§ 1735f-14. — Civil money penalties against mortgagees, lenders, and other participants in FHA programs.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1735f-14]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER V--MISCELLANEOUS
Sec. 1735f-14. Civil money penalties against mortgagees,
lenders, and other participants in FHA programs
(a) In general
(1) Authority
If a mortgagee approved under the \1\ chapter, a lender holding
a contract of insurance under subchapter I of this chapter, or a
principal, officer, or employee of such mortgagee or lender, or
other person or entity participating in either an insured mortgage
or subchapter I loan transaction under this chapter or providing
assistance to the borrower in connection with any such loan,
including sellers of the real estate involved, borrowers, closing
agents, title companies, real estate agents, mortgage brokers,
appraisers, loan correspondents and dealers, knowingly and
materially violates any applicable provision of subsection (b) of
this section, the Secretary may impose a civil money penalty on the
mortgagee or lender, or such other person or entity, in accordance
with this section. The penalty under this paragraph 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. 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.
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\1\ So in original. Probably should be ``this''.
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(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 any particular mortgagee or lender or
such other person or entity during any 1-year period shall not
exceed $1,000,000. Each violation of a \2\ the provisions of
subsection (b)(1) of this section shall constitute a separate
violation with respect to each mortgage or loan application. In the
case of a continuing violation, as determined by the Secretary, each
day shall constitute a separate violation.
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\2\ So in original. The word ``a'' probably should not appear.
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In the case of the mortgagee's failure to engage in loss
mitigation activities, as provided in subsection (b)(1)(I) of this
section, the penalty shall be in the amount of three times the
amount of any insurance benefits claimed by the mortgagee with
respect to any mortgage for which the mortgagee failed to engage in
such loss mitigation actions.
(b) Violations for which a penalty may be imposed
(1) Violations
The Secretary may impose a civil money penalty under subsection
(a) of this section for any knowing and material violation by a
mortgagee or lender, as follows:
(A) Except where expressly permitted by statute, regulation,
or contract approved by the Secretary, transfer of a mortgage
insured under this chapter to a mortgagee not approved by the
Secretary, or transfer of a loan to a transferee that is not
holding a contract of insurance under subchapter I of this
chapter.
(B) Failure of a nonsupervised mortgagee, as defined by the
Secretary--
(i) to segregate all escrow funds received from a
mortgagor for ground rents, taxes, assessments, and
insurance premiums; or
(ii) to deposit these funds in a special account with a
depository institution whose accounts are insured by the
Federal Deposit Insurance Corporation through the Bank
Insurance Fund for banks and through the Savings Association
Insurance Fund for savings associations, or by the National
Credit Union Administration.
(C) Use of escrow funds for any purpose other than that for
which they were received.
(D) Submission to the Secretary of information that was
false, in connection with any mortgage insured under this
chapter, or any loan that is covered by a contract of insurance
under subchapter I of this chapter.
(E) With respect to an officer, director, principal, or
employee--
(i) hiring such an individual whose duties will involve,
directly or indirectly, programs administered by the
Secretary, while that person was under suspension or
withdrawal by the Secretary; or
(ii) retaining in employment such an individual who
continues to be involved, directly or indirectly, in
programs administered by the Secretary, while that person
was under suspension or withdrawal by the Secretary.
(F) Falsely certifying to the Secretary or submitting to the
Secretary a false certification by another person or entity.
(G) Failure to comply with an agreement, certification, or
condition of approval set forth on, or applicable to--
(i) the application of a mortgagee or lender for
approval by the Secretary; or
(ii) the notification by a mortgagee or lender to the
Secretary concerning establishment of a branch office.
(H) Violation of any provisions of subchapter I, II, or IX-A
(as such subchapter existed immediately before December 15,
1989) of this chapter or any implementing regulation or handbook
that is issued under this chapter.
(I) Failure to engage in loss mitigation actions as provided
in section 1715u(a) of this title.
