Rules of Practice and Procedure; Civil Money Penalty Inflation Adjustment

CourtFederal Housing Finance Agency
Citation87 FR 1659
Record Number2022-00361
Publication Date12 January 2022
Federal Register, Volume 87 Issue 8 (Wednesday, January 12, 2022)
[Federal Register Volume 87, Number 8 (Wednesday, January 12, 2022)]
                [Rules and Regulations]
                [Pages 1659-1662]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2022-00361]
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                FEDERAL HOUSING FINANCE AGENCY
                12 CFR Parts 1209, 1217, and 1250
                RIN 2590-AA43
                Rules of Practice and Procedure; Civil Money Penalty Inflation
                Adjustment
                AGENCY: Federal Housing Finance Agency.
                ACTION: Final rule.
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                SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting this
                final rule amending its Rules of Practice and Procedure and other
                agency regulations to adjust each civil money penalty within its
                jurisdiction to account for inflation, pursuant to the Federal Civil
                Penalties Inflation Adjustment Act of 1990, as amended by the Federal
                Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
                DATES: Effective January 12, 2022, and applicable beginning January 15,
                2022.
                FOR FURTHER INFORMATION CONTACT: Frank R. Wright, Assistant General
                Counsel, at (202) 649-3087, [email protected] (not a toll-free
                number); Federal Housing Finance Agency, 400 7th Street SW, Washington,
                DC 20219. For TTY/TRS users with hearing and speech disabilities, dial
                711 and ask to be connected to any of the contact numbers above.
                SUPPLEMENTARY INFORMATION:
                I. Background
                 FHFA is an independent agency of the Federal government, and the
                financial safety and soundness regulator of the Federal National
                Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage
                Corporation (Freddie Mac) (collectively, the Enterprises), as well as
                the Federal Home Loan Banks (collectively, the Banks) and the Office of
                Finance under authority granted by the Federal Housing Enterprises
                Financial Safety and Soundness Act of 1992 (Safety and Soundness
                Act).\1\ FHFA oversees the Enterprises and Banks (collectively, the
                regulated entities) and the Office of Finance to ensure that they
                operate in a safe and sound manner and maintain liquidity in the
                housing finance market in accordance with applicable laws, rules and
                regulations. To that end, FHFA is vested with broad supervisory
                discretion and specific civil administrative enforcement powers,
                similar to such authority granted by Congress to the Federal bank
                regulatory agencies.\2\ Section 1376 of the Safety and Soundness Act
                (12 U.S.C. 4636) empowers FHFA to impose civil money penalties under
                specific conditions. FHFA's Rules of Practice and Procedure (12 CFR
                part 1209) (the Enforcement regulations) govern cease and desist
                proceedings, civil money penalty assessment proceedings, and other
                administrative adjudications.\3\ FHFA's Flood Insurance regulation (12
                CFR part 1250) governs flood insurance responsibilities as they pertain
                to the Enterprises.\4\ FHFA's Implementation of the Program Fraud Civil
                Remedies Act of 1986 regulation (12 CFR part 1217) sets forth
                procedures for imposing civil penalties and assessments under the
                Program Fraud Civil Remedies Act (31 U.S.C. 3801 et seq.) on any person
                that makes a false claim for property, services or money from FHFA, or
                makes a false material statement to FHFA in connection with a claim,
                where the
                [[Page 1660]]
                amount involved does not exceed $150,000.\5\
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                 \1\ See Safety and Soundness Act, 12 U.S.C. 4513 and 4631-4641.
                 \2\ Id.
                 \3\ See 12 CFR part 1209.
                 \4\ See 12 CFR part 1250.
                 \5\ See generally, 31 U.S.C. 3801 et seq.
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                The Adjustment Improvements Act
                 The Federal Civil Penalties Inflation Adjustment Act of 1990
                (Inflation Adjustment Act), as amended by the Federal Civil Penalties
                Inflation Adjustment Act Improvements Act of 2015 (Adjustment
                Improvements Act), requires FHFA, as well as other federal agencies
                with the authority to issue civil money penalties (CMPs), to adjust by
                regulation the maximum amount of each CMP authorized by law that the
                agency has jurisdiction to administer.\6\ The Adjustment Improvements
                Act required agencies to make an initial ``catch-up'' adjustment of
                their CMPs upon the statute's enactment,\7\ and further requires
                agencies to make additional adjustments on an annual basis following
                the initial adjustment.\8\
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                 \6\ See 28 U.S.C. 2461 note.
