[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Rules and Regulations]
[Pages 53596-53629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21378]



[[Page 53595]]

Vol. 76

Friday,

No. 166

August 26, 2011

Part IV





Federal Housing Finance Board





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12 CFR Part 908





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Federal Housing Finance Agency





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12 CFR Part 1209





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Department of Housing and Urban Development





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Office of Federal Housing Enterprise Oversight





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12 CFR Part 1780





Rules of Practice and Procedure; Final Rule

  Federal Register / Vol. 76 , No. 166 / Friday, August 26, 2011 / 
Rules and Regulations  

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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

AGENCIES: Federal Housing Finance Board; Federal Housing Finance 
Agency; and Office of Federal Housing Enterprise Oversight.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting a final 
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) governing civil administrative enforcement 
actions by FHFA, under which FHFA's authority was consolidated to 
initiate enforcement proceedings against the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac) (together, the Enterprises), the Federal Home Loan Banks 
(the Banks) (collectively, the regulated entities), and their entity-
affiliated parties. This rule removes the existing Rules of Practice 
and Procedure of the Federal Housing Finance Board (Finance Board) and 
the Office of Federal Housing Enterprise Oversight (OFHEO), and 
establishes new FHFA regulations.

DATES: This rule is effective September 26, 2011.

FOR FURTHER INFORMATION CONTACT: Stephen E. Hart, Managing Associate 
General Counsel, Federal Housing Finance Agency, 1700 G Street, NW., 
Fourth Floor, Washington, DC 20552, telephone (202) 414-8960 (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. Background
II. Summary of Comments
III. Final Rule
IV. Paperwork Reduction Act
V. Regulatory Flexibility Act

I. Background

A. Regulatory History

    On August 12, 2010, FHFA published for comment a proposed rule to 
implement the provisions of HERA authorizing FHFA to take civil 
enforcement actions in accordance with sections 1371 through 1379D of 
the Safety and Soundness Act under specified conditions. 75 FR 49314 
(proposed rule). The proposed rule included proposed Rules of Practice 
and Procedure for hearings on the record in enforcement actions, rules 
of practice governing individuals who practice before FHFA, provisions 
for periodic civil money penalty adjustments, and the rules governing 
suspension or removal of an entity-affiliated party charged with a 
felony. The comment period closed on October 12, 2010.
    FHFA received two comment letters on the proposed rule, one from 
the 12 Banks and the other from two trade associations, that generally 
were supportive of the proposal, and recommended ways in which the 
regulation could be amended to better achieve its objectives. A 
discussion of those comments follows. The key substantive issues raised 
by the comment letters focused principally on procedural refinements, 
whether the procedures for hearings would apply to enforcement actions 
on housing goals, and whether the rule was intended to cover 
investigative subpoenas. In this final rule, FHFA has incorporated 
certain revisions suggested by these commenters, but in other respects 
retains the substance of the proposed rule for the reasons stated in 
the comment summary below.

B. HERA Amendments

    On July 30, 2008, HERA, Public Law No. 110-289, 122 Stat. 2654, 
became law and created FHFA as an independent agency of the Federal 
government.\1\ Among other things, HERA transferred to FHFA the 
supervisory and oversight responsibilities over the Enterprises, 
previously vested in OFHEO, and the Banks, which had been regulated by 
the Finance Board. HERA established FHFA as the financial safety and 
soundness regulator to oversee the prudential operations of 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. See 12 
U.S.C. 4513. The Enterprises and Banks continue to operate under 
regulations promulgated by OFHEO and the Finance Board, respectively, 
until such time as the existing regulations are supplanted by 
regulations promulgated by FHFA.\2\
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    \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 
Safety and Soundness Act, Title XIII, Public Law 102-550, 106 Stat. 
3672, 3941-4012, sections 1301 et seq. (1992), to establish FHFA as 
an independent agency of the Federal government. See 12 U.S.C. 
4511(a).
    \2\ The existing regulations are enforceable by the Director, 
until such time as they are modified, terminated, set aside, or 
superseded by the Director, as provided by HERA sections 1302 and 
1312, 122 Stat. 2795, 2798. See also 75 FR 49314, 49315, n. 6.
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C. HERA-Enhanced Enforcement Authority

    Because the regulated entities play a key role in housing finance 
and the U.S. economy, and FHFA's mission is to provide effective 
supervision, regulation, and housing mission oversight of the 
Enterprises and the Banks, HERA amended the Safety and Soundness Act to 
make explicit the general regulatory and supervisory authority of FHFA 
and the Director. See generally, 12 U.S.C. 4511, 4513, 4517, 4518, and 
4526. The HERA amendments to sections 1371 through 1379D of the Safety 
and Soundness Act (12 U.S.C. 4631 through 4641) authorize the Director 
to initiate administrative enforcement proceedings to issue cease and 
desist orders and temporary cease and desist orders and to impose civil 
money penalties against regulated entities, entity-affiliated parties, 
and the Office of Finance of the Federal Home Loan Bank System, in 
accordance with applicable law.
    Additionally, 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. Thus, in accordance with 
section 1377(b) of the Safety and Soundness Act (12 U.S.C. 4636a(b)), 
the Director can

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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.
    Moreover, 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), and specifies 
streamlined procedures for such actions.
    Prior to HERA section 1379B of the Safety and Soundness Act (12 
U.S.C. 4641) established the subpoena power of the Director in 
administrative proceedings. Under the HERA amendments, section 1379D of 
the Safety and Soundness Act makes explicit agency subpoena powers in 
investigations and examinations, and authorizes any designated 
representative of the Director to issue, revoke, quash, or modify a 
subpoena or subpoena duces tecum, as follows:

    In the course of or in connection with any proceeding, 
examination, or investigation under this chapter, the Director or 
any designated representative thereof, including any person 
designated to conduct any hearing under this subchapter shall have 
the authority * * * to revoke, quash, or modify subpoenas and 
subpoenas duces tecum.

12 U.S.C. 4641. This provision, however, should not be read to subject 
investigative subpoenas, subpoenas issued in connection with an 
examination, or conservator and receiver subpoenas to the procedural 
requirements that would apply in administrative enforcement 
proceedings.
    Thus, under these enhanced powers, the Director has at his or her 
disposal a broad range of enforcement mechanisms to enforce, as needed, 
applicable law, rules, orders, and agreements pertaining to the safe 
and sound operation of the Enterprises and Banks.\3\ In fact, much of 
FHFA's enforcement authority parallels that of the Federal bank and 
thrift regulators who adopted uniform rules of practice and procedure 
for enforcement actions pursuant to section 916 of the Financial 
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), 
Public Law 101-73, 103 Stat. 183 (1989) (Uniform Rules). The Uniform 
Rules set the standard for formal enforcement proceedings, and served 
as the model for the enforcement regulations adopted by the Finance 
Board in 2002 (12 CFR part 908) and OFHEO in 1999 (as amended in 2001) 
(12 CFR part 1780).\4\
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    \3\ 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 to 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).
    \4\ The proposed rule included a discussion of its origin in the 
Uniform Rules. See 75 FR 49314, 49316-17.
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    FHFA has determined mainly to adopt these procedures, with some 
changes that reflect the differences in the respective regulatory 
structures. Thus, the final rule builds upon the Uniform Rules and the 
rules previously adopted by the Finance Board and OFHEO.
    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)) requires 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 and conducted in accordance with 
sections 554, 556, and 557 of the Administrative Procedure Act 
(APA).\5\ See 12 U.S.C. 4633(a)(1), (3).
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    \5\ 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 APA (5 U.S.C. 554, 
556, and 557). 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.
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    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 formal hearing. The final rule establishes the 
procedural requirements for any such hearing on the record.\6\
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    \6\ No hearing on the record is required prior to the issuance 
of an order under section 1377(h) of the Safety and Soundness Act 
(12 U.S.C. 4636a(h)), for the suspension or removal of an entity-
affiliated party charged with a felony. Once served, the subject may 
timely submit a written request to appear before the Director to 
show the continued service would not pose a threat to the interests 
of the regulated entity or threaten to impair public confidence in 
the regulated entity. This provision does not authorize or require a 
formal hearing on the record; therefore, the subpart C provisions of 
the proposed rule do not govern such proceedings.
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D. The Proposed Rule

    The proposed rule was to govern administrative hearings on the 
following matters that FHFA by law must conduct on the record under 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.
    Because the procedural framework for formal hearings on the record 
is appropriate for other types of enforcement actions, the formal 
hearing procedures were enumerated separately in subpart C of the 
proposed rule. The procedural framework established in subpart C of the 
proposed rule may accommodate formal enforcement actions under sections 
1341 and 1345 of the Safety and Soundness Act pertaining to the 
achievement of housing goals and enforcement actions to enforce the 
regulated entities' reporting requirements under section

