Federal Register / Vol. 66, No. 243 / Tuesday, December 18, 2001 / Rules and Regulations 65097

plus six serving pieces, as specified in

AHAM Standard DW–1. If the capacity of the

dishwasher, as stated by the manufacturer, is

less than eight place settings, then the test

load must be the stated capacity.

2.7 Testing requirements. Provisions in

this appendix pertaining to dishwashers that

operate with a nominal inlet temperature of

50 °F or 120 °F apply only to water heating

dishwashers.

2.8 Preconditioning requirements.

Precondition the dishwasher by establishing

the testing conditions set forth in sections 2.1

through 2.5 of this Appendix. Set the

dishwasher to the preconditioning cycle as

defined in section 1.7 of this Appendix,

without using a test load, and initiate the

cycle.

3. Instrumentation

3.1 Temperature measuring device. The

device must have an error no greater than ±

1 °F over the range being measured.

3.2 Water meter. The water meter must

have a resolution of no larger than 0.1 gallons

and a maximum error no greater than 1.5

percent for all water flow rates from one to

five gallons per minute and for all water

temperatures encountered in the test cycle.

3.3 Water pressure gauge. The water

pressure gauge must have a resolution of one

pound per square inch (psi) and must have

an error no greater than 5 percent of any

measured value over the range of 35 ± 2.5

psig.

3.4 Watt-hour meter. The watt-hour meter

must have a resolution of no greater than 1

watt-hour and a maximum error of no more

than 1 percent of the measured value for any

demand greater than 50 watts.

4. Test Cycle and Measurements

4.1 Test cycle. Perform a test cycle by

establishing the testing conditions set forth in

section 2 of this Appendix, setting the

dishwasher to the cycle type to be tested,

initiating the cycle, and allowing the cycle to

proceed to completion.

4.2 Machine electrical energy

consumption. Measure the electrical energy

consumed by the machine during the test

cycle, M, expressed in kilowatt-hours per

cycle, using a water supply temperature as

set forth in section 2.3 of this Appendix and

using a watt-hour meter as specified in

section 3.4 of this Appendix.

4.3 Water consumption. Measure the

water consumption, V, specified as the

number of gallons delivered to the

dishwasher during the entire test cycle, using

a water meter as specified in section 3.2 of

this Appendix.

4.4 Report values. You must report the

electrical energy consumption and water

consumption values for the machine, as

measured.

5. Calculation of derived results from test

measurements

5.1 Machine energy consumption for

electric dishwashers. Use the value recorded

in section 4.2 of this Appendix as the percycle machine electrical energy

consumption. Use the notation Mn for a test

of the normal cycle or Mt for a test of the

truncated normal cycle and express in

kilowatt-hours per cycle.

5.2 Water energy consumption for

dishwashers using electrically heated water.

Determine the water energy consumption

according to sections 5.2.1 and 5.2.2 of this

Appendix. Use the notation Wn for a test of

the normal cycle or Wt for a test of the

truncated normal cycle, and express in

kilowatt-hours per cycle. Note that

electrically heated water was used.

5.2.1 Dishwashers that operate with a

nominal 140 °F inlet water temperature, only.

For each test cycle, calculate the water

energy consumption, W, expressed in

kilowatt-hours per cycle and defined as:

W = V × T × K

where,

V = reported water consumption in gallons

per cycle, as measured in section 4.3 of

this Appendix,

T = nominal water heater temperature

rise = 90 °F,

K = specific heat of water in kilowatt-hours

per gallon per degree Fahrenheit = 0.0024.

5.2.2 Dishwashers that operate with a

nominal inlet water temperature of 120 °F.

For each test cycle, calculate the water

energy consumption, W, expressed in

kilowatt-hours per cycle and defined as:

W = V × T × K

where,

V = reported water consumption in gallons

per cycle, as measured in section 4.3 of

this Appendix,

T = nominal water heater temperature

rise = 70 °F,

K = specific heat of water in kilowatt-hours

per gallon per degree Fahrenheit = 0.0024.

5.3 Water energy consumption per cycle

using gas-heated or oil-heated water.

Determine the water energy consumption for

dishwashers according to sections 5.3.1 and

5.3.2 of this Appendix. Use the notation Wn

for a test of the normal cycle or Wt for a test

of the truncated normal cycle, and express in

kilowatt-hours per cycle. Note that gasheated or oil-heated water was used.

5.3.1 Dishwashers that operate with a

nominal 140 °F inlet water temperature, only.

For each test cycle, calculate the water

energy consumption using gas-heated or oilheated water, W, expressed in kilowatt-hours

per cycle and defined as:

W = V × T × K/e

where,

V = reported water consumption in gallons

per cycle, as measured in section 4.3 of

this Appendix,

T = nominal water heater temperature

rise = 90 °F,

K = specific heat of water in kilowatt-hours

per gallon per degree Fahrenheit = 0.0024,

e = nominal gas or oil water heater

recovery efficiency = 0.75.

5.3.2 Dishwashers that operate with a

nominal inlet water temperature of 120 °F.

