[Federal Register Volume 75, Number 204 (Friday, October 22, 2010)]
[Rules and Regulations]
[Pages 65214-65222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26650]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1203

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1705

RIN 2590-AA29


Equal Access to Justice Act Implementation

AGENCY: Federal Housing Finance Agency; Office of Federal Housing 
Enterprise Oversight, HUD.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing a final 
regulation that establishes procedures for the submission and 
consideration of applications for awards of fees and other expenses by 
prevailing parties in adjudications against FHFA.

DATES: The final regulation is effective November 22, 2010.

FOR FURTHER INFORMATION CONTACT: Janice A. Kullman, Associate General 
Counsel, telephone (202) 414-8970 (not a toll-free number); Federal 
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, 
DC 20552. The telephone number for the Telecommunications Device for 
the Deaf is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. Establishment of the Federal Housing Finance Agency

    The Housing and Economic Recovery Act of 2008 (HERA), Public Law 
110-289, 122 Stat. 2654, amended the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) 
(Safety and Soundness Act) and the Federal Home Loan Bank Act (12 
U.S.C. 1421 et seq.) to establish FHFA as an independent agency of the 
Federal Government.\1\ HERA transferred the supervisory and oversight 
responsibilities over the Federal National Mortgage Association (Fannie 
Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) 
(collectively, Enterprises), and the Federal Home Loan Banks 
(collectively, regulated entities), from the Office of Federal Housing 
Enterprise Oversight

[[Page 65215]]

(OFHEO) and the Federal Housing Finance Board (FHFB), respectively, to 
FHFA. FHFA was established to oversee the prudential operations of the 
regulated entities to ensure that they operate in a safe and sound 
manner, including being adequately capitalized; and carry out their 
public policy missions, including fostering liquid, efficient, 
competitive and resilient national housing finance markets. The 
regulated entities continue to operate under regulations promulgated by 
OFHEO and FHFB and such regulations are enforceable by the Director of 
FHFA until such regulations are modified, terminated, set aside, or 
superseded by regulations issued by FHFA.\2\
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    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, Section 1101 of HERA.
    \2\ See sections 1302 and 1312 of HERA.
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B. Equal Access to Justice Act

    The Equal Access to Justice Act, 5 U.S.C. 504, requires that an 
agency that conducts adversarial adjudications award costs and fees in 
connection with that adjudication to the prevailing party unless the 
adjudicative officer of the agency finds that the agency's position was 
substantially justified or other circumstances make such an award 
unjust.

II. Proposed Rulemaking and Request for Comments

    Because FHFA conducts adversarial adjudications, FHFA proposed and 
requested comments on a regulation to establish procedures for the 
submission and consideration of applications for awards of fees and 
other expenses by prevailing parties as required by the Equal Access to 
Justice Act. The proposed regulation was published in the Federal 
Register at 75 FR 17622 (April 7, 2010). FHFA received no comments on 
the proposed regulation.

III. Final Rulemaking

    FHFA is publishing as final the proposed Equal Access to Justice 
Act Implementation regulation. In addition, FHFA is removing the OFHEO 
Implementation of the Equal Access to Justice Act regulation at 12 CFR 
part 1705.

IV. Section by Section Analysis

    The following is a section-by-section analysis of the regulation.

Subpart A--General Provisions

Section 1203.1 Purpose and Scope

    Section 1203.1 provides that the purpose of this regulation is to 
implement the Equal Access to Justice Act, 5 U.S.C. 504, by 
establishing procedures for the filing and consideration of 
applications for awards of fees and other expenses to eligible 
individuals and entities who are parties to adversary adjudications 
before FHFA. This section also provides that the purpose of this part 
is to award fees and other expenses in connection with adversary 
adjudications before FHFA.

Section 1203.2 Definitions

    This section sets forth definitions for the regulation.
    Adjudicative officer means the official who presided at the 
underlying adversary adjudication, without regard to whether the 
official is designated as a hearing examiner, administrative law judge, 
administrative judge, or otherwise.
    Adversary adjudication means an administrative proceeding conducted 
by FHFA under 5 U.S.C. 554 in which the position of FHFA or any other 
agency of the United States is represented by counsel or otherwise, 
including but not limited to an adjudication conducted under the Safety 
and Soundness Act, as amended, and any implementing regulations. Any 
issue as to whether an administrative proceeding is an adversary 
adjudication for purposes of this part will be an issue for resolution 
in the proceeding on the application for award.
    Affiliate means an individual, corporation, or other entity that 
directly or indirectly controls or owns a majority of the voting shares 
or other interests of the party, or any corporation or other entity of 
which the party directly or indirectly owns or controls a majority of 
the voting shares or other interest, unless the adjudicative officer 
determines that it would be unjust and contrary to the purpose of the 
Equal Access to Justice Act in light of the actual relationship between 
the affiliated entities to consider them to be affiliates for purposes 
of this part.
    Agency counsel means the attorney or attorneys designated by the 
General Counsel of FHFA to represent FHFA in an adversary adjudication 
covered by this part.
    Demand of FHFA means the express demand of FHFA that led to the 
adversary adjudication, but does not include a recitation by FHFA of 
the maximum statutory penalty when accompanied by an express demand for 
a lesser amount.
    Director means the Director of the Federal Housing Finance Agency.
    Fees and other expenses includes reasonable attorney or agent fees, 
the reasonable expenses of expert witnesses, and the reasonable cost of 
any study, analysis, engineering report, test, or expense which the 
agency finds necessary for the preparation of the eligible party's 
case.
    FHFA means the Federal Housing Finance Agency.
    Final disposition date means the date on which a decision or order 
disposing of the merits of the adversary adjudication or any other 
complete resolution of the adversary adjudication, such as a settlement 
or voluntary dismissal, becomes final and unappealable, both within the 
agency and to the courts.
    Party means an individual, partnership, corporation, association, 
or public or private organization that is named or admitted as a party, 
that is admitted as a party for limited purposes, or that is properly 
seeking and entitled as of right to be admitted as a party in an 
adversarial adjudication.
    Position of FHFA means the position taken by FHFA in the adversary 
adjudication, including the action or failure to act by FHFA upon which 
the adversary adjudication was based.