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1314 of the Safety and Soundness Act (12 U.S.C. 4514).
    As proposed, the rule would have replaced the Rules of Practice and 
Procedure previously adopted by OFHEO (12 CFR part 1780) and the 
Finance Board (12 CFR part 908).\7\ Many of the existing procedures 
were retained in the proposed rule without significant revisions. The 
proposed rule set 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.\8\
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    \7\ See 75 FR 49314, 49317, n. 17, 18.
    \8\ See id. at n. 19.
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    The proposed process was similar to the existing rules in that 
during the course of the hearing, the presiding officer would control 
virtually all aspects of the proceeding. In particular, the proposed 
rule would have established that the presiding officer would determine 
the hearing schedule; preside over all conferences; rule on non-
dispositive motions, discovery, and evidentiary issues; and ensure that 
the proceeding is prompt, fair, and impartial, and allows for the 
creation of a written record upon which the recommended decision is 
based.\9\
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    \9\ See id. at n. 20.
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    The proposed rule retained the existing requirement that the 
Director issue a final ruling within 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. The 
proposed rule similarly would have reserved to the Director the 
authority to dismiss the proceeding, in whole or in part, or to make a 
final determination of the merits of the proceeding.
    Informed by OFHEO's prior experience in conducting enforcement 
proceedings under its existing Rules of Practice and Procedure, FHFA 
identified certain issues for clarification in its revised rule. 
Accordingly, the proposed rule would have included a definition of 
``notice of charges'' to establish the notice of charges as 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 avert any future confusion, the proposed rule would 
have stated in a new definition in Sec.  1209.3 that a ``notice of 
charges'' is to be distinguished from an ``effective notice'' within 
the meaning of 12 U.S.C. 4635(a), to more clearly articulate that this 
provision does not confer upon a Federal district court subject matter 
jurisdiction over FHFA's administrative enforcement proceeding. That 
is, although a Federal district court has authority to enforce an 
effective notice or order that has been issued by FHFA, such a notice 
is not the same as a notice of charges and the court does not obtain 
subject matter jurisdiction over an ongoing administrative enforcement 
proceeding through this provision.
    The proposed rule sought to make the presiding officer's authority 
more explicit in several respects. A principal revision in Sec.  
1209.11(b)(1) made explicit the authority of the presiding officer to 
hold an initial scheduling conference to control the proceedings and 
set the date for the testimonial phase of the hearing in a scheduling 
order issued in conjunction with the initial scheduling conference set 
under Sec.  1209.36 of the proposed rule. 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 would 
clarify 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 30 
to 60 days of service of the notice of charges.
    Additionally, the proposed rule sought to arm the presiding officer 
with sufficient autonomy to control the pace and focus of discovery to 
prohibit unnecessary or burdensome discovery. First, Sec.  
1209.11(b)(5) of the proposed rule confirmed that the presiding officer 
has full authority to issue and enforce discovery orders. Second, Sec.  
1209.11(b)(8) of the proposed rule was to effectively codify the broad 
powers of the 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, the proposed rule made explicit the requirement that matters 
or documents subject to discovery must be ``materially relevant'' to 
the charges or allowable defenses in the proceeding. This measure of 
allowable discovery was stated to support the presiding officer's 
discretion and enhance his ability to deny discovery requests that seek 
information having no logical connection to a consequential fact that 
would tend to prove or to disprove a matter in issue. The proposed rule 
thus would have included a parallel authority in Sec.  1209.11(b)(11) 
to underscore 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.

E. Differences

    When promulgating any regulation that may have future affect 
relating to the Banks, the Director is required by section 1201 of HERA 
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. See section 1201 Public Law 110-289, 122 Stat. 2782-83 
(amending 12 U.S.C. 4513(f)[sic]).\10\ As noted in the preamble to the 
proposed rule, the Director considered the differences between the 
Banks and the Enterprises, as they relate to the above factors, and 
determined that the rule is appropriate. See 75 FR 49314, 49315. FHFA 
also requested comments from the public about whether differences 
related to these factors should have resulted in any revisions to the 
proposed rule. No comments specific to that request were received. In 
sum, the five differences identified in section 1201 of HERA do not 
require a different enforcement regulation for the Banks than for the 
Enterprises. Therefore, the comparative analysis under section 1201 of 
HERA undertaken for the proposed rule required no changes.
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    \10\ So in original; no paragraphs (d) and (e) were enacted. See 
12 U.S.C.A. 4513 n 1.
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    On the effective date, this final rule will, among other things, 
repeal and replace the current Finance Board Rules of Practice and 
Procedure regulation governing formal enforcement proceedings (12 CFR 
part 908), revised to implement the HERA-amended enforcement scheme.

II. Summary of Comments

    FHFA received two comment letters on the proposed rule. In their 
respective letters the Banks and the trade associations commented on 
more than two dozen provisions and noted a number of broader issues 
presented in the proposed rule. Those broader issues centered on: 
whether the evidentiary standard stated in the rule is comparable to 
that of the Uniform Rules; whether the rule may apply to

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enforcement of housing goals; whether some of the procedures may 
provide FHFA with a tactical advantage over the responding party; 
whether the rule is intended to apply to investigative subpoenas; 
whether the provisions on district court jurisdiction should be 
clarified; whether the rule should be revisited to impose the standards 
of conduct for parties appearing before the Director on agency 
employees, and whether the rule should impose on agency staff and the 
presiding officer a confidentiality requirement under the Trade Secrets 
Act. These issues are addressed in turn below.

 Evidentiary Standard

    One commenter queried whether the evidentiary standard expressed in 
the proposed rule strays from the model Uniform Rules. FHFA has 
considered the comment and concluded that the rule does not depart from 
the evidentiary standard for discovery in enforcement hearings embodied 
in the Uniform Rules. Indeed, it is fully consistent with the Federal 
Deposit Insurance Corporation's rule that allows discovery of ``any 
matter, not privileged, that has material relevance to the merits of 
the pending action.'' 12 CFR 308.24(b). This rule adopts a similar 
standard that the evidence must be materially relevant to the charges 
or allowable defenses presented in the action. The ``materially 
relevant'' standard ensures that the information to be introduced for 
the record will have a logical connection to a consequential fact that 
tends to prove or disprove a matter in issue.
    The discovery requirement was made more explicit also to underscore 
that in an administrative enforcement hearing the presiding officer 
must have authority to frame the issues, control the pace of the 
proceedings, and to admit, exclude or limit evidence according to its 
materiality, relevance, and analytical usefulness in the context of the 
claims and available defenses. This standard for discovery matters is 
fully consistent with the APA requirement for formal administrative 
hearings that an agency ``as a matter of policy shall provide for the 
exclusion of irrelevant, immaterial, or unduly repetitive evidence.'' 
See 5 U.S.C. 556(d). Moreover, it fosters conclusions based on a 
hearing record that comprises ``reliable, probative, and substantial 
evidence.'' See id. It is, therefore, essential for evidentiary probity 
to make express this clear standard in order to promote the fair 
resolution of issues in an equitable and timely fashion, and for the 
conservation of the resources of the presiding officer. This issue also 
is discussed below in response to a comment on Sec.  1209.11(b) of the 
proposed rule.

Enforcement of Enterprise Housing Goals

    The grounds and remedies for cease and desist enforcement 
proceedings relative to Enterprise housing goals (exclusive of the 
requirements pertaining to underserved markets) in 12 U.S.C. 4581 
differ from those for cease and desist enforcement proceedings under 12 
U.S.C. 4631, but the hearing process called for in 12 U.S.C. 4582 for 
enforcement of housing goals is essentially identical to the hearing 
procedure requirements set out in 12 U.S.C. 4633. Therefore, the 
proposed rule allowed that in the future the hearing procedures in 
subpart C of the proposed rule might be utilized for housing goals 
enforcement hearings.
    One commenter opined that application of the hearing procedures in 
subpart C of the proposed rule to Enterprise housing goals enforcement 
proceedings ``appears sensible,'' but recommended that FHFA should be 
clear about which subpoena authority would be used in such actions 
because the subpoena authority in 12 U.S.C. 4588 differs in certain 
respects. For example, the treatment of witness fees in 12 U.S.C. 4588 
has provisions not found in the subpoena authority in 12 U.S.C. 4641. 
Moreover, following the HERA amendments, 12 U.S.C. 4641 applies to 
administrative enforcement actions, examinations, and investigations. 
Compare 12 U.S.C. 4588 with 12 U.S.C. 4641. Without presaging every 
possible scenario, 12 U.S.C. 4588, the subpoena authority for housing 
goals administrative enforcement proceedings under 12 U.S.C. 4581, 
appears to be controlling in such actions. Without more information, 
specific guidance on such issues in advance of potential future 
rulemakings would be premature.

