[Federal Register Volume 61, Number 186 (Tuesday, September 24, 1996)]
[Rules and Regulations]
[Pages 50208-50219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24573]
[[Page 50207]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 26, 28, 30, 81, 200, 950, 965, 3282, and 3500
Streamlining Hearing Procedures; Final Rule
Federal Register / Vol. 61, No. 186 / Tuesday, September 24, 1996 /
Rules and Regulations
[[Page 50208]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 26, 28, 30, 81, 200, 950, 965, 3282, and 3500
[Docket No. FR-4022-F-02]
RIN 2501-AC19
Streamlining Hearing Procedures;
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In response to the President's regulatory reform initiatives,
this final rule streamlines and consolidates many of HUD's regulations
containing hearing procedures. This rule also makes several substantive
changes to these regulations in order to improve the hearing process
and to make the regulations more closely follow applicable statutes.
This rule makes the regulations easier for the public to use and
understand. Finally, this rule makes appropriate adjustments in stated
penalty amounts pursuant to the Debt Collection Improvement Act of
1996.
EFFECTIVE DATE: October 24, 1996. Increases in civil money penalty
amounts, pursuant to the Debt Collection Improvement Act of 1996 (31
U.S.C. 3701 note; Pub. L. 104-134, approved April 26, 1996; 110 Stat.
1321-358) apply to civil money penalty violations that occur on or
after the effective date of this rule.
FOR FURTHER INFORMATION CONTACT: Emmett N. Roden, Assistant General
Counsel for Administrative Proceedings, Office of General Counsel,
Department of Housing and Urban Development, Room 10251, 451 7th
Street, S.W., Washington, D.C. 20410, telephone (202) 708-2350. (This
is not a toll-free number.) Hearing- and speech-impaired persons may
access this number via TTY by calling the Federal Information Relay
Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. The Proposed Rule
On April 23, 1996 (61 FR 18026), HUD published a proposed rule that
would streamline and consolidate many of HUD's regulations containing
hearing procedures. HUD published this rule in response to President
Clinton's March 4, 1995 memorandum to all Federal departments and
agencies regarding regulatory reinvention. In the April 23, 1996
proposed rule, HUD proposed to consolidate as many of HUD's hearing
procedures as possible into one part, in order to make the procedures
easier to use and understand, and thereby eliminate approximately 20
pages of unnecessary regulations from the Code of Federal Regulations
(CFR). Today's final rule adopts the proposals in the April 23, 1996
proposed rule, with several changes as described in section I.D of this
preamble.
A. Hearings According to the Administrative Procedure Act
In this final rule, HUD amends 24 CFR part 26 so that it contains
two sets of hearing regulations. The first set of regulations, in part
26 subpart A, contains all the procedures that previously appeared in
part 26. These procedures apply in HUD proceedings before a hearing
officer, including administrative sanction hearings under part 24 and
hearings with respect to actions by the Mortgagee Review Board under
part 25. This final rule does not change the substance of any of these
provisions, but it sets them apart so that they all appear within a new
subpart A of part 26.
This final rule adds the second set of regulations to form a new
subpart B of part 26. The new subpart B contains a relatively uniform
set of hearing procedures for formal hearings pursuant to the
Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA). The hearing
procedures in subpart B apply to hearings under the Program Fraud Civil
Remedies Act of 1986, to hearings in which HUD seeks civil money
penalties, to hearings pursuant to the Interstate Land Sales Full
Disclosure Act, and to other hearings conducted pursuant to the APA.
In addition to consolidating these hearing procedures into one part
and making them uniform, this final rule makes a number of changes to
streamline pleadings and reduce administrative overhead. This final
rule contains specific time limits to ensure rapid disposition of cases
(see, e.g., Secs. 26.39, 26.42, 26.44, 26.50). This final rule also
clarifies that parties must seek Secretarial review in order to exhaust
their administrative remedies before seeking judicial review, thereby
addressing the Supreme Court's decision in Darby v. Cisneros, 113 S.Ct.
2539 (1993).
B. Program Fraud Civil Remedies Act of 1986
In this final rule, HUD also streamlines the provisions in part 28
regarding the Program Fraud Civil Remedies Act of 1986 (PFCRA) (31
U.S.C. 3801) by removing the hearing procedures, and by retaining in
their place a cross-reference to the uniform hearing procedures in part
26 subpart B. This final rule also streamlines the substantive
provisions of the PFCRA regulations by eliminating unnecessary language
and by clarifying the remaining language, making these regulations
easier to use and understand. This final rule also shortens the
decision process by removing the reconsideration of initial
determinations.
C. Civil Money Penalties
This final rule also streamlines the regulations in part 30
regarding civil money penalties. This rule removes the hearing
procedures from part 30, maintaining a cross-reference to the uniform
hearing procedures in part 26 subpart B. In addition, this rule
eliminates three of the civil money penalty panels, replacing them with
certain appropriate HUD officials in their authority to initiate
actions for civil money penalties.
This rule also revises and clarifies the list of violations for
Government National Mortgage Association (GNMA) issuers and custodians,
revises the list of violations applicable to mortgagees and lenders to
include the misuse of loan proceeds and the failure to comply with
settlement agreements with HUD, and expands the violation for failure
to service Section 235 mortgages to include other housing programs.
Finally, this rule updates the regulations to include penalties that
were enacted in the Housing and Community Development Act of 1992 (Pub.
L. 102-550, approved October 28, 1992; 106 Stat. 3672).
D. This Final Rule
The deadline for the receipt of public comments on the April 23,
1996 proposed rule (61 FR 18026) was June 24, 1996. To date, HUD has
received no public comments. Therefore, based on HUD's review of the
proposed rule, today's final rule makes only the following changes to
the provisions of the proposed rule:
1. This final rule clarifies the definitions of ``Complaint'' and
``Response'' in Sec. 26.28, as well as the procedures in Sec. 26.37, so
that the public can more easily understand the procedures under which
an action is initiated.
2. This final rule changes certain time periods to make them more
reasonable and more closely aligned with other rules of procedure.
(See, e.g., Sec. 26.34(c) of this final rule.)
3. This final rule removes references to the discovery provisions
of the Federal Rules of Civil Procedure that appeared in the proposed
rule, in favor of a simple reference to the general availability of
discovery (see Sec. 26.41 of this final rule). Any discovery issues
[[Page 50209]]
that may arise between the parties will be resolved by the
administrative law judge on a case-by-case basis.
4. Pursuant to the Federal Civil Penalties Inflation Adjustment Act
of 1990 (28 U.S.C. 2461 note; Pub. L. 101-410, approved October 5,
1990; 104 Stat. 890), as amended by the Debt Collection Improvement Act
of 1996 (31 U.S.C. 3701 note; Pub. L. 104-134, approved April 26, 1996;
110 Stat. 1321-358), each Federal agency is required to issue
regulations adjusting for inflation the maximum civil money penalties
that can be imposed pursuant to such agency's statutes. The first such
adjustment is required within 180 days after April 26, 1996, which is
the date of enactment of the 1996 Act. This final rule sets forth the
adjusted penalty amounts applicable to 24 CFR parts 28, 30, 81, 3282,
and 3500.
5. Finally, this rule further streamlines the hearing procedures,
so that only those provisions necessary to conduct orderly and fair
hearings are included in the regulations.
II. Findings and Certifications
National Environmental Policy Act
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(k) of HUD regulations, the
policies and procedures contained in this final rule relate only to
hearing procedures and administrative decisions, which do not
constitute development decisions and do not affect the physical
condition of a project area or building site. Therefore, this rule is
categorically excluded from the requirements of the National
Environmental Policy Act.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), the Secretary hereby certifies that this final rule would not
have a significant economic impact on a substantial number of small
entities. This rule implements statutory authority intended to protect
HUD's programs from abusive practices, but it will have no adverse or
disproportionate economic impact on small businesses.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this final rule does not
have potential for significant impact on family formation, maintenance,
and general well-being. No significant change in existing HUD policies
or programs will result from promulgation of this rule, as those
policies and programs relate to family concerns. Therefore, the rule is
not subject to review under the Order.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under Section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this final rule will not have substantial direct effects
on States or their political subdivisions, or the relationship between
the Federal Government and the States, or on the distribution of power
and responsibilities among the various levels of government. As a
result, the rule is not subject to review under the Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub.
L. 104-4; approved March 22, 1995) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on State,
local, and tribal governments, and the private sector. This rule does
not impose any Federal mandates on any State, local, or tribal
governments, or on the private sector, within the meaning of the UMRA.
