[Federal Register Volume 75, Number 155 (Thursday, August 12, 2010)]
[Proposed Rules]
[Pages 49314-49350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19567]



[[Page 49313]]

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

Part IV

Federal Housing Finance Board
-----------------------------------------------------------------------
Federal Housing Finance Agency
-----------------------------------------------------------------------
Department of Housing and Urban Development
-----------------------------------------------------------------------



Office of Federal Housing Enterprise Oversight



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



12 CFR Parts 908, 1209, 1780



Rules of Practice and Procedure; Proposed Rule

  Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 / 
Proposed Rules  

[[Page 49314]]


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

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 908

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1209

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1780

RIN 2590-AA14


Rules of Practice and Procedure

AGENCY: Federal Housing Finance Board; Federal Housing Finance Agency; 
and Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Notice of proposed rulemaking; request for comment.

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

SUMMARY: The Federal Housing Finance Agency (FHFA) solicits written 
comment on a proposed rule to implement the Housing and Economic 
Recovery Act of 2008 (HERA) amendments to the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (Safety and 
Soundness Act) and the Federal Home Loan Bank Act (Bank Act) pertaining 
to the civil enforcement powers of FHFA, and the Rules of Practice and 
Procedure for enforcement proceedings. The Safety and Soundness Act, as 
amended by sections 1151-1158 of HERA, authorizes FHFA to initiate 
enforcement proceedings against the Federal National Mortgage 
Association and the Federal Home Loan Mortgage Corporation (together, 
the Enterprises) and the Federal Home Loan Banks (the Banks) 
(collectively, the regulated entities), and entity-affiliated parties 
as defined in the Safety and Soundness Act. When final, the rule will 
replace the existing Rules of Practice and Procedure promulgated by the 
Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal 
Housing Finance Board (Finance Board) formerly charged with overseeing 
the regulated entities. The proposed rule may provide FHFA personnel, 
the regulated entities, entity-affiliated parties, and other interested 
parties with the clear guidance necessary to prepare for and 
participate in the administrative enforcement action process to 
increase the efficiency and transparency of FHFA's administrative 
enforcement hearings.

DATES: Comments on the proposed rule must be received in writing on or 
before October 12, 2010.

ADDRESSES: You may submit your written comments on the proposed 
rulemaking, identified by RIN number 2590-AA14, by any of the following 
methods:
     E-mail: Comments to Alfred M. Pollard, General Counsel, 
may be sent by e-mail at [email protected]. Please include ``RIN 
2590-AA14'' in the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at [email protected] to ensure timely receipt by the 
Agency. Please include ``RIN 2590-AA14'' in the subject line of the 
message.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA14, Federal 
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, 
DC 20552.
     Hand Delivery/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA14, 
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. A hand-delivered package should be logged at the 
Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m.

FOR FURTHER INFORMATION CONTACT: Charlotte A. Reid, Associate General 
Counsel, Federal Housing Finance Agency, 1700 G Street, NW., Fourth 
Floor, Washington, DC 20552, telephone (202) 414-3810 (not a toll-free 
number). The telephone number for the Telecommunications Device for the 
Deaf is: (800) 877-8339.

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

I. Comments
II. Background
III. Synopsis of the Proposed Rule
IV. Section-by-Section Analysis and Discussion
V. Regulatory Impact

I. Comments

    The Federal Housing Finance Agency (FHFA) invites comments on all 
aspects of the proposed Rules of Practice and Procedure (proposed 
rule), including legal and policy considerations, and will take all 
comments into consideration before issuing the final rule. All comments 
received by the deadline will be posted for public inspection on FHFA 
Web site at http://www.fhfa.gov. Copies of all comments timely received 
will be available for public inspection and copying at the address 
above on government-business days between the hours of 10 a.m. and 3 
p.m. To make an appointment to inspect comments please call the Office 
of General Counsel at (202) 414-6924.

II. Background

A. Establishment of FHFA

    Effective July 30, 2008, Division A of HERA, Public Law 110-289, 
122 Stat. 2654 (2008), titled the Federal Housing Finance Regulatory 
Reform Act of 2008, created FHFA as an independent agency of the 
Federal government.\1\ HERA amended the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (Safety and Soundness Act) 
(12 U.S.C. 4501 et seq.) and the Federal Home Loan Bank Act (Bank Act) 
(12 U.S.C. 1421 through 1449), respectively, to provide that the 
Federal National Mortgage Association (Fannie Mae) and the Federal Home 
Loan Mortgage Corporation (Freddie Mac) (together, the Enterprises) and 
the Federal Home Loan Banks (Banks) (collectively, the regulated 
entities), are subject to the supervision and regulation of FHFA.\2\
---------------------------------------------------------------------------

    \1\ See generally, HERA, Division A, Titles I-III, Public Law 
110-289, 122 Stat. 2654, sections 1101 et seq. (July 30, 2008). 
Specifically, section 1101 of HERA amended section 1311(a) of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 
1992 (Safety and Soundness Act), Title XIII, Public Law 102-550, 106 
Stat. 3672, 3941-4012, sections 1301 et seq. (1993), to establish 
FHFA as an independent agency of the Federal government. See 12 
U.S.C. 4511(a).
    \2\ See section 1101 of HERA, amending section 1311(b)(1) of the 
Safety and Soundness Act, which provides that each regulated entity 
[defined at section 1303(20) of the Safety and Soundness Act to 
include the Enterprises and Banks] is subject to the supervision and 
regulation of FHFA. 12 U.S.C. 4511(b)(1).
---------------------------------------------------------------------------

    Additionally, section 1101 of HERA amended section 1311(b)(2) of 
the Safety and Soundness Act to provide that the regulated entities and 
the Office of Finance are subject to the general regulatory authority 
of the Director of FHFA. 12 U.S.C. 4511(b)(2).\3,4\ Under this 
provision the Director has broad general regulatory authority to 
``ensure that the purposes of [HERA], the

[[Page 49315]]

authorizing statutes, and any other applicable law are carried out.'' 
See id. 4511(b)(2).\5\
---------------------------------------------------------------------------

    \3\ The Office of Finance acts as agent of the Banks in the 
issuance of Bank debt called consolidated obligations. See 12 U.S.C. 
1431. HERA defined the Office of Finance as an ``entity-affiliated 
party.'' 12 U.S.C. 4502(11)(E). In some cases, under the HERA 
amendments, executive officers, directors or management of the 
Office of Finance may be subject to the requirements of the 
enforcement provisions and rules.
    \4\ Section 1101 of HERA established the position of Director, 
as head of FHFA, in section 1312(a) of the Safety and Soundness Act. 
12 U.S.C. 4512(a).
    \5\ Section 1303(3) of the Safety and Soundness Act, as amended 
by section 1002 of HERA, provides that the term ``authorizing 
statutes'' means the Federal National Mortgage Association Charter 
Act, the Federal Home Loan Mortgage Corporation Act, and the Federal 
Home Loan Bank Act. See 12 U.S.C. 4502(3).
---------------------------------------------------------------------------

    HERA transferred to FHFA the supervisory, mission, and oversight 
responsibilities over the Enterprises and Banks from the U.S. 
Department of Housing and Urban Development (HUD), including OFHEO, and 
the Federal Housing Finance Board (Finance Board), respectively.\6\ 
FHFA was established as the financial safety and soundness regulator to 
oversee the prudential operations of the Enterprises and Banks (i.e., 
the regulated entities) and to ensure that they operate in a safe and 
sound manner; remain adequately capitalized; foster liquid, efficient, 
competitive and resilient national housing finance markets; comply with 
the Safety and Soundness Act and their respective authorizing statutes, 
as well as all rules, regulations, guidelines, and orders issued under 
law; and carry out their missions through activities that are 
authorized by law and are consistent with the public interest.\7\
---------------------------------------------------------------------------

    \6\ HERA abolished OFHEO and the Finance Board one year after 
the date of its enactment. By operation of law, the regulated 
entities and the Office of Finance continue to operate under 
existing regulations promulgated by OFHEO and the Finance Board. 
Those existing regulations are enforceable by the Director until 
such time as they are modified, terminated, set aside, or superseded 
by the Director. See sections 1302 and 1312 of HERA, 122 Stat. 2795, 
2798. When final, FHFA Rules of Practice and Procedure (12 CFR part 
1209) will supersede the Rules of Practice and Procedure previously 
promulgated by OFHEO (12 CFR part 1780) and the Finance Board (12 
CFR part 908). See also note 17, and accompanying text.
    \7\ See Section 1102 of HERA, amending section 1313 of the 
Safety and Soundness Act (12 U.S.C. 4513).
---------------------------------------------------------------------------

B. Statutory Background

    Together, Freddie Mac and Fannie Mae owned or guaranteed nearly 
$5.34 trillion of residential mortgages in the United States (U.S.) as 
of December 31, 2009. The Banks support the U.S. housing market by 
making advances (i.e., loans secured by eligible collateral) to their 
member commercial banks, thrifts, and credit unions, assuring a ready 
flow of mortgage funding. Bank advances stood at $631.2 billion as of 
December 31, 2009. Thus, the regulated entities play a key role in 
housing finance and the U.S. economy.
    The mission of FHFA is to provide effective supervision, 
regulation, and housing mission oversight of the Enterprises and the 
Banks to promote their safety and soundness, support housing finance 
and affordable housing, and support a stable and liquid mortgage 
market. Accordingly, the HERA amendments to the Safety and Soundness 
Act make explicit the general regulatory and supervisory authority of 
FHFA and the Director, and grant specific supervisory and enforcement 
powers to the Director. See e.g., 12 U.S.C. 4511, 4513, 4517, 4518, 
4526, 4631 through 4641.
    By design, the Safety and Soundness Act provides the Director with 
broad supervisory and regulatory authority to ensure the safety and 
soundness of the regulated entities: the Director ``shall exercise such 
general regulatory authority, including such duties and authorities set 
forth under section 1313 of the Safety and Soundness Act, to ensure 
that the purposes of this Act, the authorizing statutes, and any other 
applicable law are carried out.'' See 12 U.S.C. 4511(b)(2). The 
Director's general regulatory authority is joined to more specific 
powers, such as those invoked under section 1313 of the Safety and 
Soundness Act, and the examination authority under section 1317 of the 
Safety and Soundness Act, thereby constructing a comprehensive 
framework for safety and soundness regulation of the regulated 
entities. See 12 U.S.C. 4513, 4517.
    Specifically, section 1313(a)(1) of the Safety and Soundness Act 
prescribes the principal duties of the Director. The Director shall 
``oversee the prudential operations of each regulated entity.'' 12 
U.S.C. 4513(a)(1)(A). Similarly, section 1313(a)(1)(B) of the Safety 
and Soundness Act enumerates the principal duties of the Director to 
ensure that: each regulated entity operates in a safe and sound manner, 
including maintenance of adequate capital and internal controls; the 
operations and activities of each regulated entity promote the 
efficiency, competitiveness, and liquidity of national housing finance 
markets; each regulated entity complies with the Safety and Soundness 
Act and the rules, regulations, guidelines, and orders issued under the 
Safety and Soundness Act and the authorizing statutes; each regulated 
entity executes its statutory mission through authorized activities; 
and the activities of each regulated entity are consistent with the 
public interest. 12 U.S.C. 4513(a)(1)(B).\8\
---------------------------------------------------------------------------

    \8\ See 12 U.S.C. 4513(a)(1)(B)(i) through (v).
---------------------------------------------------------------------------

    Further underscoring the Director's ongoing authority to ensure 
that the operations and management of the regulated entities comport 
with the Safety and Soundness Act and their respective authorizing 
statutes, section 1313(a)(2)(B) of the Safety and Soundness Act 
expressly authorizes the Director to ``exercise such incidental powers 
as may be necessary or appropriate to fulfill the duties and 
responsibilities of the Director in the supervision and regulation of 
each regulated entity.'' See 12 U.S.C. 4513(a)(2)(B).\9\ Thus, the 
Director may undertake such regulatory and supervisory actions as 
deemed to be necessary or appropriate to fulfilling the duties and 
responsibilities of FHFA with respect to the regulated entities.\10\
---------------------------------------------------------------------------

    \9\ The Supreme Court has held that the incidental powers 
provision applicable to national banks constitutes ``an independent 
grant of authority,'' and that courts should view ``the specific 
powers set forth thereafter as exemplary, not exclusive.'' 
NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 
U.S. 251, 258 (1995).
    \10\ Furthermore, other provisions in the Safety and Soundness 
Act reinforce the independence and general regulatory authority of 
the Director. For example, section 1311(c) of the Safety and 
Soundness Act, as amended by section 1101 of HERA, provides that the 
authority of the Director ``to take actions under subtitles B and C 
[of Title I of Division A of HERA] shall not in any way limit the 
general supervisory and regulatory authority granted to the Director 
under subsection (b).'' See 12 U.S.C. 4511(c). Section 1313B of the 
Safety and Soundness Act provides that the Director shall establish 
certain prudential management and operations standards, by 
regulation or guideline, for each regulated entity. See 12 U.S.C. 
4513b. Finally, section 1319G(a) of the Safety and Soundness Act 
provides ample, independent authority for the issuance of ``any 
regulations, guidelines, or orders necessary to carry out the duties 
of the Director under this title or the authorizing statutes, and to 
ensure that the purposes of this title and the authorizing statutes 
are accomplished.'' 12 U.S.C. 4526
---------------------------------------------------------------------------

    When promulgating regulations that may relate to the Banks, under 
section 1313(f)[sic] of the Safety and Soundness Act (as amended by 
section 1201 of HERA) the Director is required to consider the 
differences between the Banks and the Enterprises with respect to the 
Banks' cooperative ownership structure; mission of providing liquidity 
to members; affordable housing and community development mission; 
capital structure; and joint and several liability. The Director may 
also consider any other differences that are deemed appropriate. See 12 
U.S.C. 4513(f)[sic].\11\ In preparing the proposed rule, the Director 
considered the differences between the Banks and the Enterprises as 
they relate to the above factors. The Director is requesting comments 
from the public about whether differences related to these factors 
should result in a revision of the proposed rule as it may relate to 
the Banks.
---------------------------------------------------------------------------

    \11\ So in original; paragraph designation should be (d).

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

[[Page 49316]]

C. Enforcement Authority of the Director Under Sections 1371 Through 
1379D of the Safety and Soundness Act, as Amended by HERA

    To carry out its statutory mission, FHFA must have effective 
enforcement tools. The HERA amendments to the Safety and Soundness Act 
and the Bank Act provide that clear authority. The Enterprises and 
entity-affiliated parties are subject to administrative enforcement 
proceedings as provided in sections 1371 through 1379D of the Safety 
and Soundness Act, as amended by sections 1151 through 1158 of HERA (12 
U.S.C. 4631 through 4641). HERA also amended the Bank Act and the 
Safety and Soundness Act to provide that the Banks and the Office of 
Finance, respectively, are subject to this enforcement framework.\12\ 
As amended, sections 1371 through 1379D of the Safety and Soundness Act 
(12 U.S.C. 4631 through 4641) subject the Enterprises, the Banks, the 
Office of Finance, and entity-affiliated parties to the authority of 
the Director to initiate proceedings to issue cease and desist orders, 
to issue temporary cease and desist orders, to impose civil money 
penalties, or to obtain removal and prohibition orders, in accordance 
with applicable law.
---------------------------------------------------------------------------

    \12\ Section 1204 of HERA repealed the enforcement authority of 
the Finance Board over the Banks and specified parties in section 
2B(a)(5) of the Bank Act (12 U.S.C. 1422b(a)(5)). Therefore, the 
Banks, the Office of Finance, and specified parties are subject to 
FHFA enforcement authority as set forth in sections 1371 through 
1379D of subtitle C of the Safety and Soundness Act, as amended. See 
12 U.S.C. 4631 through 4641.
---------------------------------------------------------------------------

    In particular, the HERA provisions in section 1377(a) of the Safety 
and Soundness Act (12 U.S.C. 4636a(a)), give the Director express 
authority to suspend or remove from office, or to prohibit any further 
participation in the conduct of the affairs of a regulated entity, an 
entity-affiliated party, or any officer, director, or management of the 
Office of Finance, for any violation, practice, or breach of such 
party's fiduciary duty, as set forth therein. Additionally, in 
accordance with section 1377(b) of the Safety and Soundness Act (12 
U.S.C. 4636a(b)), the Director can take immediate action to suspend or 
remove from office, or to prohibit the participation in any manner in 
the conduct of the affairs of the regulated entity, any party subject 
to an action under section 1377(a) of the Safety and Soundness Act.
    Finally, under section 1377(h) of the Safety and Soundness Act (12 
U.S.C. 4636a(h)), with respect to any entity-affiliated party who is 
charged with a Federal or State crime involving dishonesty or breach of 
trust, which is punishable by imprisonment for more than one year, in 
any criminal information, indictment or complaint, the Director is 
authorized to suspend such party from office or prohibit him or her 
from any further involvement in the conduct of the affairs of a 
regulated entity if continued service or participation by such party 
could pose a threat to, or impair public confidence in, the regulated 
entity. See 12 U.S.C. 4636a(h)(1)(A). The statute prescribes that a 
copy of the suspension notice shall be served on each relevant 
regulated entity. See 12 U.S.C. 4636a(h)(1)(B)(i).
    Thus, under these enhanced powers, the Director has at his or her 
disposal a broad range of enforcement actions to enforce, as needed, 
applicable law, rules, orders, and agreements pertaining to the safe 
and sound operation of the Enterprises and Banks.\13\ Because this 
enforcement authority parallels that of the enforcement tools available 
to bank regulatory agencies, the procedures for pursuing such actions, 
by design, are similar. The Federal bank and thrift regulators' uniform 
rules of practice and procedure for enforcement actions adopted under 
section 916 of the Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (FIRREA), Public Law 101-73, 103 Stat. 183 
(1989) (the Uniform Rules) set the standard for formal enforcement 
proceedings, and served as the model for the enforcement regulations 
later adopted by OFHEO and the Finance Board.\14\ Thus, the proposed 
regulation builds upon the Uniform Rules, as well as the existing 
enforcement regulations adopted by OFHEO in 1999 (and amended in 2001) 
(12 CFR part 1780), and the Finance Board's Rules of Practice and 
Procedure adopted in 2002 (12 CFR part 908).
---------------------------------------------------------------------------

    \13\ The Director has broad safety and soundness enforcement 
authority under sections 1371 through 1379D of the Safety and 
Soundness Act, (subtitle C--Enforcement Provisions) (12 U.S.C. 4631 
through 4641), in furtherance of the Director's general safety and 
soundness regulatory authority. Additionally, the Director has 
authority under subtitle B of the Safety and Soundness Act (sections 
1361 through 1369E) to set and enforce capital levels or appoint 
FHFA as conservator or receiver for a regulated entity. More 
important, as amended by HERA, section 1311(c) of the Safety and 
Soundness Act expressly preserves these powers in addition to the 
Director's general supervisory and regulatory authority under 
subsection (b) of section 1311 of the Safety and Soundness Act, as 
amended: ``[t]he authority of the Director to take actions under 
subtitles B and C shall not in any way limit the general supervisory 
and regulatory authority granted to the Director under subsection 
(b).'' See 12 U.S.C. 4511(c).
    \14\ The Federal Financial Institutions Examination Council 
(FFIEC) members adopted the Uniform Rules as noted: the Office of 
the Comptroller of the Currency (OCC), 12 CFR part 19 (56 FR 38028, 
August 9, 1991) (as amended 61 FR 20334, May 6, 1996; 70 FR 69638, 
November 17, 2005); the Office of Thrift Supervision (OTS), 12 CFR 
Part 509 (56 FR 38306, August 12, 1991) (as amended 56 FR 59866, 
November 26, 1991; 61 FR 20353, May 6, 1996; 70 FR 69641, November 
17, 2005, and 72 FR 25955, May 8, 2007); the Federal Deposit 
Insurance Corporation (FDIC), 12 CFR Part 308 (56 FR 37975, August 
9, 1991) (as amended 61 FR 20347, May 6, 1996; 70 FR 69639, November 
17, 2005); the Board of Governors of the Federal Reserve (FED) 12 
CFR Part 263 (56 FR 38052, August 9, 1991) (as amended 61 FR 20341, 
May 6, 1996; 70 FR 69638, Nov. 17, 2005; 73 FR 58032, Oct. 6, 2008); 
and the National Credit Union Administration (NCUA), 12 CFR Part 747 
(56 FR 37767, August 8, 1991) (as amended 57 FR 523, January 7, 
1992; 61 FR 28024, June 4, 1996; 71 FR 67440, November 22, 2006).
---------------------------------------------------------------------------

    Cease and desist enforcement proceedings are commenced by serving a 
notice of charges that is to set forth the facts constituting the 
practice or violation and fix a time and place for a hearing to 
determine on the record whether an order to cease and desist from such 
practice or violation should issue. See 12 U.S.C. 4631(c)(1). Such 
hearings are governed by section 1373 of the Safety and Soundness Act. 
See generally, 12 U.S.C. 4633. In fact, section 1373(a)(1) of the 
Safety and Soundness Act (12 U.S.C. 4633(a)(1)) provides that any 
hearing under sections 1371 (cease and desist order), 1376(c) (civil 
money penalty assessment) or 1377 (removal or suspension orders; except 
removal actions under section 1377(h) of the Safety and Soundness Act) 
be held on the record. See 12 U.S.C. 4633(a)(1). Therefore, prior to 
issuing a cease-and-desist order, imposing civil money penalties, or 
ordering the suspension or removal of an entity-affiliated party or any 
officer, director, or management of the Office of Finance, FHFA must 
conduct a hearing on the record and provide the subject of such an 
order with notice and the opportunity to participate in a hearing that 
is to be conducted in accordance with chapter 5 of title 5 of the 
United States Code.\15\ Sections 554, 556, and 557 of the 
Administrative Procedure Act govern hearings on the record.\16\ The 
Rules of Practice and Procedure as proposed (proposed rule) establish 
the procedural requirements for any hearing on the record in an 
enforcement proceeding brought under subtitle C of the Safety

[[Page 49317]]

and Soundness Act in conformity with the APA.
---------------------------------------------------------------------------

    \15\ See section 1373(a)(3) of the Safety and Soundness Act (12 
U.S.C. 4633(a)(3)).
    \16\ Public Law 89-554, 80 Stat. 381 (1966) (codified at 5 
U.S.C. 551-559; 701-706). Formal adjudications (i.e., hearings ``on 
the record'') are governed by chapters 5 and 7 of the Administrative 
Procedure Act (5 U.S.C. 554, 556, and 557) (APA). The APA grants 
each agency ``the authority necessary to comply with the 
requirements of [chapter 5] through the issuance of rules or 
otherwise.'' See 5 U.S.C. 559.
---------------------------------------------------------------------------

D. Rules of Practice and Procedure

    As stated, the proposed Rules of Practice and Procedure are 
designed to govern hearings on the following matters that FHFA by law 
must conduct on the record in accordance with APA formal hearing 
requirements:
    (1) Enforcement proceedings under sections 1371 through 1379D of 
the Safety and Soundness Act (12 U.S.C. 4631 through 4641) (except 
section 1377(h) (12 U.S.C. 4636a));
    (2) Removal, prohibition, and civil money penalty proceedings for 
violations of post-employment restrictions imposed by applicable law; 
and
    (3) Proceedings under section 102 of the Flood Disaster Protection 
Act of 1973, as amended (42 U.S.C. 4012a) to assess civil money 
penalties.
    To ensure that comprehensive hearing procedures are in place to 
conduct such hearings, the proposed rule departs from the 
organizational structure of the existing OFHEO rule and delinks the 
procedural steps for hearings on the record from the underlying 
statutory enforcement authority set forth in sections 1371 through 
1379D of the Safety and Soundness Act (12 U.S.C. 4631 through 4641). To 
make this distinction clear, the enforcement authority is set out in 
subpart B of the proposed rule, whereas the formal hearing procedures 
are separately stated in subpart C of the proposed rule.
    The stand alone formal hearing procedures in subpart C of Part 1209 
also could govern civil money penalty proceedings authorized under 
section 1345 of the Safety and Soundness Act that require a hearing on 
the record, but that specifically provides for remedies that differ 
from those under sections 1371 and 1376 of the Safety and Soundness 
Act. See 12 U.S.C. 4582, 4585, 4631(a)(2) and 4636(a). In addition to 
the housing goals enforcement proceedings under sections 1341 and 1345 
of the Safety and Soundness Act, the formal hearing procedures in 
subpart C of this part could apply to the enforcement of the regulated 
entities' reporting requirements under section 1314 of the Safety and 
Soundness Act (12 U.S.C. 4514).
    The Rules of Practice and Procedure, when final, will replace the 
Rules of Practice and Procedure previously adopted by OFHEO (12 CFR 
part 1780) and the Finance Board (12 CFR part 908).\17\ The OFHEO rule 
serves as the template for the proposed rule.\18\ Specifically, the 
proposed rule sets out the requirements for the commencement of an 
enforcement proceeding by service of a notice of charges; the 
appointment of a presiding officer; hearing procedures and permissible 
activities; the conduct of the trial-like testimonial phase of the 
hearing process; the presiding officer's filing with the Director of a 
recommended decision and order, along with the hearing record; the 
decision by the Director; and the qualifications and disciplinary rules 
for practice before FHFA.\19\ During the course of the hearing, the 
presiding officer controls virtually all aspects of the proceeding. In 
particular, the presiding officer: determines the hearing schedule; 
presides over all conferences; rules on non-dispositive motions, 
discovery, and evidentiary issues; and ensures that the proceeding is 
prompt, fair, and impartial, and allows for the creation of a written 
record upon which the recommended decision is based.\20\
---------------------------------------------------------------------------

