[Federal Register Volume 74, Number 10 (Thursday, January 15, 2009)]
[Rules and Regulations]
[Pages 2750-2752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-851]



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Part IV





Housing and Urban Development Department





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24 CFR Part 30



Civil Money Penalties: Certain Prohibited Conduct; Final Rule

  Federal Register / Vol. 74, No. 10 / Thursday, January 15, 2009 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 30

[Docket No. FR-5081-F-02]
RIN 2501-AD23


Civil Money Penalties: Certain Prohibited Conduct

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This final rule revises HUD's regulations that govern the 
imposition of civil money penalties. Specifically, this rule revises 
the definitions of ``material or materially'' and adds a definition of 
``ability to pay,'' which is one factor used in determining the 
appropriateness of the amount of any civil money penalty. Additionally, 
this rule requires respondents, in their responses to the prepenalty 
notice, to specifically address the factors used in determining the 
appropriateness and amount of civil money penalty. This rule also 
allows government counsel to file complaints on behalf of the Mortgagee 
Review Board and departmental officials. Finally, this rule makes other 
minor clarifying changes. This final rule follows publication of an 
October 17, 2008, proposed rule, but makes no changes at this final 
rule stage.

DATES: Effective Date: February 17, 2009.

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

SUPPLEMENTARY INFORMATION: 

I. Background--The October 17, 2008, Proposed Rule

    HUD's civil money penalties regulations are located in 24 CFR part 
30. In general, 24 CFR part 30 outlines the procedures and requirements 
that concern violations, prepenalty notices, and complaints.
    On October 17, 2008, at 73 FR 61754, HUD published a rule that 
proposed to define ``ability to pay'' and to revise the definition of 
``material'' or ``materially'' in Sec.  30.10. Additionally, the rule 
proposed to revise Sec.  30.35 to delete failure to comply with ``the 
terms of a settlement agreement with HUD'' from the list of actions for 
which the Mortgagee Review Board may initiate a civil money penalty 
action against a mortgagee or lender. HUD also proposed clarifications 
regarding acts that may constitute unsatisfactory management, 
violations of a housing assistance payments contract, the required 
contents of a prepenalty notice, and the procedures for responding to 
prepenalty notices. The rule also proposed to clarify that the 
respondent's ability to pay is presumed unless specifically raised by 
the respondent as an affirmative defense or mitigating factor, the 
complaint under Sec.  30.85 will be issued by government counsel on 
behalf of the government officials authorized to issue such complaints, 
and a respondent may request a hearing within 15 days of receipt of the 
complaint.

II. This Final Rule

    The October 17, 2008, proposed rule provided a 60-day public 
comment period, which closed on December 16, 2008. HUD received no 
public comments in response to the proposed rule. At this final rule 
stage, HUD adopts the proposed rule without change.

III. Findings and Certifications

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
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. 
There are no anti-competitive discriminatory aspects of the rule with 
regard to small entities, and there are no unusual procedures that 
would need to be complied with by small entities. All entities, small 
or large, will be subject to the same potential penalties as 
established by statute and implemented by this rule. The statute does 
not provide an exemption for small entities. Therefore, this final rule 
will not have a significant economic impact on a substantial number of 
small entities. Accordingly, the undersigned certifies that this rule 
will not have a significant economic impact on a substantial number of 
small entities.

Environmental Impact

    In accordance with 24 CFR 50.19(c)(6) of HUD's regulations, this 
rule involves the Department's regulations implementing civil money 
penalty statutes. In accordance with 24 CFR 50.19(c)(1) of HUD's 
regulations, 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. Therefore, this final 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, 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 persons who fail to comply with the Department's 
requirements, it does not have federalism implications, and it 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 (UMRA) (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 rule does not impose 
any federal mandate on any state, local, or tribal government or the 
private sector within the meaning of UMRA.

Small Business Concerns Related to Board Enforcement Actions

    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

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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 
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 comment on the enforcement activity conducted by HUD.

List of Subjects in 24 CFR Part 30

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


0
For the reasons discussed in the preamble, HUD amends 24 CFR part 30 as 
follows:

PART 30--CIVIL MONEY PENALTIES: CERTAIN PROHIBITED CONDUCT

0
1. The authority citation for 24 CFR 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).

0
2. Revise Sec.  30.1 to read as follows:


Sec.  30.1   Purpose and scope.

