. The final decision of the Director will be based upon review of 
the entire record of the proceeding, except that the Director may limit 
the issues to be reviewed to those findings and conclusions to which 
opposing arguments or exceptions have been filed by the parties.
    (2) The Director shall render a final decision and issue an 
appropriate order within 90 days after notification of the parties that 
the case has been submitted for final decision, unless the Director 
orders that the action or any aspect thereof be remanded to the 
presiding officer for further proceedings. Copies of the final decision 
and order of the Director shall be served upon each party

[[Page 72520]]

to the proceeding and upon other persons required by statute.


Sec. 1780.56  Exhaustion of administrative remedies.

    To exhaust administrative remedies as to any issue on which a party 
disagrees with the presiding officer's recommendations, a party must 
file exceptions with the Director under Sec. 1780.54. A party must 
exhaust administrative remedies as a precondition to seeking judicial 
review of any decision issued under this subpart.


Sec. 1780.57  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the Director may not, unless specifically ordered 
by the Director or a reviewing court, operate as a stay of any order 
issued by the Director. The Director may, in his discretion and on such 
terms as he finds just, stay the effectiveness of all or any part of an 
order of the Director pending a final decision on a petition for review 
of that order.

Subpart D--Rules of Practice Before the Office of Federal Housing 
Enterprise Oversight


Sec. 1780.70  Scope.

    This subpart contains rules governing practice by parties or their 
representatives before OFHEO.
    This subpart addresses the imposition of sanctions by the presiding 
officer or the Director against parties or their representatives in an 
adjudicatory proceeding under this part. This subpart also covers other 
disciplinary sanctions--censure, suspension or disbarment--against 
individuals who appear before OFHEO in a representational capacity 
either in an adjudicatory proceeding under this part or in any other 
matters connected with presentations to OFHEO relating to a client's or 
other principal's rights, privileges, or liabilities. This 
representation includes, but is not limited to, the practice of 
attorneys and accountants. Employees of OFHEO are not subject to 
disciplinary proceedings under this subpart.


Sec. 1780.71  Definitions.

    Practice before OFHEO for the purposes of this subpart, includes, 
but is not limited to, transacting any business with OFHEO as counsel, 
representative or agent for any other person, unless the Director 
orders otherwise. Practice before OFHEO also includes the preparation 
of any statement, opinion, or other paper by a counsel, representative 
or agent that is filed with OFHEO in any certification, notification, 
application, report, or other document, with the consent of such 
counsel, representative or agent. Practice before OFHEO does not 
include work prepared for an Enterprise solely at the request of the 
Enterprise for use in the ordinary course of its business.


Sec. 1780.72  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before OFHEO or a presiding officer. (1) By 
attorneys. A party may be represented by an attorney who is a member in 
good standing of the bar of the highest court of any State, 
commonwealth, possession, territory of the United States, or the 
District of Columbia and who is not currently suspended or disbarred 
from practice before OFHEO.
    (2) By nonattorneys. An individual may appear on his own behalf. A 
member of a partnership may represent the partnership and a duly 
authorized officer, director, employee, or other agent of any 
corporation or other entity not specifically listed herein may 
represent such corporation or other entity; provided that such officer, 
director, employee, or other agent is not currently suspended or 
disbarred from practice before OFHEO. A duly authorized officer or 
employee of any Government unit, agency, or authority may represent 
that unit, agency, or authority.
    (b) Notice of appearance. Any person appearing in a representative 
capacity on behalf of a party, including OFHEO, shall execute and file 
a notice of appearance with the presiding officer at or before the time 
such person submits papers or otherwise appears on behalf of a party in 
the adjudicatory proceeding. Such notice of appearance shall include a 
written declaration that the individual is currently qualified as 
provided in paragraphs (a)(1) or (a)(2) of this section and is 
authorized to represent the particular party. By filing a notice of 
appearance on behalf of a party in an adjudicatory proceeding, the 
representative thereby agrees and represents that he is authorized to 
accept service on behalf of the represented party and that, in the 
event of withdrawal from representation, he or she will, if required by 
the presiding officer, continue to accept service until a new 
representative has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis. Unless the representative filing the notice is an attorney, the 
notice of appearance shall also be executed by the person represented 
or, if the person is not an individual, by the chief executive officer, 
or duly authorized officer of that person.


Sec. 1780.73  Conflicts of interest.

    (a) Conflict of interest in representation. No representative shall 
represent another person in an adjudicatory proceeding if it reasonably 
appears that such representation may be limited materially by that 
representative's responsibilities to a third person or by that 
representative's own interests. The presiding officer may take 
corrective measures at any stage of a proceeding to cure a conflict of 
interest in representation, including the issuance of an order limiting 
the scope of representation or disqualifying an individual from 
appearing in a representative capacity for the duration of the 
proceeding.
    (b) Certification and waiver. If any person appearing as counsel or 
other representative represents two or more parties to an adjudicatory 
proceeding or also represents a nonparty on a matter relevant to an 
issue in the proceeding, that representative must certify in writing at 
the time of filing the notice of appearance required by Sec. 1780.72--
    (1) That the representative has personally and fully discussed the 
possibility of conflicts of interest with each such party and nonparty;
    (2) That each such party and nonparty waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.