    \17\ The Finance Board's enforcement authority, as enacted in 
sections 2B(a)(2) and (5) of the Bank Act in 1999, was derived in 
part from OFHEO's enforcement authority under sections 1371 through 
1379D of the Safety and Soundness Act of 1992. Compare 12 U.S.C. 
1422b(a)(2), (5) with 12 U.S.C. 4631 through 4641. With the 
exception of the grounds for cease and desist actions and removal 
authority accorded the Finance Board, the provisions were nearly 
indistinguishable. Accordingly, the Finance Board Rules of Practice 
and Procedure (12 CFR part 908) were highly aligned with the pre-
existing OFHEO Rules of Practice and Procedure (12 CFR part 1780). 
In many respects these procedural rules are nearly identical. The 
term ``existing provision,'' is used to refer to those co-extensive 
provisions.
    \18\ As stated, the Finance Board Rules of Practice and 
Procedure (12 CFR part 908) were modeled on, and are nearly 
identical to, the OFHEO rule in most procedural respects. For 
convenience, the OFHEO rule served as the basic template for the 
proposed FHFA rule. In some cases, however, the Finance Board rule 
informed the drafting, for example, in defining certain terms such 
as notice (i.e., notice of charges), hearing, and the Safety and 
Soundness Act.
    \19\ 5 U.S.C. 1305 sets forth the authority of the Office of 
Personnel Management (OPM) relating to the appointment of an 
administrative law judge (ALJ). In practice, an OPM-appointed ALJ 
serves as presiding officer.
    \20\ As with the Uniform Rules, parties to an FHFA enforcement 
proceeding have the right to present evidence and to examine and 
cross-examine the witnesses at the evidentiary hearing stage. Upon 
completion of the testimonial phase of the hearing, the parties may 
submit proposed findings of fact and conclusions of law and a 
proposed order. After taking the evidence and considering the 
record, the presiding officer makes a recommended decision and 
submits the complete record to the Director, which includes 
recommended findings of fact and conclusions of law, and a proposed 
order. The record also includes all transcripts, exhibits, rulings, 
motions, briefs and memoranda, expert witness reports, and all 
supporting papers filed in connection with the hearing.
---------------------------------------------------------------------------

    The current requirement that the Director issue a final ruling 
within ninety (90) days of the date on which the Director serves notice 
upon the parties that the hearing record is complete and the case has 
been submitted for final decision also is retained in the proposed FHFA 
Rules of Practice and Procedure. Importantly, the presiding officer 
does not have the authority to make a ruling that disposes of the 
proceeding. Only the Director has the authority to dismiss the 
proceeding, in whole or in part, or to make a final determination of 
the merits of the proceeding. This ensures that FHFA and the respondent 
receive full and fair consideration of the matters at issue.
    Many of the proposed revisions to the Rules of Practice and 
Procedure were informed by OFHEO's prior experience in conducting 
enforcement proceedings under its rule. From that practice, FHFA has 
identified certain issues for clarification. Accordingly, FHFA is 
suggesting revisions in the proposed rule to make the adjudication 
process more efficient, fair, and transparent. For example, the 
proposed rule includes a definition of ``notice of charges.'' The 
notice of charges is the charging document that is served by FHFA on a 
regulated entity or party as provided in sections 1371 through 1377 of 
the Safety and Soundness Act (12 U.S.C. 4631 through 4636a) to initiate 
enforcement proceedings. Additionally, to resolve any confusion, the 
definition as proposed in Sec.  1209.3 clarifies that a ``notice of 
charges'' is to be distinguished from an ``effective notice'' within 
the meaning of 12 U.S.C. 4635(a), and that that provision does not 
confer jurisdiction upon a Federal district court over an agency 
enforcement proceeding.
    FHFA also is proposing to make the presiding officer's authority 
more explicit in several respects. First, Sec.  1209.11 of the proposed 
rule (Authority of the Presiding Officer) affords the presiding officer 
support for holding an initial scheduling conference to control the 
proceedings. Thus, Sec.  1209.11(b)(1) of the proposed rule states that 
the date for the testimonial phase of the hearing is to be set in a 
scheduling order issued in conjunction with the initial scheduling 
conference set under Sec.  1209.36 of the proposed rule. Second, the 
proposed rule permits the presiding officer more leeway to control the 
pace and context of discovery; and, if necessary, discretion to 
prohibit unnecessary or burdensome discovery. Accordingly, Sec.  
1209.11(b)(5) of the proposed rule confirms that, among other things, 
the presiding officer may issue and enforce discovery orders. Section 
1209.11(b)(8) of the proposed rule restates the broad powers of the

[[Page 49318]]

presiding officer to regulate the scope, timing, and completion of 
discovery of any non-privileged matter that is materially relevant to 
the charges or allowable defenses in the proceeding. Third, FHFA has 
determined to make more explicit the requirement that matters or 
documents subject to discovery must be ``materially relevant'' to the 
charges or allowable defenses in the proceeding to support the 
presiding officer's ability to deny discovery requests that are not so 
framed. (``Materially relevant'' is generally understood to mean that 
the information sought must have a logical connection to a 
consequential fact that tends to prove or disprove a matter in issue.) 
Similarly, Sec.  1209.11(b)(11) of the proposed rule underscores that 
the presiding officer has ample authority to admit, exclude, or limit 
evidence according to its material relevance to the legally cognizable 
claims and defenses presented by a notice of charges. Finally, as a 
corollary to the authority of the presiding officer to set the date of 
the evidentiary hearing in a scheduling order, Sec.  1209.23 of the 
proposed rule clarifies that the notice of charges is to specify that 
the testimonial hearing date will be determined when the presiding 
officer holds the initial scheduling conference and issues a scheduling 
order within thirty (30) to sixty (60) days of service of the notice of 
charges.
    FHFA believes that these and other enhancements to the rule as 
proposed will ensure that any enforcement action taken by FHFA is 
governed by a process that is expeditious, thorough, and fair.

III. Synopsis of the Proposed Rule

    FHFA is proposing to revise the Rules of Practice and Procedure to 
be codified in a new part 1209 that would supersede the existing OFHEO 
and Finance Board Rules of Practice and Procedure governing enforcement 
proceedings, which are nearly identical procedurally. For ease of 
drafting, the template for the proposed rule is the OFHEO Rules of 
Practice and Procedure (12 CFR part 1708).\21\ In addition, the 
proposed rule is faithful to the model Uniform Rules and meets or 
exceeds all applicable APA requirements for formal hearings. Part 1209 
will govern the conduct of FHFA administrative hearings on the record 
for enforcement proceedings as provided in the Safety and Soundness 
Act. Many of the provisions in the existing OFHEO rule (and their 
identical counterparts in the Finance Board rule) are to be adopted 
unchanged. Other provisions, as noted below, are to be modified to 
reflect actual practices or current law, to make the process more 
efficient, or to ensure that the procedures, on their face, are fair 
and transparent.
---------------------------------------------------------------------------

    \21\ As stated, when it was originally adopted, the Finance 
Board rule (12 CFR part 908) was based on the OFHEO rule (12 CFR 
part 1780), and the procedural requirements are substantively 
identical, unless otherwise noted. See notes 17 and 18 with 
accompanying text.
---------------------------------------------------------------------------

    The proposed rule is organized as follows: Part 1209 is to be 
divided into several topical subparts in order to more clearly 
delineate the specific enforcement authority of the Director under 
sections 1371 through 1379D of the Safety and Soundness Act (12 U.S.C. 
4631 through 4641) as distinct from the procedural steps for hearings 
on the record for enforcement actions and proceedings as enumerated 
below. Thus, part 1209 of this title is segmented into subparts as 
follows:
    Subpart A (Scope and Authority) sets out the purpose and authority 
of the rule, the rules of construction, and the definitions that have 
general applicability to part 1209, and provides that the rules of 
practice and procedure governing agency hearings on the record shall 
apply to:
    (1) Enforcement proceedings under sections 1371 through 1379D of 
the Safety and Soundness Act (12 U.S.C. 4631 through 4641);
    (2) Removal, prohibition, and civil money penalty proceedings for 
violations of post-employment restrictions imposed by applicable law; 
and
    (3) Civil money penalty proceedings under section 102 of the Flood 
Disaster Protection Act of 1973, as amended (42 U.S.C. 4012a).
    Subpart B (Enforcement Proceedings under sections 1371 through 
1379D) summarizes the controlling law for enforcement proceedings set 
out in sections 1371 through 1379D of the Safety and Soundness Act (12 
U.S.C. 4631 through 4641).
    Subpart C (Rules of Practice and Procedure) the principal 
procedural subpart sets out the requisite procedures for formal agency 
hearings held on the record in accordance with this part.
    Subpart D (Parties and Representational Practice before the Federal 
Housing Finance Agency; Standards of Conduct) sets out the 
responsibilities that govern every party or party's representative 
appearance in hearings on the record under these rules, or in any 
appearance before the Director or any agency representative.
    Subpart E (Civil Money Penalty Inflation Adjustments) provides a 
stand alone framework for making inflation adjustments to the civil 
money penalty amounts periodically required (not less than every four 
years) under the Federal Civil Penalties Inflation Adjustment Act of 
1990, Public Law. 101-410, 104 Stat. 890, as amended by the Debt 
Collection Improvement Act of 1996, Public Law 104-134, title III, sec. 
31001(s)(1), Apr. 26, 1996, 110 Stat. 1321-373; Public Law 105-362, 
title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 3293 (28 U.S.C. 2461 
note) (Inflation Adjustment Act).
    Subpart F (Suspension or Removal of Entity-Affiliated Party Charged 
with Felony) specifies the procedures for a hearing following 
suspension or removal of an entity-affiliated party charged with a 
felony under section 1377(h) of the Safety and Soundness Act (12 U.S.C. 
4636a(h)) that are not governed by subpart C (Rules of Practice and 
Procedure).
    The section-by-section analysis and discussion of subparts A-F 
address each section in more detail below.

IV. Section-by-Section Analysis and Discussion

Subpart A--Scope and Authority

Section 1209.1 Scope
    This section sets out the authority for agency enforcement 
proceedings under sections 1371 through 1379D of the Safety and 
Soundness Act governing civil enforcement proceedings, including: 
removal, prohibition, and civil money penalty proceedings for 
violations of post-employment restrictions imposed by applicable law, 
and proceedings under section 102 of the Flood Disaster Protection Act 
of 1973, as amended (42 U.S.C. 4012a) to assess civil money penalties.
Section 1209.2 Rules of Construction
    This section prescribes general rules of construction and provides 
that unless stated otherwise a party's representative of record may 
take any action required of a party.
Section 1209.3 Definitions
    This section sets out definitions of terms applicable to this Part. 
Many of the definitions are drawn from the existing OFHEO and Finance 
Board rules. In addition, definitions of terms are added as required to 
address the HERA amendments to the Safety and Soundness Act and Bank 
Act, such as the inclusion of the Office of Finance and its executive 
officers, directors, or management where applicable under the HERA 
amendments, or where experience has shown that the process would 
benefit from greater clarity. In particular, the rule is to contain a 
definition of ``notice of charges'' to clarify that the term refers to 
the charging document served on a respondent in an enforcement

[[Page 49319]]

proceeding, and is not to be confused with an effective notice as that 
term is used in section 1375(a) of the Safety and Soundness Act (12 
U.S.C. 4635(a)). Similarly, any notice of removal or suspension or 
intent to impose civil money penalties, is akin to a notice of charges 
in that respect. These charging documents are to be distinguished from 
effective notices and orders that are of immediate and enforceable 
effect under the Safety and Soundness Act.

Subpart B--Scope and Authority-Enforcement Proceedings Under Sections 
1371-1379D

Section 1209.4 Scope and Authority
    This section states the authority for enforcement proceedings under 
sections 1371 through 1379D of the Safety and Soundness Act (12 U.S.C. 
4631 through 4641). Specifically, section 1373 of the Safety and 
Soundness Act (12 U.S.C. 4633) provides that the following actions must 
be held on the record: (1) Cease and desist proceedings under section 
1371 of the Safety and Soundness Act (12 U.S.C. 4631), (2) civil money 
penalty assessment proceedings under section 1376 of the Safety and 
Soundness Act (12 U.S.C. 4636), and (3) proceedings under the removal 
and prohibition authority of section 1377 of the Safety and Soundness 
Act (12 U.S.C. 4636a) (except proceedings under section 1377(h) of the 
Safety and Soundness Act for the suspension or removal of an entity-
affiliated party charged with a felony. (12 U.S.C. 4636a(h)).
    Additionally, this section states that the cease and desist and 
civil money penalty provisions of sections 1371 and 1376 of the Safety 
and Soundness Act (12 U.S.C. 4631 and 4636) do not apply to cease and 
desist or civil money penalty proceedings relative to the enforcement 
of housing goals under sections 1331 through 1348 of the Safety and 
Soundness Act. In particular, section 1336(c) of the Safety and 
Soundness Act (12 U.S.C. 4566(c)) provides that actions to enforce 
housing goals must proceed under sections 1341 and 1345 of the Safety 
and Soundness Act. See 12 U.S.C. 4581, 4585, and 4631(a)(2).\22\
    Prior to HERA, actions to enforce Enterprise housing goals were 
reserved to the Secretary of Housing and Urban Development (HUD). That 
division of enforcement authority was eliminated because HERA 
transferred to the Director of FHFA the responsibility for enforcing 
Enterprise housing goals. Thus, the requirement that housing goals 
enforcement actions are to proceed under sections 1341 through 1348 of 
the Safety and Soundness Act (12 U.S.C. 4581 through 4588) 
controls.\23\ The grounds for initiating such cease and desist 
proceedings relative to housing goals are set forth in section 1341 of 
the Safety and Soundness Act (12 U.S.C. 4581), and section 1345 of the 
Safety and Soundness Act provides for civil money penalties for such 
violations that differ from the civil money penalty provisions in 
section 1376 of the Safety and Soundness Act (12 U.S.C. 4636). See 12 
U.S.C. 4585. Like the enforcement proceedings under sections 1371 
through 1376 of the Safety and Soundness Act (12 U.S.C. 4631 et seq.), 
housing goals enforcement actions proceed following the issuance and 
service of a notice of charges and are conducted as a hearing on the 
record. See 12 U.S.C. 4582(a)(1). Thus, the formal hearing procedures 
set out in subpart C of part 1209 as proposed are well-suited to govern 
housing goals enforcement proceedings.
---------------------------------------------------------------------------

    \22\ The corollary provision in section 1371(a)(2) of the Safety 
and Soundness Act (12 U.S.C. 4631(a)(2)) states in pertinent part 
that the Director may not proceed under that section to ``enforce 
compliance with any housing goal established under [sections 1331 
through 1348 of the Safety and Soundness Act], with section 1336 or 
1337 of this title, with subsection (m) or (n) of section 309 [of 
Fannie Mae's authorizing statute] (12 U.S.C. 1723a(m), (n)), with 
subsection (e) or (f) of section 307 [of Freddie Mac's authorizing 
statute] (12 U.S.C. 1456(e), (f)), or with paragraph (5) of section 
10(j) of the Federal Home Loan Bank Act (12 U.S.C. 1430(j)).''
    \23\ Section 1205 of HERA added a new section 10C of the Bank 
Act to provide that the housing goals for the Banks should be 
consistent with the housing goals for the Enterprises and applied 
the enforcement provisions of section 1336 of the Safety and 
Soundness Act to the Banks in the same manner and to the same extent 
as that section applies to the Enterprises. That effectively applies 
the same enforcement authority under sections 1341 and 1345 of the 
Safety and Soundness Act to the Banks. See generally 12 U.S.C. 1421.
---------------------------------------------------------------------------

Section 1209.5 Cease and Desist Proceedings
    Generally, the statutory authority and requirements for cease and 
desist proceedings are set out in section 1371 of the Safety and 
Soundness Act (12 U.S.C. 4631), as amended by section 1151 of HERA. 
Assuming that the requisite conditions are met, a cease and desist 
proceeding is initiated by service of a notice of charges, and a 
hearing on the record is held to determine whether the grounds are 
satisfied. The hearing is administered by an independent presiding 
officer who makes recommended findings of fact and conclusions of law 
and transmits the entire administrative record to the Director who 
makes a final determination based on the record and issues an order.
    Judicial review of an order is available pursuant to section 1374 
of the Safety and Soundness Act (12 U.S.C. 4634), which provides that 
judicial review of any order issued under sections 1371, 1313B, 1376, 
or 1377 of the Safety and Soundness Act (12 U.S.C. 4631, 4513b, 4636, 
or 4636a) may be obtained by filing a petition in the United States 
Court of Appeals for the District of Columbia Circuit within thirty 
(30) days of the date of the order. An appeal does not operate as a 
stay of an order issued by the Director, unless specifically ordered by 
the court.
    Under section 1375(a) of the Safety and Soundness Act, it is within 
the Director's discretion to seek enforcement of an effective and 
outstanding notice or order issued under subtitle C or subtitle B of 
the Safety and Soundness Act. Section 1375(b) of the Safety and 
Soundness Act prescribes that, except as otherwise expressly conferred, 
no court shall have jurisdiction to affect the issuance or enforcement 
of any notice or order under sections 1371, 1372, 1313B, 1376, or 1377 
of the Safety and Soundness Act (12 U.S.C. 4631, 4513b, 4636, and 
4636a).
    The grounds for instituting cease and desist proceedings are set 
forth in section 1371(a) and (b) of the Safety and Soundness Act (12 
U.S.C. 4631(a) and (b)). Specifically, an unsafe or unsound practice in 
conducting the business of a regulated entity or the Office of Finance, 
or violation of a law, rule, regulation, order, or any condition 
imposed in writing by the Director, may be grounds for a cease and 
desist order. Service of a notice of charges is governed by section 
1371(c)(1) of the Safety and Soundness Act (12 U.S.C. 4631(c)(1)). 
Issuance of an order is governed by section 1371(c)(2) of the Safety 
and Soundness Act (12 U.S.C. 4631(c)(2)). If the Director finds on the 
basis of the record made at a hearing that any practice or violation 
has been established (or the regulated entity or entity-affiliated 
party consents to an order), the Director may issue and serve on the 
regulated entity or entity-affiliated party an order requiring the 
party to cease and desist from such practice or violation.
    Under section 1371(d) of the Safety and Soundness Act (12 U.S.C. 
4631(d)), a cease and desist order or a temporary cease and desist 
order may also require a party to take affirmative action to correct or 
remedy any condition resulting from any practice or violation with 
respect to which the order is issued. See 12 U.S.C. 4631(a), (c)(2), 
and (d). Additionally, section 1371(e) of the Safety and Soundness Act 
(12 U.S.C.

[[Page 49320]]

4631(e)), states the authority of the Director to place limitations on 
the activities or functions of the regulated entity or entity-
affiliated party or any executive officer or director of the regulated 
entity or entity-affiliated party in connection with the cease and 
desist order or temporary cease and desist order. Finally, section 
1371(f) of the Safety and Soundness Act (12 U.S.C. 4631(f)), specifies 
the effective date of a cease and desist order and provides that such 
order shall remain effective and enforceable as provided in the order, 
except to the extent that the order is stayed, modified, terminated or 
set aside by the Director or otherwise as provided under the Safety and 
Soundness Act.
Section 1209.6 Temporary Cease and Desist Orders
    Section 1372(a) of the Safety and Soundness Act (12 U.S.C. 4632(a)) 
provides that if the Director determines that the actions specified in 
the notice of charges served upon a regulated entity or any entity-
affiliated party, or the continuation thereof, is likely to cause 
insolvency or significant dissipation of assets or earnings of that 
entity, or is likely to weaken the condition of that entity prior to 
the completion of the proceedings conducted pursuant to sections 1371 
and 1373 of the Safety and Soundness Act (12 U.S.C. 4631, 4633), the 
Director may issue a temporary order requiring that party to cease and 
desist from any such violation or practice and that such party take 
affirmative action to prevent or remedy such insolvency, dissipation, 
condition, or prejudice pending completion of the proceedings.\24\ In 
addition, the order may include any limitations on the activities or 
functions of a regulated entity or any entity-affiliated party in 
connection with the temporary cease and desist order permitted under 
section 1371(d) of the Safety and Soundness Act (12 U.S.C. 4631(d)).
---------------------------------------------------------------------------

    \24\ FHFA notes that ``prejudice,'' which is a carryover in the 
statute as amended by HERA, without more may appear to be misplaced. 
But consider that the term by itself does not provide a separate 
ground for issuing a temporary cease and desist order that requires 
affirmative action. Presumably, acts or omissions prejudicial to the 
financial interests of a regulated entity would fall under the 
``dissipation of assets'' proviso, and actions prejudicial to other 
interests of the regulated entity could be subsumed by 
``condition.'' For that reason, FHFA has determined that it is not a 
term to be deleted as an anachronism, and invites public comment on 
this issue.
---------------------------------------------------------------------------

    Section 1372(b) of the Safety and Soundness Act (12 U.S.C. 4632(b)) 
provides that the effective date of a temporary order issued under 
section 1372(a) of the Safety and Soundness Act (12 U.S.C. 4632(a)) is 
the date of service on the party. Any such order, unless set aside, 
limited, or suspended by a court under the judicial review provisions 
of section 1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)), 
shall remain in effect and enforceable pending the completion of the 
proceedings, and shall remain effective until the Director dismisses 
the charges or the order is superseded by a cease and desist order 
under section 1371 of the Safety and Soundness Act (12 U.S.C. 4631). 
See 12 U.S.C. 4632(b). Additionally, section 1372(c)(1) of the Safety 
and Soundness Act (12 U.S.C. 4632(c)(1)) prescribes the measures 
available where the notice of charges specifies that the books and 
records of the regulated entity are so incomplete or inaccurate that 
the Director is unable to determine the true financial condition of the 
regulated entity or the details of a transaction that may have a 
material effect on the financial condition of the entity. In brief, the 
Director may issue a temporary order requiring the entity to cease the 
practices giving rise to the incomplete or inaccurate records or take 
affirmative action to correct the records. See 12 U.S.C. 4631(c)(1).
    Section 1372(c)(2) of the Safety and Soundness Act (12 U.S.C. 
4632(c)(2)) specifies that the effective period of a temporary order 
pertaining to the books and records of an entity is effective upon 
service, and (unless set aside under 12 U.S.C. 4632(d)) shall remain in 
effect and enforceable until the earlier of the completion of the 
proceedings initiated under section 1371 of the Safety and Soundness 
Act (12 U.S.C. 4631) or the Director determines upon examination or 
otherwise that the books and records are accurate and reflect the 
financial condition of the regulated entity. Judicial review of a 
temporary order proceeds under section 1372(d) of the Safety and 
Soundness Act (12 U.S.C. 4632(d)) when a party served with a temporary 
order acts within ten (10) days to seek an injunction to set aside the 
order pending completion of the cease and desist proceeding. The 
district court's jurisdiction is limited to the issuance of such an 
injunction, and does not extend to the merits of the underlying 
enforcement proceeding. See 12 U.S.C. 4632(d). Without exception, the 
district court has no authority under this provision to assert subject 
matter jurisdiction over the underlying enforcement action or to remove 
the enforcement case from the presiding officer's jurisdiction to 
Federal district court.
    Finally, section 1372(e) of the Safety and Soundness Act (12 U.S.C. 
4632(e)), specifies that in the event of a violation or threatened 
violation of a temporary order issued under section 1372 of the Safety 
and Soundness Act (12 U.S.C. 4632), the Director may bring an action in 
the United States District Court for the District of Columbia for an 
injunction to enforce the order. The validity of the order is not at 
issue here and the court's action is a mandate. If the court finds any 
violation, threatened violation, or failure to obey an order issued 
under this provision, the court shall issue the injunction.
Section 1209.7 Civil Money Penalties
    Section 1376 of the Safety and Soundness Act, as revised by section 
1155 of HERA, governs civil money penalty enforcement proceedings under 
the Safety and Soundness Act, except as to housing goals violations 
addressed under section 1345(a) of the Safety and Soundness Act. See 12 
U.S.C. 4636(a). The Director may impose a civil money penalty on any 
regulated entity or an entity-affiliated party in accordance with 
section 1376 of the Safety and Soundness Act (12 U.S.C. 4636(a)). HERA 
amendments to section 1376 of the Safety and Soundness Act strengthened 
the statutory authority, preserved the three-tiered structure for 
assessing civil money penalties (Tiers 1-3), and increased (and, in the 
case of the higher tiers, significantly increased) the maximum penalty 
amounts for each tier. Under the HERA amendments to the provisions 
governing Tier 1, a regulated entity or entity-affiliated party shall 
forfeit and pay a civil penalty of not more than $10,000 for each day 
during which a violation continues, if such regulated entity or party 
violates--(1) Any provision of the Safety and Soundness Act, the 
authorizing statutes, or any order, condition, rule or regulation under 
the Safety and Soundness Act or authorizing statutes; (2) any final or 
temporary order issued under the Safety and Soundness Act; (3) any 
condition imposed by the Director in connection with the grant of any 
application or other request by the regulated entity; or (4) any 
written agreement between the regulated entity and the Director. See 12 
U.S.C. 4636(b)(1)(A)-(D) (Tier 1 violations).
    As amended by HERA, section 1376(b)(2) of the Safety and Soundness 
Act (12 U.S.C. 4636(b)(2)) sets forth broader standards for Tier 2 
violations and penalties. Moreover, with the addition of the caveat 
``notwithstanding paragraph (1),'' the revised section allows that Tier 
2 violations can stand independently of Tier 1 violations, while at the 
same time building on that set of violations. See 12 U.S.C. 4636(b)(2). 
Under the provisions