(2) Additional violations
The Secretary may impose a civil money penalty under subsection
(a) of this section for any knowing and material violation by a
principal, officer, or employee of a mortgagee or lender, or other
participants in either an insured mortgage or subchapter I loan
transaction under this chapter or provision of assistance to the
borrower in connection with any such loan, including sellers of the
real estate involved, borrowers, closing agents, title companies,
real estate agents, mortgage brokers, appraisers, loan
correspondents, and dealers for--
(A) submission to the Secretary of information that was
false, in connection with any mortgage insured under this
chapter, or any loan that is covered by a contract of insurance
under subchapter I of this chapter;
(B) falsely certifying to the Secretary or submitting to the
Secretary a false certification by another person or entity; or
(C) failure by a loan correspondent or dealer to submit to
the Secretary information which is required by regulations or
directives in connection with any loan that is covered by a
contract of insurance under subchapter I of this chapter.
(3) Notification to Attorney General
Before taking action to impose a civil money penalty for a
violation under paragraph (1)(D) or (F), or paragraph (2)(A), (B),
or (C), 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. These standards and procedures--
(A) shall provide for the Secretary to make the
determination to impose the penalty or to use an administrative
entity (such as the Mortgagee Review Board, established pursuant
to section 1708(c) of this title) to make the determination;
(B) shall provide for the imposition of a penalty only after
the mortgagee or lender or such other person or entity has been
given an 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 the
notice of opportunity for hearing, the imposition of the 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
those 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 in regulations
to be appropriate.
(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, a mortgagee or
lender or such other person or entity against whom 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 (such
as any administrative sanctions under 24 C.F.R. parts 24 and 25) as
may be addressed in the notice of determination to impose a penalty
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 determination or order be
modified or be set aside in whole or in part.
(2) Objections not raised in hearing
The 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 not presented at the 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 the 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, in any such review,
the court shall have the power to order payment of the penalty
imposed by the Secretary.
(e) Action to collect penalty
If any mortgagee or lender or such other person or entity 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 mortgagee or lender or such other person or entity and such
other relief as may be available. The monetary judgment may, in the
court's discretion, include the 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 in insurance funds
Notwithstanding any other provision of law, all civil money
penalties collected under this section shall be deposited in the
appropriate insurance fund or funds established under this chapter, as
determined by the Secretary.
(June 27, 1934, ch. 847, title V, Sec. 536, as added Pub. L. 101-235,
title I, Sec. 107(a), Dec. 15, 1989, 103 Stat. 2000; amended Pub. L.
104-208, div. A, title II, Sec. 2704(d)(13)(B), Sept. 30, 1996, 110
Stat. 3009-490; Pub. L. 105-65, title V, Sec. 553, Oct. 27, 1997, 111
Stat. 1413; Pub. L. 105-276, title VI, Sec. 601(g), (h), Oct. 21, 1998,
112 Stat. 2674.)
References in Text
Subchapter IX-A of this chapter, referred to in subsec. (b)(1)(H),
was repealed by Pub. L. 101-235, title I, Sec. 133(a), Dec. 15, 1989,
103 Stat. 2027.
Amendments
1998--Subsec. (a)(2). Pub. L. 105-276, Sec. 601(g), inserted second
paragraph.
Subsec. (b)(1)(I). Pub. L. 105-276, Sec. 601(h), which directed the
addition of subpar. (I) after subpar. ``(h)'', was executed by adding
subpar. (I) after subpar. (H), to reflect the probable intent of
Congress.
1997--Pub. L. 105-65, Sec. 553(a), amended section catchline
generally, substituting ``mortgagees, lenders, and other participants in
FHA programs'' for ``mortgagees and lenders''.