Sec. 1780.74  Sanctions.

    (a) General rule. Appropriate sanctions may be imposed during the 
course of any proceeding when any party or representative of record has 
acted or failed to act in a manner required by applicable statute, 
regulation, or order, and that act or failure to act--
    (1) Constitutes contemptuous conduct. Contemptuous conduct includes 
dilatory, obstructionist, egregious, contumacious, unethical, or other 
improper conduct at any phase of any adjudicatory proceeding;
    (2) Has caused some other party material and substantive injury, 
including, but not limited to, incurring expenses including attorney's 
fees or experiencing prejudicial delay;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Has delayed the proceeding unduly.
    (b) Sanctions. Sanctions that may be imposed include, but are not 
limited to, any one or more of the following:

[[Page 72521]]

    (1) Issuing an order against a party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning 
a late filing on any terms that are just;
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Procedure for imposition of sanctions. (1) The presiding 
officer, on the motion of any party, or on his own motion, and after 
such notice and responses as may be directed by the presiding officer, 
may impose any sanction authorized by this section. The presiding 
officer shall submit to the Director for final ruling any sanction that 
would result in a final order that terminates the case on the merits or 
is otherwise dispositive of the case.
    (2) Except as provided in paragraph (d) of this section, no 
sanction authorized by this section, other than refusing to accept late 
papers, shall be imposed without prior notice to all parties and an 
opportunity for any representative or party against whom sanctions 
would be imposed to be heard. The presiding officer shall determine and 
direct the appropriate notice and form for such opportunity to be 
heard. The opportunity to be heard may be limited to an opportunity to 
respond verbally immediately after the act or inaction in question is 
noted by the presiding officer.
    (3) For purposes of interlocutory review, motions for the 
imposition of sanctions by any party and the imposition of sanctions 
shall be treated the same as motions for any other ruling by the 
presiding officer.
    (4) Nothing in this section shall be read to preclude the presiding 
officer or the Director from taking any other action or imposing any 
other restriction or sanction authorized by any applicable statute or 
regulation.
    (d) Sanctions for contemptuous conduct. If, during the course of 
any proceeding, a presiding officer finds any representative or any 
individual representing himself to have engaged in contemptuous 
conduct, the presiding officer may summarily suspend that individual 
from participating in that or any related proceeding or impose any 
other appropriate sanction.


Sec. 1780.75  Censure, suspension, disbarment and reinstatement.