                 \7\ FHFA promulgated its catch-up adjustment of its CMPs with an
                interim final rule published July 1, 2016. 81 FR 43028.
                 \8\ FHFA promulgated its most recent annual adjustment of its
                CMP with a final rule published January 29, 2021. 86 FR 7493.
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                 The Adjustment Improvements Act sets forth the formula that
                agencies must apply when making annual adjustments, based on the
                percent change between the October Consumer Price Index for All Urban
                Consumers (the CPI-U) preceding the date of the last adjustment and the
                October CPI-U for the year before that.
                II. Description of the Rule
                 This final rule adjusts the maximum penalty amount within each of
                the three tiers specified in 12 U.S.C. 4636 by amending the table
                contained in 12 CFR 1209.80 of the Enforcement regulations to reflect
                the new adjusted maximum penalty amount that FHFA may impose upon a
                regulated entity or any entity-affiliated party within each tier. The
                increases in maximum penalty amounts contained in this final rule may
                not necessarily affect the amount of any CMP that FHFA may seek for a
                particular violation, which may not be the maximum that the law allows;
                FHFA would calculate each CMP on a case-by-case basis in light of a
                variety of factors.\9\ This rule also adjusts the maximum penalty
                amounts for violations under the FHFA Flood Insurance regulation by
                amending the text of 12 CFR 1250.3 to reflect the new adjusted maximum
                penalty amount that FHFA may impose for violations under that
                regulation. This rule also adjusts the maximum amounts for civil money
                penalties under the Program Fraud Civil Remedies Act by amending the
                text of 12 CFR 1217.3 to reflect the new adjusted maximum penalty
                amount that FHFA may impose for violations under that regulation.
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                 \9\ See, e.g., 12 CFR 1209.7(c); FHFA Enforcement Policy, AB
                2013-03 (May 31, 2013).
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                 The Adjustment Improvements Act directs federal agencies to
                calculate each annual CMP adjustment as the percent change between the
                CPI-U for the previous October and the CPI-U for October of the
                calendar year before.\10\ The maximum CMP amounts for FHFA penalties
                were last adjusted in 2021.\11\ Since FHFA is making this round of
                adjustments in calendar year 2022, and the maximum CMP amounts were
                last set in calendar year 2021, the inflation adjustment amount for
                each maximum CMP amount was calculated by comparing the CPI-U for
                October 2020 with the CPI-U for October 2021, resulting in an inflation
                factor of 1.06222. For each maximum CMP calculation, the product of
                this inflation adjustment and the previous maximum penalty amount was
                then rounded to the nearest whole dollar as required by the Adjustment
                Improvements Act, and was then summed with the previous maximum penalty
                amount to determine the new adjusted maximum penalty amount.\12\ The
                tables below set out these items accordingly.
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                 \10\ 28 U.S.C. 2461 note.
                 \11\ See 86 FR 7493 (January 29, 2021).
                 \12\ 28 U.S.C. 2461 note.
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                 Rounded New adjusted
                 U.S. Code citation Description Previous maximum inflation maximum penalty
                 penalty amount increase amount
                ----------------------------------------------------------------------------------------------------------------
                 Enforcement Regulations
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                12 U.S.C. 4636(b)(1)............. First Tier............... 12,023 748 12,771
                12 U.S.C. 4636(b)(2)............. Second Tier.............. 60,115 3,740 63,855
                12 U.S.C. 4636(b)(4)............. Third Tier (Entity- 2,404,608 149,615 2,554,223
                 affiliated party or
                 Regulated entity).
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                 Program Fraud Civil Remedies Regulation
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                31 U.S.C. 3802(a)(1)............. Maximum penalty per false 11,803 734 12,537
                 claim.