Section 1203.3 Eligible Parties

    Section 1203.3 sets out the eligibility requirements for parties 
seeking fees and expenses.
    Paragraph (a) of this section requires the applicant to be a party 
to the adversary adjudication for which it seeks an award and be a 
small entity as defined in 5 U.S.C. 601. It also requires an applicant 
to meet all conditions of eligibility set out in this paragraph and 
comply with all the requirements in subpart B of this part.
    Paragraph (b) of this section requires that a party be one of the 
following:
    <bullet> An individual who has a net worth of not more than $2 
million;
    <bullet> The sole owner of an unincorporated business who has a net 
worth of not more than $7 million, including both personal and business 
interest, and not more than 500 employees; however, a party who owns an 
unincorporated business will be considered to be an ``individual'' 
rather than the ``sole owner of an unincorporated business'' if the 
issues on which the party prevails are related primarily to personal 
interests rather than to business interests;
    <bullet> A charitable or other tax-exempt organization described in 
section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3), 
with not more than 500 employees;
    <bullet> A cooperative association as defined in section 15(a) of 
the Agricultural Marketing Act, 12 U.S.C. 1141j(a), with not more than 
500 employees; or
    <bullet> Any other partnership, corporation, association, unit of 
local government, or

[[Page 65216]]

organization that has a net worth of not more than $7 million and not 
more than 500 employees.
    Paragraph (c) of this section clarifies the requirements for 
eligibility by requiring that:
    <bullet> The employees of a party must include all persons who 
regularly perform services for remuneration for the party, under the 
party's direction and control. Part-time employees must be included on 
a proportional basis.
    <bullet> The net worth and number of employees of the party and its 
affiliates must be aggregated to determine eligibility.
    <bullet> The net worth and number of employees of a party will be 
determined as of the date the underlying adversary adjudication was 
initiated.
    <bullet> A party that participates in an adversarial adjudication 
primarily on behalf of one or more entities that would be ineligible 
for an award is not itself eligible for an award.

Section 1203.4 Standards for Awards

    Section 1203.4 sets out the standards for the award of fees and 
expenses.
    Paragraph (a) of this section provides that an eligible party that 
files an application for award of fees and other expenses in accordance 
with this part will receive an award of fees and other expenses related 
to defending against a demand of FHFA if the demand was in excess of 
the decision in the underlying adversary adjudication and was 
unreasonable when compared with the decision under the facts and 
circumstances of the case, unless the party has committed a willful 
violation of law or otherwise acted in bad faith, or unless special 
circumstances make an award unjust. This paragraph also explains that 
the burden of proof that the demand of FHFA was substantially in excess 
of the decision and is unreasonable when compared with the decision is 
on the eligible party.
    Paragraph (b) of this section provides that an eligible party that 
submits an application for award in accordance with this part will 
receive an award of fees and other expenses incurred in connection with 
an adversary adjudication in which it prevailed or in a significant and 
discrete substantive portion of the adversary adjudication in which it 
prevailed, unless the position of FHFA in the adversary adjudication 
was substantially justified or special circumstances make an award 
unjust. This paragraph further explains that FHFA has the burden of 
proof to show that its position was substantially justified and could 
do so by showing that its position was reasonable in law and in fact.

Section 1203.5 Allowable Fees and Expenses

    Section 1203.5 sets forth what fees and expenses a party may 
collect under this part.
    Paragraph (a) of this section provides that awards of fees and 
other expenses are based on rates customarily charged by persons 
engaged in the business of acting as attorneys, agents, and expert 
witnesses, even if the services were made available without charge or 
at a reduced rate to the party. This paragraph also explains that, 
except as provided in Sec.  1203.6, an award for the fee of an attorney 
or agent can not exceed $125 per hour and an award to compensate an 
expert witness can not exceed the highest rate at which FHFA pays 
expert witnesses. However, under this paragraph, an award can also 
include the reasonable expenses of the attorney, agent, or expert 
witness as a separate item if he or she ordinarily charges clients 
separately for such expenses.
    Paragraph (b) of this section sets out the factors the adjudicative 
officer must consider for determining the reasonableness of the fee, 
including the following:
    <bullet> If the attorney, agent, or expert witness is in private 
practice, his or her customary fees for similar services; or, if the 
attorney, agent, or expert witness is an employee of the eligible 
party, the fully allocated costs of the services;
    <bullet> The prevailing rate for similar services in the community 
in which the attorney, agent, or expert witness ordinarily performs 
services;
    <bullet> The time actually spent in the representation of the 
eligible party;
    <bullet> The time reasonably spent in light of the difficulty or 
complexity of the issues in the adversary adjudication; and
    <bullet> Such other factors as may bear on the value of the 
services provided.
    Paragraph (c) of this section provides that in determining the 
reasonable cost of any study, analysis, engineering report, test, 
project, or similar matter prepared on behalf of a party, the 
adjudicative officer will consider the prevailing rate for similar 
services in the community in which the services were performed.
    Paragraph (d) of this section provides that fees and other expenses 
incurred before the date on which an adversarial adjudication was 
initiated will be awarded only if the eligible party can demonstrate 
that they were reasonably incurred in preparation for the adversary 
adjudication.