[[Page 49321]]

governing Tier 2 penalties, the Director can assess a higher daily 
civil money penalty of not more than $50,000 for each day during which 
a violation, practice, or breach continues, if (A) the regulated entity 
or entity-affiliated party: (1) Commits any Tier 1 violation described 
in 12 U.S.C. 4636(b)(1); (2) recklessly engages in an unsafe or unsound 
practice in conducting the affairs of the regulated entity; or (3) 
breaches any fiduciary duty, and (B) the violation, practice, or 
breach: (1) Is part of a pattern of misconduct, (2) causes or is likely 
to cause more than a minimal loss to the regulated entity, or (3) 
results in pecuniary gain or benefit to such party. See id.
    Thus, section 1376(b) of the Safety and Soundness Act, among other 
things deleted the predicate ``violation or conduct;'' substituted 
``more than minimal loss'' for the previous requirement of ``material 
loss;'' added both ``breach of fiduciary duty'' and ``results in 
pecuniary gain'' as culpability standards; deleted the requirement of 
``recklessness;'' and eliminated the distinction in the prior statutory 
scheme that had allowed for lesser penalty amounts to be assessed 
against individuals than for regulated entities for the same Tier 2 
violations. See id. The revised statutory scheme underscores the 
Congressional purpose behind strengthening the Director's civil money 
penalty enforcement authority.
    Section 1376(b)(3) of the Safety and Soundness Act, governs Tier 3 
conduct and penalties. As with Tier 2, Tier 3 also can stand 
independent of the lower tiers. Specifically, Tier 3 provides that a 
regulated entity or entity-affiliated party shall forfeit and pay a 
civil penalty, in the amounts described below, for each day during 
which such violation, practice, or breach continues, if such party 
knowingly (1) commits any violation described in the Tier 1 provisions, 
(2) engages in any unsafe or unsound practice in conducting the affairs 
of the regulated entity, or (3) breaches any fiduciary duty, and 
knowingly or recklessly causes a substantial loss to the regulated 
entity or a substantial pecuniary gain or other benefit to such party 
by reason of such violation, practice, or breach. See 12 U.S.C. 
4636(b)(3). The Tier 3 penalty provisions set the daily maximum penalty 
at $2 million for a regulated entity. Whereas, the Director can assess 
against an entity-affiliated party a daily penalty not to exceed $2 
million.
    Section 1376(c)(2) of the Safety and Soundness Act sets out the 
factors to be considered by the Director in determining the penalties 
to be assessed under this section (12 U.S.C. 4636(c)(2)). Section 
1376(c)(3) of the Safety and Soundness Act provides that the imposition 
of any penalty under section 1376 of the Safety and Soundness Act (12 
U.S.C. 4636) is not reviewable, except as provided for in section 1374 
of the Safety and Soundness Act (12 U.S.C. 4634). See 12 U.S.C. 
4636(c)(3). Additionally, these revised amounts, which represent a 
large increase in the daily maximum penalty amounts (particularly by 
bringing penalties to be assessed against entity-affiliated parties in 
line with those assessed on a regulated entity), are adjusted 
periodically under the Inflation Adjustment Act, as provided in subpart 
E of this part.
Section 1209.8 Removal and Suspension Proceedings
    Section 1153 of HERA provides that the statutory authority and 
requirements for removal and suspension enforcement proceedings are set 
forth in section 1377 of the Safety and Soundness Act (12 U.S.C. 
4636a). The removal or suspension of an entity-affiliated party, or the 
officers, directors, or management of the Office of Finance, a joint 
office of the Banks--where the requisite conditions are met, is 
initiated by service of a notice, and a hearing on the record is held 
to determine whether the grounds are satisfied, as provided by section 
1373(a)(1) of the Safety and Soundness Act (12 U.S.C. 4633(a)(1)). As 
with a cease and desist proceeding, the hearing (with the exception of 
removal proceedings under section 1377(h) of the Safety and Soundness 
Act (12 U.S.C. 4636a (h)) is presided over by an independent presiding 
officer who sets a date for an evidentiary hearing, presides over the 
proceeding, and then submits her recommended findings of fact and 
conclusions of law with the entire administrative record to the 
Director who makes a final determination on the merits and issues an 
order.
    In particular, section 1377(a)(1) of the Safety and Soundness Act 
authorized the Director to serve upon a party described in paragraph 
(a)(2) of the section, or any officer, director, or management of the 
Office of Finance, written notice of the intention of the Director to 
suspend or remove such party from office, or prohibit any further 
participation by such party, in any manner, in the conduct of the 
affairs of a regulated entity. See 12 U.S.C. 4636a(a)(1). For purposes 
of this section, under section 1377(a)(2) of the Safety and Soundness 
Act, a party is an entity-affiliated party or any officer, director, or 
management of the Office of Finance, if the Director determines that a 
party, officer, or director directly or indirectly violated a law, 
regulation, final cease and desist order, or any written condition in 
connection with an application, notice, or other request of a regulated 
entity; engaged or participated in any unsafe or unsound practice in 
connection with any regulated entity or business institution; or 
breached a fiduciary duty, and by reason of such violation, practice, 
or breach, the regulated entity or business institution suffered or 
probably will suffer financial loss or other damage, or such party 
received financial gain or other benefit, and the violation, practice, 
or breach involves either personal dishonesty on the part of such party 
or demonstrates willful or continuing disregard by that party for the 
safety or soundness of the regulated entity or business institution. 
See 12 U.S.C. 4636a(a)(2).
    Section 1377 of the Safety and Soundness Act subjects the officers, 
directors, and management of the Office of Finance to the suspension 
and removal authority of the Director, if the stated conditions are 
met. See 12 U.S.C. 4636a. The Office of Finance is included in the 
definition of entity-affiliated party in section 1303(11)(E) of the 
Safety and Soundness Act 12 (U.S.C. 4502(11)(E)). Presumably, the term 
``business institution,'' as used in section 1377 of the Safety and 
Soundness Act, too, refers to the Office of Finance, a joint office and 
agent of the Banks central to the issuance of consolidated obligations 
on which the Banks are jointly and severally liable.
    Under section 1377(b) of the Safety and Soundness Act (12 U.S.C. 
4636a(b)), the Director may issue an order to suspend or remove a party 
from office, or prohibit such party from participation in the affairs 
of the regulated entity, upon service of the notice under paragraph 
(a)(1) of section 1377 of the Safety and Soundness Act (12 U.S.C. 
4636a(a)), if the Director makes a determination that the action is 
necessary for the protection of the regulated entity and such party is 
served with the order. See 12 U.S.C. 4636a(b)(1). An immediate order of 
suspension issued under paragraph (b) of this section is effective when 
served. See 12 U.S.C. 4636a(b)(2)(A).
    Furthermore, section 1377(b)(2)(B) of the Safety and Soundness Act 
(12 U.S.C. 4636a(b)(2)(B)) provides that unless stayed by a court under 
paragraph (g) of section 1377 of the Safety and Soundness Act (12 
U.S.C. 4636a(g)), any suspension order issued under paragraph (b) shall 
remain in effect and enforceable until the Director dismisses the 
charges set out in the notice served under paragraph (a)(1) of this 
section or

[[Page 49322]]

the effective date of the order issued under paragraph (b) [sic].\25\ 
See 12 U.S.C. 4636a(b)(2)(B).
---------------------------------------------------------------------------

    \25\ The reference should be to paragraph (c) of section 1377 of 
the Safety and Soundness Act (12 U.S.C. 4636a(c)), which concerns 
final orders.
---------------------------------------------------------------------------

    Under section 1377(b)(3) of the Safety and Soundness Act (12 U.S.C. 
4636a(b)(3)), if the Director issues an order under paragraph (b) of 
this section, the Director shall serve a copy of such order upon any 
regulated entity with which the subject of the order is affiliated at 
the time the order is issued.
    Section 1377(c) of the Safety and Soundness Act (12 U.S.C. 
4636a(c)) governs the process for providing notice, setting the 
hearing, and issuing the order. Specifically, section 1377(c) of the 
Safety and Soundness Act sets the requirements for: (1) The notice--
under section 1377(a) of the Safety and Soundness Act the notice shall 
contain a statement of the facts constituting grounds for such action 
and fix a time and place at which a hearing is to be held on the 
action; (2) the timing of the hearing--the same thirty (30) to sixty 
(60) day requirement as that pertaining to cease and desist orders, 
unless a request is made (by the party receiving the notice upon a 
showing of good cause, or the U.S. Attorney General) for an earlier or 
later date for the hearing to occur; (3) establishing consent of the 
party--a party shall be deemed to consent to the order by failing to 
appear; (4) issuance of an order of suspension--the Director may issue 
an order as he deems it appropriate if the party is deemed to consent 
or if the Director finds any of the grounds specified in the notice 
have been established upon the record developed at the hearing; and (5) 
effectiveness of an order--at the expiration of a thirty (30) day 
period after service upon the relevant regulated entity and the party, 
except where a party has consented, in which case the order shall 
become effective at the time stated in the order. Additionally, under 
section 1377(c)(5) of the Safety and Soundness Act (12 U.S.C. 
4636a(c)(5)), the order remains effective and enforceable except to 
such extent as it is stayed, modified, terminated, or set aside by 
action of the Director or a reviewing court.
    Section 1377(d) of the Safety and Soundness Act (12 U.S.C. 
4636a(d)) specifies the activities that any person subject to a removal 
or suspension order under this section is prohibited from undertaking. 
Persons subject to these orders are barred from participating in 
conducting the affairs of a regulated entity or the Office of Finance, 
and they may not exercise any proxy or voting rights or violate any 
voting agreement previously approved by the Director with respect to a 
regulated entity, or vote for a director or serve in any capacity as an 
entity-affiliated party of a regulated entity or the Office of Finance.
    Section 1377(e) of the Safety and Soundness Act (12 U.S.C. 
4636a(e)) bars a person subject to a removal or suspension order from 
participating in the conduct of the affairs of a regulated entity or 
the Office of Finance. See 12 U.S.C. 4636a(e)(1). An exception is made 
where the Director provides his written consent, in which case the 
order--to the extent of the consent--shall cease to apply to the party 
and the consent shall be made public. See 12 U.S.C. 4636a(e)(2). Any 
violation of the prohibition on participating in the affairs of the 
regulated entity or the Office of Finance by any entity-affiliated 
party charged with a felony who is subject to a suspension or removal 
order under section 1377(h) of the Safety and Soundness Act (12 U.S.C. 
4636a(h)) shall be treated as a violation of that order. See 12 U.S.C. 
4636a(e)(3).
    Section 1377(f) of the Safety and Soundness Act (12 U.S.C. 
4636a(f)), states that the removal provisions apply to individuals 
only--unless the Director specifically finds that the provisions should 
apply to a corporation, firm, or other business entity. See 12 U.S.C. 
4636a(f). Section 1377(g) of the Safety and Soundness Act (12 U.S.C. 
4636a(g)) authorizes a subject of a removal or suspension order under 
this section to seek an injunction to stay the suspension or 
prohibition order pending completion of the administrative hearing to 
be held under section 1377(c) of the Safety and Soundness Act (12 
U.S.C. 4636a(c)). This grant of subject matter jurisdiction to the 
United States District Court for the District of Columbia, or the 
United States district court for the judicial district in which the 
regulated entity is headquartered, is limited to the authority to stay 
the suspension or prohibition. See 12 U.S.C. 4636a(g). It should not be 
read to confer jurisdiction over the underlying enforcement hearing.
Section 1209.9 Supervisory Actions Not Affected
    This section underscores the independence of the Director to take 
such regulatory, supervisory, or enforcement action, as deemed 
necessary and in accordance with the Safety and Soundness Act or the 
Bank Act. In addition to the plenary regulatory and supervisory 
authority of the Director under section 1311(b)(1) of the Safety and 
Soundness Act (12 U.S.C. 4511(b)(1)), under section 1311(b)(2) of the 
Safety and Soundness Act the Director has express regulatory authority 
over the regulated entities and Office of Finance to ensure that the 
purposes of the Safety and Soundness Act, the authorizing statutes, and 
any other applicable law are carried out. (12 U.S.C. 4511(b)(2)).
    Moreover, section 1311(c) of the Safety and Soundness Act (12 
U.S.C. 4511(c)) preserves the Director's ability to avail himself of 
any of the broad powers conferred in the Safety and Soundness Act. 
Under section 1311(c) of the Safety and Soundness Act (12 U.S.C. 
4511(c)), the Director may take any regulatory or supervisory action 
under section 1311(b) of the Safety and Soundness Act (12 U.S.C. 
4511(b)), notwithstanding any action related to capital adequacy that 
may be taken under sections 1361 through 1369E of the Safety and 
Soundness Act (12 U.S.C. 4612 et seq.) or any enforcement action taken 
under sections 1371 through 1379E of the Safety and Soundness Act (12 
U.S.C. 4631 through 4641). Thus, the Director's authority under 
subtitle B of the Safety and Soundness Act to set capital requirements 
for the regulated entities, to enter into enforceable written 
agreements, to appoint FHFA as conservator or receiver for a regulated 
entity, and to take enforcement actions under specified conditions, 
does not limit his general regulatory authority over the regulated 
entities and the Office of Finance.
    Similarly, the Director's authority under sections 1371 through 
1379E of the Safety and Soundness Act (12 U.S.C. 4631 through 4641) to 
prosecute administrative enforcement actions by serving a notice of 
charges to enforce any provision or requirement of the Safety and 
Soundness Act, or other applicable standard, is independent of and does 
not limit his general supervisory or regulatory authority. Indeed, the 
selection of one form of supervisory or regulatory action or a 
combination of actions is within the discretion of the Director, and 
does not foreclose the Director from pursuing any other supervisory or 
regulatory action authorized by law.

Subpart C--Rules of Practice and Procedure for Hearings on the Record

Section 1209.10 Authority of the Director
    This section makes clear that enforcement proceedings are under the 
general authority of the Director to allow for interlocutory appeals or 
to permit actions to be performed before the appointment of the 
presiding officer.

[[Page 49323]]

The Director may perform, direct the performance of, or waive 
performance of any act that could be done or ordered by the presiding 
officer. This promotes efficiency in the hearing process, and should 
not be read to create an inherent, institutional bias on the part of 
the Director.
Section 1209.11 Authority of the Presiding Officer
    This section states that hearings are to be held in accordance with 
the APA, and provides that the presiding officer is to have complete 
charge of the proceedings, to act in a fair and impartial manner, and 
to ensure that a full and complete record of the proceeding is made. 
This section lists the powers of the presiding officer to control the 
proceedings. First among these is the authority of the presiding 
officer to set the date, time, and place (within the District of 
Columbia) of the testimonial phase of the hearing process, i.e., 
evidentiary hearing. Consistent with Sec.  1209.23, the appearance 
hearing is to be set in the scheduling order issued by the presiding 
officer following the initial scheduling conference that must be held 
no later than sixty (60) days from the date of service of the notice of 
charges, notice of intention to assess a civil money penalty, or notice 
of intention to suspend or remove a party as provided in the Safety and 
Soundness Act. In accordance with Sec.  1209.11(b)(1) setting of the 
evidentiary hearing may occur sooner upon motion of the respondent, or 
otherwise as the presiding officer finds in the best interest of 
justice.
    The section prescribes the presiding officer's authority to: reset, 
continue, or recess the hearing in whole or in part for a reasonable 
period of time; hold conferences to ensure the legal, factual, or 
evidentiary issues addressed are materially relevant to the charges or 
allowable defenses; administer oaths and affirmations; issue and 
enforce subpoenas, subpoenas duces tecum, and discovery and protective 
orders, or modify, revoke, or quash such subpoenas; take and preserve 
testimony under oath; rule on motions, except that only the Director 
may dismiss the proceeding or make a final determination on the merits; 
take all actions necessary to regulate the scope, timing, and 
completion of discovery of any non-privileged matter that is materially 
relevant to the charges or allowable defenses; rule upon the 
admissibility of evidence, and exclude or limit evidence; regulate the 
course of the testimonial phase of the hearing; examine witnesses; upon 
motion of a party, take judicial notice of a fact; prepare and present 
to the Director a recommended decision; and establish the time, place, 
and limitations on public and media attendance at public 
proceedings.\26\
---------------------------------------------------------------------------

    \26\ This section reflects both the analogous provision in the 
Uniform Rules, and instructive portions of the Manual for 
Administrative Law Judges (Third Edition), the last official edition 
of the ``Manual for Administrative Law Judges,'' published by the 
Administrative Conference of the United States. The Third Edition 
was edited and resurrected as the ``2001 Interim Internet Edition,'' 
Morrell E. Mullins, ed. (Interim Manual). The preface to the Interim 
Manual traces the history of the manual and its application in 
administrative law practice.
---------------------------------------------------------------------------

Section 1209.12 Public Hearings; Closed Hearings
    Generally, appearance hearings are to be open to the public. But 
this section also reflects the authority of the Director, under section 
1379B(b) of the Safety and Soundness Act (12 U.S.C. 4639(b)), to 
determine that holding an open hearing would be contrary to the public 
interest, and provides appropriate mechanisms for making and 
implementing such determinations. To make the determination, the 
Director must receive the party's motion, opposing briefs, and a 
recommended decision, from the presiding officer. A determination by 
the Director under this section is not a reviewable final agency 
action.
    The authority to file documents under seal is reserved to agency 
counsel, who must make a written determination that the disclosure of 
the document would be contrary to the public interest. The presiding 
officer must preserve the confidentiality of the document and, if 
needed, issue a protective order that is acceptable to FHFA counsel of 
record. If a hearing is to be closed for the purpose of introducing 
testimony or documents filed under seal, certain prescriptive 
procedures (such as the Methods of Handling Confidential Information of 
general applicability in administrative proceedings under the Interim 
Manual) are to be followed. In any event, the presiding officer is 
bound to ensure that any objections to the introduction of confidential 
information or testimony into evidence will not obstruct the 
prosecution of the enforcement case.
Section 1209.13 Good Faith Certification
    This section sets out the requirement that any filing or submission 
for the record must be signed by the movant's representative of 
record--or a party appearing pro se--to effectively certify that the 
pleading or motion is offered in good faith and not for any improper 
purpose. That certification is also imputed to any oral motion and or 
argument. The presiding officer must strike any unsigned document if it 
is not signed promptly after the omission is brought to the movant's 
attention.
Section 1209.14 Ex Parte Communications
    This section defines and prohibits ex parte communications, and 
provides for procedures for dealing with such communications, including 
sanctions. The phrase ``may be reasonably expected to be involved'' 
suffices to protect contacting parties who could not reasonably be 
expected to know that an agency employee might be involved in the 
decisional process. FHFA thus intends to insulate those who lack 
sufficient notice of the exclusion, for example if their work is 
provided to the Director or a decisional employee after it was 
submitted to the agency in the usual course of business. This section 
also provides for the separation of functions of Agency personnel. Any 
employee or agent of FHFA that participated in the examination, 
investigative, or prosecutorial functions on the case may not 
participate in or advise in the recommended decision or the Directors' 
decision on the final determination (analysis of settlement offers and 
regulatory or supervisory matters are excepted from this prohibition).
Section 1209.15 Filing of Papers
    This section, which specifies the filing requirements for papers, 
pleadings, motions, and memoranda in any proceeding governed by subpart 
C of this part, was updated to reflect electronic filing practices.
Section 1209.16 Service of Papers
    This section, which specifies the service requirements for papers, 
pleadings, motions, and memoranda in any proceeding governed by subpart 
C of this part, was updated to reflect electronic service practices.
Section 1209.17 Time Computations
    This section sets out the general rule for computing any time 
period prescribed by subpart C of this part and states when filing or 
service are deemed to be effective. Additionally, this section was 
updated to reflect electronic service practices. The rule also provides 
that the prescribed effective filing and service dates may be modified 
by the presiding officer or by agreement of the parties in the case of 
service. Finally, the rule prescribes the method for calculating of 
time for service and filing of responsive papers.

[[Page 49324]]

Section 1209.18 Change of Time Limits
    This section permits the presiding officer, upon a showing of good 
cause, to extend time limits set out in the regulation or any notice or 
order, either on a motion of a party or on his own initiative. 
Additionally, after the matter has been referred under Sec.  1209.53 to 
the Director, the Director may also grant extensions of time.
Section 1209.19 Witness Fees and Expenses
    This section specifies that the fees and expenses of witnesses 
shall be paid at the same rate as those paid in proceedings in United 
States district courts. Additionally, FHFA is not required to pay such 
fees in advance where FHFA has requested or issued the subpoena, and 
FHFA is not required to pay any fees or expenses of any witness who was 
not subpoenaed by FHFA.
Section 1209.20 Opportunity for Informal Settlement
    This section permits any respondent at any time in the enforcement 
proceeding to make a written proposal for settlement without prejudice 
to any rights of any party. Any such settlement proposal, however, must 
be made only to FHFA counsel of record. Submission of a settlement 
offer does not operate to stay the proceeding or to provide a basis for 
adjourning or otherwise delaying the proceeding. Additionally, no 
settlement offer is admissible in any proceeding.
Section 1209.21 Conduct of Examination
    This section clarifies that the prosecution of a notice of charges 
or a notice of imposition of a civil money penalty does not impact in 
any way FHFA's authority to continue or conduct any examination, 
investigation, inspection, or visitation of any regulated entity or 
entity-affiliated party authorized by law.
Section 1209.22 Collateral Attacks on Adjudicatory Proceeding
    This section provides that the pendency in any court of a 
collateral attack on the enforcement proceeding shall have no effect on 
the enforcement proceeding which shall continue without regard to the 
collateral attack. Further, the section makes clear that a default or 
failure to act within timeframes and requirements prescribed in the 
administrative proceeding will not be excused on the basis of the 
collateral attack.
Section 1209.23 Commencement of Proceeding and Contents of Notice of 
Charges
    This section states that an administrative enforcement proceeding 
is commenced by a notice of charges as defined in Sec.  1209.3(p), and 
sets out the requirements for the contents of a notice of charges. In 
short, among other things, a notice must include: the legal authority 
for the proceeding; a statement of the law and fact showing that FHFA 
is entitled to relief; the relief sought; a statement that the 
presiding officer will set the date and location (within the District 
of Columbia) of the testimonial phase of the proceeding in a scheduling 
order to be issued in connection with the initial scheduling conference 
to be held thirty (30) to sixty (60) days from the date of service of 
the notice; contact information for the presiding officer and for FHFA 
counsel of record; citation to the Rules of Practice and Procedure; and 
a statement that the answer must be filed with the presiding officer 
within the time to file an answer as required by law or regulation. The 
rule also provides that the notice must include the time within which 
to request an earlier hearing. Ordinarily, however, such a request 
would be obviated by the scheduling conference and scheduling order.
Section 1209.24 Answer
    This section provides that the respondent must file an answer 
within twenty (20) days of the service of the notice, unless the notice 
specifies otherwise, and sets out the required elements of a conforming 
answer. This section mandates that failure to file an answer within the 
required period constitutes a waiver of the respondent's right to 
appear and contest the allegations in the notice. FHFA counsel of 
record may file a motion for an entry of default, and the presiding 
officer, upon a finding of no good cause for the failure to answer, 
shall file a recommended decision with the findings and relief sought 
in the notice. A final order issued by the Director based on the 
respondent's failure to file an answer is deemed to be an order issued 
upon consent.
Section 1209.25 Amended Pleadings
    This section allows for a notice or answer to be amended or 
supplemented at any stage in the proceeding, and states the deadline 
for an answer to an amended notice. The rule also provides guidance for 
when no formal amendment is necessary to conform such pleadings to the 
evidence and issues tried at the hearing. Additionally, the rule 
provides that the presiding officer may admit evidence despite timely 
objections (as to relevance or materiality with respect to issues 
raised in the notice of charges) when admission is likely to assist in 
adjudicating the merits of the action, if an objecting party fails to 
satisfy the presiding officer that the admission of such evidence would 
unfairly prejudice the party's action or defense upon the merits. In 
such cases, the presiding officer may grant a reasonable continuance to 
allow the objecting party to meet such evidence.
Section 1209.26 Failure To Appear
    This section states that if a respondent fails to appear at a 
hearing in person or through a representative of record, that 
respondent waives his right to a testamentary hearing and is deemed to 
have admitted to all facts alleged and consented to the relief sought 
in the notice. As in the case where a respondent has failed to file an 
answer, the presiding officer shall file with the Director a 
recommended decision containing the findings and relief sought in the 
notice.
Section 1209.27 Consolidation and Severance of Actions
    This section provides authority to the presiding officer, either 
upon a motion of a party or on his own initiative, to consolidate two 
or more proceedings (for some or all purposes), if the circumstances 
meet the stated test, unless consolidation would cause unreasonable 
delay or injustice. As to severance, however, the presiding officer may 
act only on a severance motion of a party if the presiding officer 
finds that undue prejudice or injustice to the moving party would 
result and would outweigh the interests of judicial economy in the 
complete and final resolution of the proceeding.
Section 1209.28 Motions
    This section specifies that requests for an order must be in a 
written motion. The provision sets out the requirements for such 
motions, and provides that written memoranda, briefs, affidavits, or 
other relevant material may be submitted in support of a motion. On the 
other hand, the rule allows for oral motions to be made in a hearing, 
unless the presiding officer directs that the motion be reduced to 
writing. The rule has been revised to state that a response to a non-
dispositive motion is due within ten (10) days, to distinguish it from 
a response to a dispositive motion, which is governed by Sec.  1209.35, 
and to provide that reply briefs must be filed within five (5) days of 
a response,