                31 U.S.C. 3802(a)(2)............. Maximum penalty per false 11,803 734 12,537
                 statement.
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                 Flood Insurance Regulation
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                42 U.S.C. 4012a(f)(5)............ Maximum penalty per 585 36 621
                 violation.
                42 U.S.C. 4012a(f)(5)............ Maximum total penalties 168,631 10,492 179,123
                 assessed against an
                 Enterprise in a calendar
                 year.
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                III. Differences Between the Federal Home Loan Banks and the
                Enterprises
                 When promulgating any regulation that may have future effect
                relating to the Banks, the Director is required by section 1313(f) of
                the Safety and Soundness Act to consider the differences between the
                Banks and the Enterprises with respect to the Banks' cooperative
                ownership structure, mission of providing liquidity to members,
                affordable housing and community development mission, capital
                structure, and joint and several liability (12 U.S.C. 4513(f)).\13\ The
                Director considered the differences between the Banks and the
                Enterprises, as they relate to the above factors, and determined that
                this final rule is appropriate. The inflation adjustments effected by
                the final rule are mandated by law, and the special features of the
                Banks identified in section 1313(f) of the Safety and Soundness Act can
                be accommodated, if appropriate, along with any other relevant factors,
                when determining any actual penalties.
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                 \13\ So in original; no paragraphs (d) and (e) were enacted. See
                12 U.S.C.A. 4513 n 1.
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                [[Page 1661]]
                IV. Regulatory Impact
                Administrative Procedure Act
                 FHFA finds good cause that notice and an opportunity to comment on
                this final rule are unnecessary under section 553(b) of the
                Administrative Procedure Act (APA), 5 U.S.C. 553(b). The Adjustment
                Improvements Act states that the annual civil money penalty adjustments
                shall be made notwithstanding the rulemaking provisions of 5 U.S.C.
                553.\14\ Furthermore, this rulemaking conforms with and is consistent
                with the statutory directive set forth in the Adjustment Improvements
                Act. As a result, there are no issues of policy discretion about which
                to seek public comment. Accordingly, FHFA is adopting these amendments
                as a final rule.
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                 \14\ 28 U.S.C. 2461 note, section 4(b)(2).
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                Regulatory Flexibility Act
                 Pursuant to the Regulatory Flexibility Act (RFA),\15\ an agency
                must prepare a regulatory flexibility analysis for all proposed and
                final rules that describes the impact of the rule on small entities,
                unless the head of an agency certifies that the rule will not have ``a
                significant economic impact on a substantial number of small
                entities.'' However, the RFA applies only to rules for which an agency
                publishes a general notice of proposed rulemaking pursuant to the
                APA.\16\ As discussed above, FHFA has determined for good cause that
                the APA does not require a general notice of proposed rulemaking for
                this rule. Thus, the RFA does not apply to this final rule.
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                 \15\ 5 U.S.C. 603.
                 \16\ 5 U.S.C. 603(a), 604(a).
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                Congressional Review Act
                 The rule is not a ``major rule'' as defined by the Congressional
                Review Act, codified at 5 U.S.C. 801 et seq. The rule will not result
                in: (1) An annual effect on the economy of $100,000,000 or more; (2) a
                major increase in costs or prices; or (3) significant adverse effects
                on competition, employment, investment, productivity, innovation, or
                the ability of United States-based companies to compete with foreign-
                based companies.\17\
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                 \17\ 5 U.S.C. 804(2).
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                Paperwork Reduction Act
                 The Paperwork Reduction Act (44 U.S.C. 3501 et seq.) requires that
                regulations involving the collection of information receive clearance
                from the Office of Management and Budget (OMB). This rule contains no
                such collection of information requiring OMB approval under the
                Paperwork Reduction Act. Consequently, no information has been
                submitted to OMB for review.
                Lists of Subjects
                12 CFR Part 1209
                 Administrative practice and procedure, Penalties.
                12 CFR Part 1217
                 Civil remedies, Program fraud.
                12 CFR Part 1250
                 Flood insurance, Government-sponsored enterprises, Penalties,
                Reporting and record keeping requirements.
