60538 Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 25 

[Docket No. FR–5082–F–02] 

RIN 2510–AA01 

Mortgagee Review Board (MRB); 

Amendments to the MRB Regulations 

AGENCY: Office of the Assistant 

Secretary for Housing—Federal Housing 

Commissioner, HUD. 

ACTION: Final rule. 

SUMMARY: This final rule makes changes 

to the Department’s Mortgagee Review 

Board (Board) regulations to clarify and 

better reflect statutory directives and 

amend current practice, and to modify 

the Board’s procedures governing 

hearings. This rule also removes 

provisions that unnecessarily duplicate 

the authorizing statute and clarifies the 

authority and duties of the Board in 

taking administrative action against 

mortgagees approved by the Federal 

Housing Administration. This rule 

separates and clarifies the grounds for 

administrative action and the factors 

considered by the Board in evaluating 

whether to take administrative action, as 

well as requiring the mortgagee to 

address these factors in its response to 

the Board’s notice of violation. 

This rule follows publication of a 

March 28, 2008, proposed rule on which 

HUD received one public comment. At 

this final rule stage, HUD has decided 

to adopt the proposed rule with minor 

changes, as described below. 

DATES: Effective Date: November 10, 

2008. 

FOR FURTHER INFORMATION CONTACT: 

Dane Narode, Acting Associate General 

Counsel for Program Enforcement, 

Department of Housing and Urban 

Development, 1250 Maryland Avenue, 

Suite 200, Washington, DC 20024–0500; 

telephone number 202–708–2350 (this 

is not a toll-free number); e-mail: 

Dane.M.Narode@hud.gov. Hearing- and 

speech-impaired persons may access the 

voice telephone number listed above by 

calling the toll-free Federal Information 

Relay Service at 1–800–877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Mortgagee Review Board (Board) 

oversees the performance of lenders 

participating in the Federal Housing 

Administration (FHA) mortgage 

insurance programs. Section 1708(c) of 

the National Housing Act (12 U.S.C. 

1708(c)) empowers the Board to initiate 

the issuance of a letter of reprimand, 

probation, suspension, or withdrawal to 

any mortgagee found to be engaging in 

activities in violation of FHA 

requirements or the nondiscrimination 

requirements of the Equal Credit 

Opportunity Act (15 U.S.C. 1691 et 

seq.), the Fair Housing Act (42 U.S.C. 

3601 et seq.), or Executive Order 11063, 

entitled ‘‘Equal opportunity in 

housing.’’ HUD’s regulations 

implementing section 1708(c) are 

located in 24 CFR part 25. The 

regulations governing the Board set 

forth the authority of the Board; 

administrative actions available and 

factors to be considered by the Board in 

taking such action; violations that give 

rise to administrative actions; 

procedures involved in notifying 

mortgagees of a violation and 

administrative action, as well as any 

hearing that results; and guidelines for 

the publication and dissemination of 

information regarding actions. 

II. March 2008 Proposed Rule 

On March 28, 2008, at 73 FR 16605, 

HUD published a proposed rule to 

amend the regulations governing the 

Board at 24 CFR part 25. Some of the 

more significant amendments proposed 

included the following: to permit 

hearings to be conducted by an 

Administrative Law Judge (ALJ); to 

provide that grounds for administrative 

action exist if a mortgagee fails to 

comply with any agreement, 

certification, undertaking, or condition 

of approval listed on, or applicable to, 

either a mortgagee’s application for 

approval or an approved mortgagee’s 

branch office notification; to include the 

violation of an agreement with HUD as 

creating grounds for administrative 

action; to clarify that proof of delivery 

of the notice of violation to the 

mortgagee’s address of record 

establishes that the mortgagee has 

received the notice; to provide that, in 

responding to the notice, mortgagees 

must address the factors listed in new 

§ 25.8; to establish an exception to the 

written notice of violation requirement 

before issuing a letter of reprimand, 

provided that the Board has received 

information that discloses a basis for the 

issuance of a letter of reprimand; to add 

a new § 25.8 that clarifies the grounds 

for administrative action and the factors 

considered by the Board in evaluating 

whether to take administrative action 

under 12 U.S.C. 1708(c); to require the 

mortgagee to address these factors in its 

response to the Board’s notice of 

violation, which would assist in the 

Board’s informed consideration of the 

factors; to clarify that mortgagees that 

may be subject to probation, suspension, 

or withdrawal are entitled to a hearing, 

but a hearing must be requested; and to 

reflect the authority of an ALJ to 

conduct hearings. With the exception of 

the changes described below, all the 

regulatory amendments are described 

and discussed in detail in the preamble 

to the March 28, 2008, proposed rule. 

