Rules of Practice and Procedure; Civil Money Penalty Inflation Adjustment

<RULE> FEDERAL HOUSING FINANCE AGENCY <CFR>12 CFR Parts 1209, 1217, and 1250</CFR> <RIN>RIN 2590-AB31</RIN> <SUBJECT>Rules of Practice and Procedure; Civil Money Penalty Inflation Adjustment</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Housing Finance Agency. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective January 18, 2024, and applicable beginning January 15, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Frank R. Wright, Assistant General Counsel, at (202) 649-3087, <E T="03">Frank.Wright@fhfa.gov</E> (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. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> 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). <SU>1</SU> <FTREF/> 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. <SU>2</SU> <FTREF/> 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. <SU>3</SU> <FTREF/> FHFA's Flood Insurance regulation (12 CFR part 1250) governs flood insurance responsibilities as they pertain to the Enterprises. <SU>4</SU> <FTREF/> 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 <E T="03">et seq.</E> ) 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 amount involved does not exceed $150,000. <SU>5</SU> <FTREF/> <FTNT> <SU>1</SU>   <E T="03">See</E> Safety and Soundness Act, 12 U.S.C. 4513 and 4631-4641. </FTNT> <FTNT> <SU>2</SU>   <E T="03">Id.</E> </FTNT> <FTNT> <SU>3</SU>   <E T="03">See</E> 12 CFR part 1209. </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> 12 CFR part 1250. </FTNT> <FTNT> <SU>5</SU>   <E T="03">See generally,</E> 31 U.S.C. 3801 <E T="03">et seq.</E> </FTNT> <HD SOURCE="HD1">The Adjustment Improvements Act</HD> 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. <SU>6</SU> <FTREF/> The Adjustment Improvements Act required agencies to make an initial “catch-up” adjustment of their CMPs upon the statute's enactment, <SU>7</SU> <FTREF/> and further requires agencies to make additional adjustments on an annual basis following the initial adjustment. <SU>8</SU> <FTREF/> <FTNT> <SU>6</SU>   <E T="03">See</E> 28 U.S.C. 2461 note. </FTNT> <FTNT> <SU>7</SU>  FHFA promulgated its catch-up adjustment of its CMPs with an interim final rule published July 1, 2016. 81 FR 43028. </FTNT> <FTNT> <SU>8</SU>  FHFA promulgated its most recent annual adjustment of its CMP with a final rule published December 29, 2022. 87 FR 80023. </FTNT> 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. <HD SOURCE="HD1">II. Description of the Rule</HD> 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. <SU>9</SU> <FTREF/> 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. <FTNT> <SU>9</SU>   <E T="03">See, e.g.,</E> 12 CFR 1209.7(c); FHFA Enforcement Policy, AB 2013-03 (May 31, 2013). </FTNT> 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. <SU>10</SU> <FTREF/> The maximum CMP amounts for FHFA penalties were last adjusted in 2023. <SU>11</SU> <FTREF/> Since FHFA is making this round of adjustments in calendar year 2024, and the maximum CMP amounts were last set in calendar year 2023, the inflation adjustment amount for each maximum CMP amount was calculated by comparing the CPI-U for October 2022 with the CPI-U for October 2023, resulting in an inflation factor of 1.03241. 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. <SU>12</SU> <FTREF/> The tables below set out these items accordingly. <FTNT> <SU>10</SU>  28 U.S.C. 2461 note. </FTNT> <FTNT> <SU>11</SU>   <E T="03">See</E> 87 FR 80023 (December 29, 2022). </FTNT> <FTNT> <SU>12</SU>  28 U.S.C. 2461 note. </FTNT> <GPOTABLE COLS="5" OPTS="L2,i1" CDEF="s50,r50,12,12,12"> <TTITLE>Enforcement Regulations</TTITLE> <CHED H="1">U.S. Code citation</CHED> <CHED H="1">Description</CHED> <ENT I="01">12 U.S.C. 4636(b)(1)</ENT> <ENT>First Tier</ENT> <ENT>13,760</ENT> <ENT>446</ENT> <ENT>14,206</ENT> </ROW> <ROW> <ENT I="01">12 U.S.C. 4636(b)(2)</ENT> <ENT>Second Tier</ENT> <ENT>68,801</ENT> <ENT>2,230</ENT> <ENT>71,031</ENT> </ROW> <ROW> <ENT I="01">12 U.S.C. 4636(b)(4)</ENT> <ENT>Third Tier (Entity-affiliated party or Regulated entity)</ENT> <ENT>2,752,048</ENT> <ENT>89,194</ENT> <ENT>2,841,242</ENT> </ROW> </GPOTABLE> <GPOTABLE COLS="5" OPTS="L2,i1" CDEF="s50,r50,12,12,12"> <TTITLE>Program Fraud Civil Remedies Regulation</TTITLE> <CHED H="1">U.S. Code citation</CHED> <CHED H="1">Description</CHED> <ENT I="01">31 U.S.C. 3802(a)(1)</ENT> <ENT>Maximum penalty per false claim</ENT> <ENT>13,508</ENT> <ENT>438</ENT> <ENT>13,946</ENT> </ROW> <ROW> <ENT I="01">31 U.S.C 3802(a)(2)</ENT> <ENT>Maximum penalty per false statement</ENT> <ENT>13,508</ENT> <ENT>438</ENT> <ENT>13,946</ENT> </ROW> </GPOTABLE> <GPOTABLE COLS="5" OPTS="L2,i1" CDEF="s50,r50,12,12,12"> <TTITLE>Flood Insurance Regulation</TTITLE> <CHED H="1">U.S. Code citation</CHED> <CHED H="1">Description</CHED> <ENT I="01">42 U.S.C. 4012a(f)(5)</ENT> <ENT>Maximum penalty per violation</ENT> <ENT I="01">42 U.S.C. 4012a(f)(5)</ENT> <ENT>Maximum total penalties assessed against an Enterprise in a calendar year</ENT> <ENT>192,996</ENT> <ENT>6,255</ENT> <ENT>199,251</ENT> </ROW> </GPOTABLE> <HD SOURCE="HD1">III. Differences Between the Federal Home Loan Banks and the Enterprises</HD> 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 liqui ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 18k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━