List of Subjects
24 CFR Part 26
Administrative practice and procedure, Claims, Fraud, Grant
programs--housing and community development, Loan programs--housing and
community development, Mortgages, Penalties.
24 CFR Part 28
Administrative practice and procedure, Claims, Fraud, Penalties.
24 CFR Part 30
Administrative practice and procedure, Grant programs--housing and
community development, Loan programs--housing and community
development, Mortgages, Penalties.
24 CFR Part 81
Accounting, Federal Reserve System, Mortgagees, Reporting and
recordkeeping requirements, Securities.
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
24 CFR Part 950
Aged, Grant programs--housing and community development, Grant
programs--Indians, Individuals with disabilities, Low and moderate
income housing, Public housing, Reporting and recordkeeping
requirements.
24 CFR Part 965
Energy conservation, Government procurement, Grant programs--
housing and community development, Lead poisoning, Loan programs--
housing and community development, Public housing, Reporting and
recordkeeping requirements, Utilities.
24 CFR Part 3282
Administrative practice and procedure, Consumer protection,
Intergovernmental relations, Investigations, Manufactured homes,
Reporting and recordkeeping requirements.
24 CFR Part 3500
Consumer protection, Condominiums, Housing, Mortgages, Mortgage
servicing, Reporting and recordkeeping requirements.
Accordingly, parts 26, 28, 30, 81, 200, 950, 965, 3282, and 3500 of
title 24 of the Code of Federal Regulations are amended as follows:
PART 26--HEARING PROCEDURES
1. The part heading for part 26 is revised to read as set forth
above.
2. The authority citation for 24 CFR part 26 continues to read as
follows:
Authority: 42 U.S.C. 3535(d).
3. The heading of subpart A is revised to read, ``Subpart A--
Hearings Before Hearing Officers''.
Subparts B, C, D, E, F, and G--[Redesignated]
4. The headings for subparts B, C, D, E, F, and G are redesignated
as undesignated center headings; and Secs. 26.2 through 26.26 of
subparts B, C, D, E, F, and G are redesignated as Secs. 26.2 through
26.26 of subpart A.
5. A new subpart B is added to read as follows:
[[Page 50210]]
Subpart B--Hearings Pursuant to the Administrative Procedure Act
General
Sec.
26.27 Purpose and scope.
26.28 Definitions.
26.29 Powers and duties of the Administrative Law Judge (ALJ).
26.30 Ex parte contacts.
26.31 Disqualification of ALJ.
26.32 Parties to the hearing.
26.33 Separation of functions.
26.34 Time computations.
26.35 Service and filing.
26.36 Sanctions.
Prehearing Procedures
26.37 Commencement of action.
26.38 Motions.
26.39 Default.
26.40 Prehearing conferences.
26.41 Discovery.
26.42 Subpoenas.
26.43 Protective order.
Hearings
26.44 General.
26.45 Witnesses.
26.46 Evidence.
26.47 The record.
26.48 Posthearing briefs.
26.49 Initial decision.
26.50 Appeal to the Secretary.
26.51 Exhaustion of administrative remedies.
26.52 Judicial review.
26.53 Collection of civil penalties and assessments.
26.54 Right to administrative offset.
Subpart B--Hearings Pursuant to the Administrative Procedure Act
General
Sec. 26.27 Purpose and scope.
Unless otherwise specified in this title, the rules in this subpart
B of this part apply to hearings that HUD is required by statute to
conduct pursuant to the Administrative Procedure Act (5 U.S.C. 554 et
seq.).
Sec. 26.28 Definitions.
The following definitions apply to subpart B of this part:
Chief Docket Clerk means the Chief Docket Clerk of the Office of
Administrative Law Judges at the following address: 409 3rd Street,
S.W., Suite 320, Washington, D.C. 20024.
Complaint means the notice from HUD alleging violations of a HUD
statute and/or regulation, citing the legal authority upon which it is
issued, stating the relief HUD seeks, and informing a respondent of his
or her right to submit a response to a designated office and to request
an opportunity for a hearing before an administrative law judge.
Response means the written response to a complaint, admitting or
denying the allegations in the complaint and setting forth any
affirmative defense and/or any mitigating factors or extenuating
circumstances. The response shall be submitted to the Office of General
Counsel that initiates the complaint or to such other office as may be
designated in the complaint. A response is deemed a request for a
hearing.
Sec. 26.29 Powers and duties of the Administrative Law Judge (ALJ).
The ALJ shall conduct a fair and impartial hearing, avoid delay,
maintain order, and ensure that a record of the proceeding is made. The
ALJ is authorized to:
(a) Set and change the date, time, and place of the hearing upon
reasonable notice to the parties;
(b) Continue or recess the hearing in whole or in part for a
reasonable period of time;
(c) Hold conferences to identify or simplify the issues, or to
consider other matters that may aid in the expeditious disposition of
the proceeding;
(d) Administer oaths and affirmations;
(e) Issue subpoenas requiring the attendance of witnesses and the
production of documents at depositions or at hearings;
(f) Rule on motions and other procedural matters;
(g) Regulate the scope and timing of discovery;
(h) Regulate the course of the hearing and the conduct of
representatives and parties;
(i) Examine witnesses;
(j) Receive, rule on, exclude, or limit evidence;
(k) Upon motion of a party, take official notice of facts;
(l) Upon motion of a party, decide cases, in whole or in part, by
summary judgment where there is no disputed issue of material fact;
(m) Conduct any conference, argument, or hearing on motions in
person or by telephone; and
(n) Exercise such other authority as is necessary to carry out the
responsibilities of the ALJ under subpart B of this part.
Sec. 26.30 Ex parte contacts.
No party or person (except employees of the ALJ's office) shall
communicate in any way with the ALJ on any matter at issue in a case,
unless on notice and opportunity for all parties to participate. This
provision does not prohibit a person or party from inquiring about the
status of a case or asking routine questions concerning administrative
functions or procedures.
Sec. 26.31 Disqualification of ALJ.
(a) An ALJ in a particular case may disqualify himself or herself.
(b) A party may file with the ALJ a motion for the ALJ's
disqualification. The motion shall be accompanied by an affidavit
alleging the grounds for disqualification.
(c) Upon the filing of a motion and affidavit, the ALJ shall
proceed no further in the case until the matter of disqualification is
resolved.
Sec. 26.32 Parties to the hearing.
(a) General. The parties to the hearing shall be the respondent and
HUD.
(b) Rights of parties. Except as otherwise limited by subpart B of
this part, all parties may:
(1) Be accompanied, represented, and advised by a representative;
(2) Participate in any conference held by the ALJ;
(3) Conduct discovery;
(4) Agree to stipulations of fact or law, which shall be made part
of the record;
(5) Present evidence relevant to the issues at the hearing;
(6) Present and cross-examine witnesses;
(7) Present oral arguments at the hearing as permitted by the ALJ;
and
(8) Submit written briefs and proposed findings of fact and
conclusions of law after the hearing, as permitted by the ALJ.
Sec. 26.33 Separation of functions.
No officer, employee, or agent of the Federal Government engaged in
the performance of investigative, conciliatory, or prosecutorial
functions in connection with the proceeding shall, in that proceeding
or any factually related proceeding under subpart B of this part,
participate or advise in the decision of the administrative law judge,
except as a witness or counsel during the proceeding, or in its
appellate review.
Sec. 26.34 Time computations.
(a) In computing any period of time under subpart B of this part,
the time period begins the day following the act, event, or default,
and includes the last day of the period, unless the last day is a
Saturday, Sunday, or legal holiday observed by the Federal Government,
in which case the time period includes the next business day. When the
prescribed time period is seven days or less, intermediate Saturdays,
Sundays, and legal holidays shall be excluded from the computation.
(b) Entry of orders. In computing any time period involving the
date of the issuance of an order or decision by an administrative law
judge, the date of
[[Page 50211]]
issuance is the date the order or decision is served by the Chief
Docket Clerk.
(c) Service by mail. If a document is served by mail, 3 days shall
be added to the time permitted for a response.
Sec. 26.35 Service and filing.
(a) Filing. All documents shall be filed with the Chief Docket
Clerk, at the address listed in Sec. 26.28. Filing may be by first
class mail, delivery, facsimile transmission, or electronic means;
however, the ALJ may place appropriate limits on filing by facsimile
transmission or electronic means. All documents shall clearly designate
the docket number and title of the proceeding.
(b) Service. One copy of all documents filed with the Chief Docket
Clerk shall be served upon each party by the persons filing them and
shall be accompanied by a certificate of service stating how and when
such service has been made. Service may be made by delivery, first
class mail, facsimile transmission, or electronic means; however, the
ALJ may place appropriate limits on service by facsimile transmission
or electronic means. Documents shall be served upon a party's address
of residence or principal place of business, or, if the party is
represented by counsel, upon counsel of record at the address of
counsel. Service is complete when handed to the person or delivered to
the person's office or residence and deposited in a conspicuous place.
