[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Rules and Regulations]
[Pages 43028-43031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15619]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1209 and 1250

RIN 2590-AA88


Rules of Practice and Procedure; Civil Money Penalty Inflation 
Adjustment

AGENCY: Federal Housing Finance Agency.

ACTION: Interim final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing this 
interim final rule amending its Rules of Practice and Procedure and 
other agency regulations to adjust each civil money penalty within its 
jurisdiction to account for inflation, pursuant to the Federal Civil 
Penalties Inflation Adjustment Act of 1990, as amended by the Federal 
Civil Penalties Inflation Adjustment Act Improvements Act of 2015. If, 
prior to the effective date of the interim final rule, FHFA does not 
receive any comments from which FHFA concludes that the rule should be 
revised, this rule will become final without further action by FHFA.

DATES: Effective date: August 1, 2016.
    Comment date: Comments on the interim final rule must be received 
prior to August 1, 2016.

ADDRESSES: You may submit your comments, identified by regulatory 
information number (RIN) 2590-AA88, by any of the following methods:
    Agency Web site: www.fhfa.gov/open-for-comment-or-input.
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments. If you submit your comments 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-AA88'' in the subject line of the message.
    Hand Delivery/Courier: The hand delivery address is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA88, Federal 
Housing Finance Agency, Constitution Center, (OGC) Eighth Floor, 400 
Seventh Street SW., Washington, DC 20219. The package should be 
delivered to 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-AA88, Federal Housing 
Finance Agency, Constitution Center, (OGC) Eighth Floor, 400 Seventh 
Street SW., Washington, DC 20219.
    Copies of all comments will be posted without change, including any 
personal information you provide, such as your name, address, or phone 
number, on the FHFA Internet Web site at http://www.fhfa.gov. 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 20219. To make an appointment to 
inspect comments, please call the Office of General Counsel at (202) 
649-3804.

FOR FURTHER INFORMATION CONTACT: Stephen E. Hart, Deputy General 
Counsel, at (202) 649-3053, [email protected], or Frank R. Wright, 
Senior Counsel, at (202) 649-3087, [email protected] (not toll-free 
numbers); Federal Housing Finance Agency, 400 7th Street SW., 
Washington, DC 20219. The telephone number for the Telecommunications 
Device for the Hearing Impaired is: (800) 877-8339 (TDD only).

SUPPLEMENTARY INFORMATION:

I. Background

    FHFA is an independent agency of the Federal government and the 
financial safety and soundness regulator of the Federal National 
Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage 
Corporation (Freddie Mac) (collectively, the Enterprises), the Federal 
Home Loan Banks (collectively, the Banks), and the Banks' Office of 
Finance under authority granted by the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (Safety and Soundness 
Act).\1\ FHFA oversees the Enterprises and Banks (collectively, the 
regulated entities) to ensure that they operate in a safe and sound 
manner and maintain liquidity in the housing finance market in 
accordance with applicable laws, rules, and regulations. To that end, 
FHFA is vested with broad supervisory discretion and specific civil 
administrative enforcement powers, similar to such authority granted by 
Congress to the Federal bank regulatory agencies.\2\
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    \1\ See Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, Public Law 102-550, 106 Stat. 4078 (Oct. 28, 
1992) as amended by the Federal Housing Finance Regulatory Reform 
Act of 2008, Public Law 110-289, 122 Stat. 2654, sections 1101 et 
seq. (July 30, 2008).
    \2\ See Safety and Soundness Act, 12 U.S.C. 4513 and 4631-4641.
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    Section 1376 of the Safety and Soundness Act (12 U.S.C. 4636) 
empowers FHFA to impose civil money penalties under specific 
conditions. FHFA's Rules of Practice and Procedure regulation (12 CFR 
part 1209) govern cease and desist proceedings, civil money penalty 
assessment proceedings, and other administrative adjudications.\3\ 
FHFA's Flood Insurance regulation (12 CFR part 1250) governs flood 
insurance responsibilities as they pertain to the

[[Page 43029]]

Enterprises.\4\ FHFA's Implementation of the Program Fraud Civil 
Remedies Act of 1986 regulation (12 CFR part 1217) sets forth 
procedures for imposing civil penalties and assessments under the 
Program Fraud Civil Remedies Act (31 U.S.C. 3801 et seq.) on any person 
that makes a false claim for property, services or money from FHFA, or 
makes a false material statement to FHFA in connection with a claim, 
where the amount involved does not exceed $150,000.\5\
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    \3\ See 12 CFR part 1209.
    \4\ See 12 CFR part 1250.
    \5\ See generally, 31 U.S.C. 3801 et seq.
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The Adjustment Improvements Act