Section 1203.6 Rulemaking on Maximum Rate for Fees

    Section 1203.6 provides that FHFA can adopt regulations providing 
for an award of attorney or agent fees at a rate higher than $125 per 
hour in adversary adjudications covered by this part if warranted by an 
increase in the cost of living or by special circumstances. Special 
circumstances include the limited availability of attorneys or agents 
who are qualified to handle certain types of adversary adjudications. 
This section provides that FHFA can conduct any rulemaking proceedings 
for this purpose under the informal rulemaking procedures of the 
Administrative Procedure Act, 5 U.S.C. 553.

Section 1203.7 Awards Against Other Agencies

    Section 1203.7 provides that if another agency of the United States 
participates in an adversarial adjudication before FHFA and takes a 
position that was not substantially justified, the award or appropriate 
portion of the award to an eligible party that prevailed over that 
agency will be made against that agency.

Subpart B--Information Required From Applicants

Section 1203.10 Contents of the Application for Award

    Section 1203.10 provides, under paragraph (a) of this section, that 
an application for award of fees and other expenses under either Sec.  
1203.4(a) or Sec.  1203.4(b) will have to:
    <bullet> Identify the applicant and the adversary adjudication for 
which an award is sought;
    <bullet> State the amount of fees and other expenses for which an 
award is sought;
    <bullet> Provide the statements and documentation required by 
paragraph (b) or (c) of this section and Sec.  1203.12 and any 
additional information required by the adjudicative officer; and
    <bullet> Be signed by the applicant or an authorized officer or 
attorney of the applicant and contain or be accompanied by a written 
verification under oath or under penalty of perjury that the 
information provided in the application is true and correct.
    Paragraph (b) of this section requires that an application for 
award under Sec.  1203.4(a), must show that the demand of FHFA was 
substantially in excess of, and was unreasonable when compared to, the 
decision in the underlying adversary adjudication under the facts and 
circumstances of the case. This paragraph also requires the application

[[Page 65217]]

to show that the applicant is a small entity as defined in 5 U.S.C. 
601.
    Paragraph (c) of this section sets out the requirements for an 
application for award under Sec.  1203.4(b) including that the 
application must:
    <bullet> Show that the applicant has prevailed in a significant and 
discrete substantive portion of the underlying adversary adjudication 
and identify the position of FHFA in the adversary adjudication that 
the applicant alleges was not substantially justified;
    <bullet> State the number of employees of the applicant and 
describe briefly the type and purposes of its organization or business 
(if the applicant is not an individual);
    <bullet> State that the net worth of the applicant does not exceed 
$2 million, if the applicant is an individual; or for all other 
applicants, state that the net worth of the applicant and its 
affiliates, if any, does not exceed $7 million; and
    <bullet> Include one of the following:

--A detailed exhibit showing the net worth (net worth exhibit) of the 
applicant and its affiliates, if any, when the underlying adversary 
adjudication was initiated. The net worth exhibit may be in any form 
convenient to the applicant as long as the net worth exhibit provides 
full disclosure of the assets and liabilities of the applicant and its 
affiliates, if any, and is sufficient to determine whether the 
applicant qualifies as an eligible party;
--A copy of a ruling by the Internal Revenue Service that shows that 
the applicant qualifies as an organization described in section 
501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3); or in the 
case of a tax-exempt organization not required to obtain a ruling from 
the Internal Revenue Service on its exempt status, a statement that 
describes the basis for the belief that the applicant qualifies under 
such section; or
--A statement that the applicant is a cooperative association as 
defined in section 15(a) of the Agricultural Marketing Act, 12 U.S.C. 
1141j(a).

Section 1203.11 Confidentiality of Net Worth Exhibit

    Section 1203.11 states that unless otherwise ordered by the 
Director, or required by law, the statement of net worth will be for 
the confidential use of the adjudicative officer, the Director and 
agency counsel.

Section 1203.12 Documentation for Fees and Expenses

    Section 1203.12 provides the requirements for documenting fees and 
expenses.
    Paragraph (a) of this section requires that the application for 
award must be accompanied by full and itemized documentation of the 
fees and other expenses for which an award is sought. This paragraph 
further provides that the adjudicative officer could require the 
applicant to provide vouchers, receipts, logs, or other documentation 
for any fees or expenses claimed.
    Paragraph (b) of this section requires that a separate itemized 
statement be submitted for each entity or individual whose services are 
covered by the application and that each itemized statement must 
include:
    <bullet> The hours spent by each entity or individual;
    <bullet> A description of the specific services performed and the 
rates at which each fee has been computed; and
    <bullet> Any expenses for which reimbursement is sought, the total 
amount claimed, and the total amount paid or payable by the applicant 
or by any other person or entity.

Subpart C--Procedures for Filing and Consideration of the Application 
for Award

Section 1203.20 Filing and Service of the Application for Award and 
Related Papers

    Section 1203.20 sets out the procedures for filing and service of 
an application for award.
    Paragraph (a) of this section requires that an application for an 
award of fees and other expenses must be filed no later than 30 days 
after the final disposition of the underlying adversary adjudication.
    Paragraph (b) of this section requires that an application for 
award and other papers related to the proceedings on the application 
for award must be filed and served on all parties in the same manner as 
papers are filed and served in the underlying adversary adjudication, 
except as otherwise provided in this part.
    Paragraph (c) of this section requires that the computation of time 
for filing and service of the application of award and other papers 
must be computed in the same manner as in the underlying adversary 
adjudication.

