[57 F.R. 31645 (July 17, 1992)]
FR Rules Of Practice For Proceedings Adoption:
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
12 CFR Part 1102
[Docket No. AS92-1]
APPRAISAL REGULATION; RULES OF PRACTICE FOR PROCEEDINGS
AGENCY: Appraisal Subcommittee, Federal Financial Institutions Examination Council.
ACTION: Final Rule.
SUMMARY: The Appraisal Subcommittee ("ASC") of the Federal Financial Institutions Examination Council ("FFIEC") adopts Rules of Practice For Proceedings as part of its appraisal regulations. These Rules are designed to govern proceedings under section 1118 of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") for the nonrecognition of State real estate appraiser licensing and certification designations and systems and other proceedings to take such further action to carry out the purposes of Title XI under section 1119(c) of that Title. Congress intended Title XI of FIRREA and the ASC and the Federal Financial Institutions Regulatory Agencies and the Resolution Trust Corporation ("RTC") (collectively "Agencies") to protect federal financial and public policy interests in real estate-related financial transactions requiring the services of an appraiser.
EFFECTIVE DATE: [Insert date 30 days after publication in the FEDERAL REGISTER].
FOR FURTHER INFORMATION CONTACT: Edwin W. Baker, Executive Director, or Marc L. Weinberg, General Counsel, at (202) 634-6520, Appraisal Subcommittee, 2100 Pennsylvania Avenue, N.W., Suite 200, Washington, D.C. 20037.
On August 9, 1989, Congress adopted FIRREA, including section 1102 of Title XI, which established the ASC and placed it within the FFIEC. The ASC consists of representatives appointed by the heads of the federal financial institutions regulatory agencies and the Department of Housing and Urban Development. Congress intended Title XI of FIRREA, the ASC and the Agencies to protect federal financial and public policy interests in real estate-related financial transactions requiring the services of an appraiser.-9
The ASC has several statutory duties under Title XI. Among other things, it must monitor the appraisal regulations adopted by the Agencies. Those regulations set out appraisal standards for federally related transactions and define those federally related transactions requiring the services of a State certified or State licensed appraiser. The ASC also must monitor and review the practices, procedures, activities, and organizational structure of the Appraisal Foundation. And last, the ASC must monitor each State's certification and licensing programs for real estate appraisers and must review each State's compliance with the requirements of Title XI. It also is authorized by Title XI to take action against non-complying States.
II. Statutory Authority
A. Non-recognition proceedings
Pursuant to section 1118 of Title XI, financial institutions, the Agencies, the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC") generally must accept appraisals in federally related transactions performed by persons licensed or certified by a State agency. In monitoring State compliance with Title XI, the ASC, however, can "disapprove" or "not recognize appraiser certifications and licenses from States whose appraisal policies, practices or procedures are found to be inconsistent with [Title XI]."
Paragraph (b) of section 1118 describes what is meant by "non-recognition" in the context of Title XI and sets out the grounds on which the ASC can order non-recognition. If the ASC were to order non-recognition of a State agency's certifications and licenses, the ASC, all Federal financial institutions, and the Agencies, together with FNMA and FHLMC, could not rely on appraisals prepared by persons who are licensed and/or certified to appraise federally related transactions within that State agency's jurisdiction. The ASC can order non-recognition only if it makes a written finding that the State is failing to meet one or more of these statutory duties:
(1) the [State agency must] recognize and enforce the standards, requirements, and procedures prescribed pursuant to [Title XI];
(2) the [State agency must be] granted authority by the State which is adequate to permit the agency to carry out its functions under [Title XI]; or
(3) decisions concerning appraisal standards, appraiser qualifications and supervision of appraiser practices [must be] made in a manner that carries out the purposes of [Title XI].
Paragraph (c) of section 1118 provides a State with certain procedural protections before the ASC can choose not to recognize its appraiser certifications and licenses. First, the ASC must provide the offending State agency with "a written notice of [the ASC's] intention not to recognize the State's certified or licensed appraisers." Second, the ASC must give the State agency "ample opportunity to provide rebuttal information or to correct the conditions causing the refusal." Last, the ASC must "adopt written procedures for
. . . [non-recognition] actions."
B. "Other Proceedings" under section 1119(c) of Title XI
Section 1119(c) requires the ASC to "report any action of a State certified or licensed appraiser that is contrary to the purposes of [Title XI] . . . to the appropriate [State agency] for a disposition of the subject of the referral." The State agency then must provide the ASC "with a report on its disposition of the matter referred." After receiving the report, the ASC "may take such further action, pursuant to written procedures, it deems necessary to carry out the purposes of [Title XI]."
III. Summary of Comments and Recommendations
The ASC published 12 CFR part 1102, subpart B ("subpart B" or "subpart") for public comment at 57 F.R. 10146 (March 24, 1992) ("Proposal"). As discussed and analyzed in detail below, the ASC received a total of seven comment letters: five from financial industry trade associations and two from financial institutions in response to the Proposal. No comment letters, however, were received from State agencies even though they are most directly affected by the proposal.
Comment letters were received from the: (1) American Bankers Association ("ABA"); (2) Independent Bankers Association of America ("IBAA"); (3) United States League of Savings Institutions ("USL"); (4) Mortgage Bankers Association of America ("MBA"); (5) Independent Community Banks of North Carolina ("ICB"); (6) The Fountain Trust Company ("FT"); and (7) Meridian Bancorp, Inc. ("MB"). The ASC thanks the commentators for their thoughtful observations and suggestions.