    Unless provided for elsewhere in this title or under separate 
authority, this part implements HUD's civil money penalty provisions. 
The procedural rules for hearings under this part are those applicable 
to hearings in accordance with the Administrative Procedure Act, as set 
forth in 24 CFR part 26.

0
3. Amend Sec.  30.10 by adding, in alphabetical order, the definition 
of ``Ability to pay'' and revising the definition of ``Material or 
Materially'' to read as follows:


Sec.  30.10  Definitions.

* * * * *
    Ability to pay. Determined based on an assessment of the 
respondent's resources available both presently and prospectively from 
which the Department could ultimately recover the total award, which 
may be predicted based on historical evidence.
* * * * *
    Material or Materially. Having the natural tendency or potential to 
influence, or when considering the totality of the circumstances, in 
some significant respect or to some significant degree.
* * * * *

0
4. Amend Sec.  30.35 by removing paragraph (a)(14) and by redesignating 
paragraph (a)(15) as (a)(14).

0
5. Revise Sec.  30.45(d) to read as follows:


Sec.  30.45   Multifamily and section 202 or 811 mortgagors.

* * * * *
    (d) Acceptable management. For purposes of this rule, management 
acceptable to the Secretary under 12 U.S.C. 1735f-15(c)(1)(B)(xiv) 
shall include:
    (1) Fiscal management in accordance with HUD regulations and 
requirements;
    (2) Handling of vacancies and tenanting in accordance with HUD 
regulations and requirements;
    (3) Handling of rent collection in accordance with HUD regulations 
and requirements;
    (4) Maintenance in accordance with HUD regulations and 
requirements;
    (5) Compliance with HUD regulations and requirements on tenant 
organization; and
    (6) Any other matters that pertain to proper management in 
accordance with HUD regulations and requirements.
* * * * *

0
6. In Sec.  30.68(b), revise paragraph (b) introductory text to read as 
follows:


Sec.  30.68  Section 8 owners.

* * * * *
    (b) General. The Assistant Secretary for Housing--Federal Housing 
Commissioner, or his or her designee, or the Assistant Secretary for 
Public and Indian Housing, or his or her designee, may initiate a civil 
money penalty against any owner, any general partner of a partnership 
owner, or any agent employed to manage the property that has an 
identity of interest with the owner or the general partner of a 
partnership owner of a property receiving project-based assistance 
under section 8 of the United States Housing Act of 1937 (42 U.S.C. 
1437f) for a knowing and material breach of a housing assistance 
payments contract. Examples of covered violations include, but are not 
limited to, the following:
* * * * *

0
7. Revise Sec.  30.70 to read as follows:


Sec.  30.70   Prepenalty notice.

    (a) Prior to determining whether to issue a complaint under Sec.  
30.85, the official designated in subpart B of this part, or his or her 
designee (or the chairperson of the Mortgagee Review Board, or his or 
her designee, in actions under Sec.  30.35), shall issue a written 
notice to the respondent. This prepenalty notice shall include the 
following:
    (1) That HUD is considering seeking a civil money penalty;
    (2) The specific violations alleged;
    (3) The maximum civil money penalty that may be imposed;
    (4) The opportunity to reply in writing to the designated program 
official within 30 days after receipt of the notice;
    (5) That failure to respond within the 30-day period may result in 
issuance of a complaint under Sec.  30.85 without consideration of any 
information that the respondent may wish to provide; and
    (6) That if a complaint is issued under Sec.  30.85, the respondent 
may request a hearing before an administrative law judge in accordance 
with Sec.  30.95.
    (b) Obligation to preserve documents. Upon receipt of the 
prepenalty notice, the respondent is required to preserve and maintain 
all documents or data, including electronically stored data, within his 
or her possession or control that may relate to the violations alleged 
in the prepenalty notice. The Department shall also preserve such 
documents or data upon the issuance of the prepenalty notice.

0
8. Revise Sec.  30.75 to read as follows:


Sec.  30.75  Response to prepenalty notice.

    (a) The response shall be in a format prescribed in the prepenalty 
notice. The response shall address the factors set forth in Sec.  30.80 
and include any arguments opposing the imposition of a civil money 
penalty that the respondent may wish to present.
    (b) In any case where respondent seeks to raise ability to pay as 
an affirmative defense or argument in mitigation, the respondent shall 
provide documentary evidence as part of its response.

0
9. Revise Sec.  30.80 to read as follows:


Sec.  30.80   Factors in determining amount of civil money penalty.

