I
104TH CONGRESS
2D SESSION
H. R. 3741
To enhance the effectiveness of enforcement provisions relating to single
family and multifamily housing, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 27, 1996
Mr. LAZIO of New York (by request) introduced the following bill; which was
referred to the Committee on Banking and Financial Services, and in ad-
dition to the Committees on the Judiciary and Ways and Means, for a
period to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the com-
mittee concerned
A BILL
To enhance the effectiveness of enforcement provisions relat-
ing to single family and multifamily housing, and for
other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Housing Enforcement Act of 1996’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title and table of contents.
Sec. 2. Implementation.
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TITLE I—FHA SINGLE FAMILY AND MULTIFAMILY
Sec. 10. MRB exemption from automatic stay provisions of bankruptcy Code.
Sec. 11. Authorize MRB to immediately suspend mortgagees.
Sec. 12. Extension of equity skimming to other single family and multifamily
housing programs.
Sec. 13. Civil money penalties against mortgagees, lenders, and other partici-
pants in FHA programs.
TITLE II—FHA MULTIFAMILY
Sec. 20. Civil money penalties against general partners, officers, directors, and
certain managing agents of multifamily projects.
Sec. 21. Civil money penalties for noncompliance with section 8 HAP contracts.
Sec. 22. Extension of double damages remedy.
Sec. 23. Obstruction of federal audits.
Sec. 24. Disposition of amounts recovered under the Program Fraud Civil
Remedies Act.
Sec. 25. Extension of access to records to prevent fraud and abuse.
SEC. 2. IMPLEMENTATION.
(a) ISSUANCE OF NECESSARY REGULATIONS.—Not-
withstanding 42 U.S.C. 3535(o) or 24 CFR part 10, the
Secretary shall issue such regulations as may be necessary
to implement any provision of this Act, and any amend-
ment made by this Act, in accordance with section 552
or 553 of title 5, United States Code, as determined by
the Secretary.
(b) USE OF EXISTING RULES.—In implementing any
provision of this Act, the Secretary may, in the Secretary’s
discretion, provide for the use of existing rules to the ex-
tent appropriate, without the need for further rulemaking.
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TITLE I—FHA SINGLE FAMILY AND
MULTIFAMILY
SEC. 10. MRB EXEMPTION FROM AUTOMATIC STAY PROVI-
SIONS OF BANKRUPTCY CODE.
Section 202(c)(3) of the National Housing Act is
amended by inserting at the end the following:
‘‘(F) 
EXEMPTION
FROM
BANKRUPTCY
STAY.—The stay provisions of title 11 of the
United States Code shall not preclude or limit
the exercise by the Board of its right to take
an administrative action against a mortgagee as
provided in this paragraph.’’.
SEC. 11. AUTHORIZE MRB TO IMMEDIATELY SUSPEND
MORTGAGEES.
Section 202(c)(3)(C) of the National Housing Act is
amended by inserting after the first sentence the following
new sentence: ‘‘Notwithstanding paragraph (4)(A), a sus-
pension shall be effective upon issuance by the Board if
there exists adequate evidence in the determination of the
Board that immediate action is required to protect the fi-
nancial interests of the Department or the public.’’.
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SEC. 12. EXTENSION OF EQUITY SKIMMING TO OTHER SIN-
GLE FAMILY AND MULTIFAMILY HOUSING
PROGRAMS.
Section 254 of the National Housing Act is amended
to read as follows:
‘‘EQUITY SKIMMING PENALTY
‘‘Whoever, as an owner, agent, or manager, or who
is otherwise in custody, control, or possession of a multi-
family project or a 1- to 4-family residence that is security
for a mortgage note that is insured, acquired, or held by
the Secretary pursuant to the National Housing Act, or
is made pursuant to section 202 of the Housing Act of
1959 (including property still subject to section 202 pro-
gram requirements that existed before the date of enact-
ment of the Cranston-Gonzalez National Affordable Hous-
ing Act), or is insured or held pursuant to section 542
of the Housing and Community Development Act of 1992,
but is not reinsured under section 542 of the Housing and
Community Development Act of 1992, willfully uses or au-
thorizes the use of any part of the rents, assets, proceeds,
income, or other funds derived from property covered by
such mortgage note for any purpose other than to meet
reasonable and necessary expenses that include expenses
approved by the Secretary if such approval is required,
during a period when the mortgage note is in default or
the project is in a nonsurplus cash position as defined by
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the regulatory agreement covering such property, or the
mortgagor has failed to comply with the provisions of such
other form of regulatory control imposed by the Secretary,
shall be fined not more than $500,000 or imprisoned not
more than 5 years, or both.’’.