Section 1203.21 Response to the Application for Award

    Section 1203.21 sets out the procedure for responding to the 
application for an award.
    Paragraph (a) of this section requires that agency counsel file a 
response within 30 days after service of an application for award of 
fees and other expenses except as provided in paragraphs (b) and (c) of 
this section. This paragraph also requires that agency counsel explain 
any objections to the award requested and identify the facts relied 
upon to support the objections. If any of the alleged facts are not 
already in the record of the underlying adversary adjudication, agency 
counsel must include with the response either supporting affidavits or 
a request for further proceedings under Sec.  1203.25.
    Paragraph (b) of this section provides that if agency counsel and 
the applicant believe that the issues in the application for award can 
be settled, they may jointly file a statement of their intent to 
negotiate a settlement. The filing of this statement extends the time 
for filing a response for an additional 30 days. Upon request by agency 
counsel and the applicant, the adjudicative officer could grant for 
good cause further time extensions.
    Paragraph (c) of this section provides that agency counsel may 
request that the adjudicative officer extend the time period for filing 
a response. This paragraph further provides that if agency counsel does 
not respond or otherwise does not contest or settle the application for 
award within the 30-day period or the extended time period, the 
adjudicative officer may make an award of fees and other expenses upon 
a satisfactory showing of entitlement by the applicant.

Section 1203.22 Reply to the Response

    Section 1203.22 provides that within 15 days after service of a 
response, the applicant may file a reply. This section further provides 
that if the reply is based on any alleged facts not already in the 
record of the underlying adversary adjudication, the applicant must 
include with the reply either supporting affidavits or a request for 
further proceedings under Sec.  1203.25.

Section 1203.23 Comments by Other Parties

    Section 1203.23 provides that any party to the underlying adversary 
adjudication other than the applicant and agency counsel may file 
comments on an application for award within 30 calendar days after it 
is served, or on a response within 15 calendar days after it is served. 
This section also provides that a commenting party may not participate 
further in proceedings on the application unless the adjudicative 
officer determines that the public interest requires such participation 
in order to permit full exploration of matters raised in the comments.

[[Page 65218]]

Section 1203.24 Settlement

    Section 1203.24 provides that the applicant and agency counsel may 
agree on a proposed settlement of an award before the final decision on 
the application for award is made, either in connection with a 
settlement of the underlying adversary adjudication or after the 
underlying adversarial adjudication has been concluded. This section 
further requires that if the eligible party and agency counsel agree on 
a proposed settlement of an award before an application for award has 
been filed, the application must be filed with the proposed settlement.

Section 1203.25 Further Proceedings on the Application for Award

    Section 1203.25 sets forth procedures for further proceedings of an 
application for award.
    Paragraph (a) of this section provides that on request of either 
the applicant or agency counsel, on the adjudicative officer's own 
initiative, or as requested by the Director of FHFA under Sec.  
1203.27, the adjudicative officer may order further proceedings, such 
as an informal conference, oral argument, additional written 
submissions, or, as to issues other than substantial justification 
(such as the applicant's eligibility or substantiation of fees and 
expenses), pertinent discovery or an evidential hearing. This paragraph 
further provides that such additional proceedings will be held only 
when necessary for full and fair resolution of the issues arising from 
the application for award and will be conducted as promptly as 
possible. Last, this paragraph requires that the issue as to whether 
the position of FHFA in the underlying adversary adjudication was 
substantially justified must be determined based on the whole 
administrative record that was made in the underlying adversary 
adjudication.
    Paragraph (b) of this section requires that a request that the 
adjudicative officer order further proceedings under this section must 
specifically identify the information sought on the disputed issues and 
must explain why the additional proceedings are necessary to resolve 
the issues.

Section 1203.26 Decision of the Adjudicative Officer

    Section 1203.26 sets forth the requirements for the decision of the 
adjudicative officer.
    Paragraph (a) of this section provides that the adjudicative 
officer must make the initial decision on the basis of the written 
record, except if further proceedings are ordered under Sec.  1203.25.
    Paragraph (b) of this section provides that the adjudicative 
officer must issue a written initial decision on the application for 
award within 30 days after completion of proceedings on the 
application. This paragraph provides that the initial decision becomes 
the final decision of FHFA after 30 days from the day it was issued, 
unless review is ordered under Sec.  1203.27.
    Paragraph (c) of this section provides that in all initial 
decisions, the adjudicative officer must include findings and 
conclusions with respect to the applicant's eligibility and an 
explanation of the reasons for any difference between the amount 
requested by the applicant and the amount awarded. This paragraph also 
provides that if the applicant has sought an award against more than 
one agency, the adjudicative officer must also include findings and 
conclusions with respect to the allocation of payment of any award 
made.
    Paragraph (d) of this section provides that in initial decisions on 
applications filed pursuant to Sec.  1203.4(a), the adjudicative 
officer must include findings and conclusions as to whether FHFA made a 
demand that was substantially in excess of the decision in the 
underlying adversary adjudication and that was unreasonable when 
compared with that decision; and, if at issue, whether the applicant 
has committed a willful violation of the law or otherwise acted in bad 
faith, or whether special circumstances would make the award unjust.
    Paragraph (e) of this section provides that in decisions on 
applications filed pursuant to Sec.  1203.4(b), the adjudicative 
officer must include written findings and conclusions as to whether the 
applicant is a prevailing party and whether the position of FHFA was 
substantially justified; and, if at issue, whether the applicant unduly 
protracted or delayed the underlying adversary adjudication or whether 
special circumstance make the award unjust.