The Department has made technical 

revisions to the language proposed in 

the March 28, 2008, proposed rule with 

respect to §§ 25.5(b) and (c), 25.8, 

25.9(b), 25.10(a), and 25.11, to ensure 

the clarity of those provisions. 

III. Discussion of Public Comments 

At the end of the public comment 

period on May 27, 2008, HUD received 

only one public comment on the 

proposed rule. The commenter had 

several comments, which are provided 

below along with HUD’s responses: 

Comment: Rule Removes an 

Important Due Process Currently 

Available to Lenders. The commenter 

expressed concern about HUD’s 

proposal in 24 CFR 25.7(c), which 

provides an exception to the notice-ofviolation requirement. The commenter 

stated that under the existing 

regulations, the Board must provide a 

notice of a violation of an FHAapproved mortgagee before issuing a 

letter of reprimand. The March 2008 

rule proposes to create an exception to 

this requirement, and allow the Board to 

bypass written notification whenever 

information comes before the Board that 

the Board believes provides a basis for 

issuance of a letter of reprimand. The 

March 2008 proposed rule allows the 

Board to issue this letter without issuing 

a notice of violation to the mortgagee or 

providing any subsequent hearing. 

According to the commenter, this 

change in the regulation would deprive 

the lender of due process, and without 

an opportunity for hearing, a lender’s 

reputation could be harmed. The 

commenter urged that this provision be 

withdrawn at the final rule stage, and 

that the existing regulation remain in 

place. 

HUD Response: While this regulation 

does include an express exemption from 

the notice requirements of § 25.7, which 

does represent a change in the text of 

the regulation, no substantive change is 

being made through this change in the 

phrasing of the regulation. This rule 

does not alter in any way the existing 

regulatory provisions concerning the 

issuance of a letter of reprimand by the 

Board. The Department’s current 

regulations do not require the issuance 

of a notice of violation for a letter of 

reprimand, instead stating specifically 

that such a notice shall be issued prior 

to the consideration of any probation, 

suspension, or withdrawal action. This 

rule retains the exemption from 


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issuance of a notice of violation prior to 

issuance of a letter of reprimand, and 

merely casts the process in different 

terms. 

The Department disagrees that this 

exemption denies a mortgagee any due 

process. The exemption of letters of 

reprimand from the notice of violation 

derives directly from the authorizing 

statute, evidencing Congress’s belief that 

additional processes were unnecessary 

prior to the issuance of a letter of 

reprimand. 

Additionally, the commenter is 

concerned with the effect that the 

issuance of a letter of reprimand would 

have on a mortgagee. The Department 

does not believe the impact on a 

mortgagee is sufficient to warrant the 

full procedural protections afforded 

when the Board determines to take one 

of the other administrative actions 

provided for by the statute and 

regulations. Specifically, unlike the 

other administrative actions, a letter of 

reprimand does not in and of itself have 

any effect on a mortgagee’s approval or 

authority to originate mortgages for 

insurance by FHA. 

Comment: Rule Removes an 

Important Due Process Available to 

Lenders in the Future. The commenter 

expressed concern that a letter of 

reprimand may serve as a basis for a 

future proceeding, notwithstanding that 

there is no opportunity by the mortgagee 

to contest it. The commenter urged that 

this provision be withdrawn at the final 

rule stage and that the existing 

regulation remain in place. 

HUD Response: The prior issuance of 

a letter of reprimand against a mortgagee 

cannot, in and of itself, support an 

action against an FHA-approved 

mortgagee. Should a mortgagee again be 

found to have violated HUD 

requirements, any action by the Board 

would be based on those future 

violations. As noted above, while 

including a change to the text of the 

regulation, no substantive change is 

being made through this revision of the 

current regulation. Therefore, the 

Department has made no change to the 

regulation in response to this comment. 

