[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Rules and Regulations]
[Pages 51241-51243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-17232]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / 
Rules and Regulations

[[Page 51241]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1780

RIN 2550-AA17


Rules of Practice and Procedure; Civil Money Penalty Inflation 
Adjustment

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Final rule.

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SUMMARY: The Office of Federal Housing Enterprise Oversight is issuing 
this final rule amending its rules of practice and procedure to adjust 
each civil money penalty within its jurisdiction to account for 
inflation, pursuant to the Federal Civil Penalties Inflation Adjustment 
Act of 1990, as amended by the Debt Collection Improvement Act of 1996.

DATES: This rule is effective on August 30, 2005.

FOR FURTHER INFORMATION CONTACT: David W. Roderer, Deputy General 
Counsel, at (202) 414-3804; Charlotte A. Reid, Associate General 
Counsel, at (202) 414-3810; or Frank R. Wright, Senior Counsel, at 
(202) 414-6439 (not toll-free numbers); Office of Federal Housing 
Enterprise Oversight, Fourth Floor, 1700 G Street, NW., Washington, DC 
20552. The telephone number for the Telecommunications Device for the 
Deaf is: (800) 877-8339 (TDD only).

SUPPLEMENTARY INFORMATION

Background

    The Office of Federal Housing Enterprise Oversight (OFHEO), an 
independent office within the Department of Housing and Urban 
Development (HUD), is the exclusive financial safety and soundness 
regulator of the Federal National Mortgage Association (Fannie Mae) and 
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, 
the Enterprises) under the Federal Housing Enterprises Financial Safety 
and Soundness Act of 1992 (Act), as amended.\1\ The Enterprises are 
government-sponsored corporations chartered to provide liquidity to the 
residential mortgage market and to promote the availability of mortgage 
credit by investing in residential mortgages and guaranteeing 
securities backed by residential mortgages.\2\ OFHEO oversees the 
Enterprises to ensure that they remain adequately capitalized and 
operate in a safe and sound manner and in accordance with applicable 
laws, rules and regulations. To that end OFHEO is vested with broad 
supervisory discretion and specific civil administrative enforcement 
powers, similar to such authority granted by Congress to the Federal 
bank regulatory agencies.\3\ In particular, section 1376 of the Act (12 
U.S.C. 4636) empowers OFHEO to impose civil money penalties under 
specific conditions. OFHEO's Rules of Practice and Procedure (12 CFR 
part 1780) govern cease and desist proceedings, civil money penalty 
assessment proceedings and other administrative adjudications.\4\
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    \1\ See Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, Pub. L. 102-550, Title XIII, Section 1301, 
Oct. 28, 1992, 106 Stat. 3672, 3941-4012 (codified at 12 U.S.C. 4501 
et seq.).
    \2\ See Federal Home Loan Mortgage Corporation Act, 12 U.S.C. 
1451 et seq.; Federal National Mortgage Association Charter Act, 12 
U.S.C. 1716 et seq.; Act at 12 U.S.C. 4561-67, 4562 note.
    \3\ See Pub. L. No. 102-550, Title XIII, Section 1313 and 1371-
1379B (Subtitle C--Enforcement Provisions) (codified at 12 U.S.C. 
4513 and 4631-4641, respectively).
    \4\ See 12 CFR 1780.1
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The Inflation Adjustment Act

