[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3741 Introduced in House (IH)]







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 
 addition 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 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
  To enhance the effectiveness of enforcement provisions relating to 
     single family and multifamily housing, and for other purposes.

    Be it enacted by the Senate and House of Representatives 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.
               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 
                            participants 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.--Notwithstanding 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 
amendment 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 extent appropriate, without the need for 
further rulemaking.

               TITLE I--FHA SINGLE FAMILY AND MULTIFAMILY

SEC. 10. MRB EXEMPTION FROM AUTOMATIC STAY PROVISIONS 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 suspension 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 financial interests of the Department or the public.''.

SEC. 12. EXTENSION OF EQUITY SKIMMING TO OTHER SINGLE 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 multifamily 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 program requirements 
that existed before the date of enactment of the Cranston-Gonzalez 
National Affordable Housing 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 authorizes 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 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 section 536 of the 
National Housing Act is amended to read as follows: ``Civil Money 
Penalties Against Mortgagees, Lenders, and Other Participants in FHA 
Programs''.
    (b) Expansion of Persons Eligible for Penalty.--Section 536(a) of 
the National Housing Act is amended--
            (1) in paragraph (1), by revising the first sentence to 
        read as follows: ``Whenever a mortgagee approved under the Act, 
        a lender holding a contract of insurance under title I of this 
        Act, or a principal, officer or employee of such mortgage or 
        lender, or other person or entity participating in either an 
        insured mortgage or title I loan transaction under this Act 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 of the applicable 
        provisions 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 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.''; 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 Programs.--Section 536(b) of such Act is amended--
            (1) by redesignating paragraph (2) as paragraph (3);
            (2) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) The Secretary may impose a civil money penalty under 
        subsection (a) for any knowing or material violation by a 
        principal, officer or employee of a mortgagee or lender, or 
        other participants in either an insured mortgage or title I 
        loan transaction under this Act 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 the following:
                    ``(A) submission to the Secretary of information 
                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
            (3) in paragraph (3), as redesignated by paragraph (1) of 
        this subsection, by striking ``or paragraph (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 entity'';
            (2) in subsection (d)(1)--
                    (A) by inserting after ``lender'' the following: 
                ``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 ``lender'' 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 CERTAIN MANAGING AGENTS OF MULTIFAMILY 
              PROJECTS.

    (a) Civil Money Penalties Against Multifamily Mortgagors.--Section 
537 of the National Housing Act is amended--
            (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 corporate 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 following:
            ``(A) Liable parties.--The Secretary may also impose a 
        civil money penalty under this section on--
                    ``(i) any mortgagor of a property that includes 
                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;
                    ``(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) Violations.--A penalty may be imposed under this 
        section upon any liable party under subparagraph (A) that 
        knowingly and materially takes any of the following actions:'';
                            (ii) in subparagraph (B), as designated by 
                        clause (i), by redesignating the subparagraph 
                        designations (A) through (L) as clauses (i) 
                        through (xii), respectively;
                            (iii) by adding after clause (xii), as 
                        redesignated by clause (ii), the following new 
                        clauses:
                    ``(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.''; 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:
            ``(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 mortgagor'' and 
        inserting ``an entity or person'';
            (5) in subsection (f), by inserting after ``mortgagor'' 
        each place such term appears 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'';
            (6) by striking the heading of subsection (f) and inserting 
        the following: ``Civil Money Penalties Against Multifamily 
        Mortgagors, General Partners of Partnership Mortgagors, 
        Officers and Directors of Corporate Mortgagors, and Certain 
        Managing Agents''; and
            (7) by adding at the end the following new subsection:
    ``(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;
            ``(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 such ownership entity exerts effective 
        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 primarily 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 employed 
        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 amendments made by subsection 
(a) shall apply only with respect to--
            (1) violations that occur on or after the effective date of 
        the final regulations implementing the amendments made by this 
        section; and
            (2) in the case of a continuing violation (as determined 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 remedy or any available 
criminal penalty, and may be imposed regardless of whether the 
Secretary imposes other administrative sanctions. The Secretary may not 
impose penalties 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.
    ``(b) Violations of Housing Assistance Payment Contracts for Which 
Penalty May Be Imposed.--
            ``(1) Liable parties.--The Secretary may impose 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 partnership 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 requests for 
                housing assistance payments to the Secretary or to any 
                department or agency of the United States.
            ``(3) Amount of penalty.--The amount of a penalty imposed 
        for a violation under this subsection, as determined by the 
        Secretary, may not exceed $25,000 per violation.
    ``(c) Agency Procedures.--
            ``(1) Establishment.--The Secretary shall issue regulations 
        establishing standards and procedures governing the imposition 
        of civil money penalties under subsection (b). These standards 
        and procedures--
                    ``(A) shall provide for the Secretary or other 
                department official to make the determination 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 Secretary of 
                any determination or order, or interlocutory ruling, 
                arising from a hearing, and judicial review, as 
                provided under subsection (d).
            ``(2) Final orders.--If a hearing is not requested before 
        the expiration of the 15-day period beginning on the date on 
        which the notice of opportunity for hearing is received, the 
        imposition of a penalty under subsection (b) 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 that determination or order before the expiration of 
        the 90-day period beginning on the date on which the 
        determination 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
                    ``(H) such other factors as the Secretary may 
                establish by regulation.
            ``(4) Payment of penalty.--No payment of a civil money 
        penalty levied under this section shall be payable out of 
        project income.
    ``(d) Judicial Review of Agency Determination.--Judicial review of 
determinations made under this section shall be carried out in 
accordance with section 537(e) of the National Housing Act.
    ``(e) Remedies for Non-Compliance.--
            ``(1) Judicial intervention.--If a person or entity fails 
        to comply with the Secretary's determination or order imposing 
        a civil money penalty under subsection (b), after the 
        determination or order is no longer subject to review as 
        provided by subsections (c) and (d), 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 that person or entity and such other 
        relief as may be available. The monetary judgment may, in the 
        court's discretion, include the attorney's fees and other 
        expenses incurred by the United States in connection with the 
        action.
            ``(2) Nonreviewability of determination or order.--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) Deposit of Penalties.--
            ``(1) Notwithstanding any other provision of law, where the 
        mortgage covering the property receiving section 8 assistance 
        is insured or formerly insured 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 receiving 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 office within 
        the Department for administrative costs related to enforcement 
        of the requirements of the various programs administered by the 
        Secretary.
    ``(h) Definitions.--For the purposes of this section--
            ``(1) the term `agent employed to manage such property that 
        has an identity of interest' means an entity--
                    ``(A) that has management responsibility for a 
                project;
                    ``(B) in which the ownership entity, including its 
                general partner or partners (if applicable), has an 
                ownership interest; and
                    ``(C) over which such ownership entity exerts 
                effective control; and
            ``(2) the term `knowing' means having actual knowledge of 
        or acting with deliberate ignorance of or reckless disregard 
        for the prohibitions under this section.''.
    (b) Applicability.--The amendments made by subsection (a) shall 
apply only with respect to--
            (1) violations that occur on or after the effective date of 
        final regulations implementing the amendments made by this 
        section; and
            (2) in the case of a continuing violation (as determined by 
        the Secretary of Housing and Urban Development), any portion of 
        a violation that occurs on or after such date.
    (c) Implementation.--
            (1) Regulations.--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 as to the definitions of the terms ``ownership 
        interest in'' and ``effective control'', as such terms are used 
        in the definition of the term ``agent employed to manage such 
        property that has an identity of interest''.
            (2) Timing.--A proposed rule implementing the amendments 
        made by this section shall be published not later than one year 
        from the date of enactment of this Act.

