Mortgagee Review Board, 16605-16610 [E8-6323]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 73, Number 61 (Friday, March 28, 2008)]
[Proposed Rules]
[Pages 16605-16610]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-6323]



[[Page 16605]]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 25

[Docket No. FR-5082-P-01]
RIN 2510-AA01


Mortgagee Review Board

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make changes to the Department's 
Mortgagee Review Board (Board) regulations to clarify and better 
reflect statutory directives and amend current practice. This proposed 
rule would modify the Board's procedures governing hearings. Additional 
revisions proposed by this rule would remove provisions that 
unnecessarily duplicate the authorizing statute and would clarify the 
authority and duties of the Board in taking administrative action 
against mortgagees approved by the Federal Housing Administration. This 
proposed rule would separate and clarify the grounds for administrative 
action and the factors considered by the Board in evaluating whether to 
take administrative action, as well as require the mortgagee to address 
these factors in its response to the Board's notice of violation. 
Finally, other organizational changes would be made to improve overall 
clarity.

DATES: Comment Due Date: May 27, 2008.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500. Communications must 
refer to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, 
Washington, DC 20410-0001.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule. No Facsimile Comments. Facsimile (FAX) comments are not 
acceptable.

    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal 
Information Relay Service at (800) 877-8339. Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Dane Narode, Acting Associate General 
Counsel for Program Enforcement, Department of Housing and Urban 
Development, 1250 Maryland Avenue, Suite 200, Washington, DC 20024-
0500; telephone number (202) 708-2350 (this is not a toll-free number); 
e-mail: Dane_M._Narode@hud.gov. Hearing- and speech-impaired persons 
may access the voice telephone number listed above by calling the toll-
free Federal Information Relay Service at 1-(800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Mortgagee Review Board (Board) oversees the performance of 
lenders participating in the Federal Housing Administration (FHA) 
mortgage insurance programs. Section 1708(c) of the National Housing 
Act (12 U.S.C. 1708(c)) empowers the Board to initiate the issuance of 
a letter of reprimand, probation, suspension, or withdrawal of any 
mortgagee found to be engaging in activities in violation of FHA 
requirements or the nondiscrimination requirements of the Equal Credit 
Opportunity Act (15 U.S.C. 1691 et seq.), the Fair Housing Act (42 
U.S.C. 3601 et seq.), or Executive Order 11063, entitled ``Equal 
opportunity in housing.'' HUD's regulations implementing section 
1708(c) are located in 24 CFR part 25. The regulations governing the 
Board set forth the authority of the Board; administrative actions 
available and factors to be considered by the Board in taking such 
action; violations that give rise to administrative actions; the 
procedures involved in notifying mortgagees of a violation and 
administrative action, as well as any hearing that results; and provide 
for the publication and dissemination of information regarding actions.

II. This Proposed Rule

    This proposed rule would amend the regulations governing the Board 
at 24 CFR part 25. This section of the preamble describes the proposed 
regulatory changes.

A. Hearings To Be Conducted by Administrative Law Judges

    This proposed rule would permit hearings to be conducted by an 
Administrative Law Judge (ALJ). As proposed, hearings would be 
conducted in accordance with the applicable provisions of 24 CFR part 
26, with two modifications identified in the regulatory text. (The 
regulations codified in 24 CFR part 26 governing hearings that HUD is 
required to conduct pursuant to the Administrative Procedure Act (5 
U.S.C. 551 et seq.) will apply to these matters.) This change would 
eliminate the procedural delay whereby a matter is referred to a 
hearing official, who then perfunctorily refers the matter to a hearing 
officer. HUD is also proposing the removal of the definitions of 
``Hearing Official'' and ``Hearing Officer'' from Sec.  25.3, as a 
conforming change.

B. Inclusion of References To Authorizing Statute

    Additional revisions proposed by this rule would remove provisions 
that unnecessarily duplicate the authorizing statute (i.e., 12 U.S.C. 
1708), and are designed to clarify the authority and duties of the 
Board in taking administrative action against FHA-approved mortgagees. 
For example, Sec.  25.5, entitled ``Administrative Actions,'' addresses 
administrative actions available to the Board against

[[Page 16606]]

those mortgagees that fail to comply with either a directive of a 
letter of reprimand or a term of probation. Paragraphs (b) and (c) of 
Sec.  25.5 would be revised by referencing the statute as the source of 
actions available to the Board rather than the current reference of 
part 25.

