12 USC 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, 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), 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.
(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) 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.
In the case of the mortgagee’s failure to engage in loss mitigation activities, as provided in subsection (b)(1)(I), 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) for any knowing and material violation by a mortgagee or lender or any of its owners, officers, or directors, 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 Deposit Insurance Fund, 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 or II of this chapter, or any implementing regulation, handbook, or mortgagee letter that is issued under this chapter.
(I) Failure to engage in loss mitigation actions as provided in section 1715u(a) of this title.
(J) Failure to perform a required physical inspection of the mortgaged property.
(K) Violation of section 1708(d) of this title.
(L) Use of “Federal Housing Administration”, “Department of Housing and Urban Development”, “Government National Mortgage Association”, “Ginnie Mae”, the acronyms “HUD”, “FHA”, or “GNMA”, or any official seal or logo of the Department of Housing and Urban Development, except as authorized by the Secretary.
(2) Additional violations
The Secretary may impose a civil money penalty under subsection (a) 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;
(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; or
(D) causing or participating in any of the violations set forth in paragraph (1) of this subsection.
(3) Prohibition against misleading use of Federal entity designation
The Secretary may impose a civil money penalty, as adjusted from time to time, under subsection (a) for any use of “Federal Housing Administration”, “Department of Housing and Urban Development”, “Government National Mortgage Association”, “Ginnie Mae”, the acronyms “HUD”, “FHA”, or “GNMA”, or any official seal or logo of the Department of Housing and Urban Development, by any person, party, company, firm, partnership, or business, including sellers of real estate, closing agents, title companies, real estate agents, mortgage brokers, appraisers, loan correspondents, and dealers, except as authorized by the Secretary.
(c) Agency procedures
(1) Establishment
The Secretary shall establish standards and procedures governing the imposition of civil money penalties under subsection (a). 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), 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) shall not be subject to review, except as provided in subsection (d).
(d) Judicial review of agency determination
(1) In general
After exhausting all administrative remedies established by the Secretary under subsection (c)(1), a mortgagee or lender or such other person or entity against whom the Secretary has imposed a civil money penalty under subsection (a) 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) 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) 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), after the determination or order is no longer subject to review as provided by subsections (c)(1) and (d), 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
Terms Used In 12 USC 1735f-14
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- individual: shall include every infant member of the species homo sapiens who is born alive at any stage of development. See 1 USC 8
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgagee: The person to whom property is mortgaged and who has loaned the money.
- Mortgagor: The person who pledges property to a creditor as collateral for a loan and who receives the money.
- National Credit Union Administration: The federal regulatory agency that charters and supervises federal credit unions. (NCUA also administers the National Credit Union Share Insurance Fund, which insures the deposits of federal credit unions.) Source: OCC
- officer: includes any person authorized by law to perform the duties of the office. See 1 USC 1
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Remand: When an appellate court sends a case back to a lower court for further proceedings.
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- Statute: A law passed by a legislature.
The Secretary may compromise, modify, or remit any civil money penalty which may be, or has been, imposed under this section.
(g) “Knowingly” defined
For purposes of this section, a person acts knowingly when a person has actual knowledge of acts or should have known of the acts.
(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.