12 U.S.C. § 1723i — Civil money penalties against issuers

(a) In general (1) Authority If an issuer or custodian approved under section 1721(g) of this title knowingly and materially violates any provision of subsection (b), the Secretary of Housing and Urban Development may impose a civil money penalty on that issuer or custodian under this section. The penalty is in addition to any other available civil remedy or criminal penalty. The Secretary may impose it whether or not the Secretary imposes other administrative sanctions. (2) Amount of penalty The Secretary may set the penalty at no more than $5,000 for each violation. However, the total penalty for all violations by one issuer or custodian during any one-year period may not exceed $1,000,000. Each violation of subsection (b)(1) is a separate violation for each pool of mortgages. If the Secretary determines that a violation is continuing, each day is a separate violation. (b) Violations for which penalty may be imposed (1) Violations The Secretary may impose a civil money penalty under subsection (a) on an issuer or custodian for any of these violations: (A) Failing to make timely principal and interest payments to holders of securities guaranteed under section 1721(g) of this title. (B) Failing to keep cash flow from pooled mortgages separate, or failing to deposit principal and interest funds or escrow funds into special accounts at a depository institution whose accounts are insured by the National Credit^* Union Administration or by the Federal Deposit Insurance Corporation through the Deposit Insurance Fund. (C) Using escrow funds for a purpose other than the purpose for which they were received. (D) Transferring servicing for a pool of mortgages to an issuer that is not approved under this subchapter, unless a statute, regulation, or contract approved by the Secretary expressly permits the transfer. (E) Failing to maintain the minimum net worth required by the Association. (F) Failing to promptly notify the Association in writing about a change that materially affects an issuer’s business status. (G) Submitting false information to the Association in connection with securities guaranteed, or mortgages pooled, under section 1721(g) of this title. (H) Hiring or keeping an officer, director^*, principal, or employee whose duties involve, directly or indirectly, programs administered by the Association while that person^* is suspended or debarred by the Secretary. (I) Submitting a false certification to the Association, either for itself or for another person or entity. (J) Failing to comply with an agreement, certification, or approval condition stated in, or applying to, an application for approval as an issuer of securities under section 1721(g) of this title. (K) Violating any provision of this subchapter or any implementing regulation, handbook, or participant letter issued under this subchapter’s authority. (2) Notification to Attorney General Before taking action to impose a civil money penalty for a violation under paragraph (1)(G) or (1)(I), the Secretary must inform the Attorney General of the United States. (c) Agency procedures (1) Establishment The Secretary must establish standards and procedures for imposing civil money penalties under subsection (a). The standards and procedures— (A) must have the Secretary decide whether to impose the penalty; (B) must allow a penalty to be imposed only after the issuer or custodian receives notice of, and an opportunity for, a hearing on the record; and (C) may allow the Secretary to review a determination, order, or interlocutory ruling that arises from a hearing. (2) Final orders If the issuer or custodian does not request a hearing within 15 days after receiving notice of the opportunity for a hearing, imposing the penalty is a final and unappealable determination. If the Secretary reviews the determination or order, the Secretary may affirm, change, or reverse it. If the Secretary does not review it within 90 days after it is issued, the determination or order is final. (3) Factors in determining amount of penalty When setting the penalty amount under subsection (a), the Secretary must consider factors such as the seriousness of the offense, any history of earlier offenses (including offenses before December 15, 1989), the ability to pay, harm to the public, benefits received, deterrence of future violations, and any other factors the Secretary sets by regulation. (4) Reviewability of imposition of penalty The Secretary’s determination or order imposing a penalty under subsection (a) cannot be reviewed except as subsection (d) provides. (d) Judicial review of agency determination (1) In general After using all administrative remedies established under subsection (c)(1), an issuer or custodian against which the Secretary imposed a civil money penalty under subsection (a) may ask an appropriate United States court of appeals to review the penalty and any related issues that may be addressed in the notice under subsection (c)(1)(A). The issuer or custodian must file a written petition in that court within 20 days after the order or determination is entered, asking that the Secretary’s order or determination be changed or set aside in whole or in part. (2) Objections not raised in hearing A court may not consider an objection that was not raised in the hearing under subsection (c)(1), unless extraordinary circumstances caused the failure to raise it. If a party shows the court that additional evidence not presented at the hearing is material and that reasonable grounds existed for not presenting it at the hearing, the court must send the matter back to the Secretary to consider that evidence. (3) Scope of review The court must review the Secretary’s decisions, findings, and determinations under section 706 of title 5. (4) Order to pay penalty Despite any other law, the court may, in such a review, order payment of the penalty imposed by the Secretary. (e) Action to collect penalty If an issuer or custodian does not comply with the Secretary’s determination or order imposing a civil money penalty under subsection (a), and the determination or order is no longer reviewable under subsections (c)(1) and (d), the Secretary may ask the Attorney General of the United States to bring an action in an appropriate United States district court. The action may seek a monetary judgment against the issuer or custodian and any other available relief. At the court’s discretion, the monetary judgment may include attorneys’ fees and other expenses the United States incurred in the action. In an action under this subsection, the court may not review whether the Secretary’s penalty determination or order was valid or appropriate. (f) Settlement by Secretary The Secretary may compromise, change, or cancel any civil money penalty that may be or has been imposed under this section. (g) “Knowingly” defined “Knowingly” means having actual knowledge of the prohibitions under this section, or acting with deliberate ignorance of or reckless disregard for those prohibitions. This section does not define “issuer,” “custodian,” “Secretary,” “Association,” or other terms it uses. (h) Regulations The Secretary must issue the regulations the Secretary considers appropriate to implement this section. (i) Deposit of penalties The Secretary must deposit all civil money penalties collected under this section into the Association’s funds under section 1722 of this title.