[[Page 49325]]

unless the presiding officer or Director orders otherwise. The rule 
also was revised to provide that the presiding officer shall consider 
responses of parties having an interest in a motion before ruling on an 
oral or a written motion. A party's failure to oppose a motion is 
deemed to be consent to the motion and the relief sought. The rule has 
been clarified to bar frivolous, dilatory, or substantively repetitive 
motions, and continues to provide that the filing of such motions may 
form the basis for sanctions.
Section 1209.29 Discovery
    Section 1209.29 of the rule, which readopts Sec.  1780.26 of the 
existing OFHEO rule, has been amended in part to reflect actual 
practice experience and to clarify that the presiding officer is 
charged with restricting discovery to any matter not privileged that is 
materially relevant to the charges or allowable defenses in a pending 
proceeding. In particular, any document request that seeks privileged 
information or internal FHFA communications not materially relevant as 
stated, or that otherwise is unreasonable in form, excessive in scope, 
unduly burdensome, or substantially repetitive of prior discovery 
requests, shall be denied or modified.
    Section 1209.29(a)(2) of the proposed rule is a new provision that 
requires the parties to meet and confer in good faith to agree upon and 
submit to the presiding officer a discovery plan for timely, cost-
effective management of document discovery. This process was conceived 
to achieve the economies of pre-trial discovery embedded in similar 
requirements under the Federal Rules of Civil Procedure governing 
district court actions. Under this new provision, no party may commence 
discovery until the presiding officer has approved the parties' 
discovery plan. This process supports the authority of the presiding 
officer to control the proceedings and to minimize unnecessary or 
costly document discovery. In the absence of the parties' cooperation, 
however, the rule provides the presiding officer with ample authority 
to require the parties to conduct discovery in a reasonable manner.
    Under Sec.  1209.29(b)(3), as modified, any request for document 
discovery is unreasonable, oppressive, excessive in scope, or unduly 
burdensome--and shall be denied or modified--if, among other things, 
the request: (i) Fails to include limitations on the relevant subject 
matter or time period covered; (ii) fails to identify documents with 
sufficient specificity to permit identification of the repositories of 
official agency records to be searched; (iii) seeks material that is 
duplicative, cumulative, or obtainable from another source that is more 
accessible, less burdensome, or less expensive; (iv) calls for the 
production of documents, whether in hard copy or in electronic format, 
to be delivered to the requesting party or his designee and fails to 
provide a written agreement by the requestor to pay in advance for the 
costs of production, in accordance with Sec.  1209.30, or otherwise 
fails to take into account costs associated with processing 
electronically stored information or any cost-sharing agreement between 
the parties; (v) fails to afford the responding party adequate time to 
respond; or (vi) fails to take into account retention policies or 
security protocols with respect to Federal information systems.
    Discovery is limited to document requests. No other form of 
discovery is permitted; depositions (except as noted) and 
interrogatories are not permitted. This provision is not to be read to 
require the creation of any document. Additionally, this section 
reiterates that privileged documents are not discoverable. Applicable 
privileges include: attorney client, work product, and privileges 
available to government agencies (e.g., deliberative process; 
examination; investigative; or any other privileges available under the 
U.S. Constitution, Federal law, or the principles of Federal common 
law). To preserve such privileges in productions, a new provision, 
Sec.  1209.29(d)(1)(ii), provides that the parties may enter into so-
called clawback agreements, and the presiding officer shall enter an 
order to ensure the enforceability of such agreements. Finally, Sec.  
1209.29(d)(2) is added to make clear that the limitations on the 
discovery process in this rule are not to be read otherwise to limit 
the examination, regulatory or supervisory authority of FHFA. Again, 
these provisions have been added to assist in resolving issues that may 
arise in practice under this rule.
    Time limits on discovery under Sec.  1209.29(e) of the proposed 
rule require that all discovery shall be completed at least twenty (20) 
days prior to the commencement of the testimonial phase of the hearing, 
unless the presiding officer finds on the record that good cause exists 
for waiving the twenty (20) day requirement. Additionally, the 
provision that responsive documents be produced as maintained in the 
usual course of business, or labeled and organized to correspond to the 
document requests, was moved from its former place in OFHEO's existing 
rule, Sec.  1780.27(a) of this title, to make it applicable to document 
requests that are addressed either to parties or to non-parties. 
Finally, a provision was added to permit the parties to agree upon the 
production of documents as organized or otherwise, consistent with the 
discovery plan, to provide more flexibility to the parties to make 
discovery productions less onerous or costly.
Section 1209.30 Request for Document Discovery From Parties
    This section would adopt the existing OFHEO rule, Sec.  1780.27 of 
this title, with certain changes to the time limits for filing motions 
to strike or to limit discovery requests, guidance for the presiding 
officer on ruling on such motions, and revised procedures for 
compelling production of documents by parties. The rule now 
specifically requires that all document discovery from parties must 
conform to these requirements and be consistent with the discovery plan 
approved by the presiding officer under Sec.  1209.29. Any party served 
with a discovery request may object to all or part of such request 
within twenty (20) days of service of the request by filing a motion to 
strike or limit the request under Sec.  1209.28, which will also govern 
responses and replies, if any. No other party may file an objection. 
Any objections that do not conform to these requirements are waived.
    The proposed rule recognizes instances where discovery may include 
electronically stored information, and the attendant costs and burdens. 
The rule adds a new provision to address the complexities and costs 
associated with the discovery of electronically stored information (e-
discovery). In past practice, a party requesting document discovery was 
to agree in advance to pay for the costs of any document production--
e.g., reproduction (photocopies or electronic), and the responding 
party was permitted to require receipt of payment of any such charges 
prior to production. While this process is still available, under the 
revised rule, parties may agree to cost-sharing, especially where 
multiple parties present overlapping discovery requests, consistent 
with the discovery plan approved by the presiding officer. In sum, the 
revisions are intended to encourage transparency and early cooperation 
of the parties to identify and resolve issues commonly encountered in 
e-discovery, and to develop a coherent and cost-effective search 
protocol and format of production (such as searchable formats, optical 
character recognition, or load

[[Page 49326]]

files). This is particularly important where e-discovery may be 
problematic, too costly, or unduly burdensome.
    Section 1209.30(d) is amended to permit a party receiving a 
discovery request to respond within thirty (30) days with a motion to 
strike or limit the discovery requests, replacing the ten (10) days 
provided for in the prior rule. Section 1209.28 of the proposed rule 
governs responses to such motions and replies, if any.
    Section 1209.30(e) of the proposed rule governs the process for 
asserting privilege claims. A privilege log is required and documents 
may be identified by category on the log. The presiding officer has 
express discretion to determine when identification by category is 
sufficient. Section 1209.30(f) of the proposed rule provides that any 
motion to compel production must be filed in accordance with Sec.  
1209.28 within ten (10) days of the time of the assertion of the 
privilege or failure to produce is or becomes known to the requesting 
party. To oppose, the responding party must file a written response 
within five (5) days.
    Section 1209.30(g) of the proposed rule clarifies that the 
presiding officer may grant in part or otherwise modify any request for 
production of documents, or deny any request for the production of any 
document that is privileged or otherwise not within the scope of 
permissible discovery. The proposed rule also adds a provision stating 
expressly that the interlocutory appeal of a privilege determination or 
ruling on a motion for a protective order is to be in accordance with 
Sec.  1209.33, and reiterates that under Sec.  1209.33, interlocutory 
review of a privilege determination or document discovery request shall 
not stay the proceeding, unless ordered by the presiding officer or the 
Director.
    Under Sec.  1209.30(h) of the proposed rule, pertaining to the 
enforcement of a document discovery subpoena, the Director or a party 
who obtained the subpoena may seek enforcement to the extent authorized 
under section 1379D(c)(1) of the Safety and Soundness Act (12 U.S.C. 
4641(c)(1)) by seeking an order from the appropriate United States 
district court. Under Sec.  1209.30(h)(2), the court's jurisdiction is 
limited to that remedy; the court will not gain jurisdiction to affect 
by injunction or otherwise the issuance or enforcement of any effective 
and outstanding notice or order issued by the Director under section 
1313B, subtitle B, or subtitle C of the Safety and Soundness Act, or to 
review, modify, suspend, terminate, or set aside any such effective and 
outstanding notice or order. The proposed rule clarifies that seeking 
an order from a district court to enforce a subpoena or production 
order does not stay automatically the enforcement proceeding, unless 
the presiding officer or Director orders a stay. Finally, changes to 
the rule would make clear that the Director may order sanctions against 
a party who fails to produce or induces another to fail to produce 
subpoenaed documents.
Section 1209.31 Document Discovery Subpoenas to Nonparties
    Section 1209.31 of the proposed rule governs document discovery 
subpoenas to nonparties. The proposed rule would adopt the existing 
rule with minor changes to headings and the addition of text requiring 
that the subpoenaing party seek only documents that are materially 
relevant to the charges and issues presented in the action, state its 
``unequivocal'' intention to pay for document discovery of a non-party, 
and serve all other parties with the subpoena. The edits also make 
clear the discretion of the presiding officer to refuse to issue a 
subpoena to a non-party where the party's application for the subpoena 
does not set forth a valid basis of its issuance, or where the request 
is otherwise objectionable under Sec.  1209.29(b).
    Section 1209.31(b) of the proposed rule governs motions to quash or 
modify a document subpoena, and adds a provision to allow a non-party 
to enter a limited appearance in the proceeding to challenge the 
subpoena directed to it. The non-party may raise objections that may be 
raised by a party under Sec.  1209.30 within the same time deadlines. 
The revised provision permits the party seeking the subpoena to respond 
to the non-party's objections within ten (10) days of service of motion 
to quash or modify. Absent the express leave of the presiding officer, 
no other party may respond to the non-party's motion. Additionally, the 
pending motion shall not operate as a stay on the proceeding or in any 
way limit the presiding officer's authority to impose sanctions on a 
party who induces another to fail to comply with a subpoena. No party 
may rely on the pendency of a motion to quash or modify to excuse 
performance of any action required of that party under this part.
    Finally, enforcement of document subpoenas to non-parties also is 
authorized pursuant to section 1379D(c) of the Safety and Soundness Act 
(12 U.S.C. 4641(c)), and there is no automatic stay in that event. 
Here, again, a party's right to seek enforcement of a non-party 
document subpoena does not limit in any way the authority of the 
presiding officer to impose sanctions on a party who induces another to 
fail to comply with a subpoena.
Section 1209.32 Deposition of Witness Unavailable for Hearing
    Section 1209.32 of the proposed rule provides for a subpoena to 
compel the attendance at a deposition of a witness who will not be at 
the evidentiary hearing in order to preserve the testimony of that 
witness for the record. The existing proposed rule would adopt existing 
provision with only two changes. First, the proposed rule would amend 
the existing rule to require that a witness unavailable for the hearing 
must have personal knowledge of the facts and that the testimony is 
reasonably expected to be materially relevant to claims, defenses, or 
matters determined to be at issue. This requirement parallels the 
presiding officer's authority to control the proceedings and ensure 
that only materially relevant evidence is adduced. Second, a 
requirement is added to create a full written record; recorded or 
videotaped depositions must be transcribed and copies of the recordings 
or videotapes and the transcriptions must be provided to each party.
Section 1209.33 Interlocutory Review
    Section 1209.33 of the proposed rule prescribes the circumstances 
under which the Director may exercise interlocutory review of a ruling 
of the presiding officer prior to the certification of the record. The 
existing provision is adopted as stated.
Section 1209.34 Summary Disposition
    Section 1209.34 of the proposed rule states the test for an order 
granting a motion for summary disposition of the matter and the process 
for hearing and deciding such motions. The existing provision is 
adopted with one change; the time period for filing a response to a 
dispositive motion is extended to thirty (30) days, in order to provide 
sufficient time to respond to arguments that may present novel or 
complex issues.
Section 1209.35 Partial Summary Disposition
    Section 1209.35 of the proposed rule states that if the presiding 
officer determines that some of the claims are subject to summary 
disposition a hearing on the remaining claims shall be conducted, and 
following that, the recommended decision will address all of the 
claims. The proposed rule would adopt the existing provision as stated.

[[Page 49327]]

Section 1209.36 Scheduling and Pre-Hearing Conferences
    Section 1209.36 sets out how the presiding officer manages the 
scheduling and pre-hearing conferences and the issuance of scheduling 
and pre-hearing orders. The proposed rule would adopt the existing 
provision with one change: paragraph (a) ``scheduling conference'' 
would be edited to conform to the proposed powers of the presiding 
officer. As proposed, it specifies that within thirty (30) days of 
service of the notice of charges, the presiding officer is to require 
each party or the party's representative to participate (in person or 
via teleconference at the option of the presiding officer) in an 
initial scheduling conference for the purpose of setting the time and 
place of the evidentiary hearing in the District of Columbia. In 
connection with this initial scheduling conference, the presiding 
officer will determine the course and conduct of the proceeding.
Section 1209.37 Pre-Hearing Submissions
    Section 1209.37 of the proposed rule states the required 
submissions and sets the deadline for service of these items by each 
party on every other party. The existing provision, as stated, would be 
adopted.
Section 1209.38 Hearing Subpoenas
    Section 1209.39 of the proposed rule sets forth the process for 
applying for a hearing subpoena and the circumstances under which the 
presiding officer may refuse to issue a subpoena or require a 
modification of a proposed subpoena. The provision would be adopted, as 
set forth in the existing provision with minor technical edits.
Sections 1209.39 Through 1209.49 [Reserved]
Section 1209.50 Conduct of Hearings
    Section 1209.50 of the proposed rule prescribes the general rules 
for hearings, and the specific rule pertaining to the order of the 
hearing, the examination of witnesses, stipulations, and the hearing 
transcript. The existing provision would be adopted, as stated.
Section 1209.51 Evidence
    Section 1209.51 of the proposed rule sets out the requirements for 
the admissibility of evidence, official notice, the introduction of 
documentary evidence, objections to the introduction of evidence, 
stipulations, and depositions of unavailable witnesses. The provision 
would be adopted, as stated in the existing provision with minor 
technical edits to require that stipulations as to any document to be 
admitted into evidence be made a part of the record.
Section 1209.52 Post-Hearing Filings
    Section 1209.52 of the proposed rule establishes the briefing 
process and schedule for filing proposed findings and conclusions and 
supporting briefs. The provision would be adopted, as stated in the 
existing provision with minor technical edits to re-set filing 
deadlines as follows: proposed findings of fact and conclusions of law 
are to be filed with the presiding officer within thirty (30) days of 
receiving the notice that the transcript was filed with the presiding 
officer. The filing deadline was extended to ensure the parties would 
have sufficient time to address novel or complex issues of law or fact. 
Similarly, the response deadline was extended to fifteen (15) days. The 
requirement that reply briefs be limited to responding to new matters 
also was strengthened.
Section 1209.53 Recommended Decision and Filing of Record
    Section 1209.53 of the proposed rule prescribes the process and 
time deadlines for the presiding officer to file the recommended 
decision and record with the Director. The provision would be adopted, 
as stated in the existing provision with minor technical edits to reset 
the filing deadline at forty-five (45) days after expiration of the 
time allowed for filing briefs. The filing deadline proposed time is 
extended to ensure that the presiding officer is afforded sufficient 
time to address multiple parties' arguments, complex factual matters, 
or novel legal issues that may arise in any given proceeding.
Section 1209.54 Exceptions to Recommended Decision
    Section 1209.54 of the proposed rule establishes the process and 
time deadlines for the parties to respond to the presiding officer's 
recommended decision. The provision would be adopted, as stated in the 
existing provision with minor technical edits to reset the filing 
deadline at thirty (30) days after service of the recommended decision. 
The filing deadline was extended to afford the parties sufficient time 
to address issues raised in the recommended decision.
Section 1209.55 Review by Director
    Section 1209.55 of the proposed rule provides for the Director to 
serve notice on the parties when the record is determined to be 
complete, allows that the Director may permit the parties to give an 
oral argument on the issues, and states the process for rendering the 
final decision. The provision would be adopted, as stated in the 
existing provision with minor technical edits to re-set the deadline 
for rendering the decision at ninety (90) days after notification to 
the parties that the case has been submitted for final decision. The 
time period was adjusted to enable the Director adequately to address 
any issue that may be presented by an enforcement action under the 
rule.
Section 1209.56 Exhaustion of Administrative Remedies
    Section 1209.56 of the proposed rule provides that to meet the 
exhaustion requirement, a party must file with the Director exceptions 
to the recommended decision. This is a precondition to seeking judicial 
review of any decision issued by the Director under this part.
Section 1209.57 Stays Pending Judicial Review
    Section 1209.57 of the proposed rule provides that the commencement 
of an action for judicial review does not operate as a stay of the 
Director's determination unless the Director orders a stay. As 
proposed, the existing provision would be adopted, as stated with no 
changes.
Sections 1209.58 Through 1209.69 [Reserved]

Subpart D--Parties and Representational Practice Before the Federal 
Housing Finance Agency; Standards of Conduct

Section 1209.70 Scope
    Subpart D of this part contains rules governing practice by parties 
or their representatives before FHFA in an adjudicatory proceeding and 
standards of conduct under this part and in any appearance before the 
Director or any agency representative. This subpart outlines the 
sanctions that may be prescribed by a presiding officer or the Director 
against parties or their representatives who fail to conform to the 
requirements and conduct guidelines; such representation includes, but 
is not limited to, the practice of attorneys and accountants. Employees 
of FHFA are not subject to disciplinary proceedings under this subpart. 
This subpart, as proposed, would adopt the existing provision with 
minor edits as noted.
Section 1209.71 Definitions
    Section 1209.71 of the proposed rule would adopt the existing rule 
provision that defines practice before FHFA, with minor edits to 
reflect that the representation is with reference to

[[Page 49328]]

regulated entities or entity-affiliated parties, rather than the 
Enterprises. The definition excludes any work prepared for a regulated 
entity or entity-affiliated party solely at the request of such party 
for use in the ordinary course of its business.
Section 1209.72 Appearance and Practice in Adjudicatory Proceedings
    Section 1209.72 of the proposed rule would adopt, without 
amendment, the existing provision that delimits the representational 
practice of attorneys and non-attorneys before FHFA. A party may appear 
pro se. In the event of a pending proceeding any person appearing shall 
file a notice of appearance. The provision prescribes the requirements 
for such notices.
Section 1209.73 Conflicts of Interest
    Section 1209.73 of the proposed rule would adopt, without 
amendment, the existing rule provision that sets out the prohibition on 
conflicts in representation and specifies applicable requirements 
pertaining to certification and waiver.
Section 1209.74 Sanctions
    Section 1209.74 of the proposed rule would adopt the existing rule 
provision governing appropriate sanctions that may be imposed during 
the course of any proceeding when any party or representative of record 
has acted or failed to act in a manner clearly required by applicable 
statute, regulation, or order, and that act or failure to act 
constitutes contemptuous conduct, with minor technical edits. The edits 
clarify that such conduct may occur in connection with any phase of any 
proceeding, hearing, or appearance before a presiding officer or the 
Director. The proposed rule would reissue the definitions of 
contemptuous conduct, the procedure for imposition of sanctions, and 
sanctions for contemptuous conduct, without change.
Section 1209.75 Censure, Suspension, Disbarment, and Reinstatement
    Section 1209.75 of the proposed rule would adopt, with minor edits, 
the existing rule provision governing the circumstances under which the 
Director may censure any individual who practices or attempts to 
practice before FHFA, or suspend or revoke the privilege to appear or 
practice before FHFA, after notice and a hearing in the matter.
    The edit clarifies that legal or regulatory violations may pertain 
to any applicable law. Additionally, the proposed rule mirrors the 
existing rule in setting out the bases for mandatory suspension and 
debarment, and the requirements pertaining to notices, applications for 
reinstatement, hearings, and conferences in proceedings under Subpart D 
of this part.
Sections 1209.76 Through 1209.79 [Reserved]

Subpart E--Civil Money Penalty Inflation Adjustments

Section 1209.80 Inflation Adjustments
    Section 1209.80 of the proposed rule would adopt, with minor edits, 
the existing rule provision governing the maximum amount of each civil 
money penalty within FHFA's jurisdiction, as set by the Safety and 
Soundness Act and thereafter adjusted in accordance with the Inflation 
Adjustment Act. In a change from the existing rule, the proposed rule 
establishes this process in subpart E to facilitate subsequent 
technical penalty amount adjustments as provided by law.
Section 1209.81 Applicability
    Section 1209.81 of the proposed rule would adopt, with minor edits, 
the existing provision stating it is applicable to civil money 
penalties under section 1376 of the Safety and Soundness Act (12 U.S.C. 
4636) for violations occurring after July 30, 2008, the effective date 
of HERA.
Sections 1209.82 Through 1209.99 [Reserved]

Subpart F--Suspension or Removal of Entity-Affiliated Party Charged 
With Felony

Section 1209.100 Scope
    As proposed, new subpart F would adopt the requirements under 
section 1377(h) of the Safety and Soundness Act, as amended, governing 
informal hearings to be afforded to any entity-affiliated party who has 
been suspended, removed or prohibited from further participation in the 
business affairs of a regulated entity by a notice or order issued by 
the Director in accordance with section 1377(h)(4) of the Safety and 
Soundness Act (12 U.S.C. 4636a(h)). Importantly, the statute does not 
require a hearing on the record, thus the formal hearing procedures in 
subpart C are not applicable to proceedings under section 1377(h) of 
the Safety and Soundness Act. All that is required is an informal 
hearing that satisfies the basic elements of due process, notice and 
opportunity to respond. Subpart F establishes that informal hearing 
process.
Section 1209.101 Suspension, Removal, or Prohibition
    Section 1209.101 of the proposed rule implements section 1377(h) of 
the Safety and Soundness Act and prescribes the circumstances under 
which the Director may suspend, remove, or prohibit the further 
participation of an entity-affiliated party who has been charged, in 
any information, indictment, or complaint, with the commission of or 
participation in a crime that involves dishonesty or breach of trust 
that is punishable by imprisonment for more than one (1) year under 
State or Federal law. The rule requires a notice or an order of 
removal, as appropriate, and prescribes the effective period, as well 
as the effect of acquittal. The notice must state the basis for the 
suspension and the right of the party to request an informal hearing as 
provided in Sec.  1209.102.
Section 1209.102 Hearing on Removal or Suspension
    Section 1209.102 of the proposed rule sets forth the requirements 
for an informal hearing on a removal or suspension under section 
1377(h) of the Safety and Soundness Act (12 U.S.C. 46436a(h)), and the 
timing and procedural matters of such hearings. An APA-type full 
evidentiary hearing on the record is not required under the Safety and 
Soundness Act. But the hearing prescribed under this section will meet 
the essential notice and opportunity to respond requirements of due 
process. Therefore, the requirements as to form, timing, conduct, 
submissions, and the record of the hearing, are specified in this 
provision. The proposed rule allows that an entity-affiliated party may 
elect in writing to waive his right to appear in person or through 
counsel to make a statement and to have the matter determined solely on 
the basis of his written submission. A new provision clarifies that the 
purpose of the informal hearing is to determine whether the suspension 
or prohibition will be continued, modified, or terminated, or whether 
an order removing such party or prohibiting the party from 
participation in the affairs of the regulated entity will be rescinded 
or modified.
    An action by the Director under this section shall not be deemed as 
a predicate or a bar to other regulatory, supervisory or enforcement 
action under the Safety and Soundness Act.

[[Page 49329]]

Section 1209.103 Recommended and Final Decisions
    Section 1209.103 of the proposed rule sets forth the requirements 
for the recommended decision of a presiding officer. Under this 
provision the parties are afforded a five (5) day comment period, 
comments on the recommended decision are directed to the presiding 
officer, and no extensions of the stated time period are permitted. The 
decision of the Director is provided in writing to the entity-
affiliated party within sixty (60) days. The decision is a final, non-
appealable order. An individual who has been suspended or removed by 
order of the Director may request reconsideration of such an order 
under the prescribed requirements. There is no hearing on a petition 
for reconsideration, and the Director will inform the requestor of the 
disposition of the request in a timely manner. A decision on a request 
for reconsideration shall not constitute an appealable order.

V. Regulatory Impact

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the 
proposed regulation under the Regulatory Flexibility Act. FHFA 
certifies that the proposed regulation, if adopted, is not likely to 
have a significant economic impact on a substantial number of small 
business entities because the regulation applies to the Enterprises and 
Banks, which are not small entities for purposes of the Regulatory 
Flexibility Act. 5 U.S.C. 605(b).

List of Subjects

12 CFR Part 908

    Administrative practice and procedure, Federal home loan banks, 
Penalties.

12 CFR Part 1209

    Administrative practice and procedure, Federal home loan banks.

12 CFR Part 1780

    Administrative practice and procedure, Penalties.
    Accordingly, for the reasons set forth in the preamble, under the 
authority of 12 U.S.C. 4513b and 4526, the Federal Housing Finance 
Agency proposes to amend chapters IX, XII, and XVII of Title 12, Code 
of Federal Regulations, as follows:

CHAPTER IX--FEDERAL HOUSING FINANCE BOARD

Subchapter B--Federal Housing Finance Board Organization and Operations

PART 908--[REMOVED]

    1. Remove 12 CFR Part 908.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

Subchapter A--Organization and Operations

    2. Add part 1209 to subchapter A to read as follows:

PART 1209--RULES OF PRACTICE AND PROCEDURE

Subpart A--Scope and Authority
Sec.
1209.1 Scope.
1209.2 Rules of construction.
1209.3 Definitions.
Subpart B--Enforcement Proceedings Under Sections 1371 Through 1379D of 
the Safety and Soundness Act
1209.4 Scope and authority.
1209.5 Cease and desist proceedings.
1209.6 Temporary cease and desist orders.
1209.7 Civil money penalties.
1209.8 Removal and prohibition proceedings.
1209.9 Supervisory actions not affected.
Subpart C--Rules of Practice and Procedure
1209.10 Authority of the Director.
1209.11 Authority of the Presiding Officer.
1209.12 Public hearings; Closed hearings.
1209.13 Good faith certification.
1209.14 Ex parte communications.
1209.15 Filing of papers.
1209.16 Service of papers.
1209.17 Time computations.
1209.18 Change of time limits.
1209.19 Witness fees and expenses.
1209.20 Opportunity for informal settlement.
1209.21 Conduct of examination.
1209.22 Collateral attacks on adjudicatory proceeding.
1209.23 Commencement of proceeding and contents of notice of 
charges.
1209.24 Answer.
1209.25 Amended pleadings.
1209.26 Failure to appear.
1209.27 Consolidation and severance of actions.
1209.28 Motions.
1209.29 Discovery.
1209.30 Request for document discovery from parties.
1209.31 Document discovery subpoenas to nonparties.
1209.32 Deposition of witness unavailable for hearing.
1209.33 Interlocutory review.
1209.34 Summary disposition.
1209.35 Partial summary disposition.
1209.36 Scheduling and pre-hearing conferences.
1209.37 Pre-hearing submissions.
1209.38 Hearing subpoenas.
1209.39-49 [Reserved].
1209.50 Conduct of hearings.
1209.51 Evidence.
1209.52 Post-hearing filings.
1209.53 Recommended decision and filing of record.
1209.54 Exceptions to recommended decision.
1209.55 Review by Director.
1209.56 Exhaustion of administrative remedies.
1209.57 Stays pending judicial review.
1209.58-69 [Reserved].
Subpart D--Parties and Representational Practice Before the Federal 
Housing Finance Agency; Standards of Conduct
1209.70 Scope.
1209.71 Definitions.
1209.72 Appearance and practice in adjudicatory proceedings.
1209.73 Conflicts of interest.
1209.74 Sanctions.
1209.75 Censure, suspension, disbarment, and reinstatement.
1209.76-79 [Reserved].
Subpart E--Civil Money Penalty Inflation Adjustments
1209.80 Inflation adjustments.
1209.81 Applicability.
1209.82-99 [Reserved].
Subpart F--Suspension or Removal of an Entity-Affiliated Party Charged 
With Felony
1209.100 Scope.
1209.101 Suspension, removal, or prohibition.
1209.102 Hearing on removal or suspension.
1209.103 Recommended and final decisions.

    Authority: 5 U.S.C. 551, 556, 557 and 701 et seq.; 12 U.S.C. 
4501, 4503, 4511, 4513, 4513b, 4517, 4526, 4531, 4535, 4536, 4581, 
4585, 4631-4641; and 28 U.S.C. 2461 note.

Subpart A--Scope and Authority


Sec.  1209.1  Scope.

    (a) Authority. This part sets forth the Rules of Practice and 
Procedure in accordance with the Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992, title XIII of the Housing and 
Community Development Act of 1992, Public Law 102-550, sections 1301 et 
seq., codified at 12 U.S.C. 4501 et seq., as amended (the ``Safety and 
Soundness Act'').\1\
---------------------------------------------------------------------------

    \1\ As used in this part, the ``Safety and Soundness Act'' means 
the Federal Housing Enterprise Financial Safety and Soundness Act of 
1992, as amended. See 12 CFR 1209.3. The Safety and Soundness Act 
was amended by the Housing and Economic Recovery Act of 2008, Public 
Law 110-289, sections 1101 et seq., 122 Stat. 2654 (July 30, 2008) 
(HERA). Specifically, sections 1151 through 1158 of HERA amended 
sections 1371 through 1379D of the Safety and Soundness Act 
(codified at 12 U.S.C. 4631 through 4641) (hereafter, ``Enforcement 
Proceedings'').

