[Federal Register Volume 69, Number 180 (Friday, September 17, 2004)]
[Proposed Rules]
[Pages 56118-56120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-20932]



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Part II





Department of Housing and Urban Development





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24 CFR Part 291



Disposition of HUD-Acquired Single Family Property; Disciplinary 
Actions Against HUD-Qualified Real Estate Brokers; Proposed Rule

  Federal Register / Vol. 69, No. 180 / Friday, September 17, 2004 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 291

[Docket No. FR-4871-P-01; HUD 2004-0006]
RIN 2502-AI08


Disposition of HUD-Acquired Single Family Property; Disciplinary 
Actions Against HUD-Qualified Real Estate Brokers

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Proposed rule.

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SUMMARY: The purpose of this proposed rule is to address real estate 
broker participation in predatory lending practices targeted at Federal 
Housing Administration (FHA) borrowers. This rule includes measures to 
prevent property ``flipping,'' inflated appraisals, falsified gift 
letters, and fraudulent underwriting. This rule is similar to existing 
removal rules for FHA appraisers, consultants, and nonprofit 
organizations, and provides HUD a more expeditious disciplinary 
procedure for real estate brokers than the suspension and debarment 
procedures that would otherwise be applicable.

DATES: Comment Due Date: November 16, 2004.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410-0500. Interested persons may also submit 
comments electronically through either:
     The Federal eRulemaking Portal at: http://www.regulations.gov; or
     The HUD electronic Web site at: http://www.epa.gov/feddocket. Follow the link entitled ``View Open HUD Dockets''. 
Commenters should follow the instructions provided on that site to 
submit comments electronically.
    Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the docket number and title. All comments 
and communications submitted will be available, without revision, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Copies are also available for inspection and downloading 
at http://www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Wanda L. Sampedro, Deputy Director, 
Asset Management Division, Office of Housing, Room 9176, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 
20410-8000; telephone (202) 708-1672 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at 800-877-8339.

SUPPLEMENTARY INFORMATION: This rule proposes to establish the bases 
and procedures for removing real estate brokers from HUD's qualified 
selling broker list and prohibiting removed brokers from using HUD's 
systems to participate in the sale of HUD-owned, single family 
properties. Currently, HUD's qualified selling broker list is 
maintained in the Single Family Acquired Asset Management System 
(SAMS). In SAMS, a real estate broker's name and address identifier 
(NAID) enables a real estate broker to be compensated for services 
rendered. Deactivation of the NAID removes the real estate broker's 
ability to participate in the sale of HUD-owned single family 
properties.
    This rule would add a new paragraph (i) to Sec.  291.100, which 
would provide for the removal by HUD, for good cause, of a real estate 
broker from HUD's qualified selling broker list and the deactivation of 
the broker's NAID. The rule provides several examples of activities 
that would constitute good cause, such as fraudulent activities, the 
use of false and misleading statements, the loss of a state license, or 
acting in concert with an appraiser to arrive at an artificial 
appraised value.
    Once HUD makes an initial finding that there is good cause to 
remove a broker, HUD will provide the broker with written notice of the 
proposed removal. The notice will state the reasons that HUD is taking 
action, identify the violations or deficiencies involved, and provide a 
citation to the relevant regulation, statute, or policy. The notice 
will also state the effective date and duration of the proposed 
removal. The effective date of the broker's removal will be the 30th 
day after the date of the notice. HUD's determination of the duration 
of removal will reflect the number, extent, and seriousness of the 
broker's improper actions.
    Real estate brokers will be given 20 days after the date of the 
notice (or longer, if provided in the notice) to submit a written 
response to HUD opposing the proposed removal and to request a 
conference. A request for a conference must be in writing and must be 
submitted along with the written response.
    If the real estate broker does not respond within the time 
provided, the removal takes effect in accordance with the notice. If a 
conference is requested, it will occur within 15 days after the date of 
HUD's receipt of the request. Within 20 days after the date of 
completion of the conference, HUD will advise the real estate broker in 
writing of HUD's decision to rescind, modify, or affirm the broker's 
removal from HUD's qualified selling broker list. If the real estate 
broker did not request a conference when submitting the written 
response, HUD will respond in writing within 20 days after the date of 
receipt of the broker's response.
    If HUD's decision affirms the removal, the broker has the right to 
a hearing before an administrative law judge (ALJ) to appeal the 
removal. The removal, however, would remain effective pending the 
hearing before the ALJ. All bids submitted and commissions earned by 
the real estate broker prior to removal will be honored, unless they 
are determined to have been made under fraudulent circumstances.
    HUD is particularly interested in obtaining public comment on 
whether the procedures proposed in this rule for removing real estate 
brokers from HUD's qualified selling broker list may be made less 
burdensome, while still providing real estate brokers the opportunity 
to respond adequately to a notice of removal and to participate in the 
resolution of problems.

