[Federal Register Volume 73, Number 198 (Friday, October 10, 2008)]
[Rules and Regulations]
[Pages 60538-60542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23878]



[[Page 60537]]

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Part VI





Department of Housing and Urban Development





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24 CFR Part 25



Mortgagee Review Board (MRB); Amendments to the MRB Regulations; Final 
Rule

  Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 / 
Rules and Regulations  

[[Page 60538]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 25

[Docket No. FR-5082-F-02]
RIN 2510-AA01


Mortgagee Review Board (MRB); Amendments to the MRB Regulations

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

ACTION: Final rule.

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SUMMARY: This final rule makes changes to the Department's Mortgagee 
Review Board (Board) regulations to clarify and better reflect 
statutory directives and amend current practice, and to modify the 
Board's procedures governing hearings. This rule also removes 
provisions that unnecessarily duplicate the authorizing statute and 
clarifies the authority and duties of the Board in taking 
administrative action against mortgagees approved by the Federal 
Housing Administration. This rule separates and clarifies the grounds 
for administrative action and the factors considered by the Board in 
evaluating whether to take administrative action, as well as requiring 
the mortgagee to address these factors in its response to the Board's 
notice of violation.
    This rule follows publication of a March 28, 2008, proposed rule on 
which HUD received one public comment. At this final rule stage, HUD 
has decided to adopt the proposed rule with minor changes, as described 
below.

DATES: Effective Date: November 10, 2008.

FOR FURTHER INFORMATION CONTACT: Dane Narode, Acting Associate General 
Counsel for Program Enforcement, Department of Housing and Urban 
Development, 1250 Maryland Avenue, Suite 200, Washington, DC 20024-
0500; telephone number 202-708-2350 (this is not a toll-free number); 
e-mail: [email protected]. Hearing- and speech-impaired persons may 
access the voice telephone number listed above by calling the toll-free 
Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The Mortgagee Review Board (Board) oversees the performance of 
lenders participating in the Federal Housing Administration (FHA) 
mortgage insurance programs. Section 1708(c) of the National Housing 
Act (12 U.S.C. 1708(c)) empowers the Board to initiate the issuance of 
a letter of reprimand, probation, suspension, or withdrawal to any 
mortgagee found to be engaging in activities in violation of FHA 
requirements or the nondiscrimination requirements of the Equal Credit 
Opportunity Act (15 U.S.C. 1691 et seq.), the Fair Housing Act (42 
U.S.C. 3601 et seq.), or Executive Order 11063, entitled ``Equal 
opportunity in housing.'' HUD's regulations implementing section 
1708(c) are located in 24 CFR part 25. The regulations governing the 
Board set forth the authority of the Board; administrative actions 
available and factors to be considered by the Board in taking such 
action; violations that give rise to administrative actions; procedures 
involved in notifying mortgagees of a violation and administrative 
action, as well as any hearing that results; and guidelines for the 
publication and dissemination of information regarding actions.

II. March 2008 Proposed Rule

    On March 28, 2008, at 73 FR 16605, HUD published a proposed rule to 
amend the regulations governing the Board at 24 CFR part 25. Some of 
the more significant amendments proposed included the following: to 
permit hearings to be conducted by an Administrative Law Judge (ALJ); 
to provide that grounds for administrative action exist if a mortgagee 
fails to comply with any agreement, certification, undertaking, or 
condition of approval listed on, or applicable to, either a mortgagee's 
application for approval or an approved mortgagee's branch office 
notification; to include the violation of an agreement with HUD as 
creating grounds for administrative action; to clarify that proof of 
delivery of the notice of violation to the mortgagee's address of 
record establishes that the mortgagee has received the notice; to 
provide that, in responding to the notice, mortgagees must address the 
factors listed in new Sec.  25.8; to establish an exception to the 
written notice of violation requirement before issuing a letter of 
reprimand, provided that the Board has received information that 
discloses a basis for the issuance of a letter of reprimand; to add a 
new Sec.  25.8 that clarifies the grounds for administrative action and 
the factors considered by the Board in evaluating whether to take 
administrative action under 12 U.S.C. 1708(c); to require the mortgagee 
to address these factors in its response to the Board's notice of 
violation, which would assist in the Board's informed consideration of 
the factors; to clarify that mortgagees that may be subject to 
probation, suspension, or withdrawal are entitled to a hearing, but a 
hearing must be requested; and to reflect the authority of an ALJ to 
conduct hearings. With the exception of the changes described below, 
all the regulatory amendments are described and discussed in detail in 
the preamble to the March 28, 2008, proposed rule. The Department has 
made technical revisions to the language proposed in the March 28, 
2008, proposed rule with respect to Sec. Sec.  25.5(b) and (c), 25.8, 
25.9(b), 25.10(a), and 25.11, to ensure the clarity of those 
provisions.