Tactical Advantages

    One commenter questioned whether certain provisions of the proposed 
rule provided for symmetrical treatment of parties or their counsel in 
an enforcement action, in particular with respect to the filing of 
documents under seal (Sec.  1209.12(c)), requesting a closed hearing 
(Sec.  1209.12(d)), and authority to sanction counsel for ex parte 
contact of decisional employees (Sec. Sec.  1209.14 and 1209.70). These 
sections are not unfairly weighted in favor of FHFA counsel of record. 
First, whether a proceeding should be open to the public or a document 
should be filed under seal is vested exclusively in the agency by the 
statutory authority reserved to the Director to determine if disclosure 
would be contrary to the public interest. Therefore, to file a document 
under seal, FHFA counsel of record must make a written determination 
that disclosure of the document would be contrary to the public 
interest; at the same time the presiding officer is authorized to issue 
orders or close hearings in whole or in part to ensure the 
confidentiality of the material is preserved. Thus, the proposed rule 
would have entrusted to the presiding officer the responsibility to 
maintain the confidentiality of information. These standards are 
consistent with due process and the Uniform Rules. Furthermore, all 
parties' rights to protect confidential information are preserved 
because any party to a proceeding may request confidential treatment of 
information, such as personal financial information, in the form of a 
protective order.
    Second, the standards set forth in Subpart D governing 
representational conduct before the agency are to promote the 
expeditious, fair resolution of adjudications or matters defined as 
``practice before FHFA,'' including enforcement proceedings. FHFA 
counsel of record appearing before the presiding officer in an 
enforcement proceeding would of course be subject to these 
requirements. In addition, FHFA employees are held to standards of 
conduct and ethical requirements that are set forth and redressed under 
Title 5 of the United States Code. The procedures in subpart C of the 
proposed rule would not govern such matters. Notwithstanding the 
express authority of the presiding officer to take remedial action or 
sanction a party or representative for prohibited acts in a proceeding, 
the overall authority of the presiding officer and Director to take 
action or impose restrictions or sanctions authorized under applicable 
statute or regulations is preserved by Sec.  1209.74(c)(4).

Investigative Subpoenas

    One commenter asked for clarification on whether the proposed rule 
is intended to govern investigatory subpoenas. The commenter attributed 
the confusion, in part, to the fact that 12 U.S.C. 4641 contains 
authority for the issuance of subpoenas in examinations and 
investigations, in addition to adjudications. To be clear, 12 U.S.C. 
4641 is included in the citation as support for the rule because it 
contains the authority for adjudicative subpoenas; there was no 
intention to suggest the proposed rule for enforcement proceedings 
would apply to investigations or examinations. The commenter posited 
that the proposed

[[Page 53600]]

rule would not apply to examinations or investigations because: (1) 
FHFA has authority to issue (only) two types of subpoenas, 
investigative and adjudicatory; and (2) routine examinations generally 
would not involve the issuance of subpoenas, and if the subpoena 
authority is exercised ``it is commonly called a formal 
investigation.'' FHFA has considered these comments, and notes that 
express examination subpoena power is established by the HERA 
amendments in 12 U.S.C. 4641. In addition, FHFA agrees with the 
conclusion that the proposed rule does not establish a process for 
formal investigations, and thus further clarification would be 
unnecessary. Finally, by law, FHFA as conservator or receiver may issue 
subpoenas pursuant to 12 U.S.C. 4617(b)(2)(I). Therefore, FHFA has 
determined that no changes to the proposed rule are required.

Judicial Enforcement of Administrative Subpoenas

    One commenter recommended removal of the last sentence in the 
provision that governs discovery of parties, Sec.  1209.30(h)(2), which 
states that the jurisdiction of district courts to enforce 
administrative subpoenas is as provided by 12 U.S.C. 4641(c)(2). 
Specifically, the proposed rule would have added a new sentence citing 
the limitations on district court jurisdiction that are found in 12 
U.S.C. 4635(b), to underscore that a district court when called upon to 
enforce an administrative subpoena does not obtain subject matter 
jurisdiction over the administrative enforcement action.\11\ In sum, 
the statute makes express that the district court's jurisdiction is 
limited to determining whether the subpoena is legally enforceable and 
to order compliance. But because no corollary sentence was added to the 
section on discovery of nonparties in Sec.  1209.31, FHFA has deleted 
the last sentence in Sec.  1209.30(h)(2) from the final rule to avoid 
any potential for confusion.
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    \11\ 12 U.S.C. 4635(b) provides in pertinent part: ``Except as 
otherwise provided in this subchapter and sections 4619 and 4623 of 
this title, no court shall have jurisdiction to affect, by 
injunction or otherwise, the issuance or enforcement of any notice 
or order under section 4631, 4632, 4513b, 4636 or 4637 of this 
title, or subchapter II of this chapter, or to review, modify, 
suspend, terminate, or set aside any such notice or order.'' Public 
Law 102-550, Title XIII, Sec.  1375, Oct. 28, 1992, 106 Stat. 3990; 
Public Law 110-289, Div. A, Title I, Sec.  1154, 122 Stat. 2775, 
July 30, 2008.
---------------------------------------------------------------------------

Sanctions

    One commenter objected that the proposed rule would permit 
dissimilar treatment of agency counsel for prohibited conduct and 
requested that agency counsel should be expressly barred from engaging 
in ex parte communications and from conferring with decisional staff on 
settlement offers. Additionally, the commenter recommended that the 
presiding officer should have express authority under the subpart D 
provisions to sanction agency counsel for prohibited conduct. Ex parte 
communications are prohibited in Sec.  1209.14 of the proposed rule. 
The commenter objected that the proposed rule fails to act as a 
deterrent to both parties, because it does not expressly subject agency 
counsel to the sanctions applicable to prohibited communications.
    Contrary to the commenter's assertion, the rule anticipates that 
agency counsel would refrain from improper conduct and ex parte 
communications with the presiding officer. Any party or representative 
appearing in an administrative enforcement hearing, including FHFA 
counsel of record, is subject to the bar on ex parte communications and 
the corresponding authority of the presiding officer. Nevertheless, the 
rule does allow for the agency head to be briefed on matters that may 
relate to settlement issues and complex supervisory or regulatory 
matters by those employees who best know the subject matter, even if 
the subject matter bears on the proceeding. FHFA does not agree that, 
in such situations FHFA counsel of record should be so prohibited and 
subject to disciplinary action. Where the Director must rely on the 
expertise of agency staff, the Director should not be denied advice of 
counsel. For these reasons, FHFA declines to revise the final rule.

Trade Secrets Act Reminder

    One commenter remarked that more protections for confidential 
information should be afforded where discovery requests often may seek 
the production of confidential financial or other proprietary materials 
from parties and nonparties. The commenter notes that the Trade Secrets 
Act prohibits Federal employees from divulging trade secrets obtained 
in the course of their Federal employment, and notwithstanding the 
precautions taken by FHFA employees, the rule should contain a reminder 
of these prohibitions. Neither the Uniform Rules nor the current 
respective agency Rules of Practice and Procedure include a reference 
to the Trade Secrets Act. Several factors dictate against adding a 
specific reference to the Trade Secrets Act in the final rule.
    First, the Trade Secrets Act prohibits officers and employees of 
Federal agencies from publishing or disclosing trade secrets and other 
confidential business information ``to any extent not authorized by 
law.'' This prohibition on the public disclosure of trade secrets 
material unquestionably applies to FHFA employees. Following a 1992 
amendment, the Trade Secrets Act also applied to ``any person acting on 
behalf the Office of Federal Housing Enterprise Oversight.'' (See 
Public Law 102-550, Title. XIII, Sec.  1353, 106 Stat. at 3970). 
Thereafter, section 1161(d) of HERA substituted FHFA for OFHEO in this 
provision. Thus, FHFA's employees, contractors and agents are subject 
to criminal penalties for the unauthorized public disclosure of trade 
secrets material.
    Second, existing regulations govern the disclosure of confidential 
or proprietary information, even where the Trade Secrets Act would not 
bar disclosure. See 12 CFR part 1703. In short, the regulations 
currently in effect prohibit agency employees from disclosing or 
permitting the disclosure of unpublished FHFA information absent 
authorization of the Director. Any person or entity that releases, 
discloses, or uses any unpublished information, except as expressly 
authorized, may be subject to the penalties provided in 18 U.S.C. 641 
and other applicable laws. A current FHFA employee also may be subject 
to administrative or disciplinary proceedings under existing OFHEO and 
Finance Board regulations that remain in effect until FHFA issues a 
comprehensive regulation.
    Third, apart from the Trade Secrets Act and FHFA's information 
disclosure regulation(s), there are provisions in the Rules of Practice 
and Procedure sufficient to ensure that sensitive, confidential 
materials will not be inadvertently disclosed in the course of an 
enforcement hearing. The rule as proposed includes these safeguards for 
the protection of confidential financial and trade secrets information. 
For example, a party (or non-party) who provides discovery materials 
that are considered confidential may apply for a protective order to 
preserve the confidentiality of the information. In addition, FHFA 
counsel of record may file or require the filing of a document under 
seal if he or she provides a written determination that disclosure of 
the document or portion of the document would be contrary to the public 
interest in accordance with Sec.  1209.12(c) of the proposed rule. 
Moreover, a respondent may move for a closed hearing under Sec.  
1209.12(b); the presiding officer then forwards a recommended decision 
to the Director

[[Page 53601]]

for his determination. And, the proceeding itself may be closed to 
entertain the introduction of sealed materials under Sec.  1209.12(c). 
FHFA finds that there are sufficient safeguards in the rule for the 
protection of materials characterized as trade secrets.
    Finally, the Safety and Soundness Act authorizes the Director to 
make disclosures that are, in his or her exclusive discretion, in the 
best interest of the public. For example, the Director has the 
authority to determine that information sharing with other Federal 
agencies is appropriate where it is necessary for the performance of 
official duties, and to determine when it is in the public interest to 
make information public. Therefore, FHFA concludes that it is not 
necessary to add a specific reference to the Trade Secrets Act in the 
final rule.