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

[[Page 49330]]

    (b) Enforcement Proceedings. Subpart B of this part (Enforcement 
Proceedings under sections 1371 through 1379D of the Safety and 
Soundness Act) sets forth the statutory authority for enforcement 
proceedings under sections 1371 through 1379D of the Safety and 
Soundness Act (12 U.S.C. 4631 through 4641) (Enforcement Proceedings).
    (c) Rules of Practice and Procedure. Subpart C of this part (Rules 
of Practice and Procedure) prescribes the general rules of practice and 
procedure applicable to adjudicatory proceedings that the Director is 
required by statute to conduct on the record after opportunity for a 
hearing under the Administrative Procedure Act, 5 U.S.C. 554, 556, and 
557, under the following statutory provisions:
    (1) Enforcement proceedings under sections 1371 through 1379D of 
the Safety and Soundness Act (12 U.S.C. 4631 through 4641);
    (2) Removal, prohibition, and civil money penalty proceedings for 
violations of post-employment restrictions imposed by applicable law; 
and
    (3) Proceedings under section 102 of the Flood Disaster Protection 
Act of 1973, as amended (42 U.S.C. 4012a) to assess civil money 
penalties.
    (d) Representation and conduct. Subpart D of this part (Parties and 
Representational Practice before the Federal Housing Finance Agency; 
Standards of Conduct) sets out the rules of representation and conduct 
that shall govern any appearance by any person, party, or 
representative of any person or party, before a presiding officer, the 
Director of FHFA, or a designated representative of the Director or 
FHFA staff, in any proceeding or matter pending before the Director.
    (e) Civil money penalty inflation adjustments. Subpart E of this 
part (Civil Money Penalty Inflation Adjustments) sets out the 
requirements for the periodic adjustment of maximum civil money penalty 
amounts under the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended (Inflation Adjustment Act) on a recurring four-year 
cycle.\2\
---------------------------------------------------------------------------

    \2\ Public Law 101-410, 104 Stat. 890, as amended by the Debt 
Collection Improvement Act of 1996, Public Law 104-134, title III, 
sec. 31001(s)(1), Apr. 26, 1996, 110 Stat. 1321-373; Public Law 105-
362, title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 3293 (28 
U.S.C. 2461 note).
---------------------------------------------------------------------------

    (f) Informal proceedings. Subpart F of this part (Suspension or 
Removal of an Entity-Affiliated Party Charged with Felony) sets out the 
scope and procedures for the suspension or removal of an entity-
affiliated party charged with a felony under section 1377(h) of the 
Safety and Soundness Act (12 U.S.C. 4636a(h)), which provides for an 
informal hearing before the Director.


Sec.  1209.2  Rules of construction.

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


Sec.  1209.3  Definitions.

    For purposes of this part, unless explicitly stated to the 
contrary:
    Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules, on the record, and leading to the formulation of a final 
order other than a regulation.
    Agency has the meaning defined in section 1303(2) of the Safety and 
Soundness Act (12 U.S.C. 4502(2)).
    Associated with the regulated entity means, for purposes of section 
1379 of the Safety and Soundness Act (12 U.S.C. 4637), any direct or 
indirect involvement or participation in the conduct of operations or 
business affairs of a regulated entity, including engaging in 
activities related to the operations or management of, providing advice 
or services to, consulting or contracting with, serving as agent for, 
or in any other way affecting the operations or business affairs of a 
regulated entity--with or without regard to--any direct or indirect 
payment, promise to make payment, or receipt of any compensation or 
thing of value, such as money, notes, stock, stock options, or other 
securities, or other benefit or remuneration of any kind, by or on 
behalf of the regulated entity, except any payment made pursuant to a 
retirement plan or deferred compensation plan, which is determined by 
the Director to be permissible under section 1318(e) of the Safety and 
Soundness Act (12 U.S.C. 4518(e)), or by reason of the death or 
disability of the party, in the form and manner commonly paid or 
provided to retirees of the regulated entity, unless such payment, 
compensation, or such benefit is promised or provided to or for the 
benefit of said party for the provision of services or other benefit to 
the regulated entity.
    Authorizing statutes has the meaning defined in section 1303(3) of 
the Safety and Soundness Act (12 U.S.C. 4502(3)).
    Bank Act means the Federal Home Loan Bank Act, as amended (12 
U.S.C. 1421 et seq.).
    Board or Board of Directors means the board of directors of any 
Enterprise or Federal Home Loan Bank, as provided for in the respective 
authorizing statutes.
    Decisional employee means any member of the Director's or the 
presiding officer's staff who has not engaged in an investigative or 
prosecutorial role in a proceeding and who may assist the Director or 
the presiding officer, respectively, in preparing orders, recommended 
decisions, decisions, and other documents under subpart C of this part.
    Director has the meaning defined in section 1303(9) of the Safety 
and Soundness Act (12 U.S.C. 4502(9)); except, as the context requires 
in this part, ``director'' may refer to a member of the Board of 
Directors or any Board committee of an Enterprise, a Federal Home Loan 
Bank, or the Office of Finance.
    Enterprise has the meaning defined in section 1303(10) of the 
Safety and Soundness Act (12 U.S.C. 4502(10)).
    Entity-affiliated party has the meaning defined in section 1303(11) 
of the Safety and Soundness Act (12 U.S.C. 4502(11)), and may include 
an executive officer, any director, or management of the Office of 
Finance, as applicable under relevant provisions of the Safety and 
Soundness Act or FHFA regulations.
    Executive officer has the meaning defined in section 1303(12) of 
the Safety and Soundness Act (12 U.S.C. 4502(12)), and may include an 
executive officer of the Office of Finance, as applicable under 
relevant provisions of the Safety and Soundness Act or FHFA 
regulations.
    FHFA means the Federal Housing Finance Agency as defined in section 
1303(2) of the Safety and Soundness Act (12 U.S.C. 4502(2)).
    Notice of charges means the charging document served by FHFA to 
commence an enforcement proceeding under this part for the issuance of 
a cease and desist order; removal, suspension, or prohibition order; or 
an order to assess a civil money penalty, under 12 U.S.C. 4631 through 
4641 and Sec.  1209.23. A ``notice of charges,'' as used or referred to 
as such in this part, is not an ``effective notice'' under section 
1375(a) of the Safety and Soundness Act (12 U.S.C. 4635(a)).

[[Page 49331]]

    Office of Finance has the meaning defined in section 1303(19) of 
the Safety and Soundness Act (12 U.S.C. 4502(19)).
    Party means any person named as a respondent in any notice of 
charges, or FHFA, as the context requires in this part.
    Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, organization, regulated entity, entity-affiliated party, or 
other entity.
    Presiding officer means an administrative law judge or any other 
person appointed by or at the request of the Director under applicable 
law to conduct an adjudicatory proceeding under this part.
    Regulated entity has the meaning defined in section 1303(20) of the 
Safety and Soundness Act (12 U.S.C. 4502(20)).
    Representative of record means an individual who is authorized to 
represent a person or is representing himself and who has filed a 
notice of appearance and otherwise has complied with the requirements 
under Sec.  1209.72. FHFA's representative of record may be referred to 
as FHFA's counsel of record or enforcement counsel.
    Respondent means any party that is the subject of a notice of 
charges under this part.
    Safety and Soundness Act means title XIII of the Housing and 
Community Development Act of 1992, Public Law 102-550, known as the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 
as amended (12 U.S.C. 4501 et seq.)
    Violation has the meaning defined in section 1303(25) of the Safety 
and Soundness Act (12 U.S.C. 4502(25)).

Subpart B--Enforcement Proceedings Under Sections 1371 Through 
1379D of the Safety and Soundness Act


Sec.  1209.4  Scope and authority.

    The rules of practice and procedure set forth in Subpart C (Rules 
of Practice and Procedure) of this part shall be applicable to any 
hearing on the record conducted by FHFA in accordance with sections 
1371 through 1379D of the Safety and Soundness Act (12 U.S.C. 4631 
through 4641), as follows:
    (a) Cease-and-desist proceedings under sections 1371 through 1373 
of the Safety and Soundness Act, (12 U.S.C. 4631 through 4633);
    (b) Civil money penalty assessment proceedings under sections 1373 
and 1376 of the Safety and Soundness Act, (12 U.S.C. 4633 and 4636); 
and
    (c) Removal and prohibition proceedings under sections 1373 and 
1377 of the Safety and Soundness Act, (12 U.S.C. 4633 and 4636a), 
except removal proceedings under section 1377(h) of the Safety and 
Soundness Act, (12 U.S.C. 4636a(h)).


Sec.  1209.5  Cease and desist proceedings.

    (a) Cease and desist proceedings.--(1) Authority.--(i) In general. 
As prescribed by section 1371(a) of the Safety and Soundness Act (12 
U.S.C. 4631(a)), the Director may issue and serve upon the regulated 
entity or entity-affiliated party, a notice of charges (as described in 
Sec.  1209.23) to institute cease and desist proceedings, except with 
regard to the enforcement of housing goals that are addressed 
separately under sections 1341 and 1345 of the Safety and Soundness Act 
(12 U.S.C. 4581, 4585).
    (ii) Hearing on the record. In accordance with section 1373 of the 
Safety and Soundness Act (12 U.S.C. 4633)), a hearing on the record 
shall be held in the District of Columbia. Subpart C of this part shall 
govern the hearing procedures.
    (iii) Consent to order. Unless the party served with a notice of 
charges shall appear at the hearing personally or through an authorized 
representative, the party shall be deemed to have consented to the 
issuance of the cease and desist order.
    (2) Unsatisfactory rating. In accordance with section 1371(b) of 
the Safety and Soundness Act (12 U.S.C. 4631(b)), if a regulated entity 
receives an unsatisfactory rating as specified therein, the Director 
may deem the regulated entity to be engaging in an unsafe or unsound 
practice within the meaning of section 1371(a) of the Safety and 
Soundness Act (12 U.S.C. 4631(a)).
    (3) Order. As provided by section 1371(c)(2) of the Safety and 
Soundness Act (12 U.S.C. 4631(c)(2)), if the Director finds on the 
record made at a hearing in accordance with section 1373 of the Safety 
and Soundness Act (12 U.S.C. 4633) that any practice or violation 
specified in the notice of charges has been established (or the 
regulated entity or entity-affiliated party consents pursuant to 
section 1373(a)(4) of the Safety and Soundness Act (12 U.S.C. 
4633(a)(4)), the Director may issue and serve upon the regulated 
entity, executive officer, director, or entity-affiliated party, an 
order (as set forth in Sec.  1209.55) requiring such party to cease and 
desist from any such practice or violation and to take affirmative 
action to correct or remedy the conditions resulting from any such 
practice or violation.
    (b) Affirmative action to correct conditions resulting from 
violations or activities. The authority to issue a cease and desist 
order or a temporary cease and desist order requiring a regulated 
entity, executive officer, director, or entity-affiliated party to take 
affirmative action to correct or remedy any condition resulting from 
any practice or violation with respect to which such cease and desist 
order or temporary cease and desist order is set forth in section 
1371(a), (c)(2), and (d) of the Safety and Soundness Act (12 U.S.C. 
4631(a), (c)(2), and (d)), and includes the authority to:
    (1) Require the regulated entity or entity-affiliated party to make 
restitution, or to provide reimbursement, indemnification, or guarantee 
against loss, if--
    (i) Such entity or party or finance facility was unjustly enriched 
in connection with such practice or violation, or
    (ii) The violation or practice involved a reckless disregard for 
the law or any applicable regulations, or prior order of the Director;
    (2) Require the regulated entity to seek restitution, or to obtain 
reimbursement, indemnification, or guarantee against loss;
    (3) Restrict asset or liability growth of the regulated entity,
    (4) Require the regulated entity to obtain new capital;
    (5) Require the regulated entity to dispose of any loan or asset 
involved;
    (6) Require the regulated entity to rescind agreements or 
contracts;
    (7) Require the regulated entity to employ qualified officers or 
employees (who may be subject to approval by the Director at the 
direction of the Director); and
    (8) Require the regulated entity to take such other action, as the 
Director determines appropriate, including limiting activities.
    (c) Authority to limit activities. As provided by section 1371(e) 
of the Safety and Soundness Act (12 U.S.C. 4631(e)), the authority of 
the Director to issue a cease and desist order under section 1371 of 
the Safety and Soundness Act (12 U.S.C. 4631) or a temporary cease and 
desist order under section 1372 of the Safety and Soundness Act (12 
U.S.C. 4632), includes the authority to place limitations on the 
activities or functions of the regulated entity or entity-affiliated 
party or any executive officer or director of the regulated entity or 
entity-affiliated party.
    (d) Effective date of order. The effective date of an order is as 
set forth in section 1371(f) of the Safety and Soundness Act (12 U.S.C. 
4631(f)).

[[Page 49332]]

Sec.  1209.6  Temporary cease and desist orders.

    (a) Temporary cease and desist orders.--(1) Grounds for issuance. 
The grounds for issuance of a temporary cease and desist order are set 
forth in section 1372(a) of the Safety and Soundness Act (12 U.S.C. 
4632(a)). In accordance with section 1372(a) of the Safety and 
Soundness Act (12 U.S.C. 4632(a)), the Director may:
    (i) Issue a temporary order requiring that regulated entity or 
entity-affiliated party to cease and desist from any violation or 
practice specified in the notice of charges; and
    (ii) Require that regulated entity or entity-affiliated party to 
take affirmative action to prevent or remedy any insolvency, 
dissipation, condition, or prejudice, pending completion of the 
proceedings.
    (2) Additional requirements. As provided by section 1372(a)(2) of 
the Safety and Soundness Act (12 U.S.C. 4632(a)(2)), an order issued 
under section 1372(a)(1) of the Safety and Soundness Act (12 U.S.C. 
4632(a)(1)) may include any requirement authorized under section 
1371(d) of the Safety and Soundness Act (12 U.S.C. 4631(d)).
    (b) Effective date of temporary order. The effective date of a 
temporary order is as provided by section 1372(b) of the Safety and 
Soundness Act (12 U.S.C. 4632(b)). And, unless set aside, limited, or 
suspended by a court in proceedings pursuant to the judicial review 
provisions of section 1372(d) of the Safety and Soundness Act (12 
U.S.C. 4632(d)), shall remain in effect and enforceable pending the 
completion of the proceedings pursuant to such notice of charges, and 
shall remain effective until the Director dismisses the charges 
specified in the notice or until superseded by a cease-and-desist order 
issued pursuant to section 1371 of the Safety and Soundness Act (12 
U.S.C. 4631).
    (c) Incomplete or inaccurate records.--(1) Temporary order. As 
provided by section 1372(c) of the Safety and Soundness Act (12 U.S.C. 
4632(c)), if a notice of charges served under section 1371(a) or (b) of 
the Safety and Soundness Act (12 U.S.C. 4631(a), (b)), specifies on the 
basis of particular facts and circumstances that the books and records 
of the regulated entity served are so incomplete or inaccurate that the 
Director is unable, through the normal supervisory process, to 
determine the financial condition of the regulated entity or the 
details or the purpose of any transaction or transactions that may have 
a material effect on the financial condition of that regulated entity, 
the Director may issue a temporary order requiring:
    (i) The cessation of any activity or practice that gave rise, 
whether in whole or in part, to the incomplete or inaccurate state of 
the books or records; or
    (ii) Affirmative action to restore the books or records to a 
complete and accurate state.
    (2) Effective period. Any temporary order issued under section 
1372(c)(1) of the Safety and Soundness Act (12 U.S.C. 4632(c)(1)) shall 
become effective upon service, and remain in effect and enforceable 
unless set aside, limited, or suspended in accordance with section 
1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)), as 
provided by section 1372(c)(2) of the Safety and Soundness Act (12 
U.S.C. 4632(c)(2)).
    (d) Judicial review. Section 1372(d) of the Safety and Soundness 
Act (12 U.S.C. 4632(d)), authorizes a regulated entity, executive 
officer, director, or entity-affiliated party that has been served with 
a temporary order pursuant to section 1372(a) or (b) of the Safety and 
Soundness Act (12 U.S.C. 4632(a), (b)) to apply to the United States 
District Court for the District of Columbia within ten (10) days after 
service of the temporary order for an injunction setting aside, 
limiting, or suspending the enforcement, operation, or effectiveness of 
the temporary order, pending the completion of the administrative 
enforcement proceeding. The district court has jurisdiction to issue 
such injunction.
    (e) Enforcement of temporary order. As provided by section 1372(e) 
of the Safety and Soundness Act (12 U.S.C. 4632(e)), in the case of any 
violation, threatened violation, or failure to obey a temporary order 
issued pursuant to this section, the Director may bring an action in 
the United States District Court for the District of Columbia for an 
injunction to enforce a temporary order, and the district court is to 
issue such injunction upon a finding made in accordance with section 
1372(e) of the Safety and Soundness Act (12 U.S.C. 4632(e)).


Sec.  1209.7  Civil money penalties.

    (a) Civil money penalty proceedings.--(1) In general. As provided 
by section 1376(a) of the Safety and Soundness Act (12 U.S.C. 4636(a)), 
the Director may impose a civil money penalty in proceedings to be 
conducted under the procedural rules in subpart C of this part, on any 
regulated entity or any entity-affiliated party in accordance with 
section 1376 of the Safety and Soundness Act for any violation, 
practice, or breach addressed under sections 1371, 1372, or 1376 of the 
Safety and Soundness Act (12 U.S.C. 4631, 4632, 4636), except with 
regard to the enforcement of housing goals that are addressed 
separately under sections 1341 and 1345 of the Safety and Soundness Act 
(12 U.S.C. 4581, 4585).
    (2) Amount of penalty.--(i) First Tier. Section 1376(b)(1) of the 
Safety and Soundness Act (12 U.S.C. 4636(b)(1)) prescribes the civil 
penalty for violations as stated therein, in the amount of $10,000.
    (ii) Second Tier. Section 1376(b)(2) of the Safety and Soundness 
Act (12 U.S.C. 4636(b)(2)) provides that notwithstanding paragraph 
(b)(1) thereof, a regulated entity or entity-affiliated party shall 
forfeit and pay a civil penalty of not more than $50,000 for each day 
during which a violation, practice, or breach continues, if the 
regulated entity or entity-affiliated party commits any violation 
described in (b)(1) thereof, recklessly engages in an unsafe or unsound 
practice, or breaches any fiduciary duty, and the violation, practice, 
or breach is part of a pattern of misconduct; causes or is likely to 
cause more than a minimal loss to the regulated entity; or results in 
pecuniary gain or other benefit to such party.
    (iii) Third Tier. Section 1376(b)(3) of the Safety and Soundness 
Act (12 U.S.C. 4636(b)(3)) provides that, notwithstanding paragraphs 
(b)(1) and (b)(2) thereof, any regulated entity or entity-affiliated 
party shall forfeit and pay a civil penalty, in accordance with section 
1376(b)(4) of the Safety and Soundness Act (12 U.S.C. 4636(b)(4)), for 
each day during which such violation, practice, or breach continues, if 
such regulated entity or entity-affiliated party:
    (A) Knowingly--
    (1) Commits any violation described in any subparagraph of section 
1376(b)(1) of the Safety and Soundness Act;
    (2) Engages in any unsafe or unsound practice in conducting the 
affairs of the regulated entity; or
    (3) Breaches any fiduciary duty; and
    (B) Knowingly or recklessly causes a substantial loss to the 
regulated entity or a substantial pecuniary gain or other benefit to 
such party by reason of such violation, practice, or breach.
    (b) Maximum amounts.--(1) Maximum daily penalty. Section 1376(b)(4) 
of the Safety and Soundness Act (12 U.S.C. 4636(b)(4)), prescribes the 
maximum daily amount of a civil penalty that may be assessed for any 
violation, practice, or breach pursuant to section 1376(b)(3) of the 
Safety and Soundness Act (12 U.S.C. 4636(b)(3)), in the case of any 
entity-affiliated party

[[Page 49333]]

(not to exceed $2,000,000.00), and in the case of any regulated entity 
($2,000,000.00).
    (2) Inflation Adjustment Act. The maximum civil penalty amounts are 
subject to periodic adjustment under the Federal Civil Penalties 
Inflation Adjustment Act of 1990, as amended (28 U.S.C. 2461 note), as 
provided in subpart E of this part.
    (c) Factors in determining amount of penalty. In accordance with 
section 1376(c)(2) of the Safety and Soundness Act (12 U.S.C. 
4636(c)(2)), in assessing civil money penalties on a regulated entity 
or an entity-affiliated party in amounts as provided in section 1376(b) 
of the Safety and Soundness Act (12 U.S.C. 4636(b)), the Director shall 
give consideration to factors as:
    (1) The gravity of the violation, practice, or breach;
    (2) Any history of prior violations or supervisory actions, or any 
attempts at concealment;
    (3) The effect of the penalty on the safety and soundness of the 
regulated entity or the Office of Finance;
    (4) Any loss or risk of loss to the regulated entity or to the 
Office of Finance;
    (5) Any benefits received or derived, whether directly or 
indirectly, by the respondent(s);
    (6) Any injury to the public;
    (7) Any deterrent effect on future violations, practices, or 
breaches;
    (8) The financial capacity of the respondent(s), or any unusual 
circumstance(s) of hardship upon an executive officer, director, or 
other individual;
    (9) The promptness, cost, and effectiveness of any effort to remedy 
or ameliorate the consequences of the violation, practice, or breach;
    (10) The candor and cooperation, if any, of the respondent(s); and
    (11) Any other factors the Director may determine by regulation to 
be appropriate.
    (d) Review of imposition of penalty. Section 1376(c)(3) of the 
Safety and Soundness Act (12 U.S.C. 4636(c)(3)) governs judicial review 
of a penalty order under section 1374 of the Safety and Soundness Act 
(12 U.S.C. 4634).


Sec.  1209.8  Removal and prohibition proceedings.

    (a) Removal and prohibition proceedings.--(1) Authority to issue 
order. As provided by section 1377(a)(1) of the Safety and Soundness 
Act (12 U.S.C. 4636a(a)(1)), the Director may serve upon a party 
described in paragraph (a)(2) of this section, or any officer, 
director, or management of the Office of Finance, a notice of the 
intention of the Director to suspend or remove such party from office, 
or to prohibit any further participation by such party in any manner in 
the conduct of the affairs of the regulated entity. The notice shall 
conform with Sec.  1209.23.
    (2) Applicability. As provided by section 1377(a)(2) of the Safety 
and Soundness Act (12 U.S.C. 4636a(a)(2)), a party described in this 
paragraph is an entity-affiliated party or any officer, director, or 
management of the Office of Finance, if the Director determines that:
    (i) That party, officer, or director has, directly or indirectly--
    (A) Violated--
    (1) Any law or regulation;
    (2) Any cease and desist order that has become final;
    (3) Any condition imposed in writing by the Director in connection 
with an application, notice, or other request by a regulated entity; or
    (4) Any written agreement between such regulated entity and the 
Director;
    (B) Engaged or participated in any unsafe or unsound practice in 
connection with any regulated entity or business institution; or
    (C) Committed or engaged in any act, omission, or practice which 
constitutes a breach of such party's fiduciary duty;
    (ii) By reason of such violation, practice, or breach--
    (A) Such regulated entity or business institution has suffered or 
likely will suffer financial loss or other damage; or
    (B) Such party directly or indirectly received financial gain or 
other benefit; and
    (iii) The violation, practice, or breach described in subparagraph 
(i) of this section--
    (A) Involves personal dishonesty on the part of such party; or
    (B) Demonstrates willful or continuing disregard by such party for 
the safety or soundness of such regulated entity or business 
institution.
    (3) Applicability to business entities. Under section 1377(f) of 
the Safety and Soundness Act (12 U.S.C. 4636a(f)), this remedy applies 
only to a person who is an individual, unless the Director specifically 
finds that it should apply to a corporation, firm, or other business 
entity.
    (b) Suspension order.--(1) Suspension or prohibition authorized. If 
the Director serves written notice under section 1377(a) of the Safety 
and Soundness Act (12 U.S.C. 4636a(a)) upon a party subject to that 
section, the Director may, by order, suspend or remove such party from 
office, or prohibit such party from further participation in any manner 
in the conduct of the affairs of the regulated entity, if the Director:
    (i) Determines that such action is necessary for the protection of 
the regulated entity; and
    (ii) Serves such party with written notice of the order.
    (2) Effective period. The effective period of any order is as 
provided in section 1377(b) of the Safety and Soundness Act (12 U.S.C. 
4636a(b)).
    (3) Copy of order to be served on regulated entity. In accordance 
with section 1377(b)(3) of the Safety and Soundness Act (12 U.S.C. 
4636a(b)(3)), the Director will serve a copy of any order to suspend, 
remove, or prohibit participation in the conduct of the affairs on any 
regulated entity with which such party is affiliated at the time such 
order is issued.
    (c) Notice; hearing and order.--(1) Written notice. A notice of the 
intention of the Director to issue an order under sections 1377(a) and 
(c) of the Safety and Soundness Act, (12 U.S.C. 4636a(a), (c)), shall 
conform with Sec.  1209.23, and may include any such additional 
information as the Director may require.
    (2) Hearing. A hearing on the record shall be held in the District 
of Columbia in accordance with sections 1373(a)(1) and 1377(c)(2) of 
the Safety and Soundness Act. See 12 U.S.C. 4633(a)(1), 4636a(c)(2).
    (3) Consent. As provided by section 1377(c)(3) of the Safety and 
Soundness Act (12 U.S.C. 4636a(c)(3)), unless the party that is the 
subject of a notice delivered under paragraph (a) of this section 
appears in person or by a duly authorized representative, in the 
adjudicatory proceeding, such party shall be deemed to have consented 
to the issuance of an order under this section.
    (4) Issuance of order of suspension or removal. As provided by 
section 1377(c)(4) of the Safety and Soundness Act (12 U.S.C. 
4636a(c)(4)), the Director may issue an order under this part, as the 
Director may deem appropriate, if:
    (i) A party is deemed to have consented to the issuance of an order 
under paragraph (d); or
    (ii) Upon the record made at the hearing, the Director finds that 
any of the grounds specified in the notice have been established.
    (5) Effectiveness of order. As provided by section 1377(c)(5) of 
the Safety and Soundness Act (12 U.S.C. 4636a(c)(5)), any order issued 
and served upon a party in accordance with this section shall become 
effective at the expiration of thirty (30) days after the date of 
service upon such party and any regulated entity or entity-affiliated 
party. An order issued upon consent under paragraph (c)(3) of this 
section, however, shall become effective at the

