[Federal Register Volume 68, Number 51 (Monday, March 17, 2003)]
[Rules and Regulations]
[Pages 12786-12789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6320]



[[Page 12785]]

-----------------------------------------------------------------------

Part IV





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Parts 25, 28, et al.



Inflation Adjustment of Civil Money Penalty Amounts; Final Rule

  Federal Register / Vol. 68, No. 51 / Monday, March 17, 2003 / Rules 
and Regulations  

[[Page 12786]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 25, 28, 30, 81, 180, 3282, and 3500

[Docket No. FR-4787-F-01]
RIN 2501-AC91


Inflation Adjustment of Civil Money Penalty Amounts

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule revises HUD's civil money penalty regulations 
to make inflation adjustments to the civil money penalties imposed by 
HUD as required by statute. The applicable statute mandates the 
adjustments and the formula used to calculate them.

DATES: Effective Date: April 16, 2003.

FOR FURTHER INFORMATION CONTACT: Dane Narode, Deputy Chief Counsel for 
Administrative Proceedings, Departmental Enforcement Center, Department 
of Housing and Urban Development, 1250 Maryland Avenue, SW., Suite 200, 
Washington, DC 20024. Telephone (202) 708-2350 (this is not a toll-free 
number). Hearing-or speech-impaired individuals may access this number 
via TTY by calling the toll-free Federal Information Relay Service at 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. This Final Rule

    The changes made by this rule will increase the amount of civil 
money penalties, consistent with statutory authority.

A. Inflation Adjustment to the Civil Money Penalties

    The Federal Civil Penalties Inflation Adjustment Act of 1990 (28 
U.S.C. 2461) (FCPIA Act), as amended by the Debt Collection Improvement 
Act of 1996 (31 U.S.C. 3701), requires each federal agency to make 
inflation adjustments to their maximum civil money penalties. This rule 
raises the maximum penalties that HUD may impose upon violators with 
respect to several HUD regulations found in 24 CFR parts 25, 28, 30, 
81, 3282, and 3500. For several HUD regulations that address civil 
money penalties (e.g., 24 CFR 4.28, 30.20, 30.25, 30.36, 30.65, 30.68, 
and 81.83(b)(2)), no amendment is necessary because application of the 
statute's formula results in no increase to the penalty. The FCPIA Act 
provides for a ``rounding-off,'' achieved by using multiples from $10 
to $25,000, of the increase determined by use of the factor derived 
from calculating the periodic increase in the Consumer Price Index 
(CPI). (See 28 U.S.C. 2461(5)(a).) Consequently, in those instances in 
which the increased dollar amount is determined to be less than the 
applicable multiple, the existing penalty is unchanged. The following 
regulations are revised by this rule.
    In Sec.  28.10, the maximum penalty for making a false claim or 
written statement, as described in the regulation, is increased from 
$5,500 to $6,500.
    In Sec.  30.35(c), the maximum penalties that the Mortgagee Review 
Board may impose for a series of violations identified in the 
regulations are increased from $5,500 to $6,500 per violation, and from 
$1,100,000 to $1,250,000 for all violations committed during any one-
year period.
    In Sec.  30.40, the maximum penalty that HUD may impose upon a 
mortgagee or a holder of a guarantee certificate who violates the 
statutory provisions concerning loan guarantees for Indian housing is 
increased from $5,000 to $6,000 per violation, and from $1,100,000 to a 
maximum of $1,250,000 for all violations committed during any one-year 
period.
    In Sec.  30.45(g), the maximum penalty that may be imposed upon a 
mortgagor of a multifamily property or on any person in a relationship 
with the mortgagor as described in the regulations at paragraph (c) of 
Sec.  30.45 is increased to $32,500 per violation.
    In Sec.  30.50(c), the maximum penalty that may be imposed against 
a Government National Mortgage Association (GNMA) issuer or custodian 
for a violation of any provision of 12 U.S.C. 1723i(b) or other 
authorities cited in the regulations is increased from $5,500 to $6,500 
per violation, and from $1,100,000 to $1,250,000 for all violations 
committed during any one-year period.
    In Sec.  30.55(c), the maximum penalty for each violation of any 
provision of the Interstate Land Sales Full Disclosure Act remains 
unchanged at $1,100, but the one-year maximum per person increases from 
$1,100,000 to $1,250,000.
    In Sec.  30.60(c), the maximum penalty that may be imposed upon any 
dealer or loan correspondent for, among other things, falsifying 
statements or making false representations in violation of section 
2(b)(7) of the National Housing Act (12 U.S.C. 1703(b)(7)) is increased 
from $5,500 to $6,500 for each violation, and from $1,100,000 to a 
maximum of $1,250,000 during any one-year period.
    In Sec.  81.83(b)(1), the maximum penalty that the Secretary may 
impose upon a Government Sponsored Enterprise (GSE) is increased from 
$25,000 to $30,000 for each day an identified failure occurs.
    In Sec. Sec.  180.670(b)(3)(A)(2) and (3), the maximum penalty that 
the Administrative Law Judge (ALJ) may impose upon a respondent who is 
found to have engaged in a discriminatory housing practice is increased 
from $27,500 to $32,500, and from $55,000 to $60,000.
    In Sec. Sec.  180.671(a)(2) and (3), the maximum penalty that the 
ALJ may impose upon a respondent who is found to have engaged in a 
discriminatory housing practice is increased from $27,500 to $32,500, 
and from $55,000 to $60,000.
    In Sec.  3282.10, the maximum penalty for each violation of the 
National Manufactured Housing Construction and Safety Standards Act of 
1974 (42 U.S.C. 5401 et seq.) remains unchanged at $1,100. The one-year 
maximum for any related series of violations occurring within one year 
from the date of the first violation is increased from $1,100,000 to 
$1,250,000.
    In Sec.  3500.17(m)(1), the penalty for a servicer's failure to 
submit to a borrower an initial or annual escrow account statement is 
increased from $55 to $65 for each such violation. The total of 
assessed penalties may not exceed $120,000 (from the existing total of 
$110,000) for violations that occur during any consecutive 12-month 
period.

