[Federal Register Volume 85, Number 18 (Tuesday, January 28, 2020)]
[Rules and Regulations]
[Pages 4903-4905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01025]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
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  Federal Register / Vol. 85, No. 18 / Tuesday, January 28, 2020 / 
Rules and Regulations  

[[Page 4903]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1209, 1217, and 1250

RIN 2590-AB07


Rules of Practice and Procedure; Civil Money Penalty Inflation 
Adjustment

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting this 
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.

DATES: Effective January 28, 2020, and is applicable beginning January 
15, 2020.

FOR FURTHER INFORMATION CONTACT: Stephen E. Hart, Deputy General 
Counsel, at (202) 649-3053, [email protected], or Frank R. Wright, 
Assistant General 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 Deaf 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) and the Federal Home Loan Mortgage 
Corporation (Freddie Mac) (collectively, the Enterprises), as well as 
the Federal Home Loan Banks (collectively, the Banks) and the 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) and the Office of Finance 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\ 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 (12 CFR 
part 1209) (the Enforcement regulations) 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 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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    \1\ See Safety and Soundness Act, 12 U.S.C. 4513 and 4631-4641.
    \2\ Id.
    \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 required agencies to make an initial ``catch-up'' adjustment of 
their CMPs upon the statute's enactment,\7\ and further requires 
agencies to make additional adjustments on an annual basis following 
the initial adjustment.\8\
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    \6\ See 28 U.S.C. 2461 note.
    \7\ FHFA promulgated its catch-up adjustment of its CMPs with an 
interim final rule published July 1, 2016. 81 FR 43028.
    \8\ FHFA promulgated its most recent annual adjustment of its 
CMP with a final rule published March 18, 2019. 84 FR 9702.
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    The Adjustment Improvements Act sets forth the formula that 
agencies must apply when making annual adjustments, based on the 
percent change between the October Consumer Price Index for All Urban 
Consumers (the CPI-U) preceding the date of the last adjustment and the 
October CPI-U for the year before that.

II. Description of the Rule

    This 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 of the Enforcement regulations 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 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.\9\ 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. This rule also adjusts the maximum amounts for civil money 
penalties under the Program Fraud Civil Remedies Act by amending the 
text of 12 CFR 1217.3 to reflect the new adjusted maximum penalty 
amount that FHFA may impose for violations under that regulation.
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    \9\ 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 annual CMP adjustment as the percent change between the 
CPI-U for the previous October and the CPI-U for

[[Page 4904]]

October of the calendar year before.\10\ The maximum CMP amounts for 
FHFA penalties were last adjusted in 2019.\11\ Since FHFA is making 
this round of adjustments in calendar year 2020, and the maximum CMP 
amounts were last set in calendar year 2019, the inflation adjustment 
amount for each maximum CMP amount was calculated by comparing the CPI-
U for October 2018 with the CPI-U for October 2019, resulting in an 
inflation factor of 1.01764. For each maximum CMP calculation, 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.\12\ The tables below set out these items accordingly.
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    \10\ 28 U.S.C. 2461 note.
    \11\ See 84 FR 9702 (March 18, 2019).
    \12\ 28 U.S.C. 2461 note.

----------------------------------------------------------------------------------------------------------------
                                                                     Previous         Rounded      New adjusted
          U.S. code citation                   Description            maximum        inflation        maximum
                                                                  penalty amount     increase     penalty amount
----------------------------------------------------------------------------------------------------------------
Enforcement regulations:
    12 U.S.C. 4636(b)(1)..............  First Tier..............          11,677             206          11,883
    12 U.S.C. 4636(b)(2)..............  Second Tier.............          58,383           1,030          59,413
    12 U.S.C. 4636(b)(4)..............  Third Tier (Entity-            2,335,323          41,195       2,376,518
                                         affiliated party or
                                         Regulated entity).
Program Fraud Civil Remedies
 regulation:
    31 U.S.C. 3802(a)(1)..............  Maximum penalty per               11,463             202          11,665
                                         false claim.
    31 U.S.C 3802(a)(2)...............  Maximum penalty per               11,463             202          11,665
                                         false statement.
Flood Insurance regulation:
    42 U.S.C. 4012a(f)(5).............  Maximum penalty per                  568              10             578
                                         violation.
    42 U.S.C. 4012a(f)(5).............  Maximum total penalties          163,772           2,889         166,661
                                         assessed against an
                                         Enterprise in a
                                         calendar year.
----------------------------------------------------------------------------------------------------------------