Specific Provisions

    The commenters also raised points relating to specific provisions 
of the proposed rule. To the extent that FHFA either adopts revisions 
in the final rule in response to those comments or declines to adopt 
comments on the proposed rule, those matters are addressed below as 
part of the discussion of those sections in the final rule. Sections of 
the proposed rule that raised no issues or received no comments are to 
be adopted in the final rule as proposed.

III. Final Rule

A. General

    The proposed rule would have adopted many provisions of the Finance 
Board's and OFHEO's enforcement rules, which are nearly identical 
procedurally, without substantive changes, to be codified in a new part 
1209 that would supersede the existing OFHEO and Finance Board Rules of 
Practice and Procedure. In the final rule, FHFA is adopting most of 
those provisions of the proposed rule without any further substantive 
changes. Thus, most of the provisions of the final rule that are 
located in Subpart A (Scope and Authority), Subpart B (Enforcement 
Proceedings under sections 1371 through 1379D of the Safety and 
Soundness Act), Subpart C (Rules of Practice and Procedure), Subpart D 
(Parties and Representational Practice before the Federal Housing 
Finance Agency; Standards of Conduct), Subpart E (Civil Money Penalty 
Inflation Adjustments), and Subpart F (Suspension or Removal of Entity-
Affiliated Party Charged with Felony), are unchanged from the proposed 
rule. Described separately below are all instances where FHFA adopts or 
declines to adopt revisions in response to comments on specific 
sections in the proposed rule.

B. Subpart A--Scope and Authority

Section 1209.3--Definitions
    The proposed rule would have carried over into Sec.  1209.3, 
without substantive edits, nearly all of the existing definitions from 
the OFHEO and Finance Board regulations that are applicable to 
regulations in this part, but would have revised certain definitions 
and added a number of new definitions to implement the statutory 
amendments or provide greater clarity. Except as described below, the 
final rule adopts the definitions from the proposed rule without 
further change.
    The proposed rule included a new definition of ``associated with 
the regulated entity,'' to address the HERA amendments in section 1379 
of the Safety and Soundness Act that established a six-year ``look-
back'' period and expanded the scope of the parties subject to FHFA 
enforcement jurisdiction. (See 12 U.S.C. 4637). In particular, the law 
provides that the Director may issue a notice and proceed ``against any 
such entity-affiliated party, if such notice is served before the end 
of the six-year period beginning on the date such entity-affiliated 
party ceases to be associated with the regulated entity.'' See id. The 
proposed rule would have included a definition of ``associated with the 
regulated entity'' to provide descriptive guidance as to the type of 
activities meant by the phrase ``associated with.'' One commenter 
opined that ``associated with the regulated entity'' appears to be 
broader than ``entity-affiliated party,'' and does not appear elsewhere 
in the proposed rule. That commenter suggested that the six-year period 
should begin ``on the date such entity-affiliated party would no longer 
be deemed to be an entity-affiliated party.''
    FHFA disagrees with this suggestion. First, section 1379 of the 
Safety and Soundness Act statute was amended precisely for that 
reason--to hold a wider class of persons accountable for their actions 
under the Safety and Soundness Act. Under HERA, the revised provision 
reads: ``The resignation, termination of employment or participation, 
or separation of an entity-affiliated party,'' whereas prior to HERA it 
read: ``Director or executive officer of an enterprise.'' Second, the 
suggested language falls short of setting a hard deadline. Because it 
is too subjective, it may actually extend the reach of the look-back 
further than Congress intended. Third, by conflating ``entity-
affiliated party'' with ``associated with,'' the provision would read: 
When an entity-affiliated party ceases to be an entity-affiliated 
party. Such a reading would strip the phrase of any logical meaning and 
dilute the prerequisite. Therefore, the final rule adopts the 
definition as proposed.

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

Section 1209.4--Scope and Authority
    This section states the authority for administrative enforcement 
proceedings in accordance with sections 1371 through 1379D of the 
Safety and Soundness Act (12 U.S.C. 4631 through 4641), which under 
section 1373 of the Safety and Soundness Act (12 U.S.C. 4633) must be 
held on the record, as follows: (1) Cease and desist and temporary 
cease and desist proceedings under sections 1371 through 1372 of the 
Safety and Soundness Act (12 U.S.C. 4631 through 4633); (2) civil money 
penalty assessment proceedings under section 1376 of the Safety and 
Soundness Act (12 U.S.C. 4636); and (3) the removal and prohibition 
proceedings under 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, it reiterates that, pursuant to sections 1336(c) and 
1371(a)(2) of the Safety and Soundness Act (12 U.S.C. 4566(c) and 12 
U.S.C. 4631(a)(2)), 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.\12\ It is necessary to make this distinction clear because 
the grounds for initiating cease and desist proceedings relative to 
housing goals under 12 U.S.C. 4581 differ from the cease and desist 
powers under 12 U.S.C. 4631. Similarly, the civil money penalties for 
housing goals violations differ from the civil money penalty provisions 
in 12 U.S.C. 4636. See 12 U.S.C. 4585. The process for

[[Page 53602]]

conducting housing goals enforcement actions, however, is 
indistinguishable--a notice of charges is served and a hearing is 
conducted on the record. See 12 U.S.C. 4582(a)(1)). For that reason, 
the formal hearing procedures set out in subpart C of part 1209 as 
proposed are well-suited to govern housing goals enforcement 
proceedings. One commenter offered that combining the hearing 
procedures appeared sensible. FHFA has concluded that promoting use of 
the subpart C procedures for housing goals enforcement proceedings 
supports both an economies of scale approach to regulation, and 
provides certainty with respect to the process. Therefore, the 
provision is to be adopted in final as proposed.
---------------------------------------------------------------------------

    \12\ 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)).''
---------------------------------------------------------------------------