C. Clarifying and Organizational Changes

    Section 25.2 would be revised to incorporate Sec.  25.12, as 
currently designated.
    The proposed rule would revise Sec.  25.2, which describes the 
authority for the establishment of the Board, to incorporate the 
provisions of current Sec.  25.12, regarding the authority of the Board 
to impose civil money penalties. Section 25.12 would be removed.
    Additionally, the proposed rule would remove the authority to 
delegate the power to impose administrative sanctions on the grounds 
specified in paragraphs (e), (h), and (u) of Sec.  25.6 or to take 
administrative actions for failure to remain in compliance with the 
requirements for approval in 24 CFR 202.5(i), 202.5(n), 202.7(b)(4), 
202.8(b)(1), and 202.8(b)(3). The Department has decided to return this 
action to the Board, conforming it to the Board's practice regarding 
sanctions for other violations.
    Finally, this proposed rule would remove reference to the 
delegation of the Board's authority to hold hearings under this part. 
This part now specifies that hearings are to be conducted by an 
Administrative Law Judge in accordance with the provisions of the 
Administrative Procedure Act, 5 U.S.C. 551 et seq. Therefore, the 
provision authorizing delegation of this authority is no longer 
necessary.
    Section 25.4 would be revised to cite directly to the statute and 
clarify the title of an advisor.
    Section 25.4(a) would be revised to cite to the statute for the 
identity of the members of the Board. Section 25.4(b) would be revised 
based on the change in title of one advisor to Director of the Office 
of Lender Activities and Program Compliance.
    Current Sec.  25.9 would be redesignated as new Sec.  25.6.
    Section 25.9, entitled ``Violations creating grounds for 
administrative action,'' would be redesignated as Sec.  25.6 so that 
the regulations reflect the progression of the administrative process. 
In addition to the redesignation, this section would also be revised. 
The language of the introductory paragraph has been moved to create a 
new Sec.  25.8. Redesignated Sec.  25.6(g) would be revised to provide 
that grounds for administrative action exist if a mortgagee fails to 
comply with any agreement, certification, undertaking, or condition of 
approval listed on, or applicable to, either a mortgagee's application 
for approval or an approved mortgagee's branch office notification. 
Redesignated Sec.  25.6(i) would be revised to change the reference 
from hearing official or officers to Administrative Law Judge to 
reflect the change in hearing procedures proposed by this rule. 
Redesignated Sec.  25.6(j) would be revised to include the violation of 
an agreement with HUD as creating grounds for administrative action. 
Redesignated Sec.  25.6(ff) would be revised to include a catchall 
provision whereby a violation of FHA requirements that the Board or the 
Secretary determines to be so serious creates grounds for 
administrative action.
    Current Sec.  25.6 would be redesignated as new Sec.  25.7.
    Section 25.6, entitled ``Notice of violation,'' would be 
redesignated as Sec.  25.7. This section would also be revised to 
clarify that proof of delivery of the notice of violation to the 
mortgagee's address of record establishes that the mortgagee has 
received the notice. New Sec.  25.7 also would provide that in 
responding to the notice, mortgagees must address the factors listed in 
new Sec.  25.8. HUD also proposes to add a provision to this section 
that would create an exception to the written notice of violation 
requirement before issuing a letter of reprimand, provided that the 
Board has received information that discloses a basis for the issuance 
of a letter of reprimand.
    Addition of a new Sec.  25.8.
    This proposed rule would separate and clarify the grounds for 
administrative action and the factors considered by the Board in 
evaluating whether to take administrative action under 12 U.S.C. 
1708(c). Further, this proposed rule would also require the mortgagee 
to address these factors in its response to the Board's notice of 
violation, which would assist in the Board's informed consideration of 
the factors. This proposed rule would eliminate the existing exception 
from consideration of the enumerated factors for those cases that are 
based on a mortgagee's failure to maintain basic threshold eligibility 
for FHA approval, as set forth in paragraphs (e), (h), and (u) of Sec.  
25 (i.e., (e) failure of a nonsupervised mortgagee to submit the 
required annual audit report of its financial condition prepared in 
accordance with instructions issued by the Secretary within 90 days of 
the close of its fiscal year, or such longer period as the Assistant 
Secretary of Housing--Federal Housing Commissioner may authorize in 
writing prior to the expiration of 90 days; (h) failure of an approved 
mortgagee to meet or maintain the applicable net worth, liquidity, or 
warehouse line of credit requirements of 24 CFR part 202 pertaining to 
net worth, liquid assets, and warehouse line of credit or other 
acceptable funding plan; and (u) failure to pay the application and 
annual fees required by 24 CFR part 202.) With the removal of the 
delegation from Sec.  25.2 for these cases, the Board will now consider 
the mortgagee's response to the Notice of Violation in the same manner 
as all other cases it considers.
    Current Sec.  25.7 is redesignated as new Sec.  25.9.
    Section 25.7, entitled ``Notice of administrative action,'' would 
be redesignated as Sec.  25.9. This section would also be revised to 
clarify that proof of delivery of a notice of administrative action to 
the mortgagee's address of record establishes that the mortgagee has 
received the notice. The section would also be amended to require that 
in actions for probation, suspension, or withdrawal, the notice must 
describe the nature and duration of the administrative action, specify 
the reasons for the action, inform the mortgagee of its right to a 
hearing, and inform the mortgagee of the time and manner in which to 
request a hearing.
    Current Sec.  25.8 is being redesignated as new Sec.  25.10.
    Section 25.8, entitled ``Hearings and hearing request,'' would be 
redesignated as Sec.  25.10. This section would also be revised to 
clarify that mortgagees that may be subject to probation, suspension, 
or withdrawal are entitled to a hearing, but a hearing must be 
requested. This section would also be revised to reflect the authority 
of an ALJ to conduct the hearing. As such, former Sec.  25.8(d)(2), 
entitled ``Referral to a hearing officer or other independent 
official,'' has been removed. Additionally, the proposed rule would 
revise the procedural rules governing a hearing. Hearings would be 
conducted in accordance with the provisions of 24 CFR part 26 governing 
hearings that are conducted in accordance with the Administrative 
Procedure Act, as those provisions are modified by this section.
    Current Sec.  25.14 is being redesignated as new Sec.  25.11.
    Section 25.14, entitled ``Prohibition against modification of Board 
orders,'' would be redesignated as new Sec.  25.11. This section would 
also be revised to reflect that under the proposed rule hearings are to 
be conducted by ALJs.