Comment: Do Not Require ALJ to 

Grant a Hearing Extension Only if Both 

Parties Agree. The commenter also 

expressed concern about 24 CFR 

25.10(c). The commenter states that 

under the March 2008 proposed rule, 

the ALJ can grant an extension of time 

for a hearing beyond 30 days only if the 

parties agree. The ALJ can also extend 

for good cause. This is a change from 

the current rule, which allows the 

mortgagee to request a hearing beyond 

30 days. Both parties should not have to 

agree to the extension in order for the 

extension to be granted. The commenter 

urged that the final rule authorize the 

ALJ to grant an extension on the basis 

of either party’s request. 

HUD Response: The Department 

believes that the swift resolution of 

these matters is in the interests of both 

parties, which is why the proposed rule 

required the parties to agree to any 

delay in the proceedings. However, the 

Department recognizes that the interests 

of the mortgagee could also be protected 

through the provision for an extension 

upon motion by the mortgagee, which 

would then be ruled upon by the 

presiding Administrative Law Judge. 

Therefore, the Department has made a 

change in this final rule to provide that 

the mortgagee may move for an 

extension of time for the conduct of the 

hearing. 

Comment: Allow the ALJ to Dismiss 

Charge Upon Unreasonable Delay by 

HUD. The commenter recommended 

that in addition to authorizing the ALJ 

to grant an extension on the basis of one 

party’s request or to extend for good 

cause, the final rule should make clear 

that since the mortgagee is the aggrieved 

party, the ALJ may dismiss the charge 

if HUD delays the proceeding 

unreasonably. 

HUD Response: The Department’s 

procedural regulations at 24 CFR part 

26, subpart B, generally govern the 

conduct of the hearing by the ALJ. 

Because § 26.36 of 24 CFR part 26 

contains provisions permitting the ALJ 

to impose sanctions against either party 

for improper conduct, including failure 

to prosecute or defend an action, it is 

unnecessary to add a similar sanction 

provision to this part. Therefore, the 

Department has not made any change in 

response to this comment. 

Comment: Allow Discovery of Certain 

Information if ALJ Determines Such 

Information is Relevant. With respect to 

the documentary evidence provision of 

the proposed rule in 24 CFR 25.10(c), 

the commenter urges that the final rule 

allow certain information, such as 

reviews or audits by HUD against 

lenders other than the appealing 

mortgagee, which may be relevant to a 

given mortgagee appeal, to be the 

subject of discovery if the ALJ concurs 

in the relevancy of such information. 

HUD Response: The provisions 

prohibiting discovery of information 

concerning other mortgagees has not 

been altered from those in the current 

regulation. The purpose of this 

limitation is to restrict burdensome and 

unnecessary discovery into irrelevant 

matters, such as the Department’s 

decision whether or not to pursue 

enforcement actions. Under Heckler v. 

Chaney, 470 U.S. 821, 84 L. Ed. 2d 714, 

105 S. Ct. 1649 (1985), the review of an 

agency action under the Administrative 

Procedure Act does not extend to the 

right to judicial review of an agency’s 

decision not to take enforcement action. 

Under Heckler v. Chaney, the decision 

not to undertake enforcement action is 

‘‘committed to an agency’s absolute 

discretion,’’ rendering such decision 

presumptively unreviewable (see 470 

U.S. at 831). It is necessary to retain this 

prohibition to prevent unnecessary and 

irrelevant inquiries that will not lead to 

admissible or relevant evidence. 

Therefore, no change has been made in 

response to this comment. 

IV. Small Business Concerns Related to 

Board Enforcement Actions 

With respect to enforcement actions 

undertaken by the Board against a 

mortgagee, and, as noted in the March 

28, 2008, proposed rule, 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 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 http:// 

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 


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60540 Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 / Rules and Regulations 

comment on the enforcement activity 

conducted by HUD. 

V. Findings and Certifications 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 605(b)) (RFA) 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. This rule 

makes changes to HUD’s Mortgagee 

Review Board regulations at 24 CFR part 

25 to clarify and better reflect statutory 

directives and to amend current 

practice. All entities, small or large, are 

subject to the same penalties for 

violations of HUD requirements, as 

established by statute and implemented 

by the part 25 regulations. To the extent 

the rule has any impact on a small 

entity, it would be a result of the entity’s 

failure to comply with HUD 

requirements. Accordingly, the 

undersigned certifies that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

Environmental Impact 

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. Accordingly, 

under 24 CFR 50.19(c)(1), this rule is 

categorically excluded from 

environmental review under 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 mortgagees and does not 

have federalism implications and 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 (2 U.S.C. 1531– 

1538) (UMRA) 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 government or the 

private sector within the meaning of 

UMRA. 