B. Technical Correction to 24 CFR 25.12

    In addition to revising HUD's civil money penalties to make 
inflation adjustments as required by statute, this rule makes a 
technical correction to 24 CFR 25.12. Section 25.12 provides that the 
Mortgagee Review Board is authorized to impose civil money penalties 
and refers the reader to 24 CFR 30.320 for a list of violations for 
which a civil money penalty may be imposed. HUD published a final rule 
on September 24, 1996 (61 FR 50208), that removed Sec.  30.320 from 24 
CFR part 30. In part 30, subpart B now contains a separate section 
identifying each category of user that is subject to civil money 
penalties (e.g., Federal Housing Administration approved lenders and 
mortgagees, multifamily and part 202 mortgagors, GNMA issuers and 
custodians). This rule, therefore, removes the reference to Sec.  
30.320 in Sec.  25.12 and replaces it with the appropriate reference to 
subpart B (Violations) of part 30.

II. Justification for Final Rulemaking

    In general, HUD publishes a rule for public comment before issuing 
a rule for effect, in accordance with HUD's

[[Page 12787]]

regulations on rulemaking at 24 CFR part 10. Part 10, however, provides 
in Sec.  10.1 for exceptions from that general rule where HUD finds 
good cause to omit advance notice and public participation. The good 
cause requirement is satisfied when the prior public procedure is 
``impracticable, unnecessary or contrary to the public interest.''
    HUD finds that good cause exists to publish this rule for effect 
without soliciting public comment in that prior public procedure is 
``unnecessary.'' This final rule merely follows the statutory directive 
in the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 
U.S.C. 2461) to make periodic increases in HUD's civil money penalties 
by applying the adjustment formula established in the statute. 
Accordingly, because calculation of the increases is formula-driven, 
HUD has no discretion in updating the regulations to reflect the 
maximum allowable penalties derived from application of the formula. 
HUD emphasizes that this rule only addresses the matter of the 
calculation of the maximum civil money penalties for the respective 
violations described in the regulations. This rule does not address the 
issue of the Secretary's discretion to impose or not to impose a 
penalty, nor the procedures that HUD must follow in initiating a civil 
money penalty action.

III. Findings and Certifications

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. The reason 
for HUD's determination is that all entities, small or large, will be 
subject to the same penalties as established by statute and implemented 
by this rule. There are not any unusual procedures that would need to 
be complied with by small entities.

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c), this rule is 
categorically excluded from the requirements of the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on state and local governments nor preempt state law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. This final rule does not impose any 
federal mandates on any state, local, or tribal governments or the 
private sector within the meaning of the Unfunded Mandates Reform Act 
of 1995.

List of Subjects

24 CFR Part 25

    Administrative practice and procedure, Loan programs `` housing and 
community development, Organization and functions (Government 
agencies), Reporting and recordkeeping requirements.

24 CFR Part 28

    Administrative practice and procedure, Claims, Fraud, Penalties.

24 CFR Part 30

    Administrative practice and procedure, Grant programs--housing and 
community development, Loan programs--housing and community 
development, Mortgages, Penalties.

24 CFR Part 81

    Accounting, mortgages, Reporting and recordkeeping requirements, 
Securities.

24 CFR Part 180

    Administrative practice and procedure, Aged, Civil Rights, Fair 
housing, Individuals with disabilities, Investigations, Mortgages, 
Penalties, Reporting and recordkeeping requirements.