Section 1209.5--Cease and Desist Proceedings
    Section 1209.5 of the proposed rule closely followed the 
requirements of section 1371 of the Safety and Soundness Act (12 U.S.C. 
4631). That statutory provision, as amended by section 1151 of HERA, 
sets out the authority and establishes several requirements for cease 
and desist enforcement proceedings. In the final rule, FHFA has 
retained the language of the proposed rule regarding the general 
requirements, but has also made certain revisions in response to the 
comments. In particular, Sec.  1209.5(a)(1)(i) in the final rule has 
been edited to state more specifically the requisite conditions of 
section 1371(a)(1) of the Safety and Soundness Act (12 U.S.C. 
4631(a)(1)). Additionally, Sec.  1209.5(a)(i) has been edited lightly 
to underscore that the cease and desist/civil money penalty provisions 
set out in sections 1371 and 1376 of the Safety and Soundness Act (12 
U.S.C. 4631, 4636) are not to be applied to the enforcement of housing 
goals. Also in response to a comment, Sec.  1209.5(a)(2) in the final 
rule has been revised to state more expressly the discretion and 
authority of the Director to deem a regulated entity to be engaging in 
an unsafe or unsound practice on the basis of a less than satisfactory 
rating in its most recent report of examination with respect to asset 
quality, management, earnings, or liquidity, where the Director finds 
that the deficiency has not been corrected.
    Section 1209.5 of the proposed rule summarizes the statutory cease 
and desist authority under section 1371 of the Safety and Soundness Act 
(12 U.S.C. 4631), which provides in section 1371(f) of the Safety and 
Soundness Act (12 U.S.C. 4631(f)) that a cease and desist 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. One commenter recommended revising Sec.  1209.5 of the proposed 
rule to include a reference to the availability of judicial review to 
make it consistent with Sec. Sec.  1209.6(d) and 1209.7(d) in the 
proposed rule. This suggestion, which is misplaced in one respect, has 
merit for another reason: To reinforce that section 1374 of the Safety 
and Soundness Act (12 U.S.C. 4634) governs judicial review of a final 
cease and desist order. Section 1209.5 of the final rule is being 
revised to add a new paragraph (d)(2), to state that judicial review is 
governed by section 1374 of the Safety and Soundness Act (12 U.S.C. 
4634), as provided for in section 1371(f) of the Safety and Soundness 
Act (12 U.S.C. 4631(f)).
    FHFA notes that this revision to Sec.  1209.5(d) of the final rule 
is not made for the purpose of consistency with Sec.  1209.6(d) of the 
rule, as the commenter posited. In fact, Sec.  1209.6(d) refers to an 
entirely different judicial authority: The authority of a district 
court to issue an injunction to set aside, limit, or suspend the 
enforcement of a temporary cease and desist order pending the 
completion of administrative proceedings on a notice of charges under 
section 1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)). 
Section 1376(c)(3) of the Safety and Soundness Act (12 U.S.C. 
4636(c)(3)) makes clear that a district court does not have 
jurisdiction to review a final order imposing a civil money penalty: 
The order of the Director imposing a penalty under this section shall 
not be subject to review, except as provided in section 1374 of the 
Safety and Soundness Act (12 U.S.C. 4634), which vests exclusive 
jurisdiction in the United States Court of Appeals for the District of 
Columbia to review any final order issued under sections 1313B, 1371, 
1376, or 1377 of the Safety and Soundness Act (12 U.S.C. 4513b, 4631, 
4636, 4636a). In fact, section 1376(d) of the Safety and Soundness Act 
expressly bars a district court from putting at issue the validity and 
appropriateness of a civil money penalty order in an action under this 
subsection to enforce a civil money penalty by obtaining a monetary 
judgment in district court. See 12 U.S.C. 4636(d).
    For additional clarity, minor edits also have been made to 
Sec. Sec.  1209.55(c), 1209.56, and 1209.57 in the final rule to 
underscore the authority of the Director to modify, terminate, or set 
aside an order as provided by section 1373(b)(2) of the Safety and 
Soundness Act (12 U.S.C. 4633(b)(2)), to require a party to exhaust 
administrative remedies as a precondition to judicial review of any 
final decision and order, and to state that judicial review of a final 
order is available in accordance with section 1374 of the Safety and 
Soundness Act (12 U.S.C. 4634).
Section 1209.6--Temporary Cease and Desist Orders
    Section 1209.6 of the proposed rule implements section 1372(a) of 
the Safety and Soundness Act (12 U.S.C. 4632(a)) governing the issuance 
of a temporary cease and desist order. Section 1372(a) provides that, 
in connection with a notice of charges served under section 1371(a) or 
(b) of the Safety and Soundness Act, 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, are 
likely to cause insolvency or significant dissipation of assets or 
earnings of that entity, or 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 the regulated 
entity or entity-affiliated party to cease and desist from any such 
violation or practice, and take affirmative action to prevent or remedy 
such insolvency, dissipation, condition, or prejudice pending 
completion of the cease and desist proceedings.
    One commenter suggested that Sec. Sec.  1209.6 and 1209.7 of the 
proposed rule should ``specify that the notice of charges in a civil 
money penalty proceeding must conform with Sec.  1209.23,'' and 
incorporate parallels to Sec. Sec.  1209.5(a)(1) and 1209.8(a)(1). FHFA 
agrees that a notice in a civil money penalty action must provide the 
same type of information as required of a notice of charges. 
Accordingly, Sec.  1209.7 will be revised in the final rule to specify 
that the notice in a civil money penalty action must provide the same 
information as required of a notice of charges and conform to the 
requirements of Sec.  1209.23. No changes to Sec.  1209.6 are 
contemplated because the operative notice of charges in a temporary 
cease and desist proceeding would be subject to Sec.  1209.5, which, as 
stated, requires conformity with the requirements of Sec.  1209.23.
Section 1209.7--Civil Money Penalties
    Section 1209.7 of the proposed rule implemented the provisions of 
section 1376 of the Safety and Soundness Act that govern civil money 
penalty

[[Page 53603]]

enforcement proceedings under the Safety and Soundness Act. See 12 
U.S.C. 4636(a). For the commencement of such proceedings section 
1376(c) of the Safety and Soundness Act requires the Director to 
establish standards and procedures that, among other things, provide 
for the Director to notify the regulated entity or entity-affiliated 
party in writing of the Director's determination to impose a penalty. A 
hearing on the record under section 1373 of the Safety and Soundness 
Act is required. One commenter suggested that the proposed rule should 
be revised to specify that the notice should comply with the 
requirements of Sec.  1209.23 of the proposed rule that dictates the 
content of a notice of charges in order to bring the civil money 
penalty notice in parallel with a notice of charges issued under the 
cease and desist or a notice issued under the removal and prohibition 
provisions.
    The suggestion has merit. Like a notice of charges issued under 
section 1371(c)(1) of the Safety and Soundness Act (12 U.S.C. 
4631(c)(1)), or a notice of intention to remove or suspend a party 
under section 1377(c)(1) of the Safety and Soundness Act (12 U.S.C. 
4636a(a)), a notice of intent to impose a civil money penalty under 
section 1376 of the Safety and Soundness Act (12 U.S.C. 4636) should 
contain a statement of facts constituting grounds for such an action, 
and fix a time and place for the hearing. Under applicable law, each of 
these pleadings must give sufficient notice of the facts and authority 
underlying the respective proceeding, and Sec.  1209.23 was drafted 
with that premise in mind. Therefore, FHFA has determined to edit Sec.  
1209.7(a)(1) in the final rule to require that such notices shall 
conform to Sec.  1209.23.
    One commenter noted that Sec.  1209.7(a)(2) of the proposed rule 
omits a reference to the daily penalty cap. The proposed rule cited to 
but did not recite the statutory authority for Tier I violations that 
includes that reference. FHFA agrees that for the sake of clarity Sec.  
1209.7(a)(2) in the final rule should be revised to include that 
reference.
Section 1209.8--Removal and Suspension Proceedings
    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)). 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).
    Section 1209.8(a)(1) of the proposed rule was drafted to implement 
12 U.S.C. 4636a(a)(1). One commenter noted that Sec. Sec.  1209.8(a)(1) 
and (c)(1) may present confusing redundancies by repeating the 
requirement for notices to conform to Sec.  1209.23. To avoid any 
potential confusion FHFA has determined to remove the reference to 
Sec.  1209.23 from Sec.  1209.8(a)(1) in the final rule. Section 
1209.8(c)(1) will be adopted in the final rule as proposed.
    Section 1209.8(b) of the proposed rule was drafted to implement 
section 1377(b) of the Safety and Soundness Act (12 U.S.C. 4636a(b)). 
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 the 
effective date of the order issued under paragraph (b) [sic].\13\ This 
is a drafting error in the statute; the reference should be to 
paragraph (c) of section 1377. See 12 U.S.C. 4636a(b)(2)(B)(ii)).
---------------------------------------------------------------------------

    \13\ The reference should be to section 1377(c) of the Safety 
and Soundness Act (12 U.S.C. 4636a(c)), which concerns final orders.
---------------------------------------------------------------------------

