[Federal Register Volume 77, Number 234 (Wednesday, December 5, 2012)]
[Proposed Rules]
[Pages 72247-72249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29419]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1209

RIN 2590-AA57


Rules of Practice and Procedure: Enterprise and Federal Home Loan 
Bank Housing Goals Related Enforcement Amendment

AGENCY: Federal Housing Finance Agency.

ACTION: Proposed rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is proposing to 
amend its Rules of Practice and Procedure (RPP) to specify that the 
rules of practice and procedure for hearings on the record in Subpart C 
therein shall apply to any cease and desist or civil money penalty 
proceedings brought against the Federal National Mortgage Association 
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), 
or the Federal Home Loan Banks (Banks) for failure to submit or follow 
a housing plan or failure of an Enterprise to submit information on its 
housing activities, except where such rules are inconsistent with 
related statutory provisions, in which case the statutory provisions 
shall apply.

DATES: Written comments must be received on or before January 22, 2013.

ADDRESSES: You may submit your comments, identified by Regulatory 
Information Number (RIN) 2590-AA57, by any of the following methods:
     Email: Comments to Alfred M. Pollard, General Counsel, may 
be sent by email to [email protected]. Please include ``RIN 2590-
AA57'' in the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by email 
to FHFA at [email protected] to ensure timely receipt by the Agency. 
Please include ``RIN 2590-AA57'' in the subject line of the message.
     Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA57, 
Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., 
Washington, DC 20024. The package should be logged in at the Seventh 
Street entrance Guard Desk, First Floor, on business days between 9 
a.m. and 5 p.m.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA57, Federal 
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., 
Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Lyn Abrams, Assistant General Counsel, 
(202) 649-3059; or Sharon Like, Managing Associate General Counsel, 
(202) 649-3057, Office of General Counsel. These are not toll-free 
numbers. The mailing address for each contact is: Office of General 
Counsel, Federal Housing Finance Agency, Eighth Floor, 400 Seventh 
Street SW., Washington, DC 20024. The telephone number for the 
Telecommunications Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Comments

    FHFA invites comments on all aspects of the proposed rule, and will 
revise the language of the proposed rule as appropriate after taking 
all comments into consideration. Copies of all comments will be posted 
without change on the FHFA Web site at http://www.fhfa.gov, and will 
include any personal information you provide, such as your name, 
address, email address and telephone number. In addition, copies of all 
comments received will be available for examination by the public on 
business days between the hours of 10 a.m. and 3 p.m., at the Federal 
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., 
Washington, DC 20024. To make an appointment to inspect comments, 
please call the Office of General Counsel at (202) 649-3804.

II. Background

A. Statutory and Regulatory Background

1. Enterprise Enforcement for Housing Plan and Failure To Submit 
Housing Activities Information
    Prior to the enactment of the Housing and Economic Recovery Act of 
2008 (HERA), the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (Safety and Soundness Act) provided the Secretary 
of the U.S. Department of Housing and Urban Development (HUD) with 
specific authority to establish, monitor and enforce housing goals for 
mortgages purchased by Fannie Mae and Freddie Mac (collectively, the 
Enterprises). In addition, section 309(m) and (n) of the Federal 
National Mortgage Association Charter Act and section 307(e) and (f) of 
the Federal Home Loan Mortgage Corporation Act (collectively, Charter 
Acts) required that each Enterprise submit information on its housing 
activities to the Secretary of HUD, the Committee on Financial Services 
of the House of Representatives, and the Committee on Banking, Housing 
and Urban Affairs of the Senate.\1\ See 12 U.S.C. 1723a(m) and (n); 12 
U.S.C. 1456(e) and (f).
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    \1\ The Charter Acts require that the Enterprises submit 
information on their housing activities to the Committee on Banking, 
Finance and Urban Affairs of the House of Representatives. The 
Enterprises submit this information to that Committee's successor, 
the Committee on Financial Services of the House of Representatives.
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    The Safety and Soundness Act, prior to the HERA amendments, 
authorized HUD to initiate cease and desist proceedings and impose 
civil money penalties against an Enterprise for failure to submit or 
comply with a housing plan or failure to submit information on its 
housing activities. HUD issued regulations implementing its enforcement 
authority against the Enterprises for these violations. See 24 CFR part 
81, Subpart G.
    HERA amended the Safety and Soundness Act in 2008 to create FHFA as 
an independent agency of the federal government and, among other 
things, transferred the responsibility to establish, monitor and 
enforce the housing goals for the Enterprises from HUD to FHFA, and 
required that each Enterprise submit information on its housing 
activities to the Director of FHFA instead of to the Secretary of HUD. 
See Public Law 110-289, 122 Stat. 2654 (2008), codified at 12 U.S.C. 
4501 et seq. The Safety and Soundness Act, as amended, requires the 
Director of FHFA to establish new annual housing goals for mortgages 
purchased by the Enterprises, effective for 2010 and beyond. FHFA 
reviews mortgage purchase data provided by each Enterprise in its 
Annual Housing Activities Report and other mortgage reports, as well as 
other available data, and determines whether the Enterprise has met the 
housing goals.
    Enterprise compliance with the housing goals is enforced under 
section 1336 of the Safety and Soundness Act,