III. Discussion of Public Comments

    At the end of the public comment period on May 27, 2008, HUD 
received only one public comment on the proposed rule. The commenter 
had several comments, which are provided below along with HUD's 
responses:
    Comment: Rule Removes an Important Due Process Currently Available 
to Lenders. The commenter expressed concern about HUD's proposal in 24 
CFR 25.7(c), which provides an exception to the notice-of-violation 
requirement. The commenter stated that under the existing regulations, 
the Board must provide a notice of a violation of an FHA-approved 
mortgagee before issuing a letter of reprimand. The March 2008 rule 
proposes to create an exception to this requirement, and allow the 
Board to bypass written notification whenever information comes before 
the Board that the Board believes provides a basis for issuance of a 
letter of reprimand. The March 2008 proposed rule allows the Board to 
issue this letter without issuing a notice of violation to the 
mortgagee or providing any subsequent hearing. According to the 
commenter, this change in the regulation would deprive the lender of 
due process, and without an opportunity for hearing, a lender's 
reputation could be harmed. The commenter urged that this provision be 
withdrawn at the final rule stage, and that the existing regulation 
remain in place.
    HUD Response: While this regulation does include an express 
exemption from the notice requirements of Sec.  25.7, which does 
represent a change in the text of the regulation, no substantive change 
is being made through this change in the phrasing of the regulation. 
This rule does not alter in any way the existing regulatory provisions 
concerning the issuance of a letter of reprimand by the Board. The 
Department's current regulations do not require the issuance of a 
notice of violation for a letter of reprimand, instead stating 
specifically that such a notice shall be issued prior to the 
consideration of any probation, suspension, or withdrawal action. This 
rule retains the exemption from

[[Page 60539]]