Section 1203.27 Review by FHFA

    Section 1203.27 provides that within 30 days after the adjudicative 
officer issues an initial decision under Sec.  1203.26, either the 
applicant or agency counsel may request the Director to review the 
initial decision of the adjudicative officer. This section also 
provides that the Director or his or her designee may also decide, on 
his or her own initiative, to review the initial decision. Under this 
section, whether to review a decision is at the discretion of the 
Director or his or her designee. If review is ordered, the Director or 
his or her designee would issue a final decision on the application for 
award or remand the application for award to the adjudicative officer 
for further proceedings under Sec.  1203.25.

Section 1203.28 Judicial Review

    Section 1203.28 provides that any party, other than the United 
States, that is dissatisfied with the final decision on an application 
for award of fees and expenses under this part could seek judicial 
review as provided in 5 U.S.C. 504(c)(2).

Section 1203.29 Payment of Award

    Section 1203.29 provides that to receive payment of an award of 
fees and other expenses granted under this part, the applicant must 
submit a copy of the final decision that grants the award and a 
certification that the applicant will not seek review of the decision 
in the United States courts to the Director, Federal Housing Finance 
Agency, 1700 G Street, NW., Washington, DC 20552. Under this section, 
FHFA must pay the amount awarded to the applicant within 60 days of 
receipt of the submission of the copy of the final decision and the 
certification, unless judicial review of the award has already been 
sought by any party to the proceedings.

Regulatory Impacts

Paperwork Reduction Act

    The regulation does not contain any information collection 
requirement that requires the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation does not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the 
regulation under the Regulatory Flexibility Act and certifies that the 
regulation is not likely to have a significant economic impact on a 
substantial number of small business entities. The regulation is 
applicable only to parties who have prevailed in adjudication against 
FHFA. These parties will not represent a substantial number of small 
business entities.

[[Page 65219]]

List of Subjects in 12 CFR Parts 1203 and 1705

    Administrative practice and procedure, Equal access to justice.

Authority and Issuance

0
Accordingly, for the reasons stated in the preamble, under the 
authority of 12 U.S.C. 4526 and 5 U.S.C. 504, FHFA amends Chapters XII 
and XVII of Title 12 of the Code of Federal Regulations, as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER A--ORGANIZATION AND OPERATIONS

0
1. Add part 1203 to Subchapter A to read as follows:

PART 1203--EQUAL ACCESS TO JUSTICE ACT

Subpart A--General Provisions
Sec.
1203.1 Purpose and scope.
1203.2 Definitions.
1203.3 Eligible parties.
1203.4 Standards for awards.
1203.5 Allowable fees and expenses.
1203.6 Rulemaking on maximum rate for fees.
1203.7 Awards against other agencies.
1203.8-1203.9 [Reserved]
Subpart B--Information Required From Applicants
1203.10 Contents of the application for award.
1203.11 Confidentiality of net worth exhibit.
1203.12 Documentation for fees and expenses.
1203.13-1203.19 [Reserved]
Subpart C--Procedures for Filing and Consideration of the Application 
for Award
1203.20 Filing and service of the application for award and related 
papers.
1203.21 Response to the application for award.
1203.22 Reply to the response.
1203.23 Comments by other parties.
1203.24 Settlement.
1203.25 Further proceedings on the application for award.
1203.26 Decision of the adjudicative officer.
1203.27 Review by FHFA.
1203.28 Judicial review.
1203.29 Payment of award.

    Authority:  12 U.S.C. 4526, 5 U.S.C. 504.

Subpart A--General Provisions


Sec.  1203.1  Purpose and scope.

    (a) This part implements the Equal Access to Justice Act, 5 U.S.C. 
504, by establishing procedures for the filing and consideration of 
applications for awards of fees and other expenses to eligible 
individuals and entities who are parties to adversary adjudications 
before FHFA.
    (b) This part applies to the award of fees and other expenses in 
connection with adversary adjudications before FHFA. However, if a 
court reviews the underlying decision of the adversary adjudication, an 
award for fees and other expenses may be made only pursuant to 28 
U.S.C. 2412(d)(3).


Sec.  1203.2  Definitions.

    As used in this part:
    Adjudicative officer means the official who presided at the 
underlying adversary adjudication, without regard to whether the 
official is designated as a hearing examiner, administrative law judge, 
administrative judge, or otherwise.
    Adversary adjudication means an administrative proceeding conducted 
by FHFA under 5 U.S.C. 554 in which the position of FHFA or any other 
agency of the United States is represented by counsel or otherwise, 
including but not limited to an adjudication conducted under the Safety 
and Soundness Act, as amended, and any implementing regulations. Any 
issue as to whether an administrative proceeding is an adversary 
adjudication for purposes of this part will be an issue for resolution 
in the proceeding on the application for award.
    Affiliate means an individual, corporation, or other entity that 
directly or indirectly controls or owns a majority of the voting shares 
or other interests of the party, or any corporation or other entity of 
which the party directly or indirectly owns or controls a majority of 
the voting shares or other interest, unless the adjudicative officer 
determines that it would be unjust and contrary to the purpose of the 
Equal Access to Justice Act in light of the actual relationship between 
the affiliated entities to consider them to be affiliates for purposes 
of this part.
    Agency counsel means the attorney or attorneys designated by the 
General Counsel of FHFA to represent FHFA in an adversary adjudication 
covered by this part.
    Demand of FHFA means the express demand of FHFA that led to the 
adversary adjudication, but does not include a recitation by FHFA of 
the maximum statutory penalty when accompanied by an express demand for 
a lesser amount.
    Director means the Director of the Federal Housing Finance Agency.
    Fees and other expenses means reasonable attorney or agent fees, 
the reasonable expenses of expert witnesses, and the reasonable cost of 
any study, analysis, engineering report, or test, which the agency 
finds necessary for the preparation of the eligible party's case.
    FHFA means the Federal Housing Finance Agency.
    Final disposition date means the date on which a decision or order 
disposing of the merits of the adversary adjudication or any other 
complete resolution of the adversary adjudication, such as a settlement 
or voluntary dismissal, becomes final and unappealable, both within the 
agency and to the courts.
    Party means an individual, partnership, corporation, association, 
or public or private organization that is named or admitted as a party, 
that is admitted as a party for limited purposes, or that is properly 
seeking and entitled as of right to be admitted as a party in an 
adversary adjudication.
    Position of FHFA means the position taken by FHFA in the adversary 
adjudication, including the action or failure to act by FHFA upon which 
the adversary adjudication was based.