Most of the commentators generally supported the adoption of subpart B, either by explicit statement or by implication. For example, the IBAA and the USL stated explicitly their support for adoption of the subpart, while others, like the MBA, signalled their general support by noting that "[i]n general, MBA believes the proposed rule strikes an appropriate balance between [outside input and the need to act expeditiously]." Other commentators, like the ABA, focused on technical aspects of the proposed subpart and did not criticize it in a general way. The commentators' suggestions concentrated on: (1) the devastating effects of a non-recognition order; (2) the need to liberalize the proposed subpart's time frames; (3) the desirability of ensuring the broadest possible participation of affected persons in proceedings; and (4) the clarification of other, more technical, requirements. In response to those comments, the ASC today is adopting a modified version of subpart B.
IV. Discussion of Comments and Responses
A. The devastating effect of non-recognition findings and the use of out-of-State, certified or licensed appraisers
In the Proposal, the ASC described the effects of a non-recognition order in this manner:
[T]he State's real estate market in federally related transactions would be hindered, and Federally-insured banks and credit unions might have to bring in out-of-State certified or licensed appraisers (from complying States) to perform needed appraisals.
Six of the seven commentators criticized the ASC for understating the effects of a non-recognition order. Most of them commented that such an order would bring the State's real estate market to a "halt" and would be "devastating" to the State and its lenders, borrowers, real estate agents, builders and others.
The ASC agrees with these observations and assures the commentators and other interested members of the public that it has been, and will remain, acutely aware of these likely consequences. Indeed, the entire structure of subpart B, i.e., the balancing of due process concerns with expeditious treatment, reflects the ASC's sensitivity to the severity of these consequences. The ASC, however, notes that Congress also must have been aware of these likely consequences when it crafted and adopted section 1118 of Title XI. In fact, under Title XI, it is up to the States (and indirectly all persons involved in the State's marketplace for Federally related transactions, such as financial institutions, appraisers, purchasers and sellers) to comply fully with those sections of Title XI that concern them. And, it is certainly within each State's control to avoid a non-recognition order. In contrast, the Congress gave the ASC the responsibility to monitor each State's real estate appraiser licensing and certification scheme and to take action, in a fair manner, under section 1118 of Title XI whenever such action is appropriate. While the ASC hopes that it will never have to order the non-recognition of a State's appraiser licenses or certifications, it must be prepared to do so. At the very least, the existence of the draconian remedy of non-recognition should help to assure that each State will: (1) communicate, cooperate and coordinate its efforts with the ASC; (2) implement Title XI fully, promptly, efficiently and effectively; and (3) fairly and persistently enforce compliance with the spirit and letter of Title XI within its borders.
Four of the seven commentators criticized the ASC for its statement regarding the use of out-of-State licensed or certified appraisers. The commentators noted that the use of such appraisers would "impose significant delays and additional unnecessary costs . . . [and] be a practical impossibility" (ABA) and would "not be feasible" (ICB); and that those appraisers would "have no reason to travel to . . . a non-recognized state . . . ." (IBAA), and "the price of [those] appraisers, when you could get them, would shoot up astronomically" (FT).
The ASC's remark merely was intended to remind the States and other interested persons that licensed or certified appraisers in other States may be available to reduce some of the hardships following a non-recognition order. The ASC agrees with the commentators that out-of-State licensed or certified appraisers will not alleviate to any substantial degree a "non-recognized" State's difficulties, and that significant delays in obtaining appraisals in Federally related transactions and higher appraisal costs would result. The possibility of these difficulties, however, serves a positive purpose under Title XI because they are necessary and foreseeable consequences of a State's failure to comply with Title XI, i.e., Federal law.
B. ASC sensitivity to special State considerations
Three commentators noted the need for the ASC to be aware of considerations unique to the States when deciding whether to issue a non-recognition order. More specifically, the USL noted that the ASC "must be sensitive to the limitations to which individual states might be subject . . . [and be] aware of the problems faced by states in implementing a system which for most is a completely new undertaking [and evolving]." Further, the IBAA and, to some degree, the FT, underlined the need for the ASC to consider that "many states' legislatures meet only a few months a year and in some states only once every two years
. . . .," and that the real estate market in such an offending State could "be paralyzed for months" until corrective legislation can be passed. The IBAA further recommended that "the ASC allow financial institutions in such a State to continue to use licensed and certified appraisers from the state until the state legislature amends its appraiser laws . . . ."
The ASC assures the commentators and other interested members of the public that it has been, and will remain, sensitive to special situations, whether mitigating or aggravating, existing in the States, and the evolutionary nature of appraisal reform. As the ASC noted in the Proposal, at 10144, subpart B contains "provisions implementing the ASC's intentions to make a good faith effort, whenever possible, to work out all disputes, problems, issues, misunderstandings, and other difficulties . . . before . . . the commencement of formal proceedings." The ASC will make every effort to consider all relevant factors, including those presented by the commentators, in determining whether to commence a non-recognition proceeding against a particular State.
The ASC also will consider in its deliberations the infrequency in which some State legislatures meet. To ensure that the ASC has the flexibility to address these concerns, the ASC has amended ' 1102.37 of subpart B to allow the ASC to issue a non-recognition order "containing specified terms and conditions as it deems appropriate." States, however, should not rely heavily on this new flexibility; the ASC believes that its remarks above in connection with the consequences from a non-recognition order are also applicable here. The States, together with other potentially affected persons within the States, can avoid the consequences of a non-recognition order by making a good faith effort to comply fully with Title XI.
C. The proposed subpart's time frames
All of the commentators, except the ABA, recommended an extension of the time frames in '' 1102.32, 1102.33(a), 1102.34 and 1102.36(b) of the proposed subpart.