List of Subjects in 24 CFR Part 25 

Administrative practice and 

procedure, Loan programs—housing 

and community development, 

Organization and functions 

(Government agencies), Reporting and 

recordkeeping requirements. 

■ For the reasons discussed in the 

preamble, HUD amends 24 CFR part 25 

to read as follows: 

PART 25—MORTGAGEE REVIEW 

BOARD 

■ 1. The authority citation for 24 CFR 

part 25 continues to read as follows: 

Authority: 12 U.S.C. 1708(c), 1708(d), 

1709(s), 1715b, and 1735f–14; 42 U.S.C. 

3535(d). 

■ 2. Revise § 25.2 to read as follows: 

§ 25.2 Establishment and authority of 

Board. 

(a) Establishment of the Board. The 

Mortgagee Review Board (Board) was 

established in the Federal Housing 

Administration, which is in the Office 

of the Assistant Secretary for Housing— 

Federal Housing Commissioner, by 

section 202(c)(1) of the National 

Housing Act (12 U.S.C. 1708(c)(1)), as 

added by section 142 of the Department 

of Housing and Urban Development 

Reform Act of 1989 (Pub. L. 101–235, 

approved December 15, 1989). 

(b) Authority of the Board. The Board 

has the authority to initiate 

administrative actions against 

mortgagees and lenders under 12 U.S.C. 

1708(c) and shall exercise all of the 

functions of the Secretary with respect 

to administrative actions against 

mortgagees and lenders and such other 

functions as are provided in this part. 

The Board shall have all powers 

necessary and incident to the 

performance of these functions and such 

other functions as are provided in this 

part, except as limited by this part. 

(1) Administrative Actions. The Board 

has the authority to take any 

administrative action against mortgagees 

and lenders as provided in 12 U.S.C. 

1708(c). The Board may delegate its 

authority to take all nondiscretionary 

acts. 

(2) Civil Money Penalties. The Board 

is authorized pursuant to section 536 of 

the National Housing Act (12 U.S.C. 

1735(f)–14) to impose civil money 

penalties upon mortgagees and lenders, 

as set forth in 24 CFR part 30. The 

violations for which a civil money 

penalty may be imposed are listed in 

subpart B (Violations) of 24 CFR part 30. 

Hearings to challenge the imposition of 

civil money penalties shall be 

conducted according to the applicable 

rules of 24 CFR part 30. 

(3) Authorization for other 

administrative actions. The Board may, 

in its discretion, approve the initiation 

of a suspension or debarment action 

against a mortgagee or lender by any 

Suspending or Debarring Official under 

24 CFR part 24. 

§ 25.3 [Amended] 

■ 3. In § 25.3, remove the definitions of 

‘‘Hearing Official’’ and ‘‘Hearing 

Officer.’’ 

■ 4. In § 25.4, revise paragraphs (a) and 

(b) to read as follows: 

§ 25.4 Operation of the Mortgagee Review 

Board. 

(a) Members. The Board consists of 

the following HUD officials designated 

to serve on the Board by section 

202(c)(2) of the National Housing Act 

(12 U.S.C. 1708(c)(2)): 

(1) The Assistant Secretary of 

Housing-Federal Housing 

Commissioner; 

(2) The General Counsel of the 

Department; 

(3) The President of the Government 

National Mortgage Association (GNMA); 

(4) The Assistant Secretary for 

Administration; 

(5) The Assistant Secretary for Fair 

Housing and Equal Opportunity (in 

cases involving violations of 

nondiscrimination requirements); 

(6) The Chief Financial Officer of the 

Department; and 

(7) The Director of the Enforcement 

Center; or their designees. 

(b) Advisors. The Inspector General or 

his or her designee, and the Director of 

the Office of Lender Activities and 

Program Compliance (or such other 

position as may be assigned such 

duties), and such other persons as the 

Board may appoint, shall serve as 

nonvoting advisors to the Board. 

