[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2338 Placed on Calendar Senate (PCS)]






                                                       Calendar No. 481
110th CONGRESS
  1st Session
                                S. 2338

                          [Report No. 110-227]

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 13, 2007

  Mr. Reid (for Mr. Dodd) from the Committee on Banking, Housing, and 
  Urban Affairs reported the following original bill; which was read 
                    twice and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
To modernize and update the National Housing Act and enable the Federal 
Housing Administration 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 ``FHA Modernization 
Act of 2007''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
                TITLE I--BUILDING AMERICAN HOMEOWNERSHIP

Sec. 101. Short title.
Sec. 102. Maximum principal loan obligation.
Sec. 103. Cash investment requirement and prohibition of seller-funded 
                            downpayment assistance.
Sec. 104. Mortgage insurance premiums.
Sec. 105. Rehabilitation loans.
Sec. 106. Discretionary action.
Sec. 107. Insurance of condominiums.
Sec. 108. Mutual Mortgage Insurance Fund.
Sec. 109. Hawaiian home lands and Indian reservations.
Sec. 110. Conforming and technical amendments.
Sec. 111. Insurance of mortgages.
Sec. 112. Home equity conversion mortgages.
Sec. 113. Energy efficient mortgages program.
Sec. 114. Pilot program for automated process for borrowers without 
                            sufficient credit history.
Sec. 115. Homeownership preservation.
Sec. 116. Use of FHA savings for improvements in FHA technologies, 
                            procedures, processes, program performance, 
                            staffing, and salaries.
Sec. 117. Post-purchase housing counseling eligibility improvements.
Sec. 118. Pre-purchase homeownership counseling demonstration.
Sec. 119. Fraud prevention.
Sec. 120. Limitation on mortgage insurance premium increases.
Sec. 121. Savings provision.
Sec. 122. Implementation.
           TITLE II--MANUFACTURED HOUSING LOAN MODERNIZATION

Sec. 201. Short title.
Sec. 202. Purposes.
Sec. 203. Exception to limitation on financial institution portfolio.
Sec. 204. Insurance benefits.
Sec. 205. Maximum loan limits.
Sec. 206. Insurance premiums.
Sec. 207. Technical corrections.
Sec. 208. Revision of underwriting criteria.
Sec. 209. Prohibition against kickbacks and unearned fees.
Sec. 210. Leasehold requirements.

                TITLE I--BUILDING AMERICAN HOMEOWNERSHIP

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Building American Homeownership 
Act of 2007''.

SEC. 102. MAXIMUM PRINCIPAL LOAN OBLIGATION.

    Paragraph (2) of section 203(b)(2) of the National Housing Act (12 
U.S.C. 1709(b)(2)) is amended--
            (1) by amending subparagraphs (A) and (B) to read as 
        follows:
                    ``(A) not to exceed the lesser of--
                            ``(i) in the case of a 1-family residence, 
                        the median 1-family house price in the area, as 
                        determined by the Secretary; and in the case of 
                        a 2-, 3-, or 4-family residence, the percentage 
                        of such median price that bears the same ratio 
                        to such median price as the dollar amount 
                        limitation in effect under section 305(a)(2) of 
                        the Federal Home Loan Mortgage Corporation Act 
                        (12 U.S.C. 1454(a)(2)) for a 2-, 3-, or 4-
                        family residence, respectively, bears to the 
                        dollar amount limitation in effect under such 
                        section for a 1-family residence; or
                            ``(ii) the dollar amount limitation 
                        determined under such section 305(a)(2) for a 
                        residence of the applicable size;
                except that the dollar amount limitation in effect for 
                any area under this subparagraph may not be less than 
                the greater of (I) the dollar amount limitation in 
                effect under this section for the area on October 21, 
                1998, or (II) 65 percent of the dollar limitation 
                determined under such section 305(a)(2) for a residence 
                of the applicable size; and
                    ``(B) not to exceed 100 percent of the appraised 
                value of the property.''; and
            (2) in the matter following subparagraph (B), by striking 
        the second sentence (relating to a definition of ``average 
        closing cost'') and all that follows through ``section 3103A(d) 
        of title 38, United States Code.''.

SEC. 103. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED 
              DOWNPAYMENT ASSISTANCE.

