[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3206 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 3206

To authorize the Government National Mortgage Association to guarantee 
          securities backed by certain conventional mortgages.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 1, 2001

 Mrs. Roukema introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To authorize the Government National Mortgage Association to guarantee 
          securities backed by certain conventional mortgages.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Home Ownership Expansion and 
Opportunities Act of 2001''.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that--
            (1) expanding home ownership is a national goal;
            (2) despite record home ownership rates, the ability to 
        pursue the American dream of home ownership is not consistent 
        in all geographical areas or within all demographic groups in 
        the United States;
            (3) new home ownership tools are necessary to bridge the 
        gap for creditworthy borrowers who are excluded from the 
        present mortgage finance systems;
            (4) any new Federal Government liability should be limited 
        or prevented by providing appropriate Federal authority to 
        establish minimum standards of acceptable risk;
            (5) the Federal Housing Administration should partner with 
        other public and private mortgage finance systems to develop 
        and access new technology that will assist in discovering new 
        ways to underwrite affordable home ownership, as well as 
        mitigate losses;
            (6) risk-sharing between the public sector and the private 
        mortgage insurance industry will provide consumers greater 
        access to mortgage credit opportunities; and
            (7) the underwriting and financing of home ownership 
        opportunities should expand and become more flexible to meet 
        the evolving needs of the citizens and private sector financial 
        institutions of the United States.

SEC. 3. GNMA GUARANTEE OF SECURITIES BACKED BY CONVENTIONAL MORTGAGES.

