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§ 1701q-1. —  Civil money penalties against mortgagors under section 1701q of this title.



[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 12USC1701q-1]

 
                       TITLE 12--BANKS AND BANKING
 
                      CHAPTER 13--NATIONAL HOUSING
 
Sec. 1701q-1. Civil money penalties against mortgagors under 
        section 1701q of this title
        

(a) In general

    The penalties set forth in this section shall be in addition to any 
other available civil remedy or criminal penalty, and may be imposed 
whether or not the Secretary imposes other administrative sanctions. The 
Secretary may not impose penalties under this section for violations a 
material cause of which are the failure of the Department, an agent of 
the Department, or a public housing agency to comply with existing 
agreements.

(b) Penalty for violation of agreement as condition of transfer of 
        physical assets, flexible subsidy loan, capital improvement 
        loan, modification of mortgage terms, or workout agreement

                           (1) In general

        Whenever a mortgagor of property that includes 5 or more living 
    units and that has a mortgage held pursuant to section 1701q of this 
    title, who has agreed in writing, as a condition of a transfer of 
    physical assets, a flexible subsidy loan, a capital improvement 
    loan, a modification of the mortgage terms, or a workout agreement, 
    to use nonproject income to make cash contributions for payments due 
    under the note and mortgage, for payments to the reserve for 
    replacements, to restore the project to good physical condition, or 
    to pay other project liabilities, knowingly and materially fails to 
    comply with any of these commitments, the Secretary may impose a 
    civil money penalty on the mortgagor in accordance with the 
    provisions of this section.

                             (2) Amount

        The amount of the penalty, as determined by the Secretary, for a 
    violation of this subsection may not exceed the amount of the loss 
    the Secretary would incur at a foreclosure sale, or sale after 
    foreclosure, with respect to the property involved.

(c) Violations of regulatory agreement

                           (1) In general

        The Secretary may also impose a civil money penalty on a 
    mortgagor or property that includes 5 or more living units and that 
    has a mortgage held pursuant to section 1701q of this title for any 
    knowing and material violation of the regulatory agreement executed 
    by the mortgagor, as follows:
            (A) Conveyance, transfer, or encumbrance of any of the 
        mortgaged property, or permitting the conveyance, transfer, or 
        encumbrance of such property, without the prior written approval 
        of the Secretary.
            (B) Assignment, transfer, disposition, or encumbrance of any 
        personal property of the project, including rents, or paying out 
        any funds, except for reasonable operating expenses and 
        necessary repairs, without the prior written approval of the 
        Secretary.
            (C) Conveyance, assignment, or transfer of any beneficial 
        interest in any trust holding title to the property, or the 
        interest of any general partner in a partnership owning the 
        property, or any right to manage or receive the rents and 
        profits from the mortgaged property, without the prior written 
        approval of the Secretary.
            (D) Remodeling, adding to, reconstructing, or demolishing 
        any part of the mortgaged property or subtracting from any real 
        or personal property of the project, without the prior written 
        approval of the Secretary.
            (E) Requiring, as a condition of the occupancy or leasing of 
        any unit in the project, any consideration or deposit other than 
        the prepayment of the first month's rent, plus a security 
        deposit in an amount not in excess of 1 month's rent, to 
        guarantee the performance of the covenants of the lease.
            (F) Not holding any funds collected as security deposits 
        separate and apart from all other funds of the project in a 
        trust account, the amount of which at all times equals or 
        exceeds the aggregate of all outstanding obligations under the 
        account.
            (G) Payment for services, supplies, or materials which 
        exceeds $500 and substantially exceeds the amount ordinarily 
        paid for such services, supplies, or materials in the area where 
        the services are rendered or the supplies or materials 
        furnished.
            (H) Failure to maintain at any time the mortgaged property, 
        equipment, buildings, plans, offices, apparatus, devices, books, 
        contracts, records, documents, and other related papers 
        (including failure to keep copies of all written contracts or 
        other instruments which affect the mortgaged property) in 
        reasonable condition for proper audit and for examination and 
        inspection at any reasonable time by the Secretary or any duly 
        authorized agents of the Secretary.
            (I) Failure to maintain the books and accounts of the 
        operations of the mortgaged property and of the project in 
        accordance with requirements prescribed by the Secretary.
            (J) Failure to furnish the Secretary, by the expiration of 
        the 60-day period beginning on the 1st day after the completion 
        of each fiscal year, with a complete annual financial report 
        based upon an examination of the books and records of the 
        mortgagor prepared in accordance with requirements prescribed by 
        the Secretary, and prepared and certified to by an independent 
        public accountant or a certified public accountant and certified 
        to by an officer of the mortgagor, unless the Secretary has 
        approved an extension of the 60-day period in writing. The 
        Secretary shall approve an extension where the mortgagor 
        demonstrates that failure to comply with this subparagraph is 
        due to events beyond the control of the mortgagor.
            (K) At the request of the Secretary, the agents of the 
        Secretary, the employees of the Secretary, or the attorneys of 
        the Secretary, failure to furnish monthly occupancy reports or 
        failure to provide specific answers to questions upon which 
        information is sought relative to income, assets, liabilities, 
        contracts, the operation and condition of the property, or the 
        status of the mortgage.
            (L) Failure to make promptly all payments due under the note 
        and mortgage, including tax and insurance escrow payments, and 
        payments to the reserve for replacements when there is adequate 
        project income available to make such payments.
            (M) Amending the articles of incorporation or bylaws, other 
        than as permitted under the terms of the articles of 
        incorporation as approved by the Secretary, without the prior 
        written approval of the Secretary.

