2750 Federal Register / Vol. 74, No. 10 / Thursday, January 15, 2009 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 30 

[Docket No. FR–5081–F–02] 

RIN 2501–AD23 

Civil Money Penalties: Certain 

Prohibited Conduct 

AGENCY: Office of the Secretary, HUD. 

ACTION: Final rule. 

SUMMARY: This final rule revises HUD’s 

regulations that govern the imposition 

of civil money penalties. Specifically, 

this rule revises the definitions of 

‘‘material or materially’’ and adds a 

definition of ‘‘ability to pay,’’ which is 

one factor used in determining the 

appropriateness of the amount of any 

civil money penalty. Additionally, this 

rule requires respondents, in their 

responses to the prepenalty notice, to 

specifically address the factors used in 

determining the appropriateness and 

amount of civil money penalty. This 

rule also allows government counsel to 

file complaints on behalf of the 

Mortgagee Review Board and 

departmental officials. Finally, this rule 

makes other minor clarifying changes. 

This final rule follows publication of an 

October 17, 2008, proposed rule, but 

makes no changes at this final rule 

stage. 

DATES: Effective Date: February 17, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

Dane Narode, Associate General 

Counsel for Program Enforcement, 

Department of Housing and Urban 

Development, 1250 Maryland Avenue, 

SW., Suite 200, Washington, DC 20024– 

0500; telephone number 202–708–2350 

(this is not a toll-free number), or e-mail 

address Dane.M.Narode@hud.gov. 

Hearing- or speech-impaired individuals 

may access the telephone number listed 

above by calling the toll-free Federal 

Information Relay Service at 800–877– 

8339. 

SUPPLEMENTARY INFORMATION: 

I. Background—The October 17, 2008, 

Proposed Rule 

HUD’s civil money penalties 

regulations are located in 24 CFR part 

30. In general, 24 CFR part 30 outlines 

the procedures and requirements that 

concern violations, prepenalty notices, 

and complaints. 

On October 17, 2008, at 73 FR 61754, 

HUD published a rule that proposed to 

define ‘‘ability to pay’’ and to revise the 

definition of ‘‘material’’ or ‘‘materially’’ 

in § 30.10. Additionally, the rule 

proposed to revise § 30.35 to delete 

failure to comply with ‘‘the terms of a 

settlement agreement with HUD’’ from 

the list of actions for which the 

Mortgagee Review Board may initiate a 

civil money penalty action against a 

mortgagee or lender. HUD also proposed 

clarifications regarding acts that may 

constitute unsatisfactory management, 

violations of a housing assistance 

payments contract, the required 

contents of a prepenalty notice, and the 

procedures for responding to prepenalty 

notices. The rule also proposed to 

clarify that the respondent’s ability to 

pay is presumed unless specifically 

raised by the respondent as an 

affirmative defense or mitigating factor, 

the complaint under § 30.85 will be 

issued by government counsel on behalf 

of the government officials authorized to 

issue such complaints, and a respondent 

may request a hearing within 15 days of 

receipt of the complaint. 

II. This Final Rule 

The October 17, 2008, proposed rule 

provided a 60-day public comment 

period, which closed on December 16, 

2008. HUD received no public 

comments in response to the proposed 

rule. At this final rule stage, HUD 

adopts the proposed rule without 

change. 

III. Findings and Certifications 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.) generally requires 

an agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements, unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. There are no 

anti-competitive discriminatory aspects 

of the rule with regard to small entities, 

and there are no unusual procedures 

that would need to be complied with by 

small entities. All entities, small or 

large, will be subject to the same 

potential penalties as established by 

statute and implemented by this rule. 

The statute does not provide an 

exemption for small entities. Therefore, 

this final rule will not have a significant 

economic impact on a substantial 

number of small entities. Accordingly, 

the undersigned certifies that this rule 

will not have a significant economic 

impact on a substantial number of small 

entities. 