If service is by first-class mail, facsimile transmission, or
electronic means, service is complete upon deposit in the mail or upon
electronic transmission.
Sec. 26.36 Sanctions.
(a) The ALJ may sanction a person, including any party or
representative, for failing to comply with an order, rule, or procedure
governing the proceeding; failing to prosecute or defend an action; or
engaging in other misconduct that interferes with the speedy, orderly,
or fair conduct of the hearing.
(b) Any sanction, including but not limited to those listed in
paragraphs (c), (d), and (e) of this section, shall reasonably relate
to the severity and nature of the failure or misconduct.
(c) Failure to comply with an order. When a party fails to comply
with an order, including an order compelling discovery, the ALJ may:
(1) Draw an inference in favor of the requesting party with regard
to the information sought;
(2) In the case of requests for admission, regard each matter about
which an admission is requested to be admitted;
(3) Prohibit the party failing to comply with the order from
introducing evidence concerning, or otherwise relying upon, testimony
relating to the information sought; or
(4) Strike any part of the pleadings or other submissions of the
party failing to comply with the order.
(d) If a party fails to prosecute or defend an action brought under
subpart B of this part, the ALJ may dismiss the action or may issue an
initial decision against the respondent.
(e) The ALJ may refuse to consider any motion, request, response,
brief, or other document that is not filed in a timely fashion.
Prehearing Procedures
Sec. 26.37 Commencement of action.
An action under subpart B of this part shall commence with the
Government's filing of a complaint, together with the response thereto,
as those terms are defined in Sec. 26.28, with the Chief Docket Clerk.
If the respondent fails to submit a response to the Office of General
Counsel or such other office as designated in the complaint, then the
Government may file a motion for a default judgment, together with a
copy of the complaint, in accordance with Sec. 26.39.
Sec. 26.38 Motions.
(a) General. All motions shall state the specific relief requested
and the basis therefor and, except during a conference or the hearing,
shall be in writing. Written motions shall be filed and served in
accordance with Sec. 26.35.
(b) Response to motions. Unless otherwise ordered by the ALJ, a
response to a written motion may be filed within 7 days after service
of the motion. A party failing to respond timely to a motion shall be
deemed to have waived any objection to the granting of the motion.
Sec. 26.39 Default.
(a) General. The respondent may be found in default, upon motion,
for failure to file a timely response to the Government's complaint.
The motion shall include a copy of the complaint and a proposed default
order, and shall be served upon all parties. The respondent shall have
7 days from such service to respond to the motion.
(b) Default order. The ALJ shall issue a decision on the motion
within 15 days after the expiration of the time for filing a response
to the default motion. If a default order is issued, it shall
constitute the final agency action.
(c) Effect of default. A default shall constitute an admission of
all facts alleged in the Government's complaint and a waiver of
respondent's right to a hearing on such allegations. The penalty
proposed in the complaint shall be set forth in the default order and
shall be immediately due and payable by respondent without further
proceedings.
Sec. 26.40 Prehearing conferences.
(a) The ALJ may schedule prehearing conferences as appropriate.
(b) Upon the motion of any party, the ALJ shall schedule at least
one prehearing conference at a reasonable time in advance of the
hearing.
(c) The ALJ may consider the following at a prehearing conference:
(1) Simplification of the issues;
(2) Stipulations of fact and of the authenticity, accuracy, and
admissibility of documents;
(3) Submission of the case on briefs in lieu of an oral hearing;
(4) Limitation of the number of witnesses;
(5) The exchange of witness lists and of proposed exhibits;
(6) Discovery;
(7) The time and place for the hearing; and
(8) Such other matters as may tend to expedite the fair and just
disposition of the proceedings.
Sec. 26.41 Discovery.
(a) Parties may obtain discovery regarding any matter, not
privileged, that is relevant to the subject matter involved in the
adjudication, whether it relates to the case or defense of the party
seeking discovery or to the case or defense of any other party. It is
not grounds for objection that the information sought will be
inadmissible at the hearing, if such information appears reasonably
calculated to lead to the discovery of admissible evidence.
(b) Discovery in Program Fraud Civil Remedies actions (24 CFR part
28), unless agreed to by the parties, shall be available only as
ordered by the ALJ. The party opposing discovery shall have 10 days to
respond to a motion for discovery. The ALJ shall grant a motion for
discovery only if he or she finds that discovery is necessary for the
expeditious, fair, and reasonable consideration of the issues, is not
unduly costly or burdensome, will not unduly delay the proceeding, and
does not seek privileged information. The ALJ may grant discovery
subject to a protective order under Sec. 26.43. The request for
approval sent to the Attorney General from the General Counsel or
designee, as described in Sec. 28.20 of this title, is not discoverable
under any circumstances.
[[Page 50212]]
(c) The following types of discovery are authorized:
(1) Requests for production of documents for inspection and
copying. Nothing contained herein shall be interpreted to require the
creation of a document.
(2) Requests for admissions.
(3) Written interrogatories. Such interrogatories shall be limited
in number to 25, unless otherwise ordered by the ALJ.
(4) Depositions.
(d) Motions to compel. A party may file a motion to compel
discovery. The motion shall describe the information sought, cite the
opposing party's objection, and provide arguments supporting the
motion. The opposing party may file a response to the motion, including
a request for a protective order. The ALJ may issue an order compelling
a response, issue sanctions pursuant to Sec. 26.36, or issue a
protective order. For purposes of paragraph (d) of this section, an
evasive or incomplete answer to a request for discovery is treated as a
failure to answer.
(e) Each party shall bear its own costs of discovery.
Sec. 26.42 Subpoenas.
(a) General. Upon written request of a party, the ALJ may issue a
subpoena requiring the attendance of a witness at a deposition or
hearing, and/or the production of documents. The request shall specify
any documents to be produced and shall list the names and addresses of
the witnesses.
(b) Time of request. A request for a subpoena in aid of discovery
shall be filed in time to permit the conclusion of discovery 15 days
before the date fixed for the hearing. A request for a subpoena to
testify at the hearing shall be filed at least 3 days prior to the
hearing, unless otherwise allowed by the ALJ for good cause shown.
(c) Content. The subpoena shall specify the time and place at which
the witness is to appear and any documents the witness is to produce.
(d) Service and fees. Subpoenas shall be served, and fees and costs
paid to subpoenaed witnesses, in accordance with Rule 45(b)(1) of the
Federal Rules of Civil Procedure.
(e) Motion to quash. The individual to whom the subpoena is
directed or a party may file a motion to quash the subpoena within 10
days after service, or on or before the time specified in the subpoena
for compliance if it is less than 10 days after service.
Sec. 26.43 Protective order.
(a) A party, a prospective witness, or a deponent may file a motion
for a protective order with respect to discovery sought by an opposing
party or with respect to the hearing, seeking to limit the availability
or disclosure of evidence.
(b) In issuing a protective order, the ALJ may issue any order that
justice requires to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense, as provided in
Rule 26(c) of the Federal Rules of Civil Procedure.
Hearings
Sec. 26.44 General.
(a) Time of hearing. The hearing shall commence not later than 90
days following the Government's filing of the complaint and response
under Sec. 26.37, unless the time is extended for good cause. The ALJ
shall provide written notice to all parties of the reasons for any
extension of time.
(b) Location of hearing. The hearing shall be held where the
respondent resides or transacts business, or in such other place as may
be agreed upon by the parties and the ALJ. Hearings for Program Fraud
Civil Remedies Act cases shall be located in accordance with 31 U.S.C.
3803(g)(4).
(c) Notice of hearing. The ALJ shall issue a notice of hearing to
all parties specifying the time and location of the hearing, the
matters of fact and law to be heard, the legal authority under which
the hearing is to be held, a description of the procedures for the
conduct of the hearing, and such other matters as the ALJ determines to
be appropriate.
(d) Limitations for Program Fraud Civil Remedies Act cases. The
notice of hearing must be served upon the respondent within 6 years
after the date on which the claim or statement is made. If the
respondent fails to file a timely response to the Government's
complaint, service of a default judgment under Sec. 26.39 shall be
regarded as a notice of hearing for purposes of this section. The
statute of limitations may be waived by agreement of the parties.
(e) Burden and standard of proof. HUD shall prove the respondent's
liability and any aggravating factors by a preponderance of the
evidence. Respondent shall prove any affirmative defenses and any
mitigating factors by a preponderance of the evidence.