Subsec. (a)(1). Pub. L. 105-65, Sec. 553(b)(1), substituted ``If a
mortgagee approved under the chapter, a lender holding a contract of
insurance under subchapter I of this chapter, or a principal, officer,
or employee of such mortgagee or lender, or other person or entity
participating in either an insured mortgage or subchapter I loan
transaction under this chapter or providing assistance to the borrower
in connection with any such loan, including sellers of the real estate
involved, borrowers, closing agents, title companies, real estate
agents, mortgage brokers, appraisers, loan correspondents and dealers,
knowingly and materially violates any applicable provision of subsection
(b) of this section, the Secretary may impose a civil money penalty on
the mortgagee or lender, or such other person or entity, in accordance
with this section. The penalty under this paragraph 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.'' for ``Whenever a mortgagee approved under
this chapter, or a lender holding a contract of insurance under
subchapter I of this chapter, knowingly and materially violates any of
the provisions of subsection (b) of this section, the Secretary may
impose a civil money penalty on the mortgagee or lender in accordance
with the provisions of this section.''
Subsec. (a)(2). Pub. L. 105-65, Sec. 553(b)(2), inserted ``or such
other person or entity'' after ``lender'' in first sentence and
substituted ``the provisions of subsection (b)(1)'' for ``provision of
subsection (b)(1)'' in second sentence.
Subsec. (b)(2). Pub. L. 105-65, Sec. 553(c)(1), (2), added par. (2)
and redesignated former par. (2) as (3).
Subsec. (b)(3). Pub. L. 105-65, Sec. 553(c)(1), (3), redesignated
par. (2) as (3) and substituted ``or (F), or paragraph (2)(A), (B), or
(C)'' for ``or paragraph (1)(F)''.
Subsec. (c)(1)(B). Pub. L. 105-65, Sec. 553(d)(1), inserted ``or
such other person or entity'' after ``lender''.
Subsec. (d)(1). Pub. L. 105-65, Sec. 553(d)(2), inserted ``or such
other person or entity'' after ``lender'' and substituted ``parts 24 and
25'' for ``part 25''.
Subsec. (e). Pub. L. 105-65, Sec. 553(d)(3), inserted ``or such
other person or entity'' after ``lender'' in two places.
1996--Subsec. (b)(1)(B)(ii). Pub. L. 104-208, which directed the
amendment of section 526(b)(1)(B)(ii) of the National Housing Act by
substituting ``Deposit Insurance Fund'' for ``Bank Insurance Fund for
banks and through the Savings Association Insurance Fund for savings
associations'' and which substitution was probably intended by Congress
to be made in subsec. (b)(1)(B)(ii) of this section, section 536 of the
National Housing Act, 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 107(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.''
Regulations
Section 541 of title V of Pub. L. 105-65 provided that:
``(a) Issuance of Necessary Regulations.--Notwithstanding section
7(o) of the Department of Housing and Urban Development Act [42 U.S.C.
3535(o)] or part 10 of title 24, Code of Federal Regulations (as in
existence on the date of enactment of this Act [Oct. 27, 1997]), the
Secretary shall issue such regulations as the Secretary determines to be
necessary to implement this subtitle [subtitle C (Secs. 541-564) of
title V of Pub. L. 105-65, enacting section 1437z-1 of Title 42, The
Public Health and Welfare, amending this section, sections 1708, 1715z-
4a, 1715z-19, and 1735f-15 of this title, section 1516 of Title 18,
Crimes and Criminal Procedure, section 6103 of Title 26, Internal
Revenue Code, and sections 503 and 1437z of Title 42, and enacting
provisions set out as notes under section 1735f-15 of this title and
sections 503 and 1437z-1 of Title 42] and the amendments made by this
subtitle in accordance with section 552 or 553 of title 5, United States
Code, as determined by the Secretary.
``(b) Use of Existing Regulations.--In implementing any provision of
this subtitle, the Secretary may, in the discretion of the Secretary,
provide for the use of existing regulations to the extent appropriate,
without rulemaking.''
Section Referred to in Other Sections
This section is referred to in sections 1703, 1715z-13a, 1715z-13b
of this title.