For each test cycle, calculate the water

energy consumption using gas heated or oil

heated water, W, expressed in kilowatt-hours

per cycle and defined as:

W = V × T × C/c

where,

V is measured in section 4.3 of this

Appendix,

T = nominal water heater temperature

rise = 70 °F,

K = specific heat of water in kilowatt-hours

per gallon per degree Fahrenheit = 0.0024,

e = nominal gas or oil water heater

recovery efficiency = 0.75.

5.4 Total energy consumption per cycle.

For each test cycle the total per-cycle energy

consumption, E, is defined as the sum of the

per-cycle machine electrical energy

consumption, M, and the per-cycle water

energy consumption, W, in kilowatt-hours

per cycle. For the cycle type, M is calculated

according to section 5.1 of this Appendix and

W is calculated according to section 5.2 of

this Appendix for electrically heated water,

or according to section 5.3 for gas or oil

heated water. Use the notation En for a test

of the normal cycle or Et for a test of the

truncated normal cycle, and express in

kilowatt-hours per cycle.

5. Section 430.32 of Subpart C is

amended by revising paragraph (f) to

read as follows:

§ 430.32 Energy and water conservation

standards and effective dates.

* * * * *

(f) Dishwashers. The energy factor of

dishwashers manufactured on or after

May 14, 1994, must not be less than:

Product class Energy factor

(cycles/kWh)

(1) Compact Dishwasher

(capacity less than eight

place settings plus six

serving pieces as specified in ANSI/AHAM

Standard DW–1 (see

section 430.22)) ............ 0.62

(2) Standard Dishwasher

(capacity equal to or

greater than eight place

settings plus six serving

pieces as specified in

ANSI/AHAM Standard

DW–1(see section

430.22)) ......................... 0.46

* * * * *

[FR Doc. 01–30980 Filed 12–17–01; 8:45 am]

BILLING CODE 6450–01–P

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

Office of Federal Housing Enterprise

Oversight

12 CFR Part 1773

RIN 2550–AA21

Flood Insurance

AGENCY: Office of Federal Housing

Enterprise Oversight, HUD.

65098 Federal Register / Vol. 66, No. 243 / Tuesday, December 18, 2001 / Rules and Regulations

1 12 U.S.C. 4501 et seq.

2Federal National Mortgage Association Charter

Act (12 U.S.C. 1716–1723i) and Federal Home Loan

Mortgage Corporation Act (12 U.S.C. 1451–1459).

3 42 U.S.C. 4001 et seq. and other scattered

sections of 42 U.S.C.

4 42 U.S.C. 4002 et seq. and other scattered

sections of 42 U.S.C.

5Pub. L. 103–325 (Sept. 23, 1994) (codified, as

amended, at 42 U.S.C. 4001–4129).

6 42 U.S.C. 4012a(b)(3).

7 12 U.S.C. 4521(a)(4).

8 42 U.S.C. 4001 note.

9 42 U.S.C. 4012a(f)(3).

10Pursuant to the Federal Civil Penalties Inflation

Adjustment Act of 1990 (Inflation Adjustment Act),

as amended by the Debt Collection Improvement

Act of 1996, adjustments have been made to the

civil money penalty amounts. The Inflation

Adjustment Act’s rounding rules require that each

increase be rounded to the nearest multiple as

follows: $10 in the case of penalties less than or

equal to $100; $100 in the case of penalties greater

than $100 but less than or equal to $1,000; $1,000

in the case of penalties greater than $1,000 but less

than or equal to $10,000; $5,000 in the case of

penalties greater than $10,000 but less than or equal

to $100,000; $10,000 in the case of penalties greater

than $100,000 but less than or equal to $200,000;

and $25,000 in the case of penalties greater than

$200,000.

11 42 U.S.C. 4012a(f)(3), (5). 12 28 U.S.C. 2461 note.

ACTION: Final Regulation.

SUMMARY: The Office of Federal Housing

Enterprise Oversight (OFHEO) is issuing

a final regulation to clarify and to codify

OFHEO’s authority and ongoing

responsibility to oversee and enforce the

statutory requirements affecting the

operations of the Federal National

Mortgage Association and the Federal

Home Loan Mortgage Corporation under

the National Flood Insurance Reform

Act of 1994.

EFFECTIVE DATE: The effective date of

this regulation is December 18, 2001.

FOR FURTHER INFORMATION CONTACT: Luis

E. Guzman, Counsel, telephone (202)

414–3832; David A. Felt, Associate

General Counsel, telephone (202) 414–

3750 (not toll free numbers), Office of

General Counsel, Office of Federal

Housing Enterprise Oversight, 1700 G

Street, NW., Fourth Floor, Washington,

DC 20552. The telephone number for

the Telecommunications Device for the

Deaf is (800) 877–8339.