As discussed below, the ASC agrees with the commentators and, in general, is extending the various time frames in subpart B. The ASC continues to believe, however, that its proceedings under subpart B should be vigorously and expeditiously pursued, given the fundamental interests involved. As noted above, the need for expeditious treatment was acknowledged by commentators.
More specifically, the IBAA and the ICB respectively suggested that the minimum 21 calendar day information gathering phase in ' 1102.32 be extended to 30 working days and 60 calendar days. The ASC has determined to extend this time frame from 21 calendar days to 30 working days and has amended ' 1102.32 accordingly. This additional two weeks or so should help to assure the ASC and the other parties to the proceeding that there is sufficient time to file and develop all pertinent information relating to the proceeding.
The MBA, USL, IBAA, FT and MB stated that the 15 calendar day deadline for filing a Rebuttal or a Notice Not To Contest was too brief. The MBA and USL respectively suggested that the period be extended to 20 and 30 days. The IBAA, however, recommended an extension to 20 working days. The ASC has determined to extend this time frame from 15 calendar days to 20 working days. This extension ordinarily should provide a party with an additional week to prepare a response to the Notice of Intention.
Finally, the MBA and MB criticized as too short the 10 calendar day period for responding to briefs, memoranda and statements under ' 1102.34 of the subpart. The MBA suggested that the response period be lengthened to 20 calendar days. In response, and in keeping with the general change to working days, the ASC is amending ' 1102.34's time period to 15 working days. This extension should provide the responding party with an additional week.
D. Broader participation in the proceeding
A number of the commentators requested that the ASC amend the subpart to allow the participation of all entities and individuals that will be directly affected by an adverse ASC decision. For example, the IBAA commented:
Because of the dramatic impact a decision of nonrecognition would have on a state's overall economy and in the "public interest[,]" the ASC must allow banks lenders, consumer groups, and residential and commercial building industries from the affected state to express their concerns to the ASC and participate in the proceedings.
In response, the ASC has amended ' 1102.34 of the subpart. New paragraph (b) of the section allows "any person with a demonstrable, direct interest in the outcome of [a nonrecognition] proceeding" to file with the ASC's Secretary a written brief, memorandum or other statement providing factual data and policy and legal arguments regarding the matters set out in the Notice of Intention. [Emphasis added.]
Two features of Paragraph (b) merit some discussion. First, the paragraph only relates to non-recognition proceedings, i.e., proceedings under section 1118 of Title XI. It does not apply to other ASC proceedings pursuant to section 1119(c) of that Title.
Second, the ASC and its staff will not assume that any person has a demonstrable, direct interest in the outcome of a non-recognition proceeding. The submitting person has that responsiblity. Paragraph (b) authorizes the ASC's Chairperson or his or her designee not to accept any such document if the submitting person cannot demonstrate a direct interest in the outcome of the proceeding. For example, in a non-recognition proceeding against State A where the ASC is seeking non-recognition of State A's licenses and not its certifications, a letter from an appraiser who is certified in State A generally would not be accepted by the Chairperson or his or her designee. In all likelihood, rejection also would occur even if a licensed appraiser from State A submits a letter to the ASC but the appraiser fails to clearly identify his or her direct interest in the outcome of the proceeding. On the other hand, the ASC most likely would accept a submission from a financial institutions trade association, such as the ABA, which has members in State A, even though it may be headquartered in State B.
E. The burden of proof
The MBA and MB criticized the burden of proof standard in ' 1102.31 of the subpart. In pertinent part, the MBA said that it "does not believe it necessary to require a respondent [to] bear the ultimate burden of proof in all proceedings. Since the ASC would be taking action against a respondent for alleged violations of Title XI, it seems more reasonable that the ASC should bear the burden of proof. Otherwise the ASC could successfully accuse a respondent of violating Title XI without supplying evidence." MB similarly noted that the "burden of proof in matters heard by the ASC should not be on the respondent. The burden of proof should be on the ASC to establish a violation."
The ASC agrees with both commentators and notes that their comments and the standard in ' 1102.31 are consistent and in accord with section 556(d) of the Administrative Procedure Act ("APA"). That section states, "[e]xcept as otherwise provided by statute, the proponent of a rule or order has the burden of proof." Courts have interpreted this section of the APA to require the proponent of the action, in this instance the ASC, to prove a prima facie case. Such a case has been defined to be "of sufficient evidence in the type of case to get plaintiff past a motion for directed verdict in a jury case or motion to dismiss in a non-jury case; it is the evidence necessary to require the defendant to proceed with his case." Thus, the ASC has to present sufficient evidence to prove the basic elements of its case, which, in a non-recognition proceeding, can be found in section 1118(b) of Title XI. After that point, the respondent "has the burden to go forward to persuade" the ASC otherwise.
F. Section 1102.38 - compliance activities
Two areas of ' 1102.38 were of concern to the commentators, one substantive and the other technical. Turning to the substantive comment, the ABA noted that the language of ' 1102.38, which enables the ASC staff to "commence an informal, preliminary inquiry" when "it appears that a person has violated, is violating or is about to violate Title XI of FIRREA or the rules or regulations thereunder . . . ," seems to authorize the ASC to initiate inquiries directed against banks, among other persons, who could be accused of noncompliance with rules and regulations administered by Federal agencies or instrumentalities other than the ASC. The ABA concluded that "[t]his rather broad mandate . . . appears to exceed the authority specifically granted to the [ASC] in Section 1119(c)."