Environmental Impact 

In accordance with 24 CFR 50.19(c)(6) 

of HUD’s regulations, this rule involves 

the Department’s regulations 

implementing civil money penalty 

statutes. In accordance with 24 CFR 

50.19(c)(1) of HUD’s regulations, this 

rule does not direct, provide for 

assistance or loan and mortgage 

insurance for, or otherwise govern or 

regulate, real property acquisition, 

disposition, leasing, rehabilitation, 

alteration, demolition, or new 

construction, or establish, revise, or 

provide for standards for construction or 

construction materials, manufactured 

housing, or occupancy. Therefore, this 

final rule is categorically excluded from 

the requirements of the National 

Environmental Policy Act (42 U.S.C. 

4321 et seq.). 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 

compliance costs on state and local 

governments and is not required by 

statute, or preempts state law, unless the 

relevant requirements of Section 6 of the 

Executive Order are met. This rule 

affects only persons who fail to comply 

with the Department’s requirements, it 

does not have federalism implications, 

and it does not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the Executive 

Order. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) (2 U.S.C. 

1531–1538) 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 mandate on any state, local, or 

tribal government or the private sector 

within the meaning of UMRA. 

Small Business Concerns Related to 

Board Enforcement Actions 

HUD is cognizant that section 222 of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (Pub. 

L. 104–121) (SBREFA) requires the 

Small Business and Agriculture 

Regulatory Enforcement Ombudsman to 

‘‘work with each agency with regulatory 

authority over small businesses to 

ensure that small business concerns that 

receive or are subject to an audit, on-site 

inspection, compliance assistance effort, 

or other enforcement related 

communication or contact by agency 

personnel are provided with a means to 

comment on the enforcement activity 

conducted by this personnel.’’ To 

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Federal Register / Vol. 74, No. 10 / Thursday, January 15, 2009 / Rules and Regulations 2751 

implement this statutory provision, the 

Small Business Administration has 

requested that federal agencies include 

the following language on agency 

publications and notices that are 

provided to small business concerns at 

the time the enforcement action is 

undertaken. The language is as follows: 

Your Comments Are Important 

The Small Business and Agriculture 

Regulatory Enforcement Ombudsman and 10 

Regional Fairness Boards were established to 

receive comments from small businesses 

about federal agency enforcement actions. 

The Ombudsman will annually evaluate the 

enforcement activities and rate each agency’s 

responsiveness to small business. If you wish 

to comment on the enforcement actions of 

[insert agency name], you will find the 

necessary comment forms at www.sba.gov/ 

ombudsman or call 1–888–REG–FAIR (1– 

888–734–3247). 

In accordance with its notice 

describing HUD’s actions on the 

implementation of SBREFA, which was 

published on May 21, 1998 (63 FR 

28214), HUD will include the language 

cited above on notices implementing 

enforcement actions, to ensure that 

small entities have the full means to 

comment on the enforcement activity 

conducted by HUD. 

List of Subjects in 24 CFR Part 30 

Administrative practice and 

procedure, Grant programs—housing 

and community development, Loan 

programs—housing and community 

development, Mortgages, Penalties. 

■ For the reasons discussed in the 

preamble, HUD amends 24 CFR part 30 

as follows: 

PART 30—CIVIL MONEY PENALTIES: 

CERTAIN PROHIBITED CONDUCT 

■ 1. The authority citation for 24 CFR 

part 30 continues to read as follows: 

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. 1437z–1 and 

3535(d). 

■ 2. Revise § 30.1 to read as follows: 

§ 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 

those applicable to hearings in 

accordance with the Administrative 

Procedure Act, as set forth in 24 CFR 

part 26. 

■ 3. Amend § 30.10 by adding, in 

alphabetical order, the definition of 

‘‘Ability to pay’’ and revising the 

definition of ‘‘Material or Materially’’ to 

read as follows: 

§ 30.10 Definitions. 

* * * * * 

Ability to pay. Determined based on 

an assessment of the respondent’s 

resources available both presently and 

prospectively from which the 

Department could ultimately recover the 

total award, which may be predicted 

based on historical evidence. 