SUPPLEMENTARY INFORMATION:

I. Statutory Framework

Title XIII of the Housing and

Community Development Act of 1992,

Public Law 102–550, entitled the

‘‘Federal Housing Enterprises Financial

Safety and Soundness Act of 1992’’ (the

‘‘Act’’),1 established the Office of

Federal Housing Enterprise Oversight

(‘‘OFHEO’’) as an independent office

within the Department of Housing and

Urban Development. OFHEO is the

financial safety and soundness regulator

of the nation’s two largest housingrelated Government-sponsored

enterprises: the Federal National

Mortgage Association (‘‘Fannie Mae’’)

and the Federal Home Loan Mortgage

Corporation (‘‘Freddie Mac’’)

(collectively, the ‘‘Enterprises’’). In

addition to establishing OFHEO, the Act

made amendments to the Enterprises’

enabling statutes (collectively, ‘‘the

Charter Acts’’) 2 to, among other things,

accommodate the restructured

regulatory regime under the Act.

The National Flood Insurance Act of

1968 (‘‘NFIA’’) 3 and the Flood Disaster

Protection Act of 1973 (‘‘FDPA’’),4 as

amended by the National Flood

Insurance Reform Act of 1994

(‘‘NFIRA’’),5 together establish a

comprehensive National Flood

Insurance Program (‘‘NFIP’’) that

includes various provisions designed to

ensure that structures built in flood

plains are covered by, at least, specified

statutory minimum amounts of flood

insurance. NFIRA, among other things,

added specific requirements explicitly

applicable to the Enterprises; 6

designated OFHEO as the Federal

agency responsible for determining

compliance of the Enterprises’ flood

insurance responsibilities; required

OFHEO to report to Congress on the

Enterprises’ compliance in the agency’s

1996, 1998 and 2000 annual reports; 7

and authorized OFHEO to issue any

regulations necessary to carry out the

applicable provisions of NFIRA.8 NFIRA

also explicitly authorized OFHEO to

impose civil money penalties upon an

Enterprise that fails to implement

procedures reasonably designed to

ensure that the loans it purchases

comply with the mandatory flood

insurance purchase requirements.9

More specifically, NFIRA requires

that the Enterprises each implement

procedures reasonably designed to

ensure that any mortgage loan that is

purchased and is secured by property

located in a designated flood hazard

area is covered for the term of the loan

by flood insurance in an amount at least

equal to the lesser of (1) the outstanding

principal balance of the loan or (2) the

maximum limit of coverage made

available for that type of property under

the NFIP. OFHEO is authorized under

NFIRA to levy a civil money penalty for

each violation, not to exceed an

aggregate maximum amount per year,10

against an Enterprise that it finds to

have engaged in a pattern or practice of

purchasing loans in violation of the

procedures established pursuant to

NFIRA.11

OFHEO published a notice of

proposed rulemaking (66 FR 47563,

September 12, 2001) for public

comment relating to its flood insurance

oversight responsibilities. Comments on

the proposed regulation were received

only from the two Enterprises. Those

comments were carefully considered in

developing this final regulation. A

discussion of those comments and

OFHEO’s response to them follows.

II. Background

The Enterprises have a key role in the

implementation of the National Flood

Insurance Program, particularly with

regard to lenders that are not subject to

direct supervision by a Federal

regulatory agency. The Enterprises use

their seller/servicer guidelines and other

quality control review procedures to

ensure that lenders with whom they

contract comply with the applicable

flood insurance laws. The Enterprises

are required to establish procedures

designed to prevent their purchase of

loans that do not comply with these

laws. NFIRA tasks OFHEO with

reviewing the adequacy of such

procedures as well as the Enterprises’

compliance with them.

A primary purpose of the final

regulation is to reiterate the relevant

statutory provisions specifically

applicable to the Enterprises and to

OFHEO and to codify them in OFHEO’s

regulations. The final regulation is

intended to provide guidance as to the

procedures to be applied if an

enforcement action were to be required,

to add statutory civil money penalty

amounts for infractions of the flood

insurance requirements to the schedule

of penalties in OFHEO’s regulations and

to adjust such penalty amounts as

contemplated by law for inflation.

The Inflation Adjustment Act

The Federal Civil Penalties Inflation

Adjustment Act of 1990, as amended by

the Debt Collection Improvement Act of

1996 (the Inflation Adjustment Act),12

requires Federal agencies with the

authority to issue civil money penalties,

to adopt regulations to adjust each civil

money penalty authorized by law that

the agency has jurisdiction to

administer. The purpose of these

adjustments is to maintain the deterrent

effect of civil money penalties and

promote compliance with the law. The

Inflation Adjustment Act requires

agencies to make an initial adjustment

of their civil money penalties upon the

statute’s enactment, and to make

additional adjustments on an ongoing

basis, at least once every four years

following the initial adjustment.

Federal Register / Vol. 66, No. 243 / Tuesday, December 18, 2001 / Rules and Regulations 65099

13The statute’s rounding rules require that each

increase be rounded to the nearest multiple as

follows: $10 in the case of penalties less than or

equal to $100; $100 in the case of penalties greater

than $100 but less than or equal to $1,000; $1,000

in the case of penalties greater than $1,000 but less

than or equal to $10,000; $5,000 in the case of

penalties greater than $10,000 but less than or equal

to $100,000; $10,000 in the case of penalties greater

than $100,000 but less than or equal to $200,000;

and $25,000 in the case of penalties greater than

$200,000. 14 42 U.S.C. 4012a(f)(3).