SEC. 22. EXTENSION OF DOUBLE DAMAGES REMEDY.

    Section 421 of the Housing and Community Development Act of 1987 is 
amended--
            (1) in subsection (a)(1)--
                    (A) in the first sentence, by striking ``Act; or 
                (B)'' and inserting the following: ``Act; (B) a 
                regulatory agreement that applies to a multifamily 
                project whose mortgage is insured or held by the 
Secretary under section 202 of the Housing Act of 1959 (including 
property subject to section 202 of such Act as it existed before 
enactment of the Cranston-Gonzalez National Affordable Housing Act of 
1990); (C) a regulatory agreement or such other form of regulatory 
control as may be imposed by the Secretary that applies to mortgages 
insured or held by the Secretary under section 542 of the Housing and 
Community Development Act of 1992, but not reinsured under section 542 
of the Housing and Community Development Act of 1992; or (D)'';
                    (B) in the second sentence, by inserting after 
                ``agreement'' the following: ``, or such other form of 
                regulatory control as may be imposed by the 
                Secretary,'';
            (2) in subsection (a)(2), by inserting after ``Act,'' the 
        following: ``under section 202 of the Housing Act of 1959 
        (including section 202 of such Act as it existed before 
        enactment of the Cranston-Gonzalez National Affordable Housing 
        Act of 1990) and under section 542 of the Housing and Community 
        Development Act of 1992,'';
            (3) in subsection (b), by inserting after ``agreement'' the 
        following: ``, or such other form of regulatory control as may 
        be imposed by the Secretary,'';
            (4) in subsection (c)--
                    (A) in the first sentence, by inserting after 
                ``agreement'' the following: ``, or such other form of 
                regulatory control as may be imposed by the 
                Secretary,''; and
                    (B) in the second sentence, by inserting before the 
                period the following: ``or under the Housing Act of 
                1959, as appropriate''; and
            (5) in subsection (d), by inserting after ``agreement'' the 
        following: ``, or such other form of regulatory control as may 
        be imposed by the Secretary,''.

SEC. 23. OBSTRUCTION OF FEDERAL AUDITS.

    Section 1516(a) of title 18, United States Code, is amended by 
inserting after ``under a contract or subcontract,'' the following: 
``or relating to any property that is security for a mortgage note that 
is insured, guaranteed, acquired, or held by the Secretary of Housing 
and Urban Development pursuant to any Act administered by the 
Secretary''.

SEC. 24. DISPOSITION OF AMOUNTS UNDER THE PROGRAM FRAUD CIVIL REMEDIES 
              ACT.

    Section 3806(g)(2) of title 31, United States Code, is amended by 
adding at the end the following new subparagraphs:
            ``(F) Any amount of a penalty or assessment imposed by the 
        Secretary of Housing and Urban Development under this chapter 
        with respect to a claim or statement made in connection with 
        the mortgage and loan insurance functions of the Secretary 
        under the National Housing Act shall be deposited in the 
        appropriate Insurance Fund established under that Act.
            ``(G) Any amount of a penalty or assessment imposed by the 
        Secretary of Housing and Urban Development under this chapter 
        with respect to a claim or statement made in connection with 
        the guarantee functions of the Secretary under title III of the 
        National Housing Act shall be deposited in the account of the 
        Government National Mortgage Association with the United States 
        Treasury.''.

SEC. 25. EXTENSION OF ACCESS TO RECORDS TO PREVENT FRAUD AND ABUSE.

    Section 303(i)(5) of the Social Security Act is hereby repealed.
                                 <all>