                        (2) Amount of penalty

        A penalty imposed for a violation under this subsection, as 
    determined by the Secretary, may not exceed $25,000 for a violation 
    of any of the subparagraphs of paragraph (1).

(d) Agency procedures

                          (1) Establishment

        The Secretary shall establish standards and procedures governing 
    the imposition of civil money penalties under subsections (b) and 
    (c) of this section. These standards and procedures--
            (A) shall provide for the Secretary or other department 
        official (such as the Assistant Secretary for Housing) to make 
        the determination to impose a penalty;
            (B) shall provide for the imposition of a penalty only after 
        the mortgagor 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 (b) or 
    (c) 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 tenants, 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 (b) or (c) of this section shall not be subject to 
    review, except as provided in subsection (e) of this section.

(e) Judicial review of agency determination

                           (1) In general

        After exhausting all administrative remedies established by the 
    Secretary under subsection (d)(1) of this section, a mortgagor 
    against whom the Secretary has imposed a civil money penalty under 
    subsection (b) or (c) of this section may obtain a review of the 
    penalty and such ancillary issues as may be addressed in the notice 
    of determination to impose a penalty under subsection (d)(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

        The court shall not consider any objection that was not raised 
    in the hearing conducted pursuant to subsection (d)(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 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, in any such review, 
    the court shall have the power to order payment of the penalty 
    imposed by the Secretary.

(f) Action to collect penalty

    If a mortgagor fails to comply with the Secretary's determination or 
order imposing a civil money penalty under subsection (b) or (c) of this 
section, after the determination or order is no longer subject to review 
as provided by subsections (d)(1) and (e) 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 mortgagor 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.

(g) Settlement by Secretary

    The Secretary may compromise, modify, or remit any civil money 
penalty which may be, or has been, imposed under this section.

(h) ``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.

(i) Regulations

    The Secretary shall issue such regulations as the Secretary deems 
appropriate to implement this section.

(j) 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 fund 
established under section 1715z-1a(j) of this title.

(Pub. L. 86-372, title II, Sec. 202a, as added Pub. L. 101-235, title I, 
Sec. 109(a), Dec. 15, 1989, 103 Stat. 2007.)

                          Codification

    Section was enacted as part of the Housing Act of 1959, and not as 
part of the National Housing Act which comprises this chapter.


                             Effective Date

    Section 109(b) of Pub. L. 101-235 provided that: ``The amendment 
made by subsection (a) [enacting this section] shall apply only with 
respect to violations referred to in the amendment that occur on or 
after the effective date of this section [Dec. 15, 1989].''

                  Section Referred to in Other Sections

    This section is referred to in section 1715z-1a of this title.



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