[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5121 Introduced in House (IH)]







109th CONGRESS
  2d Session
                                H. R. 5121

To modernize and update the National Housing Act and enable the Federal 
 Housing Administration to use risk-based pricing to more effectively 
          reach underserved borrowers, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 6, 2006

Mr. Ney (for himself, Ms. Waters, Mr. Gary G. Miller of California, and 
 Mr. Tiberi) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To modernize and update the National Housing Act and enable the Federal 
 Housing Administration to use risk-based pricing to more effectively 
          reach underserved borrowers, 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 ``Expanding American 
Homeownership Act of 2006''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Maximum principal loan obligation.
Sec. 4. Extension of mortgage term.
Sec. 5. Cash investment requirement.
Sec. 6. Mortgage insurance premiums.
Sec. 7. Rehabilitation loans.
Sec. 8. Discretionary action.
Sec. 9. Insurance of condominiums.
Sec. 10. Mutual Mortgage Insurance Fund.
Sec. 11. Hawaiian home lands and Indian reservations.
Sec. 12. Conforming and technical amendments.
Sec. 13. Home equity conversion mortgages.
Sec. 14. Conforming loan limit in disaster areas.
Sec. 15. Savings provision.
Sec. 16. Implementation.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) one of the primary missions of the Federal Housing 
        Administration (FHA) single family mortgage insurance program 
        is to reach borrowers who are underserved, or not served, by 
        the existing conventional mortgage marketplace;
            (2) the FHA program has a long history of innovation, which 
        includes pioneering the 30-year self-amortizing mortgage and a 
        safe-to-seniors reverse mortgage product, both of which were 
        once thought too risky to private lenders;
            (3) the FHA single family mortgage insurance program 
        traditionally has been a major provider of mortgage insurance 
        for home purchases;
            (4) the FHA mortgage insurance premium structure, as well 
        as FHA's product offerings, should be revised to reflect FHA's 
        enhanced ability to determine risk at the loan level and to 
        allow FHA to better respond to changes in the mortgage market;
            (5) during past recessions, including the oil-patch 
        downturns in the mid-1980s, FHA remained a viable credit 
        enhancer and was therefore instrumental in preventing a more 
        catastrophic collapse in housing markets and a greater loss of 
        homeowner equity; and
            (6) as housing price appreciation slows and interest rates 
        rise, many homeowners and prospective homebuyers will need the 
        less-expensive, safer financing alternative that FHA mortgage 
        insurance provides.
    (b) Purposes.--The purposes of this Act are--
            (1) to provide flexibility to FHA to allow for the 
        insurance of housing loans for low- and moderate-income 
        homebuyers during all economic cycles in the mortgage market;
            (2) to modernize the FHA single family mortgage insurance 
        program by making it more reflective of enhancements to loan-
        level risk assessments and changes to the mortgage market; and
            (3) to adjust the loan limits for the single family 
        mortgage insurance program to reflect rising house prices and 
        the increased costs associated with new construction.

SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION.

    Paragraph (2) of section 203(b) of the National Housing Act (12 
U.S.C. 1709(b)(2)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking the subparagraph designation and 
                all that follows through the end of clause (i) and 
                inserting the following:
                    ``(A) not to exceed the lesser of--
                            ``(i) the median house price in the area, 
                        as determined by the Secretary; or''; and
                    (B) in clause (ii)--
                            (i) by striking ``87 percent of'';
                            (ii) by striking ``for Fiscal Year'' and 
                        inserting a comma; and
                            (iii) by striking ``48 percent'' and 
                        inserting ``65 percent'';
            (2) by striking subparagraph (B) and inserting the 
        following:
                    ``(B) not to exceed the appraised value of the 
                property, plus any initial service charges, appraisal, 
                inspection and other fees in connection with the 
                mortgage as approved by the Secretary.'';
            (3) in the matter after and below subparagraph (B), by 
        striking the semi-colon in the first sentence and all that 
        follows through ``title 38, United States Code'' and inserting 
        a period; and
            (4) by striking the last undesignated paragraph (relating 
        to counseling with respect to the responsibilities and 
        financial management involved in homeownership).

