View all text of Subchapter V [§ 1731 - § 1735h]
§ 1735f–15. Civil money penalties against multifamily mortgagors
(a) In general
(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
(2) Amount of penalty
(c) Other violations
(1)
(A) Liable partiesThe Secretary may also impose a civil money penalty under this section on—
(i) any mortgagor of a property that includes 5 or more living units and that has a mortgage insured, coinsured, or held pursuant to this chapter;
(ii) any general partner of a partnership mortgagor of such property;
(iii) any officer or director of a corporate mortgagor;
(iv) any agent employed to manage the property that has an identity of interest with the mortgagor, with the general partner of a partnership mortgagor, or with any officer or director of a corporate mortgagor of such property; or
(v) any member of a limited liability company that is the mortgagor of such property or is the general partner of a limited partnership mortgagor or is a partner of a general partnership mortgagor.
(B) ViolationsA penalty may be imposed under this section upon any liable party under subparagraph (A) that knowingly and materially takes any of the following actions:
(i) 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.
(ii) Assignment, transfer, disposition, or encumbrance of any personal property of the project, including rents, other revenues, or contract rights, or paying out any funds, except for reasonable operating expenses and necessary repairs, without the prior written approval of the Secretary.
(iii) 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.
(iv) 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.
(v) 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.
(vi) 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.
(vii) 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.
(viii) 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.
(ix) 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.
(x) Failure to furnish the Secretary, by the expiration of the 90-day period beginning on the first day after the completion of each fiscal year (unless the Secretary has approved an extension of the 90-day period in writing), with a complete annual financial report, in accordance with requirements prescribed by the Secretary, including requirements that the report be—(I) based upon an examination of the books and records of the mortgagor;(II) prepared and certified to by an independent public accountant or a certified public accountant (unless the Secretary has waived this requirement in writing); and(III) certified to by the mortgagor or an authorized representative of the mortgagor.
The Secretary shall approve an extension where the mortgagor demonstrates that failure to comply with this clause is due to events beyond the control of the mortgagor.
(xi) 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.
(xii) Failure to make promptly all payments due under the note and mortgage, including mortgage insurance premiums, tax and insurance escrow payments, and payments to the reserve for replacements when there is adequate project income available to make such payments.
(xiii) Failure to maintain the premises, accommodations, any living unit in the project, and the grounds and equipment appurtenant thereto in good repair and condition in accordance with regulations and requirements of the Secretary, except that nothing in this clause shall have the effect of altering the provisions of an existing regulatory agreement or federally insured mortgage on the property.
(xiv) Failure, by a mortgagor, a general partner of a partnership mortgagor, or an officer or director of a corporate mortgagor, to provide management for the project that is acceptable to the Secretary pursuant to regulations and requirements of the Secretary.
(xv) Failure to provide access to the books, records, and accounts related to the operations of the mortgaged property and of the project.
The pay out of surplus cash, as defined by and provided for in the regulatory agreement, shall not constitute a violation of this subsection.
(2) Amount of penalty
(d) Agency procedures
(1) EstablishmentThe Secretary shall establish standards and procedures governing the imposition of civil money penalties under subsections (b) and (c). 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, general partner of a partnership mortgagor, officer or director of a corporate mortgagor, or identity of interest agent employed to manage the property 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
(3) Factors in determining amount of penalty
(4) Reviewability of imposition of penalty
(5) Payment of penalty
(e) Judicial review of agency determination
(1) In general
(2) Objections not raised in hearing
(3) Scope of review
(4) Order to pay penalty
(f) Civil money penalties against multifamily mortgagors, general partners of partnership mortgagors, officers and directors of corporate mortgagors, and certain managing agents
(g) Settlement by Secretary
(h) “Knowingly” defined
(i) Regulations
(j) Deposit of penalties in insurance funds
(k) Identity of interest managing agentIn this section, the terms “agent employed to manage the property that has an identity of interest” and “identity of interest agent” mean an entity—
(1) that has management responsibility for a project;
(2) in which the ownership entity, including its general partner or partners (if applicable) and its officers or directors (if applicable), has an ownership interest; and
(3) over which the ownership entity exerts effective control.
(June 27, 1934, ch. 847, title V, § 537, as added Pub. L. 101–235, title I, § 108(a), Dec. 15, 1989, 103 Stat. 2003; amended Pub. L. 105–65, title V, § 561(a), Oct. 27, 1997, 111 Stat. 1414; Pub. L. 108–447, div. I, title II, § 219(b), (c), Dec. 8, 2004, 118 Stat. 3319.)