[[Page 16607]]

    Current Sec. Sec.  25.10, 25.11, and 25.13 are being consolidated 
into new Sec.  25.12.
    Section 25.10, entitled ``Publication in Federal Register of 
actions,'' Sec.  25.11, entitled ``Notification to other agencies,'' 
and Sec.  25.13, entitled ``Notifying GNMA of withdrawal actions,'' are 
being combined and redesignated as Sec.  25.12. In addition to 
including each of the referenced provisions, Sec.  25.12 would be 
revised to include a paragraph that provides for the availability of 
all non-privileged information regarding the nature of the violation 
and the resolution of the action to the public in cases where the 
notice of administrative action does not result in a hearing or in any 
case in which a settlement is entered into by the Board and a 
mortgagee.

III. Small Business Concerns Related to Board Enforcement Actions

    With respect to enforcement actions undertaken by the Board against 
a mortgagee, HUD is cognizant that section 222 of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) 
requires the Small Business and Agriculture Regulatory Enforcement 
Ombudsman to ``work with each agency with regulatory authority over 
small businesses to ensure that small business concerns that receive or 
are subject to an audit, on-site inspection, compliance assistance 
effort, or other enforcement related communication or contact by agency 
personnel are provided with a means to comment on the enforcement 
activity conducted by this personnel.'' To implement this statutory 
provision, the Small Business Administration has requested that federal 
agencies include the following language on agency publications and 
notices that are provided to small business concerns at the time the 
enforcement action is undertaken. The language is as follows:

    Your Comments Are Important
    The Small Business and Agriculture Regulatory Enforcement 
Ombudsman and 10 Regional Fairness Boards were established to 
receive comments from small businesses about federal agency 
enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to 
small business. If you wish to comment on the enforcement actions of 
[insert agency name], you will find the necessary comment forms at 
www.sba.gov/ombudsman or call 1-888-REG-FAIR (1-888-734-3247).