Under the Inflation Adjustment Act,

the inflation adjustment for each

applicable civil money penalty is

determined by increasing the maximum

civil money penalty amount by a costof-living adjustment. As is described in

detail below, the Inflation Adjustment

Act provides that this cost-of-living

adjustment is to reflect the percentage

increase in the Consumer Price Index

since the civil money penalties were last

adjusted or established.

NFIRA sets forth the procedures

under which the Director of OFHEO

could impose civil money penalties

against an Enterprise and the amounts

of these civil money penalties. In this

rulemaking, the amounts of these civil

money penalties are being adjusted in

accordance with the requirements of the

Inflation Adjustment Act. The increases

in maximum civil money penalty

amounts contained in this final rule do

not mandate the amount of any civil

money penalty that OFHEO may seek

for a particular violation; OFHEO would

determine each civil money penalty on

a case-by-case basis in light of the

circumstances of the case.

The Inflation Adjustment Act directs

Federal agencies to calculate each civil

money penalty adjustment as the

percentage by which the CPI–U for June

of the calendar year preceding the

adjustment exceeds the CPI–U for June

of the calendar year in which the

amount of such civil money penalty was

last set or adjusted pursuant to law.

OFHEO has not previously adjusted

these CMP amounts, so the base period

is 1995, the year the statutory

requirements became applicable to the

Enterprises. Because OFHEO is making

these adjustments in calendar year 2001,

and the statutory requirements became

applicable to the Enterprises in 1995,

the inflation adjustment amount for

each civil money penalty was calculated

by comparing the CPI–U for June 1995

(152.5) with the CPI–U for June 2000

(172.4), resulting in an inflation

adjustment of 13.05 percent. For each

civil money penalty, the product of this

inflation adjustment and the previous

maximum penalty amount was then

rounded in accordance with the specific

requirements of the Inflation

Adjustment Act,13 then added to the

previous maximum penalty amount to

determine the new adjusted maximum

penalty amount. However, the Inflation

Adjustment Act further specifies that

the first adjustment of any civil money

penalty pursuant to such Act may not

exceed ten percent of the penalty.

Accordingly, the original civil money

penalty maximum of $350 under NFIRA

is increased to $385 for each violation

and the civil money penalty maximum

of $100,000 is increased to $110,000 for

the total assessed penalties against any

Enterprise during any calendar year.

Section-By-Section Analysis

Section 1773.1 Authority and Scope

Section 1773.1 sets forth the authority

upon which this final regulation is

based, namely the National Flood

Insurance Act of 1968 and the Flood

Disaster Protection Act of 1973, as

amended by the National Flood

Insurance Reform Act of 1994. The

National Flood Insurance Reform Act of

1994 requires OFHEO to examine the

Enterprises to ascertain their

compliance with these statutes and to

report to Congress on their compliance,

and provides OFHEO with the authority

to issue any regulations necessary to

carry out the applicable provisions of

NFIRA. OFHEO is authorized to impose

civil money penalties on an Enterprise

for violation of procedures established

pursuant to the National Flood

Insurance Act of 1968, as amended, or

rules or regulations adopted pursuant

thereto.14

Section 1773.2 Requirements

Section 1773.2(a) sets forth the

requirement that each Enterprise is to

implement procedures reasonably

designed to ensure that the properties

securing particular loans described in

paragraph (a) are properly insured in

accordance with the National Flood

Insurance Act of 1968 and the Flood

Disaster Protection Act of 1973, as

amended by the National Flood

Insurance Reform Act of 1994. This

requirement applies to any loan

purchased by an Enterprise that is

secured by improved real estate or a

mobile home located in an area that has

been identified, at the time of the

origination of the loan or at any time

during the term of the loan, by the

Director of the Federal Emergency

Management Agency as an area having

special flood hazards and in which

flood insurance is available under the

National Flood Insurance Program. As

explained in this section, the Enterprise

is required to ensure that a building or

mobile home, and any personal property

securing such loan are covered for the

term of the loan by flood insurance in

an amount at least equal to the lesser of

the outstanding principal balance of the

loan or the maximum limit of coverage

made available with respect to the

particular type of property under the

National Flood Insurance Program.

Section 1773.2(b) sets forth that the

procedures in section 1773.2(a) need

apply only to loans made, increased,

extended, or renewed after September

22, 1995. It further provides that

paragraph (a) does not apply to any loan

having an original outstanding principal

balance of $5,000 or less and a

repayment term of one year or less.

Section 1773.3 Civil Money Penalties

Section 1773.3 sets forth procedures

under this final section under which the

Director of OFHEO may impose civil

money penalties against an Enterprise.

Section 1773.3(a) sets forth that the

Director of OFHEO may assess a civil

money penalty against an Enterprise

determined by the Director to have

engaged in a pattern or practice of

purchasing loans in violation of the

procedures established pursuant to

§ 1773.2.

