12USC1735f-14

§ 1735f–13

TITLE 12—BANKS AND BANKING

(June 27, 1934, ch. 847, title V, § 534, as added Pub.
L. 100–242, title IV, § 418, Feb. 5, 1988, 101 Stat.
1912; amended Pub. L. 102–550, title V, § 512(a),
Oct. 28, 1992, 106 Stat. 3786.)
AMENDMENTS
1992—Pub. L. 102–550 designated existing provisions as
subsec. (a), inserted heading, and added subsec. (b).
REGULATIONS
Section 512(b) of Pub. L. 102–550 provided that: ‘‘The
procedure referred to in the amendment made by subsection (a) [amending this section] shall be established
through interim and final regulations issued by the
Secretary. The Secretary shall issue interim regulations implementing the procedure not later than the
expiration of the 90-day period beginning on the date of
the enactment of this Act [Oct. 28, 1992], which shall be
effective upon issuance. The Secretary shall issue final
regulations after notice and opportunity for public
comment pursuant to the provisions of section 553 of
title 5, United States Code (notwithstanding subsections (a)(2), (b)(B), and (d)(3) of such section).’’

§ 1735f–13. Prohibition of requirement of minimum principal loan amount
A mortgagee or lender may not require, as a
condition of providing a loan insured under this
chapter or secured by a mortgage insured under
this chapter, that the principal amount of the
loan exceed a minimum amount established by
the mortgagee or lender.
(June 27, 1934, ch. 847, title V, § 535, as added Pub.
L. 100–242, title IV, § 419(a), Feb. 5, 1988, 101 Stat.
1913.)
§ 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.
1 So

in original. Probably should be ‘‘this’’.

Page 794

(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.
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 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 adminis2 So

in original. The word ‘‘a’’ probably should not appear.

Page 795

TITLE 12—BANKS AND BANKING

tered 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) 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;
(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; 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

§ 1735f–14

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) 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

§ 1735f–14

TITLE 12—BANKS AND BANKING

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
For purposes of this section, a person acts
knowingly when a person has actual knowledge
of acts or should have known of the acts.

Page 796

(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, § 536, as added Pub.
L. 101–235, title I, § 107(a), Dec. 15, 1989, 103 Stat.
2000; amended Pub. L. 104–208, div. A, title II,
§ 2704(d)(13)(B), Sept. 30, 1996, 110 Stat. 3009–490;
Pub. L. 105–65, title V, § 553, Oct. 27, 1997, 111
Stat. 1413; Pub. L. 105–276, title VI, § 601(g), (h),
Oct. 21, 1998, 112 Stat. 2674; Pub. L. 108–447, div.
I, title II, § 219(a), Dec. 8, 2004, 118 Stat. 3319; Pub.
L. 109–171, title II, § 2102(b), Feb. 8, 2006, 120 Stat.
9; Pub. L. 109–173, § 9(f)(2), Feb. 15, 2006, 119 Stat.
3618; Pub. L. 111–22, div. A, title II, § 203(f), May
20, 2009, 123 Stat. 1647.)
AMENDMENTS
2009—Subsec. (b)(1). Pub. L. 111–22, § 203(f)(1)(A)(i), inserted ‘‘or any of its owners, officers, or directors’’
after ‘‘mortgagee or lender’’ in introductory provisions.
Subsec. (b)(1)(H). Pub. L. 111–22, § 203(f)(1)(A)(ii), substituted ‘‘subchapter I or II of this chapter, or any implementing regulation, handbook, or mortgagee letter
that is issued under this chapter.’’ for ‘‘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.’’
Subsec. (b)(1)(K), (L). Pub. L. 111–22, § 203(f)(1)(A)(iii),
added subpars. (K) and (L).
Subsec. (b)(2)(D). Pub. L. 111–22, § 203(f)(1)(B), added
subpar. (D).
Subsec. (b)(3). Pub. L. 111–22, § 203(f)(1)(C), amended
par. (3) generally. Prior to amendment, text read as follows: ‘‘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.’’
Subsec. (g). Pub. L. 111–22, § 203(f)(2), substituted ‘‘For
purposes of this section, a person acts knowingly when
a person has actual knowledge of acts or should have
known of the acts.’’ for ‘‘The term ‘knowingly’ means
having actual knowledge of or acting with deliberate
ignorance of or reckless disregard for the prohibitions
under this section.’’
2006—Subsec. (b)(1)(B)(ii). Pub. L. 109–173 substituted
‘‘Deposit Insurance Fund’’ for ‘‘Bank Insurance Fund
for banks and through the Savings Association Insurance Fund for savings associations’’.
Pub.
L.
109–171
repealed
Pub.
L.
104–208,
§ 2704(d)(13)(B). See 1996 Amendment note below.
2004—Subsec. (b)(1)(J). Pub. L. 108–447 added subpar.
(J).
1998—Subsec. (a)(2). Pub. L. 105–276, § 601(g), inserted
second paragraph.
Subsec. (b)(1)(I). Pub. L. 105–276, § 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, § 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, § 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 partici-

Page 797

§ 1735f–15

TITLE 12—BANKS AND BANKING

pating 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, § 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, § 553(c)(1), (2), added par.
(2) and redesignated former par. (2) as (3).
Subsec. (b)(3). Pub. L. 105–65, § 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, § 553(d)(1), inserted
‘‘or such other person or entity’’ after ‘‘lender’’.
Subsec. (d)(1). Pub. L. 105–65, § 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, § 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,
§ 2704(d)(13)(B), 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 repealed by
Pub. L. 109–171. See Effective Date of 1996 Amendment
note below and 2006 Amendment note above.
EFFECTIVE DATE OF 2006 AMENDMENT
Amendment by Pub. L. 109–173 effective Mar. 31, 2006,
see section 9(j) of Pub. L. 109–173, set out as a note
under section 24 of this title.
Amendment by Pub. L. 109–171 effective no later than
the first day of the first calendar quarter that begins
after the end of the 90-day period beginning Feb. 8, 2006,
see section 2102(c) of Pub. L. 109–171, set out as a Merger
of BIF and SAIF note under section 1821 of this title.
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, formerly 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 (§§ 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.’’

§ 1735f–15. Civil money penalties against multifamily mortgagors
(a) In general
The penalties set forth in this section 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 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) Authority
Whenever a mortgagor of property that includes 5 or more living units and that has a
mortgage insured, co-insured, or held pursuant
to this chapter, 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 that mortgagor,
on a general partner of a partnership mortgagor, or on any officer or director of a corporate mortgagor in accordance with the provisions of this section.
(2) Amount of penalty
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 experience at a foreclosure sale, or a sale after foreclosure, of the
property involved.