Sec.  1203.3  Eligible parties.

    (a) To be eligible for an award of fees and other expenses under 
the Equal Access to Justice Act, the applicant must show that it meets 
all conditions of eligibility set out in this paragraph and has 
complied with all the requirements in Subpart B of this part. The 
applicant must also be a party to the adversary adjudication for which 
it seeks an award.
    (b) To be eligible for an award of fees and other expenses for 
prevailing parties, a party must be one of the following:
    (1) An individual who has a net worth of not more than $2 million;
    (2) The sole owner of an unincorporated business who has a net 
worth of not more than $7 million, including both personal and business 
interest, and not more than 500 employees; however, a party who owns an 
unincorporated business will be considered to be an ``individual'' 
rather than the ``sole owner of an unincorporated business'' if the 
issues on which the party prevails are related primarily to personal 
interests rather than to business interests;
    (3) A charitable or other tax-exempt organization described in 
section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3), 
with not more than 500 employees;
    (4) A cooperative association as defined in section 15(a) of the 
Agricultural Marketing Act, 12 U.S.C. 1141j(a), with not more than 500 
employees;
    (5) Any other partnership, corporation, association, unit of local 
government, or organization that has a

[[Page 65220]]

net worth of not more than $7 million and not more than 500 employees; 
or
    (6) For the purposes of an application filed pursuant to 5 U.S.C. 
504(a)(4), a small entity as defined in 5 U.S.C. 601.
    (c) For purposes of eligibility under this section:
    (1) The employees of a party must include all persons who regularly 
perform services for remuneration for the party, under the party's 
direction and control. Part-time employees must be included on a 
proportional basis.
    (2) The net worth and number of employees of the party and its 
affiliates must be aggregated to determine eligibility.
    (3) The net worth and number of employees of a party will be 
determined as of the date the underlying adversary adjudication was 
initiated.
    (4) A party that participates in an adversary adjudication 
primarily on behalf of one or more entities that would be ineligible 
for an award is not itself eligible for an award.


Sec.  1203.4  Standards for awards.

    (a) An eligible party that files an application for award of fees 
and other expenses in accordance with this part will receive an award 
of fees and other expenses related to defending against a demand of 
FHFA if the demand was in excess of the decision in the underlying 
adversary adjudication and was unreasonable when compared with the 
decision under the facts and circumstances of the case, unless the 
party has committed a willful violation of law or otherwise acted in 
bad faith, or unless special circumstances make an award unjust. The 
burden of proof that the demand of FHFA was substantially in excess of 
the decision and is unreasonable when compared with the decision is on 
the eligible party.
    (b) An eligible party that submits an application for award in 
accordance with this part will receive an award of fees and other 
expenses incurred in connection with an adversary adjudication in which 
it prevailed or in a significant and discrete substantive portion of 
the adversary adjudication in which it prevailed, unless the position 
of FHFA in the adversary adjudication was substantially justified or 
special circumstances make an award unjust. FHFA has the burden of 
proof to show that its position was substantially justified and may do 
so by showing that its position was reasonable in law and in fact.


Sec.  1203.5  Allowable fees and expenses.

    (a) Awards of fees and other expenses will be based on rates 
customarily charged by persons engaged in the business of acting as 
attorneys, agents, and expert witnesses, even if the services were made 
available without charge or at a reduced rate to the party. However, 
except as provided in Sec.  1203.6, an award for the fee of an attorney 
or agent may not exceed $125 per hour and an award to compensate an 
expert witness may not exceed the highest rate at which FHFA pays 
expert witnesses. However, an award may also include the reasonable 
expenses of the attorney, agent, or expert witness as a separate item 
if he or she ordinarily charges clients separately for such expenses.
    (b) In determining the reasonableness of the fee sought for an 
attorney, agent, or expert witness, the adjudicative officer will 
consider the following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fees for similar services; or, if the 
attorney, agent, or expert witness is an employee of the eligible 
party, the fully allocated costs of the services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;
    (3) The time actually spent in the representation of the eligible 
party;
    (4) The time reasonably spent in light of the difficulty or 
complexity of the issues in the adversary adjudication; and
    (5) Such other factors as may bear on the value of the services 
provided.
    (c) In determining the reasonable cost of any study, analysis, 
engineering report, test, project, or similar matter prepared on behalf 
of a party, the adjudicative officer will consider the prevailing rate 
for similar services in the community in which the services were 
performed.
    (d) Fees and other expenses incurred before the date on which an 
adversary adjudication was initiated will be awarded only if the 
eligible party can demonstrate that they were reasonably incurred in 
preparation for the adversary adjudication.