Section 1773.3(b) sets forth notice and

hearing requirements prior to the

imposition of civil money penalties

under this section. A civil money

penalty may be issued only after notice

and an opportunity for a hearing on the

record has been provided under 12 CFR

part 1780.

Section 1773.3(c) sets forth the

maximum amount of civil money

penalties that may be imposed on an

Enterprise under this section. A civil

money penalty under this section may

not exceed the adjusted statutory

amount of $385 for each violation and

the total amount of penalties assessed

under this section against an Enterprise

during any calendar year may not

exceed the adjusted statutory cap of

$110,000 for such total penalties.

Section 1773.3(d) sets forth

procedures for the deposit of civil

money penalties. Any civil money

penalties collected under this section

shall be paid into the National Flood

Mitigation Fund in accordance with 42

U.S.C. 4104d.

Section 1773.3(e) provides that any

civil money penalty under this section

shall be in addition to any civil remedy

or criminal penalty otherwise available.

Section 1773.3(f) provides that no

penalty may be imposed under this

section after the expiration of the fouryear period beginning on the date of the

occurrence of the violation for which

the penalty is authorized.

65100 Federal Register / Vol. 66, No. 243 / Tuesday, December 18, 2001 / Rules and Regulations

III. Comments on the Proposed Flood

Insurance Regulation

Enterprise Compliance

Fannie Mae’s first comment

concerned proposed new 12 CFR

1773.2(a), which sets forth the

requirement that each Enterprise is to

implement procedures reasonably

designed to ensure that the properties

securing particular loans described in

paragraph (a) are properly insured in

accordance with the National Flood

Insurance Act of 1968 and the Flood

Disaster Protection Act of 1973, as

amended by the National Flood

Insurance Reform Act of 1994. Both

Enterprises assert that they have

implemented procedures consistent

with these statutes and have also

consistently complied with all statutory

requirements for flood insurance.

Fannie Mae noted that neither the

proposed regulation nor the preamble of

the proposal suggest that the proposal,

should it be adopted, is intended to

require the Enterprises to readdress or

revise the procedures they already have

developed and implemented that

comply with the relevant statutes.

Fannie Mae suggested that OFHEO

confirm this interpretation in

connection with final rulemaking so as

to avoid any confusion on this point.

It would not be germaine, however, to

the purposes of a rulemaking to issue a

pronouncement that an Enterprises has

fully developed and implemented

adequate procedures that comply with

their statutory responsibilities. The

Enterprises’ obligation to institute

statutorily mandated procedures is

subject to ongoing oversight by OFHEO

as part of its routine examination

process. This rulemaking is not

intended to imply any deficiency in

compliance or inadequacy of existing

policies or practices of the Enterprises

under the law.

Civil Money Penalties (§ 1773.3(a)), and

Other Available Sanctions

Freddie Mac asserted that the general

grant of authority to promulgate

necessary regulations (granted to

various agencies by 42 U.S.C. 4001 note)

does not override the National Flood

Insurance Reform Act’s implicit

limitation on OFHEO’s authority to

impose penalties. In explanation,

Freddie Mac asserts that OFHEO’s

explicit statutory authority to assess

civil money penalties relating to flood

insurance is limited solely to assessing

penalties for patterns or practices of

purchasing loans in violation of an

Enterprise’s procedures established

pursuant to the National Flood

Insurance Reform Act. Freddie Mac

asserts, therefore, that OFHEO’s

authority to assess penalties does not

extend to other violations of the

proposed flood insurance regulation or

the law. According to Freddie Mac, the

proposed flood insurance regulation

exceeds statutory limits to the extent

that its language could be read to

provide for regulatory action against

other statutory or regulatory violations,

or would permit regulatory sanctions

other than civil money penalties.

Fannie Mae expressed similar

concerns that the language in proposed

new 12 CFR 1773.3(a) is overbroad in

suggesting that OFHEO may assess civil

money penalties against an Enterprise

that engages in a pattern or practice of

purchasing loans in violation of

procedures established pursuant to the

National Flood Insurance Act. Fannie

Mae urges OFHEO to substitute the

reference to the National Flood

Insurance Act for a reference to 42

U.S.C. 4012a(b)(3), inasmuch as the

latter is assertedly the specific statutory

provision to which OFHEO’s civil

money penalty authority in 42 U.S.C.

4012a(f)(3) relates.

OFHEO disagrees. The regulatory

scheme established under NFIA under

which OFHEO is charged to ensure

compliance by the Enterprises cannot be

reasonably read to allow unlawful

conduct to go without sanction or

remedy. OFHEO is broadly empowered

under its enabling law to ensure the safe

and sound operations of the Enterprises,

including authority to oversee

compliance by the Enterprises with

applicable laws. The extraordinary civil

money penalty authority granted under

NFIA does not explicitly limit or

displace the general powers of OFHEO

to enforce applicable laws using its

general enforcement powers under the

1992 Act.

Authority and Scope (§ 1773.1(a))

Fannie Mae’s third comment notes

that proposed new 12 CFR 1773.1(a)

states that the National Flood Insurance

Reform Act of 1994 designates OFHEO

as the federal agency responsible for

determining the Enterprises’ compliance

with the National Flood Insurance

Reform Act of 1994 and the National

Flood Insurance Act of 1968. Fannie

Mae asserts that the asserted breadth of

the proposed rule is overly broad

because the only compliance role

Congress explicitly assigned to OFHEO

with regard to those Acts is confined to

42 U.S.C. 4012a. Fannie Mae therefore

requests that OFHEO redraft this part of

the proposed new rule to more narrowly

reference only 42 U.S.C. 4012a.

