Should The HVCC Settlement Be Treated As An Agency Rulemaking?

Ted C. Koshiol, Chicago-Kent College of Law

Abstract

Abstract On March 3, 2008, the New York Attorney General’s reached an important settlement with Fannie Mae, Freddie Mac, and the Office of Federal Housing Enterprise Oversight. Under the terms of the agreement, Fannie and Freddie agreed to only purchase mortgages from banks that would abide by a new set of appraisal standards. Observers immediately recognized that the impact of the agreement would be widespread, effectively imposing new rules on every mortgage lender in America. The scenario raises a novel legal issue: is a settlement agreement always an adjudicatory action, or are there instances where it should be required to allow for notice and comment pursuant the Administrative Procedures Act? This note will provide a complete background on the particular agreement in question, as well as the various procedural requirements for different types of agency action. Then, the article will argue that, at least in this circumstance, the settlement agreement should be thought of as a de facto agency rulemaking for two central reasons, both of which have been used to distinguish rulemakings from adjudications in other situations. First, the agreement has a broad impact on third parties. Second, the agreement has a clear future effect beyond simply ending the attorney general’s investigation. Accordingly, the agreement should have been subjected to notice and comment procedures.