Sec.  1203.6  Rulemaking on maximum rate for fees.

    If warranted by an increase in the cost of living or by special 
circumstances, FHFA may adopt regulations providing for an award of 
attorney or agent fees at a rate higher than $125 per hour in adversary 
adjudications covered by this part. Special circumstances include the 
limited availability of attorneys or agents who are qualified to handle 
certain types of adversary adjudications. FHFA will conduct any 
rulemaking proceedings for this purpose under the informal rulemaking 
procedures of the Administrative Procedure Act, 5 U.S.C. 553.


Sec.  1203.7  Awards against other agencies.

    If another agency of the United States participates in an adversary 
adjudication before FHFA and takes a position that was not 
substantially justified, the award or appropriate portion of the award 
to an eligible party that prevailed over that agency will be made 
against that agency.


Sec. Sec.  1203.8-1203.9  [Reserved]

Subpart B--Information Required From Applicants


Sec.  1203.10  Contents of the application for award.

    (a) An application for award of fees and other expenses under 
either Sec.  1203.4(a) and Sec.  1203.4(b) must:
    (1) Identify the applicant and the adversary adjudication for which 
an award is sought;
    (2) State the amount of fees and other expenses for which an award 
is sought;
    (3) Provide the statements and documentation required by paragraph 
(b) or (c) of this section and Sec.  1203.12 and any additional 
information required by the adjudicative officer; and
    (4) Be signed by the applicant or an authorized officer or attorney 
of the applicant and contain or be accompanied by a written 
verification under oath or under penalty of perjury that the 
information provided in the application is true and correct.
    (b) An application for award under Sec.  1203.4(a) must show that 
the demand of FHFA was substantially in excess of, and was unreasonable 
when compared to, the decision in the underlying adversary adjudication 
under the facts and circumstances of the case. It must also show that 
the applicant is a small entity as defined in 5 U.S.C. 601.
    (c) An application for award under Sec.  1203.4(b) must:
    (1) Show that the applicant has prevailed in a significant and 
discrete substantive portion of the underlying adversary adjudication 
and identify the position of FHFA in the adversary adjudication that 
the applicant alleges was not substantially justified;
    (2) State the number of employees of the applicant and describe 
briefly the type and purposes of its organization or business (if the 
applicant is not an individual);
    (3) State that the net worth of the applicant does not exceed $2 
million, if the applicant is an individual; or for all other 
applicants, state that the net worth of the applicant and its 
affiliates, if any, does not exceed $7 million; and
    (4) Include one of the following:

[[Page 65221]]

    (i) A detailed exhibit showing the net worth (net worth exhibit) of 
the applicant and its affiliates, if any, when the underlying adversary 
adjudication was initiated. The net worth exhibit may be in any form 
convenient to the applicant as long as the net worth exhibit provides 
full disclosure of the assets and liabilities of the applicant and its 
affiliates, if any, and is sufficient to determine whether the 
applicant qualifies as an eligible party;
    (ii) A copy of a ruling by the Internal Revenue Service that shows 
that the applicant qualifies as an organization described in section 
501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3); or in the 
case of a tax-exempt organization not required to obtain a ruling from 
the Internal Revenue Service on its exempt status, a statement that 
describes the basis for the belief that the applicant qualifies under 
such section; or
    (iii) A statement that the applicant is a cooperative association 
as defined in section 15(a) of the Agricultural Marketing Act, 12 
U.S.C. 1141j(a).


Sec.  1203.11  Confidentiality of net worth exhibit.

    Unless otherwise ordered by the Director, or required by law, the 
statement of net worth will be for the confidential use of the 
adjudicative officer, the Director, and agency counsel.


Sec.  1203.12  Documentation for fees and expenses.

    (a) The application for award must be accompanied by full and 
itemized documentation of the fees and other expenses for which an 
award is sought. The adjudicative officer may require the applicant to 
provide vouchers, receipts, logs, or other documentation for any fees 
or expenses claimed.
    (b) A separate itemized statement must be submitted for each entity 
or individual whose services are covered by the application. Each 
itemized statement must include:
    (1) The hours spent by each entity or individual;
    (2) A description of the specific services performed and the rates 
at which each fee has been computed; and
    (3) Any expenses for which reimbursement is sought, the total 
amount claimed, and the total amount paid or payable by the applicant 
or by any other person or entity.


Sec. Sec.  1203.13-1203.19  [Reserved]

Subpart C--Procedures for Filing and Consideration of the 
Application for Award


Sec.  1203.20  Filing and service of the application for award and 
related papers.

    (a) An application for an award of fees and other expenses must be 
filed no later than 30 days after the final disposition of the 
underlying adversary adjudication.
    (b) An application for award and other papers related to the 
proceedings on the application for award must be filed and served on 
all parties in the same manner as papers are filed and served in the 
underlying adversary adjudication, except as otherwise provided in this 
part.
    (c) The computation of time for filing and service of the 
application of award and other papers must be computed in the same 
manner as in the underlying adversary adjudication.


Sec.  1203.21  Response to the application for award.