[[Page 72248]]

which provides that if an Enterprise fails to meet a housing goal 
determined by the Director to be feasible, the Director may, in his or 
her discretion, require the Enterprise to submit a housing plan 
describing the specific actions the Enterprise will take to achieve the 
goal. See 12 U.S.C. 4566.
    Section 1336 further provides that if an Enterprise fails to submit 
an acceptable housing plan or fails to comply with the plan, the 
Director may initiate cease and desist proceedings or impose civil 
money penalties against the Enterprise in accordance with sections 1341 
and 1345, respectively, of the Safety and Soundness Act, exercise other 
appropriate enforcement authority, or seek other appropriate actions. 
See 12 U.S.C. 4566(c)(1) and (c)(7), 4581, 4585. In addition, sections 
1341 and 1345 provide that the Director may initiate cease and desist 
proceedings or impose civil money penalties, respectively, if an 
Enterprise fails to submit information on its housing activities. Id. 
FHFA's regulations do not currently address enforcement proceedings for 
these violations. Accordingly, as further discussed below, FHFA is 
proposing to amend its RPP to implement the hearing procedures for 
enforcement actions under sections 1341 to 1348 of the Safety and 
Soundness Act. See 12 U.S.C. 4581-4588.
2. Bank Housing Plan Enforcement
    Section 10C(a) of the Federal Home Loan Bank Act (Bank Act), as 
amended by HERA (12 U.S.C. 1430c(a)), requires the Director of FHFA to 
establish housing goals with respect to the purchase of mortgages, if 
any, by the Banks. Section 10C(a) further states that the goals shall 
be consistent with the goals established for the Enterprises under 
sections 1331 through 1334 of the Safety and Soundness Act, taking into 
consideration the unique mission and ownership structure of the Banks. 
Section 10C(d) provides that the monitoring and enforcement 
requirements of section 1336 of the Safety and Soundness Act shall 
apply to the Banks in the same manner and to the same extent as they 
apply to the Enterprises. Thus, in accordance with section 1336, if a 
Bank fails to submit or follow an acceptable housing plan, the Director 
may initiate cease and desist proceedings or impose civil money 
penalties against the Bank.
    FHFA's Bank housing goals regulation, which implements the 
statutory housing goals requirements, includes housing plan provisions 
similar to those in FHFA's Enterprise housing goals regulation, but 
like the Enterprise housing goals regulation, does not specifically 
address enforcement actions for failure to submit or follow a housing 
plan. See 12 CFR Part 1281.
3. Applicable Enforcement Provisions
    Sections 1341 to 1348 of the Safety and Soundness Act set forth the 
grounds and procedures for the enforcement actions that are the subject 
of this proposed rule. Following is a summary of these provisions.
a. Cease and Desist Proceedings
    Section 1341 of the Safety and Soundness Act sets forth the grounds 
for initiating cease and desist proceedings and the procedures FHFA 
must follow when filing a notice of charges against an Enterprise and 
issuing an order in such proceedings. See 12 U.S.C. 4581. The grounds 
for issuing a notice of charges are:
    (1) Failure to submit housing activity information required under 
section 309(m) or (n) of Fannie Mae's Charter Act or section 307(e) or 
(f) of Freddie Mac's Charter Act;
    (2) Failure to submit an acceptable housing plan with respect to 
the housing goals; or
    (3) Failure to comply with a housing plan.\2\
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    \2\ Sections 1341 and 1345 also include Enterprise failure to 
submit a report under section 1327 as grounds for enforcement 
actions. However, section 1327 does not exist in the Safety and 
Soundness Act, as amended by HERA, its subject having been subsumed 