issuance of a notice of violation prior to issuance of a letter of 
reprimand, and merely casts the process in different terms.
    The Department disagrees that this exemption denies a mortgagee any 
due process. The exemption of letters of reprimand from the notice of 
violation derives directly from the authorizing statute, evidencing 
Congress's belief that additional processes were unnecessary prior to 
the issuance of a letter of reprimand.
    Additionally, the commenter is concerned with the effect that the 
issuance of a letter of reprimand would have on a mortgagee. The 
Department does not believe the impact on a mortgagee is sufficient to 
warrant the full procedural protections afforded when the Board 
determines to take one of the other administrative actions provided for 
by the statute and regulations. Specifically, unlike the other 
administrative actions, a letter of reprimand does not in and of itself 
have any effect on a mortgagee's approval or authority to originate 
mortgages for insurance by FHA.
    Comment: Rule Removes an Important Due Process Available to Lenders 
in the Future. The commenter expressed concern that a letter of 
reprimand may serve as a basis for a future proceeding, notwithstanding 
that there is no opportunity by the mortgagee to contest it. The 
commenter urged that this provision be withdrawn at the final rule 
stage and that the existing regulation remain in place.
    HUD Response: The prior issuance of a letter of reprimand against a 
mortgagee cannot, in and of itself, support an action against an FHA-
approved mortgagee. Should a mortgagee again be found to have violated 
HUD requirements, any action by the Board would be based on those 
future violations. As noted above, while including a change to the text 
of the regulation, no substantive change is being made through this 
revision of the current regulation. Therefore, the Department has made 
no change to the regulation in response to this comment.
    Comment: Do Not Require ALJ to Grant a Hearing Extension Only if 
Both Parties Agree. The commenter also expressed concern about 24 CFR 
25.10(c). The commenter states that under the March 2008 proposed rule, 
the ALJ can grant an extension of time for a hearing beyond 30 days 
only if the parties agree. The ALJ can also extend for good cause. This 
is a change from the current rule, which allows the mortgagee to 
request a hearing beyond 30 days. Both parties should not have to agree 
to the extension in order for the extension to be granted. The 
commenter urged that the final rule authorize the ALJ to grant an 
extension on the basis of either party's request.
    HUD Response: The Department believes that the swift resolution of 
these matters is in the interests of both parties, which is why the 
proposed rule required the parties to agree to any delay in the 
proceedings. However, the Department recognizes that the interests of 
the mortgagee could also be protected through the provision for an 
extension upon motion by the mortgagee, which would then be ruled upon 
by the presiding Administrative Law Judge. Therefore, the Department 
has made a change in this final rule to provide that the mortgagee may 
move for an extension of time for the conduct of the hearing.
    Comment: Allow the ALJ to Dismiss Charge Upon Unreasonable Delay by 
HUD. The commenter recommended that in addition to authorizing the ALJ 
to grant an extension on the basis of one party's request or to extend 
for good cause, the final rule should make clear that since the 
mortgagee is the aggrieved party, the ALJ may dismiss the charge if HUD 
delays the proceeding unreasonably.
    HUD Response: The Department's procedural regulations at 24 CFR 
part 26, subpart B, generally govern the conduct of the hearing by the 
ALJ. Because Sec.  26.36 of 24 CFR part 26 contains provisions 
permitting the ALJ to impose sanctions against either party for 
improper conduct, including failure to prosecute or defend an action, 
it is unnecessary to add a similar sanction provision to this part. 
Therefore, the Department has not made any change in response to this 
comment.
    Comment: Allow Discovery of Certain Information if ALJ Determines 
Such Information is Relevant. With respect to the documentary evidence 
provision of the proposed rule in 24 CFR 25.10(c), the commenter urges 
that the final rule allow certain information, such as reviews or 
audits by HUD against lenders other than the appealing mortgagee, which 
may be relevant to a given mortgagee appeal, to be the subject of 
discovery if the ALJ concurs in the relevancy of such information.
    HUD Response: The provisions prohibiting discovery of information 
concerning other mortgagees has not been altered from those in the 
current regulation. The purpose of this limitation is to restrict 
burdensome and unnecessary discovery into irrelevant matters, such as 
the Department's decision whether or not to pursue enforcement actions. 
Under Heckler v. Chaney, 470 U.S. 821, 84 L. Ed. 2d 714, 105 S. Ct. 
1649 (1985), the review of an agency action under the Administrative 
Procedure Act does not extend to the right to judicial review of an 
agency's decision not to take enforcement action. Under Heckler v. 
Chaney, the decision not to undertake enforcement action is ``committed 
to an agency's absolute discretion,'' rendering such decision 
presumptively unreviewable (see 470 U.S. at 831). It is necessary to 
retain this prohibition to prevent unnecessary and irrelevant inquiries 
that will not lead to admissible or relevant evidence. Therefore, no 
change has been made in response to this comment.

IV. Small Business Concerns Related to Board Enforcement Actions

    With respect to enforcement actions undertaken by the Board against 
a mortgagee, and, as noted in the March 28, 2008, proposed rule, HUD is 
cognizant that section 222 of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 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 federal agencies include the 
following language on agency publications and notices that are provided 
to small business 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 
[insert agency name], you will find the necessary comment forms at 
http://www.sba.gov/ombudsman or call 1-888-REG-FAIR (1-888-734-
3247).