    Paragraph 9 of section 203(b) of the National Housing Act (12 
U.S.C. 1709(b)(9)) is amended to read as follows:
            ``(9) Cash investment requirement.--
                    ``(A) In general.--A mortgage insured under this 
                section shall be executed by a mortgagor who shall have 
                paid, in cash, on account of the property an amount 
                equal to not less than 1.5 percent of the appraised 
                value of the property or such larger amount as the 
                Secretary may determine.
                    ``(B) Family members.--For purposes of this 
                paragraph, the Secretary shall consider as cash or its 
                equivalent any amounts borrowed from a family member 
                (as such term is defined in section 201), subject only 
                to the requirements that, in any case in which the 
                repayment of such borrowed amounts is secured by a lien 
                against the property, that--
                            ``(i) such lien shall be subordinate to the 
                        mortgage; and
                            ``(ii) the sum of the principal obligation 
                        of the mortgage and the obligation secured by 
                        such lien may not exceed 100 percent of the 
                        appraised value of the property.
                    ``(C) Prohibited sources.--In no case shall the 
                funds required by subparagraph (A) consist, in whole or 
                in part, of funds provided by any of the following 
                parties before, during, or after closing of the 
                property sale:
                            ``(i) The seller or any other person or 
                        entity that financially benefits from the 
                        transaction.
                            ``(ii) Any third party or entity that is 
                        reimbursed, directly or indirectly, by any of 
                        the parties described in clause (i).''.

SEC. 104. MORTGAGE INSURANCE PREMIUMS.

    Section 203(c)(2) of the National Housing Act (12 U.S.C. 
1709(c)(2)) is amended--
            (1) in the matter preceding subparagraph (A), by striking 
        ``or of the General Insurance Fund'' and all that follows 
        through ``section 234(c),,''; and
            (2) in subparagraph (A)--
                    (A) by striking ``2.25 percent'' and inserting ``3 
                percent''; and
                    (B) by striking ``2.0 percent'' and inserting 
                ``2.75 percent''.

SEC. 105. 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. 106. 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. 107. INSURANCE OF CONDOMINIUMS.

    (a) In General.--Section 234 of the National Housing Act (12 U.S.C. 
1715y) is amended--
            (1) in subsection (c), in the first sentence--
                    (A) by striking ``and'' before ``(2)''; and
                    (B) 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
            (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) before ``a first mortgage'' insert ``(A)'';
            (2) by striking ``or on a leasehold (1)'' and inserting 
        ``(B) a first mortgage on a leasehold on real estate (i)'';
            (3) by striking ``or (2)'' and inserting ``, or (ii)''; and
            (4) by inserting before the semicolon the following: ``, or 
        (C) a first mortgage given to secure the unpaid purchase price 
        of a fee interest in, or long-term leasehold interest in, real 
        estate consisting of a one-family unit in a multifamily 
        project, including a project in which the dwelling units are 
        attached, or are manufactured housing units, semi-detached, or 
        detached, and an undivided interest in the common areas and 
        facilities which serve the project''.
    (c) Definition of Real Estate.--Section 201 of the National Housing 
Act (12 U.S.C. 1707) is amended by adding at the end the following new 
subsection:
    ``(g) The term `real estate' means land and all natural resources 
and structures permanently affixed to the land, including residential 
buildings and stationary manufactured housing. The Secretary may not 
require, for treatment of any land or other property as real estate for 
purposes of this title, that such land or property be treated as real 
estate for purposes of State taxation.''.

SEC. 108. 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 
        calendar 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 
        2008, or on the last day of the first full calendar quarter 
        following the enactment of the Building American Homeownership 
        Act of 2007, whichever is later.
            ``(6) Adjustment of premiums.--If, pursuant to the 
        independent actuarial study of the Fund required under 
        paragraph (4), the Secretary determines that the Fund is not 
        meeting the operational goals established under paragraph (7) 
        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 this title 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 minimize the default risk to the Fund and 
                to homeowners by among other actions instituting fraud 
                prevention quality control screening not later than 18 
                months after the date of enactment of the Building 
                American Homeownership Act of 2007; and
                    ``(B) 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 
                through the end of the subsection 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. 109. HAWAIIAN HOME LANDS AND INDIAN RESERVATIONS.

    (a) Hawaiian Home Lands.--Section 247(c) of the National Housing 
Act (12 U.S.C. 1715z-12(c)) 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(f)) 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. 110. 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. 111. INSURANCE OF MORTGAGES.

    Subsection (n)(2) of section 203 of the National Housing Act (12 
U.S.C. 1709(n)(2)) is amended--
            (1) in subparagraph (A), by inserting ``or subordinate 
        mortgage or'' before ``lien given''; and
            (2) in subparagraph (C), by inserting ``or subordinate 
        mortgage or'' before ``lien''.

SEC. 112. HOME EQUITY CONVERSION MORTGAGES.

