[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.
<all>