    In accordance with its notice describing HUD's actions on the 
implementation of SBREFA, which was published on May 21, 1998 (63 FR 
28214), HUD will include the language cited above on notices 
implementing enforcement actions, to ensure that small entities have 
the full means to

[[Page 60540]]

comment on the enforcement activity conducted by HUD.

V. Findings and Certifications

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 605(b)) (RFA) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. This rule makes 
changes to HUD's Mortgagee Review Board regulations at 24 CFR part 25 
to clarify and better reflect statutory directives and to amend current 
practice. All entities, small or large, are subject to the same 
penalties for violations of HUD requirements, as established by statute 
and implemented by the part 25 regulations. To the extent the rule has 
any impact on a small entity, it would be a result of the entity's 
failure to comply with HUD requirements. Accordingly, the undersigned 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities.

Environmental Impact

    This 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)(1), this rule 
is categorically excluded from environmental review under the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
affects only mortgagees and 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.

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 rule does not impose 
any federal mandates on any state, local, or tribal government or the 
private sector within the meaning of UMRA.

List of Subjects in 24 CFR Part 25

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

0
For the reasons discussed in the preamble, HUD amends 24 CFR part 25 to 
read as follows:

PART 25--MORTGAGEE REVIEW BOARD

0
1. The authority citation for 24 CFR part 25 continues to read as 
follows:

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


0
2. Revise Sec.  25.2 to read as follows:


Sec.  25.2  Establishment and authority of Board.

    (a) Establishment of the Board. The Mortgagee Review Board (Board) 
was established in the Federal Housing Administration, which is in the 
Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, by section 202(c)(1) of the National Housing Act (12 
U.S.C. 1708(c)(1)), as added by section 142 of the Department of 
Housing and Urban Development Reform Act of 1989 (Pub. L. 101-235, 
approved December 15, 1989).
    (b) Authority of the Board. The Board has the authority to initiate 
administrative actions against mortgagees and lenders under 12 U.S.C. 
1708(c) and shall exercise all of the functions of the Secretary with 
respect to administrative actions against mortgagees and lenders and 
such other functions as are provided in this part. The Board shall have 
all powers necessary and incident to the performance of these functions 
and such other functions as are provided in this part, except as 
limited by this part.
    (1) Administrative Actions. The Board has the authority to take any 
administrative action against mortgagees and lenders as provided in 12 
U.S.C. 1708(c). The Board may delegate its authority to take all 
nondiscretionary acts.
    (2) 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 mortgagees and lenders, 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 24 CFR part 30. 
Hearings to challenge the imposition of civil money penalties shall be 
conducted according to the applicable rules of 24 CFR part 30.
    (3) Authorization for other administrative actions. The Board may, 
in its discretion, approve the initiation of a suspension or debarment 
action against a mortgagee or lender by any Suspending or Debarring 
Official under 24 CFR part 24.


Sec.  25.3  [Amended]

0
3. In Sec.  25.3, remove the definitions of ``Hearing Official'' and 
``Hearing Officer.''

0
4. In Sec.  25.4, revise paragraphs (a) and (b) to read as follows:


Sec.  25.4  Operation of the Mortgagee Review Board.

    (a) Members. The Board consists of the following HUD officials 
designated to serve on the Board by section 202(c)(2) of the National 
Housing Act (12 U.S.C. 1708(c)(2)):
    (1) The Assistant Secretary of Housing-Federal Housing 
Commissioner;
    (2) The General Counsel of the Department;
    (3) The President of the Government National Mortgage Association 
(GNMA);
    (4) The Assistant Secretary for Administration;
    (5) The Assistant Secretary for Fair Housing and Equal Opportunity 
(in cases involving violations of nondiscrimination requirements);
    (6) The Chief Financial Officer of the Department; and
    (7) The Director of the Enforcement Center; or their designees.
    (b) Advisors. The Inspector General or his or her designee, and the 
Director of the Office of Lender Activities and Program Compliance (or 
such other position as may be assigned such duties), and such other 
persons as the Board may appoint, shall serve as nonvoting advisors to 
the Board.
* * * * *

0
5. Revise Sec.  25.5 to read as follows:


Sec.  25.5  Administrative actions.