* * * * * 

■ 5. Revise § 25.5 to read as follows: 

§ 25.5 Administrative actions. 

(a) General. The Board is authorized 

to take administrative actions in 

accordance with 12 U.S.C. 1708(c), 

including, but not limited to, the 

following: issue a letter of reprimand, 


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probation, suspension, or withdrawal; 

or enter into a settlement agreement. 

(b) Letter of reprimand. A letter of 

reprimand shall be effective upon 

receipt of the letter by the mortgagee. 

Failure to comply with a directive in the 

letter of reprimand may result in any 

other administrative action that the 

Board finds appropriate as provided by 

12 U.S.C. 1708(c). 

(c) Probation. Probation shall be 

effective upon receipt of the notice of 

probation by the mortgagee. Failure to 

comply with the terms of probation may 

result in any other administrative action 

that the Board finds appropriate as 

provided by 12 U.S.C. 1708(c). 

(d) Suspension. (1) Effect of 

suspension. (i) During the period of 

suspension, HUD will not endorse any 

mortgage originated by the suspended 

mortgagee under the Title II program 

unless prior to the date of suspension: 

(A) A firm commitment has been 

issued relating to any such mortgage; or 

(B) A Direct Endorsement underwriter 

has approved the mortgagor for any 

such mortgage. 

(ii) During the period of suspension, 

a lender or loan correspondent may not 

originate new Title I loans under its 

Title I Contract of Insurance or apply for 

a new Contract of Insurance. 

(2) Effective date of suspension. A 

suspension issued pursuant to § 25.7(d) 

is effective upon issuance. Any other 

suspension is effective upon receipt of 

the notice of suspension by the 

mortgagee. 

(e) Withdrawal—(1) Effect of 

withdrawal. (i) During the period of 

withdrawal, HUD will not endorse any 

mortgage originated by the withdrawn 

mortgagee under the Title II program, 

unless prior to the date of withdrawal: 

(A) A firm commitment has been 

issued relating to any such mortgage; or 

(B) A Direct Endorsement underwriter 

has approved the mortgagor for any 

such mortgage. 

(ii) During the period of withdrawal, 

a lender or loan correspondent may not 

originate new Title I loans under its 

Title I Contract of Insurance or apply for 

a new Contract of Insurance. The Board 

may limit the geographical extent of the 

withdrawal, or limit its scope (e.g., to 

either the single family or multifamily 

activities of a withdrawn mortgagee). 

Upon the expiration of the period of 

withdrawal, the mortgagee may file a 

new application for approval under 24 

CFR part 202. 

(2) Effective date of withdrawal. (i) If 

the Board determines that immediate 

action is in the public interest or in the 

best interests of the Department, then 

withdrawal shall be effective upon 

receipt of the Board’s notice of 

withdrawal. 

(ii) If the Board does not determine 

that immediate action is necessary 

according to paragraph (e)(2)(i) of this 

section, then withdrawal shall be 

effective either: 

(A) Upon the expiration of the 30-day 

period specified in § 25.10, if the 

mortgagee has not requested a hearing; 

or 

(B) Upon receipt of the Board’s 

decision under § 25.10, if the mortgagee 

requests a hearing. 

■ 6. Remove §§ 25.10 and 25.11. 

■ 7. Redesignate §§ 25.6, 25.7, 25.8, and 

25.9 as §§ 25.7, 25.9, 25.10, and 25.6, 

respectively. 

■ 8. In newly designated § 25.6, revise 

the section heading, the introductory 

text, and paragraphs (g), (j), (x), and (ff) 

to read as follows: 

§ 25.6 Violations creating grounds for 

administrative action. 

Any administrative action imposed 

under 12 U.S.C. 1708(c) shall be based 

upon one or more of the following 

violations: 

* * * * * 

(g) Failure to comply with any 

agreement, certification, undertaking, or 

condition of approval listed on, or 

applicable to, either a mortgagee’s 

application for approval or an approved 

mortgagee’s branch office notification; 

* * * * * 

(j) Violation of the requirements of 

any contract or agreement with the 

Department, or violation of the 

requirements set forth in any statute, 

regulation, handbook, mortgagee letter, 

or other written rule or instruction; 

* * * * * 

(x) Failure to submit a report required 

under 24 CFR 202.12(c) within the time 

determined by the Commissioner, or to 

commence or complete a plan for 

corrective action under that section 

within the time agreed upon with the 

Commissioner. 

