[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4811 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 4811

To protect the American taxpayers by improving the safety and soundness 
of the FHA mortgage insurance programs of the Department of Housing and 
                           Urban Development.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 10, 2010

Mrs. Capito (for herself, Mr. Bachus, Mrs. Biggert, Mr. Garrett of New 
  Jersey, Mr. Neugebauer, Mr. Lance, Mr. Hensarling, and Mr. Gary G. 
Miller of California) introduced the following bill; which was referred 
                 to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To protect the American taxpayers by improving the safety and soundness 
of the FHA mortgage insurance programs of the Department of Housing and 
                           Urban Development.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``FHA Safety and Soundness and 
Taxpayer Protection Act of 2010''.

SEC. 2. DEPUTY ASSISTANT SECRETARY OF FHA FOR RISK MANAGEMENT.

    (a) Establishment of Position.--Subsection (b) of section 4 of the 
Department of Housing and Urban Development Act (42 U.S.C. 3533(b)) is 
amended--
            (1) by inserting ``(1)'' after ``(b)''; and
            (2) by adding at the end the following new paragraph:
    ``(2) There shall be in the Department, within the Federal Housing 
Administration, a Deputy Assistant Secretary for Risk Management, who 
shall be appointed by the Secretary and shall be responsible to the 
Federal Housing Commissioner for all matters relating to managing and 
mitigating risk to the mortgage insurance funds of the Department and 
ensuring the performance of mortgages insured by the Department.''.
    (b) Termination.--Upon the appointment and confirmation of the 
initial Deputy Assistant Secretary for Risk Management pursuant to 
section 4(b)(2) of the Department of Housing and Urban Development Act, 
as amended by subsection (a) of this section, the position of chief 
risk officer within the Department of Housing and Urban Development, 
filled by appointment by the Federal Housing Commissioner, is 
abolished.

SEC. 3. USE OF OUTSIDE CREDIT RISK ANALYSIS SOURCES.

    Section 202 of the National Housing Act (12 U.S.C. 1708) is amended 
by adding at the end the following new subsection:
    ``(i) Use of Outside Credit Risk Analysis Sources.--To improve the 
credit risk analysis functions of the Department of Housing and Urban 
Development in connection with insurance provided by the Department for 
single-family housing mortgages, the Secretary may obtain the services 
of, and enter into contracts with, private and other entities outside 
of the Department in--
            ``(1) analyzing credit risk models and practices employed 
        by the Department in connection with such mortgages;
            ``(2) evaluating underwriting standards applicable to such 
        mortgages insured by the Department; and
            ``(3) analyzing the performance of lenders in complying 
        with, and the Department in enforcing, such underwriting 
        standards.''.

SEC. 4. AUTHORITY TO INCREASE ANNUAL INSURANCE PREMIUMS.

    (a) Authority.--Paragraph (2) of section 203(c) of the National 
Housing Act (12 U.S.C. 1709(c)(2)) is amended--
            (1) in subparagraph (B), in the matter preceding clause 
        (i), by inserting ``, except as provided in subparagraph (C),'' 
        before ``0.50 percent''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) The Secretary may, if the Secretary 
                determines that action pursuant to this subparagraph is 
                necessary to protect the safety and soundness of the 
                Mutual Mortgage Insurance Fund, establish and collect 
                the annual premium payments in an amount not exceeding 
                1.75 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) for the first 30 
                years of the mortgage term.''.
    (b) Effect on Up-Front Premiums.--Subparagraph (A) of section 
203(c)(2) of the National Housing Act (12 U.S.C. 1709(c)(2)(A)) is 
amended by adding at the end the following: ``In establishing the 
amount of the single premium payment pursuant to this subparagraph, the 
Secretary shall consider any increase of the annual premium payment 
pursuant to subparagraph (C) and shall ensure that such single and 
annual premium payments are sufficient to ensure the safety and 
soundness of the Mutual Mortgage Insurance Fund.''.

SEC. 5. RISK-BASED PREMIUM PILOT PROGRAM.