SEC. 4. EXTENSION OF MORTGAGE TERM.

     Paragraph (3) of section 203(b) of the National Housing Act (12 
U.S.C. 1709(b)(3)) is amended--
            (1) by striking ``thirty-five years'' and inserting ``forty 
        years''; and
            (2) by striking ``(or thirty years if such mortgage is not 
        approved for insurance prior to construction)''.

SEC. 5. CASH INVESTMENT REQUIREMENT.

    Paragraph (9) of section 203(b) of the National Housing Act (12 
U.S.C. 1709(b)(9) is amended by striking the paragraph designation and 
all that follows through ``Provided further, That for'' and inserting 
the following:
            ``(9) Be executed by a mortgagor who shall have paid on 
        account of the property, in cash or its equivalent, an amount, 
        if any, as the Secretary may determine based on factors 
        determined by the Secretary and commensurate with the 
        likelihood of default. For''.

SEC. 6. MORTGAGE INSURANCE PREMIUMS.

     Section 203(c) of the National Housing Act (12 U.S.C. 1709(c)) is 
amended--
            (1) in paragraph (2), in the matter preceding subparagraph 
        (A), by striking ``Notwithstanding'' and inserting ``Except as 
        provided in paragraph (3) and notwithstanding''; and
            (2) by adding at the end the following new paragraph:
    ``(3) Flexible Risk-Based Premiums.--
            ``(A) In general.--For any mortgage insured by the 
        Secretary under this title that is secured by a 1- to 4-family 
        dwelling and for which the loan application is received by the 
        mortgagor on or after October 1, 2006, the Secretary may 
        establish a mortgage insurance premium structure involving a 
        single premium payment collected prior to the insurance of the 
        mortgage or periodic payments, or both, without regard to any 
        maximum or minimum premium amounts set forth in this 
        subsection. The rate of premium for such a mortgage may vary 
        during the mortgage term as long as the basis for determining 
        the variable rate is established before the execution of the 
        mortgage. The Secretary may change a premium structure 
        established under this subparagraph but only to the extent that 
        such change is not applied to any mortgage already executed.
            ``(B) Establishment and alteration of premium structure.--A 
        premium structure shall be established or changed under 
        subparagraph (A) only by providing notice to mortgagees and to 
        the Congress, at least 30 days before the premium structure is 
        established or changed.
            ``(C) Considerations for premium structure.--When 
        establishing a premium structure under subparagraph (A) or when 
        changing such a premium structure, the Secretary shall consider 
        the following:
                    ``(i) The effect of the proposed premium structure 
                on the Secretary's ability to meet the operational 
                goals of the Mutual Mortgage Insurance Fund as provided 
                in section 202(a).
                    ``(ii) Underwriting variables.
                    ``(iii) The extent to which new pricing under the 
                proposed premium structure has potential for acceptance 
                in the private market.
                    ``(iv) The administrative capability of the 
                Secretary to administer the proposed premium structure.
                    ``(v) The effect of the proposed premium structure 
                on the Secretary's ability to maintain the availability 
                of mortgage credit and provide stability to mortgage 
                markets.''.

SEC. 7. REHABILITATION LOANS.

     Subsection (k) of section 203 of the National Housing Act (12 
U.S.C. 1709(k)) is amended--
            (1) in paragraph (1), by striking ``on'' and all that 
        follows through ``1978''; and
            (2) in paragraph (5)--
                    (A) by striking ``General Insurance Fund'' the 
                first place it appears and inserting ``Mutual Mortgage 
                Insurance Fund''; and
                    (B) in the second sentence, by striking the comma 
                and all that follows through ``General Insurance 
                Fund''.

SEC. 8. DISCRETIONARY ACTION.