[[Page 49334]]

time specified therein. Any such order shall remain effective and 
enforceable except to such extent as it is stayed, modified, 
terminated, or set aside by action of the Director or a reviewing 
court.
    (d) Prohibition of certain activities and industry-wide 
prohibition.--(1) Prohibition of certain activities. As provided by 
section 1377(d) of the Safety and Soundness Act (12 U.S.C. 4636a(d)), 
any person subject to an order issued under subpart B of this part 
shall not--
    (i) Participate in any manner in the conduct of the affairs of any 
regulated entity or the Office of Finance;
    (ii) Solicit, procure, transfer, attempt to transfer, vote, or 
attempt to vote any proxy, consent, or authorization with respect to 
any voting rights in any regulated entity;
    (iii) Violate any voting agreement previously approved by the 
Director; or
    (iv) Vote for a director, or serve or act as an entity-affiliated 
party of a regulated entity or as an officer or director of the Office 
of Finance.
    (2) Industry-wide prohibition. As provided by section 1377(e)(1) of 
the Safety and Soundness Act (12 U.S.C. 4636a(e)(1)), except as 
provided in section 1377(e)(2) of the Safety and Soundness Act (12 
U.S.C. 4636a(e)(2)), any person who, pursuant to an order issued under 
section 1377 of the Safety and Soundness Act (12 U.S.C. 4636a), has 
been removed or suspended from office in a regulated entity or the 
Office of Finance, or prohibited from participating in the conduct of 
the affairs of a regulated entity or the Office of Finance, may not, 
while such order is in effect, continue or commence to hold any office 
in, or participate in any manner in the conduct of the affairs of, any 
regulated entity or the Office of Finance.
    (3) Relief from industry-wide prohibition at the discretion of the 
Director.--(i) Relief from order. As provided by section 1377(e)(2) of 
the Safety and Soundness Act (12 U.S.C. 4636a(e)(2)), if, on or after 
the date on which an order has been issued under section 1377 of the 
Safety and Soundness Act (12 U.S.C. 4636a) that removes or suspends 
from office any party, or prohibits such party from participating in 
the conduct of the affairs of a regulated entity or the Office of 
Finance, such party receives the written consent of the Director, the 
order shall, to the extent of such consent, cease to apply to such 
party with respect to the regulated entity or the Office of Finance as 
described in the written consent. Such written consent shall be on such 
terms and conditions as the Director therein may specify. Any such 
consent shall be publicly disclosed.
    (ii) No waiver; no private right of action. Nothing in this 
paragraph shall be construed to require the Director to entertain or 
provide such written consent, or to confer any rights to such 
consideration or consent upon any party, regulated entity, entity-
affiliated party, or the Office of Finance. Additionally, any refusal 
by the Director to consent to relief from an outstanding order under 
this part is committed wholly to the discretion of the Director, and 
shall not be a final agency action for purposes of seeking judicial 
review.
    (4) Violation of industry-wide prohibition. As provided by section 
1377(e)(3) of the Safety and Soundness Act (12 U.S.C. 4636a(e)(3)), any 
violation of section 1377(e)(1) of the Safety and Soundness Act (12 
U.S.C. 4636a(e)(1)) by any person who is subject to an order issued 
under section 1377(h) of the Safety and Soundness Act (12 U.S.C. 
4636a(h)) (suspension or removal of entity-affiliated party charged 
with felony) shall be treated as a violation of the order.
    (e) Stay of suspension or prohibition of entity-affiliated party. 
As provided by section 1377(g) of the Safety and Soundness Act (12 
U.S.C. 4636a(g)), not later than ten (10) days after the date on which 
any entity-affiliated party has been suspended from office or 
prohibited from participation in the conduct of the affairs of a 
regulated entity, such party may apply to the United States District 
Court for the District of Columbia, or the United States district court 
for the judicial district in which the headquarters of the regulated 
entity is located, for a stay of such suspension or prohibition pending 
the completion of the administrative enforcement proceeding pursuant to 
section 1377(c) of the Safety and Soundness Act (12 U.S.C. 4636a(c)). 
The court shall have jurisdiction to stay such suspension or 
prohibition, but such jurisdiction does not extend to the 
administrative enforcement proceeding.


Sec.  1209.9  Supervisory actions not affected.

    As provided by section 1311(c) of the Safety and Soundness Act (12 
U.S.C. 4511(c)), the authority of the Director to take action under 
subtitle A of the Safety and Soundness Act (12 U.S.C. 4611 et seq.) 
(e.g., the appointment of a conservator or receiver for a regulated 
entity; entering into a written agreement or pursuing an informal 
agreement with a regulated entity as the Director deems appropriate; 
and undertaking other such actions as may be applicable to 
undercapitalized, significantly undercapitalized or critically 
undercapitalized regulated entities), or to initiate enforcement 
proceedings under subtitle C of the Safety and Soundness Act (12 U.S.C. 
4631 et seq.), shall not in any way limit the general supervisory or 
regulatory authority granted the Director under section 1311(b) of the 
Safety and Soundness Act (12 U.S.C. 4511(b)). The selection and form of 
regulatory or supervisory action under the Safety and Soundness Act is 
committed to the discretion of the Director, and the selection of one 
form of action or a combination of actions does not foreclose the 
Director from pursuing any other supervisory action authorized by law.

Subpart C--Rules of Practice and Procedure


Sec.  1209.10  Authority of the Director.

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


Sec.  1209.11  Authority of the Presiding Officer.

    (a) General rule. All proceedings governed by subpart C of this 
section shall be conducted consistent with the provisions of chapter 5 
of title 5 of the United States Code. The presiding officer shall have 
complete charge of the adjudicative proceeding, conduct a fair and 
impartial hearing, avoid unnecessary delay, and assure that a record of 
the proceeding is made.
    (b) Powers. The presiding officer shall have all powers necessary 
to conduct the proceeding in accordance with paragraph (a) of this 
section and 5 U.S.C. 556(c). The presiding officer is authorized to:
    (1) Control the proceedings.--(i) Upon reasonable notice to the 
parties, not earlier than thirty (30) days or later than sixty (60) 
days after service of a notice of charges under the Safety and 
Soundness Act, set a date, time, and place for an evidentiary hearing 
on the record, within the District of Columbia, as provided in section 
1373 of the Safety and Soundness Act (12 U.S.C. 4633), in a scheduling 
order that may be issued in conjunction with the initial scheduling 
conference set under Sec.  1209.36, or otherwise as the presiding 
officer finds in the best interest of justice, in accordance with this 
part; and
    (ii) Upon reasonable notice to the parties, reset or change the 
date, time, or place (within the District of Columbia) of an 
evidentiary hearing;

[[Page 49335]]

    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to address legal or factual issues, or 
evidentiary matters materially relevant to the charges or allowable 
defenses; to regulate the timing and scope of discovery and rule on 
discovery plans; or otherwise to consider matters that may facilitate 
an effective, fair, and expeditious disposition of the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue and enforce subpoenas, subpoenas duces tecum, discovery 
and protective orders, as authorized by this part, and to revoke, 
quash, or modify such subpoenas;
    (6) Take and preserve testimony under oath;
    (7) Rule on motions and other procedural matters appropriate in an 
adjudicatory proceeding, except that only the Director shall have the 
power to grant summary disposition or any motion to dismiss the 
proceeding or to make a final determination of the merits of the 
proceeding;
    (8) Take all actions authorized under this part to regulate the 
scope, timing, and completion of discovery of any non-privileged 
documents that are materially relevant to the charges or allowable 
defenses;
    (9) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (10) Examine witnesses;
    (11) Receive materially relevant evidence, and rule upon the 
admissibility of evidence or exclude, limit, or otherwise rule on 
offers of proof;
    (12) Upon motion of a party, take official notice of facts;
    (13) Recuse himself upon his own motion or upon motion made by a 
party;
    (14) Prepare and present to the Director a recommended decision as 
provided in this part;
    (15) Establish time, place, and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (16) Do all other things necessary or appropriate to discharge the 
duties of a presiding officer.


Sec.  1209.12  Public hearings; Closed hearings.

    (a) General rule. As provided in section 1379B(b) of the Safety and 
Soundness Act (12 U.S.C. 4639(b)), all hearings shall be open to the 
public, except that the Director, in his discretion, may determine that 
holding an open hearing would be contrary to the public interest. The 
Director may make such determination sua sponte at any time by written 
notice to all parties, or as provided in paragraphs (b) and (c) of this 
section.
    (b) Motion for closed hearing. Within twenty (20) days of service 
of the notice of charges, any party may file with the presiding officer 
a motion for a private hearing and any party may file a pleading in 
reply to the motion. The presiding officer shall forward the motion and 
any reply, together with a recommended decision on the motion, to the 
Director, who shall make a final determination. Such motions and 
replies are governed by Sec.  1209.28. A determination under this 
section is committed to the discretion of the Director and is not a 
reviewable final agency action.
    (c) Filing documents under seal. FHFA counsel of record, in his 
discretion, may file or require the filing of any document or part of a 
document under seal, if such counsel makes a written determination that 
disclosure of the document would be contrary to the public interest. 
The presiding officer shall issue an order to govern confidential 
information, and take all appropriate steps to preserve the 
confidentiality of such documents in whole or in part, including 
closing any portion of a hearing to the public or issuing a protective 
order under such terms as may be acceptable to FHFA counsel of record.
    (d) Procedures for closed hearing. An evidentiary hearing, or any 
part thereof, that is closed for the purpose of offering into evidence 
testimony or documents filed under seal as provided in paragraph (c) of 
this section shall be conducted under procedures that may include: 
prior notification to the submitter of confidential information; 
provisions for sealing portions of the record, briefs, and decisions; 
in camera arguments, offers of proof, and testimony; and limitations on 
representatives of record or other participants, as the presiding 
officer may designate. Additionally, at such proceedings the presiding 
officer may make an opening statement as to the confidentiality and 
limitations and deliver an oath to the parties, representatives of 
record, or other approved participants as to the confidentiality of the 
proceedings.


Sec.  1209.13  Good faith certification.

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


Sec.  1209.14  Ex parte communications.

    (a) Definition.--(1) Ex parte communication means any material oral 
or written communication relevant to an adjudication of the merits of 
any proceeding under this subpart, that was neither on the record nor 
on reasonable prior notice to all parties that takes place between:
    (i) An interested person outside FHFA (including the person's 
representative); and
    (ii) The presiding officer handling that proceeding, the Director, 
a decisional employee assigned to that proceeding, or any other person 
who is or may be reasonably expected to be involved in the decisional 
process.
    (2) A communication that is procedural in that it does not concern

[[Page 49336]]

the merits of an adjudicatory proceeding, such as a request for status 
of the proceeding, does not constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time a notice 
of charges commencing a proceeding under this part is issued by the 
Director until the date that the Director issues his final decision 
pursuant to Sec.  1209.55, no person referred to in paragraph (a)(1)(i) 
of this section shall knowingly make or cause to be made an ex parte 
communication with the Director or the presiding officer. The Director, 
presiding officer, or a decisional employee shall not knowingly make or 
cause to be made an ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by any person identified in paragraph 
(a) of this section, that person shall cause all such written 
communications (or, if the communication is oral, a memorandum stating 
the substance of the communication) to be placed on the record of the 
proceeding and served on all parties. All parties to the proceeding 
shall have an opportunity within ten (10) days of receipt of service of 
the ex parte communication, to file responses thereto, and to recommend 
sanctions that they believe to be appropriate under the circumstances, 
in accordance with paragraph (d) of this section.
    (d) Sanctions. Any party or representative for a party who makes an 
ex parte communication, or who encourages or solicits another to make 
an ex parte communication, may be subject to any appropriate sanction 
or sanctions imposed by the Director or the presiding officer, 
including, but not limited to, exclusion from the proceedings, an 
adverse ruling on the issue that is the subject of the prohibited 
communication, or other appropriate and commensurate action(s).
    (e) Consultations by presiding officer. Except to the extent 
required for the disposition of ex parte matters as authorized by law, 
the presiding officer may not consult a person or party on any matter 
relevant to the merits of the adjudication, unless upon notice to and 
opportunity for all parties to participate.
    (f) Separation of functions. An employee or agent engaged in the 
performance of any investigative or prosecuting function for FHFA in a 
case may not, in that or in a factually related case, participate or 
advise in the recommended decision, the Director's review under Sec.  
1209.55 of the recommended decision, or the Director's final 
determination on the merits based upon his review of the recommended 
decision, except as a witness or counsel in the adjudicatory 
proceedings. This section shall not prohibit FHFA counsel from 
providing necessary and appropriate legal advice to the Director on 
supervisory or regulatory matters.


Sec.  1209.15  Filing of papers.

    (a) Filing. All pleadings, motions, memoranda, and any other 
submissions or papers required to be filed in the proceeding shall be 
addressed to the presiding officer and filed with FHFA, 1700 G Street, 
NW., Fourth Floor, Washington, DC 20552, in accordance with paragraphs 
(b) and (c) of this section.
    (b) Manner of filing. Unless otherwise specified by the Director or 
the presiding officer, filing shall be accomplished by:
    (1) Overnight delivery. Overnight U.S. Postal Service delivery or 
delivery by a reliable commercial delivery service for same day or 
overnight delivery to the address stated above; or
    (2) U.S. Mail. First class, registered, or certified mail via the 
U.S. Postal Service; and
    (3) Electronic media. Transmission by electronic media shall be 
required by and upon any conditions specified by the Director or the 
presiding officer. FHFA shall provide a designated site for the 
electronic filing of all papers in a proceeding in accordance with any 
conditions specified by the presiding officer. All papers filed by 
electronic media shall be filed concurrently in a manner set out above 
and in accordance with paragraph (c) of this section.
    (c) Formal requirements as to papers filed.--(1) Form. To be filed, 
all papers must set forth the name, address, telephone number, and 
electronic mail address of the representative or party seeking to make 
the filing. Additionally, all such papers must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced on 8\1/2\ x 11-
inch paper and must be clear, legible, and formatted as required by 
paragraph (c)(5) of this section.
    (2) Signature. All papers filed must be dated and signed as 
provided in Sec.  1209.13.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the FHFA caption, title and docket number of the 
proceeding, the name of the filing party, and the subject of the 
particular paper.
    (4) Number of copies. Unless otherwise specified by the Director or 
the presiding officer, an original and one copy of all pleadings, 
motions and memoranda, or other such papers shall be filed, except that 
only one copy of transcripts of testimony and exhibits shall be filed.
    (5) Content format. All papers filed shall be formatted in such 
program(s) (e.g., MS WORD(copyright), MS Excel(copyright), or 
WordPerfect(copyright)) as the presiding officer or Director shall 
specify.


Sec.  1209.16  Service of papers.

    (a) Except as otherwise provided, a party filing papers or serving 
a subpoena shall serve a copy upon the representative of record for 
each party to the proceeding so represented, and upon any party who is 
not so represented, in accordance with the requirements of this 
section.
    (b) Except as provided in paragraphs (c)(2) and (d) of this 
section, a serving party shall use one or more of the following methods 
of service:
    (1) Personal service;
    (2) Overnight U.S. Postal Service delivery or delivery by a 
reliable commercial delivery service for same day or overnight delivery 
to the parties' respective street addresses; or
    (3) First class, registered, or certified mail via the U.S. Postal 
Service; and
    (4) For transmission by electronic media, each party shall promptly 
provide the presiding officer and all parties, in writing, an active 
electronic mail address where service will be accepted on behalf of 
such party. Any document transmitted via electronic mail for service on 
a party shall comply in all respects with the requirements of Sec.  
1209.15(c).
    (5) Service of pleadings or other papers made by facsimile may not 
exceed a total page count of thirty (30) pages. Any paper served by 
facsimile transmission shall meet the requirements of Sec.  1209.15(c).
    (6) Any party serving a pleading or other paper by electronic media 
under paragraph (4) of this section also shall concurrently serve that 
pleading or paper by one of the methods specified in paragraphs (1) 
through (5) of this section.
    (c) By the Director or the presiding officer.--(1) All papers 
required to be served by the Director or the presiding officer upon a 
party who has appeared in the proceeding in accordance with Sec.  
1209.72 shall be served by the means specified in paragraph (b) of this 
section.
    (2) If a notice of appearance has not been filed in the proceeding 
for a party in accordance with Sec.  1209.72, the Director or the 
presiding officer shall make service upon the party by any of the 
following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of

[[Page 49337]]

suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or 
to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual 
notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where 
the individual resides or works;
    (3) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or 
to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual 
notice.
    (e) Area of service. Service in any State or the District of 
Columbia, or any commonwealth, possession, territory or other place 
subject to the jurisdiction of the United States, or on any person 
doing business in any State or the District of Columbia, or any 
commonwealth, possession, territory or other place subject to the 
jurisdiction of the United States, or on any person as otherwise 
permitted by law, is effective without regard to the place where the 
hearing is held.
    (f) Proof of service. Proof of service of papers filed by a party 
shall be filed before action is taken thereon. The proof of service, 
which shall serve as prima facie evidence of the fact and date of 
service, shall show the date and manner of service and may be by 
written acknowledgment of service, by declaration of the person making 
service, or by certificate of a representative of record. However, 
failure to file proof of service contemporaneously with the papers 
shall not affect the validity of actual service.
    The presiding officer may allow the proof to be amended or 
supplied, unless to do so would result in material prejudice to a 
party.


Sec.  1209.17  Time computations.

    (a) General rule. In computing any period of time prescribed or 
allowed under this part, the date of the act or event that commences 
the designated period of time is not included. Computations shall 
include the last day of the time period, unless the day falls on a 
Saturday, Sunday, or Federal holiday. When the last day is a Saturday, 
Sunday or Federal holiday, the period of time shall run until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten (10) days or less, not including any 
additional time allowed for in paragraph (c) of this section, 
intermediate Saturdays, Sundays and Federal holidays are not included.
    (b) When papers are deemed to be filed or served.[boxh](1) Filing 
or service are deemed to be effective:
    (i) In the case of personal service or same day reliable commercial 
delivery service, upon actual service;
    (ii) In the case of U.S. Postal Service or reliable commercial 
overnight delivery service, or first class, registered, or certified 
mail, upon deposit in or delivery to an appropriate point of 
collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing; or
    (iv) In the case of transmission by electronic media or facsimile, 
when the device through which the document was sent provides a reliable 
indicator that the document has been received by the opposing party, in 
the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Director or the presiding 
officer, or by agreement of the parties in the case of service.
    (c) Calculation of time for service and filing of responsive 
papers. Whenever a time limit is measured by a prescribed period from 
the service of any notice, pleading or paper, the applicable time 
limits shall be calculated as follows:
    (1) If service was made by delivery to the U.S. Postal Service for 
longer than overnight delivery service by first class, registered, or 
certified mail, add three (3) calendar days to the prescribed period 
for the responsive pleading or other filing.
    (2) If service was personal, or was made by delivery to the U.S. 
Postal Service or any reliable commercial delivery service for 
overnight delivery, add one (1) calendar-day to the prescribed period 
for the responsive pleading or other filing.
    (3) If service was made by electronic media transmission or 
facsimile, add one (1) calendar-day to the prescribed period for the 
responsive pleading or other filing--unless otherwise determined by the 
Director or the presiding officer sua sponte, or upon motion of a party 
in the case of filing or by prior agreement among the parties in the 
case of service.


Sec.  1209.18  Change of time limits.

    Except as otherwise by law required, the presiding officer may 
extend any time limit that is prescribed above or in any notice or 
order issued in the proceedings. After the referral of the case to the 
Director pursuant to Sec.  1209.53, the Director may grant extensions 
of the time limits for good cause shown. Extensions may be granted on 
the motion of a party after notice and opportunity to respond is 
afforded all nonmoving parties, or on the Director's or the presiding 
officer's own motion.


Sec.  1209.19  Witness fees and expenses.

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


Sec.  1209.20  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to FHFA's counsel of record written offers or proposals for 
settlement of a proceeding without prejudice to the rights of any of 
the parties. No such offer or proposal shall be made to any FHFA 
representative other than FHFA's counsel of record. Submission of a 
written settlement offer does not provide a basis for adjourning, 
deferring or otherwise delaying all or any portion

[[Page 49338]]

of a proceeding under this part. No settlement offer or proposal, or 
any subsequent negotiation or resolution, is admissible as evidence in 
any proceeding.


Sec.  1209.21  Conduct of examination.

    Nothing in this part limits or constrains in any manner any duty, 
authority, or right of FHFA to conduct or to continue any examination, 
investigation, inspection, or visitation of any regulated entity or 
entity-affiliated party.


Sec.  1209.22  Collateral attacks on adjudicatory proceeding.

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


Sec.  1209.23  Commencement of proceeding and contents of notice of 
charges.

    Proceedings under subpart C of this part are commenced by the 
Director by the issuance of a notice of charges, as defined in Sec.  
1209.3(p), that must be served upon a respondent. A notice of charges 
shall state all of the following:
    (a) The legal authority for the proceeding and for FHFA's 
jurisdiction over the proceeding;
    (b) A statement of the matters of fact or law showing that FHFA is 
entitled to relief;
    (c) A proposed order or prayer for an order granting the requested 
relief;
    (d) Information concerning the nature of the proceeding and 
pertinent procedural matters, including: The requirement that the 
hearing shall be held in the District of Columbia; the presiding 
officer will set the date and location for an evidentiary hearing in a 
scheduling order to be issued not less than thirty (30) days or more 
than sixty (60) days after service of the notice of charges; contact 
information for FHFA enforcement counsel and the presiding officer, if 
known; submission information for filings and appearances, the time 
within which to request a hearing, and citation to FHFA Rules of 
Practice and Procedure; and
    (e) Information concerning proper filing of the answer, including 
the time within which to file the answer as required by law or 
regulation, a statement that the answer shall be filed with the 
presiding officer or with FHFA as specified therein, and the address 
for filing the answer (and request for a hearing, if applicable).


Sec.  1209.24  Answer.

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


Sec.  1209.25  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten (10) days after service of the amended 
notice, whichever period is longer, unless the Director or presiding 
officer orders otherwise for good cause shown.
    (b) Amendments to conform to the evidence. When issues not raised 
in the notice or answer are tried at the hearing by express or implied 
consent of the parties, or as the presiding officer may allow for good 
cause shown, such issues will be treated in all respects as if they had 
been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
presiding officer may admit the evidence when admission is likely to 
assist in adjudicating the merits of the action. The presiding officer 
will do so freely when the determination of the merits of the action is 
served thereby and the objecting party fails to satisfy the presiding 
officer that the admission of such evidence would unfairly prejudice 
that party's action or defense upon the merits. The presiding officer 
may grant a continuance to enable the objecting party to meet such 
evidence.


Sec.  1209.26  Failure to appear.

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


Sec.  1209.27  Consolidation and severance of actions.

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

[[Page 49339]]

economy and expedition in the complete and final resolution of the 
proceeding.


Sec.  1209.28  Motions.

    (a) In writing.--(1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the presiding officer. Written memoranda, briefs, 
affidavits, or other relevant material or documents may be filed in 
support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record, unless 
the presiding officer directs that such motion be reduced to writing, 
in which case the motion will be subject to the requirements of this 
section.
    (c) Filing of motions. Motions must be filed with the presiding 
officer and served on all parties; except that following the filing of 
a recommended decision, motions must be filed with the Director. 
Motions for pre-trial relief such as motions in limine or objections to 
offers of proof or experts shall be filed not less than ten (10) days 
prior to the date of the evidentiary hearing, except as provided with 
the consent of the presiding officer for good cause shown.
    (d) Responses and replies.--(1) Except as otherwise provided 
herein, (i) any party may file a written response to a non-dispositive 
motion within ten (10) days after service of any written motion, or 
within such other period of time as may be established by the presiding 
officer or the Director; and (ii) the moving party may file a written 
reply to a written response to a non-dispositive motion within five (5) 
days after the service of the response, unless some other period is 
ordered by the presiding officer or the Director. The presiding officer 
shall not rule on any oral or written motion before each party with an 
interest in the motion has had an opportunity to respond as provided in 
this section.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed as consent by that party to the 
entry of an order substantially in the form of the order accompanying 
the motion.
    (e) Dilatory motions. Frivolous, dilatory, or substantively 
repetitive motions are prohibited. The filing of such motions may form 
the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec.  1209.34 and 1209.35.


Sec.  1209.29  Discovery.

    (a) General rule.--(1) Limits on discovery. Subject to the 
limitations set out in paragraphs (a)(2), (b), (d), and (e) of this 
section, a party to a proceeding under this part may obtain document 
discovery by serving upon any other party in the proceeding a written 
request to produce documents. For purposes of such requests, the term 
``documents'' may be defined to include records, drawings, graphs, 
charts, photographs, recordings, or data stored in electronic form or 
other data compilations from which information can be obtained or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form (e.g., electronically stored information), as 
well as written material of all kinds.
    (2) Discovery plan.--(i) In the initial scheduling conference held 
in accordance with Sec.  1209.36, or otherwise at the earliest 
practicable time, the presiding officer shall require the parties to 
confer in good faith to develop and submit a joint discovery plan for 
the timely, cost-effective management of document discovery (including, 
if applicable, electronically stored information). The discovery plan 
should provide for the coordination of similar discovery requests by 
multiple parties, if any, and specify how costs are to be apportioned 
among those parties. The discovery plan shall specify the form of 
electronic productions, if any. Documents are to be produced in 
accordance with the technical specifications described in the discovery 
plan.
    (ii) Discovery in the proceeding may commence upon the approval of 
the discovery plan by the presiding officer. Thereafter, the presiding 
officer may interpret or modify the discovery plan for good cause shown 
or in his discretion due to changed circumstances.
    (iii) Nothing in this paragraph shall be interpreted or deemed to 
require the production of documents that are privileged or not 
reasonably accessible because of undue burden or cost, or to require 
any document production otherwise inconsistent with the limitations on 
discovery set forth in this part.
    (b) Relevance and scope.--(1) A party may obtain document discovery 
regarding any matter not privileged that is materially relevant to the 
charges or allowable defenses raised in the pending proceeding.
    (2) The scope of available discovery shall be limited in accordance 
with subpart C of this part. Any request for the production of 
documents that seeks to obtain privileged information or documents not 
materially relevant under paragraph (b)(1) of this section, or that is 
unreasonable, oppressive, excessive in scope, unduly burdensome, 
cumulative, or repetitive of any prior discovery requests, shall be 
denied or modified.
    (3) A request for document discovery is unreasonable, oppressive, 
excessive in scope, or unduly burdensome--and shall be denied or 
modified--if, among other things, the request:
    (i) Fails to specify justifiable limitations on the relevant 
subject matter, time period covered, search parameters, or the 
geographic location(s) or data repositories to be searched;
    (ii) Fails to identify documents with sufficient specificity;
    (iii) Seeks material that is duplicative, cumulative, or obtainable 
from another source that is more accessible, cost-effective, or less 
burdensome;
    (iv) Calls for the production of documents to be delivered to the 
requesting party or his designee and fails to provide a written 
agreement by the requestor to pay in advance for the costs of 
production in accordance with Sec.  1209.30, or otherwise fails to take 
into account costs associated with processing electronically stored 
information or any cost-sharing agreements between the parties;
    (v) Fails to afford the responding party adequate time to respond; 
or
    (vi) Fails to take into account retention policies or security 
protocols with respect to Federal information systems.
    (c) Forms of discovery. Discovery shall be limited to requests for 
production of documents for inspection and copying. No other form of 
discovery shall be allowed. Discovery by use of interrogatories is not 
permitted. This paragraph shall not be interpreted to require the 
creation of a document.
    (d) Privileged matter.--(1) Privileged documents are not 
discoverable.
    (i) Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative process 
privilege and any other privileges provided by the Constitution, any 
applicable act of Congress, or the principles of common law.
    (ii) The parties may enter into a written agreement to permit a 
producing party to assert applicable privileges of a document even 
after its production and to request the return or destruction of 
privileged matter (clawback agreement).