     Title II of the National Housing Act is amended--
            (1) in section 203(c)(2) (12 U.S.C. 1709(c)(2)), in the 
        matter preceding subparagraph (A), by striking 
        ``Notwithstanding'' and inserting ``Except as provided in 
        section 259 and notwithstanding''; and
            (2) by adding after section 258 (12 U.S.C. 1715z-24) the 
        following new section:

``SEC. 259. FLEXIBLE RISK-BASED PREMIUM PILOT PROGRAM.

    ``(a) Establishment.--The Secretary shall carry out a pilot program 
to provide a flexible risk-based premium structure for mortgage 
insurance premiums only for mortgages that are--
            ``(1) insured under this title;
            ``(2) secured by 1- to 4-family residences; and
            ``(3) executed by first-time homebuyers.
    ``(b) Flexible Risk-Based Premiums.--
            ``(1) Premium structure.--Under the pilot program under 
        this section, the Secretary shall 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 section 203(c). 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 paragraph 
        but only to the extent that such change is not applied to any 
        mortgage already executed.
            ``(2) Notice to establish and alter premium structure.--A 
        premium structure shall be established or changed under 
        paragraph (1) only by providing notice to mortgagees and to the 
        Congress, at least 30 days before the premium structure is 
        established or changed.
            ``(3) Considerations.--When establishing a premium 
        structure under paragraph (1) or when changing such a premium 
        structure, the Secretary shall consider the following:
                    ``(A) 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).
                    ``(B) Underwriting variables.
                    ``(C) The extent to which new pricing under the 
                proposed premium structure has potential for acceptance 
                in the private market.
                    ``(D) The administrative capability of the 
                Secretary to administer the proposed premium structure.
                    ``(E) 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.
    ``(c) Scope.--The Secretary may carry out the pilot program under 
this section on a limited basis or scope, except that the program shall 
be carried out nationwide and the Secretary shall ensure wide 
geographic representation of residences subject to mortgages insured 
pursuant to the pilot program.
    ``(d) Limitations.--
            ``(1) Annual.--In any fiscal year, the aggregate number of 
        mortgages insured pursuant to the pilot program 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.
            ``(2) Term of program.--The aggregate number or mortgages 
        insured pursuant to the pilot program under this section may 
        not exceed 150,000.
    ``(e) Sunset.--After the expiration of the 3-year period beginning 
on the date of the enactment of the FHA Safety and Soundness and 
Taxpayer Protection Act of 2010, the Secretary may not enter into any 
new commitment to insure any mortgage, or newly insure any mortgage, 
pursuant to the pilot program under this section.''.

SEC. 6. ONGOING LENDER REVIEW OF DELINQUENCIES AMONG RECENT 
              ORIGINATIONS AND AUTHORITY TO SUSPEND LENDERS.

    Section 533 of the National Housing Act (12 U.S.C. 1735f-11) is 
amended--
            (1) by striking the section designation and heading and 
        inserting the following:

``SEC. 533. REVIEWS OF MORTGAGEE PERFORMANCE AND AUTHORITY TO 
              TEMPORARILY SUSPEND AND TERMINATE.'';