    In accordance with its notice describing HUD's actions on the 
implementation of SBREFA, which was published on May 21, 1998 (63 FR 
28214), HUD will provide small entities with information on the 
Fairness Boards and National Ombudsman program, at the time enforcement 
actions are taken, to ensure that small entities have the full means to 
comment on the enforcement activity conducted by HUD.

IV. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
Control Number 2502-0523. In accordance with the Paperwork Reduction 
Act, an agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information, unless the collection 
displays a valid OMB control number.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 605(b)) (RFA) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. This proposed rule 
would make changes to HUD's Mortgagee Review Board regulations at 24 
CFR part 25 to clarify and better reflect statutory directives and to 
amend current practice. All entities, small or large, are subject to 
the same penalties for violations of HUD requirements, as established 
by statute and implemented by the part 25 regulations. To the extent 
the rule has any impact on a small entity, it would be a result of the 
entity's failure to comply with HUD requirements.
    Accordingly, the undersigned certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities. Notwithstanding HUD's determination that this rule will not 
have a significant effect on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives, as described 
in this preamble.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern or regulate, real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act (42 U.S.C. 4321 et seq.).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of Section 6 of the Executive Order are met. This rule 
affects only mortgagees and does not have federalism implications and 
does not impose substantial direct compliance costs on state and local 
governments or preempt state law within the meaning of the Executive 
Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This proposed rule does not 
impose any federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

List of Subjects in 24 CFR Part 25

    Administrative practice and procedure, Loan programs-housing and 
community development, Organization and functions (Government 
agencies), Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, HUD proposes to amend 24 
CFR part 25 to read as follows:

PART 25--MORTGAGEE REVIEW BOARD

    1. The authority citation for 24 CFR part 25 continues to read as 
follows:

    Authority: 12 U.S.C. 1708(c), 1708(d), 1709(s), 1715b, and 
1735f-14; 42 U.S.C. 3535(d).

    2. Revise Sec.  25.2 to read as follows:


Sec.  25.2  Establishment and authority of Board.

    (a) Establishment of the Board. The Mortgagee Review Board (Board) 
was established in the Federal Housing Administration, which is in the 
Office of the Assistant Secretary for Housing--

[[Page 16608]]

Federal Housing Commissioner, by section 202(c)(1) of the National 
Housing Act (12 U.S.C. 1708(c)(1)), as added by section 142 of the 
Department of Housing and Urban Development Reform Act of 1989 (Pub. L. 
101-235, approved December 15, 1989).
    (b) Authority of the Board. The Board has the authority to initiate 
administrative actions against mortgagees and lenders under 12 U.S.C. 
1708(c) and shall exercise all of the functions of the Secretary with 
respect to administrative actions against mortgagees and lenders and 
such other functions as are provided in this part. The Board shall have 
all powers necessary and incident to the performance of these functions 
and such other functions as are provided in this part, except as 
limited by this part.
    (1) Administrative Actions. The Board has the authority to take any 
administrative action against mortgagees and lenders as provided in 12 
U.S.C. 1708(c). The Board may delegate its authority to take all 
nondiscretionary acts.
    (2) Civil Money Penalties. The Board is authorized pursuant to 
section 536 of the National Housing Act (12 U.S.C. 1735(f)-14) to 
impose civil money penalties upon mortgagees and lenders, as set forth 
in 24 CFR part 30. The violations for which a civil money penalty may 
be imposed are listed in subpart B (Violations) of 24 CFR part 30. 
Hearings to challenge the imposition of civil money penalties shall be 
conducted according to the applicable rules of 24 CFR part 30.
    (3) Authorization for other administrative actions. The Board may, 
in its discretion, approve the initiation of a suspension or debarment 
action against a mortgagee or lender by any Suspending or Debarring 
Official under 24 CFR part 24.
    3. In Sec.  25.3, remove the definitions of ``Hearing Official'' 
and ``Hearing Officer.''
    4. In Sec.  25.4, revise paragraphs (a) and (b) to read as follows:


Sec.  25.4  Operation of the Mortgagee Review Board.