    Noting this technical error, one commenter posited that Sec.  
1209.8 of the proposed rule, which refers to the applicable provision, 
``leaves unclear the distinction between an immediate suspension/
prohibition order issued pursuant to Sec.  1209.8(b) and a final 
suspension/prohibition order issued pursuant to Sec.  1209.8(c).'' To 
give the statute logical meaning the commenter would make an explicit 
reference to paragraph (c) in Sec.  1209.8(b)(2) of the final rule to 
specify ``that the effective period of a suspension order issued under 
Sec.  1209.8(b) commences upon service and unless a court issues a 
stay, remains effective until the Director either dismisses the 
charges, or pursuant to Sec.  1209.8(c), the Director issues a final 
order.'' FHFA agrees that the intent of the law is that an order issued 
under section 1377(b) of the Safety and Soundness Act (12 U.S.C. 
4636a(b)) is effective immediately upon service and, absent a court-
ordered stay, remains in effect and enforceable until the Director 
dismisses the charges or the effective date of an order issued under 
section 1377(c) of the Safety and Soundness Act. See 12 U.S.C. 
4636a(b)(2). Accordingly, to more specifically convey the intent of the 
law, Sec.  1209.8(b)(2) (effective period) in the final rule has been 
revised to that effect.
    Section 1209.8(d)(3) of the proposed rule was written to implement 
the provisions of section 1377(e) of the Safety and Soundness Act (12 
U.S.C. 4636a(e)) that impose industry-wide restrictions on anyone who 
has been removed or suspended from office (or barred from participating 
in the affairs of a regulated entity or the Office of Finance), absent 
the written consent of the Director in accordance with section 
1377(e)(2) of the Safety and Soundness Act (12 U.S.C. 4636a(e)(2)). 
Such consent is committed to the discretion of the Director by law. The 
provision is silent on any process or procedures for obtaining that 
written consent, other than to require that the consent be publicly 
disclosed.
    One commenter suggested that Sec.  1209.8(d)(3)(ii) of the proposed 
rule was inadvertent in stating that the Director's refusal to consent 
shall not be a final agency action, because that effectively would bar 
access to judicial review. In truth, the draft rule provision is not a 
mistake, and FHFA disagrees with the premise of the commenter's 
suggestion because there is no provision for judicial review. Section 
1377(e) of the Safety and Soundness Act (12 U.S.C. 4636a(e)) does not 
provide for judicial review of the Director's decision whether to 
permit a person subject to a removal or suspension order to continue, 
resume, or undertake participation in the affairs of a regulated entity 
or the Office of Finance. In fact, section 1377 of the Safety and 
Soundness Act provides only two judicial remedies. First, for orders 
issued under section 1377(b) of the Safety and Soundness Act, the 
subject may pursue a stay of the order through an action in district 
court under section 1377(g) of the Safety and Soundness Act (12 U.S.C. 
4636a(b), (g)). Second, a final suspension/removal/prohibition order 
issued under section 1377(c) of the Safety and Soundness Act (12 U.S.C.

[[Page 53604]]

4636a(c)) is subject to judicial review in the court of appeals in 
accordance with section 1374 of the Safety and Soundness Act (12 U.S.C. 
4634). Third, the public purpose of the industry-wide prohibition set 
out in section 1377(e)(1) of the Safety and Soundness Act (12 U.S.C. 
4636a(e)(1)), taken together with the prohibitions on certain specified 
activities in section 1377(d) of the Safety and Soundness Act (12 
U.S.C. 4636a(d)), must be given weight. Fourth, the decision whether to 
permit an entity-affiliated party to participate in the affairs of a 
regulated entity or the Office of Finance is committed to the 
discretion of the Director by law. Fifth, under the general precepts of 
statutory construction, where a provision (such as the right of 
judicial review) is included in one portion of an act, but excluded in 
other sections, implying a legislative intent to include the missing 
provision where it is omitted is unsupported.\14\
---------------------------------------------------------------------------

    \14\ See generally, Singer, N., Statutes and Statutory 
Construction (Sixth Ed.), Sec.  67:9.
---------------------------------------------------------------------------

    Moreover, in the context of a final order under section 1377(c) of 
the Safety and Soundness Act (12 U.S.C. 4636a(c)), where a court of 
appeals has already ruled on the appropriateness of a final order, the 
subject should not then be permitted to seek district court review of 
the Director's refusal to consent to the subject's proposed 
participation in a regulated entity or the Office of Finance. The 
statute includes no such provision of jurisdiction, and to read in such 
a right potentially would allow a subject to circumvent a final order. 
As stated, district court jurisdiction is limited by section 1377(g) of 
the Safety and Soundness Act (12 U.S.C. 4636a(g)) to ordering a stay of 
a suspension or prohibition order pending the completion of an 
administrative hearing under section 1377(c) of the Safety and 
Soundness Act (12 U.S.C. 4636a(c)). Finally, to upend the finality of a 
final order issued under section 1377(c) of the Safety and Soundness 
Act (12 U.S.C. 4636a(c)), that was affirmed by the appellate court, 
would run contrary to the statutory intent to let the Director exercise 
his advanced knowledge of the Enterprises, the Banks, and the Office of 
Finance to determine what is in the best interests of these entities. 
Therefore, having considered the issues, FHFA declines to remove the 
word ``not'' from Sec.  1209.8(d)(3)(ii) in the final rule as was 
suggested by the commenter.

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

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. 
The powers of the presiding officer to control proceedings are 
specified. Several commenters noted that Sec.  1209.11(b)(11) of the 
proposed rule provides that the presiding officer may receive 
``materially relevant'' evidence, and characterized this as a stricter 
evidentiary standard than is provided for in the Uniform Rules. One 
commenter suggested that this could create uncertainty and disparity in 
the administrative process, ultimately resulting in unnecessary 
judicial review of the standard.
    In fact, to ensure that the record is complete and accurate, the 
presiding officer has broad authority under the proposed rule to take 
all lawful 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; and, 
upon motion of a party, take judicial notice of a fact. (See Sec.  
1209.11(b)).
    FHFA has considered the comment and concludes that it misconstrues 
the standard embodied in the Uniform Rules. Section 1209.11(b) of the 
proposed rule reflects the analogous provisions in the Uniform Rules; 
and, while it may be an extension of the standard, it does not create a 
disparity. For example, the Uniform Rules of the Federal Deposit 
Insurance Corporation (12 CFR part 308, Subpart A) (FDIC rule) provide 
that the powers of the administrative law judge include the power ``to 
receive relevant evidence * * *'' (12 CFR 308.5(b)(3)). And relevance 
is more specifically defined in the discovery rule governing relevance 
that limits discovery to ``any matter not privileged that has material 
relevance to the merits of the pending action.'' (12 CFR 308.25(a), 
(b)). The proposed rule would adopt the same standard. It is necessary 
and appropriate to expect that evidence have a logical connection to a 
consequential fact that tends to prove or disprove a matter in issue 
relative to the charges or allowable defenses in the pending action. 
This is to enable the presiding officer to ensure that the case is not 
sidetracked by unnecessary discovery, that discovery is focused on the 
salient issues, and that an accurate, thorough administrative record is 
timely created. Accordingly, FHFA declines to revise this provision in 
the final rule.
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. Section 1209.12(c) of the proposed 
rule reserves to FHFA counsel of record the authority to file documents 
under seal, or to require that a document be filed under seal, upon a 
written determination that the disclosure of the document would be 
contrary to the public interest. Furthermore, 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 procedures for handling 
confidential information are to be followed.
    One commenter objected to this process arguing that the rule should 
provide authority to respondent's counsel to file documents under seal 
voluntarily to preserve a private (or public) need to protect filings 
from public disclosure. FHFA has considered the comment and determined 
that a respondent's right to protect confidential information is 
procedurally ensured because any party to a proceeding may request 
confidential treatment of information, such as personal financial 
information, in the form of a protective order. Therefore, FHFA has 
determined not to change the provision in the final rule.
    One commenter mistakenly cited Sec.  1209.12(d) in objecting to the 
requirement in Sec.  1209.12(c) of the proposed rule that a protective 
order issued by the presiding officer to protect the confidentiality of 
sensitive information should be acceptable to FHFA counsel of record. 
FHFA sees no inconsistency in this requirement. The Agency has a vital 
interest in ensuring the confidentiality of sensitive commercial and 
financial information of the regulated entities. Respondent's counsel 
would find similar protections

[[Page 53605]]