    (a) Guarantee Authority.--Section 306 of the National Housing Act 
(12 U.S.C. 1721) is amended by adding at the end the following new 
subsections:
    ``(h) Guarantee of Securities Backed by Conventional Mortgages.--
            ``(1) In general.--The Association may guarantee the timely 
        payment of principal of and interest on such trust certificates 
        and other securities that are based on or backed by qualifying 
        privately insured mortgages.
            ``(2) Mortgage insurance premiums.--The issuer of any trust 
        certificate or security that is guaranteed by the Association 
        pursuant to this subsection shall--
                    ``(A) for primary mortgage insurance, collect from 
                the mortgagor, and remit to the qualified mortgage 
                insurer, such premium or premiums as may be established 
                by the qualified mortgage insurer in accordance with 
                applicable Federal or State law; and
                    ``(B) for supplemental mortgage insurance, pay and 
                remit the premium or premiums to the Secretary of 
                Housing and Urban Development from the sums 
                attributable to the difference between the interest 
                rate of the mortgages in the particular pool and the 
                interest rate set forth on the trust certificate or 
                security guaranteed by the Association based on and 
                backed by such mortgages, and without additional 
                premium charge therefor to the mortgagor.
            ``(3) Origination, servicing, and default practices.--
                    ``(A) Inapplicability of fha practices.--The 
                requirements of the National Housing Act, and of the 
                Secretary, that apply to mortgages insured under the 
                National Housing Act (other than insurance provided 
                under this subsection) and to the mortgagees that make 
                and service such mortgages shall not apply to--
                            ``(i) qualifying privately insured 
                        mortgages;
                            ``(ii) lenders making qualifying privately 
                        insured mortgages; and
                            ``(iii) issuer of certificates or 
                        securities that are, or will be, based on or 
                        backed by qualifying privately insured 
                        mortgages and guaranteed under this subsection 
                        by the Association.
                    ``(B) Disposition of property upon default.--Upon 
                default by the mortgagor on a qualifying privately 
                insured mortgage which backs, or upon which is based, 
                any trust certificate or security that is or will be 
                guaranteed pursuant to this subsection, the property 
                covered by the mortgage shall be disposed of by the 
                issuer or the qualified mortgage insurer in accordance 
                with the applicable issuer's or insurer's customary 
                policies and procedures.
            ``(4) Effect of homeowners protection act of 1998.--For 
        purposes of the Homeowners Protection Act of 1998 (12 U.S.C. 
        4901 et seq.), in the case of a qualifying privately insured 
        mortgage against which trust certificates or securities are 
        issued that are guaranteed pursuant to this subsection--
                    ``(A) primary mortgage insurance provided in 
                connection with such mortgage shall not be considered 
                to be mortgage insurance made available under the 
                National Housing Act (12 U.S.C. 1701 et seq.); and
                    ``(B) supplemental mortgage insurance provided in 
                connection with such mortgage shall be considered to be 
                mortgage insurance made available under the National 
                Housing Act (12 U.S.C. 1701 et seq.).
            ``(5) Voluntary program participation.--This subsection may 
        not be construed to require any issuer to issue any trust 
        certificate or security that is based on or backed by a trust 
        or pool composed of qualifying privately insured mortgages.
            ``(6) No federal contractor status.--Notwithstanding any 
        other provision of law, a qualified mortgage insurer that 
        participates in the program under this subsection for guarantee 
        of trust certificates or securities backed by qualifying 
        privately insured mortgages shall not be considered, by virtue 
        of such participation, as entering into a contract with any 
        Federal department or agency, participating in any program or 
        activity that receives Federal financial assistance, or 
        participating in any program or activity that is conducted by 
        any Federal department or agency. This paragraph may not be 
        construed to deny or otherwise affect the rights of the 
        Association as the assignee, holder, or beneficiary of a 
        mortgage insurance contract.
            ``(7) Minimum underwriting standards.--
                    ``(A) In general.--The Association and the 
                Secretary shall establish minimum underwriting 
                standards with respect to certificates and securities 
                guaranteed under this subsection that limit the level 
                of risk to the Association and supplemental insurance 
                provided by the Secretary.
                    ``(B) Failure to meet standards.--If the issuer of 
                a certificate or security guaranteed under this 
                subsection does not meet the minimum standards 
                established under subparagraph (A), the Association and 
                the Secretary shall assign to the issuer and 
                underwriter any liability not covered under paragraph 
                (2).
            ``(8) Commitment authority.--
                    ``(A) Aggregate commitment limit.--The aggregate 
                amount of guarantees issued under this subsection by 
                the Association during any fiscal year may not exceed 
                an amount equal to 30 percent of the aggregate amount 
                of guarantees authorized, in accordance with section 
                504(b) of the Congressional Budget Act of 1974, to be 
                made under this section during such fiscal year.
                    ``(B) Authorization of appropriations for costs.--
                There is authorized to be appropriated for the costs 
                (as such term is defined in section 502 of the 
                Congressional Budget Act of 1974 (2 U.S.C. 661a)) of 
                guarantees under this subsection such sums as may be 
                necessary for fiscal year 2002.
    ``(i) Definitions.--For purposes of this section:
            ``(1) Conventional mortgage limit.--The term `conventional 
        mortgage limit' means the greater of the applicable maximum 
        original principal obligation of conventional mortgages 
        established by--
                    ``(A) the Federal National Mortgage Association, 
                pursuant to section 302(b)(2) of this Act; or
                    ``(B) the Federal Home Loan Mortgage Corporation, 
                pursuant to section 305(a)(2) of the Federal Home Loan 
                Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).
            ``(2) Coverage percentage.--The term `coverage percentage' 
        means, with respect to mortgage insurance for a mortgage, the 
        percentage of the total of the outstanding principal balance on 
        the mortgage, and accrued interest, advances, and reasonable 
        expenses related to property preservation and foreclosure, that 
        is subject to payment in the event of a claim under the 
        mortgage insurance policy provided by a qualified mortgage 
        insurer or under the terms of the mortgage insurance provided 
        by the Secretary.
            ``(3) Mandatory cancellation or termination.--The term 
        `mandatory cancellation or termination' means cancellation or 
        termination of mortgage insurance, as provided in section 3 of 
