§ 1723i. — Civil money penalties against issuers.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1723i]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER III--NATIONAL MORTGAGE ASSOCIATIONS
Sec. 1723i. Civil money penalties against issuers
(a) In general
(1) Authority
Whenever an issuer or custodian approved under section 1721(g)
of this title knowingly and materially violates any provisions of
subsection (b) of this section, the Secretary of Housing and Urban
Development may impose a civil money penalty on the issuer or the
custodian in accordance with the provisions of this section. The
penalty shall be in addition to any other available civil remedy or
any available criminal penalty and may be imposed whether or not the
Secretary imposes other administrative sanctions.
(2) Amount of penalty
The amount of the penalty, as determined by the Secretary, may
not exceed $5,000 for each violation, except that the maximum
penalty for all violations by a particular issuer or custodian
during any one-year period shall not exceed $1,000,000. Each
violation of a provision of subsection (b)(1) of this section shall
constitute a separate violation with respect to each pool of
mortgages. In the case of a continuing violation, as determined by
the Secretary, each day shall constitute a separate violation.
(b) Violations for which penalty may be imposed
(1) Violations
The violations by an issuer or a custodian for which the
Secretary may impose a civil money penalty under subsection (a) of
this section are the following:
(A) Failure to make timely payments of principal and
interest to holders of securities guaranteed under section
1721(g) of this title.
(B) Failure to segregate cash flow from pooled mortgages or
to deposit either principal and interest funds or escrow funds
into special accounts with a depository institution whose
accounts are insured by the National Credit Union Administration
or by the Federal Deposit Insurance Corporation through the Bank
Insurance Fund for banks or through the Savings Association
Insurance Fund for savings associations.
(C) Use of escrow funds for any purpose other than that for
which they were received.
(D) Transfer of servicing for a pool of mortgages to an
issuer not approved under this subchapter, unless expressly
permitted by statute, regulation, or contract approved by the
Secretary.
(E) Failure to maintain a minimum net worth in accordance
with requirements prescribed by the Association;
(F) Failure to promptly notify the Association in writing of
any changes that materially affect the business status of an
issuer.
(G) Submission to the Association of false information in
connection with any securities guaranteed, or mortgages pooled,
under section 1721(g) of this title.
(H) Hiring, or retaining in employment, an officer,
director, principal, or employee whose duties involve, directly
or indirectly, programs administered by the Association while
such person was under suspension or debarment by the Secretary.
(I) Submission to the Association of a false certification
either on its own behalf or on behalf of another person or
entity.
(J) Failure to comply with an agreement, certification, or
condition of approval set forth on, or applicable to, the
application for approval as an issuer of securities under
section 1721(g) of this title.
(K) Violation of any provisions of this subchapter or any
implementing regulation, handbook, or participant letter issued
under authority of this subchapter.
(2) Notification to Attorney General
Before taking action to impose a civil money penalty for a
violation under paragraph (1)(G) or paragraph (1)(I), the Secretary
shall inform the Attorney General of the United States.
(c) Agency procedures
(1) Establishment
The Secretary shall establish standards and procedures governing
the imposition of civil money penalties under subsection (a) of this
section. The standards and procedures--
(A) shall provide for the Secretary to make the
determination to impose the penalty;
(B) shall provide for the imposition of a penalty only after
an issuer or a custodian has been given notice of, and
opportunity for, a hearing on the record; and
(C) may provide for review by the Secretary of any
determination or order, or interlocutory ruling, arising from a
hearing.
(2) Final orders
If no hearing is requested within 15 days of receipt of a notice
of opportunity for hearing, the imposition of a penalty shall
constitute a final and unappealable determination. If the Secretary
reviews the determination or order, the Secretary may affirm,
modify, or reverse that determination or order. If the Secretary
does not review the determination or order within 90 days of the
issuance of the determination or order, the determination or order
shall be final.
(3) Factors in determining amount of penalty
In determining the amount of a penalty under subsection (a) of
this section, consideration shall be given to such factors as the
gravity of the offense, any history of prior offenses (including
offenses occurring before December 15, 1989), ability to pay the
penalty, injury to the public, benefits received, deterrence of
future violations, and such other factors as the Secretary may
determine by regulations.