Freddie Mac also argues that the law

narrowly charges OFHEO with

enforcing the requirements of the

National Flood Insurance Reform Act

and empowers OFHEO with the

authority to assessing civil money

penalties. Freddie Mac asserts that to

the extent proposed new 12 CFR

1773.1(a) can be read more broadly to

encompass more than what the statute

contemplated it is invalid. That is,

Freddie Mac asserts that the National

Flood Insurance Reform Act establishes

the only enforcement sanction

applicable to the Enterprises to be civil

money penalty assessments, and no

other administrative action or sanction

is available to OFHEO.

Both commenters recommended that

OFHEO amend proposed new 12 CFR

1773.1(a) to more narrowly recite that

OFHEO is charged solely with enforcing

the requirements of 42 U.S.C.

4012a(b)(3) through the assessment of

civil money penalties.

Similarly, Fannie Mae asserts that to

the extent proposed new 12 CFR

1773.1(a) contemplates that OFHEO

may enforce the requirements of the

National Flood Insurance with respect

to the Enterprises that language is overly

broad inasmuch as OFHEO has no

statutory basis for instituting an

enforcement action against an

Enterprise under the National Flood

Insurance Reform Act beyond that

explicitly set forth in 42 U.S.C. 4012a.

Fannie Mae further asserts that

OFHEO’s organic enforcement

authority, found at 12 U.S.C. 4615 et

seq., includes no explicit language

relating to violations of the National

Flood Insurance Reform Act.

OFHEO disagrees. The Enterprises

proposal to narrowly confine OFHEO’s

role under the National Flood Insurance

Act would ignore OFHEO’s pervasive

authority under the 1992 Safety and

Soundness Act to use its full array of

preventative and remedial tools to

ensure the safety and soundness of the

Enterprises, including compliance with

applicable federal laws and regulations.

It is implausible that Congress would

suggest a scheme that would allow

violative conduct, constituting unsafe

and unsound practice, to go without

sanction or remedy.

Amount of Flood Insurance Coverage

(§ 1773.2)

Freddie Mac’s comment notes that,

with respect to the amount of required

flood insurance, the proposed regulation

reiterates the statutory requirement that

the amount of flood insurance be at least

equal to the lesser of the outstanding

principal balance of the loan or the

maximum limit of coverage made

available with respect to the particular

type of property under the NFIP.

Federal Register / Vol. 66, No. 243 / Tuesday, December 18, 2001 / Rules and Regulations 65101

Freddie Mac indicated that in

implementing the law’s requirements

under NFIRA it requires flood insurance

coverage levels at or above the statutory

minimums. That is, Freddie Mac,

requires seller/servicers to ensure that

borrowers maintain insurance ‘‘at least

equal to the higher’’ of: (a) 80% of the

replacement cost of the insurable

improvements, or (b) the lower of the

outstanding loan balance or the full

replacement cost of the improvements

(provided that the insurance never

needs to exceed the maximum amount

available under the NFIP). The

Enterprise asserts that it requires such

higher coverage because borrowers are

not fully protected against a partial loss

under a NFIP flood insurance policy if

the policy covers less than 80% of the

replacement cost of the improvements.

Freddie Mac asserts that the higher

required coverage serves the best

interests of Freddie Mac, the borrower

and the public purpose of the NFIP.

In order to avoid any doubt as to its

authority to require such a higher

coverage amount, Freddie Mac

recommends that OFHEO add a

provision to proposed section 1773.2(a)

explicitly stating that nothing in the

regulation precludes an Enterprise from

requiring a higher level of coverage than

is required by the regulation. Freddie

Mac asserts that such a provision would

assist the Enterprises in the cases in

which lenders or borrowers assert that

a higher level of coverage may not be

allowed under law.

Nothing in this regulation precludes

the asserted authority of the Enterprises

to require additional flood insurance

coverage. This issue of authority

encompasses questions of law and

policy beyond the immediate

parameters of the published proposal

and request for comment. OFHEO will,

however, refrain at this time from

addressing the issue further absent a

fuller exploration of the matter. The

Enterprise or any other involved parties

may nevertheless seek to otherwise

clarify the issue through other

appropriate means.

