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U.S. Code as of:
01/19/04
Section 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.
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