[[Page 49340]]

The parties shall file the clawback agreement with the presiding 
officer. To ensure the enforceability of the terms of any such clawback 
agreement, the presiding officer shall enter an order. Any party may 
petition the presiding officer for an order specifying clawback 
procedures for good cause shown.
    (2) No effect on examination authority. The limitations on 
discoverable matter provided for in this part are not intended and 
shall not be construed to limit or otherwise affect the examination, 
regulatory or supervisory authority of FHFA.
    (e) Time limits. All discovery matters, including all responses to 
discovery requests, shall be completed at least twenty (20) days prior 
to the date scheduled for the commencement of the testimonial phase of 
the hearing. No exception to this discovery time limit shall be 
permitted, unless the presiding officer finds on the record that good 
cause exists for waiving the twenty (20) day requirement of this 
paragraph.
    (f) Production. Documents must be produced as they are kept in the 
usual course of business, or labeled and organized to correspond with 
the categories in the request, or otherwise produced in a manner 
determined by mutual agreement between the requesting party and the 
party or non-party to whom the request is directed in accordance with 
this part.


Sec.  1209.30  Request for document discovery from parties.

    (a) General rule. Each request for the production of documents must 
conform to the requirements of this part.
    (1) Limitations. Subject to applicable limitations on discovery in 
this part, a party may serve (requesting party) a request on another 
party (responding party) for the production of any non-privileged, 
discoverable documents in the possession, custody, or control of the 
responding party. A requesting party shall serve a copy of any such 
document request on all other parties. Each request for the production 
of documents must, with reasonable particularity, identify or describe 
the documents to be produced, either by individual item or by category, 
with sufficient specificity to enable the responding party to respond 
consistent with the requirements of this part.
    (2) Discovery plan. Document discovery under subpart C of this part 
shall be consistent with any discovery plan approved by the presiding 
officer under Sec.  1209.29.
    (b) Production and costs.--(1) General rule. Subject to the 
applicable limitations on discovery in this part and the discovery 
plan, the requesting party shall specify a reasonable time, place and 
manner for the production of documents and the performance of any 
related acts. The responding party shall produce documents to the 
requesting party in a manner consistent with the discovery plan.
    (2) Costs. All costs associated with document productions--
including, without limitation, photocopying (as specified in paragraph 
(b)(4) of this section) or electronic processing (as specified in 
paragraph (b)(5) of this section)--shall be borne by the requesting 
party, or otherwise in accordance with any discovery plan approved by 
the presiding officer that may require such costs be apportioned 
between parties, or as otherwise ordered by the presiding officer. If 
consistent with the discovery plan approved by the presiding officer, 
the responding party may require receipt of payment of any such 
document production costs in advance before any such production of 
responsive documents.
    (3) Organization. Unless otherwise provided for in any discovery 
plan approved by the presiding officer under Sec.  1209.29, or by order 
of the presiding officer, documents must be produced as they are kept 
in the usual course of business or they shall be labeled and organized 
to correspond with the categories in the document request.
    (4) Photocopying charges. Photocopying charges are to be set at the 
current rate per page imposed by FHFA under the fee schedule pursuant 
to Sec.  1202.11(c) of this chapter for requests for documents filed 
under the Freedom of Information Act, 5 U.S.C. 552.
    (5) Electronic processing. In the event that any party seeks the 
production of electronically stored information (i.e., information 
created, stored, communicated, or used in digital format requiring the 
use of computer hardware and software), the parties shall confer in 
good faith to resolve common discovery issues related to electronically 
stored information, such as preservation, search methodology, 
collection, and need for such information; the suitability of 
alternative means to obtain it; and the format of production. 
Consistent with the discovery plan approved by the presiding officer 
under Sec.  1209.29, costs associated with the processing of such 
electronic information (i.e., imaging; scanning; conversion of 
``native'' files to images that are viewable and searchable; indexing; 
coding; database or Web-based hosting; searches; branding of 
endorsements, such as ``confidential'' or document control numbering; 
privilege reviews; and copies of production discs) and delivery of any 
such document production, shall be borne by the requesting party, 
apportioned among the parties, or as otherwise ordered by the presiding 
officer. Nothing in this part shall be deemed to require FHFA to 
produce privileged documents or any electronic records in violation of 
applicable Federal law or security protocols.
    (c) Obligation to update responses. A party who has responded to a 
discovery request is not required to supplement the response, unless:
    (1) The responding party learns that in some material respect the 
information disclosed is incomplete or incorrect, and
    (2) The additional or corrective information has not otherwise been 
made known to the other parties during the discovery process or in 
writing.
    (d) Motions to strike or limit discovery requests.--(1) Any party 
served with a document discovery request may object within thirty (30) 
days of service of the request by filing a motion to strike or limit 
the request in accordance with the provisions of Sec.  1209.28. No 
other party may file an objection. If an objection is made only to a 
portion of an item or category in a request, the objection shall 
specify that portion. Any objections not made in accordance with this 
paragraph and Sec.  1209.28 are waived.
    (2) The party who served the request that is the subject of a 
motion to strike or limit may file a written response in accordance 
with the provisions of Sec.  1209.28. A reply by the moving party, if 
any, shall be governed by Sec.  1209.28. No other party may file a 
response.
    (e) Privilege. At the time other documents are produced, all 
documents withheld on a claim of privilege must be reasonably 
identified, together with a statement of the basis for the assertion of 
privilege on a privilege log. When similar documents that are protected 
by the government's deliberative process, investigative or examination 
privilege; the attorney work-product doctrine, or the attorney-client 
privilege are voluminous, such documents may be identified on the log 
by category instead of by individual document. The presiding officer 
has discretion to determine when the identification by category is 
sufficient.
    (f) Motions to compel production.--(1) If a party withholds any 
document as privileged or fails to comply fully with a document 
discovery request, the requesting party may, within ten (10) days of 
the assertion of privilege or of the time the failure to comply becomes 
known to the requesting party, file a motion in accordance with the 
provisions of Sec.  1209.28 for the issuance of a subpoena compelling 
the production of any such document.

[[Page 49341]]

    (2) The party who asserted the privilege or failed to comply with 
the request may, within five (5) days of service of a motion for the 
issuance of a subpoena compelling production, file a written response 
to the motion. No other party may file a response.
    (g) Ruling on motions.--(1) Appropriate protective orders. After 
the time for filing a response to a motion to compel pursuant to this 
section has expired, the presiding officer shall rule promptly on all 
such motions. The presiding officer may deny, grant in part, or 
otherwise modify any request for the production of documents, if he 
determines that a discovery request, or any one or more of its terms, 
seeks to obtain the production of documents that are privileged or 
otherwise not within the scope of permissible discovery under Sec.  
1209.29(b), and may issue appropriate protective orders, upon such 
conditions as justice may require.
    (2) No stay. The pendency of a motion to strike or limit discovery, 
or to compel the production of any document, shall not stay or continue 
the proceeding, unless otherwise ordered by the presiding officer. 
Notwithstanding any other provision in this part, the presiding officer 
may not release, or order any party to produce, any document withheld 
on the basis of privilege, if the withholding party has stated to the 
presiding officer its intention to file with the Director a timely 
motion for interlocutory review of the presiding officer's privilege 
determination or order to produce the documents, until the Director has 
rendered a decision on the motion for interlocutory review.
    (3) Interlocutory review by the Director. Interlocutory review of a 
privilege determination or document discovery subpoena of the presiding 
officer shall be in accordance with Sec.  1209.33. To the extent 
necessary to rule promptly on such matters, the Director may request 
that the presiding officer provide additional information from the 
record. As provided by Sec.  1209.33, a pending interlocutory review of 
a privilege determination or document discovery subpoena shall not stay 
the proceedings, unless otherwise ordered by the presiding officer or 
the Director.
    (h) Enforcement of document discovery subpoenas.--(1) Authority. If 
the presiding officer or Director issues a subpoena compelling 
production of documents by a party in a proceeding under this part, in 
the event of noncompliance with the subpoena and to the extent 
authorized by section 1379D(c)(1) of the Safety and Soundness Act (12 
U.S.C. 4641(c)(1)), the Director or the subpoenaing party may apply to 
the appropriate United States district court for an order requiring 
compliance with the subpoena.
    (2) United States district court jurisdiction. As provided by 
section 1379D(c)(2) of the Safety and Soundness Act (12 U.S.C. 
4641(c)(2)), the appropriate United States district court has the 
jurisdiction and power to order and to require compliance with any 
discovery subpoena issued under this part. Notwithstanding any other 
provision in this part, as provided by section 1375(b) of the Safety 
and Soundness Act (12 U.S.C. 4635(b)), in connection with the 
enforcement of a subpoena under this part, no district court has 
jurisdiction to affect by injunction or otherwise the issuance or 
enforcement of any effective and outstanding notice or order issued 
under section 1313B, subtitle B, or subtitle C of the Safety and 
Soundness Act, or to review, modify, suspend, terminate, or set aside 
any such effective and outstanding notice or order.
    (3) No stay; sanctions. The judicial enforcement of a discovery 
subpoena shall not operate as a stay of the proceedings, unless the 
presiding officer or the Director orders a stay of such duration as the 
presiding officer or Director may find reasonable and in the best 
interest of the parties or as justice may require. A party's right to 
seek judicial enforcement of a subpoena shall not in any manner limit 
the sanctions that may be imposed by the presiding officer or Director 
against a party who fails to produce or induces another to fail to 
produce subpoenaed documents.


Sec.  1209.31  Document discovery subpoenas to nonparties.

    (a) General rules.--(1) Application for subpoena. As provided under 
this part, any party may apply to the presiding officer for the 
issuance of a document discovery subpoena addressed to any person who 
is not a party to the proceeding. The application must contain the 
proposed document subpoena, and a brief statement of facts 
demonstrating that the documents are materially relevant to the charges 
and issues presented in the proceeding and the reasonableness of the 
scope of the document request. The subpoenaing party shall specify a 
reasonable time, place, and manner for production in response to the 
subpoena, and state its unequivocal intention to pay for the production 
of the documents as provided in this part.
    (2) Service of subpoena. A party shall apply for a document 
subpoena under this section only within the time period during which 
such party could serve a discovery request under Sec.  1209.30. The 
party obtaining the document subpoena is responsible for serving it on 
the subpoenaed person and for serving copies on all other parties. 
Document subpoenas may be served in the District of Columbia, or any 
State, Territory, possession, or other place subject to the 
jurisdiction of the United States, or as otherwise provided by law.
    (3) Presiding officer's discretion. The presiding officer shall 
issue promptly any document subpoena applied for under this section 
subject to the application conditions set forth in this section and his 
discretion. If the presiding officer determines that the application 
does not set forth a valid basis for the issuance of the requested 
document subpoena, or that any of its terms are unreasonable, 
oppressive, excessive in scope, unduly burdensome, or otherwise 
objectionable under Sec.  1209.29(b), he may refuse to issue the 
requested document subpoena or may issue it in a modified form upon 
such additional conditions as may be determined by the presiding 
officer.
    (b) Motion to quash or modify.--(1) Limited appearance. Any non-
party to a pending proceeding to whom a document subpoena is directed 
may enter a limited appearance, through a representative or on his own 
behalf, before the presiding officer to file with the presiding officer 
a motion to quash or modify such subpoena, accompanied by a statement 
of the basis for quashing or modifying the subpoena.
    (2) Objections. Any motion to quash or modify a document subpoena 
must be filed on the same basis, including the assertion of any 
privileges, upon which a party could object to a discovery document 
request under Sec.  1209.30 and during the same time limits during 
which such an objection could be filed.
    (3) Responses and replies. The party who obtained the subpoena may 
respond to such motion within ten (10) days of service of the motion; 
the response shall be served on the non-party in accordance with this 
part. Absent express leave of the presiding officer, no other party may 
respond to the non-party's motion. The non-party may file a reply 
within five (5) days of service of a response.
    (4) No stay. A non-party's right to seek to quash or modify a 
document subpoena shall not stay the proceeding, or limit in any manner 
the sanctions that may be imposed by the presiding officer against a 
party who induces another to fail to produce any such subpoenaed 
documents. No party may rely upon the pendency of a non-party's motion 
to quash or modify a document subpoena to excuse performance of any

[[Page 49342]]

action required of that party under this part.
    (c) Enforcing document subpoenas to non-parties.--(1) Application 
for enforcement of subpoena. If a non-party fails to comply with any 
subpoena issued pursuant to this section or with any order of the 
presiding officer that directs compliance with all or any portion of a 
document subpoena issued pursuant to this section, the subpoenaing 
party or any other aggrieved party to the proceeding may, to the extent 
authorized by section 1379D(c) of the Safety and Soundness Act (12 
U.S.C. 4641(c)), apply to an appropriate United States district court 
for an order requiring compliance with the subpoena.
    (2) No stay. A party's right to seek district court enforcement of 
a non-party document production subpoena under this section shall not 
stay automatically an enforcement proceeding under of the Safety and 
Soundness Act.
    (3) Sanctions. A party's right to seek district court enforcement 
of a non-party document subpoena shall in no way limit the sanctions 
that may be imposed by the presiding officer on a party who induces 
another to fail to comply with any subpoena issued under this section.


Sec.  1209.32  Deposition of witness unavailable for hearing.

    (a) General rules.--(1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply to the presiding officer in accordance with the 
procedures set forth in paragraph (a)(2) of this section for the 
issuance of a subpoena or subpoena duces tecum requiring the attendance 
of the witness at a deposition for the purpose of preserving that 
witness' testimony. The presiding officer may issue a deposition 
subpoena under this section upon a showing that:
    (i) The witness will be unable to attend or may be prevented from 
attending the testimonial phase of the hearing because of age, 
sickness, or infirmity, or will be otherwise unavailable;
    (ii) The subpoenaing party did not cause or contribute to the 
unavailability of the witness for the hearing;
    (iii) The witness has personal knowledge and the testimony is 
reasonably expected to be materially relevant to claims, defenses, or 
matters determined to be at issue in the proceeding; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed anywhere within the 
United States, or its Territories and possessions, in which that 
witness resides or has a regular place of employment or such other 
convenient place as the presiding officer shall fix.
    (3) Subpoenas must be issued promptly upon request, unless the 
presiding officer determines that the request fails to set forth a 
valid basis under this section for its issuance. Before making a 
determination that there is no valid basis for issuing the subpoena, 
the presiding officer shall require a written response from the party 
requesting the subpoena or require attendance at a conference to 
determine whether there is a valid basis upon which to issue the 
requested subpoena.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the presiding officer orders otherwise, no deposition under this 
section shall be taken on fewer than ten (10) days' notice to the 
witness and all parties. Deposition subpoenas may be served anywhere 
within the United States or its Territories and possessions, or on any 
person doing business anywhere within the United States or its 
Territories and possessions, or as otherwise permitted by law.
    (b) Objections to deposition subpoenas.--(1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the presiding officer 
under Sec.  1209.28 to quash or modify the subpoena prior to the time 
for compliance specified in the subpoena, but not more than ten (10) 
days after service of the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The 
motion must be served on all parties.
    (c) Procedure upon deposition.--(1) Each witness testifying 
pursuant to a deposition subpoena must be duly sworn and each party 
shall have the right to examine the witness. Objections to questions or 
documents must be in short form, stating the grounds for the objection. 
Failure to object to questions or documents is not deemed a waiver 
except where the ground for objection might have been avoided if the 
objection had been presented timely. All questions, answers and 
objections must be recorded and transcribed. Videotaped depositions 
must be transcribed for the record; copies and transcriptions must be 
supplied to each party.
    (2) Any party may move before the presiding officer for an order 
compelling the witness to answer any questions the witness has refused 
to answer or submit any evidence that, during the deposition, the 
witness has refused to submit.
    (3) The deposition transcript must be subscribed by the witness, 
unless the parties and the witness, by stipulation, have waived the 
signing, or the witness is ill, cannot be found, or has refused to 
sign. If the deposition is not subscribed by the witness, the court 
reporter taking the deposition shall certify that the transcript is a 
true and complete transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply 
with any subpoena issued pursuant to this section or with any order of 
the presiding officer made upon motion under paragraph (c)(2) of this 
section, the subpoenaing party or other aggrieved party may, to the 
extent authorized by section 1379D(c) of the Safety and Soundness Act 
(12 U.S.C. 4641(c)), apply to an appropriate United States district 
court for an order requiring compliance with the portions of the 
subpoena that the presiding officer has ordered enforced. A party's 
right to seek court enforcement of a deposition subpoena in no way 
limits the sanctions that may be imposed by the presiding officer on a 
party who fails to comply with or induces a failure to comply with a 
subpoena issued under this section.


Sec.  1209.33  Interlocutory review.

    (a) General rule. The Director may review a ruling of the presiding 
officer prior to the certification of the record to the Director only 
in accordance with the procedures set forth in this section.
    (b) Scope of review. The Director may exercise interlocutory review 
of a ruling of the presiding officer if the Director finds that--
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.

[[Page 49343]]

    (c) Procedure. Any motion for interlocutory review shall be filed 
by a party with the presiding officer within ten (10) days of his 
ruling. Upon the expiration of the time for filing all responses, the 
presiding officer shall refer the matter to the Director for final 
disposition. In referring the matter to the Director, the presiding 
officer may indicate agreement or disagreement with the asserted 
grounds for interlocutory review of the ruling in question.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Director under this 
section suspends or stays the proceeding unless otherwise ordered by 
the presiding officer or the Director.


Sec.  1209.34  Summary disposition.

    (a) In general. The presiding officer shall recommend that the 
Director issue a final order granting a motion for summary disposition 
if the undisputed pleaded facts, admissions, affidavits, stipulations, 
documentary evidence, matters as to which official notice may be taken 
and any other evidentiary materials properly submitted in connection 
with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The movant is entitled to a decision in its favor as a matter 
of law.
    (b) Filing of motions and responses.--(1) Any party who believes 
there is no genuine issue of material fact to be determined and that 
such party is entitled to a decision as a matter of law may move at any 
time for summary disposition in its favor of all or any part of the 
proceeding. Any party, within thirty (30) days after service of such 
motion or within such time period as allowed by the presiding officer, 
may file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of material facts as to which the movant contends there is no 
genuine issue. Such motion must be supported by documentary evidence, 
which may take the form of admissions in pleadings, stipulations, 
depositions, investigatory depositions, transcripts, affidavits and any 
other evidentiary materials that the movant contends support its 
position. The motion must also be accompanied by a brief containing the 
points and authorities in support of the contention of the movant. Any 
party opposing a motion for summary disposition must file a statement 
setting forth those material facts as to which the party contends a 
genuine dispute exists. Such opposition must be supported by evidence 
of the same type as that submitted with the motion for summary 
disposition and a brief containing the points and authorities in 
support of the contention that summary disposition would be 
inappropriate.
    (c) Hearing on motion. At the request of any party or on his own 
motion, the presiding officer may hear oral argument on the motion for 
summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the presiding officer shall 
determine whether the movant is entitled to summary disposition. If the 
presiding officer determines that summary disposition is warranted, the 
presiding officer shall submit a recommended decision to that effect to 
the Director, under Sec.  1209.53. If the presiding officer finds that 
the moving party is not entitled to summary disposition, the presiding 
officer shall make a ruling denying the motion.


Sec.  1209.35  Partial summary disposition.

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


Sec.  1209.36  Scheduling and pre-hearing conferences.

    (a) Scheduling conference. After service of a notice of charges 
commencing a proceeding under this part, the presiding officer shall 
order the representative(s) of record for each party, and any party not 
so represented who is appearing pro se, to meet with him in person or 
to confer with him by telephone at a specified time within thirty (30) 
days of service of such notice for the purpose of setting the time and 
place of the testimonial hearing on the record to be held within the 
District of Columbia and scheduling the course and conduct of the 
proceeding (the ``scheduling conference''). The identification of 
potential witnesses, the time for and manner of discovery and the 
exchange of any pre-hearing materials including witness lists, 
statements of issues, stipulations, exhibits, and any other materials 
also may be determined at the scheduling conference.
    (b) Pre-hearing conferences. The presiding officer may, in addition 
to the scheduling conference, on his own motion or at the request of 
any party, direct representatives for the parties to meet with him (in 
person or by telephone) at a pre-hearing conference to address any or 
all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The presiding officer, in his discretion, may 
require that a scheduling or pre-hearing conference be recorded by a 
court reporter. A transcript of the conference and any materials filed, 
including orders, becomes part of the record of the proceeding. A party 
may obtain a copy of the transcript at such party's expense.
    (d) Scheduling or pre-hearing orders. Within a reasonable time 
following the conclusion of the scheduling conference or any pre-
hearing conference, the presiding officer shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.


Sec.  1209.37  Pre-hearing submissions.

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


Sec.  1209.38  Hearing subpoenas.

    (a) Issuance.--(1) Upon application of a party to the presiding 
officer showing relevance and reasonableness of scope

[[Page 49344]]

of the testimony or other evidence sought, the presiding officer may 
issue a subpoena or a subpoena duces tecum requiring the attendance of 
a witness at the hearing or the production of documentary or physical 
evidence at such hearing. The application for a hearing subpoena must 
also contain a proposed subpoena specifying the attendance of a witness 
or the production of evidence from any place within the United States 
or its territories and possessions, or as otherwise provided by law, at 
the designated place where the hearing is being conducted. The party 
making the application shall serve a copy of the application and the 
proposed subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of or during a hearing. During a hearing, a party may make 
an application for a subpoena orally on the record before the presiding 
officer.
    (3) The presiding officer shall promptly issue any hearing subpoena 
applied for under this section; except that, if the presiding officer 
determines that the application does not set forth a valid basis for 
the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
may refuse to issue the subpoena or may issue the subpoena in a 
modified form upon any conditions consistent with subpart C of this 
part. Upon issuance by the presiding officer, the party making the 
application shall serve the subpoena on the person named in the 
subpoena and on each party.
    (b) Motion to quash or modify.--(1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
such subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten (10) days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but no more 
than ten (10) days after the date of service of the subpoena upon the 
movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply 
with any subpoena issued pursuant to this section or any order of the 
presiding officer that directs compliance with all or any portion of a 
hearing subpoena, the subpoenaing party or any other aggrieved party 
may seek enforcement of the subpoena pursuant to Sec.  1209.31. A 
party's right to seek court enforcement of a hearing subpoena shall in 
no way limit the sanctions that may be imposed by the presiding officer 
on a party who induces a failure to comply with subpoenas issued under 
this section.


Sec. Sec.  1209.39 through 1209.49  [Reserved]


Sec.  1209.50  Conduct of hearings.

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


Sec.  1209.51  Evidence.

    (a) Admissibility.--(1) Except as is otherwise set forth in this 
section, relevant, material and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act (5 U.S.C. 552 et seq.) and other 
applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to subpart C 
of this part.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to subpart C of this part if such evidence is 
relevant, material, probative and reliable, and not unduly repetitive.
    (b) Official notice.--(1) Official notice may be taken of any 
material fact that may be judicially noticed by a United States 
district court and any materially relevant information in the official 
public records of any Federal or State government agency.
    (2) All matters officially noticed by the presiding officer or the 
Director shall appear on the record.
    (3) If official notice is requested of any material fact, the 
parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents.--(1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible 
copy of the original.
    (2) Subject to the requirements of paragraph (a)(1) of this 
section, any document, including a report of examination, oversight 
activity, inspection or visitation prepared by FHFA or by another 
Federal or State financial institutions regulatory agency, is 
admissible either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines, or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the presiding officer's discretion, be used 
with or without being admitted into evidence.
    (d) Objections.--(1) Objections to the admissibility of evidence 
must be timely made and rulings on all objections must appear in the 
record.
    (2) When an objection to a question or line of questioning is 
sustained, the examining representative of record may make a specific 
proffer on the record of what he expected to prove by the expected 
testimony of the witness. The

[[Page 49345]]

proffer may be by representation of the representative or by direct 
interrogation of the witness.
    (3) The presiding officer shall retain rejected exhibits, 
adequately marked for identification, for the record and transmit such 
exhibits to the Director.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any document to be admitted 
into evidence. Such stipulations must be received in evidence at a 
hearing, are binding on the parties with respect to the matters therein 
stipulated, and shall be made part of the record.
    (f) Depositions of unavailable witnesses.--(1) If a witness is 
unavailable to testify at a hearing and that witness has testified in a 
deposition in accordance with Sec.  1209.32, a party may offer as 
evidence all or any part of the transcript of the deposition, including 
deposition exhibits, if any.
    (2) Such deposition transcript is admissible to the same extent 
that testimony would have been admissible had that person testified at 
the hearing, provided that if a witness refused to answer proper 
questions during the depositions, the presiding officer may, on that 
basis, limit the admissibility of the deposition in any manner that 
justice requires.
    (3) Only those portions of a deposition or related exhibits 
received in evidence at the hearing in accordance with this section 
shall constitute a part of the record.


Sec.  1209.52  Post-hearing filings.