* * * * * 

Material or Materially. Having the 

natural tendency or potential to 

influence, or when considering the 

totality of the circumstances, in some 

significant respect or to some significant 

degree. 

* * * * * 

■ 4. Amend § 30.35 by removing 

paragraph (a)(14) and by redesignating 

paragraph (a)(15) as (a)(14). 

■ 5. Revise § 30.45(d) to read as follows: 

§ 30.45 Multifamily and section 202 or 811 

mortgagors. 

* * * * * 

(d) Acceptable management. For 

purposes of this rule, management 

acceptable to the Secretary under 12 

U.S.C. 1735f–15(c)(1)(B)(xiv) shall 

include: 

(1) Fiscal management in accordance 

with HUD regulations and requirements; 

(2) Handling of vacancies and 

tenanting in accordance with HUD 

regulations and requirements; 

(3) Handling of rent collection in 

accordance with HUD regulations and 

requirements; 

(4) Maintenance in accordance with 

HUD regulations and requirements; 

(5) Compliance with HUD regulations 

and requirements on tenant 

organization; and 

(6) Any other matters that pertain to 

proper management in accordance with 

HUD regulations and requirements. 

* * * * * 

■ 6. In § 30.68(b), revise paragraph (b) 

introductory text to read as follows: 

§ 30.68 Section 8 owners. 

* * * * * 

(b) General. The Assistant Secretary 

for Housing—Federal Housing 

Commissioner, or his or her designee, or 

the Assistant Secretary for Public and 

Indian Housing, or his or her designee, 

may initiate a civil money penalty 

against any owner, any general partner 

of a partnership owner, or any agent 

employed to manage the property that 

has an identity of interest with the 

owner or the general partner of a 

partnership owner of a property 

receiving project-based assistance under 

section 8 of the United States Housing 

Act of 1937 (42 U.S.C. 1437f) for a 

knowing and material breach of a 

housing assistance payments contract. 

Examples of covered violations include, 

but are not limited to, the following: 

* * * * * 

■ 7. Revise § 30.70 to read as follows: 

§ 30.70 Prepenalty notice. 

(a) Prior to determining whether to 

issue a complaint under § 30.85, 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 § 30.35), shall issue a written 

notice to the respondent. This 

prepenalty notice shall include the 

following: 

(1) That HUD is considering seeking 

a civil money penalty; 

(2) The specific violations alleged; 

(3) The maximum civil money penalty 

that may be imposed; 

(4) The opportunity to reply in 

writing to the designated program 

official within 30 days after receipt of 

the notice; 

(5) That failure to respond within the 

30-day period may result in issuance of 

a complaint under § 30.85 without 

consideration of any information that 

the respondent may wish to provide; 

and 

(6) That if a complaint is issued under 

§ 30.85, the respondent may request a 

hearing before an administrative law 

judge in accordance with § 30.95. 

(b) Obligation to preserve documents. 

Upon receipt of the prepenalty notice, 

the respondent is required to preserve 

and maintain all documents or data, 

including electronically stored data, 

within his or her possession or control 

that may relate to the violations alleged 

in the prepenalty notice. The 

Department shall also preserve such 

documents or data upon the issuance of 

the prepenalty notice. 

■ 8. Revise § 30.75 to read as follows: 

§ 30.75 Response to prepenalty notice. 

(a) The response shall be in a format 

prescribed in the prepenalty notice. The 

response shall address the factors set 

forth in § 30.80 and include any 

arguments opposing the imposition of a 

civil money penalty that the respondent 

may wish to present. 

(b) In any case where respondent 

seeks to raise ability to pay as an 

affirmative defense or argument in 

mitigation, the respondent shall provide 

documentary evidence as part of its 

response. 

■ 9. Revise § 30.80 to read as follows: 

§ 30.80 Factors in determining amount of 

civil money penalty. 