(f) Public hearings. Unless otherwise ordered by the ALJ for good
cause shown, the hearing shall be open to the public.
Sec. 26.45 Witnesses.
(a) Except as provided in paragraph (b) of this section, testimony
at the hearing shall be given orally by witnesses under oath or
affirmation.
(b) At the discretion of the ALJ, testimony may be admitted in the
form of a written statement or deposition. In order to be admissible,
any written statement must be provided to all other parties along with
the last known address of the witness, in a manner that allows
sufficient time for other parties to subpoena the witness for cross-
examination at the hearing.
Sec. 26.46 Evidence.
The ALJ shall admit any relevant oral or documentary evidence that
is not privileged. The ALJ may, however, exclude evidence if its
probative value is substantially outweighed by confusion of the issues,
or by considerations of undue delay, waste of time, or needless
presentation of cumulative evidence.
Sec. 26.47 The record.
The hearing will be recorded and transcribed. The transcript of
testimony, exhibits, and other evidence admitted at the hearing and all
papers and requests filed in the proceeding constitute the record for
the decision by the ALJ and the Secretary or designee.
Sec. 26.48 Posthearing briefs.
Posthearing briefs shall be filed only upon order by the ALJ.
Sec. 26.49 Initial decision.
(a) The ALJ shall issue an initial decision based only on the
record, which shall contain findings of fact, conclusions of law, and
the relief granted.
(b) The ALJ shall serve the initial decision on all parties within
60 days after either the close of the record or the expiration of time
permitted for submission of posthearing briefs, whichever is later. The
initial decision shall include a statement of each party's right to
file a request for Secretarial review. The ALJ may extend the 60-day
period for serving the initial decision in writing for good cause.
(c) If no appeal is timely filed with the Secretary or designee,
the initial decision shall become the final agency action.
Sec. 26.50 Appeal to the Secretary.
(a) Except as otherwise set forth in paragraph (b) of this section,
either party may file with the Secretary a petition for review within
30 days after the ALJ issues an initial decision. The Secretary or
designee may extend the 30-day period for good cause. If the Secretary
or designee does not act upon the petition for review within 90 days
[[Page 50213]]
of its service, then the initial decision shall become final.
(b) Appeals of Program Fraud Civil Remedies Act decisions (24 CFR
part 28). Only the respondent may file a petition for Secretarial
review. The petition must be filed within 30 days after the ALJ issues
the initial decision. The Secretary or designee may extend the 30-day
period for good cause. If the Secretary or designee does not act upon
the petition for review within 30 days of its service, then the initial
decision shall become final.
(c) Brief in support of petition. The petition for review shall be
accompanied by a written brief, not to exceed 10 pages, specifying
exceptions to the initial decision and reasons supporting the
exceptions.
(d) Service. The party submitting the petition for review shall
serve a copy of the petition and brief in support of the petition on
the other parties and on the Chief Docket Clerk.
(e) Forwarding of the record. Upon request by the Office of the
Secretary, the ALJ shall forward the record of the proceeding to the
Secretary or designee.
(f) Brief in opposition. Any opposing party may file a brief
opposing review, not to exceed 10 pages, within 20 days of receiving
the petition for review and accompanying brief. The brief in opposition
shall be served on all parties.
(g) Additional briefs. If the petition is granted, then the
Secretary or designee may order the filing of additional briefs.
(h) There is no right to appear personally before the Secretary or
designee.
(i) There is no right to appeal any interlocutory ruling by the
ALJ.
(j) In reviewing the initial decision, the Secretary or designee
shall not consider any objection that was not raised before the ALJ
unless a demonstration is made of extraordinary circumstances causing
the failure to raise the objection.
(k) The Secretary or designee shall consider only evidence
contained in the record forwarded by the ALJ. However, if any party
demonstrates to the satisfaction of the Secretary or designee that
additional evidence not presented at the hearing is material and that
there were reasonable grounds for the failure to present such evidence
at such hearing, the Secretary or designee shall remand the matter to
the ALJ for consideration of such additional evidence.
(l) The prohibitions of ex parte contacts in Sec. 26.30 shall apply
to contacts with the Secretary or designee.
(m) The Secretary or designee may affirm, reduce, reverse,
compromise, remand, or settle any relief granted in the initial
decision. The Secretary or designee shall consider, and include in any
final determination, such factors as may be set forth in applicable
statutes or regulations.
(n) The Secretary or designee shall promptly serve each party to
the appeal with a copy of his or her decision and a statement
describing the right to seek judicial review.
(o) Judicial review. A party must generally file a petition for
judicial review within 20 days of service of the Secretary's
determination, or the Secretary's determination shall become final and
not subject to judicial review. In Program Fraud Civil Remedies Act
matters (24 CFR part 28), the respondent shall have 60 days from the
date that the determination is sent to the respondent in which to file
a petition. See also Sec. 26.52.
Sec. 26.51 Exhaustion of administrative remedies.
In order to fulfill the requirement of exhausting administrative
remedies, a party must seek Secretarial review under Sec. 26.50 prior
to seeking judicial review of any initial decision issued under subpart
B of this part.
Sec. 26.52 Judicial review.
Judicial review shall be in accordance with applicable statutory
procedures and the procedures of the appropriate Federal court. The
Government may not seek judicial review of an adverse determination of
a Program Fraud Civil Remedies Act matter.
Sec. 26.53 Collection of civil penalties and assessments.
Collection of civil penalties and assessments shall be in
accordance with applicable statutory provisions.
Sec. 26.54 Right to administrative offset.
The amount of any penalty or assessment that has become final under
Sec. 26.49, or for which a judgment has been entered after action under
Secs. 26.52 or 26.53, or agreed upon in a compromise or settlement
among the parties, may be collected by administrative offset under 31
U.S.C. 3716 or other applicable law. In Program Fraud Civil Remedies
Act matters, an administrative offset may not be collected against a
refund of an overpayment of Federal taxes then or later owing by the
United States to the respondent.
6-8. Part 28 is revised to read as follows:
PART 28--IMPLEMENTATION OF THE PROGRAM FRAUD CIVIL REMEDIES ACT OF
1986
Sec.
28.1 Purpose.
28.5 Definitions.
28.10 Basis for civil penalties and assessments.
28.15 Investigation.
28.20 Request for approval by the Department of Justice.
28.25 Complaint.
28.30 Response.
28.35 Disclosure of documents.
28.40 Hearings.
28.45 Settlements.
Authority: 28 U.S.C. 2461 note; 31 U.S.C. 3801; 42 U.S.C.
3535(d).
Sec. 28.1 Purpose.
This part:
(a) Establishes administrative procedures for imposing civil
penalties and assessments against persons who make, submit, or present,
or cause to be made, submitted, or presented, false, fictitious, or
fraudulent claims or written statements to Federal authorities or to
their agents; and
(b) Specifies the hearing and appeal rights of persons subject to
allegations of liability for such penalties and assessments. Hearings
under this part shall be conducted pursuant to 24 CFR part 26, subpart
B.
Sec. 28.5 Definitions.
The terms ALJ and HUD are defined in 24 CFR part 5.
Benefit means anything of value, including, but not limited to, any
advantage, preference, privilege, license, permit, favorable decision,
ruling, status, or loan insurance or guarantee.
Claim means any request, demand, or submission:
(1) Made to HUD for property, services, or money (including money
representing grants, loans, insurance, or benefits);
(2) Made to a recipient of property, services, or money from HUD,
or to a party to a contract with HUD, for property or services provided
by the U.S. Government, purchased with Government funds, or for which
the Government will reimburse the recipient or party; or
(3) Made to HUD that has the effect of decreasing an obligation to
pay or account for property, services, or money.
Knows or has reason to know means that a person has actual
knowledge that a claim or statement is false, fictitious, or
fraudulent; acts in deliberate ignorance of the truth or falsity of the
claim or statement; or acts in reckless disregard of the truth or
falsity of the claim or statement.
[[Page 50214]]
Person means any individual, partnership, corporation, association,
private organization, or entity.
Respondent means any person alleged to be liable for a civil
penalty or assessment under Sec. 28.25.
Statement means any representation, certification, affirmation,
document, record, or accounting or bookkeeping entry made:
(1) With respect to a claim, to obtain approval or payment of a
claim, or relating to eligibility to make a claim; or
(2) With respect to or relating to eligibility for a contract, bid,
or proposal for a contract with; or a grant or cooperative agreement,
loan, or benefit from; HUD, any State, any political subdivision of a
State, or other party, if the United States Government provides any
portion of the money or property under the contract or the grant or
cooperative agreement, loan, or benefit, or if the Government will
reimburse the State, political subdivision, or party for any portion of
the money or property under the contract or for the grant or
cooperative agreement, loan, or benefit.