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


Sec.  1209.53  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within forty-five 
(45) days after expiration of the time allowed for filing reply briefs 
under Sec.  1209.52(b), the presiding officer shall file with and 
certify to the Director, for decision, the record of the proceeding. 
The record must include the presiding officer's recommended decision, 
recommended findings of fact and conclusions of law, and proposed 
order; all pre-hearing and hearing transcripts, exhibits and rulings; 
and the motions, briefs, memoranda and other supporting papers filed in 
connection with the hearing. The presiding officer shall serve upon 
each party the recommended decision, recommended findings and 
conclusions, and proposed order.
    (b) Filing of index. At the same time the presiding officer files 
with and certifies to the Director, for final determination, the record 
of the proceeding, the presiding officer shall furnish to the Director 
a certified index of the entire record of the proceeding. The certified 
index shall include, at a minimum, an entry for each paper, document or 
motion filed with the presiding officer in the proceeding, the date of 
the filing, and the identity of the filer. The certified index shall 
also include an exhibit index containing, at a minimum, an entry 
consisting of exhibit number and title or description for: Each exhibit 
introduced and admitted into evidence at the hearing; each exhibit 
introduced but not admitted into evidence at the hearing; each exhibit 
introduced and admitted into evidence after the completion of the 
hearing; and each exhibit introduced but not admitted into evidence 
after the completion of the hearing.


Sec.  1209.54  Exceptions to recommended decision.

    (a) Filing exceptions. Within thirty (30) days after service of the 
recommended decision, recommended findings and conclusions, and 
proposed order under Sec.  1209.53, a party may file with the Director 
written exceptions to the presiding officer's recommended decision, 
recommended findings and conclusions, and proposed order; to the 
admission or exclusion of evidence; or to the failure of the presiding 
officer to make a ruling proposed by a party. A supporting brief may be 
filed at the time the exceptions are filed, either as part of the same 
document or in a separate document.
    (b) Effect of failure to file or raise exceptions.--(1) Failure of 
a party to file exceptions to those matters specified in paragraph (a) 
of this section within the time prescribed is deemed a waiver of 
objection thereto.
    (2) No exception need be considered by the Director if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the presiding officer and failed to do so.
    (c) Contents.--(1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in or omissions 
from the presiding officer's recommendations to which that party takes 
exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
presiding officer's recommendations to which exception is taken, the 
page or paragraph references to those portions of the record relied 
upon to support each exception and the legal authority relied upon to 
support each exception. Exceptions and briefs in support shall not 
exceed a total of 30 pages, except by leave of the Director on motion.
    (3) One reply brief may be submitted by each party opposing the 
exceptions within ten (10) days of service of exceptions and briefs in 
support of exceptions. Reply briefs shall not exceed fifteen (15) 
pages, except by leave of the Director on motion.


Sec.  1209.55  Review by Director.

    (a) Notice of submission to the Director. When the Director 
determines that the record in the proceeding is complete, the Director 
shall serve notice upon the parties that the case has been submitted to 
the Director for final decision.

[[Page 49346]]

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


Sec.  1209.56  Exhaustion of administrative remedies.

    To exhaust administrative remedies as to any issue on which a party 
disagrees with the presiding officer's recommendations, a party must 
file exceptions with the Director under Sec.  1209.54. A party must 
exhaust administrative remedies as a precondition to seeking judicial 
review of any decision issued under subpart C of this part.


Sec.  1209.57  Stays pending judicial review.

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


Sec. Sec.  1209.58 through 1209.69  [Reserved].

Subpart D--Parties and Representational Practice Before the Federal 
Housing Finance Agency; Standards of Conduct


Sec.  1209.70  Scope.

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


Sec.  1209.71  Definitions.

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


Sec.  1209.72  Appearance and practice in adjudicatory proceedings.

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


Sec.  1209.73  Conflicts of interest.

    (a) Conflict of interest in representation. No representative shall 
represent another person in an adjudicatory proceeding if it reasonably 
appears that such representation may be limited materially by that 
representative's responsibilities to a third person or by that 
representative's own interests. The presiding officer may take 
corrective measures at any stage of a proceeding to cure a conflict of 
interest in representation, including the issuance of an order limiting 
the scope of representation or disqualifying an individual from 
appearing in a representative capacity for the duration of the 
proceeding.
    (b) Certification and waiver. If any person appearing as counsel or 
other representative represents two or more parties to an adjudicatory 
proceeding, or also represents a nonparty on a matter

[[Page 49347]]

relevant to an issue in the proceeding, that representative must 
certify in writing at the time of filing the notice of appearance 
required by Sec.  1209.72 as follows:
    (1) That the representative has personally and fully discussed the 
possibility of conflicts of interest with each such party and nonparty; 
and
    (2) That each such party and nonparty waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.


Sec.  1209.74  Sanctions.

    (a) General rule. Appropriate sanctions may be imposed during the 
course of any proceeding when any party or representative of record has 
acted or failed to act in a manner required by applicable statute, 
regulation, or order, and that act or failure to act--
    (1) Constitutes contemptuous conduct. Contemptuous conduct includes 
dilatory, obstructionist, egregious, contumacious, unethical, or other 
improper conduct at any phase of any proceeding, hearing, or appearance 
before a presiding officer or the Director;
    (2) Has caused some other party material and substantive injury, 
including, but not limited to, incurring expenses including attorney's 
fees or experiencing prejudicial delay;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Has delayed the proceeding unduly.
    (b) Sanctions. Sanctions that may be imposed include, but are not 
limited to, any one or more of the following:
    (1) Issuing an order against a party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning 
a late filing on any terms that may be just; or
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Procedure for imposition of sanctions.--(1) The presiding 
officer, on the motion of any party, or on his own motion, and after 
such notice and responses as may be directed by the presiding officer, 
may impose any sanction authorized by this section. The presiding 
officer shall submit to the Director for final ruling any sanction that 
would result in a final order that terminates the case on the merits or 
is otherwise dispositive of the case.
    (2) Except as provided in paragraph (d) of this section, no 
sanction authorized by this section, other than refusing to accept late 
papers, shall be imposed without prior notice to all parties and an 
opportunity for any representative or party against whom sanctions may 
be imposed to be heard. The presiding officer shall determine and 
direct the appropriate notice and form for such opportunity to be 
heard. The opportunity to be heard may be limited to an opportunity to 
respond verbally immediately after the act or inaction in question is 
noted by the presiding officer.
    (3) For purposes of interlocutory review, motions for the 
imposition of sanctions by any party and the imposition of sanctions 
shall be treated the same as motions for any other ruling by the 
presiding officer.
    (4) Nothing in this section shall be read to preclude the presiding 
officer or the Director from taking any other action or imposing any 
other restriction or sanction authorized by any applicable statute or 
regulation.
    (d) Sanctions for contemptuous conduct. If, during the course of 
any proceeding, a presiding officer finds any representative or any 
individual representing himself to have engaged in contemptuous 
conduct, the presiding officer may summarily suspend that individual 
from participating in that or any related proceeding or impose any 
other appropriate sanction.


Sec.  1209.75  Censure, suspension, disbarment, and reinstatement.

    (a) Discretionary censure, suspension and disbarment.--(1) The 
Director may censure any individual who practices or attempts to 
practice before FHFA or suspend or revoke the privilege to appear or 
practice before FHFA of such individual if, after notice of and 
opportunity for hearing in the matter, that individual is found by the 
Director--
    (i) Not to possess the requisite qualifications or competence to 
represent others;
    (ii) To be seriously lacking in character or integrity or to have 
engaged in material unethical or improper professional conduct;
    (iii) To have caused unfair and material injury or prejudice to 
another party, such as prejudicial delay or unnecessary expenses 
including attorney's fees;
    (iv) To have engaged in, or aided and abetted, a material and 
knowing violation of the Safety and Soundness Act, the Federal Home 
Loan Mortgage Corporation Act, the Federal National Mortgage 
Association Charter Act, or the rules or regulations issued under those 
statutes, or any other applicable law or regulation;
    (v) To have engaged in contemptuous conduct before FHFA;
    (vi) With intent to defraud in any manner, to have willfully and 
knowingly deceived, misled, or threatened any client or prospective 
client; or
    (vii) Within the last ten (10) years, to have been convicted of an 
offense involving moral turpitude, dishonesty or breach of trust, if 
the conviction has not been reversed on appeal. A conviction within the 
meaning of this paragraph shall be deemed to have occurred when the 
convicting court enters its judgment or order, regardless of whether an 
appeal is pending or could be taken and includes a judgment or an order 
on a plea of nolo contendere or on consent, regardless of whether a 
violation is admitted in the consent.
    (2) Suspension or revocation on the grounds set forth in paragraphs 
(a)(1)(ii) through (vii) of this section shall only be ordered upon a 
further finding that the individual's conduct or character was 
sufficiently egregious as to justify suspension or revocation. 
Suspension or disbarment under this paragraph shall continue until the 
applicant has been reinstated by the Director for good cause shown or 
until, in the case of a suspension, the suspension period has expired.
    (3) If the final order against the respondent is for censure, the 
individual may be permitted to practice before FHFA, but such 
individual's future representations may be subject to conditions 
designed to promote high standards of conduct. If a written letter of 
censure is issued, a copy will be maintained in FHFA's files.
    (b) Mandatory suspension and disbarment.--(1) Any counsel who has 
been and remains suspended or disbarred by a court of the United States 
or of any State, commonwealth, possession, territory of the United 
States or the District of Columbia; any accountant or other licensed 
expert whose license to practice has been revoked in any State, 
commonwealth, possession, territory of the United States or the 
District of Columbia; any person who has been and remains suspended or 
barred from practice by or before the Department of Housing and Urban 
Development, the Office of the Comptroller of the Currency, the Board

[[Page 49348]]

of Governors of the Federal Reserve System, the Office of Thrift 
Supervision, the Federal Deposit Insurance Corporation, the National 
Credit Union Administration, the Federal Housing Finance Board, the 
Farm Credit Administration, the Securities and Exchange Commission, or 
the Commodity Futures Trading Commission is also suspended 
automatically from appearing or practicing before FHFA. A disbarment or 
suspension within the meaning of this paragraph shall be deemed to have 
occurred when the disbarring or suspending agency or tribunal enters 
its judgment or order, regardless of whether an appeal is pending or 
could be taken and regardless of whether a violation is admitted in the 
consent.
    (2) A suspension or disbarment from practice before FHFA under 
paragraph (b)(1) of this section shall continue until the person 
suspended or disbarred is reinstated under paragraph (d)(2) of this 
section.
    (c) Notices to be filed.--(1) Any individual appearing or 
practicing before FHFA who is the subject of an order, judgment, 
decree, or finding of the types set forth in paragraph (b)(1) of this 
section shall file promptly with the Director a copy thereof, together 
with any related opinion or statement of the agency or tribunal 
involved.
    (2) Any individual appearing or practicing before FHFA who is or 
within the last 10 years has been convicted of a felony or of a 
misdemeanor that resulted in a sentence of prison term or in a fine or 
restitution order totaling more than $5,000 promptly shall file a 
notice with the Director. The notice shall include a copy of the order 
imposing the sentence or fine, together with any related opinion or 
statement of the court involved.
    (d) Reinstatement.--(1) Unless otherwise ordered by the Director, 
an application for reinstatement for good cause may be made in writing 
by a person suspended or disbarred under paragraph (a)(1) of this 
section at any time more than three (3) years after the effective date 
of the suspension or disbarment and, thereafter, at any time more than 
one year after the person's most recent application for reinstatement. 
An applicant for reinstatement hereunder may, in the Director's sole 
discretion, be afforded a hearing.
    (2) An application for reinstatement for good cause by any person 
suspended or disbarred under paragraph (b)(1) of this section may be 
filed at any time, but not less than one (1) year after the applicant's 
most recent application. An applicant for reinstatement for good cause 
hereunder may, in the Director's sole discretion, be afforded a 
hearing. If, however, all the grounds for suspension or disbarment 
under paragraph (b)(1) of this section have been removed by a reversal 
of the order of suspension or disbarment or by termination of the 
underlying suspension or disbarment, any person suspended or disbarred 
under paragraph (b)(1) of this section may apply immediately for 
reinstatement and shall be reinstated by FHFA upon written application 
notifying FHFA that the grounds have been removed.
    (e) Conferences.--(1) General. Counsel for FHFA may confer with a 
proposed respondent concerning allegations of misconduct or other 
grounds for censure, disbarment or suspension, regardless of whether a 
proceeding for censure, disbarment or suspension has been commenced. If 
a conference results in a stipulation in connection with a proceeding 
in which the individual is the respondent, the stipulation may be 
entered in the record at the request of either party to the proceeding.
    (2) Resignation or voluntary suspension. In order to avoid the 
institution of or a decision in a disbarment or suspension proceeding, 
a person who practices before FHFA may consent to censure, suspension 
or disbarment from practice. At the discretion of the Director, the 
individual may be censured, suspended or disbarred in accordance with 
the consent offered.
    (f) Hearings under this section. Hearings conducted under this 
section shall be conducted in substantially the same manner as other 
hearings under this part, provided that in proceedings to terminate an 
existing FHFA suspension or disbarment order, the person seeking the 
termination of the order shall bear the burden of going forward with an 
application and with proof and that the Director may, in the Director's 
sole discretion, direct that any proceeding to terminate an existing 
suspension or disbarment by FHFA be limited to written submissions. All 
hearings held under this section shall be closed to the public unless 
the Director, on the Director's own motion or upon the request of a 
party, otherwise directs.


Sec. Sec.  1209.76 through 1209.79  [Reserved].

Subpart E--Civil Money Penalty Inflation Adjustments


Sec.  1209.80  Inflation adjustments.

    The maximum amount of each civil money penalty within FHFA's 
jurisdiction, as set by the Act and thereafter adjusted in accordance 
with the Inflation Adjustment Act, on a recurring four-year cycle, is 
as follows:

------------------------------------------------------------------------
                                                        Adjusted maximum
      U.S. code citation              Description        penalty amount
------------------------------------------------------------------------
12 U.S.C. 4636(b)(1)..........  First Tier............            10,000
12 U.S.C. 4636(b)(2)..........  Second Tier...........            50,000
12 U.S.C. 4636(b)(4)..........  Third Tier (Entity-            2,000,000
                                 Affiliated party).
12 U.S.C. 4636(b)(4)..........  Third Tier (Regulated          2,000,000
                                 entity).
------------------------------------------------------------------------

Sec.  1209.81  Applicability.

    The inflation adjustments set out in Sec.  1209.80 shall apply to 
civil money penalties assessed in accordance with the provisions of the 
Safety and Soundness Act, 12 U.S.C. 4636, and subparts B and C of this 
part, for violations occurring after the effective date of July 30, 
2008.


Sec. Sec.  1209.82 through 1209.99  [Reserved].

Subpart F--Suspension or Removal of an Entity-Affiliated Party 
Charged with Felony


Sec.  1209.100  Scope.

    Subpart F of this part applies to informal hearings afforded to any 
entity-affiliated party who has been suspended, removed or prohibited 
from further participation in the business affairs of a regulated 
entity by a notice or order issued by the Director under section 
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)).


Sec.  1209.101  Suspension, removal, or prohibition.

    (a) Notice of suspension or prohibition.--(1) As provided by 
section 1377(h)(1) of the Safety and Soundness

[[Page 49349]]

Act (12 U.S.C. 4636a(h)(1)), if an entity-affiliated party is charged 
in any information, indictment, or complaint, with the commission of or 
participation in a crime that involves dishonesty or breach of trust 
that is punishable by imprisonment for more than one (1) year under 
State or Federal law, the Director may, if continued service or 
participation by such party may pose a threat to the regulated entity 
or impair public confidence in the regulated entity, by written notice 
served upon such party, suspend such party from office or prohibit such 
party from further participation in any manner in the conduct of the 
affairs of any regulated entity.
    (2) In accordance with section 1377(h)(1) of the Safety and 
Soundness Act (12 U.S.C. 4636a(h)(1)), the notice of suspension or 
prohibition is effective upon service. A copy of such notice will be 
served on the relevant regulated entity. The notice will state the 
basis for the suspension and the right of the party to request an 
informal hearing as provided in Sec.  1209.102. The suspension or 
prohibition is to remain in effect until the information, indictment or 
complaint is finally disposed of, or until terminated by the Director, 
or otherwise as provided in paragraph (c) of this section.
    (b) Order of removal or prohibition. As provided by section 
1377(h)(2) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(2)), at 
such time as a judgment of conviction is entered (or pretrial diversion 
or other plea bargain is agreed to) in connection with a crime as 
referred to above in paragraph (a) (the ``conviction''), and the 
conviction is no longer subject to appellate review, the Director may, 
if continued service or participation by such party may pose a threat 
to the regulated entity or impair public confidence in the regulated 
entity, issue an order removing such party from office or prohibiting 
such party from further participation in any manner in the conduct of 
the affairs of the regulated entity without the prior written consent 
of the Director. A copy of such order will be served on the relevant 
regulated entity at which time the entity-affiliated party shall 
immediately cease to be director or officer of the regulated entity. 
The notice will state the basis for the removal or prohibition and the 
right of the party to request a hearing as provided in Sec.  1209.102.
    (c) Effective period. Unless terminated by the Director, a notice 
of suspension or order of removal issued under section 1377(h)(1) or 
(2) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(1),(2)) shall 
remain effective and outstanding until the completion of any informal 
hearing or appeal provided under section 1377(h)(4) of the Safety and 
Soundness Act (12 U.S.C. 4636a(h)(4)). The pendency of an informal 
hearing, if any, does not stay any notice of suspension or prohibition 
or order of removal or prohibition under subpart F of this part.
    (d) Effect of acquittal. As provided by section 1377(h)(2)(B)(ii) 
of the Safety and Soundness Act (12 U.S.C. 4636a(h)(2)(B)(ii)), a 
finding of not guilty or other disposition of the charge does not 
preclude the Director from instituting removal, suspension, or 
prohibition proceedings under section 1377(a) or (b) of the Safety and 
Soundness Act (12 U.S.C. 4636a(a),(b)).
    (e) Preservation of authority. Action by the Director under section 
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)), shall not 
be deemed as a predicate or a bar to any other regulatory, supervisory, 
or enforcement action under the Safety and Soundness Act.


Sec.  1209.102  Hearing on removal or suspension.

    (a) Hearing requests.--(1) Deadline. An entity-affiliated party 
served with a notice of suspension or prohibition or an order of 
removal or prohibition, within thirty (30) days of service of such 
notice or order, may submit to the Director a written request to appear 
before the Director to show that his or her continued service or 
participation in the affairs of the regulated entity will not pose a 
threat to the interests of, or threaten to impair public confidence in, 
the Enterprises or the Banks. The request must be addressed to the 
Director and sent to the Federal Housing Finance Agency at 1700 G 
Street, NW., Washington, DC 20552, by:
    (i) Overnight U.S. Postal Service delivery or delivery by a 
reliable commercial delivery service for same day or overnight delivery 
to the address stated above; or
    (ii) First class, registered, or certified mail via the U.S. Postal 
Service.
    (2) Waiver of appearance. An entity-affiliated party may elect in 
writing to waive his right to appear to make a statement in person or 
through counsel and have the matter determined solely on the basis of 
his written submission.
    (b) Form and timing of hearing.--(1) Informal hearing. Hearings 
under subpart F of this part are not subject to the formal adjudication 
provisions of the Administrative Procedure Act (5 U.S.C. 554 through 
557), and are not conducted under subpart C of this part.
    (2) Setting of the hearing. Upon receipt of a timely request for a 
hearing, the Director will give written notice and set a date within 
thirty (30) days for the entity-affiliated party to appear, personally 
or through counsel, before the Director or his designee(s) to submit 
written materials (or, at the discretion of the Director, oral 
testimony and oral argument) to make the necessary showing under 
paragraph (a) of this section. The entity-affiliated party may submit a 
written request for additional time for the hearing to commence, 
without undue delay, and the Director may extend the hearing date for a 
specified time.
    (3) Oral testimony. The Director or his designee, in his 
discretion, may deny, permit, or limit oral testimony in the hearing.
    (c) Conduct of the hearing.--(1) Hearing officer. A hearing under 
this section may be presided over by the Director or one or more 
designated FHFA employees, except that an officer designated by the 
Director (hearing officer) to conduct the hearing may not have been 
involved in an underlying criminal proceeding, a factually related 
proceeding, or an enforcement proceeding in a prosecutorial or 
investigative role. This provision does not preclude the Director 
otherwise from seeking information on the matters at issue from 
appropriate FHFA staff on an as needed basis consistent with Sec.  
1209.101(d)(2).
    (2) Submissions. All submissions of the requestor and agency 
counsel must be received by the Director or his designee no later than 
ten (10) days prior to the date set for the hearing. FHFA may respond 
in writing to the requestor's submission and serve the requestor (and 
any other interested party such as the regulated entity) not later than 
the date fixed by the hearing officer for submissions or other time 
period as the hearing officer may require.
    (3) Procedures.--(i) Fact finding authority of the hearing officer. 
The hearing officer shall determine all procedural matters under 
subpart F of this part, permit or limit the appearance of witnesses in 
accordance with paragraph (b)(3) of this section, and impose time 
limits as he or she deems reasonable. All oral statements, witness 
testimony, if permitted, and documents submitted that are found by the 
hearing officer to be materially relevant to the proceeding and not 
unduly repetitious may be considered. The hearing officer may question 
any person appearing in the proceeding, and may make any ruling 
reasonably necessary to ensure the full and fair presentation of 
evidence and to facilitate the efficient

[[Page 49350]]

and effective operation of the proceeding.
    (ii) Statements to an officer. Any oral or written statement made 
to the Director, a hearing officer, or any FHFA employee under subpart 
F of this part is deemed to be a statement made to a Federal officer or 
agency within the meaning of 18 U.S.C. 1006.
    (iii) Oral testimony. If either the requestor or agency counsel 
desires to present oral testimony to supplement the party's written 
submission he must make a request in writing to the hearing officer not 
later than ten (10) days prior to the hearing, as provided in paragraph 
(c)(2) of this section, or within a shorter time period as permitted by 
the hearing officer for good cause shown. The request should include 
the name of the individual(s), a statement generally descriptive of the 
expected testimony, and the reasons why such oral testimony is 
warranted. The hearing officer generally will not admit witnesses, 
absent a strong showing of specific and compelling need. Witnesses, if 
admitted, shall be sworn.
    (iv) Written materials. Each party must file a copy of any 
affidavit, memorandum, or other written material to be presented at the 
hearing with the hearing officer and serve copies on any other 
interested party (such as the affected regulated entity) not later than 
ten (10) days prior to commencement of the informal hearing, as 
provided in paragraph (c)(2), or within a shorter time period as 
permitted by the hearing officer for good cause shown.
    (v) Relief. The purpose of the hearing is to determine whether the 
suspension or prohibition from participation in any manner in the 
conduct of the affairs of the regulated entity will be continued, 
terminated or otherwise modified, or whether the order removing such 
party from office or prohibiting the party from further participation 
in any manner in the conduct of the affairs of the regulated entity 
will be rescinded or otherwise modified.
    (vi) Ultimate question. In deciding on any request for relief from 
a notice of suspension or prohibition, the hearing officer shall not 
consider the ultimate question of guilt or innocence with respect to 
the outstanding criminal charge(s). In deciding on a request for relief 
from a removal order, the hearing officer shall not consider challenges 
to or efforts to impeach the validity of the conviction. In either 
case, the hearing officer may consider facts that show the nature of 
the events on which the conviction or charges were based.
    (4) Record. If warranted under the circumstances of the matter, the 
hearing officer may require that a transcript of the proceedings be 
prepared at the expense of the requesting party. The hearing officer 
may order the record be kept open for a reasonable time following the 
hearing, not to exceed five (5) business days, to permit the filing of 
additional pertinent submissions for the record. Thereafter, no further 
submissions are to be admitted to the record, absent good cause shown.


Sec.  1209.103  Recommended and final decisions.

    (a) Recommended decision.--(1) Written recommended decision of the 
hearing officer. Not later than twenty (20) days following the close of 
the hearing (or if the requestor waived a hearing, from the deadline 
for submission of the written materials), the hearing officer will 
serve a copy of the recommended decision on the parties to the 
proceeding. The recommended decision must include a summary of the 
findings, the parties' respective arguments, and support for the 
determination.
    (2) Five-day comment period. Not later than five (5) business days 
after receipt of the recommended decision, the parties shall submit 
written comments in response to the recommended decision, if any, to 
the hearing officer. The hearing officer shall not grant any extension 
of the stated time for responses to a recommended decision.
    (3) Recommended decision to be transmitted to the Director. The 
hearing officer shall promptly forward the recommended decision, and 
written comments, if any, and the record to the Director for final 
determination.
    (b) Decision of the Director. Within sixty (60) days of the date of 
the hearing, or if the requestor waived a hearing the date fixed for 
the hearing, the Director will notify the entity-affiliated party in 
writing by registered mail of the disposition of his request for relief 
from the notice of suspension or prohibition or the order of removal or 
prohibition. The decision will state whether the suspension or 
prohibition will be continued, terminated or otherwise modified, or 
whether the order removing such party from any participation in the 
affairs of the regulated entity will be rescinded or otherwise 
modified. The decision will contain a brief statement of the basis for 
an adverse determination. The Director's decision is a final and non-
appealable order.
    (c) Effect of notice or order. A removal or prohibition by order 
shall remain in effect until terminated by the Director. A suspension 
or prohibition by notice remains in effect until the criminal charge is 
disposed of or until terminated by the Director.
    (d) Reconsideration. A suspended or removed entity-affiliated party 
subsequently may petition the Director to reconsider the final decision 
any time after the expiration of a twelve (12) month period from the 
date of the decision, but no such request may be made within twelve 
(12) months of a previous petition for reconsideration. An entity-
affiliated party must submit a petition for reconsideration in writing; 
the petition shall state the specific grounds for relief from the 
notice of suspension or order or removal and be supported by a 
memorandum and any other documentation materially relevant to the 
request for reconsideration. No hearing will be held on a petition for 
reconsideration, and the Director will inform the requestor of the 
disposition of the reconsideration request in a timely manner. A 
decision on a request for reconsideration shall not constitute an 
appealable order.

CHAPTER XVII--OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, 
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Subchapter D--Rules of Practice and Procedure

PART 1780--[REMOVED]

    3. Remove 12 CFR Part 1780.

    Dated: August 3, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-19567 Filed 8-11-10; 8:45 am]
BILLING CODE 8070-01-P