* * * * * 

(ff) Any other violation of Federal 

Housing Administration requirements 

that the Board or the Secretary 

determines to be so serious as to justify 

an administrative sanction. 

* * * * * 

■ 9. Revise newly designated § 25.7 to 

read as follows: 

§ 25.7 Notice of violation. 

(a) General. The Chairperson of the 

Board, or the Chairperson’s designee, 

shall issue a written notice to the 

mortgagee at the mortgagee’s address of 

record at least 30 days prior to taking 

any action under 12 U.S.C. 1708(c) 

against the mortgagee. Proof of delivery 

to the mortgagee’s address of record 

shall establish the mortgagee’s receipt of 

the notice. The notice shall state the 

specific violations that have been 

alleged, and shall direct the mortgagee 

to reply in writing to the Board within 

30 days after receipt of the notice by the 

mortgagee. The notice shall also provide 

the address to which the response shall 

be sent. If the mortgagee fails to reply 

during such time period, the Board may 

make a determination without 

considering any comments of the 

mortgagee. 

(b) Mortgagee’s response. The 

mortgagee’s response to the Board shall 

be in a format prescribed by the 

Secretary and shall not exceed 15 

double-spaced typewritten pages. The 

response shall include an executive 

summary, a statement of the facts 

surrounding the matter, an argument, 

and a conclusion. Such response shall 

also address the factors listed in § 25.8. 

A more lengthy submission, including 

documents and other exhibits, may be 

simultaneously submitted to Board staff 

for review. 

(c) Exception for letter of reprimand. 

Whenever information comes before the 

Board that discloses a basis for the 

issuance of a letter of reprimand, the 

Board may issue the letter without 

having previously issued a notice of 

violation. 

(d) Exception for immediate 

suspension. If the Board determines that 

there exists adequate evidence that 

immediate action is required to protect 

the financial interests of the Department 

or the public, the Board may take a 

suspension action without having 

previously issued a notice of violation. 

■ 10. Add § 25.8 to read as follows: 

§ 25.8 Factors considered in taking 

administrative action. 

In determining which administrative 

action under 12 U.S.C. 1708(c), if any, 

should be taken, the Board will 

consider, among other factors, the 

seriousness and extent of the violations, 

the degree of mortgagee responsibility 

for the occurrences, and any other 

mitigating or aggravating facts. Where 

the Board is considering a withdrawal 

action, the Board will also consider 

whether the violations were egregious or 

willful, in order to determine whether a 

permanent withdrawal is mandated by 

12 U.S.C. 1708(c). 

■ 11. Revise newly designated § 25.9 to 

read as follows: 

§ 25.9 Notice of administrative action. 

(a) Whenever the Board decides to 

take an action in accordance with 12 


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U.S.C. 1708(c)(3), the Chairperson of the 

Board, or the Chairperson’s designee, 

shall issue a written notice of the action 

to the mortgagee at the mortgagee’s 

address of record of the determination. 

Proof of delivery to the mortgagee’s 

address of record shall establish the 

mortgagee’s receipt of the notice. 

(b) In actions for probation, 

suspension, or withdrawal, the notice 

shall describe the nature and duration of 

the administrative action, and shall 

specifically state the reasons for the 

action. In actions for probation, 

suspension, or withdrawal, the notice 

shall inform the mortgagee of its right to 

a hearing regarding the administrative 

action and of the manner and time in 

which to request a hearing. 

■ 12. Revise newly designated § 25.10 to 

read as follows: 

§ 25.10 Hearings and hearing request. 

(a) Hearing request. A mortgagee 

subject to any administrative action 

under 12 U.S.C. 1708(c), except for a 

letter of reprimand, may request a 

hearing, which shall be held on the 

record before an administrative law 

judge. The mortgagee shall submit its 

request for a hearing within 30 days of 

receiving the Board’s notice of 

administrative action. The request shall 

be addressed to the Mortgagee Review 

Board Docket Clerk, Department of 

Housing and Urban Development, 451 

7th Street, SW., Washington, DC 20410. 