The ASC is amending proposed paragraph (a) of ' 1102.38 for clarification purposes. As noted in the Proposal, the ASC and its staff receives information about potential violations of Title XI from various sources. Some of these potential violations of Title XI involve financial institutions that allegedly are not complying with one or more rules and regulations adopted by the Agencies pertaining to appraisals. In such a situation, the new language in paragraph (a) simply recognizes that the ASC staff can conduct an informal, preliminary inquiry into the matter. If that inquiry shows that the potential violation or violations concern regulations primarily administered by another Federal agency, then the ASC must refer the matter to the other agency for appropriate action. The ASC subsequently will retain a monitoring role pertaining to the referral consistent with the letter and spirit of its responsibilities under '' 1103(a)(2) and 1119(c) of Title XI.
The ASC also has amended ' 1102.38 in response to comments from the MBA and MB. Both commentators expressed a concern about making information public during the preliminary stages of an inquiry and about the ASC not being required to advise a target of an inquiry or investigation of its termination. Paragraph (c) no longer will allow the Secretary to place in a public file a written statement voluntarily submitted by a person involved in a preliminary inquiry. As amended, the Secretary will place the statement in the public file only if the ASC commences a formal investigation or a proceeding under this subpart. In addition, paragraph (d) of ' 1102.38 has been changed to require the ASC staff to advise a person of the termination of the staff's inquiry when the staff has concluded not
to recommend the commencement of a formal investigation or a proceeding involving that person.
G. Other issues
1. ASC warnings
Three commentators suggested that the ASC provide advance warnings of consequences at two different times. First, the IBAA, recommended that the ASC should provide a State with a warning when it is approaching the threshold for ASC commencement of a non-recognition proceeding. This warning would provide the State an opportunity to correct its deficiencies and avoid such a proceeding.
The ASC believes that such a warning would be unnecessary. Barring extraordinary circumstances, the ASC cannot foresee a State or State agency ever being surprised by the commencement of a non-recognition proceeding. Indeed, the ASC will resort to instituting a non-recognition proceeding only as a last resort, i.e., when all other reasonable avenues of reconciling the situation have been explored and closed. Moreover, the ASC believes that it already has addressed these concerns by including ' 1102.39 into the subpart. That section requires the ASC "to cooperate"; that is, to "provide parties or persons ample opportunity to work out problems by consent, by settlement, or in some other manner."
Two of the commentators (MBA and MB) recommended that the ASC amend
' 1102.33(d) to provide a party who fails to respond to the Notice of Intention an additional warning notice before the ASC can assume that the party has waived his or her opportunity to rebut and then find the facts as presented in the Notice of Intention and make a decision on those facts. The ASC does not believe such an additional formal notice is necessary. First, it is clear from the last sentence of ' 1103.33(d) that a party may still avoid the effects of not responding to a Notice of Intention. The ASC, for good cause shown, will permit the filing of a Rebuttal after the prescribed time for doing so. Second, to ensure that the consequences of failing to respond to the Notice of Intention are clear to any party, the ASC is amending ' 1102.32 of the subpart to require the ASC to include in the Notice of Intention a "bold-faced warning respecting the effect of a failure to file a Rebuttal or Notice Not To Contest under ' 1102.33(d) . . . ."
2. Commencement of a proceeding
The IBAA requested a clarification of the exact time when a proceeding begins and suggested that it should "begin no sooner than upon the . . . receipt of the Notice." The ASC agrees that this time frame needs clarification and is amending ' 1102.32 to include the phrase, "and shall commence at the time of service," at the end of the second sentence of the proposed section. Thus, the time of commencement of a proceeding will be guided by '' 1102.25, 1102.26 and 1102.27 of the subpart, which relate to methods of service, the effectiveness of service and how time frames are computed.
3. Conference summaries
Both the MBA and MB commented on ' 1102.29(f) of the subpart pertaining to how conferences are handled. Under that section, the Secretary is required to place in the proceeding's public file a memorandum summarizing the results of the conference. That memorandum controls the subsequent course of the proceedings, unless the ASC for good cause modifies the results and instructs the Secretary to place an amendatory memorandum to that effect in the public file. The commentators noted that a party disagreeing with the substance of a memorandum would have no way to register his or her disagreement under this provision. While the ASC is of the view that the "for good cause" language would allow parties to obtain a modification of the memorandum, it also believes that some clarification may be useful. In that regard, the ASC has amended ' 1102.29(f) by inserting the phrase, "by one or more parties to the conference," after the word, "shown," and before the word," modifies."
4. Broader notification of proceeding
The IBAA recommended that "[b]ecause of the seriousness of a non-recognition decision, the State's Governor and the Secretary of the Department of Commerce should receive the Notice of Intention . . . . [This] would ensure that the state appraiser agency gives proper attention to the Notice and also serves to provide senior officials notice of a possible negative affect [sic] on the state economy." While the ASC agrees with the IBAA that benefits very well may accrue from sending the Notice of Intention to these State officials, the ASC believes that those benefits would be marginal. As discussed above, the ASC will use non-recognition only as a last resort. No one will be surprised, including the problem State's Governor. As also discussed above, absent extraordinary circumstances, the ASC will make every possible effort to be in contact with the Governor's office well before the commencement of a non-recognition proceeding. For these reasons, the ASC has determined not to amend this portion of the subpart. 5. Oral presentations
The MBA and MB stated that the ASC should not have the discretion to deny a party the opportunity to make an oral presentation under ' 1102.36(a). Both believe that parties should have a right to an oral presentation. The ASC believes that such discretion is necessary and appropriate in view of the need for expeditious handling of matters under the subpart and the new ability of persons with a demonstrable, direct interest in the outcome of a non-recognition proceeding to provide, in effect, written testimony on the matters at issue. However, to assure that requests for oral presentations will not be unreasonably denied, the ASC has amended this paragraph to say that a party's request to make an oral presentation may be denied only if such a denial is appropriate and reasonable under the circumstances.