    After determining that a respondent has committed a violation as 
described

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in Subpart B of this part that subjects the respondent to liability 
under this part, the officials designated in subpart B of this part 
shall consider the following factors to determine the amount of penalty 
to seek against a respondent, if any:
    (a) The gravity of the offense;
    (b) Any history of prior offenses;
    (c) The ability to pay the penalty, which ability shall be presumed 
unless specifically raised as an affirmative defense or mitigating 
factor by the respondent;
    (d) The injury to the public;
    (e) Any benefits received by the violator;
    (f) The extent of potential benefit to other persons;
    (g) Deterrence of future violations;
    (h) The degree of the violator's culpability;
    (i) With respect to Urban Homestead violations under Sec.  30.30, 
the expenditures made by the violator in connection with any gross 
profit derived; and
    (j) Such other matters as justice may require.
    (k) In addition to the above factors, with respect to violations 
under Sec. Sec.  30.45, 30.55, 30.60, and 30.68, the Assistant 
Secretary for Housing--Federal Housing Commissioner, or his or her 
designee, or the Assistant Secretary for Public and Indian Housing, or 
his or her designee, shall also consider:
    (1) Any injury to tenants; and/or
    (2) Any injury to lot owners.
    (l) HUD may consider the factors listed in paragraphs (a) through 
(k) of this section to determine the appropriateness of imposing a 
penalty under Sec.  30.35(c)(2); however, HUD cannot change the amount 
of the penalty under Sec.  30.35(c)(2).

0
10. In Sec.  30.85, revise paragraphs (b) introductory text, (c), and 
(d) and add paragraph (e) to read as follows:


Sec.  30.85   Complaint.

* * * * *
    (b) If a determination is made to seek a civil money penalty, 
government counsel shall issue a complaint to the respondent on behalf 
of the officials listed at subpart B of this part or the Mortgagee 
Review Board for violations under Sec.  30.35. The complaint shall be 
served upon respondent and simultaneously filed with the Office of 
Administrative Law Judges, and shall state the following:
* * * * *
    (c) A copy of this part and of 24 CFR part 26, subpart B, shall be 
included with the complaint.
    (d) Service of the complaint. The complaint shall be served on the 
respondent by first class mail, personal delivery, or other means.
    (e) Before taking an action under Sec. Sec.  30.35 for violation of 
12 U.S.C. Sec.  1735f-14(b)(1)(D) or (F), 30.36, or 30.50 for violation 
of 12 U.S.C. 1723i(b)(1)(G) or (I), the Secretary shall inform the 
Attorney General of the United States, which may be accomplished by 
providing a copy of the complaint. The Secretary shall include in the 
body of the complaint a statement confirming that this action was 
taken.

0
11. In Sec.  30.90, revised paragraph (a), redesignate paragraph (b) as 
(c), and revise the new paragraph (b) to read as follows:


Sec.  30.90   Response to the complaint.

    (a) Request for a hearing. If the respondent desires a hearing 
before an administrative law judge, the respondent shall submit a 
request for a hearing to HUD and the Office of Administrative Law 
Judges no later than 15 days following receipt of the complaint, as 
required by statute. This mandated period cannot be extended.
    (b) Answer. In any case in which the respondent has requested a 
hearing, the respondent shall serve upon HUD and file with the Office 
of Administrative Law Judges a written answer to the complaint within 
30 days of receipt of the complaint, unless such time is extended by 
the administrative law judge for good cause. The answer shall include 
the admission or denial of each allegation of liability made in the 
complaint; any defense on which the respondent intends to rely; any 
reasons why the civil money penalty should be less than the amount 
sought in the complaint, based on the factors listed at Sec.  30.80; 
and the name, address, and telephone number of the person who will act 
as the respondent's representative, if any.
* * * * *

0
12. Revise Sec.  30.95 to read as follows:


Sec.  30.95   Hearings.

    Hearings under this part shall be conducted in accordance with the 
procedures applicable to hearings in accordance with the Administrative 
Procedure Act, set forth in 24 CFR part 26.

0
13. Revise Sec.  30.100 to read as follows:


Sec.  30.100  Settlement of a civil money penalty action.

    The officials listed at subpart B of this part, or their designees 
(or the Mortgagee Review Board, or designee, for violations under Sec.  
30.35), are authorized to enter into settlement agreements resolving 
civil money penalty actions that may be brought under part 30.

    Dated: January 9, 2009.
Roy A. Bernardi,
Deputy Secretary.
[FR Doc. E9-851 Filed 1-14-09; 8:45 am]
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