    The National Housing Act is amended--
            (1) in subsection (e) of section 202 (12 U.S.C. 1708(e))--
                    (A) in paragraph (3)(B), by striking ``section 
                202(e) of the National Housing Act'' and inserting 
                ``this subsection''; and
                    (B) by redesignating such subsection as subsection 
                (f);
            (2) by striking paragraph (4) of section 203(s) (12 U.S.C. 
        1709(s)(4)) and inserting the following new paragraph:
            ``(4) the Secretary of Agriculture;''; and
            (3) by transferring subsection (s) of section 203 (as 
        amended by paragraph (2) of this section) to section 202, 
        inserting such subsection after subsection (d) of section 202, 
        and redesignating such subsection as subsection (e).

SEC. 9. INSURANCE OF CONDOMINIUMS.

    (a) In General.--Section 234 of the National Housing Act (12 U.S.C. 
1715y) is amended--
            (1) in subsection (c)--
                    (A) in the first sentence--
                            (i) by striking ``and'' before ``(2)''; and
                            (ii) by inserting before the period at the 
                        end the following: ``, and (3) the project has 
                        a blanket mortgage insured by the Secretary 
                        under subsection (d)''; and
                    (B) in clause (B) of the third sentence, by 
                striking ``thirty-five years'' and inserting ``forty 
                years''; and
            (2) in subsection (g), by striking ``, except that'' and 
        all that follows and inserting a period.
    (b) Definition of Mortgage.--Section 201(a) of the National Housing 
Act (12 U.S.C. 1707(a)) is amended--
            (1) in clause (1), by striking ``or'' and inserting a 
        comma; and
            (2) by inserting before the semicolon the following: ``, or 
        (3) a first mortgage given to secure the unpaid purchase price 
        of a fee interest in, or long-term leasehold interest in, a 
        one-family unit in a multifamily project, including a project 
        in which the dwelling units are attached, semi-detached, or 
        detached, and an undivided interest in the common areas and 
        facilities which serve the project''.

SEC. 10. MUTUAL MORTGAGE INSURANCE FUND.