    (a) In General.--Section 255 of the National Housing Act (12 U.S.C. 
1715z-20) is amended--
            (1) in subsection (b)(2), insert ```real estate,''' after 
        ```mortgagor','';
            (2) 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'';
            (3) in subsection (i)(1)(C), by striking ``limitations'' 
        and inserting ``limitation''; and
            (4) by adding at the end the following new subsection:
    ``(o) Authority To Insure Home Purchase Mortgage.--
            ``(1) In general.--Notwithstanding any other provision of 
        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 home 
        equity conversion mortgage will be used to purchase a 1- to 4-
        family dwelling unit, one unit of which that the mortgagor will 
        occupy as a primary residence, and to provide for any future 
        payments to the mortgagor, based on available equity, as 
        authorized under subsection (d)(9).
            ``(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 1-family 
        residence.''.
    (b) Mortgages for Cooperatives.--Subsection (b) of section 255 of 
the National Housing Act (12 U.S.C. 1715z-20(b)) is amended--
            (1) in paragraph (4)--
                    (A) by inserting ``a first or subordinate mortgage 
                or lien'' before ``on all stock'';
                    (B) by inserting ``unit'' after ``dwelling''; and
                    (C) by inserting ``a first mortgage or first lien'' 
                before ``on a leasehold''; and
            (2) in paragraph (5), by inserting ``a first or subordinate 
        lien on'' before ``all stock''.
    (c) Limitation on Origination Fees.--Section 255 of the National 
Housing Act (12 U.S.C. 1715z-20), as amended by the preceding 
provisions of this section, is further amended--
            (1) by redesignating subsections (k), (l), and (m) as 
        subsections (l), (m), and (n), respectively; and
            (2) by inserting after subsection (j) the following new 
        subsection:
    ``(k) Limitation on Origination Fees.--The Secretary shall 
establish limits on the origination fee that may be charged to a 
mortgagor under a mortgage insured under this section, which 
limitations shall--
            ``(1) equal 1.5 percent of the maximum claim amount of the 
        mortgage unless adjusted thereafter on the basis of--
                    ``(A) the costs to the mortgagor; and
                    ``(B) the impact of such fees on the reverse 
                mortgage market;
            ``(2) be subject to a minimum allowable amount;
            ``(3) provide that the origination fee may be fully 
        financed with the mortgage;
            ``(4) include any fees paid to correspondent mortgagees 
        approved by the Secretary; and
            ``(5) have the same effective date as subsection (o)(2) 
        regarding the limitation on principal obligation.''.
    (d) Study Regarding Program Costs and Credit Availability.--
            (1) In general.--The Comptroller General of the United 
        States shall conduct a study regarding the costs and 
        availability of credit under the home equity conversion 
        mortgages for elderly homeowners program under section 255 of 
        the National Housing Act (12 U.S.C. 1715z-20) (in this 
        subsection referred to as the ``program'').
            (2) Purpose.--The purpose of the study required under 
        paragraph (1) is to help Congress analyze and determine the 
        effects of limiting the amounts of the costs or fees under the 
        program from the amounts charged under the program as of the 
        date of the enactment of this Act.
            (3) Content of report.--The study required under paragraph 
        (1) should focus on--
                    (A) the cost to mortgagors of participating in the 
                program;
                    (B) the financial soundness of the program;
                    (C) the availability of credit under the program; 
                and
                    (D) the costs to elderly homeowners participating 
                in the program, including--
                            (i) mortgage insurance premiums charged 
                        under the program;
                            (ii) up-front fees charged under the 
                        program; and
                            (iii) margin rates charged under the 
                        program.
            (4) Timing of report.--Not later than 12 months after the 
        date of the enactment of this Act, the Comptroller General 
        shall submit a report to the Committee on Banking, Housing, and 
        Urban Affairs of the Senate and the Committee on Financial 
        Services of the House of Representatives setting forth the 
        results and conclusions of the study required under paragraph 
        (1).

SEC. 113. ENERGY EFFICIENT MORTGAGES PROGRAM.

    Section 106(a)(2) of the Energy Policy Act of 1992 (42 U.S.C. 12712 
note) is amended--
            (1) by amending subparagraph (C) to read as follows:
                    ``(C) Costs of improvements.--The cost of cost-
                effective energy efficiency improvements shall not 
                exceed the greater of--
                            ``(i) 5 percent of the property value (not 
                        to exceed 5 percent of the limit established 
                        under section 203(b)(2)(A)) of the National 
                        Housing Act (12 U.S.C. 1709(b)(2)(A); or
                            ``(ii) 2 percent of the limit established 
                        under section 203(b)(2)(B) of such Act.''; and
            (2) by adding at the end the following:
                    ``(D) Limitation.--In any fiscal year, the 
                aggregate number of mortgages insured pursuant to this 
                section may not exceed 5 percent of the aggregate 
                number of mortgages for 1- to 4-family residences 
                insured by the Secretary of Housing and Urban 
                Development under title II of the National Housing Act 
                (12 U.S.C. 1707 et seq.) during the preceding fiscal 
                year.''.