24 CFR Part 3282

    Administrative practice and procedure, Consumer protection, 
Intergovernmental relations, Investigations, Manufactured homes, 
Mortgages, Reporting and recordkeeping requirements.

24 CFR Part 3500

    Consumer protection, Housing, Mortgages, Reporting and 
recordkeeping requirements.

    Accordingly, for the reasons described in the preamble, HUD amends 
24 CFR parts 25, 28, 30, 81, 180, 3282, and 3500 to read as follows:

PART 25--MORTGAGEE REVIEW BOARD

    1. The authority citation for part 25 continues to read as follows:

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

    2. Revise Sec.  25.12 to read as follows:


Sec.  25.12  Civil money penalties.

    The Board is authorized pursuant to section 536 of the National 
Housing Act (12 U.S.C.1735(f)-14) to impose civil money penalties upon 
lenders and mortgagees, as set forth in 24 CFR part 30. The violations 
for which a civil money penalty may be imposed are listed in subpart B 
(Violations) of part 30. Hearings to challenge the imposition of civil 
money penalties shall be conducted according to the applicable rules of 
24 CFR part 30.

PART 28--IMPLEMENTATION OF THE PROGRAM FRAUD CIVIL REMEDIES ACT OF 
1986

    3. The authority citation for part 28 continues to read as follows:

    Authority: 28 U.S.C. 2461 note; 31 U.S.C. 3801; 42 U.S.C. 
3535(d).

    4. Amend Sec.  28.10 by revising the introductory text of 
paragraphs (a) and (b)(1) to read as follows:


Sec.  28.10  Basis for civil penalties and assessments.

    (a) Claims. A civil penalty of not more than $6,500 may be imposed 
upon a person who makes a claim that the person knows or has reason to 
know:
* * * * *
    (b) Statements. (1) A civil penalty of up to $6,500 may be imposed 
upon a person who makes a written statement that:
* * * * *

[[Page 12788]]

PART 30--CIVIL MONEY PENALTIES: CERTAIN PROHIBITED CONDUCT

    5. The authority citation for part 30 continues to read as follows:

    Authority: 12 U.S.C. 1701q-1, 1703, 1723i, 1735f-14, 1735f-15; 
15 U.S.C. 1717a; 28 U.S.C. 2461 note; 42 U.S.C. 1437z-1 and 3535(d).

    6. Amend Sec.  30.35 by revising paragraph (c) to read as follows:


Sec.  30.35  Mortgagees and lenders.

* * * * *
    (c) Amount of penalty. The maximum penalty is $6,500 for each 
violation, up to a limit of $1,250,000 for all violations committed 
during any one-year period. Each violation shall constitute a separate 
violation as to each mortgage or loan application.

    7. Amend Sec.  30.40 by revising paragraph (c) to read as follows:


Sec.  30.40  Loan guarantees for Indian housing.

* * * * *
    (c) Amount of penalty. The maximum penalty is $6,000 for each 
violation, up to a limit of $1,250,000 for all violations committed 
during any one-year period. Each violation shall constitute a separate 
violation as to each mortgage or loan application.

    8. Amend Sec.  30.45 by revising paragraph (g) to read as follows:


Sec.  30.45  Multifamily and Section 202 or 811 mortgagors.

* * * * *
    (g) Maximum penalty. The maximum penalty for each violation under 
paragraph (c) of this section is $32,500.
* * * * *

    9. Amend Sec.  30.50 by revising paragraph (c) to read as follows:


Sec.  30.50  GNMA issuers and custodians.

* * * * *
    (c) Amount of penalty. The maximum penalty is $6,500 for each 
violation, up to a limit of $1,250,000 during any one-year period. Each 
violation shall constitute a separate violation with respect to each 
pool of mortgages.

    10. Amend Sec.  30.55 by revising paragraph (c) to read as follows:


Sec.  30.55  Interstate Land Sales violations.

* * * * *
    (c) Amount of penalty. The maximum penalty is $1,100 for each 
violation, up to a limit for any particular person of $1,250,000 during 
any one-year period. Each violation shall constitute a separate 
violation as to each sale or lease or offer to sell or lease.

    11. Amend Sec.  30.60 by revising paragraph (c) to read as follows:


Sec.  30.60  Dealers or loan correspondents.

* * * * *
    (c) Amount of penalty. The maximum penalty is $6,500 for each 
violation, up to a limit for any particular person of $1,250,000 during 
any one-year period.

PART 81--THE SECRETARY OF HUD'S REGULATION OF THE FEDERAL NATIONAL 
MORTGAGE ASSOCIATION (FANNIE MAE) AND THE FEDERAL HOME LOAN 
MORTGAGE CORPORATION (FREDDIE MAC)

    12. The authority citation for part 81 continues to read as 
follows:

    Authority: 12 U.S.C. 1451 et seq., 1716-1723h, and 4501-4641: 28 
U.S.C. 2461 note; 42 U.S.C. 3535(d) and 3601-3619.