available where a private hearing is authorized. Section 1209.12(b) of 
the proposed rule permits any party to request a private hearing; the 
determination is committed to the discretion of the Director, which is 
consistent with 12 U.S.C. 4639(b), (d). Having considered the issues, 
FHFA declines to revise Sec.  1209.12(c) in the final rule.
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. This section also provides for the separation of functions 
of Agency personnel. Any employee or agent of FHFA who participated in 
the examination, investigative, or prosecutorial functions on the case 
may not participate in or advise in the recommended decision or the 
Director's decision on the final determination. One commenter objected 
that analysis of settlement offers and regulatory or supervisory 
matters are exempt from this prohibition. This reasonable carve out 
anticipates situations where FHFA counsel of record may be the staff 
possessed of the detailed knowledge of an issue that could be relied 
upon to provide context, content, and legal advice to the Director on a 
supervisory or regulatory matter, or the basis for appropriately 
resolving an enforcement action.
Section 1209.29--Discovery
    Section 1209.29 of the rule provides 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. One commenter objected to the standard and stated that it 
differs from the evidentiary standard in the Uniform Rules. The 
identical concern was raised with respect to Sec.  1209.11(b) of the 
proposed rule. For the reasons stated in response to the comment on 
Sec.  1209.11(b), FHFA has determined not to revise these provisions in 
the final rule. This evidentiary standard is in addition to other 
measures that are designed to assist the presiding officer in 
controlling the proceeding, such as a new meet and confer requirement 
in Sec.  1209.29(a)(2) of the proposed rule that requires the parties 
to meet and confer in good faith and to submit a discovery plan to the 
presiding officer for his or her approval.
    Discovery is limited to document requests; no other form of 
discovery is permitted. That is, with the exception of depositions to 
preserve testimony of a witness unavailable for a hearing (Sec.  
1209.32 of the proposed rule), depositions are prohibited. And, Sec.  
1209.29(c) of the proposed rule 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) of the proposed 
rule, would have provided that the parties may enter into so-called 
``claw back'' agreements, and that the presiding officer shall enter an 
order to ensure the enforceability of such agreements. One commenter 
suggested the provision be revised to permit the presiding officer to 
order claw back procedures where parties did not reach such an 
agreement prior to production. As proposed, however, the section allows 
any party to petition the presiding officer to issue claw back 
procedures, which should address the commenter's concern. FHFA has 
considered the issue and determined not to revise this section in the 
final rule.
Section 1209.30--Request for Document Discovery From Parties
    This section in the proposed rule would have established the 
requirements for document discovery from parties, and stated that such 
discovery must be consistent with the discovery plan approved by the 
presiding officer under Sec.  1209.29. Among other things, the proposed 
rule set deadlines for objections to discovery requests or assertion of 
privilege claims, and addressed the complexities and costs associated 
with the discovery of electronically-stored information (e-discovery) 
to encourage transparency and cooperation of the parties to avoid the 
costly issues commonly encountered in e-discovery.
    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. Section 1209.30(h)(2) of the proposed rule would have 
dedicated a sentence to state the limitations on a district court's 
jurisdiction under section 1375(b) of the Safety and Soundness Act (12 
U.S.C. 4635(b)). A district court that is reviewing a subpoena does not 
obtain jurisdiction over the enforcement action itself, because section 
1375(b) of the Safety and Soundness Act (12 U.S.C. 4635(b)) provides 
that a court may not affect by injunction or otherwise the issuance or 
enforcement of any effective and outstanding notice or order issued by 
the Director under sections 4513b, 4631, 4632, 4636, and 4637 of Title 
12 of the United States Code. The same provision also bars a district 
court from enjoining or otherwise affecting the issuance or enforcement 
of an order issued under subchapter II of the Safety and Soundness Act 
(pertaining to required capital levels, special enforcement powers, and 
reviews of assets and liabilities), or otherwise to review, modify, 
suspend, terminate, or set aside any such effective and outstanding 
notice or order. That is, the jurisdiction of a district court charged 
with enforcing a subpoena (or declining to do so) would run only to the 
appropriateness of the subpoena.
    Several commenters objected that that sentence in the proposed rule 
was misleading or overbroad in referring to ``subtitle C of the Safety 
and Soundness Act,'' and that the provision otherwise appeared to 
govern discovery of non-parties as well. To resolve any confusion, the 
commenter recommended that FHFA remove that sentence from Sec.  
1209.30(h)(2). In considering the comments, FHFA notes that the 
jurisdictional bar in section 1375(b) of the Safety and Soundness Act 
(12 U.S.C. 4635(b)) is set out as a matter of law. To avoid redundancy 
and foreclose any confusion, FHFA has removed the sentence from the 
final rule.
Section 1209.31--Document Discovery Subpoenas to Non-Parties
    Section 1209.31 of the proposed rule governs document discovery 
subpoenas to non-parties. 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).
    One commenter suggested the evidentiary standard be revised to one

[[Page 53606]]

of ``general relevance.'' Here, again, the proposed rule specifies a 
materially relevant standard to keep the Rules of Practice and 
Procedure aligned with the material and relevant standard adopted by 
the Federal banking agencies in the Uniform Rules, and to mirror the 
generally accepted standards of materiality and relevance embodied in 
Federal law. This standard best takes into account the importance of a 
transparent discovery process in expeditiously resolving the issues 
presented by the claims and defenses in a case. FHFA rejects the 
suggestion that this standard differs from the Uniform Rules, and is 
issuing this provision in the final rule as proposed.
    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 the same types of 
objections that may be raised by a party under Sec.  1209.30, and 
within the same time deadlines. The revised provision permits the party 
seeking the subpoena to respond to the non-party's objections within 10 
days of service of a motion to quash or modify. Absent 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.
    One commenter argued that any party should be permitted to object 
to any subpoena to a non-party for the purpose of asserting that 
party's rights with respect to the subpoenaed materials, such as the 
confidentiality of commercial information. FHFA has considered the 
comment in the context of the overall discovery process and the 
discretion of the presiding officer to control the proceedings. 
Additionally, it should be noted that any party may seek a protective 
order. FHFA is of the view that the mechanisms in place sufficiently 
protect the rights of parties who may be concerned about the possible 
disclosure of sensitive or personal information. Therefore, FHFA has 
determined not to revise the provision in the final rule.
    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)). Section 1209.31(c)(2) of the proposed rule 
provides that there is no automatic stay in the event that a subpoena 
enforcement action is initiated. In an apparent misreading of the 
proposed rule, one commenter argued that the presiding officer should 
have discretion to order a stay. As in Sec.  1209.30(h)(3) of the 
proposed rule, the provision would allow for a discretionary stay of 
the proceedings by the presiding officer or the Director for a 
reasonable period in the interests of the parties or justice. The 
presiding presumably will ensure that the stay does not interfere with 
the pace and independence of the enforcement proceeding. This is to 
ensure the agency process can go forward without delay due to discovery 
disputes so that the proceedings are not derailed and no hardships are 
imposed on the parties who seek a speedy adjudication. Therefore, FHFA 
has determined to promulgate the provision in the final rule as 
proposed.

E. 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.
    This provision also states that employees of FHFA are not subject 
to disciplinary proceedings under this subpart, which is a carry-over 
from the existing enforcement regulations. One commenter mistakenly 
assumed from this provision that the presiding officer could not 
sanction agency counsel for violating the rules of practice, but should 
have discretion to do so. In fact, the presiding officer has exactly 
that discretionary authority. This provision underscores that employee 
disciplinary matters proceed under the applicable rules in Title 5 of 
the United States Code. Disciplinary matters are to be distinguished 
from conduct that violates the rules of practice for matters before the 
Director or the presiding officer. If FHFA counsel of record is found 
to have engaged in prohibited contumacious conduct in the course of an 
enforcement proceeding, FHFA is of the view that this subpart provides 
sufficient discretion and guidance for the presiding officer to deal 
with it, and is adopting the provision in the final rule as proposed. 
Moreover, this subpart should not be read to preclude the Director from 
taking any other action or imposing any restriction or sanction 
authorized by applicable law, rule, order or regulation.

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

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. 4636a(h)), and the 
timing and procedural matters of such hearings. Because the Safety and 
Soundness Act does not require a formal APA-type full evidentiary 
hearing on the record, the process is less formal. Nevertheless, the 
procedure provides the requisite due process requirements of notice and 
opportunity to respond. This provision in the proposed rule specified 
the requirements as to form, timing, conduct, submissions, and the 
record of the hearing.
    The proposed rule allowed that an entity-affiliated party could 
have elected in writing to waive his or her right to appear in person 
or through counsel to make a statement, and to have the matter 
determined solely on the basis of a written submission, thus obviating 
an appearance hearing. Additionally, as proposed, the rule provided 
that the Director or his designee would have the discretion to 
determine to deny, permit, or limit oral testimony in a hearing. The 
sole 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.
    One commenter argued that: (1) The presiding officer should not 
have the power to determine whether to admit or exclude witness 
testimony, and (2) the rule should require the creation of a hearing 
transcript. FHFA disagrees with these comments for the reason that the 
Director has the authority to make such a determination, and written 
submissions may constitute the full record in the absence of an 
appearance. In any case, the recommended decision

[[Page 53607]]

would reflect all materials or testimony and be transmitted to the 
Director, who makes the final determination. These steps are sufficient 
in the context of this process to adequately protect the parties. 
Therefore, to provide for the efficient operation of the rule, FHFA is 
not adopting the modifications suggested by the commenter.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. 3501 et seq.) requires that 
regulations involving the collection of information receive clearance 
from OMB. This rule contains no such collection of information 
requiring OMB approval under the Paperwork Reduction Act. Consequently, 
no information has been submitted to OMB for review.

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 final regulation 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 amends 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]

0
1. Remove part 908.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

Subchapter A-Organization and Operations

0
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 non-parties.
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.
1209.39-1209.49 [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 Judicial review; no automatic stay.
1209.58-1209.69 [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.
1209.76-1209.79 [Reserved].
Subpart E--Civil Money Penalty Inflation Adjustments
1209.80 Inflation adjustments.
1209.81 Applicability.
1209.82-1209.99 [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. 554, 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 for hearings on the record in administrative enforcement 
proceedings 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''), as stated in Sec.  1209.4 of this 
part.\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 Sec.  1209.3. The Safety and Soundness Act was 
amended by the Housing and Economic Recovery Act of 2008, Public Law 
No. 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 53608]]

    (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, as amended (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 (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)).
    Office of Finance has the meaning defined in section 1303(19) of 
the Safety and Soundness Act (12 U.S.C. 4502(19)).