Sec. 28.10 Basis for civil penalties and assessments.
(a) Claims. (1) A civil penalty of not more than $5,500 may be
imposed upon a person who makes a claim that the person knows or has
reason to know:
(i) Is false, fictitious, or fraudulent;
(ii) Includes or is supported by a written statement that either
contains a material fact that is false, fictitious, or fraudulent; or
omits a material fact that the person has a duty to include and is
false, fictitious, or fraudulent as a result of the omission; or
(iii) Is for payment for the provision of property or services that
the person has not provided as claimed.
(2) Each voucher, invoice, claim form, or other individual request
or demand for property, services, or money constitutes a separate
claim.
(3) A claim shall be considered made to HUD, to a recipient, or to
a party when the claim actually is made to an agent, fiscal
intermediary, or other entity, including any State or political
subdivision of a State, acting for or on behalf of HUD, the recipient,
or the party.
(4) Each claim for property, services, or money is subject to a
civil penalty without regard to whether the property, services, or
money actually is delivered or paid.
(5) Liability under this part shall not lie if the amount of money
or value of property or services claimed exceeds $150,000 as to each
claim that a person submits. For purposes of paragraph (a) of this
section, a group of claims submitted simultaneously as part of a single
transaction shall be considered a single claim.
(6) If the Government has made any payment, transferred property,
or provided services on a claim, then the Government may assess a
person found liable up to twice the amount of the claim or portion of
the claim that is determined to be in violation of paragraph (a)(1) of
this section.
(b) Statements. (1) A civil penalty of up to $5,500 may be imposed
upon a person who makes a written statement that:
(i) The person knows, or has reason to know, contains a material
fact that is false, fictitious, or fraudulent; or omits a material fact
that the person has a duty to include and is false, fictitious, or
fraudulent because of that omission; and
(ii) Contains or is accompanied by an express certification or
affirmation of the truthfulness and accuracy of the contents of the
statement.
(2) Each written representation, certification, or affirmation
constitutes a separate statement.
(3) A statement shall be considered made to HUD when the statement
is actually made to an agent, fiscal intermediary, or other entity,
including any State or political subdivision of a State, acting for or
on behalf of HUD.
(c) Limit on liability. If the claim or statement relates to low-
income housing benefits or housing benefits for the elderly or
handicapped, then a person may be held liable only if he or she has
made the claim or statement in the course of applying for such
benefits, with respect to his or her eligibility, or family's
eligibility, to receive such benefits. For purposes of paragraph (c) of
this section, ``housing benefits'' means any instance wherein funds
administered by the Secretary directly or indirectly permit low-income
families or elderly or handicapped persons to reside in housing that
otherwise would not be available to them.
(d) Specific intent. No proof of specific intent to defraud is
required to establish liability under this section.
(e) Joint and several liability. A civil penalty or assessment may
be imposed jointly and severally if more than one person is determined
to be liable.
Sec. 28.15 Investigation.
(a) General. HUD may initiate a Program Fraud Civil Remedies Act
(31 U.S.C. 3801) case against a respondent only upon an investigation
by the Inspector General or his or her designee.
(b) Subpoena. Pursuant to 31 U.S.C. 3804(a), the Inspector General
or designee may require by subpoena the production of records and other
documents. The subpoena shall state the authority under which it is
issued, identify the records sought, and name the person designated to
receive the records. The recipient of the subpoena shall provide a
certification that the documents sought have been produced, that the
documents are not available and the reasons they are not available, or
that the documents, suitably identified, have been withheld based upon
the assertion of an identified privilege.
(c) Investigation report. If the Inspector General or designee
concludes that an action under the Program Fraud Civil Remedies Act may
be warranted, her or she shall submit a report containing the findings
and conclusions of the investigation to the General Counsel or his or
her designee.
(d) The Inspector General may refer allegations directly to the
Department of Justice for suit under the False Claims Act (31 U.S.C.
3730) or for other civil relief, or may postpone submitting a report to
the General Counsel to avoid interference with a criminal investigation
or prosecution. The Inspector General shall report violations of
criminal law to the Attorney General.
Sec. 28.20 Request for approval by the Department of Justice.
(a) If the General Counsel or designee determines that the
investigation report supports an action under this part, he or she must
submit a written request to the Department of Justice for approval to
issue a notice under Sec. 28.25.
(b) The request shall include a description of the claims or
statements at issue; the evidence supporting the notice; an estimate of
the amount of money or the value of property, services, or other
benefits requested or demanded in violation of Sec. 28.10; any
exculpatory or mitigating circumstances that may relate to the claims
or statements; and a statement that there is a reasonable prospect of
collecting an appropriate amount of penalties and assessments.
Sec. 28.25 Complaint.
(a) General. Upon obtaining approval from the Department of
Justice, the General Counsel or designee may issue a complaint to the
respondent. The complaint shall be sent by certified mail, return
receipt requested, or shall be personally served.
(b) The complaint shall include:
(1) The allegations of liability against the respondent, including
the statutory basis for liability, the claims or statements at issue,
and the reasons why liability arises from those claims or statements;
[[Page 50215]]
(2) The amount of penalties and assessments for which the
respondent may be held liable;
(3) That the respondent may request a hearing by submitting a
written response to the complaint;
(4) The address to which a response must be sent; and
(5) That failure to submit an answer within 30 days of receipt of
the complaint may result in the imposition of the maximum amount of
penalties and assessments sought without right of appeal.
(c) A copy of this part 28 and of 24 CFR part 26, subpart B shall
be included with the complaint.
Sec. 28.30 Response.
(a) The respondent may submit a written response to HUD within 30
days of service of the complaint. The response shall be deemed to be a
request for hearing. The response should include the admission or
denial of each allegation of liability made in the complaint; any
defense on which the respondent intends to rely; any reasons why the
penalties and assessments should be less than the amount set forth in
the complaint; and the name, address, and telephone number of the
person who will act as the respondent's representative, if any.
(b) Filing with the administrative law judges. HUD shall file the
complaint and response with the Chief Docket Clerk, Office of
Administrative Law Judges, in accordance with Sec. 26.37 of this title.
If no response is submitted, then HUD may file a motion for default
judgment, together with a copy of the complaint, in accordance with
Sec. 26.39 of this title.
Sec. 28.35 Disclosure of documents.
Upon receipt of a complaint, the respondent may, upon written
request to the General Counsel or designee, review any relevant and
material nonprivileged documents, including any exculpatory documents,
that relate to the allegations set out in the complaint. Exculpatory
information that is contained in a privileged document must be
disclosed.
Sec. 28.40 Hearings.
(a) General. Hearings under this part shall be conducted in
accordance with the procedures in 24 CFR part 26, subpart B.
(b) Factors to consider in determining amount of penalties and
assessments. In determining an appropriate amount of civil penalties
and assessments, the administrative law judge (ALJ) and, upon appeal,
the Secretary shall consider and state in their opinions any mitigating
or aggravating circumstances. Because of the intangible costs of fraud,
the expense of investigating fraudulent conduct, and the need for
deterrence, ordinarily double damages and a significant civil penalty
should be imposed. The ALJ and the Secretary shall consider the
following factors in determining the amount of penalties and
assessments to be imposed:
(1) The number of false, fictitious, or fraudulent claims or
statements;
(2) The time period over which such claims or statements were made;
(3) The degree of the respondent's culpability with respect to the
misconduct;
(4) The amount of money or the value of the property, services, or
benefit falsely claimed;
(5) The value of the Government's actual loss as a result of the
misconduct, including foreseeable consequential damages and the cost of
investigation;
(6) The relationship of the civil penalties to the amount of the
Government's loss;
(7) The potential or actual impact of the misconduct upon national
defense, public health or safety, or public confidence in the
management of Government programs and operations, including
particularly the impact on the intended beneficiaries of such programs;
(8) Whether the respondent has engaged in a pattern of the same or
similar misconduct;
(9) Whether the respondent attempted to conceal the misconduct;
(10) The degree to which the respondent has involved others in the
misconduct or in concealing it;
(11) If the misconduct of employees or agents is imputed to the
respondent, the extent to which the respondent's practices fostered or
attempted to preclude the misconduct;
(12) Whether the respondent cooperated in or obstructed an
investigation of the misconduct;
(13) Whether the respondent assisted in identifying and prosecuting
other wrongdoers;
(14) The complexity of the program or transaction, and the degree
of the respondent's sophistication with respect to it, including the
extent of the respondent's prior participation in the program or in
similar transactions;
(15) Whether the respondent has been found, in any criminal, civil,
or administrative proceeding, to have engaged in similar misconduct or
to have dealt dishonestly with the Government of the United States or
of a State, directly or indirectly;
(16) The need to deter the respondent and others from engaging in
the same or similar misconduct; and
(17) Any other factors that in any given case may mitigate or
aggravate the offense for which penalties and assessments are imposed.