On the basis of the foregoing, the ASC has determined to adopt the subpart as revised to reflect modifications to account for the commentators' suggestions.
VI. Regulatory Flexibility Act Statement
Pursuant to section 605(b) of the Regulatory Flexibility Act, the ASC certifies that this notice of adoption of subpart B of 12 CFR part 1102 is not expected to have a significant adverse economic impact on a substantial number of small business entities. Accordingly, a regulatory flexibility analysis is not required.
VII. Paperwork Reduction Act Statement
In accordance with the Paperwork Reduction Act of 1980, the forms, reporting, and recordkeeping requirements included in final Subpart B were approved by the Office of Management and Budget ("OMB") on July 7, 1992, through July 31, 1995, and were assigned OMB No. 3139-0005. On January 1, 1993, all federally insured financial institutions must use State licensed or certified appraisers in federally related transactions. About one-half of the States already have in place mandatory appraiser licensing and certification requirements.
The final Rule will enable the ASC to fulfill its compliance and enforcement duties under Title XI of FIRREA. There is a total possible universe of 57 States and Territories that can be sanctioned by the ASC. It is very difficult to estimate the number of ASC enforcement actions at this early stage of Title XI implementation. In addition, the ASC is authorized by Title XI to take "further action" against State agencies respecting individual appraisers. We estimate conservatively that 75,000 appraisers eventually will be licensed or certified. Against this backdrop, the ASC estimates that it will initiate six proceedings per year under subpart B (one non-recognition proceeding, with the balance being "other proceedings"), each of them requiring on average about 60 hours of information collection burden. The annual burden of information collection therefore should total 360 hours. No commentators raised any cost implications. Therefore, this final Rule is considered to be nonmajor under Executive Order 12291.
VIII. Statutory Basis of New Rules
Subpart B is being adopted pursuant to under sections 1103, 1106, 1118 and 1119(c) of Title XI of FIRREA.
List of Subjects in 12 CFR part 1102
Administrative practice and procedure, Appraisers, Banks, banking, Mortgages, Reporting and recordkeeping requirements.
Text of the Rule
Chapter XI, title 12 of the Code of Federal Regulations, is amended as set forth below:
PART 1102 -- APPRAISAL REGULATION
1. By adding new subpart B, consisting of '' 1102.20 through 1102.39, to part 1102, to read as follows:
Subpart B - RULES OF PRACTICE FOR PROCEEDINGS
1102.20 Authority, purpose and scope.
1102.22 Appearance and practice before the Subcommittee.
1102.23 Formal requirements as to papers filed.
1102.24 Filing requirements.
1102.26 When papers are deemed filed or served.
1102.27 Computing time.
1102.28 Documents and exhibits in proceedings public.
1102.29 Conduct of proceedings.
1102.30 Rules of evidence.
1102.31 Burden of proof.
1102.32 Notice of Intention to Commence A Proceeding.
1102.33 Rebuttal or Notice Not To Contest.
1102.34 Briefs, memoranda and statements.
1102.35 Opportunity for informal settlement.
1102.36 Oral presentations.
1102.37 Decision of the Subcommittee and judicial review.
1102.38 Compliance activities.
1102.39 Duty to cooperate.
Subpart B -- RULES OF PRACTICE FOR PROCEEDINGS
Authority: 12 U.S.C. 3332, 3335, 3347, and 3348(c).
' 1102.20 Authority, purpose, and scope.
(a) Authority. This subpart is issued under sections 1103, 1106, 1118 and 1119(c) of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") (12 U.S.C. 3332, 3335, 3347, and 3348(c)).
(b) Purpose and scope. This subpart prescribes rules of practice and procedure governing non-recognition proceedings under section 1118 of Title XI (12 U.S.C. 3347); and other proceedings necessary to carry out the purposes of Title XI under section 1119(c) of Title XI (12 U.S.C. 3348(c)).
' 1102.21 Definitions.
As used in this subpart:
(a) Subcommittee or ASC means the Appraisal Subcommittee of the Federal Financial Institutions Examination Council, as established under section 1011 of Title XI (12 U.S.C. 3310).
(b) Party means the ASC or a person, agency or other entity named as a party, including, when appropriate, persons appearing in the proceeding under ' 1102.22 of this subpart.
(c) Respondent means any party other than the ASC.
(d) Secretary means the Secretary of the ASC under its Rules of Operation.
' 1102.22 Appearance and practice before the Subcommittee.
(a) By attorneys and notice of appearance. Any person who is a member in good standing of the bar of the highest court of any State or of the District of Columbia, or of any possession, territory, or commonwealth of the United States, may represent parties before the ASC upon filing with the Secretary a written notice of appearance stating that he or she is currently qualified as provided in this paragraph and is authorized to represent the particular party on whose behalf he or she acts.
(b) By non-attorneys. An individual may appear on his or her own behalf. A member of a partnership may represent the partnership, and an officer, director or employee of any government unit, agency, institution, corporation or authority may represent that unit, agency, institution, corporation or authority. The partner, officer, director or employee must file with the Secretary a written statement that he or she has been duly authorized by the partnership, government unit, agency, institution, corporation or authority to act on its behalf. The ASC may require the representative to attach to the statement appropriate supporting documentation, such as a corporate resolution.
(c) Conduct during proceedings. All participants in a proceeding shall conduct themselves with dignity and in an orderly and ethical manner. The attorney or other representative of a party shall make every effort to restrain a client from improper conduct in connection with a proceeding. Improper language or conduct, refusal to comply with directions, use of dilatory tactics, or refusal to adhere to reasonable standards of orderly and ethical conduct constitute grounds for immediate exclusion from the proceeding at the direction of the ASC.
