---
kind: "section"
citation: "12 U.S.C. § 1701q–1"
title: "12"
title_heading: "Banks and Banking"
number: "1701q–1"
heading: "Civil money penalties against mortgagors under section 1701q of this title"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/1701q-1"
units:
  - "Chapter 13 — National Housing"
---

# §1701q–1. Civil money penalties against mortgagors under section 1701q of this title

- (a) **In general—** The penalties set forth in this section shall be in addition to any other available civil remedy or criminal penalty, and may be imposed whether or not the [Secretary](/usc/12/1715z–22a.md?p=4) imposes other administrative sanctions. The [Secretary](/usc/12/1715z–22a.md?p=4) 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) **In general—** Whenever a [mortgagor](/usc/12/1707.md?p=b) of property that includes 5 or more living units and that has a [mortgage](/usc/12/1707.md?p=a) held pursuant to [section 1701q of this title](/usc/12/1701q.md), 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](/usc/12/1707.md?p=a) terms, or a workout agreement, to use nonproject income to make cash contributions for payments due under the note and [mortgage](/usc/12/1707.md?p=a), 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](/usc/12/1715z–22a.md?p=4) may impose a civil money penalty on the [mortgagor](/usc/12/1707.md?p=b) in accordance with the provisions of this section.
  - (2) **Amount—** The amount of the penalty, as determined by the [Secretary](/usc/12/1715z–22a.md?p=4), for a violation of this subsection may not exceed the amount of the loss the [Secretary](/usc/12/1715z–22a.md?p=4) would incur at a foreclosure sale, or sale after foreclosure, with respect to the property involved.
- (c) **Violations of regulatory agreement—**
  - (1) **In general—** The [Secretary](/usc/12/1715z–22a.md?p=4) may also impose a civil money penalty on a [mortgagor](/usc/12/1707.md?p=b) or property that includes 5 or more living units and that has a [mortgage](/usc/12/1707.md?p=a) held pursuant to [section 1701q of this title](/usc/12/1701q.md) for any knowing and material violation of the regulatory agreement executed by the [mortgagor](/usc/12/1707.md?p=b), as follows:
    - (A) 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](/usc/12/1715z–22a.md?p=4).
    - (B) Assignment, transfer, disposition, or encumbrance of any personal property of the project, including rents, or paying out any funds, except for reasonable operating expenses and necessary repairs, without the prior written approval of the [Secretary](/usc/12/1715z–22a.md?p=4).
    - (C) 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](/usc/12/1715z–22a.md?p=4).
    - (D) 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](/usc/12/1715z–22a.md?p=4).
    - (E) 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.
    - (F) 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.
    - (G) 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.
    - (H) 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](/usc/12/1715z–22a.md?p=4) or any duly authorized agents of the [Secretary](/usc/12/1715z–22a.md?p=4).
    - (I) 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](/usc/12/1715z–22a.md?p=4).
    - (J) Failure to furnish the [Secretary](/usc/12/1715z–22a.md?p=4), by the expiration of the 60-day period beginning on the 1st day after the completion of each fiscal year, with a complete annual financial report based upon an examination of the books and records of the [mortgagor](/usc/12/1707.md?p=b) prepared in accordance with requirements prescribed by the [Secretary](/usc/12/1715z–22a.md?p=4), and prepared and certified to by an independent public accountant or a certified public accountant and certified to by an officer of the [mortgagor](/usc/12/1707.md?p=b), unless the [Secretary](/usc/12/1715z–22a.md?p=4) has approved an extension of the 60-day period in writing. The [Secretary](/usc/12/1715z–22a.md?p=4) shall approve an extension where the [mortgagor](/usc/12/1707.md?p=b) demonstrates that failure to comply with this subparagraph is due to events beyond the control of the [mortgagor](/usc/12/1707.md?p=b).
    - (K) At the request of the [Secretary](/usc/12/1715z–22a.md?p=4), the agents of the [Secretary](/usc/12/1715z–22a.md?p=4), the employees of the [Secretary](/usc/12/1715z–22a.md?p=4), or the attorneys of the [Secretary](/usc/12/1715z–22a.md?p=4), 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](/usc/12/1707.md?p=a).
    - (L) Failure to make promptly all payments due under the note and [mortgage](/usc/12/1707.md?p=a), including tax and insurance escrow payments, and payments to the reserve for replacements when there is adequate project income available to make such payments.
    - (M) Amending the articles of incorporation or bylaws, other than as permitted under the terms of the articles of incorporation as approved by the [Secretary](/usc/12/1715z–22a.md?p=4), without the prior written approval of the [Secretary](/usc/12/1715z–22a.md?p=4).
