4060.2 REV 2

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Chapter 5. Civil Money Penalties

5-1. General. Department of Housing and Urban Development

Reform Act of 1989 ( 12 U.S.C. 1708 ) authorizes the

Mortgage Preview Board to impose civil money penalties on

mortgagees and Title I lenders who knowingly and

materially violate program statutes, regulations and

Handbook requirements. A civil money penalty may be

imposed in addition to any other administrative action

taken by the Board, or any civil or criminal penalties.

The regulations governing the imposition of civil money

penalties are set forth in 24 CFR Part 30.

5-2. Offices of Lender Activities and Land Sales Registration.

The Office of Lender Activities and Land Sales

Registration serves as staff to The Board and is the

designated contact point for all civil money penalty

cases that are referred to The Board for action. ( See

chapter 2 ).

5-3. Notice of Intent to Seek a Civil Money Penalty. Whenever

the Board intends to seek a civil money penalty, it will

issue a written notice to the program participant. ( See

24 CFR Sections 30.100 and 30.105 ). The notice informs

the participant that:

A. The Board is considering imposing a civil money

penalty

B. States the specific violations that have been

alleged

C. States the amount of the penalty that will be

recommended

D. Provides an opportunity for the submission of a

written response within 30 days from receipt of the

notice.

Failure to respond to this notice will result in the

Board considering a civil money penalty without any

further notice to the participant.

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5-1 9/92

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4060.2 REV 2

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5-4. Factors in Determining the Amount of the Penalty. In

deciding the amount of a civil money penalty to be

imposed, the Board will consider the following ( See 24

CFR 30.215 ):

A. The gravity of the offense

B. Any history of prior offenses

C. Ability to pay the penalty

D. Injury to the public because of the violation

E. Any benefits received by the mortgagee or lender

F. Potential benefit to other persons

G. Deterrence of future violations

H. The degree of the mortgagee or lender culpability.

5-5. Amount of Penalty. The maximum amounts of penalties, as

determined by the Board, may not exceed \$5,000 for each

violation by a mortgagee or lender, except that the

maximum penalty for all violations by any mortgagee or

lender during any one year period may not exceed \$1

million. Each violation constitutes a separate

violation with respect to each mortgage or Title I loan

application, subject to the maximum penalty of \$1 million

during any one year period ( See 24 CFR Section 30.220

and 30.345 ).

5-6. Violations for which Civil Money Penalties may be Imposed

on Mortgagees and Title I Lenders. A civil money penalty

may be imposed by the Board against a mortgagee or Title

I Lender for knowing and material program violations that

include ( See 24 CFR Section 30.320 ):

A. Transfer of an insured mortgage to a mortgagee not

approved by the Department or Title I loan to a

lender not holding a contract of insurance.

B. Failure by a nonsupervised mortgagee to segregate

all escrow funds received from a mortgagor for

ground rents, taxes, assessments and insurance

premiums.

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9/92 5-2

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4060.2 REV 2

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C. Failure by a nonsupervised mortgagee to deposit all

escrow funds in a special account with a depository

whose accounts are insured by an agency of the

Federal Government.

D. Use of escrow funds for any purpose other than that

for which they were received.

E. Falsely certifying to the Department or submitting

to the Department a false certification by another

person.

F. Submitting false information to the Department in

connection with any insured mortgage or Title I

loan.

G. Failing to comply with any agreement, certification

or condition set forth, or applicable to, the

application of a mortgagee or Title I lender for

approval by the Department.

H. Hiring or employing an individual such as an

officer, director, principal or employee whose

duties involve programs administered by the

Department while that person is under suspension or

withdrawal by the department.

I. Failure by a Title I lender to comply with the

Department\'s requirements concerning approval or

supervision of the dealers, or approving a dealer

who has been suspended, debarred or otherwise denied

participation in HUD programs.

J. Failure to remit, or timely remit, mortgage

insurance premiums, loan insurance charges, late

charges or interest penalties.

K. Failure to report all delinquent FHA insured

mortgages to the Department.

L. Failure to comply with mortgage servicing

requirements or Title I loan servicing requirements.

5-7. Settlements, A mortgagee or lender may at any time enter

into a Settlement Agreement before or after a matter is

referred to the Board for consideration of a civil money

penalty ( See 24 CFR Section 30.1010).

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5-3 9/92

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4060.2 REV 2

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5-8. Opportunity for a hearing. Before a civil money penalty

can be imposed, the mortgagee or lender will be given an

opportunity for a hearing before an Administrative Law

Judge. If a hearing is not requested, the Administrative

Law Judge will issue a default judgment. Unless the

mortgagee or lender can show that extraordinary

circumstances prevented it from making a hearing request,

the determination of the Board for the imposition of an

civil money penalty will become final and unappealable

( See 24 CFR Sections 30.800 through 30.1010 ).

5-9. Referrals of Civil Money Penalty Cases. HUD program and

field offices may refer a mortgagee or lender for

consideration of civil money penalties by the Board. A

referral must be based upon adequate documentation that

the mortgagee or lender has knowingly and materially

engaged in violations of the Department\'s rules or

requirements. Generally, the term \"materially\" means

that the violations have a financial impact on the

Department or may have influenced a Departmental decision

or that have substantially injured the public. The term

\"knowingly\" means that the mortgagee or lender had actual

knowledge of the violations or was acting with deliberate

ignorance or reckless disregard of the Department\'s

requirements.

A. All referrals of mortgagees and lenders for civil

money penalties must be sent to the Director, Office

of Lender Activities and Land Sales Registration.

B. A referral for civil money penalties must contain a

written report of the violations by the mortgagee or

lender including:

1\) a full factual background description of the

violations

2\) citations of the specific statutes, regulations

or requirements that have been violated

3\) all available supporting documentation

evidencing the violations

5-10. Civil Money Penalties Handbook. A new Handbook on the

Department\'s procedures for imposing civil money

penalties under 24 CFR part 30, with respect to all

HUD-FHA programs, is presently being developed. This

Handbook will be available to HUD staff and program

participants in the near future.

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9/92 5-4

\*U.S. Government Printing Office - 312-218/60286