    The Federal Civil Penalties Inflation Adjustment Act of 1990 
(``Inflation Adjustment Act''), as amended by the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 
(``Adjustment Improvements Act''), requires FHFA, as well as other 
Federal agencies with the authority to issue civil money penalties 
(CMPs), to adjust by regulation the maximum amount of each CMP 
authorized by law that the agency has jurisdiction to administer.\6\ 
The Adjustment Improvements Act requires agencies to make an initial 
``catch-up'' adjustment of their CMPs upon the statute's enactment, and 
further requires agencies to make additional adjustments on an annual 
basis following the initial adjustment.\7\
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    \6\ See 28 U.S.C. 2461 note.
    \7\ The Adjustment Improvements Act superseded the Debt 
Collection Improvement Act of 1996, which was used to prepare FHFA's 
Civil Money Penalty Inflation Adjustment rule, published at 81 FR 
8369 (February 22, 2016.).
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    The Adjustment Improvements Act provides that the initial catch-up 
adjustment must be implemented by an interim final rule and will be 
based on the percent change between the Consumer Price Index for all 
Urban Consumers (CPI-U) for October 2015 and the CPI-U for the month of 
October in the year that the civil money penalty was established or 
adjusted under a provision of law other than the Inflation Adjustment 
Act. Previous inflation adjustments made under the Inflation Adjustment 
Act prior to the Adjustment Improvements Act are not considered in 
making the catch-up adjustment.\8\ In the future, annual inflation 
adjustments will be based on the percent change between the October 
CPI-U preceding the date of the adjustment and the October CPI-U for 
the year before that.
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    \8\ Earlier inflation adjustments such as those issued in 81 FR 
8369 are not considered in determining the amount of the catch-up 
adjustment.
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II. Differences Between the Federal Home Loan Banks and the Enterprises

    When promulgating any regulation that may have future effect 
relating to the Banks, the Director is required by section 1313(f) of 
the Safety and Soundness Act 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 (12 U.S.C. 4513(f)).\9\ The 
Director considered the differences between the Banks and the 
Enterprises, as they relate to the above factors, and determined that 
this interim final rule is appropriate. In sum, the five differences 
identified in section 1313(f) of the Safety and Soundness Act do not 
require a different enforcement regulation for the Banks than for the 
Enterprises, and in any event, the inflation adjustments effected by 
the interim final rule are mandated by law.
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    \9\ So in original; no paragraphs (d) and (e) were enacted. See 
12 U.S.C.A. 4513 n 1.
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III. Description of the Rule

    This interim final rule adjusts the maximum penalty amount within 
each of the three tiers specified in 12 U.S.C. 4636 by amending the 
table contained in 12 CFR 1209.80 to reflect the new adjusted maximum 
penalty amount that FHFA may impose upon a regulated entity or any 
entity-affiliated party within each tier. The increases in maximum 
penalty amounts contained in this interim final rule may not 
necessarily affect the amount of any CMP that FHFA may seek for a 
particular violation, which may not be the maximum that the law allows; 
FHFA would calculate each CMP on a case-by-case basis in light of a 
variety of factors.\10\ This rule also adjusts the maximum penalty 
amounts for violations under the FHFA Flood Insurance regulation by 
amending the text of 12 CFR 1250.3 to reflect the new adjusted maximum 
penalty amount that FHFA may impose for violations under that 
regulation. FHFA has adjusted the maximum amounts for penalties under 
the Program Fraud Civil Remedies Act in a separate rule required by 
that Act, which was also published today in this edition of the Federal 
Register.
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    \10\ See, e.g., 12 CFR 1209.7(c); FHFA Enforcement Policy, AB 
2013-03 (May 31, 2013).
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    The Adjustment Improvements Act directs federal agencies to 
calculate each initial catch-up CMP adjustment as the percent change 
between the CPI-U for October 2015 and the CPI-U for October of the 
calendar year in which the amount of each CMP was set.\11\ The maximum 
CMP amounts for FHFA penalties under 12 U.S.C. 4636 were set in 
2008.\12\ Since FHFA is making this round of catch-up adjustments in 
calendar year 2016, and the maximum CMP amounts were last set in 
calendar year 2008, the inflation adjustment amount for each maximum 
CMP amount was calculated by comparing the CPI-U for October 2008 with 
the CPI-U for October 2015, resulting in an inflation factor of 
1.09819. For each maximum CMP amount, the product of this inflation 
adjustment and the previous maximum penalty amount was then rounded to 
the nearest whole dollar as required by the Adjustment Improvements 
Act, and was then summed with the previous maximum penalty amount to 
determine the new adjusted maximum penalty amount.\13\ The table below 
sets out these items accordingly.
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    \11\ For the initial adjustment under the Adjustment 
Improvements Act a CMP is considered to have been set in the 
calendar year during which the amount of such CMP was established or 
adjusted under a provision of law other than the Inflation 
Adjustment Act.
    \12\ See 12 U.S.C. 4636.
    \13\ 28 U.S.C. 2461 note.