  - (2) **Amount of penalty—** A penalty imposed for a violation under this subsection, as determined by the [Secretary](/usc/12/1715z–22a.md?p=4), may not exceed $25,000 for a violation of any of the subparagraphs of [paragraph (1)](#c-1).
- (d) **Agency procedures—**
  - (1) **Establishment—** The [Secretary](/usc/12/1715z–22a.md?p=4) shall establish standards and procedures governing the imposition of civil money penalties under subsections [(b)](#b) and [(c)](#c). These standards and procedures—
    - (A) shall provide for the [Secretary](/usc/12/1715z–22a.md?p=4) or other department official (such as the Assistant [Secretary](/usc/12/1715z–22a.md?p=4) for Housing) to make the determination to impose a penalty;
    - (B) shall provide for the imposition of a penalty only after the [mortgagor](/usc/12/1707.md?p=b) has been given an opportunity for a hearing on the record; and
    - (C) may provide for review by the [Secretary](/usc/12/1715z–22a.md?p=4) 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](/usc/12/1715z–22a.md?p=4) reviews the determination or order, the [Secretary](/usc/12/1715z–22a.md?p=4) may affirm, modify, or reverse that determination or order. If the [Secretary](/usc/12/1715z–22a.md?p=4) 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 [(b)](#b) or [(c)](#c), consideration shall be given to such factors as the gravity of the offense, any history of prior offenses (including offenses occurring before December 15, 1989), ability to pay the penalty, injury to the tenants, injury to the public, benefits received, deterrence of future violations, and such other factors as the [Secretary](/usc/12/1715z–22a.md?p=4) may determine in regulations to be appropriate.
  - (4) **Reviewability of imposition of penalty—** The [Secretary](/usc/12/1715z–22a.md?p=4)’s determination or order imposing a penalty under subsection [(b)](#b) or [(c)](#c) shall not be subject to review, except as provided in [subsection (e)](#e).
- (e) **Judicial review of agency determination—**
  - (1) **In general—** After exhausting all administrative remedies established by the [Secretary](/usc/12/1715z–22a.md?p=4) under [subsection (d)(1)](#d-1), a [mortgagor](/usc/12/1707.md?p=b) against whom the [Secretary](/usc/12/1715z–22a.md?p=4) has imposed a civil money penalty under subsection [(b)](#b) or [(c)](#c) may obtain a review of the penalty and such ancillary issues as may be addressed in the notice of determination to impose a penalty under [subsection (d)(1)(A)](#d-1-A) 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](/usc/12/1715z–22a.md?p=4)’s order or determination 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 (d)(1)](#d-1) 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 such 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](/usc/12/1715z–22a.md?p=4) for consideration of such additional evidence.
  - (3) **Scope of review—** The decisions, findings, and determinations of the [Secretary](/usc/12/1715z–22a.md?p=4) shall be reviewed pursuant to [section 706 of title 5](/usc/5/706.md).
  - (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](/usc/12/1715z–22a.md?p=4).
- (f) **Action to collect penalty—** If a [mortgagor](/usc/12/1707.md?p=b) fails to comply with the [Secretary](/usc/12/1715z–22a.md?p=4)’s determination or order imposing a civil money penalty under subsection [(b)](#b) or [(c)](#c), after the determination or order is no longer subject to review as provided by subsections [(d)(1)](#d-1) and [(e)](#e), the [Secretary](/usc/12/1715z–22a.md?p=4) 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 [mortgagor](/usc/12/1707.md?p=b) 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](/usc/12/1715z–22a.md?p=4)’s determination or order imposing the penalty shall not be subject to review.
- (g) **Settlement by Secretary—** The [Secretary](/usc/12/1715z–22a.md?p=4) may compromise, modify, or remit any civil money penalty which may be, or has been, imposed under this section.
- (h) **“Knowingly” defined—** The term “knowingly” means having actual knowledge of or acting with deliberate ignorance of or reckless disregard for the prohibitions under this section.
- (i) **Regulations—** The [Secretary](/usc/12/1715z–22a.md?p=4) shall issue such regulations as the [Secretary](/usc/12/1715z–22a.md?p=4) deems appropriate to implement this section.
- (j) **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 fund established under [section 1715z–1a(j) of this title](/usc/12/1715z–1a.md?p=j).

## Source credit

(Pub. L. 86–372, title II, § 202a, as added Pub. L. 101–235, title I, § 109(a), Dec. 15, 1989, 103 Stat. 2007.)

## Notes

### Editorial Notes

### Codification

Section was enacted as part of the Housing Act of 1959, and not as part of the National Housing Act which comprises this chapter.

### Statutory Notes and Related Subsidiaries

### Effective Date

Pub. L. 101–235, title I, § 109(b), Dec. 15, 1989, 103 Stat. 2011, provided that: “The amendment made by subsection (a) [enacting this section] shall apply only with respect to violations referred to in the amendment that occur on or after the effective date of this section [Dec. 15, 1989].”