SEC. 114. PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS WITHOUT 
              SUFFICIENT CREDIT HISTORY.

    (a) Establishment.--Title II of the National Housing Act (12 U.S.C. 
1707 et seq.) is amended by adding at the end the following new 
section:

``SEC. 257. PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS WITHOUT 
              SUFFICIENT CREDIT HISTORY.

    ``(a) Establishment.--The Secretary shall carry out a pilot program 
to establish, and make available to mortgagees, an automated process 
for providing alternative credit rating information for mortgagors and 
prospective mortgagors under mortgages on 1- to 4-family residences to 
be insured under this title who have insufficient credit histories for 
determining their creditworthiness. Such alternative credit rating 
information may include rent, utilities, and insurance payment 
histories, and such other information as the Secretary considers 
appropriate.
    ``(b) Scope.--The Secretary may carry out the pilot program under 
this section on a limited basis or scope, and may consider limiting the 
program to first-time homebuyers.
    ``(c) Limitation.--In any fiscal year, the aggregate number of 
mortgages insured pursuant to the automated process established under 
this section may not exceed 5 percent of the aggregate number of 
mortgages for 1- to 4-family residences insured by the Secretary under 
this title during the preceding fiscal year.
    ``(d) Sunset.--After the expiration of the 5-year period beginning 
on the date of the enactment of the Building American Homeownership Act 
of 2007, the Secretary may not enter into any new commitment to insure 
any mortgage, or newly insure any mortgage, pursuant to the automated 
process established under this section.''.
    (b) GAO Report.--Not later than the expiration of the two-year 
period beginning on the date of the enactment of this title, the 
Comptroller General of the United States shall submit to the Congress a 
report identifying the number of additional mortgagors served using the 
automated process established pursuant to section 257 of the National 
Housing Act (as added by the amendment made by subsection (a) of this 
section) and the impact of such process and the insurance of mortgages 
pursuant to such process on the safety and soundness of the insurance 
funds under the National Housing Act of which such mortgages are 
obligations.

SEC. 115. HOMEOWNERSHIP PRESERVATION.

    The Secretary of Housing and Urban Development and the Commissioner 
of the Federal Housing Administration, in consultation with industry, 
the Neighborhood Reinvestment Corporation, and other entities involved 
in foreclosure prevention activities, shall--
            (1) develop and implement a plan to improve the Federal 
        Housing Administration's loss mitigation process; and
            (2) report such plan to the Committee on Banking, Housing, 
        and Urban Affairs of the Senate and the Committee on Financial 
        Services of the House of Representatives.

SEC. 116. USE OF FHA SAVINGS FOR IMPROVEMENTS IN FHA TECHNOLOGIES, 
              PROCEDURES, PROCESSES, PROGRAM PERFORMANCE, STAFFING, AND 
              SALARIES.

    (a) Authorization of Appropriations.--There is authorized to be 
appropriated for each of fiscal years 2008 through 2012, $25,000,000, 
from negative credit subsidy for the mortgage insurance programs under 
title II of the National Housing Act, to the Secretary of Housing and 
Urban Development for increasing funding for the purpose of improving 
technology, processes, program performance, eliminating fraud, and for 
providing appropriate staffing in connection with the mortgage 
insurance programs under title II of the National Housing Act.
    (b) Certification.--The authorization under subsection (a) shall 
not be effective for a fiscal year unless the Secretary of Housing and 
Urban Development has, by rulemaking in accordance with section 553 of 
title 5, United States Code (notwithstanding subsections (a)(2), 
(b)(B), and (d)(3) of such section), made a determination that--
            (1) premiums being, or to be, charged during such fiscal 
        year for mortgage insurance under title II of the National 
        Housing Act are established at the minimum amount sufficient 
        to--
                    (A) comply with the requirements of section 205(f) 
                of such Act (relating to required capital ratio for the 
                Mutual Mortgage Insurance Fund); and
                    (B) ensure the safety and soundness of the other 
                mortgage insurance funds under such Act; and
            (2) any negative credit subsidy for such fiscal year 
        resulting from such mortgage insurance programs adequately 
        ensures the efficient delivery and availability of such 
        programs.
    (c) Study and Report.--The Secretary of Housing and Urban 
Development shall conduct a study to obtain recommendations from 
participants in the private residential (both single family and 
multifamily) mortgage lending business and the secondary market for 
such mortgages on how best to update and upgrade processes and 
technologies for the mortgage insurance programs under title II of the 
National Housing Act so that the procedures for originating, insuring, 
and servicing of such mortgages conform with those customarily used by 
secondary market purchasers of residential mortgage loans. Not later 
than the expiration of the 12-month period beginning on the date of the 
enactment of this Act, the Secretary shall submit a report to the 
Congress describing the progress made and to be made toward updating 
and upgrading such processes and technology, and providing appropriate 
staffing for such mortgage insurance programs.