SEC. 13. CIVIL MONEY PENALTIES AGAINST MORTGAGEES,
LENDERS, AND OTHER PARTICIPANTS IN FHA
PROGRAMS.
(A) CHANGE TO SECTION TITLE.—The title of sec-
tion 536 of the National Housing Act is amended to read
as follows: ‘‘CIVIL MONEY PENALTIES AGAINST MORTGA-
GEES, LENDERS, AND OTHER PARTICIPANTS IN FHA
PROGRAMS’’.
(b) EXPANSION OF PERSONS ELIGIBLE FOR PEN-
ALTY.—Section 536(a) of the National Housing Act is
amended—
(1) in paragraph (1), by revising the first sen-
tence to read as follows: ‘‘Whenever a mortgagee ap-
proved under the Act, a lender holding a contract of
insurance under title I of this Act, or a principal, of-
ficer or employee of such mortgage or lender, or
other person or entity participating in either an in-
sured mortgage or title I loan transaction under this
Act or providing assistance to the borrower in con-
nection with any such loan, including sellers of the
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real estate involved, borrowers, closing agents, title
companies, real estate agents, mortgage brokers, ap-
praisers, loan correspondents and dealers, knowingly
and materially violates any of the applicable provi-
sions of subsection (b), the Secretary may impose a
civil money penalty on the mortgagee or lender, or
such other person or entity, in accordance with the
provisions of this section. The penalty shall be in ad-
dition to any other available civil remedy or any
available criminal penalty, and may be imposed
whether or not the Secretary imposes other adminis-
trative sanctions.’’; and
(2) in paragraph (2)—
(A) in the first sentence, by inserting ‘‘or
such other person or entity’’ after ‘‘lender’’; and
(B) in the second sentence, by striking
‘‘provision’’ and inserting ‘‘the provisions’’.
(c) ADDITIONAL VIOLATIONS
FOR MORTGAGEES,
LENDERS, AND OTHER PARTICIPANTS
IN FHA PRO-
GRAMS.—Section 536(b) of such Act is amended—
(1) by redesignating paragraph (2) as para-
graph (3);
(2) by inserting after paragraph (1) the follow-
ing new paragraph:
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‘‘(2) The Secretary may impose a civil money
penalty under subsection (a) for any knowing or ma-
terial violation by a principal, officer or employee of
a mortgagee or lender, or other participants in ei-
ther an insured mortgage or title I loan transaction
under this Act or provision of assistance to the bor-
rower 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 the following:
‘‘(A) submission to the Secretary of infor-
mation that was false, in connection with any
mortgage insured under this Act, or any loan
that is covered by a contract of insurance under
title I of this Act;
‘‘(B) falsely certifying to the Secretary or
submitting to the Secretary a false certification
by another person or entity; or
‘‘(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 title I of this Act.’’;
and
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(3) in paragraph (3), as redesignated by para-
graph (1) of this subsection, by striking ‘‘or para-
graph (1)(F)’’ and inserting ‘‘or (F), or paragraph
(2)(A), (B), or (C)’’.
(d) CONFORMING AND TECHNICAL AMENDMENTS.—
Section 536 of such Act is further amended as follows:
(1) in subsection (c)(1)(B), by inserting after
‘‘lender’’’ the following: ‘‘or such other person or en-
tity’’;
(2) in subsection (d)(1)—
(A) by inserting after ‘‘lender’’ the follow-
ing: ‘‘or such other person or entity’’; and
(B) by striking ‘‘part 25’’ and inserting
‘‘parts 24 and 25’’; and
(3) in subsection (e), by inserting after ‘‘lend-
er’’ each time it appears the following: ‘‘or such
other person or entity’’.
TITLE II—FHA MULTIFAMILY
SEC. 20. CIVIL MONEY PENALTIES AGAINST GENERAL
PARTNERS, OFFICERS, DIRECTORS, AND CER-
TAIN MANAGING AGENTS OF MULTIFAMILY
PROJECTS.
