Requirements for FHA-approved mortgagees

(a)

Mortgagee review board

Paragraph (2) of section 202(c) of the National Housing Act (12 U.S.C. 1708(c)) is amended— (1)in subparagraph (E), by inserting and after the semicolon; (2)in subparagraph (F), by striking ; and and inserting a period; and (3)by striking subparagraph (G). (b)

Limitations on participation and mortgagee approval and use of name

Section 202 of the National Housing Act (12 U.S.C. 1708) is amended— (1)by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g), respectively; (2)by inserting after subsection (c) the following new subsection:

(d)

Limitations on participation in origination and mortgagee approval

(1)

Requirement

Any person or entity that is not approved by the Secretary to serve as a mortgagee, as such term is defined in subsection (c)(7), shall not participate in the origination of an FHA-insured loan except as authorized by the Secretary. (2)

Eligibility for approval

In order to be eligible for approval by the Secretary, an applicant mortgagee shall not be, and shall not have any officer, partner, director, principal, or employee of the applicant mortgagee who is— (A)currently suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under part 24 or 25 of title 24 of the Code of Federal Regulations, or any successor regulations to such parts, or under similar provisions of any other Federal agency; (B)under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant’s integrity, competence or fitness to meet the responsibilities of an approved mortgagee; (C)subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review; (D)engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility; (E)convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry— (i)during the 7-year period preceding the date of the application for licensing and registration; or (ii)at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering; (F)in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of State law; or (G)in violation of any other requirement as established by the Secretary.

; and

(3)by adding at the end the following new subsection:

(h)

Use of name

The Secretary shall, by regulation, require each mortgagee approved by the Secretary for participation in the FHA mortgage insurance programs of the Secretary— (1)to use the business name of the mortgagee that is registered with the Secretary in connection with such approval in all advertisements and promotional materials, as such terms are defined by the Secretary, relating to the business of such mortgagee in such mortgage insurance programs; and (2)to maintain copies of all such advertisements and promotional materials, in such form and for such period as the Secretary requires.

(c)

Change of status

The National Housing Act is amended by striking section 532 (12 U.S.C. 1735f–10) and inserting the following new section:

532.

Change of mortgagee status

(a)

Notification

Upon the occurrence of any action described in subsection (b), an approved mortgagee shall immediately submit to the Secretary, in writing, notification of such occurrence. (b)

Actions

The actions described in this subsection are as follows: (1)The debarment, suspension of a Limited Denial of Participation (LDP), or application of other sanctions, fines, or penalties applied to the mortgagee or to any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the mortgagee pursuant to applicable provisions of State or Federal law. (2)The revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other similar declaration of ineligibility pursuant to State law.

(d)

Civil money penalties

Section 536 of the National Housing Act (12 U.S.C. 1735f–14) is amended— (1)in subsection (b)— (A)in paragraph (1)— (i)in the matter preceding subparagraph (A), by inserting or any of its owners, officers, or directors after mortgagee or lender; (ii)in subparagraph (H), by striking title I and all that follows through Act of 1989) and inserting “title I or II”; and (iii)by inserting after subparagraph (J) the following:

(K)Violation of section 202(d) of this Act (12 U.S.C. 1708(d)).

; and

(B)in paragraph (2)— (i)in subparagraph (B), by striking or at the end; (ii)in subparagraph (C), by striking the period at the end and inserting ; or; and (iii)by adding at the end the following new subparagraph:

(D)causing or participating in any of the violations set forth in paragraph (1) of this subsection.

; and

(2)in subsection (g), by striking The term and all that follows through the end of the sentence and inserting For purposes of this section, a person acts knowingly when a person has actual knowledge of acts or should have known of the acts.. (e)

Expanded review of FHA mortgagee applicants and newly approved mortgagees

Not later than the expiration of the 3-month period beginning upon the date of the enactment of this Act, the Secretary of Housing and Urban Development shall— (1)expand the existing process for reviewing new applicants for approval for participation in the mortgage insurance programs of the Secretary for mortgages on 1- to 4-family residences for the purpose of identifying applicants who represent a high risk to the Mutual Mortgage Insurance Fund; and (2)implement procedures that, for mortgagees approved during the 12-month period ending upon such date of enactment— (A)expand the number of mortgages originated by such mortgagees that are reviewed for compliance with applicable laws, regulations, and policies; and (B)include a process for random reviews of such mortgagees and a process for reviews that is based on volume of mortgages originated by such mortgagees.