[Code of Federal Regulations]

[Title 24, Volume 1]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 24CFR25.9]



[Page 277-279]

 

                 TITLE 24--HOUSING AND URBAN DEVELOPMENT

 

PART 25_MORTGAGEE REVIEW BOARD--Table of Contents

 

Sec.  25.9  Grounds for an administrative action.



    One or more of the following violations by a mortgagee may result in 

an administrative action by the Board under Sec.  25.5. Except in cases 

where the Board's authority has been delegated in accordance with Sec.  

25.2, the Board will consider, among other factors, the seriousness and 

extent of the violations, the degree of mortgagee responsibility for the 

occurrences and any mitigating factors, in determining which 

administrative action, if any, is appropriate. Any administrative action 

imposed under Sec.  25.5 shall be based upon one or more of the 

following grounds:

    (a) The transfer of an insured mortgage to non-approved mortgagee, 

except pursuant to 24 CFR 203.433 or 203.435;

    (b) The failure of a mortgagee to segregate all escrow funds 

received from mortgagors on account of ground rents, taxes, assessments 

and insurance premiums, or failure to deposit these funds with one or 

more financial institutions in a special account or accounts that are 

fully insured by the Federal Deposit Insurance Corporation or by the 

National Credit Union Administration except as otherwise provided in 

writing by the Assistant Secretary for Housing--Federal Housing 

Commissioner;

    (c) The use of escrow funds for any purpose other than that for 

which they are received;

    (d) The termination of a mortgagee's supervision by a governmental 

agency;

    (e) The failure of a nonsupervised mortgagee to submit the required 

annual audit report of its financial condition prepared in accordance 

with instructions issued by the Secretary within 90 days of the close of 

its fiscal year, or such longer period as the Assistant Secretary of 

Housing--Federal Housing Commissioner may authorize in writing prior to 

the expiration of 90 days;



[[Page 278]]



    (f) The payment by a mortgagee of a referral fee to any person or 

organization; or payment of any thing of value, directly or indirectly, 

in connection with any insured mortgage transaction or transactions to 

any person, including but not limited to an attorney, escrow agent, 

title company, consultant, mortgage broker, seller, builder or real 

estate agent, if that person has received any other compensation from 

the mortgagor, the seller, the builder or any other person for services 

related to such transactions or from or related to the purchase or sale 

of the mortgaged property, except compensation paid for the actual 

performance of such services as may be approved by the Assistant 

Secretary for Housing--Federal Housing Commissioner;

    (g) Failure to comply with any agreement, certification, 

undertaking, or condition of approval listed on either a mortgagee's 

application for approval or on an approved mortgagee's branch office 

notification;

    (h) Failure of an approved mortgagee to meet or maintain the 

applicable net worth, liquidity or warehouse line of credit requirements 

of 24 CFR part 202 pertaining to net worth, liquid assets, and warehouse 

line of credit or other acceptable funding plan;

    (i) Failure or refusal of an approved mortgagee to comply with an 

order of the Board, the Secretary, the hearing official, hearing officer 

or other independent official to whom matters are referred under Sec.  

25.8(d)(2).

    (j) Violation of the requirements of any contract with the 

Department, or violation of the requirements set forth in any statute, 

regulation, handbook, mortgagee letter, or other written rule or 

instruction;

    (k) Submission of false information to HUD in connection with any 

HUD/FHA insured mortgage transaction;

    (l) Failure of a mortgagee to respond to inquiries from the Board;

    (m) Indictment or conviction of a mortgagee or any of its officers, 

directors, principals or employees for an offense which reflects upon 

the responsibility, integrity, or ability of the mortgagee to 

participate in HUD/FHA programs as an approved mortgagee;

    (n) Employing or retaining:

    (1) An officer, partner, director or principal at such time when 

such person was suspended, debarred, ineligible, or subject to a limited 

denial of participation under 24 CFR part 24 or otherwise prohibited 

from participation in HUD programs, where the mortgagee knew or should 

have known of the prohibition;

