12 U.S.C. § 1715z–19: Equity skimming penalty

Summary

Makes it a crime for an owner, agent, manager, or anyone who controls a 1–4 family house or a multifamily rental that backs certain federal mortgage loans to intentionally use or let others use rents, assets, income, or other money from the property for anything except reasonable, necessary expenses (including expenses the Secretary must approve). The rule applies while the loan is in default, the project is in a "nonsurplus cash" state as defined in its regulatory agreement, or the borrower fails to follow Secretary-imposed controls. Punishment can be a fine up to $500,000, up to 5 years in prison, or both. It covers loans that are insured, acquired, or held by the Secretary under this chapter; loans made under section 1701q (including ones under rules before November 28, 1990); and loans insured or held under section 1715z–22 but not reinsured under that section.

Title 12, §1715z–19

Banks and Banking, Source: USLM XML via OLRC

(a)In general

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 described in subsection (b), willfully uses or authorizes the use of any part of the rents, assets, proceeds, income, or other funds derived from property covered by that 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, in a period during which the mortgage note is in default or the project is in a nonsurplus cash position, as defined by the regulatory agreement covering the 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, imprisoned not more than 5 years, or both.

(b)Mortgage notes described

For purposes of subsection (a), a mortgage note is described in this subsection if it—

(1)is insured, acquired, or held by the Secretary pursuant to this chapter;

(2)is made pursuant to section 1701q of this title (including property still subject to section 1701q program requirements that existed before November 28, 1990); or

(3)is insured or held pursuant to section 1715z–22 of this title, but is not reinsured under section 1715z–22 of this title.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1997—Pub. L. 105–65 amended section generally. Prior to amendment, section read as follows: “Whoever, as an owner, agent, or manager, or who is otherwise in custody, control, or possession of property that is security for a mortgage note that is insured, acquired, or held by the Secretary pursuant to section 1709, 1713, 1715e, 1715k, 1715l(d)(3), 1715l(d)(4), 1715n(f), 1715v, 1715w, 1715y, 1715z–1, 1715z–3(c), 1715z–6, 1715z–7, 1715z–9, 1743, or 1748h–2 of this title, or subchapter IX–B of this chapter, or is made pursuant to section 1701q of this title, 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 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, for any purpose other than to meet actual or necessary expenses that include expenses approved by the Secretary if such approval is required under the terms of the regulatory agreement, shall be fined not more than $250,000 or imprisoned not more than 5 years, or both.”

§1715z–19 Equity Skimming Penalty

Summary

Title 12, §1715z–19

Notes & Related Subsidiaries

Editorial Notes

Amendments

Citations & Metadata