    (a) Agency counsel must file a response within 30 days after 
service of an application for award of fees and other expenses except 
as provided in paragraphs (b) and (c) of this section. In the response, 
agency counsel must explain any objections to the award requested and 
identify the facts relied upon to support the objections. If any of the 
alleged facts are not already in the record of the underlying adversary 
adjudication, agency counsel must include with the response either 
supporting affidavits or a request for further proceedings under Sec.  
1203.25.
    (b) If agency counsel and the applicant believe that the issues in 
the application for award can be settled, they may jointly file a 
statement of their intent to negotiate a settlement. The filing of this 
statement will extend the time for filing a response for an additional 
30 days. Upon request by agency counsel and the applicant, the 
adjudicative officer may grant for good cause further time extensions.
    (c) Agency counsel may request that the adjudicative officer extend 
the time period for filing a response. If agency counsel does not 
respond or otherwise does not contest or settle the application for 
award within the 30-day period or the extended time period, the 
adjudicative officer may make an award of fees and other expenses upon 
a satisfactory showing of entitlement by the applicant.


Sec.  1203.22  Reply to the response.

    Within 15 days after service of a response, the applicant may file 
a reply. If the reply is based on any alleged facts not already in the 
record of the underlying adversary adjudication, the applicant must 
include with the reply either supporting affidavits or a request for 
further proceedings under Sec.  1203.25.


Sec.  1203.23  Comments by other parties.

    Any party to the underlying adversary adjudication other than the 
applicant and agency counsel may file comments on an application for 
award within 30 calendar days after it is served, or on a response 
within 15 calendar days after it is served. A commenting party may not 
participate further in proceedings on the application unless the 
adjudicative officer determines that the public interest requires such 
participation in order to permit full exploration of matters raised in 
the comments.


Sec.  1203.24  Settlement.

    The applicant and agency counsel may agree on a proposed settlement 
of an award before the final decision on the application for award is 
made, either in connection with a settlement of the underlying 
adversary adjudication or after the underlying adversary adjudication 
has been concluded. If the eligible party and agency counsel agree on a 
proposed settlement of an award before an application for award has 
been filed, the application must be filed with the proposed settlement.


Sec.  1203.25  Further proceedings on the application for award.

    (a) On request of either the applicant or agency counsel, on the 
adjudicative officer's own initiative, or as requested by the Director 
under Sec.  1203.27, the adjudicative officer may order further 
proceedings, such as an informal conference, oral argument, additional 
written submissions, or, as to issues other than substantial 
justification (such as the applicant's eligibility or substantiation of 
fees and expenses), pertinent discovery or an evidential hearing. Such 
further proceedings will be held only when necessary for full and fair 
resolution of the issues arising from the application for award and 
will be conducted as promptly as possible. The issue as to whether the 
position of FHFA in the underlying adversary adjudication was 
substantially justified will be determined on the basis of the whole 
administrative record that was made in the underlying adversary 
adjudication.
    (b) A request that the adjudicative officer order further 
proceedings under this section must specifically identify the 
information sought on the disputed issues and must explain why the

[[Page 65222]]

additional proceedings are necessary to resolve the issues.


Sec.  1203.26  Decision of the adjudicative officer.

    (a) The adjudicative officer must make the initial decision on the 
basis of the written record, except if further proceedings are ordered 
under Sec.  1203.25.
    (b) The adjudicative officer must issue a written initial decision 
on the application for award within 30 days after completion of 
proceedings on the application. The initial decision will become the 
final decision of FHFA after 30 days from the day it was issued, unless 
review is ordered under Sec.  1203.27.
    (c) In all initial decisions, the adjudicative officer must include 
findings and conclusions with respect to the applicant's eligibility 
and an explanation of the reasons for any difference between the amount 
requested by the applicant and the amount awarded. If the applicant has 
sought an award against more than one agency, the adjudicative officer 
must also include findings and conclusions with respect to the 
allocation of payment of any award made.
    (d) In initial decisions on applications filed pursuant to Sec.  
1203.4(a), the adjudicative officer must include findings and 
conclusions as to whether FHFA made a demand that was substantially in 
excess of the decision in the underlying adversary adjudication and 
that was unreasonable when compared with that decision; and, if at 
issue, whether the applicant has committed a willful violation of the 
law or otherwise acted in bad faith, or whether special circumstances 
would make the award unjust.
    (e) In decisions on applications filed pursuant to Sec.  1203.4(b), 
the adjudicative officer must include written findings and conclusions 
as to whether the applicant is a prevailing party and whether the 
position of FHFA was substantially justified; and, if at issue, whether 
the applicant unduly protracted or delayed the underlying adversary 
adjudication or whether special circumstance make the award unjust.


Sec.  1203.27  Review by FHFA.

    Within 30 days after the adjudicative officer issues an initial 
decision under Sec.  1203.26, either the applicant or agency counsel 
may request the Director to review the initial decision of the 
adjudicative officer. The Director may also decide, at his or her 
discretion, to review the initial decision. If review is ordered, the 
Director must issue a final decision on the application for award or 
remand the application for award to the adjudicative officer for 
further proceedings under Sec.  1203.25.


Sec.  1203.28  Judicial review.

    Any party, other than the United States, that is dissatisfied with 
the final decision on an application for award of fees and expenses 
under this part may seek judicial review as provided in 5 U.S.C. 
504(c)(2).


Sec.  1203.29  Payment of award.

    To receive payment of an award of fees and other expenses granted 
under this part, the applicant must submit a copy of the final decision 
that grants the award and a certification that the applicant will not 
seek review of the decision in the United States courts to the 
Director, Federal Housing Finance Agency, 1700 G Street, NW., 
Washington, DC 20552. FHFA must pay the amount awarded to the applicant 
within 60 days of receipt of the submission of the copy of the final 
decision and the certification, unless judicial review of the award has 
been sought by any party to the proceedings.

CHAPTER XVII--OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, 
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

PART 1705--[REMOVED]

0
2. Remove part 1705.

    Dated: October 14, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-26650 Filed 10-21-10; 8:45 am]
BILLING CODE 8070-01-P