Findings and Certifications

Unfunded Mandates Reform Act

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

Environmental Impact

    In accordance with HUD's regulations at 24 CFR 50.19(c)(6), this 
rule sets forth administrative requirements which do not constitute a 
development decision that affects the physical condition of specific 
project areas or building sites, and therefore is categorically 
excluded from the requirements of the National Environmental Policy Act 
(42 U.S.C. 4321 et seq.) and related federal laws and authorities.

Regulatory Flexibility Act

    The Secretary has reviewed this rule before publication and, by 
approving it,

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certifies, in accordance with the Regulatory Flexibility Act (5 U.S.C. 
605(b)), that this rule would not have a significant economic impact on 
a substantial number of small entities. The proposed rule would 
establish uniform and expeditious requirements and procedures to remove 
real estate brokers from HUD's qualified selling broker list. As such, 
the rule would benefit both the industry and the government in that it 
clarifies the terms of the relationship between HUD and its listed real 
estate brokers. Notwithstanding HUD's determination that this rule will 
not have a significant economic impact on a substantial number of small 
entities, HUD specifically invites comments regarding less burdensome 
alternatives to this rule that will meet HUD's program 
responsibilities.
    With respect to removing a real estate broker or taking other 
appropriate enforcement action against a real estate broker, HUD is 
cognizant that Section 222 of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Public Law 104-121) (SBREFA) requires the Small 
Business and Agriculture Regulatory Enforcement Ombudsman to ``work 
with each agency with regulatory authority over small businesses to 
ensure that small business concerns that receive or are subject to an 
audit, on-site inspection, compliance assistance effort, or other 
enforcement related communication or contact by agency personnel are 
provided with a means to comment on the enforcement activity conducted 
by this personnel.'' To implement this statutory provision, the Small 
Business Administration has requested that agencies include the 
following language on agency publications and notices that are provided 
to small businesses concerns at the time the enforcement action is 
undertaken. The language is as follows:

Your Comments Are Important

    The Small Business and Agriculture Regulatory Enforcement 
Ombudsman and 10 Regional Fairness Boards were established to 
receive comments from small businesses about federal agency 
enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to 
small business. If you wish to comment on the enforcement actions of 
an agency, including HUD, you will find the necessary comment forms 
at URL: http://www.sba.gov/ombudsman, or call 1-888-REG-FAIR (1-888-
734-3247).

    As HUD stated in its notice describing HUD's actions on the 
implementation of SBREFA, published on May 21, 1998 (63 FR 28214), HUD 
intends to work with the Small Business Administration to provide small 
entities with information on the Fairness Boards and National Ombudsman 
program at the time enforcement actions are taken to ensure that small 
entities have the full means to comment on the enforcement activity 
conducted by HUD.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either (1) imposes substantial direct compliance costs on state and 
local governments and is not required by statute or (2) the rule 
preempts state law, unless the agency meets the consultation and 
funding requirements of Section 6 of the executive order. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the executive order.

Executive Order 12866, Regulatory Planning and Review

    OMB reviewed this rule under Executive Order 12866 (entitled 
``Regulatory Planning and Review''). OMB determined that this rule is a 
``significant regulatory action,'' as defined in Section 3(f) of the 
executive order (although not economically significant, as provided in 
Section 3(f)(1) of the executive order). Any changes made to the rule 
subsequent to its submission to OMB are identified in the docket file, 
which is available for public inspection in the Regulations Division, 
Office of the General Counsel, Room 10276, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Washington, DC 20410-0500.

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    Accordingly, HUD proposes to amend 24 CFR part 291 as follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    1. The authority citation for 24 CFR part 291 continues to read as 
follows:

    Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, and 
3535(d).