    (a) Discretionary censure, suspension and disbarment. (1) The 
Director may censure any individual who practices or attempts to 
practice before OFHEO or suspend or revoke the privilege to appear or 
practice before OFHEO of such individual if, after notice of and 
opportunity for hearing in the matter, that individual is found by the 
Director--
    (i) Not to possess the requisite qualifications or competence to 
represent others;
    (ii) To be seriously lacking in character or integrity or to have 
engaged in material unethical or improper professional conduct;
    (iii) To have caused unfair and material injury or prejudice to 
another party, such as prejudicial delay or unnecessary expenses 
including attorney's fees;
    (iv) To have engaged in, or aided and abetted, a material and 
knowing violation of the 1992 Act, the Federal Home Loan Mortgage 
Corporation Act, the Federal National Mortgage Association Charter Act 
or the rules or regulations issued under those statutes or any other 
law or regulation governing Enterprise operations;
    (v) To have engaged in contemptuous conduct before OFHEO;
    (vi) With intent to defraud in any manner, to have willfully and 
knowingly deceived, misled, or threatened any client or prospective 
client; or
    (vii) Within the last 10 years, to have been convicted of an 
offense involving moral turpitude, dishonesty or breach of trust, if 
the conviction has not been reversed on appeal. A conviction within the 
meaning of this paragraph shall be deemed to have occurred when the 
convicting court enters its judgment or order, regardless of whether an 
appeal is pending or could be taken and includes a judgment or an order 
on a plea of nolo contendere or on consent, regardless of whether a 
violation is admitted in the consent.
    (2) Suspension or revocation on the grounds set forth in paragraphs 
(a)(1) (ii), (iii), (iv), (v), (vi) and (vii) of this section shall 
only be ordered upon a further finding that the individual's conduct or 
character was sufficiently egregious as to justify suspension or 
revocation. Suspension or disbarment under this paragraph shall 
continue until the applicant has been reinstated by the Director for 
good cause shown or until, in the case of a suspension, the suspension 
period has expired.
    (3) If the final order against the respondent is for censure, the 
individual may be permitted to practice before OFHEO, but such 
individual's future representations may be subject to conditions 
designed to promote high standards of conduct. If a written letter of 
censure is issued, a copy will be maintained in OFHEO's files.
    (b) Mandatory suspension and disbarment. (1) Any counsel who has 
been and remains suspended or disbarred by a court of the United States 
or of any State, commonwealth, possession, territory of the United 
States or the District of Columbia; any accountant or other licensed 
expert whose license to practice has been revoked in any State, 
commonwealth, possession, territory of the United States or the 
District of Columbia; any person who has been and remains suspended or 
barred from practice before the Department of Housing and Urban 
Development, the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Office of Thrift 
Supervision, the Federal Deposit Insurance Corporation, the National 
Credit Union Administration, the Federal Housing Finance Board, the 
Farm Credit Administration, the Securities and Exchange Commission, or 
the Commodity Futures Trading Commission is also suspended 
automatically from appearing or practicing before OFHEO. A disbarment 
or suspension within the meaning of this paragraph shall be deemed to 
have occurred when the disbarring or suspending agency or tribunal 
enters its judgment or order, regardless of whether an appeal is 
pending or could be taken and regardless of whether a violation is 
admitted in the consent.
    (2) A suspension or disbarment from practice before OFHEO under 
paragraph (b)(1) of this section shall continue until the person 
suspended or disbarred is reinstated under paragraph (d)(2) of this 
section.
    (c) Notices to be filed. (1) Any individual appearing or practicing 
before OFHEO who is the subject of an order, judgment, decree, or 
finding of the types set forth in paragraph (b)(1) of this section 
shall file promptly with the Director a copy thereof, together with any 
related opinion or statement of the agency or tribunal involved.
    (2) Any individual appearing or practicing before OFHEO who is or 
within the last 10 years has been convicted of a felony or of a 
misdemeanor that resulted in a sentence of prison term or in a fine or 
restitution order totaling more than $5,000 shall file a notice 
promptly with the Director. The notice shall include a copy of the 
order imposing the sentence or fine,

[[Page 72522]]

together with any related opinion or statement of the court involved.
    (d) Reinstatement. (1) Unless otherwise ordered by the Director, an 
application for reinstatement for good cause may be made in writing by 
a person suspended or disbarred under paragraph (a)(1) of this section 
at any time more than three years after the effective date of the 
suspension or disbarment and, thereafter, at any time more than one 
year after the person's most recent application for reinstatement. An 
applicant for reinstatement under this paragraph (d)(1) may, in the 
Director's sole discretion, be afforded a hearing.
    (2) An application for reinstatement for good cause by any person 
suspended or disbarred under paragraph (b)(1) of this section may be 
filed at any time, but not less than 1 year after the applicant's most 
recent application. An applicant for reinstatement for good cause under 
this paragraph (d)(2) may, in the Director's sole discretion, be 
afforded a hearing. However, if all the grounds for suspension or 
disbarment under paragraph (b)(1) of this section have been removed by 
a reversal of the order of suspension or disbarment or by termination 
of the underlying suspension or disbarment, any person suspended or 
disbarred under paragraph (b)(1) of this section may apply immediately 
for reinstatement and shall be reinstated by OFHEO upon written 
application notifying OFHEO that the grounds have been removed.
    (e) Conferences. (1) General. Counsel for OFHEO may confer with a 
proposed respondent concerning allegations of misconduct or other 
grounds for censure, disbarment or suspension, regardless of whether a 
proceeding for censure, disbarment or suspension has been commenced. If 
a conference results in a stipulation in connection with a proceeding 
in which the individual is the respondent, the stipulation may be 
entered in the record at the request of either party to the proceeding.
    (2) Resignation or voluntary suspension. In order to avoid the 
institution of or a decision in a disbarment or suspension proceeding, 
a person who practices before OFHEO may consent to censure, suspension 
or disbarment from practice. At the discretion of the Director, the 
individual may be censured, suspended or disbarred in accordance with 
the consent offered.
    (f) Hearings under this section. Hearings conducted under this 
section shall be conducted in substantially the same manner as other 
hearings under this part, provided that in proceedings to terminate an 
existing OFHEO suspension or disbarment order, the person seeking the 
termination of the order shall bear the burden of going forward with an 
application and with proof and that the Director may, in the Director's 
sole discretion, direct that any proceeding to terminate an existing 
suspension or disbarment by OFHEO be limited to written submissions. 
All hearings held under this section shall be closed to the public 
unless the Director, on the Director's own motion or upon the request 
of a party, otherwise directs.

    Dated: December 21, 1999.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 99-33461 Filed 12-27-99; 8:45 am]
BILLING CODE 4220-01-P