05-17232. Rules of Practice and Procedure; Civil Money Penalty Inflation Adjustment

AGENCY:

Office of Federal Housing Enterprise Oversight, HUD.

ACTION:

Final rule.

SUMMARY:

The Office of Federal Housing Enterprise Oversight is issuing this final rule amending its rules of practice and procedure 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 Debt Collection Improvement Act of 1996.

DATES:

This rule is effective on August 30, 2005.

FOR FURTHER INFORMATION CONTACT:

David W. Roderer, Deputy General Counsel, at [phone]; Charlotte A. Reid, Associate General Counsel, at [phone]; or Frank R. Wright, Senior Counsel, at [phone] (not toll-free numbers); Office of Federal Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The telephone number for the Telecommunications Device for the Deaf is: [phone] (TDD only).

SUPPLEMENTARY INFORMATION

Background

The Office of Federal Housing Enterprise Oversight (OFHEO), an independent office within the Department of Housing and Urban Development (HUD), is the exclusive 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) under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Act), as amended.^[1] The Enterprises are government-sponsored corporations chartered to provide liquidity to the residential mortgage market and to promote the availability of mortgage credit by investing in residential mortgages and guaranteeing securities backed by residential mortgages.^[2] OFHEO oversees the Enterprises to ensure that they remain adequately capitalized and operate in a safe and sound manner and in accordance with applicable laws, rules and regulations. To that end OFHEO 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.^[3] In particular, section 1376 of the Act (12 U.S.C. 4636) empowers OFHEO to impose civil money penalties under specific conditions. OFHEO's Rules of Practice and Procedure (12 CFR part 1780) govern cease and desist proceedings, civil money penalty assessment proceedings and other administrative adjudications.^[4]

The Inflation Adjustment Act

The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 (the Inflation Adjustment Act) requires OFHEO, as well as other Federal agencies with the authority to issue civil money penalties (CMPs), to publish regulations to adjust the maximum amount of each CMP authorized by law that the agency has jurisdiction to administer.^[5] The Inflation Adjustment Act required agencies to make an initial adjustment of their CMPs upon the statute's enactment, and further requires agencies to make additional adjustments on an ongoing basis, every four years following the initial adjustment. The purpose of these periodic adjustments is to maintain the deterrent effect of CMPs and promote compliance with the law. Subpart E of OFHEO's Rules of Practice and Procedure sets forth the Civil Money Penalty Inflation Adjustment amounts and discusses their applicability. See 12 CFR parts 1780.80-81.

As required, OFHEO made the initial adjustment to the maximum civil money penalty amounts in 1997, and provided that such adjustments were applicable to any violation occurring after October 23, 1996 (the effective date of the Inflation Adjustment Act).^[6] The last adjustment was made in 2000, effective January 4, 2001.^[7] OFHEO again is amending the maximum civil money penalty amount for each tier that OFHEO has authority to impose under 12 U.S.C. 4636 in accordance with the Inflation Adjustment Act.

Under the Inflation Adjustment Act, the inflation adjustment for each applicable CMP is determined by increasing the maximum CMP amount per violation by a cost-of-living adjustment. As is described in detail below, the Inflation Adjustment Act provides that this cost-of-living adjustment is to reflect the percentage increase in the Consumer Price Index since the CMPs were last adjusted or established, and rounded in accordance with rules provided in the statute.^[8]

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 part 1780.80 to reflect the new adjusted maximum penalty amount that OFHEO may impose upon an executive officer or director or an Enterprise within each tier. The increases in maximum penalty amounts contained in this final rule may not necessarily affect the amount of any CMP that OFHEO may seek for a particular violation; OFHEO would calculate each CMP on a case-by-case basis in light of a variety of factors.^[9]