    (a) In General.--Subsection (a) of section 202 of the National 
Housing Act (12 U.S.C. 1708(a)) is amended to read as follows:
    ``(a) Mutual Mortgage Insurance Fund.--
            ``(1) Establishment.--Subject to the provisions of the 
        Federal Credit Reform Act of 1990, there is hereby created a 
        Mutual Mortgage Insurance Fund (in this title referred to as 
        the `Fund'), which shall be used by the Secretary to carry out 
        the provisions of this title with respect to mortgages insured 
        under section 203. The Secretary may enter into commitments to 
        guarantee, and may guarantee, such insured mortgages.
            ``(2) Limit on loan guarantees.--The authority of the 
        Secretary to enter into commitments to guarantee such insured 
        mortgages shall be effective for any fiscal year only to the 
        extent that the aggregate original principal loan amount under 
        such mortgages, any part of which is guaranteed, does not 
        exceed the amount specified in appropriations Acts for such 
        fiscal year.
            ``(3) Fiduciary responsibility.--The Secretary has a 
        responsibility to ensure that the Mutual Mortgage Insurance 
        Fund remains financially sound.
            ``(4) Annual independent actuarial study.--The Secretary 
        shall provide for an independent actuarial study of the Fund to 
        be conducted annually, which shall analyze the financial 
        position of the Fund. The Secretary shall submit a report 
        annually to the Congress describing the results of such study 
        and assessing the financial status of the Fund. The report 
        shall recommend adjustments to underwriting standards, program 
        participation, or premiums, if necessary, to ensure that the 
        Fund remains financially sound.
            ``(5) Quarterly reports.--During each fiscal year, the 
        Secretary shall submit a report to the Congress for each 
        quarter, which shall specify for mortgages that are obligations 
        of the Fund--
                    ``(A) the cumulative volume of loan guarantee 
                commitments that have been made during such fiscal year 
                through the end of the quarter for which the report is 
                submitted;
                    ``(B) the types of loans insured, categorized by 
                risk;
                    ``(C) any significant changes between actual and 
                projected claim and prepayment activity;
                    ``(D) projected versus actual loss rates; and
                    ``(E) updated projections of the annual subsidy 
                rates to ensure that increases in risk to the Fund are 
                identified and mitigated by adjustments to underwriting 
                standards, program participation, or premiums, and the 
                financial soundness of the Fund is maintained.
        The first quarterly report under this paragraph shall be 
        submitted on the last day of the first quarter of fiscal year 
        2007, or upon the expiration of the 90-day period beginning on 
        the date of the enactment of the Expanding American 
        Homeownership Act of 2006, whichever is later.
            ``(6) Adjustment of premiums.--If, pursuant to the 
        independent actuarial study of the Fund required under 
        paragraph (5), the Secretary determines that the Fund is not 
        meeting the operational goals established under paragraph (8) 
        or there is a substantial probability that the Fund will not 
        maintain its established target subsidy rate, the Secretary may 
        either make programmatic adjustments under section 203 as 
        necessary to reduce the risk to the Fund, or make appropriate 
        premium adjustments.
            ``(7) Operational goals.--The operational goals for the 
        Fund are--
                    ``(A) to charge borrowers under loans that are 
                obligations of the Fund an appropriate premium for the 
                risk that such loans pose to the Fund;
                    ``(B) to minimize the default risk to the Fund and 
                to homeowners;
                    ``(C) to curtail the impact of adverse selection on 
                the Fund; and
                    ``(D) to meet the housing needs of the borrowers 
                that the single family mortgage insurance program under 
                this title is designed to serve.''.
    (b) Obligations of Fund.--The National Housing Act is amended as 
follows:
            (1) Homeownership voucher program mortgages.--In section 
        203(v) (12 U.S.C. 1709(v))--
                    (A) by striking ``Notwithstanding section 202 of 
                this title, the'' and inserting ``The''; and
                    (B) by striking ``General Insurance Fund'' the 
                first place such term appears and all that follows and 
                inserting ``Mutual Mortgage Insurance Fund.''.
            (2) Home equity conversion mortgages.--Section 255(i)(2)(A) 
        of the National Housing Act (12 U.S.C. 1715z-20(i)(2)(A)) is 
        amended by striking ``General Insurance Fund'' and inserting 
        ``Mutual Mortgage Insurance Fund''.
    (c) Conforming Amendments.--The National Housing Act is amended--
            (1) in section 205 (12 U.S.C. 1711), by striking 
        subsections (g) and (h); and
            (2) in section 519(e) (12 U.S.C. 1735c(e)), by striking 
        ``203(b)'' and all that follows through ``203(i)'' and 
        inserting ``203, except as determined by the Secretary,''.

SEC. 11. HAWAIIAN HOME LANDS AND INDIAN RESERVATIONS.

    (a) Hawaiian Home Lands.--Section 247(c) of the National Housing 
Act (12 U.S.C. 1715z-12) is amended--
            (1) by striking ``General Insurance Fund established in 
        section 519'' and inserting ``Mutual Mortgage Insurance Fund''; 
        and
            (2) in the second sentence, by striking ``(1) all 
        references'' and all that follows through ``and (2)''.
    (b) Indian Reservations.--Section 248(f) of the National Housing 
Act (12 U.S.C. 1715z-13) is amended--
            (1) by striking ``General Insurance Fund'' the first place 
        it appears through ``519'' and inserting ``Mutual Mortgage 
        Insurance Fund''; and
            (2) in the second sentence, by striking ``(1) all 
        references'' and all that follows through ``and (2)''.

SEC. 12. CONFORMING AND TECHNICAL AMENDMENTS.