    2. In Sec.  291.100, add paragraph (i) to read as follows:


Sec.  291.100  General policy.

* * * * *
    (i) Disciplinary actions against HUD-qualified real estate 
brokers--
    (1) In general. Real estate brokers that are involved in Real 
Estate Owned (REO) sales will be removed from HUD's qualified selling 
broker list and will be blocked from using HUD systems to participate 
in the sale of HUD-owned single family properties for good cause in 
accordance with the procedures of this paragraph. Nothing in this 
section prohibits HUD from taking such other action against a broker as 
provided in 24 CFR part 24 or from seeking any other available remedy.
    (2) Good cause. Good cause includes, but is not limited to:
    (i) Conviction of a broker under 18 U.S.C. 1010;
    (ii) Any of the following actions by a broker:
    (A) Falsifying loan documents or aiding or abetting persons in the 
use of false or misleading information including, but not limited to 
forged or fraudulent gift letters and owner occupant certifications;
    (B) Acting in concert with an appraiser to arrive at an artificial 
appraised value;
    (C) Engaging in fraudulent activities (with or without the 
assistance of an appraiser) that have led to default and payment of an 
insurance claim;
    (D) Violating the terms of the Selling Broker Certification, form 
SAMS-1111-A;
    (E) Failing to maintain a current state license;
    (F) Violating Section 8(a) of the Real Estate Settlement Procedures 
Act (RESPA) (12 U.S.C. 2607(a)), particularly when the real estate 
broker has acted in concert with a particular settlement service 
provider by accepting a ``thing of value'' for the referral of the 
settlement service business; and
    (G) Committing any other offense that reflects on the broker's 
character and integrity, including non-compliance with civil rights 
requirements regarding the sale of HUD-owned single family properties.
    (3) Written notice. Once HUD makes an initial finding that there is 
good cause to remove a broker, HUD will provide the broker with written 
notice of proposed removal from HUD's qualified selling broker list and 
deactivation of the broker's access to HUD systems to participate in 
the sale of HUD-owned properties. The notice will:
    (i) State the reasons that HUD is taking the action;
    (ii) Identify the violations or deficiencies involved;
    (iii) Provide a citation to the relevant regulation, statute, or 
policy; and

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    (iv) State the effective date and duration of the removal and 
deactivation;
    (A) The effective date of the broker's removal will be the 30th day 
after the date of the notice;
    (B) HUD's determination of the duration of removal and deactivation 
will be based upon HUD's consideration of the number and seriousness of 
the broker's violations and deficiencies.
    (4) Response and conference. Real estate brokers will be given 20 
days after the date of the notice (or longer, if provided in the 
notice) to submit a written response to HUD opposing the proposed 
removal and to request a conference. A request for a conference must be 
in writing and must be submitted along with the written response. If a 
conference is requested, it will occur within 15 days after the date of 
receipt of the request.
    (5) Disposition--(i) No response from real estate broker. If the 
real estate broker does not submit a written response within the time 
provided, the removal and deactivation take effect in accordance with 
the notice.
    (ii) Response from real estate broker. If the real estate broker 
submits a written response within the time provided, the removal and 
deactivation are delayed until HUD considers the response and makes a 
final determination. Within 20 days after the date of receipt of the 
written response, or if a conference is requested, within 20 days after 
the date of completion of the conference, HUD will advise the real 
estate broker in writing of the decision to rescind, modify, or affirm 
the removal from HUD's qualified selling broker list and the 
deactivation of the broker's access to HUD systems to participate in 
the sale of HUD-owned properties. If HUD's decision affirms the 
removal, the broker has the right to a hearing before an administrative 
law judge (ALJ). The removal remains in effect pending the proceeding 
before the ALJ. Participation in the appeal process before the ALJ is 
not a prerequisite to filing an action for judicial review under the 
Administrative Procedure Act.
    (6) Effect of removal proceeding on bids. All bids submitted and 
commissions earned by the real estate broker prior to removal will be 
honored, unless HUD determines they were made under fraudulent 
circumstances.

    Dated: August 24, 2004.
Sean Cassidy,
General Deputy Assistant Secretary for Housing.
[FR Doc. 04-20932 Filed 9-16-04; 8:45 am]
BILLING CODE 4210-27-P