III. 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)).\13\ The 
Director considered the differences between the Banks and the 
Enterprises, as they relate to the above factors, and determined that 
this final rule is appropriate. The inflation adjustments effected by 
the final rule are mandated by law, and the special features of the 
Banks identified in section 1313(f) of the Safety and Soundness Act can 
be accommodated, if appropriate, along with any other relevant factors, 
when determining any actual penalties.
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    \13\ So in original; no paragraphs (d) and (e) were enacted. See 
12 U.S.C.A. 4513 n 1.
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IV. Regulatory Impact

Administrative Procedure Act

    FHFA finds good cause that notice and an opportunity to comment on 
this final rule are unnecessary under section 553(b) of the 
Administrative Procedure Act (APA), 5 U.S.C. 553(b). The Adjustment 
Improvements Act states that the annual civil money penalty adjustments 
shall be made notwithstanding the rulemaking provisions of 5 U.S.C. 
553.\14\ Furthermore, this rulemaking conforms with and is consistent 
with the statutory directive set forth in the Adjustment Improvements 
Act. As a result, there are no issues of policy discretion about which 
to seek public comment. Accordingly, FHFA is adopting these amendments 
as a final rule.
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    \14\ 28 U.S.C. 2461 note, section 4(b)(2).
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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\ As discussed above, 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 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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Congressional Review Act

    The rule is not a ``major rule'' as defined by the Congressional 
Review Act, codified at 5 U.S.C. 801 et seq. The rule will not result 
in: (1) An annual effect on the economy of $100,000,000 or more; (2) a 
major increase in costs or prices; or (3) significant adverse effects 
on competition, employment, investment, productivity, innovation, or 
the ability of United States-based companies to compete with foreign-
based companies.\17\
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    \17\ 5 U.S.C. 804(2).
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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.

Lists of Subjects

12 CFR Part 1209

    Administrative practice and procedure, Penalties.

12 CFR Part 1217

    Civil remedies, Program fraud.

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

[[Page 4905]]

Finance Agency hereby amends subchapters A and C of chapter XII of 
Title 12 of the Code of Federal Regulations as follows:

Subchapter A--Organization and Operations

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
------------------------------------------------------------------------
12 U.S.C. 4636(b)(1)..............  First Tier..........         $11,883
12 U.S.C. 4636(b)(2)..............  Second Tier.........          59,413
12 U.S.C. 4636(b)(4)..............  Third Tier                 2,376,518
                                     (Regulated Entity
                                     or Entity-
                                     Affiliated party).
------------------------------------------------------------------------


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 January 15, 2020.

PART 1217--PROGRAM FRAUD CIVIL REMEDIES ACT

0
4. The authority citation for part 1217 continues to read as follows:

    Authority: 12 U.S.C. 4501; 12 U.S.C. 4526; 28 U.S.C. 2461 note; 
31 U.S.C. 3801-3812.


0
5. Amend Sec.  1217.3 by revising paragraphs (a)(1) introductory text 
and (b)(1) introductory text to read as follows:


 Sec.  1217.3   Basis for civil penalties and assessments.

    (a) * * *
    (1) A civil penalty of not more than $11,665 may be imposed upon a 
person who makes a claim to FHFA for property, services, or money where 
the person knows or has reason to know that the claim:
* * * * *
    (b) * * *
    (1) A civil penalty of up to $11,665 may be imposed upon a person 
who makes a written statement to FHFA with respect to a claim, 
contract, bid or proposal for a contract, or benefit from FHFA that:
* * * * *

Subchapter C--Enterprises

PART 1250--FLOOD INSURANCE

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

    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
7. Amend Sec.  1250.3 by revising paragraph (c) to read as follows:


Sec.  1250.3   Civil money penalties.

* * * * *
    (c) Amount. The maximum civil money penalty amount is $568 for each 
violation that occurs before January 15, 2020, with total penalties not 
to exceed $163,772. For violations that occur on or after January 15, 
2020, the civil money penalty under this section may not exceed $578 
for each violation, with total penalties assessed under this section 
against an Enterprise during any calendar year not to exceed $166,661.
* * * * *

    Dated: January 16, 2020.
Mark A. Calabria,
Director, Federal Housing Finance Agency.
[FR Doc. 2020-01025 Filed 1-27-20; 8:45 am]
BILLING CODE 8070-01-P