Multiple Agencies Seek Comment on Flood Insurance Regulation Changes

by Shannon Allen

The Office of the Comptroller of the Currency (“OCC”), Board of Governors of the Federal Reserve System (“Board”), Federal Deposit Insurance Corporation (“FDIC”), the Farm Credit Administration (“FCA”), and the National Credit Union Administration (“NCUA”) (collectively, the “Agencies”) seek input on proposed amendments to regulations on loans in “areas having special flood hazards” in order to apply provisions of the “Biggert-Waters Flood Insurance Reform Act of 2012.”  In particular, this notice of proposed rulemaking would create requirements regarding the “escrow of flood insurance payments,” the receiving of “private flood insurance coverage,” and the “force-placement of flood insurance.”   In addition, the OCC and the FDIC propose to “integrate their flood insurance regulations . . . .”

Federal flood insurance statutes were revised by the Biggert-Waters Flood Insurance Reform Act of 2012 (the “Act”).  Two sections regarding the “escrow of flood insurance payments” and “acceptance of private flood insurance coverage” changed the Flood Disaster Protection Act (“FDPA”) that require the Agencies to issue implementing regulations.  This proposal revises regulations as follows:

1. this proposal requires regulated lending institutions to escrow premiums and fees for flood insurance for any loans secured by residential improved real estate or a mobile home, unless the institutions qualify for the statutory exception;
2. this proposal mandates regulated lending institutions accept private flood insurance that meets the statutory definition to satisfy the mandatory purchase requirement;
3. this proposal includes new and revised sample notice forms and clauses;
4. this proposal amends the force-placement of flood insurance provisions to clarify that a lender or its servicer has the authority to charge a borrower for the cost of flood insurance coverage commencing on the date on which the borrower's coverage lapsed or became insufficient;
5. this proposal makes technical corrections; and
6. the OCC and the FDIC propose to integrate their flood insurance regulations for national banks and Federal savings associations and for State non-member banks and State savings associations, respectively.

Interested parties are invited to comment specifically on the following:

• whether the proposed collection of information is necessary for the proper performance of the Agencies’ functions; including whether the information has practical utility;
• the accuracy of the Agencies’ estimate of the burden of the proposed information collection, including the cost of compliance;
• ways to enhance the quality, utility, and clarity of the information to be collected; and
• ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology.

Comments should be submitted jointly to all of the Agencies, using the title “Loans in Areas Having Special Flood Hazards” by December 10, 2013 in one of the following ways:

• Federal eRulemaking Portal:  http://www.regulations.gov  Enter “Docket ID OCC-2013-0015” in the Search Box and click “Search;”
• Email: regs.comments@occ.treas.gov;
• Mail: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219;
• Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219; OR
• Fax: (571) 465-4326.

Cost-Benefit Analysis & EO 12866: A Twenty-Year Retrospective - Part II

by Nina Hart

On October 28, 2013, New York University’s Institute for Policy Integrity hosted its Fifth Annual Cost-Benefit Analysis & Issue Advocacy Workshop.  One highlight was an afternoon panel reflecting on the consequences of Executive Order 12866 of 1993, which reaffirmed and expanded on the Reagan Administration’s requirement that significant executive agency regulations be subject to cost-benefit analysis.  The panel featured Boris Bershtyn, former Acting Director of OIRA (2011-13) and General Counsel for OMB (2012-13); Sally Katzen, former Director of OIRA (1993-98); C. Boyden Gray, former White House Counsel (1989-93); and E. Donald Elliott, former Assistant Administrator and General Counsel for the EPA (1989-91).  Richard Revesz, dean emeritus and professor at NYU School of Law, moderated the panel.  Notice and Comment is pleased to present series of posts by blogger Nina Hart on some of the critical issues discussed during the panel and key policy recommendations. 

Part II - OIRA’s Lack of Personnel Challenges its Capacity in terms of Numbers and Expertise

While many of the initial challenges discussed by the panelists were rooted in a sheer dearth in numbers, a related problem is, as Katzen put it, “uneven” expertise.  “I once had someone ask me what an aquifer was,” she admitted.  Bershtyn added that OIRA consists mostly of younger staffers in their 30s, which means they are often grappling with policy issues for the first time.  That said, Katzen and Bershtyn stressed that OIRA has always relied on other agencies and staffers within White House departments such as OMB, the Council of Economic Advisors, and the Office of Science & Technology Policy to fill the gaps.  While this has proven effective at providing OIRA with much-needed assistance, it is not an ideal solution.           

Bershtyn, Katzen, and Gray also stated that OIRA has suffered from “brain drain” due to pay freezes, furloughs, and the ongoing budget fights in Washington.  Gray said that he sees a role for OIRA in promoting greater and routine coordination on regulations between agencies, and this would be easy to solve without greater funding, notwithstanding the agency turf wars that might impede this goal.  As Gray noted, in the early days of the Bush Administration, the fights between the DOJ and DHS were “legendary,” often forcing officials to ask, “are we talking to each other today?”  Thus, if the ultimate hope is to deal with lack of expertise internally, then OIRA will require a much larger budget.