    (a) Members. The Board consists of those HUD officials designated 
to serve on the Board by section 202(c)(2) of the National Housing Act 
(12 U.S.C. 1708(c)(2)).
    (b) Advisors. The Inspector General or his or her designee, and the 
Director of the Office of Lender Activities and Program Compliance (or 
such other position as may be assigned such duties), and such other 
persons as the Board may appoint, shall serve as nonvoting advisors to 
the Board.
* * * * *
    5. Revise Sec.  25.5 to read as follows:


Sec.  25.5  Administrative actions.

    (a) General. The Board is authorized to take administrative actions 
in accordance with 12 U.S.C. 1708(c), including, but not limited to, 
the following: issue a letter of reprimand, probation, suspension, or 
withdrawal; or enter into a settlement agreement.
    (b) Letter of reprimand. A letter of reprimand shall be effective 
upon receipt of the letter by the mortgagee. Failure to comply with a 
directive in the letter of reprimand may result in any other 
administrative action as provided by 12 U.S.C. 1708(c) that the Board 
finds appropriate.
    (c) Probation. Probation shall be effective upon receipt of the 
notice of probation by the mortgagee. Failure to comply with the terms 
of probation may result in any other administrative action as provided 
by 12 U.S.C. 1708(c) that the Board finds appropriate.
    (d) Suspension. (1) Effect of suspension. (i) During the period of 
suspension, HUD will not endorse any mortgage originated by the 
suspended mortgagee under the Title II program unless prior to the date 
of suspension:
    (A) A firm commitment has been issued relating to any such 
mortgage; or
    (B) A Direct Endorsement underwriter has approved the mortgagor for 
any such mortgage.
    (ii) During the period of suspension, a lender or loan 
correspondent may not originate new Title I loans under its Title I 
Contract of Insurance or apply for a new Contract of Insurance.
    (2) Effective date of suspension. A suspension issued pursuant to 
Sec.  25.7(d) is effective upon issuance. Any other suspension is 
effective upon receipt of the notice of suspension by the mortgagee.
    (e) Withdrawal. (1) Effect of withdrawal. (i) During the period of 
withdrawal, HUD will not endorse any mortgage originated by the 
withdrawn mortgagee under the Title II program, unless prior to the 
date of withdrawal:
    (A) A firm commitment has been issued relating to any such 
mortgage; or
    (B) A Direct Endorsement underwriter has approved the mortgagor for 
any such mortgage.
    (ii) During the period of withdrawal, a lender or loan 
correspondent may not originate new Title I loans under its Title I 
Contract of Insurance or apply for a new Contract of Insurance. The 
Board may limit the geographical extent of the withdrawal, or limit its 
scope (e.g., to either the single family or multifamily activities of a 
withdrawn mortgagee). Upon the expiration of the period of withdrawal, 
the mortgagee may file a new application for approval under 24 CFR part 
202.
    (2) Effective date of withdrawal. (i) If the Board determines that 
immediate action is in the public interest or in the best interests of 
the Department, then withdrawal shall be effective upon receipt of the 
Board's notice of withdrawal.
    (ii) If the Board does not determine that immediate action is 
necessary according to paragraph (e)(2)(i) of this section, then 
withdrawal shall be effective either:
    (A) Upon the expiration of the 30-day period specified in Sec.  
25.10, if the mortgagee has not requested a hearing; or
    (B) Upon receipt of the Board's decision under Sec.  25.10, if the 
mortgagee requests a hearing.


Sec. Sec.  25.10 and 25.11  [Removed]

    6. Remove Sec. Sec.  25.10 and 25.11.
    7. Redesignate Sec. Sec.  25.6, 25.7, 25.8, and 25.9 as Sec. Sec.  
25.7, 25.9, 25.10, and 25.6, respectively.
    8. In newly designated Sec.  25.6, revise the section heading, the 
introductory text, and paragraphs (g), (j), (x), and (ff), to read as 
follows:


Sec.  25.6  Violations creating grounds for administrative action.