After determining that a respondent 

has committed a violation as described 

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2752 Federal Register / Vol. 74, No. 10 / Thursday, January 15, 2009 / Rules and Regulations 

in Subpart B of this part that subjects 

the respondent to liability under this 

part, the officials designated in subpart 

B of this part shall consider the 

following factors to determine the 

amount of penalty to seek against a 

respondent, if any: 

(a) The gravity of the offense; 

(b) Any history of prior offenses; 

(c) The ability to pay the penalty, 

which ability shall be presumed unless 

specifically raised as an affirmative 

defense or mitigating factor by the 

respondent; 

(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 § 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 

§§ 30.45, 30.55, 30.60, and 30.68, the 

Assistant Secretary for Housing— 

Federal Housing Commissioner, or his 

or her designee, or the Assistant 

Secretary for Public and Indian 

Housing, or his or her designee, shall 

also consider: 

(1) Any injury to tenants; and/or 

(2) Any injury to lot owners. 

(l) HUD may consider the factors 

listed in paragraphs (a) through (k) of 

this section to determine the 

appropriateness of imposing a penalty 

under § 30.35(c)(2); however, HUD 

cannot change the amount of the 

penalty under § 30.35(c)(2). 

■ 10. In § 30.85, revise paragraphs (b) 

introductory text, (c), and (d) and add 

paragraph (e) to read as follows: 

§ 30.85 Complaint. 

* * * * * 

(b) If a determination is made to seek 

a civil money penalty, government 

counsel shall issue a complaint to the 

respondent on behalf of the officials 

listed at subpart B of this part or the 

Mortgagee Review Board for violations 

under § 30.35. The complaint shall be 

served upon respondent and 

simultaneously filed with the Office of 

Administrative Law Judges, and shall 

state the following: 

* * * * * 

(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. 

(e) Before taking an action under 

§§ 30.35 for violation of 12 U.S.C. 

§ 1735f–14(b)(1)(D) or (F), 30.36, or 

30.50 for violation of 12 U.S.C. 

1723i(b)(1)(G) or (I), the Secretary shall 

inform the Attorney General of the 

United States, which may be 

accomplished by providing a copy of 

the complaint. The Secretary shall 

include in the body of the complaint a 

statement confirming that this action 

was taken. 

■ 11. In § 30.90, revised paragraph (a), 

redesignate paragraph (b) as (c), and 

revise the new paragraph (b) to read as 

follows: 

§ 30.90 Response to the complaint. 

(a) Request for a hearing. If the 

respondent desires a hearing before an 

administrative law judge, the 

respondent shall submit a request for a 

hearing to HUD and the Office of 

Administrative Law Judges no later than 

15 days following receipt of the 

complaint, as required by statute. This 

mandated period cannot be extended. 

(b) Answer. In any case in which the 

respondent has requested a hearing, the 

respondent shall serve upon HUD and 

file with the Office of Administrative 

Law Judges a written answer to the 

complaint within 30 days of receipt of 

the complaint, unless such time is 

extended by the administrative law 

judge for good cause. The answer shall 

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 should be 

less than the amount sought in the 

complaint, based on the factors listed at 

§ 30.80; and the name, address, and 

telephone number of the person who 

will act as the respondent’s 

representative, if any. 

* * * * * 

■ 12. Revise § 30.95 to read as follows: 

§ 30.95 Hearings. 

Hearings under this part shall be 

conducted in accordance with the 

procedures applicable to hearings in 

accordance with the Administrative 

Procedure Act, set forth in 24 CFR part 

26. 

■ 13. Revise § 30.100 to read as follows: 

§ 30.100 Settlement of a civil money 

penalty action. 

The officials listed at subpart B of this 

part, or their designees (or the 

Mortgagee Review Board, or designee, 

for violations under § 30.35), are 

authorized to enter into settlement 

agreements resolving civil money 

penalty actions that may be brought 

under part 30. 

Dated: January 9, 2009. 

Roy A. Bernardi, 

Deputy Secretary. 

[FR Doc. E9–851 Filed 1–14–09; 8:45 am] 

BILLING CODE 4210–67–P 

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