    The Federal Civil Penalties Inflation Adjustment Act of 1990, as 
amended by the Debt Collection Improvement Act of 1996 (the Inflation 
Adjustment Act) requires OFHEO, as well as other Federal agencies with 
the authority to issue civil money penalties (CMPs), to publish 
regulations to adjust the maximum amount of each CMP authorized by law 
that the agency has jurisdiction to administer.\5\ The Inflation 
Adjustment Act required agencies to make an initial adjustment of their 
CMPs upon the statute's enactment, and further requires agencies to 
make additional adjustments on an ongoing basis, every four years 
following the initial adjustment. The purpose of these periodic 
adjustments is to maintain the deterrent effect of CMPs and promote 
compliance with the law. Subpart E of OFHEO's Rules of Practice and 
Procedure sets forth the Civil Money Penalty Inflation Adjustment 
amounts and discusses their applicability. See 12 CFR parts 1780.80-81.
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    \5\ See 28 U.S.C. 2461 note.
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    As required, OFHEO made the initial adjustment to the maximum civil 
money penalty amounts in 1997, and provided that such adjustments were 
applicable to any violation occurring after October 23, 1996 (the 
effective date of the Inflation Adjustment Act).\6\ The last adjustment 
was made in 2000, effective January 4, 2001.\7\ OFHEO again is amending 
the maximum civil money penalty amount for each tier that OFHEO has 
authority to impose under 12 U.S.C. 4636 in accordance with the 
Inflation Adjustment Act.
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    \6\ See 62 FR 68152, December 31, 1997.
    \7\ See 66 FR 709, Jan. 4, 2001.
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    Under the Inflation Adjustment Act, the inflation adjustment for 
each applicable CMP is determined by increasing the maximum CMP amount 
per violation by a cost-of-living adjustment. As is described in detail 
below, the Inflation Adjustment Act provides that this cost-of-living 
adjustment is to reflect the percentage increase in the Consumer Price 
Index since the CMPs were last adjusted or established, and rounded in 
accordance with rules provided in the statute.\8\
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    \8\ The Inflation Adjustment Act specifically identifies the 
Consumer Price Index for All Urban Consumers published by the United 
States Department of Labor (CPI-U). The Department of Labor (DOL) 
computes the CPI-U using two different base time periods, 1967 and 
1982-1984. The Inflation Adjustment Act does not specify which of 
these base periods should be used to calculate the inflation 
adjustment. OFHEO calculated the initial adjustment of its CMPs 
using CPI-U data with the 1967 base period. OFHEO is using CPI-U 
data with the 1982-1984 base period for the adjustments adopted in 
this final rule, because such data now reflect the most current 
method of computing the CPI-U.
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Description of the Rule

    This final rule adjusts the maximum penalty amount within each of 
the three tiers specified in 12 U.S.C. 4636 by amending the table 
contained in 12 CFR part 1780.80 to reflect the new adjusted maximum 
penalty amount that OFHEO

[[Page 51242]]

may impose upon an executive officer or director or an Enterprise 
within each tier. The increases in maximum penalty amounts contained in 
this final rule may not necessarily affect the amount of any CMP that 
OFHEO may seek for a particular violation; OFHEO would calculate each 
CMP on a case-by-case basis in light of a variety of factors.\9\
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    \9\ See, e.g., 12 CFR part 1780.1(c).
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    The Inflation Adjustment Act directs federal agencies to calculate 
each CMP adjustment as the percentage by which the CPI-U for June of 
the calendar year preceding the adjustment exceeds the CPI-U for June 
of the calendar year in which the amount of each CMP was last adjusted. 
The CMP for Third Tier penalties by an Enterprise was adjusted in 2000, 
and every other CMP was last adjusted in 1997.\10\ Since OFHEO is 
making this round of adjustments in calendar year 2005, and OFHEO made 
the last round of adjustments in calendar year 2000, the inflation 
adjustment amount for each CMP that was adjusted in 2000 was calculated 
by comparing the CPI-U for June 2000 (172.4) with the CPI-U for June 
2004 (189.7), resulting in an inflation adjustment of 10.0 percent.\11\ 
For each CMP that was last adjusted in 1997, the inflation adjustment 
amount was calculated by comparing the CPI-U for June 1997 (160.3) with 
the CPI-U for June 2004 (189.7), resulting in an inflation adjustment 
of 18.3 percent. For each CMP, the product of this inflation adjustment 
and the previous maximum penalty amount was then rounded in accordance 
with the specific requirements of the Inflation Adjustment Act, and was 
then summed with the previous maximum penalty amount to determine the 
new adjusted maximum penalty amount.\12\ The table below sets out these 
items accordingly.
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    \10\ See 66 FR 709, Jan. 4, 2001; 62 FR 68152, Dec. 31, 1997.
    \11\ OFHEO's last round of adjustments in 2000 applied an 
inflation factor of 3.7 percent, calculated by comparing June 1997 
data to June 1999 data. The 1997 data was used as the base period in 
accordance with the Inflation Adjustment Act's directive to use CPI-
U data from the year of the CMP's previous adjustment. The resulting 
penalty was then rounded in accordance with the statutory rules 
described below. 66 FR 709, January 4, 2001. Although the adjustment 
is being made in calendar year 2005, the resulting CMP increases do 
not take effect until publication of the rule, and will only apply 
to conduct occurring after such data.
    \12\ The statute's rounding rules require that each increase be 
rounded to the nearest multiple as follows: $10 in the case of 
penalties less than or equal to $100; $100 in the case of penalties 
greater than $100 but less than or equal to $1,000; $1,000 in the 
case of penalties greater than $1,000 but less than or equal to 
$10,000; $5,000 in the case of penalties greater than $10,000 but 
less than or equal to $100,000; $10,000 in the case of penalties 
greater than $100,000 but less than or equal to $200,000; and 
$25,000 in the case of penalties greater than $200,000.