    Any administrative action imposed under 12 U.S.C. 1708(c) shall be 
based upon one or more of the following violations:
* * * * *
    (g) Failure to comply with any agreement, certification, 
undertaking, or condition of approval listed on, or applicable to, 
either a mortgagee's application for approval or an approved 
mortgagee's branch office notification;
* * * * *
    (j) Violation of the requirements of any contract or agreement with 
the Department, or violation of the requirements set forth in any 
statute, regulation, handbook, mortgagee letter, or other written rule 
or instruction;
* * * * *
    (x) Failure to submit a report required under 24 CFR 202.12(c) 
within the time determined by the Commissioner, or to commence or 
complete a plan for corrective action under that section within the 
time agreed upon with the Commissioner.
* * * * *
    (ff) Any other violation of Federal Housing Administration 
requirements that the Board or the Secretary determines to be so 
serious as to justify an administrative sanction.

[[Page 16609]]

    9. Revise newly designated Sec.  25.7, to read as follows:


Sec.  25.7  Notice of violation.

    (a) General. The Chairperson of the Board, or the Chairperson's 
designee, shall issue a written notice to the mortgagee at the 
mortgagee's address of record at least 30 days prior to taking any 
action under 12 U.S.C. 1708(c) against the mortgagee. Proof of delivery 
to the mortgagee's address of record shall establish the mortgagee's 
receipt of the notice. The notice shall state the specific violations 
that have been alleged, and shall direct the mortgagee to reply in 
writing to the Board within 30 days after receipt of the notice by the 
mortgagee. The notice shall also provide the address to which the 
response shall be sent. If the mortgagee fails to reply during such 
time period, the Board may make a determination without considering any 
comments of the mortgagee.
    (b) Mortgagee's response. The mortgagee's response to the Board 
shall be in a format prescribed by the Secretary and shall not exceed 
15 double-spaced typewritten pages. The response shall include an 
executive summary, a statement of the facts surrounding the matter, an 
argument, and a conclusion. Such response shall also address the 
factors listed in Sec.  25.8. A more lengthy submission, including 
documents and other exhibits, may be simultaneously submitted to Board 
staff for review.
    (c) Exception for letter of reprimand. Whenever information comes 
before the Board that discloses a basis for the issuance of a letter of 
reprimand, the Board may issue the letter without having previously 
issued a notice of violation.
    (d) Exception for immediate suspension. If the Board determines 
that there exists adequate evidence that immediate action is required 
to protect the financial interests of the Department or the public, the 
Board may take a suspension action without having previously issued a 
notice of violation.
    10. Add Sec.  25.8, to read as follows:


Sec.  25.8  Factors considered in taking administrative action.

    In determining which administrative action under 12 U.S.C. 1708(c), 
if any, should be taken, the Board will consider, among other factors, 
the seriousness and extent of the violations, the degree of mortgagee 
responsibility for the occurrences, and any other mitigating or 
aggravating facts. Where the Board is considering the taking of a 
withdrawal action, the Board will also consider whether the violations 
were egregious or willful in order to determine whether a permanent 
withdrawal is mandated by 12 U.S.C. 1708(c).
    11. Revise newly designated Sec.  25.9 to read as follows:


Sec.  25.9  Notice of administrative action.

    (a) Whenever the Board decides to take an action in accordance with 
12 U.S.C. 1708(c)(3), the Chairperson of the Board, or the 
Chairperson's designee, shall issue a written notice of the action to 
the mortgagee at the mortgagee's address of record of the 
determination. Proof of delivery to the mortgagee's address of record 
shall establish the mortgagee's receipt of the notice.
    (b) In actions for probation, suspension, or withdrawal, the notice 
shall describe the nature and duration of the administrative action, 
and shall specifically state the reasons for the action. In actions for 
probation, suspension, or withdrawal, the notice shall inform the 
mortgagee of its right to a hearing, pursuant to Sec.  25.10, regarding 
the administrative action and of the manner and time in which to 
request a hearing.
    12. Revise newly designated Sec.  25.10 to read as follows:


Sec.  25.10  Hearings and hearing request.