CFTC Proposes Rule Requiring Registered Futures Association Membership

by Shannon Allen

The Commodity Futures Trading Commission (“Commission”) seeks comment on a proposed regulation amendment that would require “all persons registered” with the Commission as “introducing brokers (“IBs”), commodity pool operators (“CPOs”), and commodity trading advisors (“CTAs”)” to join and maintain membership in “at least one registered futures association (“RFA”).”

The proposed amendment would remove existing gaps in regulatory oversight programs by the Commission and the National Futures Association (“NFA”).  In addition, it would advance the Commission’s goal to establish an oversight regime that “levels the playing field” by guaranteeing “consistent treatment of all its registered intermediaries . . . .”  Subject to Commission oversight, the NFA is the frontline regulator of its members and requiring membership in an RFA would allow the NFA to “ensure compliance” with Section 17 of the Commodity Exchange Act (“CEA”) . . . .”  Appropriate and effective implementation of programs required by Section 17 of the CEA could be obstructed without the membership mandate.  Thus, the Commission believes that “such membership is necessary . . . to ensure . . . market oversight . . . is applied consistently to all registered intermediaries.”

This proposed rule:

• would give the Commission the ability to delegate particular oversight responsibility for intermediaries, including IBs, CPOs, and CTAs, to an RFA;
• would facilitate more efficient use of agency resources;
• would benefit the public by ensuring integrity of the swaps market and its participants; and
• may lead to an increase in market participation.

The Commission seeks comment on all aspects of this proposed rulemaking, and has listed specific requests for comment including, but not limited to the following:

1. Has the Commission accurately identified the benefits of this proposed regulation?
2. Are there other benefits to the Commission, market participants, and/or the public that may result from the adoption of the proposed regulation that the Commission should consider?
3. Should entities who are currently registered with the Commission but otherwise qualify for a Rule 4.14(a)(9) exemption be required to become members of NFA? If not, why?
4. Will this proposal impact, positively or negatively, the risk management procedures or actions of intermediaries?
5. Is the proposed collection of information necessary for the proper performance of the functions of the Commission?
6. Is the Commission’s estimate of the burden of the proposed collection of information accurate?
7. Are there ways to enhance the quality, utility, and clarity of the information to be collected?

Interested parties are invited to submit comments, identified by RIN number 3038-AE09, by January 17, 2014, by only one of the following methods:

•  Mail, hand delivery or courier: Melissa D. Jurgens, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581;
• Federal eRulemaking Portal: http://www.regulations.gov;
• Fax: to the Office of Information and Regulatory Affairs at (202) 395-6566; or
• Email: OIRAsubmissions@omb.eop.gov.

Cost-Benefit Analysis & EO 12866: A Twenty-Year Retrospective

by Nina Hart

On October 28, 2013, New York University’s Institute for Policy Integrity hosted its Fifth Annual Cost-Benefit Analysis & Issue Advocacy Workshop.  One highlight was an afternoon panel reflecting on the consequences of Executive Order 12866 of 1993, which reaffirmed and expanded on the Reagan Administration’s requirement that significant executive agency regulations be subject to cost-benefit analysis.  The panel featured Boris Bershtyn, former Acting Director of OIRA (2011-13) and General Counsel for OMB (2012-13); Sally Katzen, former Director of OIRA (1993-98); C. Boyden Gray, former White House Counsel (1989-93); and E. Donald Elliott, former Assistant Administrator and General Counsel for the EPA (1989-91).  Richard Revesz, dean emeritus and professor at NYU School of Law, moderated the panel.  Notice and Comment is pleased to present series of posts by blogger Nina Hart on some of the critical issues discussed during the panel and key policy recommendations. 

Cost-Benefit Analysis is Here to Stay, but OIRA Faces Resource Constraints that Challenge its Ability to Ensure that CBA Analysis is Performed

           

Revesz opened the panel by asking what surprised the panelists most about EO 12-866.  Katzen and Gray, both involved in drafting the Executive Order, each began by noting the Order’s durability.  Gray then moved on to a topic that framed much of the session: OIRA’s limited budget. 

To Gray, the limited budget and decrease over time in personnel indicated that the perceived entrenchment of CBA and large monitoring role for OIRA was “more fragile than it appears.”  It is unrealistic for OIRA to actively monitor each agency to ensure it has undertaken a thorough analysis of every regulation.  For example, Gray said, given the complicated economics behind HHS’s determination to narrowly define which insurance plans could be grandfathered into the Affordable Care Act regime, the regulation was likely promulgated absent thorough cost-benefit analysis.  Despite this fact, given OIRA’s scarce resources, it was unlikely that the Office could or did hold the agency to account.