(c) Stays ordered by the Department of Justice. If at any time the
Attorney General of the United States or an Assistant Attorney General
designated by the Attorney General notifies the Secretary in writing
that continuation of HUD's case may adversely affect any pending or
potential criminal or civil action related to the claim or statement at
issue, the ALJ or the Secretary shall stay the process immediately. The
case may be resumed only upon receipt of the written authorization of
the Attorney General.
Sec. 28.45 Settlements.
(a) HUD and the respondent may enter into a settlement agreement at
any time prior to the issuing of a notice of final determination under
Sec. 26.50 of this title.
(b) Failure of the respondent to comply with a settlement agreement
shall be sufficient cause for resuming an action under this part, or
for any other judicial or administrative action.
9-11. Part 30 is revised to read as follows:
PART 30--CIVIL MONEY PENALTIES: CERTAIN PROHIBITED CONDUCT
Subpart A--General
Sec.
30.1 Purpose and scope.
30.5 Effective dates.
30.10 Definitions.
30.15 Application of other remedies.
Subpart B--Violations
30.20 Ethical violations by HUD employees.
30.25 Violations by applicants for assistance.
30.30 Urban Homestead violations.
30.35 Mortgagees and lenders.
30.40 Loan guarantees for Indian housing.
30.45 Multifamily and Section 202 mortgagors.
30.50 GNMA issuers and custodians.
30.55 Interstate Land Sales violations.
30.60 Dealers or loan correspondents.
30.65 Failure to disclose lead-based paint hazards.
Subpart C--Procedures
30.70 Prepenalty notice.
30.75 Response to prepenalty notice.
30.80 Factors in determining appropriateness and amount of civil
money penalty.
30.85 Complaint.
30.90 Response to the complaint.
30.95 Hearings.
30.100 Settlements.
Authority: 12 U.S.C. 1701q-1, 1703, 1723i, 1735f-14, 1735f-15;
15 U.S.C. 1717a; 28 U.S.C. 2461 note; 42 U.S.C. 3535(d).
[[Page 50216]]
Subpart A--General
Sec. 30.1 Purpose and scope.
Unless provided for elsewhere in this title or under separate
authority, this part implements HUD's civil money penalty provisions.
The procedural rules for hearings under this part are set forth in 24
CFR part 26, subpart B.
Sec. 30.5 Effective dates.
(a) Under Sec. 30.20, a civil money penalty may be imposed for
violations occurring on or after May 22, 1991.
(b) Under Secs. 30.25, 30.35, 30.45, 30.50, 30.55, and 30.60, a
civil money penalty may be imposed for any violations that occur on or
after December 15, 1989.
(c) Under Sec. 30.30, a civil money penalty may be imposed with
respect to any property transferred for use under section 810 of the
Housing and Community Development Act of 1974, as amended (12 U.S.C.
1706e), after January 1, 1981, to a state, a unit of general local
government, or a public agency or qualified community organization
designated by a unit of general local government, or a transferee of
any such entity.
(d) Under Sec. 30.40, concerning loan guarantees for Indian
housing, a civil money penalty may be imposed for violations occurring
on or after October 28, 1992.
(e) Under Sec. 30.65, a civil money penalty may be imposed for
violations occurring on or after the following dates:
(1) September 6, 1996, for owners of more than four residential
dwellings; or
(2) December 6, 1996, for owners of one to four residential
dwellings.
Sec. 30.10 Definitions.
Since this part is primarily procedural, terms not defined in this
section shall have the meanings given them in relevant program
regulations. Comprehensive definitions are in 24 CFR part 4 (HUD Reform
Act). The terms ALJ, Department, HUD, and Secretary are defined in 24
CFR part 5.
Agent. Any person, including an officer, director, partner, or
trustee, who acts on behalf of another person.
Dealer. A seller, contractor or supplier of goods or services
having a direct or indirect financial interest in the transaction
between the borrower and the lender, and who assists the borrower in
preparing the credit application or otherwise assists the borrower in
obtaining the loan from the lender.
Knowing or Knowingly. Having actual knowledge of or acting with
deliberate ignorance of or reckless disregard for the prohibitions
under subpart B of this part or under 24 CFR part 4.
Loan correspondent. A lender or loan correspondent as defined at
Sec. 202.2 of this title.
Material or Materially. In some significant respect or to some
significant degree.
Person. An individual, corporation, company, association,
authority, firm, partnership, society, State, local government or
agency thereof, or any other organization or group of people.
Respondent. A person against whom a civil money penalty action is
initiated.
Sec. 30.15 Application of other remedies.
A civil money penalty may be imposed in addition to other
administrative sanctions or any other civil remedy or criminal penalty.
Subpart B--Violations
Sec. 30.20 Ethical violations by HUD employees.
(a) General. The General Counsel, or his or her designee, may
initiate a civil money penalty action against HUD employees who
improperly disclose information pursuant to section 103 of the HUD
Reform Act of 1989 (42 U.S.C. 3537a(c)) and 24 CFR part 4, subpart B.
(b) Maximum penalty. The maximum penalty is $11,000 for each
violation.
Sec. 30.25 Violations by applicants for assistance.
(a) General. The General Counsel, or his or her designee, may
initiate a civil money penalty action against applicants for
assistance, as defined in 24 CFR part 4, subpart A, who knowingly and
materially violate the provisions of subsections (b) or (c) of section
102 of the HUD Reform Act of 1989 (42 U.S.C. 3545).
(b) Maximum penalty. The maximum penalty for each violation is
$11,000.
Sec. 30.30 Urban Homestead violations.
(a) General. The Assistant Secretary for Community Planning and
Development, or his or her designee, or the Director of the Office of
Technical Assistance and Management may initiate a civil money penalty
action against persons who knowingly and materially violate section 810
of the Housing and Community Development Act of 1974, as amended (12
U.S.C. 1706e), or the provisions of 24 CFR part 590, in the use or
conveyance of property made available under the Urban Homestead
Program.
(b) Maximum penalty. The maximum penalty is either twice the amount
of the gross profit realized from any impermissible use or conveyance
of the property, or the amount of section 810 funds used to reimburse
HUD, the Department of Veterans Affairs, the Resolution Trust
Corporation, or the Farmers Home Administration (or its successor
agency under Public Law 103-354) for the property, whichever is
greater. If the property is still held by the violator, the gross
profit shall include any appreciation between the amount the violator
paid for the property and its current value as determined by an
independent, HUD-qualified appraiser.
Sec. 30.35 Mortgagees and lenders.
(a) General. The Mortgagee Review Board may initiate a civil money
penalty action against any mortgagee or lender who knowingly and
materially:
(1) Violates the provisions listed in 12 U.S.C. 1735f-14(b);
(2) Fails to comply with the requirements of Sec. 201.27(a) of this
title regarding approval and supervision of dealers;
(3) Approves a dealer that has been suspended, debarred, or
otherwise denied participation in HUD's programs;
(4) Makes a payment that is prohibited under Sec. 202.12(p) of this
title;
(5) Fails to remit, or timely remit, mortgage insurance premiums,
loan insurance charges, or late charges or interest penalties;
(6) Permits loan documents for an FHA insured loan to be signed in
blank by its agents or any other party to the loan transaction unless
expressly approved by the Secretary;
(7) Fails to follow the mortgage assignment procedures set forth in
Secs. 203.650 through 203.664 of this title or in Secs. 207.255 through
207.258b of this title.
(8) Fails to timely submit documents that are complete and accurate
in connection with a conveyance of property or a claim for insurance
benefits, in accordance with Secs. 203.365, 203.366, or 203.368 of this
title;
(9) Fails to:
(i) Process requests for formal release of liability under an FHA
insured mortgage;
(ii) Obtain a credit report, issued not more than 90 days prior to
approval of a person as a borrower, as to the person's creditworthiness
to assume an FHA insured mortgage;
(iii) Timely submit proper notification of a change in mortgagor or
mortgagee as required by Sec. 203.431 of this title;
(iv) Timely submit proper notification of mortgage insurance
termination as required by Sec. 203.318 of this title;
(v) Timely submit proper notification of a change in mortgage
servicing as required by Sec. 203.502 of this title; or
[[Page 50217]]
(vi) Report all delinquent mortgages to HUD, as required by
Sec. 203.332 of this title;
(10) Fails to service FHA insured mortgages, in accordance with the
requirements of 24 CFR parts 201, 203, and 235;
(11) Fails to fund loans that it originated, or otherwise misuses
loan proceeds;
(12) Fails to comply with the conditions relating to the assignment
or pledge of mortgages;
(13) Fails to comply with the provisions of the Real Estate
Settlement Procedures Act (12 U.S.C. 2601 et seq.), the Equal Credit
Opportunity Act (15 U.S.C. 1691 et seq.), or the Fair Housing Act (42
U.S.C. 3601 et seq.);
(14) Fails to comply with the terms of a settlement agreement with
HUD.