    (2) An employee who is not an officer, partner, director, or 

principal and who is or will be working on HUD/FHA program matters at a 

time when such person was suspended, debarred, ineligible, or subject to 

a limited denial of participation under 24 CFR part 24 or otherwise 

prohibited from participation in HUD programs, where the mortgagee knew 

or should have known of the prohibition;

    (o) Violation by an approved mortgagee of the nondiscrimination 

requirements of the Equal Credit Opportunity Act (15 U.S.C. 1691-1691f), 

Fair Housing Act (42 U.S.C. 3601-3619), Executive Order 11063 (27 FR 

11527), and all regulations issued pursuant thereto;

    (p) Business practices which do not conform to generally accepted 

practices of prudent mortgagees or which demonstrate irresponsibility;

    (q) Failure to cooperate with an audit or investigation by the 

Department's Office of Inspector General or an inquiry by HUD/FHA into 

the conduct of the mortgagee's HUD/FHA insured business or any other 

failure to provide information to the Secretary or a representative 

related to the conduct of the mortgagee's HUD/FHA business;

    (r) Violation by an approved mortgagee of the requirements or 

prohibitions of the Real Estate Settlement Procedures Act (12 U.S.C. 

2601-2617);

    (s) Without regard to the date of the insurance of the mortgage, 

failure to service an insured mortgage in accordance with the 

regulations and any other requirements of the Secretary which are in 

effect at the time the act or omission occurs;

    (t) Failure to administer properly an assistance payment contract 

under section 235 of the National Housing Act (12 U.S.C. 1715z);

    (u) Failure to pay the application and annual fees required by 24 

CFR part 202;



[[Page 279]]



    (v) The failure of a coinsuring mortgagee:

    (1) To properly perform underwriting, servicing or property 

disposition functions in accordance with instructions and standards 

issued by the Commissioner;

    (2) To make full payment to an investing mortgagee as required by 24 

CFR part 204;

    (3) To discharge responsibilities under a contract for coinsurance;

    (4) To comply with restrictions concerning the transfer of a 

coinsured mortgage to an agency not approved under 24 CFR part 250;

    (5) To maintain additional net worth requirements, as applicable;

    (w) Failure to remit, or timely remit, mortgage insurance premiums, 

loan insurance charges, late charges, or interest penalties to the 

Department;

    (x) Failure to submit a report required under 24 CFR 202.12(c) 

within the time determined by the Commissioner, or to commence or 

complete a plan for corrective action under that section within the time 

agreed upon by the Commissioner.

    (y) Failure to properly perform underwriting functions in accordance 

with instructions and standards issued by the Department;

    (z) Failure to fund mortgage loans or any other misuse of mortgage 

loan proceeds;

    (aa) Permitting the use of strawbuyer mortgagors in an insured 

mortgage transaction where the mortgagee knew or should have known of 

such use of strawbuyers;

    (bb) Breach by the mortgagee of a fiduciary duty owed by it to any 

person as defined in Sec.  25.3, including GNMA and the holder of any 

mortgage-backed security guaranteed by GNMA, with respect to an insured 

loan or mortgage transaction.

    (cc) Violation by a Title I lender or loan correspondent of any of 

the applicable provisions of this section or 24 CFR 202.11(a)(2).

    (dd) Failure to pay any civil money penalty, but only after all 

administrative appeals requested by the mortgagee have been exhausted.

    (ee) Submitting, or causing to be submitted, with an application for 

FHA mortgage insurance an appraisal, valuation condition sheet, or any 

other documentation relating to an appraisal that does not satisfy FHA 

requirements.

    (ff) Any other reason the Board or the Secretary determines to be so 

serious as to justify an administrative sanction.



(Approved by the Office of Management and Budget under Control Number 

2502-0450)



[57 FR 31051, July 13, 1992; 57 FR 37085, Aug. 18, 1992, as amended at 

57 FR 58339, Dec. 9, 1992; 60 FR 13836, Mar. 14, 1995; 60 FR 39238, Aug. 

1, 1995; 61 FR 685, Jan. 9, 1996; 62 FR 20081, Apr. 24, 1997; 69 FR 

43509, July 20, 2004]