        the Homeowners Protection Act of 1998 (12 U.S.C. 4902) or by a 
        protected State law (as such term is defined in section 9 of 
        such Act).
            ``(4) Primary mortgage insurance.--
                    ``(A) In general.--The term `primary mortgage 
                insurance' means mortgage insurance that--
                            ``(i) is issued by a qualified mortgage 
                        insurer;
                            ``(ii) guarantees and insures against 
                        losses on the mortgage, under standard terms 
                        and conditions generally offered in the private 
                        mortgage guaranty insurance industry;
                            ``(iii) may be canceled or terminated by 
                        the mortgagor, issuer, or qualified mortgage 
                        insurer only pursuant to mandatory cancellation 
                        or termination; and
                            ``(iv) subject to subparagraph (B), has a 
                        coverage percentage equal to--
                                    ``(I) not less than 25 percent, if 
                                the principal-to-value ratio for the 
                                mortgage is greater than 85 percent and 
                                not greater than 90 percent;
                                    ``(II) not less than 30 percent, if 
                                the principal-to-value ratio for the 
                                mortgage is greater than 90 percent and 
                                not greater than 95 percent; and
                                    ``(III) not less than 35 percent, 
                                if the principal-to-value ratio for the 
                                mortgage is greater than 95 percent.
                    ``(B) Adjustment of percentages.--The Association 
                may, by notice to its participating issuers, adjust one 
                or more of the coverage percentages specified 
                subparagraph (A)(iv) upon a finding that such coverage 
                percentage or percentages no longer represent a 
                coverage equal to the risk associated with mortgages in 
                the appropriate principal-to-value range, as determined 
                by the Association. The Association may not adjust any 
                coverage percentage to a level that, in the absence of 
                the guarantee by the Association, would not allow the 
                trust certificates or other securities backed by the 
                qualifying privately insured mortgage to be rated in 1 
                of the 2 highest rating categories by a nationally 
                recognized statistical rating organization.
            ``(5) Principal-to-value ratio.--The term `principal-to-
        value ratio' means the ratio of the original outstanding 
        principal balance of a first mortgage to the value of the 
        property securing the mortgage, as established at the time of 
        origination by appraisal or other reliable indicia of property, 
        conducted or performed not earlier than 6 months prior to the 
        date of origination and not later than the date of origination.
            ``(6) Qualified mortgage insurer.--The term `qualified 
        mortgage insurer' means a provider of private mortgage 
        insurance (as such term is defined in section 2 of the 
        Homeowners Protection Act of 1998 (12 U.S.C. 4901)), that--
                    ``(A) is authorized and licensed by a State or 
                instrumentality thereof to transact private mortgage 
                insurance business in the State in which the provider 
                is transacting such business, excluding any entity that 
                is exempt from State licensing requirements;
                    ``(B) is rated in 1 of the 2 highest rating 
                categories by not less than 1 nationally recognized 
                statistical rating organization; and
                    ``(C) meets such additional qualifications as may 
                be determined by the Association.
            ``(7) Qualifying privately insured mortgage.--The term 
        `qualifying privately insured mortgage' means a first 
        mortgage--
                    ``(A) that is not--
                            ``(i) insured under title II of this Act, 
                        except as specifically provided in this 
                        section;
                            ``(ii) insured under title V of the Housing 
                        Act of 1949 (42 U.S.C. 1471 et seq.);
                            ``(iii) insured or guaranteed under chapter 
                        37 of title 38, United States Code or the 
                        Servicemen's Readjustment Act of 1944; or
                            ``(iv) made or guaranteed under part B of 
                        title V of the Public Health Service Act (42 
                        U.S.C. 290bb et seq.);
                    ``(B) that--
                            ``(i) is secured by property comprising 1- 
                        to 4-family dwelling units;
                            ``(ii) has a term of not longer than 30 
                        years;
                            ``(iii) has a principal-to-value ratio of 
                        more than 85 percent; and
                            ``(iv) has an original principal obligation 
                        that does not exceed the conventional mortgage 
                        limit;
                    ``(C) not more than one payment of which has been 
                delinquent by more than 30 days, and no payment of 
                which has been delinquent by more than 60 days, during 
                the 12-month period that ends upon the issuance of a 
                guaranty under this subsection for a trust certificate 
                or security based on or backed by the mortgage; and
                    ``(D) that is covered by primary mortgage insurance 
                and supplemental mortgage insurance.
            ``(8) Supplemental mortgage insurance.--The term 
        `supplemental mortgage insurance' means mortgage insurance 
        that--
                    ``(A) is issued by the Secretary of Housing and 
                Urban Development pursuant to the authority under 
                section 203(l);
                    ``(B) guarantees and insures against losses on the 
                mortgage under such terms and conditions as are 
                reasonably acceptable to the Association;
                    ``(C) becomes effective on the date on which a 
                guaranty issued under this subsection for a trust 
                certificate or other security based on or backed by the 
                mortgage becomes effective; and
                    ``(D) has a coverage percentage of not more than 10 
                percent.''.
    (b) Guaranty Fee.--Section 306(g)(3)(A) of the National Housing Act 
(12 U.S.C. 1721(g)(3)(A)) is amended--
            (1) by inserting ``(i)'' after ``(A)''; and
            (2) by adding at the end the following new clause:
    ``(ii) Notwithstanding clause (i) of this subparagraph or 
subparagraph (B), (C), or (E), the Association shall assess and collect 
a fee on or with regard to each guaranty issued under subsection (h) in 
an amount that is sufficient, as determined by the Secretary of Housing 
and Urban Development, to generate revenues from such fees to the 
Federal Government in an amount not less than the cost (as such term is 
defined in section 502 of the Congressional Budget Act of 1974 (2 
U.S.C. 661a)) of such guarantees, except that such fee shall not in any 
case exceed 8 basis points.''.
    (c) Mortgage Pool Composition.--Section 306 of the National Housing 
Act (12 U.S.C. 1721), as amended by the preceding provisions of this 
Act, is further amended by adding at the end the following new 
subsection:
    ``(j) Mortgage Pool Composition.--Any trust or pool that is the 
basis for or backs any trust certificate or other security guaranteed 
under this section may include only--
            ``(1) qualifying privately insured mortgages; or
            ``(2) mortgages described in subsection (g)(1).''.

SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Guarantees.--Section 306(g)(1) of the National Housing Act (12 
U.S.C. 1721(g)(1)) is amended--
            (1) by inserting ``(A)'' after ``(g)(1)'';
            (2) in the second sentence--
                    (A) by striking ``The Association'' and inserting 
                ``Subject to paragraph (3), the Association''; and
                    (B) by inserting ``or subsection (h)'' after ``this 
                subsection'';
            (3) in the third sentence, by inserting ``or subsection 
        (h)'' after ``this subsection'' each place such term appears;
            (4) in the penultimate and last sentences, by inserting 
        ``or subsection (h)'' after ``this subsection'' each place such 
        term appears;
            (5) by striking ``The Association is hereby empowered,'' 
        and all that follows through ``against which the guaranteed 
        securities are issued.''; and
            (6) by adding at the end the following:
    ``(B)(i) The Association may, in connection with any guaranty under 
this subsection or subsection (h), whether before or after any default 
by the issuer or any default by the qualified mortgage insurer (in the 
case of securities based on and backed by qualifying privately insured 
mortgages)--
            ``(I) provide by contract with the issuer for the 
        extinguishment, upon default by the issuer, of any redemption, 
        equitable, legal, or other right, title, or interest of the 
        issuer in any mortgage or mortgages constituting the trust or 
        pool against which the guaranteed securities are issued; or
            ``(II) provide by contract with the qualified mortgage 
        insurer for the extinguishment, upon default by the qualified 
        mortgage insurer, of any redemption, equitable, legal, or other 
        right, title, or interest of the qualified mortgage insurer in 
        such mortgage or mortgages, as well as any related primary 
        mortgage insurance or supplemental mortgage insurance coverage 
        or any future premiums and proceeds related thereto.
    ``(ii) With respect to any issue of guaranteed securities--
            ``(I) in the event of default by the issuer, and pursuant 
        otherwise to the terms of the contract, the mortgages that 
        constitute the trust or pool referred to in clause (i) shall 
        become the absolute property of the Association, subject only 
        to the unsatisfied rights of the holders of the securities 
        based on and backed by that trust or pool; and
            ``(II) in the event of default by the qualified mortgage 
        insurer, and pursuant otherwise to the terms of the contract, 
        any right of the qualified mortgage insurer with respect to the 
        mortgages that constitute such trust or pool and any related 
        primary mortgage insurance or supplemental mortgage insurance 
        coverage and any future premiums and proceeds related thereto 
        shall become the absolute property of the Association, subject 
        only to the unsatisfied rights of the holders of the securities 
        based on and backed by such trust or pool and to the 
        unsatisfied rights of any insured issuer with respect to any 
        mortgage insurance coverage.
    ``(C) No State, local, or Federal law (except, with respect to 
guarantees under this subsection, Federal law enacted expressly in 
limitation of this subsection after October 8, 1980, and, with respect 
to guarantees under subsection (h), Federal law enacted expressly in 
limitation of subsection (h) after the date of enactment of the Home 
Ownership Expansion and Opportunities Act of 2001), shall preclude or 
limit the exercise by the Association of--
            ``(i) its power to contract with the issuer, or the 
        qualified mortgage insurer on the terms stated in subparagraph 
        (B);
            ``(ii) its rights to enforce any such contract with the 
        issuer or the qualified mortgage insurer; or
            ``(iii) its ownership rights, as provided in subparagraph 
        (B), with respect to the mortgages constituting the trust or 
        pool, against which the guaranteed securities are issued, and 
        with respect to any related primary mortgage insurance or 
        supplemental mortgage insurance coverage and any future 
        premiums and proceeds related thereto.''.
    (b) Supplemental Mortgage Insurance.--Section 203 of the National 
Housing Act (12 U.S.C. 1709) is amended by inserting after subsection 
(k) the following new subsection:
    ``(l) Supplemental Mortgage Insurance for Qualifying Privately 
Insured Mortgages.--The Secretary is authorized to provide supplemental 
mortgage insurance (as such term is defined in section 306(i)) in 
connection with qualifying privately insured mortgages (as such term is 
defined in such section), which shall be an obligation of the Mutual 
Mortgage Insurance Fund established under section 202.''.

SEC. 5. GUARANTEE FEE.

    Section 972 of the Higher Education Amendments of 1998 (Public Law 
105-244; 112 Stat. 1837) is hereby repealed.

SEC. 6. EFFECTIVE DATE.

    (a) In General.--The Government National Mortgage Association shall 
provide for the initial implementation of this Act by notice to its 
participating issuers.
    (b) Publication.--The notice required under subsection (a) shall be 
published not later than 60 days after the date of the enactment of 
this Act.
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