(b) Continuing violation. Each day that a violation continues shall
constitute a separate violation.
(c) Amount of penalty. The maximum penalty is $5,500 for each
violation, up to a limit of $1,100,000 for all violations committed
during any one-year period. Each violation shall constitute a separate
violation as to each mortgage or loan application.
Sec. 30.40 Loan guarantees for Indian housing.
(a) General. The Secretary may initiate a civil money penalty
action against any mortgagee or holder of a guarantee certificate who
knowingly and materially violates the provisions of 12 U.S.C. 1715z-
13a(g)(2) concerning loan guarantees for Indian housing;
(b) Continuing violation. Each day that a violation continues shall
constitute a separate violation.
(c) Amount of penalty. The maximum penalty is $5,000 for each
violation, up to a limit of $1,100,000 for all violations committed
during any one-year period. Each violation shall constitute a separate
violation as to each mortgage or loan application.
Sec. 30.45 Multifamily and Section 202 mortgagors.
(a) General. The Assistant Secretary for Housing-Federal Housing
Commissioner, or his or her designee, may initiate a civil money
penalty action against any mortgagor of property that includes five or
more living units and is subject to a mortgage insured, coinsured, or
held by the Secretary, who knowingly and materially commits a violation
listed at 12 U.S.C. 1735f-15 (b) or (c), or 12 U.S.C. 1701q-1 (b) or
(c).
(b) Maximum penalty. The maximum penalty for each violation of 12
U.S.C. 1735f-15(b) and 12 U.S.C. 1701q-1(b) is the amount of loss that
the Secretary incurs at a foreclosure sale, or a sale after
foreclosure, with respect to the property involved. The maximum penalty
for each violation of 12 U.S.C. 1735f-15(c) and 12 U.S.C. 1701q-1(c) is
$27,500.
Sec. 30.50 GNMA issuers and custodians.
(a) General. The President of GNMA, or his or her designee, may
initiate a civil money penalty action against a GNMA issuer or
custodian that knowingly and materially violates any provision of 12
U.S.C. 1723i(b), title III of the National Housing Act, or any
implementing regulation, handbook, guaranty agreement, or contractual
agreement, or participant letter issued by GNMA, or fails to comply
with the terms of a settlement agreement with GNMA.
(b) Continuing violation. Each day that a violation continues shall
constitute a separate violation.
(c) Amount of penalty. The maximum penalty is $5,500 for each
violation, up to a limit of $1,100,000 during any one-year period. Each
violation shall constitute a separate violation with respect to each
pool of mortgages.
Sec. 30.55 Interstate Land Sales violations.
(a) General. The Assistant Secretary for Housing-Federal Housing
Commissioner, or his or her designee, may initiate a civil money
penalty action against any person who knowingly and materially violates
any provision of the Interstate Land Sales Full Disclosure Act (15
U.S.C. 1701 et seq.); the rules and regulations set forth at 24 CFR
parts 1710, 1715, and 1720; or any order issued thereunder.
(b) Continuing violation. Each day that a violation continues shall
constitute a separate violation.
(c) Maximum penalty. The maximum penalty is $1,100 for each
violation, up to a limit for any particular person of $1,100,000 during
any one-year period. Each violation shall constitute a separate
violation as to each sale or lease or offer to sell or lease.
Sec. 30.60 Dealers or loan correspondents.
(a) General. The Assistant Secretary for Housing-Federal Housing
Commissioner, or his or her designee, may initiate a civil money
penalty action against any dealer or loan correspondent who violates
section 2(b)(7) of the National Housing Act (12 U.S.C. 1703). Such
violations include, but are not limited to:
(1) Falsifying information on an application for dealer approval or
reapproval submitted to a lender;
(2) Falsifying statements on a HUD credit application, improvement
contract, note, security instrument, completion certificate, or other
loan document;
(3) Failing to sign a credit application if the dealer or loan
correspondent assisted the borrower in completing the application;
(4) Falsely certifying to a lender that the loan proceeds have been
or will be spent on eligible improvements;
(5) Falsely certifying to a lender that the property improvements
have been completed;
(6) Falsely certifying that a borrower has not been given or
promised any cash payment, rebate, cash bonus, or anything of more than
nominal value as an inducement to enter into a loan transaction;
(7) Making a false representation to a lender with respect to the
creditworthiness of a borrower or the eligibility of the improvements
for which a loan is sought.
(b) Continuing violation. Each day that a violation continues shall
constitute a separate violation.
(c) Amount of penalty. The maximum penalty is $5,500 for each
violation, up to a limit for any particular person of $1,100,000 during
any one-year period.
Sec. 30.65 Failure to disclose lead-based paint hazards.
(a) General. The Director of the Office of Lead Hazard Control, or
his or her designee, may initiate a civil money penalty action against
any person who knowingly violates 42 U.S.C. 4852d(b)(1).
(b) Amount of penalty. The maximum penalty is $11,000 for each
violation.
Subpart C--Procedures
Sec. 30.70 Prepenalty notice.
Whenever HUD intends to seek a civil money penalty, the official
designated in subpart B of this part, or his or her designee (or the
chairperson of the Mortgagee Review Board, or his or her designee, in
actions under Sec. 30.35), shall issue a written notice to the
respondent. This prepenalty notice shall include the following:
(a) That HUD is considering seeking a civil money penalty;
(b) The specific violations alleged;
(c) The maximum civil money penalty that may be imposed;
(d) The opportunity to reply in writing to the designated program
official within 30 days after receipt of the notice; and
(e) That failure to respond within the 30-day period may result in
issuance of a complaint under Sec. 30.85 without consideration of any
information that the respondent may wish to provide.
[[Page 50218]]
Sec. 30.75 Response to prepenalty notice.
The response shall be in a format prescribed in the prepenalty
notice. The response shall include any arguments opposing the
imposition of a civil money penalty that the respondent may wish to
present.
Sec. 30.80 Factors in determining appropriateness and amount of civil
money penalty.
In determining whether to seek a penalty, and the amount of such
penalty, the officials designated in subpart B of this part shall
consider the following factors:
(a) The gravity of the offense;
(b) Any history of prior offenses. For violations under
Secs. 30.25, 30.35, 30.45, 30.50, 30.55, and 30.60, offenses that
occurred prior to December 15, 1989 may be considered;
(c) The ability to pay the penalty;
(d) The injury to the public;
(e) Any benefits received by the violator;
(f) The extent of potential benefit to other persons;
(g) Deterrence of future violations;
(h) The degree of the violator's culpability;
(i) With respect to Urban Homestead violations under Sec. 30.30,
the expenditures made by the violator in connection with any gross
profit derived; and
(j) Such other matters as justice may require.
(k) In addition to the above factors, with respect to violations
under Secs. 30.45, 30.55, and 30.60, the Assistant Secretary for
Housing-Federal Housing Commissioner, or his or her designee, shall
also consider:
(1) Any injury to tenants; and/or
(2) Any injury to lot owners.
Sec. 30.85 Complaint.
(a) General. Upon the expiration of the period for the respondent
to submit a response to the prepenalty notice, the official designated
in subpart B of this part, or his or her designee (or the Mortgagee
Review Board in actions under Sec. 30.35) shall determine whether to
seek a civil money penalty. Such determination shall be based upon a
review of the prepenalty notice, the response, if any, and the factors
listed at Sec. 30.80. A determination by the Mortgagee Review Board to
seek a civil money penalty shall be by a majority vote of the Board.
(b) If a determination is made to seek a civil money penalty, the
official or his or her designee, or the Mortgagee Review Board, shall
issue a complaint to the respondent. The complaint shall state the
following:
(1) The factual basis for the decision to seek a penalty;
(2) The applicable civil money penalty statute;
(3) The amount of penalty sought;
(4) The right to submit a response in writing, within 15 days of
receipt of the complaint, requesting a hearing on any material fact in
the complaint, or on the appropriateness of the penalty sought;
(5) The address to which a response must be sent;
(6) That the failure to submit a response may result in the
imposition of the penalty in the amount sought.