(a) CIVIL MONEY PENALTIES AGAINST MULTIFAM-
ILY MORTGAGORS.—Section 537 of the National Housing
Act is amended—
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(1) in subsection (b)(1), by striking ‘‘on that
mortgagor’’ and inserting the following: ‘‘on that
mortgagor, on a general partner of a partnership
mortgagor, or on any officer or director of a cor-
porate mortgagor’’;
(2) in subsection (c)—
(A) by striking the heading and inserting
the following: ‘‘(c) OTHER VIOLATIONS.—’’;
(B) in paragraph (1)—
(i) by striking ‘‘VIOLATIONS.—The
Secretary may’’ and all that follows
through the colon and inserting the follow-
ing:
‘‘(A) LIABLE
PARTIES.—The Secretary may
also impose a civil money penalty under this section
on—
‘‘(i) any mortgagor of a property that in-
cludes five or more living units and that has a
mortgage insured, coinsured, or held pursuant
to this Act;
‘‘(ii) any general partner of a partnership
mortgagor of such property;
‘‘(iii) any officer or director of a corporate
mortgagor;
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‘‘(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 prop-
erty; or
‘‘(v) any member of a limited liability com-
pany that is the mortgagor of such property or
is the general partner of a limited partnership
mortgagor or is a partner of a general partner-
ship mortgagor.
‘‘(B) VIOLATIONS.—A penalty may be imposed
under this section upon any liable party under sub-
paragraph (A) that knowingly and materially takes
any of the following actions:’’;
(ii) in subparagraph (B), as des-
ignated by clause (i), by redesignating the
subparagraph designations (A) through
(L) as clauses (i) through (xii), respec-
tively;
(iii) by adding after clause (xii), as re-
designated by clause (ii), the following new
clauses:
‘‘(xiii) Failure to maintain the premises,
accommodations, any living unit in the project,
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and the grounds and equipment appurtenant
thereto in good repair and condition in accord-
ance 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 offi-
cer or director of a corporate mortgagor, to pro-
vide management for the project that is accept-
able to the Secretary pursuant to regulations
and requirements of the Secretary.’’; and
(iv) in the last sentence, by deleting
‘‘of such agreement’’ and inserting ‘‘of this
subsection’’;
(3) in subsection (d)—
(A) in paragraph (1)(B), by inserting after
‘‘mortgagor’’ the following: ‘‘, general partner
of a partnership mortgagor, officer or director
of a corporate mortgagor, or identity of interest
agent employed to manage the property’’; and
(B) by adding at the end the following new
paragraph:
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‘‘(5) PAYMENT OF PENALTY.—No payment of a
civil money penalty levied under this section shall be
payable out of project income.’’;
(4) in subsection (e)(1), by deleting ‘‘a mortga-
gor’’ and inserting ‘‘an entity or person’’;
(5) in subsection (f), by inserting after ‘‘mort-
gagor’’ each place such term appears the following:
‘‘, general partner of a partnership mortgagor, offi-
cer or director of a corporate mortgagor, or identity
of interest agent employed to manage the property’’;
(6) by striking the heading of subsection (f)
and inserting the following: ‘‘CIVIL MONEY PEN-
ALTIES AGAINST MULTIFAMILY MORTGAGORS, GEN-
ERAL PARTNERS
OF PARTNERSHIP MORTGAGORS,
OFFICERS AND DIRECTORS OF CORPORATE MORT-
GAGORS, AND CERTAIN MANAGING AGENTS’’; and
(7) by adding at the end the following new sub-
section:
‘‘(k) IDENTITY OF INTEREST MANAGING AGENT.—
For purposes of 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;
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‘‘(2) in which the ownership entity, including its
general partner or partners (if applicable) and its of-
ficers or directors (if applicable), has an ownership
interest; and
‘‘(3) over which such ownership entity exerts ef-
fective control.’’.
(b) IMPLEMENTATION.—
(1) PUBLIC
COMMENT.—The Secretary shall
implement the amendments made by this section by
regulation issued after notice and opportunity for
public comment. The notice shall seek comments pri-
marily as to the definitions of the terms ‘‘ownership
interest in’’ and ‘‘effective control’’, as such terms
are used in the definition of the terms ‘‘agent em-
ployed to manage the property that has an identity
of interest’’ and ‘‘identity of interest agent’’.
(2) TIMING.—A proposed rule implementing the
amendments made by this section shall be published
not later than one year after the date of enactment
of this Act.
(c) APPLICABILITY OF AMENDMENTS.—The amend-
ments made by subsection (a) shall apply only with respect
to—
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(1) violations that occur on or after the effec-
tive date of the final regulations implementing the
amendments made by this section; and
(2) in the case of a continuing violation (as de-
termined by the Secretary of Housing and Urban
Development), any portion of a violation that occurs
on or after such date.
SEC. 21. CIVIL MONEY PENALTIES FOR NONCOMPLIANCE
WITH SECTION 8 HAP CONTRACTS.