    (a) Hearing request. A mortgagee subject to administrative action 
under 12 U.S.C. 1708(c) (except for a letter of reprimand) is entitled 
to a hearing, which, when requested, shall be held on the record. The 
mortgagee shall submit its request for a hearing within 30 days of 
receiving the Board's notice of administrative action. The request 
shall be addressed to the Mortgagee Review Board Docket Clerk, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Washington, DC 20410. The request shall specifically respond to the 
violations set forth in the notice of administrative action. If the 
mortgagee fails to request a hearing within 30 days after receiving the 
notice of administrative action, the Board's action shall become final.
    (b) Hearing by Administrative Law Judge. Hearings are to be 
conducted by an Administrative Law Judge (ALJ), as set forth in this 
part. The ALJ shall commence a de novo hearing within 30 days of HUD's 
receipt of the mortgagee's request, unless the parties agree to an 
extension. The ALJ may extend this time period for good cause.
    (c) Procedural rules. The hearing shall be conducted in accordance 
with the applicable provisions of 24 CFR part 26, with the following 
modifications:
    (1) The mortgagee or its representative shall be afforded an 
opportunity to appear, submit documentary evidence, present witnesses, 
and confront any witness the agency presents, except that the parties 
shall not be allowed to present members of the Board as witnesses.
    (2) Discovery of information and/or documents that do not pertain 
to the appealing mortgagee, including, but not limited to, reviews or 
audits by the Department or administrative actions by the Board against 
mortgagees other than the appealing mortgagee, shall not be permitted. 
Members of the Board shall not be subject to deposition.
    (3) The hearing shall generally be held in Washington, DC. However, 
upon a showing of undue hardship or other cause, the ALJ may, in his or 
her discretion, order the hearing to be held in a location other than 
Washington, DC.
    13. Revise Sec.  25.12 to read as follows:


Sec.  25.12  Public access to information; Publication of actions.

    (a) Where a notice of administrative action does not result in a 
hearing and in any cases in which a settlement is entered into by the 
Board and a mortgagee, all non-privileged information regarding the 
nature of the violation and the resolution of the action shall be 
available to the public.
    (b) Publication in the Federal Register. The Secretary shall 
publish, in the Federal Register, a description of and the cause for 
each administrative action taken by the Board against a mortgagee.
    (c) Notification of other agencies. Whenever the Board has taken 
any discretionary action to suspend and/or withdraw the approval of a 
mortgagee, the Secretary shall provide prompt notice of the action and 
a statement of the reasons for the action to the Secretary of Veterans 
Affairs; the chief executive officer of the Federal National Mortgage 
Association; the chief executive officer of the Federal Home Loan 
Mortgage Corporation; the Administrator of the Rural Housing Service 
(formerly the Farmers Home Administration); the Comptroller of the 
Currency, if the mortgagee is a National Bank or District Bank or 
subsidiary or affiliate of such a bank; the Board of Governors of the 
Federal Reserve System, if the mortgagee is a state bank that is a 
member of the Federal Reserve System or a subsidiary or affiliate of 
such a bank, or a bank holding company or a subsidiary or affiliate of 
such a company; the Board of Directors of the Federal Deposit Insurance 
Corporation, if the mortgagee is a state bank that is not a member of 
the Federal Reserve System, or is a subsidiary or affiliate of such a 
bank; and the Director of the

[[Page 16610]]

Office of Thrift Supervision, if the mortgagee is a federal or state 
savings association or a subsidiary or affiliate of a savings 
association.
    (d) Notification to GNMA of withdrawal actions. Whenever the Board 
issues a notice of violation that could lead to withdrawal of a 
mortgagee's approval, or is notified by GNMA of an action that could 
lead to withdrawal of GNMA approval, the Board shall proceed in 
accordance with 12 U.S.C. 1708(d).


Sec.  25.13  [Removed]

    14. Section 25.13 is removed.
    15. Section 25.14 is redesignated as Sec.  25.11 and is revised to 
read as follows:


Sec.  25.11  Prohibition against modification of Board orders.

    No ALJ before whom proceedings are conducted under Sec.  25.10 
shall modify or otherwise disturb in any way an order or notice by the 
Board until the hearing under Sec.  25.10 has been concluded. Any order 
issued by the presiding ALJ following the conclusion of the hearing 
under Sec.  25.10 shall not become effective until all administrative 
appeals have been exhausted.
    16. Redesignate Sec.  25.15 as Sec.  25.13.

    Dated: February 26, 2008.
Brian D. Montgomery,
 Assistant Secretary for Housing--Federal Housing Commissioner .
 [FR Doc. E8-6323 Filed 3-27-08; 8:45 am]
BILLING CODE 4210-67-P