Other consequences that result, at least in part, from what the panelists unanimously perceived to be an inadequate budget include:

• Nearly all of the impetus to engage in rulemaking has shifted away from the White House to the agencies;
• OIRA must balance its shortages against the fact that its role is both procedural (akin to “hard look review”) and substantive (evaluation of the CBA itself), and each role places different strains on its resources;
• Undertaking the “regulatory lookback” imposed by President Obama becomes all the more necessary, but all the more difficult to complete.  It may be desirable to institute “Lookback 2.0” to ensure that this retroactive review of CBA is institutionalized.

Next week, we’ll analyze how personnel challenges impact OIRA’s ability to oversee the regulatory process.

Serving Our Veterans

If you are looking for ways to serve our nation's veterans, the American Bar Association encourages you to consider volunteering for one of the following military-assistance programs:

• ABA Home Front - a source of free publications and easy-to-understand information on a variety of legal topics that military families face every day.
• The ABA Military Pro Bono Project - accepts case referrals for civilian pro bono lawyers from military lawyers on behalf of junior-enlisted, active-duty military personnel and their families. 
• The Veterans' Claims Assistance Network - helps wounded and disabled veterans who must wait too long to receive the disability benefits they have earned.
• The ABA Commission on Homelessness and Poverty - conducts programs and advocacy on behalf of homeless veterans, who make up a significant segment of the homeless population.
• The ABA Coordinating Committee on Veterans Benefits and Services - pulls together information on the resources above and all ABA military-related activities.

For more information, visit the American Bar Association website. The Section of Administrative Law and Regulatory Practice salutes our nations veterans!

Treasury Dept CDFI Fund to Require Non-Profit Financial Audits Not Reviews

by Shannon Allen

The Department of Treasury’s, Community Development Financial Institutions (“CDFI”) Fund seeks comment on an interim rule requiring non-profit CDFI Fund awardees to submit audited (not merely reviewed) financial statements as part of their annual report to the CDFI Fund.

Empowering individuals, “unleashing the economic potential of small businesses,” establishing affordable housing, creating employment opportunities, and revitalizing communities, requires “[a]ccess to credit, investment capital, and financial services.”  The CDFI Fund (the “Fund”) was created as a “wholly owned government corporation by the Community Development Banking and Financial Institutions Act of 1994” (the “Act”) and placed within the Department of Treasury.  The Fund’s programs are intended to make possible the “flow of lending” and “investment capital” to underserved “communities and . . . individuals” who are not able to “take full advantage of the financial services industry.”

The long-term goal of the CDFI Fund (the “Fund”) is to “economically empower America's underserved and distressed communities” by boosting financial opportunity and encouraging “community development investments” for “underserved populations in the United States.”  Specifically, the CDFI Program (the “Program”) promotes “economic revitalization” and “community development” by helping and investing in CDFIs, which focus on serving “underserved markets . . . .” 

CDFIs are smaller and frequently have challenges in “raising the capital needed” to provide adequate services.  In order to improve the ability of CFIs to provide their products and services to the intended communities, the Fund gives them financial help, via “grants, loans, equity investments and deposits,” to CDFIs chosen through a “merit-based application process.”

Non-profit awardees of the Fund have time and expense challenges in obtaining “audited financial statements” within the required 180-day period after the end of their fiscal year.  Thus, current Program regulations allow non-profit CDFI awardees, as part of their annual report, to “submit financial statements” that are “reviewed,” and not “audited” by “independent certified public accounts.”

This interim rule, however, in order to conform to the requirements of the Act, proposes to amend CDFI Program rules and now require non-profit awardees to provide “audited financial statements within 180 days” after the end of their fiscal year end.  With this change, a mere review by an independent certified public accountant will no longer suffice for non-profit CDFI awardees.

Interested parties are invited to submit comments, addressed to the CDFI Program Manager, by December 30, 2013 by one of the following methods:

• Electronic: (preferred method) http://www.regulations.gov
• Email:  cdfihelp@cdfi.treas.gov
• Fax: (202) 453-2466
• Traditional mail: to the CDFI Program Manager, Community Development Financial Institutions Fund, Department of the Treasury, 1500 Pennsylvania Avenue NW., Washington, DC 20220.

Section Administrative Law Conference 2013 Starts Today!

Join the ABA Section of Administrative Law and Regulatory Practice for the Administrative Law Fall Conference, November 7-8, 2013 at the Georgetown University Hotel and Conference Center in Washington, DC. The conference will include CLE Panels on a wide-range of topics including Developments in Administrative Law Parts 1 and 2, Where Regulation and Innovation Converge, and the Centralization of Regulatory Power in the White House. Click here for the full meeting agenda and additional event details. Hope to see you there!