' 1102.23 Formal requirements as to papers filed.
(a) Form. All papers filed under this subpart must be double-spaced and printed or typewritten on 8-1/2" x 11" paper. All copies shall be clear and legible.
(b) Caption. All papers filed must include at the head thereof, or on a title page, the name of the ASC and of the filing party, the title and/or docket number of the proceeding, and the subject of the particular paper.
(c) Party names, signatures, certificates of service. All papers filed must set forth the name, address and telephone number of the attorney or party making the filing, must be signed by the attorney or party, and must be accompanied by a certification setting forth when and how service has been made on all other parties.
(d) Copies. Unless otherwise specifically provided in the notice of proceeding or by the ASC during the proceeding, an original and one copy of all documents and papers shall be furnished to the Secretary.
' 1102.24 Filing requirements.
(a) Filing. All papers filed with the ASC in any proceeding shall be filed with the Secretary, Appraisal Subcommittee, 2100 Pennsylvania Avenue, N.W., Suite 200, Washington, D.C. 20037.
(b) Manner of filing. Unless otherwise specified by the ASC, filing may be accomplished by :
(1) Personal service;
(2) Delivering the papers to a reliable commercial courier service, overnight delivery service, or to the U.S. Post Office for Express Mail delivery; and
(3) Mailing the papers by first class, registered, or certified mail.
(a) Methods; appearing party. A serving party, who has made an appearance under
' 1102.22 of this subpart, shall use one or more of the following methods of service:
(1) Personal service;
(2) Delivering the papers to a reliable commercial courier service, overnight delivery service, or to the U.S. Post Office for Express Mail delivery; and
(3) Mailing the papers by first class, registered, or certified mail.
(b) Methods; non-appearing party. If a party has not appeared in the proceeding in accordance with ' 1102.22 of this subpart, the ASC or any other party shall make service by any of the following methods:
(1) By personal service;
(2) By delivery to a person of suitable age and discretion at the party's last known address;
(3) By registered or certified mail addressed to the party's last known address; or
(4) By any other manner reasonably calculated to give actual notice.
(c) By the Subcommittee. All papers required to be served by the ASC shall be served by the Secretary unless some other person shall be designated for such purpose by the ASC. (d) By the respondent. All papers filed in a proceeding under this subpart shall be served by a respondent on the Secretary and each party's attorney, or, if any party is not so represented, then upon such party. Such service may be made by any of the appropriate methods specified in paragraphs (a) and (b) of this section.
' 1102.26 When papers are deemed filed or served.
(a) Effectiveness. Filing and service are deemed effective:
(1) For personal service or same-day commercial courier delivery, upon actual delivery; and
(2) For overnight commercial delivery service, U.S. Express Mail delivery, or first class, registered, or certified mail, upon deposit in, or delivery to, an appropriate point of collection.
(b) Modification. The effective times for filing and service in paragraph (a) of this section may be modified by the ASC in the case of filing or by agreement of the parties in the case of service.
' 1102.27 Computing time.
(a) General rule. In computing any period of time prescribed or allowed by this subpart, the date of the act, event or default from which the designated period of time begins to run is not included. The last day so computed is included, unless it is a Saturday, Sunday, or Federal holiday, in which event the period runs until the end of the next day which is not a Saturday, Sunday or Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays shall not be included in the computation.
(b) For service and filing responsive papers. Whenever a time limit is measured by a prescribed period from the service of any notice or paper, the applicable time periods are calculated as follows:
(1) If service is made by first class, registered or certified mail, add three days to the prescribed period; and
(2) If service is made by express mail or overnight delivery service, add one day to the prescribed period.
' 1102.28 Documents and exhibits in proceedings public.
Unless and until otherwise ordered by the ASC or unless otherwise provided by statute or by ASC regulation, all documents, papers and exhibits filed in connection with any proceeding, other than those that may be withheld from disclosure under applicable law, shall be placed by the Secretary in the proceeding's public file and will be available for public inspection and copying at the address set out in ' 1102.24 of this subpart.
' 1102.29 Conduct of proceedings.
(a) In general. Unless otherwise provided in the notice of proceedings, all proceedings under this subpart shall be conducted as hereinafter provided.
(b) Written Submissions. All aspects of the proceeding shall be conducted by written submissions only, with the exception of oral presentations allowed under ' 1102.36 of this subpart.
(c) Disqualification. A Subcommittee member who deems himself or herself disqualified may at any time withdraw. Upon receipt of a timely and sufficient affidavit of personal bias or disqualification of such member, the ASC will rule on the matter as a part of the record and decision in the case.
(d) Use of ASC staff. Appropriate members of the ASC's staff who are not engaged in the performance of investigative or prosecuting functions in the proceeding may advise and assist the ASC in the consideration of the case and in the preparation of appropriate documents for its disposition.
(e) Authority of Subcommittee Chairperson. The Chairperson of the ASC, in consultation with other members of the ASC whenever appropriate, shall have complete charge of the proceeding and shall have the duty to conduct it in a fair and impartial manner and to take all necessary action to avoid delay in the disposition of proceedings in accordance with this subpart.
(f) Conferences. (1) The ASC may on its own initiative or at the request of any party, direct all parties or counsel to meet with one or more duly authorized ASC members or staff at a specified time and place, or to submit to the ASC or its designee, suggestions in writing for the purpose of considering any or all of the following:
(i) Scheduling of matters, including a timetable for the information-gathering phase of the proceeding;
(ii) Simplification and clarification of the issues;
(iii) Stipulations and admissions of fact and of the content and authenticity of documents;
(iv) Matters of which official notice will be taken; and
(v) Such other matters as may aid in the orderly disposition of the proceeding, including disclosure of the names of persons submitting affidavits or other documents and exhibits which may be introduced into the public file of the proceeding.