    (a) Repeals.--The following provisions of the National Housing Act 
are repealed:
            (1) Subsection (i) of section 203 (12 U.S.C. 1709(i)).
            (2) Subsection (o) of section 203 (12 U.S.C. 1709(o)).
            (3) Subsection (p) of section 203 (12 U.S.C. 1709(p)).
            (4) Subsection (q) of section 203 (12 U.S.C. 1709(q)).
            (5) Section 222 (12 U.S.C. 1715m).
            (6) Section 237 (12 U.S.C. 1715z-2).
            (7) Section 245 (12 U.S.C. 1715z-10).
    (b) Definition of Area.--Section 203(u)(2)(A) of the National 
Housing Act (12 U.S.C. 1709(u)(2)(A)) is amended by striking ``shall'' 
and all that follows and inserting ``means a metropolitan statistical 
area as established by the Office of Management and Budget;''.
    (c) Definition of State.--Section 201(d) of the National Housing 
Act (12 U.S.C. 1707(d)) is amended by striking ``the Trust Territory of 
the Pacific Islands'' and inserting ``the Commonwealth of the Northern 
Mariana Islands''.

SEC. 13. HOME EQUITY CONVERSION MORTGAGES.

    Section 255 of the National Housing Act (12 U.S.C. 1715z-20) is 
amended--
            (1) in subsection (g)--
                    (A) by striking the first sentence; and
                    (B) by striking ``established under section 
                203(b)(2)'' and all that follows through ``located'' 
                and inserting ``limitation established under section 
                305(a)(2) of the Federal Home Loan Mortgage Corporation 
                Act for a 1-family residence'';
            (2) in subsection (i)(1)(C), by striking ``limitations'' 
        and inserting ``limitation''; and
            (3) by adding at the end the following new subsection:
    ``(n) Authority to Insure Home Purchase Mortgage.--
            ``(1) In general.--Notwithstanding any other provision in 
        this section, the Secretary may insure, upon application by a 
        mortgagee, a home equity conversion mortgage upon such terms 
        and conditions as the Secretary may prescribe, when the primary 
        purpose of the home equity conversion mortgage is to enable an 
        elderly mortgagor to purchase a 1-to 4 family dwelling in which 
        the mortgagor will occupy or occupies one of the units.
            ``(2) Limitation on principal obligation.--A home equity 
        conversion mortgage insured pursuant to paragraph (1) shall 
        involve a principal obligation that does not exceed the dollar 
        amount limitation determined under section 305(a)(2) of the 
        Federal Home Loan Mortgage Corporation Act for a residence of 
        the applicable size.''.

SEC. 14. CONFORMING LOAN LIMIT IN DISASTER AREAS.

    Section 203(h) of the National Housing Act (12 U.S.C. 1709) is 
amended--
            (1) by inserting after ``property'' the following: ``plus 
        any initial service charges, appraisal, inspection and other 
        fees in connection with the mortgage as approved by the 
        Secretary,'';
            (2) by striking the third sentence (as added by chapter 7 
        of the Emergency Supplemental Appropriations Act of 1994 
        (Public Law 103-211; 108 Stat. 12)); and
            (3) by adding at the end the following new sentence: ``In 
        any case in which the single family residence to be insured 
        under this subsection is within a jurisdiction in which the 
        President has declared a major disaster to have occurred, the 
        Secretary is authorized, for a temporary period not to exceed 
        36 months from the date of such Presidential declaration, to 
        enter into agreements to insure a mortgage which involves a 
        principal obligation of up to 100 percent of the dollar 
        limitation determined under section 305(a)(2) of the Federal 
        Home Loan Mortgage Corporation Act for a single family 
        residence, and not in excess of 100 percent of the appraised 
        value of the property plus any initial service charges, 
        appraisal, inspection and other fees in connection with the 
        mortgage as approved by the Secretary.''.

SEC. 15. SAVINGS PROVISION.

    Any mortgage insured under title II of the National Housing Act 
before the date of enactment of this title shall continue to be 
governed by the laws, regulations, orders, and terms and conditions to 
which it was subject on the day before the date of the enactment of 
this Act.

SEC. 16. IMPLEMENTATION.

     The Secretary of Housing and Urban Development shall by notice 
establish any additional requirements that may be necessary to 
immediately carry out the provisions of this title. The notice shall 
take effect upon issuance.
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