in section 1314.
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b. Civil Money Penalties
    Section 1345 sets forth the grounds for imposing civil money 
penalties under this section, which are identical to the grounds for 
initiating cease and desist proceedings under section 1341. See 12 
U.S.C. 4585. This section also sets forth the procedures governing 
imposition of civil money penalties, the factors the Director shall 
consider in determining the amount of a penalty, the maximum amount of 
penalty the Director may impose, and authorizes the Director to bring 
an action in federal court to collect a penalty.
c. Hearings, Judicial Review and Enforcement
    Section 1342 sets forth the hearing requirements for hearings under 
sections 1341 and 1345. See 12 U.S.C. 4582. Section 1342 specifies that 
hearings shall be held on the record and in accordance with the 
Administrative Procedures Act (APA). This section also governs the 
issuance of the order from the Director after the hearing. Section 1343 
sets forth the procedures for judicial review of a final order pursuant 
to a proceeding under sections 1341 and 1345. See 12 U.S.C. 4583. 
Section 1344 authorizes the Director to bring a civil action in federal 
court to enforce a notice or order under sections 1341 and 1345.
d. Public Disclosure and Notice of Service
    Section 1346 governs disclosure of the Director's enforcement 
actions under sections 1342 and 1343, public hearings, and retention of 
documents. See 12 U.S.C. 4586. Section 1347 gives the Director 
authority to determine, by regulation or otherwise, the manner of 
notice of service. See 12 U.S.C. 4587.
e. Subpoena Authority
    Section 1348 sets forth the Director's subpoena authority for 
administrative proceedings under sections 1341 to 1348. See 12 U.S.C. 
4588.
4. General Enforcement Under FHFA's RPP
    Sections 1371 through 1379D of the Safety and Soundness Act 
authorize the Director to initiate civil administrative enforcement 
actions against the Enterprises, the Banks, and their entity-affiliated 
parties to enforce, as needed, applicable law, rules, orders and 
agreements pertaining to the safe and sound operation of the 
Enterprises and Banks. See 12 U.S.C. 4631--4641. FHFA's RPP implements 
these provisions by setting forth the authority, grounds and procedures 
for cease and desist proceedings, temporary cease and desist orders, 
civil money penalty proceedings, and removal and prohibition 
proceedings. Subpart C of the RPP sets forth the specific rules of 
practice and procedure for hearings on the record and hearings in 
accordance with the APA in connection with these enforcement 
proceedings.
    However, the RPP does not implement provisions governing 
enforcement proceedings for failure to submit or comply with a housing 
plan or failure to submit information on housing activities. The 
hearing procedures set forth in the Safety and Soundness Act for 
adjudicating these actions are almost indistinguishable from the 
statutory procedures for adjudicating enforcement actions under 
sections 1371 to 1379D. Accordingly, the formal hearing procedures set 
forth in Subpart C of the RPP are well suited to govern enforcement 
proceedings under sections 1341 to 1348. FHFA stated this in the 
SUPPLEMENTARY INFORMATION published with the RPP and noted that 
promoting use of the Subpart C procedures for housing-goals-

[[Page 72249]]

related enforcement proceedings both supports an economies of scale 
approach to regulation, and provides certainty with respect to the 
process. See 76 FR 53596, 53601-53602 (Aug. 26, 2011).

B. Conservatorship

    On September 6, 2008, the Director of FHFA appointed FHFA as 
conservator of the Enterprises to maintain the Enterprises in a safe 
and sound financial condition and to help assure performance of their 
public mission. The Enterprises remain under conservatorship at this 
time.