SEC. 117. POST-PURCHASE HOUSING COUNSELING ELIGIBILITY IMPROVEMENTS.

    Section 106(c)(4) of the Housing and Urban Development Act of 1968 
(12 U.S.C. 1701x(c)(4)) is amended:
            (1) in subparagraph (C)--
                    (A) in clause (i), by striking ``; or'' and 
                inserting a semicolon;
                    (B) in clause (ii), by striking the period at the 
                end and inserting a semicolon; and
                    (C) by adding at the end the following:
                            ``(iii) a significant reduction in the 
                        income of the household due to divorce or 
                        death; or
                            ``(iv) a significant increase in basic 
                        expenses of the homeowner or an immediate 
                        family member of the homeowner (including the 
                        spouse, child, or parent for whom the homeowner 
                        provides substantial care or financial 
                        assistance) due to--
                                    ``(I) an unexpected or significant 
                                increase in medical expenses;
                                    ``(II) a divorce;
                                    ``(III) unexpected and significant 
                                damage to the property, the repair of 
                                which will not be covered by private or 
                                public insurance; or
                                    ``(IV) a large property-tax 
                                increase; or'';
            (2) by striking the matter that follows subparagraph (C); 
        and
            (3) by adding at the end the following:
                    ``(D) the Secretary of Housing and Urban 
                Development determines that the annual income of the 
                homeowner is no greater than the annual income 
                established by the Secretary as being of low- or 
                moderate-income.''.

SEC. 118. PRE-PURCHASE HOMEOWNERSHIP COUNSELING DEMONSTRATION.

    (a) Establishment of Program.--For the period beginning on the date 
of enactment of this Act and ending on the date that is 3 years after 
such date of enactment, the Secretary of Housing and Urban Development 
shall establish and conduct a demonstration program to test the 
effectiveness of alternative forms of pre-purchase homeownership 
counseling for eligible homebuyers.
    (b) Forms of Counseling.--The Secretary of Housing and Urban 
Development shall provide to eligible homebuyers pre-purchase 
homeownership counseling under this section in the form of --
            (1) telephone counseling;
            (2) individualized in-person counseling;
            (3) web-based counseling;
            (4) counseling classes; or
            (5) any other form or type of counseling that the Secretary 
        may, in his discretion, determine appropriate.
    (c) Size of Program.--The Secretary shall make available the pre-
purchase homeownership counseling described in subsection (b) to not 
more than 3,000 eligible homebuyers in any given year.
    (d) Incentive to Participate.--The Secretary of Housing and Urban 
Development may provide incentives to eligible homebuyers to 
participate in the demonstration program established under subsection 
(a). Such incentives may include the reduction of any insurance premium 
charges owed by the eligible homebuyer to the Secretary.
    (e) Eligible Homebuyer Defined.--For purposes of this section an 
``eligible homebuyer'' means a first-time homebuyer who has been 
approved for a home loan with a loan-to-value ratio between 97 percent 
and 98.5 percent.
    (f) Report to Congress.--The Secretary of Housing and Urban 
Development shall report to the Committee on Banking, Housing, and 
Urban Affairs of the Senate and the Committee on Financial Services of 
the House of Representative--
            (1) on an annual basis, on the progress and results of the 
        demonstration program established under subsection (a); and
            (2) for the period beginning on the date of enactment of 
        this Act and ending on the date that is 5 years after such date 
        of enactment, on the payment history and delinquency rates of 
        eligible homebuyers who participated in the demonstration 
        program.

SEC. 119. FRAUD PREVENTION.

    Section 1014 of title 18, United States Code, is amended in the 
first sentence--
            (1) by inserting ``the Federal Housing Administration'' 
        before ``the Farm Credit Administration''; and
            (2) by striking ``commitment, or loan'' and inserting 
        ``commitment, loan, or insurance agreement or application for 
        insurance or a guarantee''.

SEC. 120. LIMITATION ON MORTGAGE INSURANCE PREMIUM INCREASES.