(c) A copy of this part and of 24 CFR part 26, subpart B shall be
included with the complaint.
(d) Service of the complaint. The complaint shall be served on the
respondent by first class mail, personal delivery, or other means. In
cases of violations by mortgagees and lenders of 12 U.S.C. 1735f-14(b)
(1)(D) or (1)(F), or by GNMA issuers or custodians of 12 U.S.C.
1723i(b) (1)(G) or (1)(I), a copy of the complaint shall be provided to
the Attorney General.
Sec. 30.90 Response to the complaint.
(a) General. The respondent may submit to HUD a written response to
the complaint within 15 days of its receipt. The response shall be
considered a request for a hearing. The response should include the
admission or denial of each allegation of liability made in the
complaint; any defense on which the respondent intends to rely; any
reasons why the civil money penalty is not warranted or should be less
than the amount sought in the complaint; and the name, address, and
telephone number of the person who will act as the respondent's
representative, if any.
(b) Filing with the administrative law judges. HUD shall file the
complaint and response with the Chief Docket Clerk, Office of
Administrative Law Judges, in accordance with Sec. 26.37 of this title.
If no response is submitted, then HUD may file a motion for default
judgment, together with a copy of the complaint, in accordance with
Sec. 26.39 of this title.
Sec. 30.95 Hearings.
Hearings under this part shall be conducted in accordance with the
procedures at 24 CFR part 26, subpart B.
Sec. 30.100 Settlements.
The officials listed at subpart B of this part, or their designees
(or the Mortgagee Review Board for violations under Sec. 30.35), are
authorized to enter into settlement agreements of civil money penalty
claims. Settlement agreements may be executed at any time prior to the
issuing of a notice of final determination under Sec. 26.50 of this
title, and may include sanctions for failure to comply with the terms
of the agreement.
PART 81--REGULATIONS IMPLEMENTING THE AUTHORITY OF THE SECRETARY OF
THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OVER THE CONDUCT OF
THE SECONDARY MARKET OPERATIONS OF THE FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
12. The authority citation for 24 CFR part 81 is revised to read as
follows:
Authority: 12 U.S.C. 1451 et seq., 1716-1723h, and 4501-4641; 28
U.S.C. 2461 note; 42 U.S.C. 3535(d) and 3601-3619.
Sec. 81.46 [Amended]
13. Section 81.46 is amended by revising the first sentence of
paragraph (e)(1) to read as follows:
Sec. 81.46 Remedial actions.
* * * * *
(e) * * *
(1) Where a lender timely requests a hearing on a remedial action,
a hearing shall be conducted before a HUD administrative law judge
(ALJ) and a final decision rendered in accordance with the procedures
set forth in 24 CFR part 26, subpart B, to the extent such provisions
are not inconsistent with subpart C of this part or FHEFSSA. * * *
* * * * *
14. Section 81.82 is amended by revising the second sentence of
paragraph (b)(2) to read as follows:
Sec. 81.82 Cease-and-desist proceedings.
* * * * *
(b) * * *
(2) Administrative law judge. * * * The hearing shall be conducted
in accordance with Sec. 81.84 and, to the extent the provisions are not
inconsistent with any of the procedures in this part or FHEFSSA, with
24 CFR part 26, subpart B.
* * * * *
Sec. 81.83 [Amended]
15. Section 81.83 is amended as follows:
a. Paragraph (b)(2) is revised by removing the reference to
``$10,000'', and by adding in its place a reference to ``$11,000''; and
b. Paragraph (d)(3) is revised, to read as follows:
Sec. 81.83 Civil money penalties.
* * * * *
[[Page 50219]]
(d) * * *
(3) Administrative law judge. A HUD ALJ shall preside over any
hearing conducted under this section, in accordance with Sec. 81.84
and, to the extent the provisions are not inconsistent with any of the
procedures in this part or FHEFSSA, with 24 CFR part 26, subpart B.
* * * * *
Sec. 81.84 [Amended]
16. Section 81.84 is amended by:
a. Revising paragraph (b)(2);
b. Revising paragraph (d);
c. Amending the third sentence of paragraph (h)(1) by removing the
reference to ``Sec. 30.515'', and by adding in its place a reference to
``Sec. 26.38'';
d. Amending the first sentence of paragraph (j)(2) by removing the
reference to ``Sec. 30.910'', and by adding in its place a reference to
``Sec. 26.51(c)''; and amending the second sentence of paragraph (j)(2)
by removing the reference to ``Sec. 30.910(c) and (d)'', and by adding
in its place a reference to ``Sec. 26.51(f)''; to read as follows:
Sec. 81.84 Hearings.
* * * * *
(b) * * *
(2) Hearings shall be conducted by a HUD ALJ authorized to conduct
proceedings under 24 CFR part 26, subpart B.
* * * * *
(d) Procedure. Hearings shall be conducted in accordance with the
procedures set forth in 24 CFR part 26, subpart B to the extent that
such provisions are not inconsistent with any of the procedures in this
part or FHEFSSA.
* * * * *
Sec. 81.85 [Amended]
17. Section 81.85 is amended by amending the third sentence of
paragraph (c)(1) by removing the reference to ``Sec. 30.515'', and by
adding in its place a reference to ``Sec. 26.38''.
PART 200--INTRODUCTION
20. The authority citation for 24 CFR part 200 continues to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
Sec. 200.243 [Amended]
21. In Sec. 200.243, the second sentence of the introductory text
of paragraph (a) is amended by adding the phrase ``, subpart A'' after
the phrase ``24 CFR part 26''.
PART 950--INDIAN HOUSING PROGRAMS
22. The authority citation for 24 CFR part 950 continues to read as
follows:
Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa-1437ee, and
3535(d).
Sec. 950.190 [Amended]
23. In Sec. 950.190, the last sentence of paragraph (e) is amended
by adding the phrase ``, subpart A'' after the phrase ``24 CFR part
26''.
PART 965--PHA-OWNED OR LEASED PROJECTS--MAINTENANCE AND OPERATION
24. The authority citation for 24 CFR part 965 continues to read as
follows:
Authority: 42 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d).
Subpart H is also issued under 42 U.S.C. 4821-4846.
Sec. 965.205 [Amended]
25. In Sec. 965.205, the last sentence of paragraph (e) is amended
by adding the phrase ``, subpart A'' after the phrase ``24 CFR part
26''.
PART 3282--MANUFACTURED HOME PROCEDURAL AND ENFORCEMENT REGULATIONS
26. The authority citation for 24 CFR part 3282 is revised to read
as follows:
Authority: 28 U.S.C. 2461 note; 42 U.S.C. 5424; and 42 U.S.C.
3535(d).
Sec. 3282.10 [Amended]
27. Section 3282.10 is amended by adding a new sentence at the end,
to read as follows:
Sec. 3282.10 Civil and criminal penalties.
* * * The maximum amount of penalties imposed under section 611 of
the Act shall be $1,100 for each violation, up to a maximum of
$1,100,000 for any related series of violations occurring within one
year from the date of the first violation.
PART 3500--REAL ESTATE SETTLEMENT PROCEDURES ACT
28. The authority citation for 24 CFR part 3500 is revised to read
as follows:
Authority: 12 U.S.C. 2601 et seq.; 28 U.S.C. 2461 note.
Sec. 3500.17 [Amended]
29. Section 3500.17 is amended as follows:
a. Paragraph (m) is revised to read as follows; and
b. Paragraphs (n)(1) and (n)(4)(iii) are amended by removing the
phrase ``, subpart E,''.
Sec. 3500.17 Escrow accounts.
* * * * *
(m) Penalties. (1) A servicer's failure to submit to a borrower an
initial or annual escrow account statement meeting the requirements of
this part shall constitute a violation of section 10(d) of RESPA (12
U.S.C. 2609(d)) and this section. For each such violation, the
Secretary shall assess a civil penalty of 55 dollars ($55), except that
the total of the assessed penalties shall not exceed $110,000 for any
one servicer for violations that occur during any consecutive 12-month
period.
(2) Violations described in paragraph (m)(1) of this section do not
require any proof of intent. However, if a lender or servicer is shown
to have intentionally disregarded the requirements that it submit the
escrow account statement to the borrower, then the Secretary shall
assess a civil penalty of $110 for each violation, with no limit on the
total amount of the penalty.
* * * * *
Dated: September 19, 1996.
Henry G. Cisneros,
Secretary.
[FR Doc. 96-24573 Filed 9-23-96; 8:45 am]
BILLING CODE 4210-32-P