    (a) General. The Board is authorized to take administrative actions 
in accordance with 12 U.S.C. 1708(c), including, but not limited to, 
the following: issue a letter of reprimand,

[[Page 60541]]

probation, suspension, or withdrawal; or enter into a settlement 
agreement.
    (b) Letter of reprimand. A letter of reprimand shall be effective 
upon receipt of the letter by the mortgagee. Failure to comply with a 
directive in the letter of reprimand may result in any other 
administrative action that the Board finds appropriate as provided by 
12 U.S.C. 1708(c).
    (c) Probation. Probation shall be effective upon receipt of the 
notice of probation by the mortgagee. Failure to comply with the terms 
of probation may result in any other administrative action that the 
Board finds appropriate as provided by 12 U.S.C. 1708(c).
    (d) Suspension. (1) Effect of suspension. (i) During the period of 
suspension, HUD will not endorse any mortgage originated by the 
suspended mortgagee under the Title II program unless prior to the date 
of suspension:
    (A) A firm commitment has been issued relating to any such 
mortgage; or
    (B) A Direct Endorsement underwriter has approved the mortgagor for 
any such mortgage.
    (ii) During the period of suspension, a lender or loan 
correspondent may not originate new Title I loans under its Title I 
Contract of Insurance or apply for a new Contract of Insurance.
    (2) Effective date of suspension. A suspension issued pursuant to 
Sec.  25.7(d) is effective upon issuance. Any other suspension is 
effective upon receipt of the notice of suspension by the mortgagee.
    (e) Withdrawal--(1) Effect of withdrawal. (i) During the period of 
withdrawal, HUD will not endorse any mortgage originated by the 
withdrawn mortgagee under the Title II program, unless prior to the 
date of withdrawal:
    (A) A firm commitment has been issued relating to any such 
mortgage; or
    (B) A Direct Endorsement underwriter has approved the mortgagor for 
any such mortgage.
    (ii) During the period of withdrawal, a lender or loan 
correspondent may not originate new Title I loans under its Title I 
Contract of Insurance or apply for a new Contract of Insurance. The 
Board may limit the geographical extent of the withdrawal, or limit its 
scope (e.g., to either the single family or multifamily activities of a 
withdrawn mortgagee). Upon the expiration of the period of withdrawal, 
the mortgagee may file a new application for approval under 24 CFR part 
202.
    (2) Effective date of withdrawal. (i) If the Board determines that 
immediate action is in the public interest or in the best interests of 
the Department, then withdrawal shall be effective upon receipt of the 
Board's notice of withdrawal.
    (ii) If the Board does not determine that immediate action is 
necessary according to paragraph (e)(2)(i) of this section, then 
withdrawal shall be effective either:
    (A) Upon the expiration of the 30-day period specified in Sec.  
25.10, if the mortgagee has not requested a hearing; or
    (B) Upon receipt of the Board's decision under Sec.  25.10, if the 
mortgagee requests a hearing.

0
6. Remove Sec. Sec.  25.10 and 25.11.

0
7. Redesignate Sec. Sec.  25.6, 25.7, 25.8, and 25.9 as Sec. Sec.  
25.7, 25.9, 25.10, and 25.6, respectively.

0
8. In newly designated Sec.  25.6, revise the section heading, the 
introductory text, and paragraphs (g), (j), (x), and (ff) to read as 
follows:


Sec.  25.6  Violations creating grounds for administrative action.