Regulatory Impact

Executive Order 12866, Regulatory

Planning and Review

This final rule is not deemed to be a

significant rule under Executive Order

12866 because it will not result in (1)

An annual effect on the economy of

$100 million or more; (2) a major

increase in costs or prices for

consumers, individual industries,

Federal, State, or local government

agencies, or geographic regions; or (3)

significant adverse effects on

competition, employment, investment,

productivity, innovation or on the

ability of United States-based

enterprises to compete with foreignbased enterprises in domestic or foreign

markets. Accordingly, no regulatory

impact assessment is required and this

final rule has not been submitted to the

Office of Management and Budget for

review.

Regulatory Flexibility Act

The Regulatory Flexibility Act (5

U.S.C. 601 et seq.) requires that a rule

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 will not have a

significant economic impact on a

substantial number of small entities. 5

U.S.C. 605(b). OFHEO has considered

the impact of this final rule under the

Regulatory Flexibility Act. The General

Counsel certifies that this final rule will

not have a significant economic impact

on a substantial number of small

business entities.

Paperwork Reduction Act

This final rule does not contain any

information collection requirements that

require the approval of the Office of

Management and Budget under the

Paperwork Reduction Act (44 U.S.C.

3501 et seq.).

Unfunded Mandates Reform Act of 1995

This final rule does not require the

preparation of an assessment statement

in accordance with the Unfunded

Mandates Reform Act of 1995, 2 U.S.C.

1531. Assessment statements are not

required for regulations that incorporate

requirements specifically set forth in

law. As explained in the preamble, this

rule implements specific statutory

requirements. In addition, this rule does

not include a Federal mandate that may

result in the expenditure by State, local,

and tribal governments, in the aggregate,

or by the private sector, of $100 million

or more (adjusted annually for inflation)

in any one year.

List of Subjects in 12 CFR Part 1773

Administrative practice and

procedure, Flood insurance, Penalties,

Reporting and recordkeeping

requirements.

Accordingly, for the reasons stated in

the preamble, OFHEO adds 12 CFR part

1773 to subchapter C of Chapter XVII to

read as follows:

PART 1773—FLOOD INSURANCE

Sec.

1773.1 Authority and scope.

1773.2 Requirements.

1773.3 Civil money penalties.

Authority: 12 U.S.C. 4521(a)(4), 4513,

4536(a); 42 U.S.C. 4001 note; 28 U.S.C. 2461

note; 42 U.S.C. 4012a(f)(3), (4), (8), (9), (10).

§ 1773.1 Authority and scope.

(a) Authority. The National Flood

Insurance Act of 1968, title XII of Public

Law 90–448, Aug. 1, 1968, 42 U.S.C.

4002 et seq., and the Flood Disaster

Protection Act of 1973, 42 U.S.C. 4002

et seq., as amended by the National

Flood Insurance Reform Act of 1994

(‘‘NFIRA’’), Public Law 103–325, Sept.

23, 1994, 42 U.S.C. 4001–4129, together

create the National Flood Insurance

Program (‘‘NFIP’’) which established

specific requirements applicable to the

Enterprises. NFIRA designates OFHEO

as the Federal agency responsible for

determining compliance by the

Enterprises with these statutes and with

reporting to Congress biannually for six

years on the Enterprises’ compliance.

OFHEO has the authority to issue any

regulations necessary to carry out the

applicable provisions of NFIRA. OFHEO

is also charged with enforcing the

requirements of NFIRA as to the

Enterprises and provides for the

assessment of civil money penalties for

violations of the procedures established

by the Enterprises pursuant to the law

or implementing regulations.

(b) Scope. This part sets forth the

responsibilities of the Enterprises under

NFIRA and the procedures to be used in

any proceeding to assess civil money

penalties against an Enterprise under

NFIRA.

§ 1773.2 Requirements.

(a) Procedures. Each Enterprise shall

implement procedures reasonably

designed to ensure for any loan that is

secured by improved real estate or a

mobile home located in an area that has

been identified, at the time of the

origination of the loan or at any time

during the term of the loan, by the

Director of the Federal Emergency

Management Agency as an area having

special flood hazards and in which

flood insurance is available under the

NFIP, and purchased by such entity, the

building or mobile home and any

personal property securing the loan is

covered for the term of the loan by flood

insurance in an amount at least equal to

the lesser of the outstanding principal

balance of the loan or the maximum

limit of coverage made available with

respect to the particular type of property

under the NFIP.

65102 Federal Register / Vol. 66, No. 243 / Tuesday, December 18, 2001 / Rules and Regulations

(b) Applicability. (1) Paragraph (a) of

this section shall apply only with

respect to any loan made, increased,

extended, or renewed after September

22, 1995.

(2) Paragraph (a) of this section shall

not apply to any loan having an original

outstanding balance of $5,000 or less

and a repayment term of one year or

less.

§ 1773.3 Civil money penalties.

(a) In general. If an Enterprise is

determined by the Director of OFHEO to

have engaged in a pattern or practice of

purchasing loans in violation of the

procedures established pursuant to the

NFIA, as amended, or to § 1773.2, the

Director may assess civil money

penalties against such Enterprise in

such amount or amounts as deemed to

be appropriate under paragraph (c) of

this section.