(4) Reviewability of imposition of penalty
The Secretary's determination or order imposing a penalty under
subsection (a) of this section shall not be subject to review,
except as provided in subsection (d) of this section.
(d) Judicial review of agency determination
(1) In general
After exhausting all administrative remedies established by the
Secretary under subsection (c)(1) of this section, an issuer or a
custodian against which the Secretary has imposed a civil money
penalty under subsection (a) of this section may obtain a review of
the penalty and such ancillary issues as may be addressed in the
notice provided under subsection (c)(1)(A) of this section in the
appropriate court of appeals of the United States, by filing in such
court, within 20 days after the entry of such order or
determination, a written petition praying that the Secretary's order
or determination be modified or be set aside in whole or in part.
(2) Objections not raised in hearing
A court shall not consider any objection that was not raised in
the hearing conducted pursuant to subsection (c)(1) of this section
unless a demonstration is made of extraordinary circumstances
causing the failure to raise the objection. If any party
demonstrates to the satisfaction of the court that additional
evidence, which was not presented at such hearing, is material and
that there were reasonable grounds for the failure to present such
evidence at the hearing, the court shall remand the matter to the
Secretary for consideration of such additional evidence.
(3) Scope of review
The decisions, findings, and determinations of the Secretary
shall be reviewed pursuant to section 706 of title 5.
(4) Order to pay penalty
Notwithstanding any other provision of law, the court shall have
the power in any such review to order payment of the penalty imposed
by the Secretary.
(e) Action to collect penalty
If any issuer or custodian fails to comply with the Secretary's
determination or order imposing a civil money penalty under subsection
(a) of this section, after the determination or order is no longer
subject to review as provided by subsections (c)(1) and (d) of this
section, the Secretary may request the Attorney General of the United
States to bring an action in an appropriate United States district court
to obtain a monetary judgment against the issuer or custodian and such
other relief as may be available. The monetary judgment may, in the
discretion of the court, include any attorneys fees and other expenses
incurred by the United States in connection with the action. In an
action under this subsection, the validity and appropriateness of the
Secretary's determination or order imposing the penalty shall not be
subject to review.
(f) Settlement by Secretary
The Secretary may compromise, modify, or remit any civil money
penalty which may be, or has been, imposed under this section.
(g) ``Knowingly'' defined
The term ``knowingly'' means having actual knowledge of or acting
with deliberate ignorance of or reckless disregard for the prohibitions
under this section.
(h) Regulations
The Secretary shall issue such regulations as the Secretary deems
appropriate to implement this section.
(i) Deposit of penalties
The Secretary shall deposit all civil money penalties collected
under this section into moneys of the Association pursuant to section
1722 of this title.
(June 27, 1934, ch. 847, title III, Sec. 317, as added Pub. L. 101-235,
title I, Sec. 110(a), Dec. 15, 1989, 103 Stat. 2011; amended Pub. L.
104-208, div. A, title II, Sec. 2704(d)(13)(A), Sept. 30, 1996, 110
Stat. 3009-490.)
Amendments
1996--Subsec. (b)(1)(B). Pub. L. 104-208, which directed
substitution of ``Deposit Insurance Fund'' for ``Bank Insurance Fund for
banks or through the Savings Association Insurance Fund for savings
associations'', was not executed. See Effective Date of 1996 Amendment
note below.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104-208 effective Jan. 1, 1999, if no insured
depository institution is a savings association on that date, see
section 2704(c) of Pub. L. 104-208, set out as a note under section 1821
of this title.
Effective Date
Section 110(b) of Pub. L. 101-235 provided that: ``The amendment
made by subsection (a) [enacting this section] shall apply only with
respect to--
``(1) violations referred to in the amendment that occur on or
after the effective date of this section [Dec. 15, 1989]; and
``(2) in the case of a continuing violation (as determined by
the Secretary of Housing and Urban Development), any portion of a
violation referred to in the amendment that occurs on or after such
date.''