The Inflation Adjustment Act directs federal agencies to calculate each CMP adjustment as the percentage by which the CPI-U for June of the calendar year preceding the adjustment exceeds the CPI-U for June of the calendar year in which the amount of each CMP was last adjusted. The CMP for Third Tier penalties by an Enterprise was adjusted in 2000, and every other CMP was last adjusted in 1997.^[10] Since OFHEO is making this round of adjustments in calendar year 2005, and OFHEO made the last round of adjustments in calendar year 2000, the inflation adjustment amount for each CMP that was adjusted in 2000 was calculated by comparing the CPI-U for June 2000 (172.4) with the CPI-U for June 2004 (189.7), resulting in an inflation adjustment of 10.0 percent.^[11] For each CMP that was last adjusted in 1997, the inflation adjustment amount was calculated by comparing the CPI-U for June 1997 (160.3) with the CPI-U for June 2004 (189.7), resulting in an inflation adjustment of 18.3 percent. For each CMP, the product of this inflation adjustment and the previous maximum penalty amount was then rounded in accordance with the specific requirements of the Inflation Adjustment Act, and was then summed with the previous maximum penalty amount to determine the new adjusted maximum penalty amount.^[12] The table below sets out these items accordingly.

U.S. code citation	Description	Previous maximum penalty amount	Inflation increase	Rounded inflation increase	New adjusted maximum penalty amount
12 U.S.C. 4636(b)(1)	First Tier	5,500	1,006.50	1,000	6,500
12 U.S.C. 4636(b)(2)	Second Tier (Executive Officer or Director)	11,000	2,013	0	11,000
12 U.S.C. 4636(b)(2)	Second Tier (Enterprise)	27,500	5,032.50	5,000	32,500
12 U.S.C. 4636(b)(3)	Third Tier (Executive Officer or Director)	110,000	20,130	20,000	130,000
12 U.S.C. 4636(b)(3)	Third Tier (Enterprise)	1,150,000	115,000	125,000	1,275,000

Section 1780.81 states that the adjustments made in § 1780.80 apply only to violations that occur after the effective date, August 30, 2005.

Public Notice and Comment and Delayed Effective Date Not Required

OFHEO finds good cause that notice and an opportunity to comment on this document are unnecessary under the Administrative Procedure Act, 5 U.S.C. 551-559, as amended (APA). This rulemaking conforms with and is consistent with the statutory directive set forth in the Inflation Adjustment Act, with no issues of policy discretion, and public comment is impracticable and unnecessary. Accordingly, OFHEO is issuing the amendments as a final rule.

In addition, OFHEO finds good cause to make this rule effective upon publication of this document in the Federal Register under the APA. See 5 U.S.C. 553(d). This final rule does not impose any additional responsibilities on any entity. Instead, it simply adjusts the amount of each CMP tier as dictated by the Inflation Adjustment Act.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review

This final rule is not classified as a significant rule under Executive Order 12866 because it will not result in an annual effect on the economy of $100 million or more or a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based Enterprises to compete with foreign-based enterprises in domestic or foreign markets.

Accordingly, no regulatory impact assessment is required and this final rule has not been submitted to the Office of Management and Budget for review.

Unfunded Mandates Reform Act of 1995

This final rule does not include a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year. As a result, the final rule does not warrant the preparation of an assessment statement in accordance with the Unfunded Mandates Reform Act of 1995.

Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) only applies to rules for which an agency publishes a general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b) (see 5 U.S.C. 601(2)). OFHEO has determined for good cause that the APA does not require a general notice of proposed rulemaking for this regulatory action. The Regulatory Flexibility Act does not apply to this final rule.

Paperwork Reduction Act of 1995

The rule contains no information collection requirements that require the approval of the Office of Management and Budget pursuant to the Paperwork Reduction Act, 44 U.S.C. 3501-3520.

List of Subjects in 12 CFR Part 1780

• Administrative practice and procedure
• Penalties

Accordingly, for the reasons set out in the preamble, the Office of Federal Housing Enterprise Oversight hereby amends 12 CFR part 1780 as follows:

PART 1780—RULES OF PRACTICE AND PROCEDURE

1. The authority citation for part 1780 is revised to read as follows:

Authority: 12 U.S.C. 4501, 4513(b), 4517, 4521, 4631-4641.