(b) Notice and hearing. A civil money

penalty under this section may be

assessed only after notice and an

opportunity for a hearing on the record

has been provided under 12 CFR part

1780.

(c) Amount. A civil money penalty

under this section may not exceed $385

for each violation. The total amount of

penalties assessed under this section

against an Enterprise during any

calendar year may not exceed $110,000.

(d) Deposit of penalties. Any penalties

collected under this section shall be

paid into the National Flood Mitigation

Fund in accordance with 42 U.S.C.

4104d.

(e) Additional penalties. Any penalty

under this section shall be in addition

to, and shall not preclude, any civil

remedy or criminal penalty otherwise

available.

(f) Statute of limitations. No civil

money penalty may be imposed under

this section after the expiration of the

four-year period beginning on the date

of the occurrence of the violation for

which the penalty is authorized under

this section.

Dated: December 13, 2001.

Armando Falcon, Jr.,

Director, Office of Federal Housing Enterprise

Oversight.

[FR Doc. 01–31166 Filed 12–17–01; 8:45 am]

BILLING CODE 4220–01–U

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2001–SW–18–AD; Amendment

39–12561; AD 2001–25–08]

RIN 2120–AA64

Airworthiness Directives; Sikorsky

Model S–70A and S–70C Helicopters

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule; request for

comments.

SUMMARY: This amendment adopts a

new airworthiness directive (AD) for

Sikorsky Model S–70A and S–70C

helicopters. This action requires certain

inspections of each main landing gear

drag beam (beam) for a crack and

removing any cracked beam before

further flight. This action also requires

reducing the torque of the jackpad

mounting bolt retention nut (nut) of

each beam. This amendment is

prompted by failure of a beam due to

stress corrosion resulting from sustained

tensile stress due partly to excessive

torque of the nut. The actions specified

in this AD are intended to prevent

excessive torque of the nut, failure of a

beam, and subsequent loss of control of

the helicopter during takeoff or landing.

DATES: Effective January 2, 2002.

Comments for inclusion in the Rules

Docket must be received on or before

February 19, 2002.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Office of the

Regional Counsel, Southwest Region,

Attention: Rules Docket No. 2001–SW–

18–AD, 2601 Meacham Blvd., Room

663, Fort Worth, Texas 76137. You may

also send comments electronically to

the Rules Docket at the following

address: 9–asw–adcomments@faa.gov.

FOR FURTHER INFORMATION CONTACT:

Terry Fahr, Aviation Safety Engineer,

Boston Aircraft Certification Office, 12

New England Executive Park,

Burlington, MA 01803, telephone (781)

238–7155, fax (781) 238–7199.

SUPPLEMENTARY INFORMATION: This

amendment adopts a new AD for

Sikorsky Model S–70A and S–70C

helicopters. This action requires certain

inspections of each beam for a crack and

removing any cracked beam before

further flight. This AD also requires

reducing the torque of the nut on each

beam. This amendment is prompted by

the failure of a beam due to stress

corrosion resulting from sustained

tensile stress due partly to excessive

torque on the nut.

The FAA has reviewed Sikorsky Alert

Service Bulletin No. 70–03–2, dated July

26, 1999 (ASB). The ASB describes

procedures for reducing the torque on

each nut to 45–50 ft-lbs to reduce stress

to the beam.

We have identified an unsafe

condition that is likely to exist or

develop on other Sikorsky Model S–70A

and S–70C helicopters of the same type

designs. Therefore, this AD is being

issued to prevent excessive torque on a

nut, failure of a beam, and subsequent

loss of control of the helicopter during

takeoff or landing. The short compliance

time involved is required because the

previously described critical unsafe

condition can adversely affect the

controllability and structural integrity of

the helicopter. Therefore, within 30

hours time-in-service, the following

actions are required for the beam, and

this AD must be issued immediately:

• Visually inspect each beam for a

crack.

• If a crack is found, remove the beam

before further flight.

• If a crack is suspected, dyepenetrant inspect the beam, and if a

crack is found, remove the beam before

further flight.

• If no crack is found, reduce the

torque on the nut.

Since a situation exists that requires

the immediate adoption of this

regulation, it is found that notice and

opportunity for prior public comment

hereon are impracticable, and that good

cause exists for making this amendment

effective in less than 30 days.

The FAA estimates that 3 helicopters

on the U.S. register will be affected by

this AD, that it will take approximately

2 work hours to inspect the beam and

to reduce the torque on each nut, and 2

work hours to replace a cracked beam.

The average labor rate is $60 per work

hour. Required parts will cost

approximately $18,600 per beam. Based

on these figures, the total cost impact of

the AD on U.S. operators is estimated to

be $56,520, assuming one beam has to

be replaced on each affected helicopter.

Comments Invited

Although this action is in the form of

a final rule that involves requirements

affecting flight safety and, thus, was not

preceded by notice and an opportunity

for public comment, comments are

invited on this rule. Interested persons

are invited to comment on this rule by

submitting such written data, views, or

arguments as they may desire.

Communications should identify the

Rules Docket number and be submitted

in triplicate to the address specified