[[Page 53609]]

    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 counsel of record, agency counsel 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 and 1373 of 
the Safety and Soundness Act, (12 U.S.C. 4631, 4633);
    (b) Civil money penalty assessment proceedings under sections 1373 
and 1376 of the Safety and Soundness Act, (12 U.S.C. 4633, 4636); and
    (c) Removal and prohibition proceedings under sections 1373 and 
1377 of the Safety and Soundness Act, (12 U.S.C. 4633, 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)), if in the opinion of the Director, a regulated entity 
or any entity-affiliated party is engaging or has engaged, or the 
Director has reasonable cause to believe that the regulated entity or 
any entity-affiliated party is about to engage, in an unsafe or unsound 
practice in conducting the business of the regulated entity or the 
Office of Finance, or is violating or has violated, or the Director has 
reasonable cause to believe is about to violate, a law, rule, 
regulation, or order, or any condition imposed in writing by the 
Director in connection with the granting of any application or other 
request by the regulated entity or the Office of Finance or any written 
agreement entered into with the Director, 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 any housing goal 
that must be addressed 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 of record, 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, in its most recent report of examination, a less-than-
satisfactory rating for asset quality, management, earnings, or 
liquidity, 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)), if any such 
deficiency has not been corrected.
    (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; as
    (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

[[Page 53610]]

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; judicial review.--(1) Effective date. 
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)).
    (2) Judicial review. Judicial review is governed by section 1374 of 
the Safety and Soundness Act (12 U.S.C. 4634).


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 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. Section 1376 
of the Safety and Soundness Act (12 U.S.C. 4636) governs the imposition 
of civil money penalties. Upon written notice, which shall conform to 
the requirements of Sec.  1209.23 of this part, and a hearing on the 
record to be conducted in accordance with subpart C of this part, the 
Director may impose a civil money penalty on any regulated entity or 
any entity-affiliated party as provided by 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 for 
each day during which a violation continues.
    (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:

[[Page 53611]]

    (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 (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 such 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 or the Office of 
Finance.
    (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 or the Office of 
Finance, if the Director:
    (i) Determines that such action is necessary for the protection of 
the regulated entity or the Office of Finance; and
    (ii) Serves such party with written notice of the order.
    (2) Effective period. The effective period of any order under 
section 1377(b)(1) of the Safety and Soundness Act (12 U.S.C. 
4636a(b)(1)) is specified in section 1377(b)(2) of the Safety and 
Soundness Act (12 U.S.C. 4636a(b)(2)). An order of suspension shall 
become effective upon service and, absent a court-ordered stay, remains 
effective and enforceable until the date the Director dismisses the 
charges or the effective date of an order issued by the Director under 
section 1377(c)(4) of the Safety and Soundness Act (12 U.S.C. 
4636a(c)(4),(5)).
    (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 the 
Office of Finance or 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).

[[Page 53612]]

    (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 of record, 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 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 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 cease to apply to such party with respect to the regulated 
entity or the Office of Finance to the extent described in the written 
consent. Such written consent shall be on such terms and conditions as 
the Director therein may specify in his discretion. Any such consent 
shall be publicly disclosed.
    (ii) No private right of action; no final agency action. Nothing in 
this paragraph shall be construed to require the Director to entertain 
or to 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, whether the 
Director consents to relief from an outstanding order under this part 
is committed wholly to the discretion of the Director, and such 
determination 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 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 
part shall be conducted consistent with the provisions of chapter 5 of 
Title 5 of the

[[Page 53613]]

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 complete 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 30 days or later than 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;
    (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 issued by the presiding officer;
    (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 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 of this part. 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

[[Page 53614]]

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 of record); 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 
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 of this part, 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 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 of record 
from providing necessary and appropriate legal advice to the Director 
on supervisory (including information or legal advice as to settlement 
issues) 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

[[Page 53615]]

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 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 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 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. (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 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 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 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.

[[Page 53616]]

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 counsel of record. Submission of a 
written settlement offer does not provide a basis for adjourning, 
deferring or otherwise delaying all or any portion 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 30 days or more than 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 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 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 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

[[Page 53617]]

Agency's 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 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 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, 
any party may file a written response to a non-dispositive motion 
within 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 the moving party may file a written reply to a 
written response to a non-dispositive motion within five 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 of this part.


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 or her discretion due to changed circumstances.
    (iii) Nothing in paragraph (a)(2) of this section 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 or her 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

[[Page 53618]]

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 (claw back agreement). The parties shall file the 
claw back agreement with the presiding officer. To ensure the 
enforceability of the terms of any such claw back agreement, the 
presiding officer shall enter an order. Any party may petition the 
presiding officer for an order specifying claw back 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 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 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 born 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 of this 
part, 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 part 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 born 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 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 of this 
part. 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

[[Page 53619]]

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 permit submission of a privilege log subsequent to 
the document production(s), which may occur on a rolling basis if 
agreed to by the parties in the discovery plan, and to determine 
whether an identification by category is sufficient to provide notice 
of withheld documents.
    (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 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.
    (2) The party who asserted the privilege or failed to comply with 
the request may, within five 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 any 
such motion. 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 of this part, 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.
    (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 non-parties.

    (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 of this 
part. 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 
or her 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 or 
her 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

[[Page 53620]]

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 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 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 
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 
automatically stay 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's 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 attendance of 
the witness at a deposition for the purpose of preserving that 
witness's 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 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 of this part to quash or modify the subpoena prior 
to the time for compliance specified in the subpoena, but not more than 
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.

[[Page 53621]]

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.
    (c) Procedure. Any motion for interlocutory review shall be filed 
by a party with the presiding officer within 10 days of his or her 
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 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 or her 
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 in person or to confer 
by telephone at a specified time within 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 or her own motion or at the 
request of any party, direct representatives for the parties to meet 
with (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 or her discretion, 
may require that a scheduling or pre-hearing conference be recorded by 
a court reporter. Any transcript of the conference and any materials 
filed, including orders, become part of the record of the proceeding. A 
party may obtain a copy of a 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) General. Within the time set by the presiding officer, but in 
no case later than 10 days before the start of the

[[Page 53622]]

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 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 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 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 chapter 5 of Title 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 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 
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 the order of 
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 of 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,

[[Page 53623]]

inspection, or visitation prepared by FHFA or by another Federal or 
State financial institution's 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 or she expected to prove by the 
expected testimony of the witness. The 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 
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 deposition 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 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 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 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 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

[[Page 53624]]

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 10 days of service of exceptions and briefs in 
support of exceptions. Reply briefs shall not exceed 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.
    (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 and order. (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 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 as otherwise 
required by statute.
    (3) The Director may modify, terminate, or set aside an order in 
accordance with section 1373(b)(2) of the Safety and Soundness Act (12 
U.S.C. 4633(b)(2)).


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 of this part. A 
party must exhaust administrative remedies as a precondition to seeking 
judicial review of any final decision and order issued under this part.


Sec.  1209.57  Judicial review; no automatic stay.

    (a) Judicial review. Judicial review of any final order of the 
Director shall be exclusively as provided by section 1374 of the Safety 
and Soundness Act (12 U.S.C. 4634).
    (b) No automatic stay. 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 or 
her 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 of this part 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 of record, 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 or 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 or her 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

[[Page 53625]]

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 non-party on a matter 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 
of this part as follows:
    (1) That the representative has personally and fully discussed the 
possibility of conflicts of interest with each affected party and non-
party; and
    (2) That each affected party and non-party 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, which 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 or her 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 themself 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 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.

[[Page 53626]]

    (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 or 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 or 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 
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 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 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 rule. The FHFA counsel of record 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, except 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 Safety and Soundness Act and thereafter 
adjusted in accordance with the Inflation Adjustment Act, on a 
recurring four-year cycle, is as follows:

------------------------------------------------------------------------
                                                            Adjusted
      U.S. Code citation              Description       maximum  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).

[[Page 53627]]

 
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 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 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 a 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 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 or her right to appear to make a statement in 
person or through counsel and have the matter determined solely on the 
basis of his or her 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 30 
days for the entity-affiliated party to appear, personally, or through 
counsel, before the Director or his or her 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.

[[Page 53628]]

    (3) Oral testimony. The Director or his or her designee, in his or 
her 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 FHFA's 
counsel of record must be received by the Director or his or her 
designee no later than 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 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 FHFA counsel of 
record desires to present oral testimony to supplement the party's 
written submission he or she must make a request in writing to the 
hearing officer not later than 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 
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 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 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 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 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 or her 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 12-month period from the date of the 
decision, but no such request may be made within 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

[[Page 53629]]

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]

0
3. Remove part 1780.

    Dated: August 16, 2011.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2011-21378 Filed 8-25-11; 8:45 am]
BILLING CODE 8070-01-P