2. Revise Subpart E of part 1780 to read as follows:

Subpart E—Civil Money Penalty Inflation Adjustments

§ 1780.80

Inflation adjustments.

The maximum amount of each civil money penalty within OFHEO's jurisdiction is adjusted in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 (28 U.S.C. 2461 note) as follows:

U.S. code citation	Description	New adjusted maximum penalty amount
12 U.S.C. 4636(b)(1)	First Tier	6,500
12 U.S.C. 4636(b)(2)	Second Tier (Executive Officer or Director)	11,000
12 U.S.C. 4636(b)(2)	Second Tier (Enterprise)	32,500
12 U.S.C. 4636(b)(3)	Third Tier (Executive Officer or Director)	130,000
12 U.S.C. 4636(b)(3)	Third Tier (Enterprise)	1,275,000

§ 1780.81

Applicability.

The inflation adjustments in § 1780.80 apply to civil money penalties assessed in accordance with the provisions of 12 U.S.C. 4636 for violations occurring after the effective date, August 30, 2005.

Dated: August 25, 2005.

Stephen A. Blumenthal,

Acting Director, Office of Federal Housing Enterprise Oversight.

Footnotes

1.  See Federal Housing Enterprises Financial Safety and Soundness Act of 1992, Pub. L. 102-550, Title XIII, Section 1301, Oct. 28, 1992, 106 Stat. 3672, 3941-4012 (codified at 12 U.S.C. 4501 et seq.).

2.  See Federal Home Loan Mortgage Corporation Act, 12 U.S.C. 1451 et seq.; Federal National Mortgage Association Charter Act, 12 U.S.C. 1716 et seq.; Act at 12 U.S.C. 4561-67, 4562 note.

3.  See Pub. L. No. 102-550, Title XIII, Section 1313 and 1371-1379B (Subtitle C—Enforcement Provisions) (codified at 12 U.S.C. 4513 and 4631-4641, respectively).

4.  See 12 CFR 1780.1

5.  See 28 U.S.C. 2461 note.

6.  See 62 FR 68152, December 31, 1997.

7.  See 66 FR 709, Jan. 4, 2001.

8.  The Inflation Adjustment Act specifically identifies the Consumer Price Index for All Urban Consumers published by the United States Department of Labor (CPI-U). The Department of Labor (DOL) computes the CPI-U using two different base time periods, 1967 and 1982-1984. The Inflation Adjustment Act does not specify which of these base periods should be used to calculate the inflation adjustment. OFHEO calculated the initial adjustment of its CMPs using CPI-U data with the 1967 base period. OFHEO is using CPI-U data with the 1982-1984 base period for the adjustments adopted in this final rule, because such data now reflect the most current method of computing the CPI-U.

9.  See, e.g., 12 CFR part 1780.1(c).

10.  See 66 FR 709, Jan. 4, 2001; 62 FR 68152, Dec. 31, 1997.

11.  OFHEO's last round of adjustments in 2000 applied an inflation factor of 3.7 percent, calculated by comparing June 1997 data to June 1999 data. The 1997 data was used as the base period in accordance with the Inflation Adjustment Act's directive to use CPI-U data from the year of the CMP's previous adjustment. The resulting penalty was then rounded in accordance with the statutory rules described below. 66 FR 709, January 4, 2001. Although the adjustment is being made in calendar year 2005, the resulting CMP increases do not take effect until publication of the rule, and will only apply to conduct occurring after such data.

12.  The statute's rounding rules require that each increase be rounded to the nearest multiple as follows: $10 in the case of penalties less than or equal to $100; $100 in the case of penalties greater than $100 but less than or equal to $1,000; $1,000 in the case of penalties greater than $1,000 but less than or equal to $10,000; $5,000 in the case of penalties greater than $10,000 but less than or equal to $100,000; $10,000 in the case of penalties greater than $100,000 but less than or equal to $200,000; and $25,000 in the case of penalties greater than $200,000.