III. Analysis of Proposed Rule

    As successor to HUD in establishing, monitoring and enforcing the 
housing goals, FHFA is responsible for initiating and adjudicating 
enforcement actions for failure to submit or comply with a housing 
plan. FHFA is also responsible for ensuring that an Enterprise submits 
information on its housing activities to Congress and the Director, and 
FHFA has the authority to enforce this requirement.\3\
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    \3\ The Banks are subject to similar reporting requirements 
under 12 CFR Part 1281. Because the reporting requirements for the 
Banks are already subject to enforcement under sections 1371 through 
1379D of the Safety and Soundness Act, they are not addressed in 
this rulemaking.
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    None of the Banks was subject to housing goals in 2011. Under 
FHFA's Bank housing goals regulation, to be subject to housing goals, 
the total unpaid principal balance of loans purchased through the 
Acquired Member Assets programs held by a Bank must exceed $2.5 billion 
in a given year. See 12 CFR Part 1281. Mortgage purchase volumes did 
not individually exceed $2.5 billion at any of the Banks in 2011.
    To provide clarity on the rules of practice and procedure that 
would apply should FHFA initiate enforcement actions under sections 
1341 to 1348 of the Safety and Soundness Act, the proposed rule would 
amend Sec.  1209.1(c) of the RPP to specify that the rules of practice 
and procedure for hearings on the record in Subpart C therein shall 
apply to enforcement proceedings under sections 1341 to 1348, except 
where such rules are inconsistent with sections 1341 to 1348 or section 
10C of the Bank Act, in which case those statutory provisions shall 
apply. The amendment would codify FHFA's intent as expressed in the 
SUPPLEMENTARY INFORMATION published with the RPP. FHFA is proposing to 
amend Sec.  1209.1(c) as a simpler and more efficient approach than 
making conforming amendments to each of the affected sections of the 
RPP.

IV. Consideration of Differences Between the Banks and the Enterprises

    Section 1313(f) of the Safety and Soundness Act, as amended by 
HERA, requires the Director, when promulgating regulations relating to 
the Banks, 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; joint and 
several liability; and any other differences the Director considers 
appropriate. See 12 U.S.C. 4513(f). In preparing this proposed rule, 
the Director considered the differences between the Banks and the 
Enterprises as they relate to the above factors, and determined that 
the Banks should not be treated differently from the Enterprises for 
purposes of the proposed rule, particularly as section 10C(d) of the 
Bank Act provides that the monitoring and enforcement requirements of 
section 1336 of the Safety and Soundness Act shall apply to the Banks 
in the same manner and to the same extent as they apply to the 
Enterprises. Nonetheless, FHFA requests comments on whether these 
factors should result in a revision of the proposed amendment as it 
relates to the Banks.

V. Paperwork Reduction Act

    The proposed rule does not contain any information collection 
requirement that requires the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

VI. 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 rule under the Regulatory Flexibility Act.
    The General Counsel of FHFA certifies that the proposed rule, if 
adopted as a final rule, is not likely to have a significant economic 
impact on a substantial number of small entities because the regulation 
is applicable only to the Enterprises and the Banks, which are not 
small entities for purposes of the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1209

    Administrative practice and procedure, Federal home loan banks, 
Mortgages, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, FHFA 
proposes to amend part 1209, Subchapter A, Chapter XII of title 12 of 
the Code of Federal Regulations as follows:

PART 1209--RULES OF PRACTICE AND PROCEDURE

    1. The authority citation for part 1209 is revised to read as 
follows:

    Authority: 5 U.S.C. 554, 556, 557, and 701 et seq.; 12 U.S.C. 
1430c(d); 12 U.S.C. 4501, 4502, 4503, 4511, 4513, 4513b, 4517, 4526, 
4566(c)(1) and (c)(7), 4581-4588, 4631-4641; and 28 U.S.C. 2461 
note.

    2. Amend Sec.  1209.1 by:
    a. In paragraph (c)(2), remove the word ``and'';
    b. In paragraph (c)(3), remove ``.'' at the end of the paragraph 
and add in its place ``; and''; and
    c. Add new paragraph (c)(4) to read as follows:


Sec.  1209.1  Scope.

* * * * *
    (c) * * *
    (4) Enforcement proceedings under sections 1341 through 1348 of the 
Safety and Soundness Act, as amended (12 U.S.C. 4581 through 4588), and 
section 10C of the Federal Home Loan Bank Act, as amended (12 U.S.C. 
1430c), except where the Rules of Practice and Procedure in Subpart C 
are inconsistent with such statutory provisions, in which case the 
statutory provisions shall apply.

    Dated: November 29, 2012.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2012-29419 Filed 12-4-12; 8:45 am]
BILLING CODE 8070-01-P