(2) Such conferences will not be recorded, but the Secretary shall place in the proceeding's public file a memorandum summarizing the results of the conference and shall provide a copy of the memorandum to each party. The memorandum shall control the subsequent course of the proceedings, unless the ASC for good cause shown by one or more parties to the conference, modifies those results and instructs the Secretary to place an amendatory memorandum to that effect in the public file.
(g) Changes or extensions of time and changes of place of proceeding. The ASC, in connection with initiating a specific proceeding under ' 1102.32 of this subpart, may instruct the Secretary to publish in the Federal Register time limits different from those specified in this subpart, and may, on its own initiative or for good cause shown, issue an exemption changing the place of the proceeding or extending any time limit prescribed by this subpart, including the date for ending the information-gathering phase of the proceeding.
(h) Call for further briefs, memoranda, statements; reopening of matters. The ASC may call for the production of further information upon any issue, the submission of briefs, memoranda and statements (together with written responses), and, upon appropriate notice, may reopen any aspect of the proceeding at any time prior to a decision on the matter.
' 1102.30 Rules of evidence.
(a) In general. (1) Except as is otherwise set forth in this section, relevant, material and reliable evidence that is not unduly repetitive is admissible to the fullest extent authorized by the Administrative Procedure Act (5 U.S.C. 551, et seq.) and other applicable law.
(2) Evidence that would be admissible under the Federal Rules of Evidence is admissible in a proceeding conducted under this subpart.
(3) Evidence that would be inadmissible under the Federal Rules of Evidence may be deemed or ruled admissible in a proceeding conducted under this subpart if such evidence is relevant, material, reliable and not unduly repetitive.
(b) Stipulations. Any party may stipulate in writing as to any relevant matters of fact, law, or the authenticity of any relevant documents. The Secretary shall place such stipulations in the public file, and they shall be binding on the parties.
(c) Official notice. Every matter officially noticed by the ASC shall appear in the public file, unless the ASC determines that the matter must be withheld from public disclosure under applicable Federal law.
' 1102.31 Burden of proof.
The ultimate burden of proof shall be on the respondent. The burden of going forward with a prima facie case shall be on the ASC.
' 1102.32 Notice of Intention To Commence A Proceeding.
The ASC shall instruct the Secretary or other designated officer acting for the ASC to publish in the Federal Register a Notice of Intention To Commence A Proceeding ("Notice of Intention"). The Notice of Intention shall be served upon the party or parties to the proceeding and shall commence at the time of service. The Notice of Intention shall state the legal authority and jurisdiction under which the proceeding is to be held; shall contain, or incorporate by appropriate reference, a specific statement of the matters of fact or law constituting the grounds for the proceeding; and shall state a date no sooner than 25 days after service of the Notice of Intention is made for termination of the information-gathering phase of the proceeding. The Notice of Intention also must contain a bold-faced warning respecting the effect of a failure to file a Rebuttal or Notice Not To Contest under
' 1102.33(d) of this subpart. The ASC may amend a Notice of Intention in any manner and to the extent consistent with provisions of applicable law.
' 1102.33 Rebuttal or Notice Not To Contest.
(a) When required. A party to the proceeding may file either a Rebuttal or a Notice Not to Contest the statements contained in the Notice of Intention or any amendment thereto with the Secretary within 15 days after being served with the Notice of Intention or an amendment to such Notice. The Secretary shall place the Rebuttal or the Notice Not To Contest in the public file.
(b) Requirements of Rebuttal; effect of failure to deny. A Rebuttal filed under this section shall specifically admit, deny or state that the party does not have sufficient information to admit or deny each statement in the Notice of Intention. A statement of lack of information shall have the effect of a denial. Any statement not denied shall be deemed to be admitted. When a party intends to deny only a part or a qualification of an statement, the party shall admit so much of it as is true and shall deny only the remainder.
(c) Notice Not To Contest. A party filing a Notice Not To Contest the statement of fact set forth in the Notice of Intention shall constitute a waiver of the party's opportunity to rebut the facts alleged, and together with the Notice of Intention and any referenced documents, will provide a record basis on which the ASC shall decide the matter. The filing of a Notice Not To Contest shall not constitute a waiver of the right of such party to a judicial review of the ASC's decision, findings and conclusions.
(d) Effect of failure to file Rebuttal or Notice Not To Contest. Failure of a party to file a response required by this section within the time provided shall constitute a waiver of the party's opportunity to rebut and to contest the statements in the Notice of Intention and shall constitute authorization for the ASC to find the facts to be as presented in the Notice of Intention and to file with the Secretary a decision containing such findings and appropriate conclusions. The ASC, for good cause shown, will permit the filing of a Rebuttal after the prescribed time.
' 1102.34 Briefs, memoranda and statements.
(a) By the parties. Until the end of the information-gathering phase of the proceeding, any party may file with the Secretary a written brief, memorandum or other statement providing factual data and policy and legal arguments regarding the matters set out in the Notice of Intention. The filing party shall simultaneously serve other parties to the proceeding with a copy of the document. No later than ten days after such service, any party may file with the Secretary a written response to the document and must simultaneously serve a copy thereof on the other parties to the proceeding. The Secretary will receive documents and responses and will place them in the public file.