    Any administrative action imposed under 12 U.S.C. 1708(c) shall be 
based upon one or more of the following violations:
* * * * *
    (g) Failure to comply with any agreement, certification, 
undertaking, or condition of approval listed on, or applicable to, 
either a mortgagee's application for approval or an approved 
mortgagee's branch office notification;
* * * * *
    (j) Violation of the requirements of any contract or agreement with 
the Department, or violation of the requirements set forth in any 
statute, regulation, handbook, mortgagee letter, or other written rule 
or instruction;
* * * * *
    (x) Failure to submit a report required under 24 CFR 202.12(c) 
within the time determined by the Commissioner, or to commence or 
complete a plan for corrective action under that section within the 
time agreed upon with the Commissioner.
* * * * *
    (ff) Any other violation of Federal Housing Administration 
requirements that the Board or the Secretary determines to be so 
serious as to justify an administrative sanction.
* * * * *

0
9. Revise newly designated Sec.  25.7 to read as follows:


Sec.  25.7  Notice of violation.

    (a) General. The Chairperson of the Board, or the Chairperson's 
designee, shall issue a written notice to the mortgagee at the 
mortgagee's address of record at least 30 days prior to taking any 
action under 12 U.S.C. 1708(c) against the mortgagee. Proof of delivery 
to the mortgagee's address of record shall establish the mortgagee's 
receipt of the notice. The notice shall state the specific violations 
that have been alleged, and shall direct the mortgagee to reply in 
writing to the Board within 30 days after receipt of the notice by the 
mortgagee. The notice shall also provide the address to which the 
response shall be sent. If the mortgagee fails to reply during such 
time period, the Board may make a determination without considering any 
comments of the mortgagee.
    (b) Mortgagee's response. The mortgagee's response to the Board 
shall be in a format prescribed by the Secretary and shall not exceed 
15 double-spaced typewritten pages. The response shall include an 
executive summary, a statement of the facts surrounding the matter, an 
argument, and a conclusion. Such response shall also address the 
factors listed in Sec.  25.8. A more lengthy submission, including 
documents and other exhibits, may be simultaneously submitted to Board 
staff for review.
    (c) Exception for letter of reprimand. Whenever information comes 
before the Board that discloses a basis for the issuance of a letter of 
reprimand, the Board may issue the letter without having previously 
issued a notice of violation.
    (d) Exception for immediate suspension. If the Board determines 
that there exists adequate evidence that immediate action is required 
to protect the financial interests of the Department or the public, the 
Board may take a suspension action without having previously issued a 
notice of violation.

0
10. Add Sec.  25.8 to read as follows:


Sec.  25.8  Factors considered in taking administrative action.

    In determining which administrative action under 12 U.S.C. 1708(c), 
if any, should be taken, the Board will consider, among other factors, 
the seriousness and extent of the violations, the degree of mortgagee 
responsibility for the occurrences, and any other mitigating or 
aggravating facts. Where the Board is considering a withdrawal action, 
the Board will also consider whether the violations were egregious or 
willful, in order to determine whether a permanent withdrawal is 
mandated by 12 U.S.C. 1708(c).

0
11. Revise newly designated Sec.  25.9 to read as follows:


Sec.  25.9  Notice of administrative action.

    (a) Whenever the Board decides to take an action in accordance with 
12

[[Page 60542]]

U.S.C. 1708(c)(3), the Chairperson of the Board, or the Chairperson's 
designee, shall issue a written notice of the action to the mortgagee 
at the mortgagee's address of record of the determination. Proof of 
delivery to the mortgagee's address of record shall establish the 
mortgagee's receipt of the notice.
    (b) In actions for probation, suspension, or withdrawal, the notice 
shall describe the nature and duration of the administrative action, 
and shall specifically state the reasons for the action. In actions for 
probation, suspension, or withdrawal, the notice shall inform the 
mortgagee of its right to a hearing regarding the administrative action 
and of the manner and time in which to request a hearing.

0
12. Revise newly designated Sec.  25.10 to read as follows:


Sec.  25.10  Hearings and hearing request.