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                                                                                                         New
                                                                Previous                  Rounded      adjusted
           U.S. code citation                 Description       maximum     Inflation    inflation     maximum
                                                                penalty      increase     increase     penalty
                                                                 amount                                 amount
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12 U.S.C. 4636(b)(1)....................  First Tier........        5,500     1,006.50        1,000        6,500
12 U.S.C. 4636(b)(2)....................  Second Tier              11,000     2,013               0       11,000
                                           (Executive
                                           Officer or
                                           Director).
12 U.S.C. 4636(b)(2)....................  Second Tier              27,500     5,032.50        5,000       32,500
                                           (Enterprise).
12 U.S.C. 4636(b)(3)....................  Third Tier              110,000    20,130          20,000      130,000
                                           (Executive
                                           Officer or
                                           Director).
12 U.S.C. 4636(b)(3)....................  Third Tier            1,150,000   115,000         125,000    1,275,000
                                           (Enterprise).
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    Section 1780.81 states that the adjustments made in Sec.  1780.80 
apply only to violations that occur after the effective date, August 
30, 2005.

Public Notice and Comment and Delayed Effective Date Not Required

    OFHEO finds good cause that notice and an opportunity to comment on 
this document are unnecessary under the Administrative Procedure Act, 5 
U.S.C. 551-559, as amended (APA). This rulemaking conforms with and is 
consistent with the statutory directive set forth in the Inflation 
Adjustment Act, with no issues of policy discretion, and public comment 
is impracticable and unnecessary. Accordingly, OFHEO is issuing the 
amendments as a final rule.
    In addition, OFHEO finds good cause to make this rule effective 
upon publication of this document in the Federal Register under the 
APA. See 5 U.S.C. 553(d). This final rule does not impose any 
additional responsibilities on any entity. Instead, it simply adjusts 
the amount of each CMP tier as dictated by the Inflation Adjustment 
Act.

Regulatory Impact

Executive Order 12866, Regulatory Planning and Review

    This final rule is not classified as a significant rule under 
Executive Order 12866 because it will not result in an annual effect on 
the economy of $100 million or more or a major increase in costs or 
prices for consumers, individual industries, Federal, State, or local 
government agencies, or geographic regions; or have significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based Enterprises to 
compete with foreign-based enterprises in domestic or foreign markets.
    Accordingly, no regulatory impact assessment is required and this 
final rule has not been submitted to the Office of Management and 
Budget for review.

Unfunded Mandates Reform Act of 1995

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

Regulatory Flexibility Act

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

Paperwork Reduction Act of 1995

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

List of Subjects in 12 CFR Part 1780

    Administrative practice and procedure, Penalties.

0
Accordingly, for the reasons set out in the preamble, the Office of 
Federal

[[Page 51243]]

Housing Enterprise Oversight hereby amends 12 CFR part 1780 as follows:

PART 1780--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation for part 1780 is revised to read as follows:

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

0
2. Revise Subpart E of part 1780 to read as follows:

Subpart E--Civil Money Penalty Inflation Adjustments


Sec.  1780.80  Inflation adjustments.

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

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                                                                                                  New adjusted
                      U.S. code citation                                 Description            maximum  penalty
                                                                                                     amount
----------------------------------------------------------------------------------------------------------------
12 U.S.C. 4636(b)(1).........................................  First Tier.....................             6,500
12 U.S.C. 4636(b)(2).........................................  Second Tier (Executive Officer             11,000
                                                                or Director).
12 U.S.C. 4636(b)(2).........................................  Second Tier (Enterprise).......            32,500
12 U.S.C. 4636(b)(3).........................................  Third Tier (Executive Officer             130,000
                                                                or Director).
12 U.S.C. 4636(b)(3).........................................  Third Tier (Enterprise)........         1,275,000
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Sec.  1780.81  Applicability.

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

    Dated: August 25, 2005.
Stephen A. Blumenthal,
Acting Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 05-17232 Filed 8-29-05; 8:45 am]
BILLING CODE 4220-01-U