(b) By interested persons, in non-recognition proceedings. Until the end of the information-gathering phase of a proceeding under section 1118 of FIRREA (12 U.S.C. 3347), any person with a demonstrable, direct interest in the outcome of the proceeding may file with the Secretary a written brief, memorandum or other statement providing factual data and policy and legal arguments regarding the matters set out in the Notice of Intention. The ASC's Chairperson or his or her designee may not accept any such written brief, memorandum or other statement if the submitting person cannot demonstrate a direct interest in the outcome of the proceeding. Upon acceptance of the written brief, memorandum or other statement, the Secretary shall make copies of the document and forward one copy thereof to each party to the proceeding. No later than ten days after such service, any party may file with the Secretary a written response to the document and must simultaneously serve one copy thereof on the other parties to the proceeding. The Secretary will place a copy of such briefs, memoranda, statements and responses in the public file.
' 1102.35 Opportunity for informal settlement.
Any party may at any time submit to the Secretary, for consideration by the Subcommittee, written offers or proposals for settlement of a proceeding, without prejudice to the rights of the parties. No offer or proposal shall be included in the proceeding's public file over the objection of any party to such proceeding. This paragraph shall not preclude settlement of any proceeding by the filing of a Notice Not To Contest as provided in
' 1102.33(c) or by the submission of the case to the ASC on a stipulation of facts.
' 1102.36 Oral presentations.
(a) In general. A party does not have a right to an oral presentation. Under this section, a party's request to make an oral presentation may be denied if such a denial is appropriate and reasonable under the circumstances. An oral presentation shall be considered as an opportunity to offer, emphasize and clarify the facts, policies and laws concerning the proceeding.
(b) Method and time of request. Between the commencement of the proceeding and ten days before the end of the information-gathering phase, any party to the proceeding may file with the Secretary a letter requesting that the Secretary schedule an opportunity for the party to give an oral presentation to the ASC. That letter shall include the reasons why an oral presentation is necessary.
(c) ASC processing. The Secretary must promptly forward the letter request to the Chairman of the ASC. The Chairman, after informally contacting other ASC members and the ASC's senior staff for their views, will instruct the Secretary to forward a letter to the party either: Scheduling a date and time for the oral presentation and specifying the allowable duration of the presentation; or Declining the request and providing the reasons therefor. The party's letter request and the ASC's response will be included in the proceeding's public file.
(d) Procedure on presentation day. On the appropriate date and time, the party or his or her attorney (if any) will make the oral presentation before the ASC. Any ASC member may ask the party or the attorney, as the case may be, pertinent questions relating to the content of the oral presentation. Oral presentations will not be recorded or otherwise transcribed. The Secretary must enter promptly into the proceeding's public file a memorandum summarizing the subjects discussed during the oral presentation.
' 1102.37 Decision of the Subcommittee and judicial review.
At a reasonable time after the end of the information-gathering phase of the proceeding, but not exceeding 35 days, the ASC shall issue a final decision, containing specified terms and conditions as it deems appropriate, in the matter and shall cause the decision to be published promptly in the Federal Register. The final decision shall be effective on issuance. The Secretary shall serve the decision upon the parties promptly, shall place it in the proceeding's public file and shall furnish it to such other persons as the ASC may direct. Pursuant to the provisions of Chapter 7 of Title 5 of the U.S. Code and section 1118(c)(3) of Title XI of FIRREA (12 U.S.C. 3348(c)(3)), a final decision of the ASC is a prerequisite to seeking judicial review.
' 1102.38 Compliance activities.
(a) Where, from complaints received from members of the public, communications from Federal or State agencies, examination of information by the ASC, or otherwise, it appears that a person has violated, is violating or is about to violate Title XI of FIRREA or the rules or regulations thereunder, the ASC staff may commence an informal, preliminary inquiry into the matter. If, upon such inquiry, it appears that one or more allegations relate to possible violations of regulations administered by another agency or instrumentality of the Federal Government, then the matter shall be referred to that agency or instrumentality for appropriate action. The ASC, pursuant to its responsibilities under section 1103(a)(2) of Title XI (12 U.S.C. 3332(a)(2)) and section 1119 (c) of Title XI (12 U.S.C. 3348), shall monitor the matter. If, upon inquiry, it appears that one or more allegations are within the ASC's jurisdiction, then the ASC, in its discretion, may determine to commence a formal investigation respecting the matter and shall instruct the Secretary to create a public file for the formal investigation. The Secretary shall place in that file a memorandum naming the person or persons subject to the investigation and the statutory basis for the investigation.
(b) Unless otherwise instructed by the ASC or required by law, the Secretary shall ensure that all other papers, documents and materials gathered or submitted in connection with the investigation are non-public and for ASC use only.
(c) Persons who become involved in preliminary inquiries or formal investigations may, on their own initiative, submit a written statement to the Secretary setting forth their interests, positions or views regarding the subject matter of the investigation. Upon request,
the staff, in its discretion, may advise such persons of the general nature of the investigation, including the indicated violations as they pertain to them and the amount of time that may be available for preparing and submitting such a statement prior to the presentation of a staff recommendation to the ASC. Upon the commencement of a formal investigation or a proceeding under this subpart, the Secretary shall place any such statement in the appropriate public file.
(d) In instances where the staff has concluded its inquiry of a particular matter and has determined that it will not recommend the commencement of a formal investigation or a proceeding under this subpart against a person, the staff shall advise the person that its inquiry has been terminated. Such advice, if given, must in no way be construed as indicating that the person has been exonerated or that no action may ultimately result from the staff's inquiry into the particular matter.
' 1102.39 Duty to cooperate.
In the course of the its investigations and proceedings, the ASC (and its staff, with
appropriate authorization) must provide parties or persons ample opportunity to work out
problems by consent, by settlement, or in some other manner.
By the Appraisal Subcommittee of the Federal Financial Institutions Examination Council,
Date Fred D. Finke, Chairman