    13. Amend Sec.  81.83 by revising paragraph (b)(1) to read as 
follows:


Sec.  81.83  Civil money penalties.

* * * * *
    (b) * * *
    (1) For any failure described in paragraph (a)(1) of this section, 
$30,000 for each day that the failure occurs; and
* * * * *

PART 180--CONSOLIDATED HUD HEARING PROCEDURES FOR CIVIL RIGHTS 
MATTERS

    14. The authority citation for part 180 continues to read as 
follows:

    Authority: 29 U.S.C.794; 42 U.S.C. 2000d-1, 3535(d), 3601-3619, 
5301-5320, and 6103.

    15. Amend Sec.  180.670 by revising paragraphs (b)(3)(iii)(A)(2) 
and (3) to read as follows:


Sec.  180.670  Initial decision of ALJ.

* * * * *
    (b) * * *
    (3) * * *
    (iii) * * *
    (A) * * *
    (2) $32,500, if the respondent has been adjudged to have committed 
one other discriminatory housing practice in any administrative hearing 
or civil action permitted under the Fair Housing Act, or under any 
state or local fair housing law, or in any licensing or regulatory 
proceeding conducted by a Federal, state, or local government agency, 
and the adjudication was made during the five-year period preceding the 
date of filing of the charge.
    (3) $60,000, if the respondent has been adjudged to have committed 
two or more discriminatory housing practices in any administrative 
hearings or civil actions permitted under the Fair Housing Act, or 
under any state or local fair housing law, or in any licensing or 
regulatory proceeding conducted by a federal, state, or local 
government agency, and the adjudications were made during the seven-
year period preceding the date of filing of the charge.
* * * * *

    16. Amend Sec.  180.671 by revising paragraphs (a)(2) and (3) to 
read as follows:


Sec.  180.671  Assessing civil penalties for Fair Housing Act cases.

    (a) * * *
    (1) * * *
    (2) $32,500, if the respondent has been adjudged in any 
administrative hearing or civil action permitted under the Fair Housing 
Act, or under any state or local fair housing law, or in any licensing 
or regulatory proceeding conducted by a federal, state, or local 
government agency, to have committed one other discriminatory housing 
practice and the adjudication was made during the five-year period 
preceding the date of filing of the charge.
    (3) $60,000, if the respondent has been adjudged in any 
administrative hearings or civil actions permitted under the Fair 
Housing Act, or under any state or local fair housing law, or in any 
licensing or regulatory proceeding conducted by a federal, state, or 
local government agency, to have committed two or more discriminatory 
housing practices and the adjudications were made during the seven-year 
period preceding the date of filing of the charge.
* * * * *

PART 3282--MANUFACTURED HOME PROCEDURAL AND ENFORCEMENT REGULATIONS

    17. The authority citation for part 3282 continues to read as 
follows:

    Authority: 28 U.S.C. 2461 note; 42 U.S.C. 5424; and 42 U.S.C. 
3535(d).

    18. Revise Sec.  3282.10 to read as follows:


Sec.  3282.10  Civil and criminal penalties.

    Failure to comply with these regulations may subject the party in 
question to the civil and criminal penalties provided for in section 
611 of the Act, 42 U.S.C. 5410. The maximum amount of penalties imposed 
under section 611 of the Act shall be $1,100 for each violation, up to 
a maximum of $1,250,000 for any related series of violations occurring 
within one year from the date of the first violation.

PART 3500--REAL ESTATE SETTLEMENT PROCEDURES ACT

    19. The authority citation for part 3500 continues to read as 
follows:


[[Page 12789]]


    Authority: 12 U.S.C. 2601 et seq; 42 U.S.C. 3535(d).

    20. Amend Sec.  3500.17 by revising paragraph (m)(1) to read as 
follows:


Sec.  3500.17  Escrow accounts.

* * * * *
    (m) Penalties. (1) A servicer's failure to submit to a borrower an 
initial or annual escrow account statement meeting the requirements of 
this part shall constitute a violation of section 10(d) of RESPA (12 
U.S.C. 2609(d)) and this section. For each such violation, the 
Secretary shall assess a civil penalty of 65 dollars ($65), except that 
the total of the assessed penalties shall not exceed $120,000 for any 
one servicer for violations that occur during any consecutive 12-month 
period.
* * * * *

    Dated: February 24, 2003.
Mel Martinez,
Secretary.
[FR Doc. 03-6320 Filed 3-14-03; 8:45 am]
BILLING CODE 4210-32-P