[Federal Register Volume 66, Number 243 (Tuesday, December 18, 2001)]
[Rules and Regulations]
[Pages 65097-65102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31166]
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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.
[[Page 65098]]
ACTION: Final Regulation.
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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 housing-related 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.
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\1\ 12 U.S.C. 4501 et seq.
\2\ Federal National Mortgage Association Charter Act (12 U.S.C.
1716-1723i) and Federal Home Loan Mortgage Corporation Act (12
U.S.C. 1451-1459).
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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\
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\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.
\5\ Pub. 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).
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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\
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\10\ Pursuant 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).
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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.
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\12\ 28 U.S.C. 2461 note.
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[[Page 65099]]
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 cost-of-living adjustment. As
is described in detail below, the Inflation Adjustment Act provides
that this cost-of-living adjustment is to reflect the percentage
increase in the Consumer Price Index since the 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.
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\13\ The statute's rounding rules require that each increase be
rounded to the nearest multiple as follows: $10 in the case of
penalties less than or equal to $100; $100 in the case of penalties
greater than $100 but less than or equal to $1,000; $1,000 in the
case of penalties greater than $1,000 but less than or equal to
$10,000; $5,000 in the case of penalties greater than $10,000 but
less than or equal to $100,000; $10,000 in the case of penalties
greater than $100,000 but less than or equal to $200,000; and
$25,000 in the case of penalties greater than $200,000.
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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\
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\14\ 42 U.S.C. 4012a(f)(3).
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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 Sec. 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 four-year period beginning on
the date of the occurrence of the violation for which the penalty is
authorized.
[[Page 65100]]
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 (Sec. 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 (Sec. 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 (Sec. 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.
[[Page 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 foreign-based enterprises in domestic or foreign markets.
Accordingly, no regulatory impact assessment is required and this final
rule has not been submitted to the Office of Management and Budget for
review.
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).
Sec. 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.
Sec. 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.
[[Page 65102]]
(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.
Sec. 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 Sec. 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