    (a) Hearing request. A mortgagee subject to any administrative 
action under 12 U.S.C. 1708(c), except for a letter of reprimand, may 
request a hearing, which shall be held on the record before an 
administrative law judge. The mortgagee shall submit its request for a 
hearing within 30 days of receiving the Board's notice of 
administrative action. The request shall be addressed to the Mortgagee 
Review Board Docket Clerk, Department of Housing and Urban Development, 
451 7th Street, SW., Washington, DC 20410. The request shall 
specifically respond to the violations set forth in the notice of 
administrative action. If the mortgagee fails to request a hearing 
within 30 days after receiving the notice of administrative action, the 
Board's action shall become final.
    (b) Hearing by Administrative Law Judge. Hearings are to be 
conducted by an Administrative Law Judge (ALJ), as set forth in this 
part. The ALJ shall commence a de novo hearing within 30 days of HUD's 
receipt of the mortgagee's request, unless the mortgagee moves for an 
extension of time. The ALJ may extend this time period for good cause.
    (c) Procedural rules. The hearing shall be conducted in accordance 
with the applicable provisions of 24 CFR part 26, with the following 
modifications:
    (1) The mortgagee or its representative shall be afforded an 
opportunity to appear, submit documentary evidence, present witnesses, 
and confront any witness the agency presents, except that the parties 
shall not be allowed to present members of the Board as witnesses.
    (2) Discovery of information and/or documents that do not pertain 
to the appealing mortgagee, including, but not limited to, reviews or 
audits by the Department or administrative actions by the Board against 
mortgagees other than the appealing mortgagee, shall not be permitted. 
Members of the Board shall not be subject to deposition.
    (3) The hearing shall generally be held in Washington, DC. However, 
upon a showing of undue hardship or other cause, the ALJ may, in his or 
her discretion, order the hearing to be held in a location other than 
Washington, DC.

0
13. Section 25.14 is redesignated as Sec.  25.11 and is revised to read 
as follows:


Sec.  25.11  Modification of Board orders.

    No order of an ALJ before whom proceedings are conducted under 
Sec.  25.10 may modify or otherwise disturb in any way an order or 
notice by the Board, unless the order of the ALJ becomes final agency 
action in accordance with Subpart B of Part 26 of this Title.

0
14. Revise Sec.  25.12 to read as follows:


Sec.  25.12  Public access to information; Publication of actions.

    (a) Where a notice of administrative action does not result in a 
hearing and in any cases in which a settlement is entered into by the 
Board and a mortgagee, all non-privileged information regarding the 
nature of the violation and the resolution of the action shall be 
available to the public.
    (b) Publication in the Federal Register. The Secretary shall 
publish, in the Federal Register, a description of and the cause for 
each administrative action taken by the Board against a mortgagee.
    (c) Notification of other agencies. Whenever the Board has taken 
any discretionary action to suspend and/or withdraw the approval of a 
mortgagee, the Secretary shall provide prompt notice of the action and 
a statement of the reasons for the action to the Secretary of Veterans 
Affairs; the chief executive officer of the Federal National Mortgage 
Association; the chief executive officer of the Federal Home Loan 
Mortgage Corporation; the Administrator of the Rural Housing Service 
(formerly the Farmers Home Administration); the Comptroller of the 
Currency, if the mortgagee is a National Bank or District Bank or 
subsidiary or affiliate of such a bank; the Board of Governors of the 
Federal Reserve System, if the mortgagee is a state bank that is a 
member of the Federal Reserve System or a subsidiary or affiliate of 
such a bank, or a bank holding company or a subsidiary or affiliate of 
such a company; the Board of Directors of the Federal Deposit Insurance 
Corporation, if the mortgagee is a state bank that is not a member of 
the Federal Reserve System, or is a subsidiary or affiliate of such a 
bank; and the Director of the Office of Thrift Supervision, if the 
mortgagee is a federal or state savings association or a subsidiary or 
affiliate of a savings association.
    (d) Notification to GNMA of withdrawal actions. Whenever the Board 
issues a notice of violation that could lead to withdrawal of a 
mortgagee's approval, or is notified by GNMA of an action that could 
lead to withdrawal of GNMA approval, the Board shall proceed in 
accordance with 12 U.S.C. 1708(d).

    Dated: September 23, 2008.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. E8-23878 Filed 10-9-08; 8:45 am]
BILLING CODE 4210-67-P