The request shall specifically respond to 

the violations set forth in the notice of 

administrative action. If the mortgagee 

fails to request a hearing within 30 days 

after receiving the notice of 

administrative action, the Board’s action 

shall become final. 

(b) Hearing by Administrative Law 

Judge. Hearings are to be conducted by 

an Administrative Law Judge (ALJ), as 

set forth in this part. The ALJ shall 

commence a de novo hearing within 30 

days of HUD’s receipt of the mortgagee’s 

request, unless the mortgagee moves for 

an extension of time. The ALJ may 

extend this time period for good cause. 

(c) Procedural rules. The hearing shall 

be conducted in accordance with the 

applicable provisions of 24 CFR part 26, 

with the following modifications: 

(1) The mortgagee or its representative 

shall be afforded an opportunity to 

appear, submit documentary evidence, 

present witnesses, and confront any 

witness the agency presents, except that 

the parties shall not be allowed to 

present members of the Board as 

witnesses. 

(2) Discovery of information and/or 

documents that do not pertain to the 

appealing mortgagee, including, but not 

limited to, reviews or audits by the 

Department or administrative actions by 

the Board against mortgagees other than 

the appealing mortgagee, shall not be 

permitted. Members of the Board shall 

not be subject to deposition. 

(3) The hearing shall generally be held 

in Washington, DC. However, upon a 

showing of undue hardship or other 

cause, the ALJ may, in his or her 

discretion, order the hearing to be held 

in a location other than Washington, 

DC. 

■ 13. Section 25.14 is redesignated as 

§ 25.11 and is revised to read as follows: 

§ 25.11 Modification of Board orders. 

No order of an ALJ before whom 

proceedings are conducted under 

§ 25.10 may modify or otherwise disturb 

in any way an order or notice by the 

Board, unless the order of the ALJ 

becomes final agency action in 

accordance with Subpart B of Part 26 of 

this Title. 

■ 14. Revise § 25.12 to read as follows: 

§ 25.12 Public access to information; 

Publication of actions. 

(a) Where a notice of administrative 

action does not result in a hearing and 

in any cases in which a settlement is 

entered into by the Board and a 

mortgagee, all non-privileged 

information regarding the nature of the 

violation and the resolution of the 

action shall be available to the public. 

(b) Publication in the Federal 

Register. The Secretary shall publish, in 

the Federal Register, a description of 

and the cause for each administrative 

action taken by the Board against a 

mortgagee. 

(c) Notification of other agencies. 

Whenever the Board has taken any 

discretionary action to suspend and/or 

withdraw the approval of a mortgagee, 

the Secretary shall provide prompt 

notice of the action and a statement of 

the reasons for the action to the 

Secretary of Veterans Affairs; the chief 

executive officer of the Federal National 

Mortgage Association; the chief 

executive officer of the Federal Home 

Loan Mortgage Corporation; the 

Administrator of the Rural Housing 

Service (formerly the Farmers Home 

Administration); the Comptroller of the 

Currency, if the mortgagee is a National 

Bank or District Bank or subsidiary or 

affiliate of such a bank; the Board of 

Governors of the Federal Reserve 

System, if the mortgagee is a state bank 

that is a member of the Federal Reserve 

System or a subsidiary or affiliate of 

such a bank, or a bank holding company 

or a subsidiary or affiliate of such a 

company; the Board of Directors of the 

Federal Deposit Insurance Corporation, 

if the mortgagee is a state bank that is 

not a member of the Federal Reserve 

System, or is a subsidiary or affiliate of 

such a bank; and the Director of the 

Office of Thrift Supervision, if the 

mortgagee is a federal or state savings 

association or a subsidiary or affiliate of 

a savings association. 

(d) Notification to GNMA of 

withdrawal actions. Whenever the 

Board issues a notice of violation that 

could lead to withdrawal of a 

mortgagee’s approval, or is notified by 

GNMA of an action that could lead to 

withdrawal of GNMA approval, the 

Board shall proceed in accordance with 

12 U.S.C. 1708(d). 

Dated: September 23, 2008. 

Brian D. Montgomery, 

Assistant Secretary for Housing—Federal 

Housing Commissioner. 

[FR Doc. E8–23878 Filed 10–9–08; 8:45 am] 

BILLING CODE 4210–67–P 


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