                 Accordingly, for the reasons stated in the preamble and under the
                authority of 12 U.S.C. 4513b and 12 U.S.C. 4526, the Federal Housing
                Finance Agency hereby amends subchapters A and C of chapter XII of
                Title 12 of the Code of Federal Regulations as follows:
                Subchapter A--Organization and Operations
                PART 1209--RULES OF PRACTICE AND PROCEDURE
                0
                1. The authority citation for part 1209 continues to read as follows:
                 Authority: 5 U.S.C. 554, 556, 557, and 701 et seq.; 12 U.S.C.
                1430c(d); 12 U.S.C. 4501, 4502, 4503, 4511, 4513, 4513b, 4517, 4526,
                4566(c)(1) and (c)(7), 4581-4588, 4631-4641; and 28 U.S.C. 2461
                note.
                0
                2. Revise Sec. 1209.80 to read as follows:
                Sec. 1209.80 Inflation adjustments.
                 The maximum amount of each civil money penalty within FHFA's
                jurisdiction, as set by the Safety and Soundness Act and thereafter
                adjusted in accordance with the Inflation Adjustment Act, is as
                follows:
                 Table 1 to Sec. 1209.80
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                 New adjusted
                 U.S. Code citation Description maximum penalty
                 amount
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                12 U.S.C. 4636(b)(1).......... First Tier............ $12,771
                12 U.S.C. 4636(b)(2).......... Second Tier........... 63,855
                12 U.S.C. 4636(b)(4).......... Third Tier (Regulated 2,554,223
                 Entity or Entity-
                 Affiliated party).
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                0
                3. Revise Sec. 1209.81 to read as follows:
                Sec. 1209.81 Applicability.
                 The inflation adjustments set out in Sec. 1209.80 shall apply to
                civil money penalties assessed in accordance with the provisions of the
                Safety and Soundness Act, 12 U.S.C. 4636, and subparts B and C of this
                part, for violations occurring on or after January 15, 2022.
                PART 1217--PROGRAM FRAUD CIVIL REMEDIES ACT
                0
                4. The authority citation for part 1217 continues to read as follows:
                 Authority: 12 U.S.C. 4501; 12 U.S.C. 4526; 28 U.S.C. 2461 note;
                31 U.S.C. 3801-3812.
                0
                5. Amend Sec. 1217.3 by revising paragraphs (a)(1) introductory text
                and (b)(1) introductory text to read as follows:
                 Sec. 1217.3 Basis for civil penalties and assessments.
                 (a) * * *
                 (1) A civil penalty of not more than $12,537 may be imposed upon a
                person who makes a claim to FHFA for property, services, or money where
                the person knows or has reason to know that the claim:
                * * * * *
                 (b) * * *
                 (1) A civil penalty of up to $12,537 may be imposed upon a person
                who makes a written statement to FHFA with respect to a claim,
                contract, bid or proposal for a contract, or benefit from FHFA that:
                * * * * *
                Subchapter C--Enterprises
                PART 1250--FLOOD INSURANCE
                0
                6. The authority citation for part 1250 continues to read as follows:
                [[Page 1662]]
                 Authority: 12 U.S.C. 4521(a)(4) and 4526; 28 U.S.C. 2461 note;
                42 U.S.C. 4001 note; 42 U.S.C. 4012a(f)(3), (4), (5), (8), (9), and
                (10).
                0
                7. Amend Sec. 1250.3 by revising paragraph (c) to read as follows:
                Sec. 1250.3 Civil money penalties.
                * * * * *
                 (c) Amount. The maximum civil money penalty amount is $621 for each
                violation that occurs before January 15, 2022, with total penalties not
                to exceed $179,123. For violations that occur on or after January 15,
                2022, the civil money penalty under this section may not exceed $621
                for each violation, with total penalties assessed under this section
                against an Enterprise during any calendar year not to exceed $179,123.
                * * * * *
                Sandra L. Thompson,
                Acting Director, Federal Housing Finance Agency.
                [FR Doc. 2022-00361 Filed 1-11-22; 8:45 am]
                BILLING CODE 8070-01-P
                

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