    (a) In General.--Notwithstanding any other provision of law, 
including any provision of this Act and any amendment made by this 
Act--
            (1) for the period beginning on the date of the enactment 
        of this Act and ending on October 1, 2009, the premiums charged 
        for mortgage insurance under multifamily housing programs under 
        the National Housing Act may not be increased above the premium 
        amounts in effect under such program on October 1, 2006, unless 
        the Secretary of Housing and Urban Development determines that, 
        absent such increase, insurance of additional mortgages under 
        such program would, under the Federal Credit Reform Act of 
        1990, require the appropriation of new budget authority to 
        cover the costs (as such term is defined in section 502 of the 
        Federal Credit Reform Act of 1990 (2 U.S.C. 661a) of such 
        insurance; and
            (2) a premium increase pursuant to paragraph (1) may be 
        made only if not less than 30 days prior to such increase 
        taking effect, the Secretary of Housing and Urban Development--
                    (A) notifies the Committee on Banking, Housing, and 
                Urban Affairs of the Senate and the Committee on 
                Financial Services of the House of Representatives of 
                such increase; and
                    (B) publishes notice of such increase in the 
                Federal Register.
    (b) Waiver.--The Secretary of Housing and Urban Development may 
waive the 30-day notice requirement under subsection (a)(2), if the 
Secretary determines that waiting 30-days before increasing premiums 
would cause substantial damage to the solvency of multifamily housing 
programs under the National Housing Act.

SEC. 121. 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 title.

SEC. 122. 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.

           TITLE II--MANUFACTURED HOUSING LOAN MODERNIZATION

SEC. 201. SHORT TITLE.

    This title may be cited as the ``FHA Manufactured Housing Loan 
Modernization Act of 2007''.

SEC. 202. PURPOSES.

    The purposes of this title are--
            (1) to provide adequate funding for FHA-insured 
        manufactured housing loans for low- and moderate-income 
        homebuyers during all economic cycles in the manufactured 
        housing industry;
            (2) to modernize the FHA title I insurance program for 
        manufactured housing loans to enhance participation by Ginnie 
        Mae and the private lending markets; and
            (3) to adjust the low loan limits for title I manufactured 
        home loan insurance to reflect the increase in costs since such 
        limits were last increased in 1992 and to index the limits to 
        inflation.

SEC. 203. EXCEPTION TO LIMITATION ON FINANCIAL INSTITUTION PORTFOLIO.

    The second sentence of section 2(a) of the National Housing Act (12 
U.S.C. 1703(a)) is amended--
            (1) by striking ``In no case'' and inserting ``Other than 
        in connection with a manufactured home or a lot on which to 
        place such a home (or both), in no case''; and
            (2) by striking ``: Provided, That with'' and inserting ``. 
        With''.

SEC. 204. INSURANCE BENEFITS.

    (a) In General.--Subsection (b) of section 2 of the National 
Housing Act (12 U.S.C. 1703(b)), is amended by adding at the end the 
following new paragraph:
            ``(8) Insurance benefits for manufactured housing loans.--
        Any contract of insurance with respect to loans, advances of 
        credit, or purchases in connection with a manufactured home or 
        a lot on which to place a manufactured home (or both) for a 
        financial institution that is executed under this title after 
        the date of the enactment of the FHA Manufactured Housing Loan 
        Modernization Act of 2007 by the Secretary shall be conclusive 
        evidence of the eligibility of such financial institution for 
        insurance, and the validity of any contract of insurance so 
        executed shall be incontestable in the hands of the bearer from 
        the date of the execution of such contract, except for fraud or 
        misrepresentation on the part of such institution.''.
    (b) Applicability.--The amendment made by subsection (a) shall only 
apply to loans that are registered or endorsed for insurance after the 
date of the enactment of this Act.

SEC. 205. MAXIMUM LOAN LIMITS.

    (a) Dollar Amounts.--Paragraph (1) of section 2(b) of the National 
Housing Act (12 U.S.C. 1703(b)(1)) is amended--
            (1) in clause (ii) of subparagraph (A), by striking 
        ``$17,500'' and inserting ``$25,090'';
            (2) in subparagraph (C) by striking ``$48,600'' and 
        inserting ``$69,678'';
            (3) in subparagraph (D) by striking ``$64,800'' and 
        inserting ``$92,904'';
            (4) in subparagraph (E) by striking ``$16,200'' and 
        inserting ``$23,226''; and
            (5) by realigning subparagraphs (C), (D), and (E) 2 ems to 
        the left so that the left margins of such subparagraphs are 
        aligned with the margins of subparagraphs (A) and (B).
    (b) Annual Indexing.--Subsection (b) of section 2 of the National 
Housing Act (12 U.S.C. 1703(b)), as amended by the preceding provisions 
of this Act, is further amended by adding at the end the following new 
paragraph:
            ``(9) Annual indexing of manufactured housing loans.--The 
        Secretary shall develop a method of indexing in order to 
        annually adjust the loan limits established in subparagraphs 
        (A)(ii), (C), (D), and (E) of this subsection. Such index shall 
        be based on the manufactured housing price data collected by 
        the United States Census Bureau. The Secretary shall establish 
        such index no later than 1 year after the date of the enactment 
        of the FHA Manufactured Housing Loan Modernization Act of 
        2007.''
    (c) Technical and Conforming Changes.--Paragraph (1) of section 
2(b) of the National Housing Act (12 U.S.C. 1703(b)(1)) is amended--
            (1) by striking ``No'' and inserting ``Except as provided 
        in the last sentence of this paragraph, no''; and
            (2) by adding after and below subparagraph (G) the 
        following:
    ``The Secretary shall, by regulation, annually increase the dollar 
amount limitations in subparagraphs (A)(ii), (C), (D), and (E) (as such 
limitations may have been previously adjusted under this sentence) in 
accordance with the index established pursuant to paragraph (9).''.