(a) BASIC AUTHORITY.—Title I of the United States
Housing Act of 1937 is amended by adding at the end
the following new section:
‘‘SEC. 27. CIVIL MONEY PENALTIES AGAINST SECTION 8
OWNERS.
‘‘(a) IN GENERAL.—The penalties set forth in this
section shall be in addition to any other available civil rem-
edy or any available criminal penalty, and may be imposed
regardless of whether the Secretary imposes other admin-
istrative sanctions. The Secretary may not impose pen-
alties under this section for a violation, if a material cause
of the violation is the failure of the Secretary, an agent
of the Secretary, or a public housing agency to comply
with an existing agreement.
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‘‘(b) VIOLATIONS
OF HOUSING ASSISTANCE PAY-
MENT CONTRACTS FOR WHICH PENALTY MAY BE IM-
POSED.—
‘‘(1) LIABLE PARTIES.—The Secretary may im-
pose a civil money penalty under this section on—
‘‘(A) any owner of a property receiving
project-based assistance under section 8;
‘‘(B) any general partner of a partnership
owner of such property; and
‘‘(C) any agent employed to manage such
property that has an identity of interest with
the owner or the general partner of a partner-
ship owner of the property.
‘‘(2) VIOLATIONS.—A penalty may be imposed
under this section for a knowing and material
breach of a housing assistance payments contract,
including the following:
‘‘(A) failure to provide decent, safe, and
sanitary housing pursuant to section 8; or
‘‘(B) knowing or willful submission of
false, fictitious, or fraudulent statements or re-
quests for housing assistance payments to the
Secretary or to any department or agency of
the United States.
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‘‘(3) AMOUNT OF PENALTY.—The amount of a
penalty imposed for a violation under this sub-
section, as determined by the Secretary, may not ex-
ceed $25,000 per violation.
‘‘(c) AGENCY PROCEDURES.—
‘‘(1) ESTABLISHMENT.—The Secretary shall
issue regulations establishing standards and proce-
dures governing the imposition of civil money pen-
alties under subsection (b). These standards and
procedures—
‘‘(A) shall provide for the Secretary or
other department official to make the deter-
mination to impose the penalty;
‘‘(B) shall provide for the imposition of a
penalty only after the liable party has received
notice and the opportunity for a hearing on the
record; and
‘‘(C) may provide for review by the Sec-
retary of any determination or order, or inter-
locutory ruling, arising from a hearing, and ju-
dicial review, as provided under subsection (d).
‘‘(2) FINAL ORDERS.—If a hearing is not re-
quested before the expiration of the 15-day period
beginning on the date on which the notice of oppor-
tunity for hearing is received, the imposition of a
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penalty under subsection (b) shall constitute a final
and unappealable determination. If the Secretary re-
views the determination or order, the Secretary may
affirm, modify, or reverse that determination or
order. If the Secretary does not review that deter-
mination or order before the expiration of the 90-
day period beginning on the date on which the deter-
mination or order is issued, the determination or
order shall be final.
‘‘(3) FACTORS
IN
DETERMINING
AMOUNT
OF
PENALTY.—In determining the amount of a penalty
under subsection (b), the Secretary shall take into
consideration—
‘‘(A) the gravity of the offense;
‘‘(B) any history of prior offenses by the
violator (including offenses occurring before the
enactment of this section);
‘‘(C) the ability of the violator to pay the
penalty;
‘‘(D) any injury to tenants;
‘‘(E) any injury to the public;
‘‘(F) any benefits received by the violator
as a result of the violation;
‘‘(G) deterrence of future violations; and
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‘‘(2) NONREVIEWABILITY
OF
DETERMINATION
OR ORDER.—In an action under this subsection, the
validity and appropriateness of the Secretary’s deter-
mination 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) DEPOSIT OF PENALTIES.—
‘‘(1) Notwithstanding any other provision of
law, where the mortgage covering the property re-
ceiving section 8 assistance is insured or formerly in-
sured by the Secretary, the Secretary shall apply all
civil money penalties collected under this section to
the appropriate insurance fund or funds established
under this Act, as determined by the Secretary.
‘‘(2) Notwithstanding any other provision of
law, where the mortgage covering the property re-
ceiving section 8 assistance is neither insured nor
formerly insured by the Secretary, the Secretary
shall make all civil money penalties collected under
this section available for use by the appropriate of-
fice within the Department for administrative costs
related to enforcement of the requirements of the
various programs administered by the Secretary.