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                                                                     Previous                      New adjusted
                                                                      maximum         Rounded         maximum
          U.S. Code citation                   Description            penalty        inflation        penalty
                                                                      amount         increase         amount
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12 U.S.C. 4636(b)(1)..................  First Tier..............          10,000             982          10,982
12 U.S.C. 4636(b)(2)..................  Second Tier.............          50,000            4910          54,910
12 U.S.C. 4636(b)(4)..................  Third Tier (Entity-            2,000,000         196,380       2,196,380
                                         affiliated party and
                                         Regulated entity).
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[[Page 43030]]

    The CMP for FHFA penalties under the Flood Insurance regulation 
were set in 2009.\14\ Since FHFA is making this round of adjustments in 
calendar year 2016, and the maximum CMP amounts were last set in 
calendar year 2009, the inflation adjustment amount for each maximum 
CMP amount was calculated by comparing the CPI-U for October 2009 with 
the CPI-U for October 2015, resulting in an inflation factor of 
1.10020. The table below sets out these items accordingly.
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    \14\ See 74 FR 2347, 2349 (Jan. 15, 2009).

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                                                                     Previous                      New adjusted
                                                                      maximum         Rounded         maximum
          U.S. Code citation                   Description            penalty        inflation        penalty
                                                                      amount         increase         amount
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42 U.S.C. 4012a(f)(5).................  Maximum penalty per                  485              49             534
                                         violation.
42 U.S.C. 4012a(f)(5).................  Maximum total penalties          140,000          14,028         154,028
                                         assessed against an
                                         Enterprise in a
                                         calendar year.
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IV. Regulatory Impact

Administrative Procedure Act

    FHFA finds good cause that notice and an opportunity to comment on 
this interim final rule are unnecessary under section 553(b) of the 
Administrative Procedure Act (APA), 5 U.S.C. 553(b). This rulemaking 
conforms with and is consistent with the statutory directive set forth 
in the Inflation Adjustment Act. As a result, there are no issues of 
policy discretion about which to seek public comment. Furthermore, the 
rule is mandated by the Adjustment Improvements Act to be adopted in 
interim final form. Accordingly, FHFA is issuing the amendments as an 
interim final rule.
    In addition, FHFA finds good cause to make this rule effective 
thirty days after publication of this document in the Federal Register 
under the APA. The rule adjusts the amount of each CMP tier as dictated 
by the Inflation Adjustment Act, and, as noted above, is mandated by 
the Adjustment Improvements Act to be adopted as an interim final rule, 
presumptively with no greater delayed effective date than the APA 
otherwise provides.

Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (RFA),\15\ an agency 
must prepare a regulatory flexibility analysis for all proposed and 
final rules that describes the impact of the rule on small entities, 
unless the head of an agency certifies that the rule will not have ``a 
significant economic impact on a substantial number of small 
entities.'' However, the RFA applies only to rules for which an agency 
publishes a general notice of proposed rulemaking pursuant to the 
APA,\16\ and FHFA is required by statute to issue this rule as an 
interim final rule. As a result FHFA has determined for good cause that 
the APA does not require a general notice of proposed rulemaking for 
this rule. Thus, the RFA does not apply to this interim final rule.
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    \15\ 5 U.S.C. 603.
    \16\ 5 U.S.C. 603(a), 604(a).
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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 the Office of Management and Budget (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.

List of Subjects

12 CFR Part 1209

    Administrative practice and procedure, Penalties.

12 CFR Part 1250

    Flood insurance, Government-sponsored enterprises, Penalties, 
Reporting and record keeping requirements.

    Accordingly, for the reasons stated in the SUPPLEMENTARY 
INFORMATION and under the authority of 12 U.S.C. 4513b and 12 U.S.C. 
4526, the Federal Housing Finance Agency hereby amends subchapters A 
and C of chapter XII of Title 12 of the Code of Federal Regulations as 
follows:

PART 1209--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation for part 1209 continues 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.

0
2. Revise Sec.  1209.80 to read as follows:


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, is as 
follows:

------------------------------------------------------------------------
                                                           New adjusted
        U.S. Code citation               Description          maximum
                                                          penalty amount
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12 U.S.C. 4636(b)(1)..............  First Tier..........         $10,982
12 U.S.C. 4636(b)(2)..............  Second Tier.........          54,910
12 U.S.C. 4636(b)(4)..............  Third Tier                 2,196,380
                                     (Regulated Entity
                                     or Entity-
                                     Affiliated party).
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0
3. Revise Sec.  1209.81 to read as follows:


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 August 1, 2016.

PART 1250--FLOOD INSURANCE

0
4. The authority citation for part 1250 continues to read as follows:


[[Page 43031]]


    Authority: 12 U.S.C. 4521(a)(4) and 4526; 28 U.S.C. 2461 note; 
42 U.S.C. 4001 note; 42 U.S.C. 4012a(f)(3), (4), (5), (8), (9), and 
(10).

0
5. Revise Sec.  1250.3(c) to read as follows:


Sec.  1250.3  Civil money penalties.

* * * * *
    (c) Amount. The maximum civil money penalty amount is $485 for each 
violation that occurs before August 1, 2016, with total penalties not 
to exceed $140,000. For violations that occur on or after August 1, 
2016, the civil money penalty under this section may not exceed $534 
for each violation, with total penalties assessed under this section 
against an Enterprise during any calendar year not to exceed $154,028.
* * * * *

    Dated: June 27, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-15619 Filed 6-30-16; 8:45 am]
BILLING CODE 8070-01-P