SEC. 206. INSURANCE PREMIUMS.

    Subsection (f) of section 2 of the National Housing Act (12 U.S.C. 
1703(f)) is amended--
            (1) by inserting ``(1) Premium charges.--'' after ``(f)''; 
        and
            (2) by adding at the end the following new paragraph:
    ``(2) Manufactured Home Loans.--Notwithstanding paragraph (1), in 
the case of a loan, advance of credit, or purchase in connection with a 
manufactured home or a lot on which to place such a home (or both), the 
premium charge for the insurance granted under this section shall be 
paid by the borrower under the loan or advance of credit, as follows:
            ``(A) At the time of the making of the loan, advance of 
        credit, or purchase, a single premium payment in an amount not 
        to exceed 2.25 percent of the amount of the original insured 
        principal obligation.
            ``(B) In addition to the premium under subparagraph (A), 
        annual premium payments during the term of the loan, advance, 
        or obligation purchased in an amount not exceeding 1.0 percent 
        of the remaining insured principal balance (excluding the 
        portion of the remaining balance attributable to the premium 
        collected under subparagraph (A) and without taking into 
        account delinquent payments or prepayments).
            ``(C) Premium charges under this paragraph shall be 
        established in amounts that are sufficient, but do not exceed 
        the minimum amounts necessary, to maintain a negative credit 
        subsidy for the program under this section for insurance of 
        loans, advances of credit, or purchases in connection with a 
        manufactured home or a lot on which to place such a home (or 
        both), as determined based upon risk to the Federal Government 
        under existing underwriting requirements.
            ``(D) The Secretary may increase the limitations on premium 
        payments to percentages above those set forth in subparagraphs 
        (A) and (B), but only if necessary, and not in excess of the 
        minimum increase necessary, to maintain a negative credit 
        subsidy as described in subparagraph (C).''.

SEC. 207. TECHNICAL CORRECTIONS.

    (a) Dates.--Subsection (a) of section 2 of the National Housing Act 
(12 U.S.C. 1703(a)) is amended--
            (1) by striking ``on and after July 1, 1939,'' each place 
        such term appears; and
            (2) by striking ``made after the effective date of the 
        Housing Act of 1954''.
    (b) Authority of Secretary.--Subsection (c) of section 2 of the 
National Housing Act (12 U.S.C. 1703(c)) is amended to read as follows:
    ``(c) Handling and Disposal of Property.--
            ``(1) Authority of secretary.--Notwithstanding any other 
        provision of law, the Secretary may--
                    ``(A) deal with, complete, rent, renovate, 
                modernize, insure, or assign or sell at public or 
                private sale, or otherwise dispose of, for cash or 
                credit in the Secretary's discretion, and upon such 
                terms and conditions and for such consideration as the 
                Secretary shall determine to be reasonable, any real or 
                personal property conveyed to or otherwise acquired by 
                the Secretary, in connection with the payment of 
                insurance heretofore or hereafter granted under this 
                title, including any evidence of debt, contract, claim, 
                personal property, or security assigned to or held by 
                him in connection with the payment of insurance 
                heretofore or hereafter granted under this section; and
                    ``(B) pursue to final collection, by way of 
                compromise or otherwise, all claims assigned to or held 
                by the Secretary and all legal or equitable rights 
                accruing to the Secretary in connection with the 
                payment of such insurance, including unpaid insurance 
                premiums owed in connection with insurance made 
                available by this title.
            ``(2) Advertisements for proposals.--Section 3709 of the 
        Revised Statutes shall not be construed to apply to any 
        contract of hazard insurance or to any purchase or contract for 
        services or supplies on account of such property if the amount 
        thereof does not exceed $25,000.
            ``(3) Delegation of authority.--The power to convey and to 
        execute in the name of the Secretary, deeds of conveyance, 
        deeds of release, assignments and satisfactions of mortgages, 
        and any other written instrument relating to real or personal 
        property or any interest therein heretofore or hereafter 
        acquired by the Secretary pursuant to the provisions of this 
        title may be exercised by an officer appointed by the Secretary 
        without the execution of any express delegation of power or 
        power of attorney. Nothing in this subsection shall be 
        construed to prevent the Secretary from delegating such power 
        by order or by power of attorney, in the Secretary's 
        discretion, to any officer or agent the Secretary may 
        appoint.''.

