Replacement of HOPE for Homeowners Program with program for insurance of homeownership retention mortgages

(a)

Replacement of program

Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is amended— (1)in section 257 (12 U.S.C. 1715z–23), as added by section 1402(a) of Public Law 110–289— (A)by striking subsections (a) through (k); and (B)by striking subsections (n) through (v); (2)by redesignating section 257 (12 U.S.C. 1715z–24), as added by section 2124 of Public Law 110–289, as section 259; and (3)by inserting before such section 259 (as so redesignated) the following new section:

258.

Insurance of homeownership retention mortgages

(a)

Authority

The Secretary shall, subject only to the absence of qualified requests for insurance under this section and to the limitations under sections 257(m) and 531(a), make commitments to insure and insure any mortgage covering a 1- to 4-family residence that is made for the purpose of paying or prepaying outstanding obligations under an existing mortgage or mortgages on the residence if the mortgage being insured under this section meets the requirements of this section, as established by the Secretary. The Secretary shall establish such mortgage insurance products, and requirements and standards, in accordance with this section as the Secretary considers appropriate to carry out this section and shall prescribe such regulations and provide such guidance as may be necessary or appropriate to implement such products, requirements, and standards. (b)

Requirements of insured mortgage

To be eligible for insurance under this section, a mortgage shall comply with all of the following requirements: (1)

Primary residence

The mortgagor under the mortgage to be insured under this section shall provide documentation satisfactory in the determination of the Secretary to prove that the residence covered by the mortgage to be insured under this section is occupied by the mortgagor as the primary residence of the mortgagor, and that such residence is the only residence in which the mortgagor has any present ownership interest. (2)

Troubled homeowner

The mortgagor under the mortgage to be insured under this section shall be the mortgagor under the existing mortgage to be refinanced by the insured mortgage and shall— (A)be in default on the mortgagor’s obligations under the existing mortgage; (B)be in danger of defaulting, as determined in accordance with standards established by the Secretary, on the mortgagor’s obligations under the existing mortgage; or (C)have a remaining principal obligation amount under such existing mortgage that exceeds, at the time of the commitment for mortgage insurance under this section, the appraised value of the property that is subject to such existing mortgage. (3)

Prohibition on refinancing liar loans

The Secretary may not insure a mortgage under this section if the mortgagor under such mortgage has knowingly, or willfully and with actual knowledge, furnished any material information regarding the income or financial worth of the mortgagor that is known to be false for the purpose of obtaining the existing mortgage that is to be refinanced by the mortgage to be insured under this section. (4)

Prohibition on refinancing zero-down loans and loans with equity removed

The Secretary may not insure a mortgage under this section if— (A)under the existing mortgage to be refinanced, the mortgagor did not make any payment on account of the property (or any payment exceeding such nominal amount as the Secretary may establish), in cash or its equivalent, in connection with acquisition of the property; or (B)during the term of the existing mortgage to be refinanced, the mortgagor withdrew all, or substantially all (in accordance with such standards and guidelines as the Secretary shall establish) of any equity of the mortgagor in the property subject to such existing mortgage. (5)

Terms

The mortgage to be insured under this section shall have such terms and conditions as the Secretary shall provide, except that such mortgage shall— (A)have a term to maturity not exceeding 40 years; and (B)bear interest at an annual rate that is fixed for the entire term of the mortgage. (6)

Required waiver of prepayment penalties and fees

All penalties for prepayment or refinancing of the existing mortgage, and all fees and penalties related to default or delinquency on the existing mortgage, shall be waived or forgiven. (7)

Shared appreciation

The Secretary shall provide that, with respect to each mortgage insured under this section, upon any sale or disposition of the property subject to such mortgage occurring during the 5-year period beginning on the date of the insurance of the mortgage, to the extent of any principal write- down or interest rate subsidy provided in connection with the mortgage, the Secretary and the mortgagee shall be entitled to a percentage of any appreciation in value of such property that has occurred since the date that such mortgage was insured under this section, which percentage shall decrease over time, and the mortgagor shall be entitled to the remainder of any such appreciation. (8)

Maximum loan amount

The principal obligation amount of the mortgage to be insured under this section shall not exceed the applicable dollar amount limitation in effect under section 305(a)(2) of the Federal Home Loan Mortgage Corporation (12 U.S.C. 1452(a)(2)) for a property of the applicable size for the area in which the property is located. (9)

Term; interest rate

The refinanced eligible mortgage to be insured shall— (A)bear interest at a single rate that is fixed for the entire term of the mortgage; and (B)have a maturity of not less than 30 years from the date of the beginning of amortization of such refinanced eligible mortgage. (c)

Exit fee

The Secretary may establish a fee, charge, or other mechanism for recovering, upon sale or other disposition of the property that is subject to the mortgage insured under this section or upon the subsequent refinancing of the mortgage, a portion of the equity or appreciation in the property. (d)

GNMA pricing

In order to facilitate favorable pricing for loans insured under this section, the Board of Governors of the Federal Reserve System, the Secretary of the Treasury, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation are authorized to purchase mortgage-backed securities guaranteed by the Government National Mortgage Association that are backed by loans originated under this section or whole loans originated and purchased under this section. The Government National Mortgage Association is authorized to hold, sell, and securitize whole loans originated under this section. (e)

Sunset

The Secretary may not enter into any new commitment to insure any refinanced eligible mortgage, or newly insure any refinanced eligible mortgage pursuant to this section after the expiration of the 3-year period beginning upon the date of the enactment of this section.

(b)

Use of aggregate insurance authority and funds under HOPE for Homeowners Program

Section 257 of the National Housing Act (12 U.S.C. 1715z–24), as added by section 1402(a) of Public Law 110–289), is amended— (1)in subsection (l)(1), by striking this section and inserting section 258; (2)in subsection (m), by striking this section and inserting section 258; (3)in subsection (w)— (A)in paragraphs (1) and (3), by striking HOPE for Homeowners Program each place such term appears and inserting mortgage insurance program under section 258; and (B)in paragraph (4) by striking HOPE for Homeowners Program in accordance with subsections (i) and (k) and inserting mortgage insurance program under section 258; (4)by redesignating subsections (l), (m), and (w) as subsections (a), (b), and (c), respectively; and (5)by striking the section heading and inserting the following:

HOPE Fund and HOPE bonds.

(c)

Reducing TARP funds to offset costs of program

Paragraph (3) of section 115(a) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5225) is amended by inserting “, as such amount is reduced by $1,000,000,000,” after “$700,000,000,000”.