SEC. 208. REVISION OF UNDERWRITING CRITERIA.

    (a) In General.--Subsection (b) of section 2 of the National 
Housing Act (12 U.S.C. 1703(b)), as amended by the preceding provisions 
of this Act, is further amended by adding at the end the following new 
paragraph:
            ``(10) Financial soundness of manufactured housing 
        program.--The Secretary shall establish such underwriting 
        criteria for loans and advances of credit in connection with a 
        manufactured home or a lot on which to place a manufactured 
        home (or both), including such loans and advances represented 
        by obligations purchased by financial institutions, as may be 
        necessary to ensure that the program under this title for 
        insurance for financial institutions against losses from such 
        loans, advances of credit, and purchases is financially 
        sound.''.
    (b) Timing.--Not later than the expiration of the 6-month period 
beginning on the date of the enactment of this Act, the Secretary of 
Housing and Urban Development shall revise the existing underwriting 
criteria for the program referred to in paragraph (10) of section 2(b) 
of the National Housing Act (as added by subsection (a) of this 
section) in accordance with the requirements of such paragraph.

SEC. 209. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES.

    Title I of the National Housing Act is amended by adding at the end 
of section 9 the following new section:

``SEC. 10. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES.

    ``(a) In General.--Except as provided in subsection (b), the 
provisions of sections 3, 8, 16, 17, 18, and 19 of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.) shall apply 
to each sale of a manufactured home financed with an FHA-insured loan 
or extension of credit, as well as to services rendered in connection 
with such transactions.
    ``(b) Authority of the Secretary.--The Secretary is authorized to 
determine the manner and extent to which the provisions of sections 3, 
8, 16, 17, 18, and 19 of the Real Estate Settlement Procedures Act of 
1974 (12 U.S.C. 2601 et seq.) may reasonably be applied to the 
transactions described in subsection (a), and to grant such exemptions 
as may be necessary to achieve the purposes of this section.
    ``(c) Definitions.--For purposes of this section--
            ``(1) the term `federally related mortgage loan' as used in 
        sections 3, 8, 16, 17, 18, and 19 of the Real Estate Settlement 
        Procedures Act of 1974 (12 U.S.C. 2601 et seq.) shall include 
        an FHA-insured loan or extension of credit made to a borrower 
        for the purpose of purchasing a manufactured home that the 
        borrower intends to occupy as a personal residence; and
            ``(2) the term `real estate settlement service' as used in 
        sections 3, 8, 16, 17, 18, and 19 of the Real Estate Settlement 
        Procedures Act of 1974 (12 U.S.C. 2601 et seq.) shall include 
        any service rendered in connection with a loan or extension of 
        credit insured by the Federal Housing Administration for the 
        purchase of a manufactured home.
    ``(d) Unfair and Deceptive Practices.--In connection with the 
purchase of a manufactured home financed with a loan or extension of 
credit insured by the Federal Housing Administration under this title, 
the Secretary shall prohibit acts or practices in connection with loans 
or extensions of credit that the Secretary finds to be unfair, 
deceptive, or otherwise not in the interests of the borrower.''.

SEC. 210. LEASEHOLD REQUIREMENTS.

    Subsection (b) of section 2 of the National Housing Act (12 U.S.C. 
1703(b)), as amended by the preceding provisions of this Act, is 
further amended by adding at the end the following new paragraph:
            ``(11) Leasehold requirements.--No insurance shall be 
        granted under this section to any such financial institution 
        with respect to any obligation representing any such loan, 
        advance of credit, or purchase by it, made for the purposes of 
        financing a manufactured home which is intended to be situated 
        in a manufactured home community pursuant to a lease, unless 
        such lease--
                    ``(A) expires not less than 3 years after the 
                origination date of the obligation;
                    ``(B) is renewable upon the expiration of the 
                original 3 year term by successive 1 year terms; and
                    ``(C) requires the lessor to provide the lessee 
                written notice of termination of the lease not less 
                than 180 days prior to the expiration of the current 
                lease term in the event the lessee is required to move 
                due to the closing of the manufactured home community, 
                and further provides that failure to provide such 
                notice to the mortgagor in a timely manner will cause 
                the lease term, at its expiration, to automatically 
                renew for an additional 1 year term.''.
                                                       Calendar No. 481

110th CONGRESS

  1st Session

                                S. 2338

                          [Report No. 110-227]

_______________________________________________________________________

                                 A BILL

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

_______________________________________________________________________

                           November 13, 2007

                 Read twice and placed on the calendar