            (2) in subsection (a), by striking ``at least once a year'' 
        and all that follows through the end of the subsection and 
        inserting the following: ``the Secretary shall--
            ``(1) at least once a year, for each mortgagee that 
        originates or underwrites mortgages on single family housing 
        that are insured by the Secretary, review the rate of early 
        defaults and claims for such mortgages for such mortgagee; and
            ``(2) conduct an ongoing review of mortgages on single 
        family housing originated during the preceding 24 months and 
        insured by the Secretary under which the mortgagor has become 
        60 or more days delinquent with respect to payment under the 
        mortgage during the first 24 months of the term of the mortgage 
        to determine--
                    ``(A) which mortgages should not have been 
                originated or insured and the characteristics of such 
                mortgages;
                    ``(B) which mortgagees have relatively high 
                incidences, as determined by the Secretary, of such 
                delinquent mortgages or insurance claims on mortgages, 
                with respect to all mortgages originated by the 
                mortgagee or mortgages on housing located in any 
                particular geographic area or areas; and
                    ``(C) which mortgagees have had a significant or 
                rapid increase, as determined by the Secretary, in the 
                number or percentage of such delinquent mortgages or 
                insurance claims on such mortgages, with respect to all 
                mortgages originated by the mortgagee or mortgages on 
                housing located in any particular geographic area or 
                areas.'';
            (3) in the first sentence of subsection (b), by inserting 
        ``or areas or on a nationwide basis'' after ``area'' each place 
        such term appears;
            (4) in subsection (c)(1), by inserting ``for any area or 
        areas, or on a nationwide basis'' after ``single family 
        mortgages''; and
            (5) by adding at the end the following new subsections:
    ``(d) Required Mortgagee Investigation for High Early Default 
Rates.--If the Secretary determines pursuant to review under subsection 
(a)(2) or otherwise that, with respect to any mortgagee of mortgages on 
single family housing that are insured by the Secretary, that--
            ``(1) there is a relatively high incidence of mortgages 
        originated by such mortgagee under which the mortgagor has 
        become 60 or more days delinquent with respect to payment under 
        the mortgage during the first 24 months of the term of the 
        mortgage, with respect to all mortgages originated by such 
        mortgagee or mortgages on housing located in any particular 
        geographic area or areas, or
            ``(2) there has been a significant or rapid increase in the 
        number or percentage of such delinquent mortgages originated by 
        any mortgagee, with respect to all mortgages originated by the 
        mortgagee or mortgages on housing located in any particular 
        geographic area or areas,
the Secretary shall undertake an investigation of the mortgagee to 
determine if action against such mortgagee under subsection (e) of this 
section is warranted or the matter should be referred to the Mortgagee 
Review Board under section 202(c).
    ``(e) Authority To Temporarily Suspend Mortgagees in Exigent 
Circumstances.--
            ``(1) Authority.--Notwithstanding section 202(c), the 
        Secretary may temporarily suspend the approval of a mortgagee 
        to originate or underwrite mortgages on single family housing 
        that are insured by the Secretary if the Secretary determines, 
        in accordance with regulations issued by the Secretary, that 
        any of the grounds under paragraph (2) of this subsection 
        exist. If the grounds under paragraph (2) for a suspension of a 
        mortgagee are limited to a particular geographic area or areas, 
        the suspension may apply to such particular geographic area or 
        areas or to all business of the mortgagee with the Federal 
        Housing Administration regardless of location of the mortgaged 
        properties.
            ``(2) Grounds.--The grounds under this paragraph exist for 
        a suspension of a mortgagee pursuant to paragraph (1) only if--
                    ``(A) there exists adequate evidence of--
                            ``(i) a relatively high incidence of 
                        mortgages originated by such mortgagee under 
                        which the mortgagor has become 60 or more days 
                        delinquent with respect to payment under the 
                        mortgage during the first 24 months of the term 
                        of the mortgage, with respect to all mortgages 
                        originated by such mortgagee or mortgages on 
                        housing located in any particular geographic 
                        area or areas; or
                            ``(ii) a significant or rapid increase in 
                        the number or percentage such delinquent 
                        mortgages originated by such mortgagee, with 
                        respect to all mortgages originated by such 
                        mortgagee or mortgages on housing located in 
                        any particular geographic area or areas; and
                    ``(B) continuation of the mortgagee's approval, 
                pending or at the completion of any audit, 
                investigation, or other review, or such administrative 
                or other legal proceedings as may ensue, would not be 
                in--
                            ``(i) the public interest; or
                            ``(ii) the best interests of the 
                        Department, including the best interests of the 
                        safety and soundness of the insurance funds 
                        under this title.
            ``(3) Immediate effectiveness.--A suspension of a mortgagee 
        pursuant to this subsection shall take effect upon the 
        Secretary providing written notice of the suspension to the 
        mortgagee and to the Mortgagee Review Board. Pursuant to such 
        notice, the Mortgagee Review Board shall, as promptly as 
        possible, review the suspension and the grounds for the 
        suspension and make a determination whether to terminate the 
        suspension, take other action pursuant to section 202(c), or 
        both. Such a suspension shall continue in effect until 
        withdrawn by the Secretary or terminated by the Mortgagee 
        Review Board pursuant to action under section 202(c).
            ``(4) Conference.--If requested in writing by the suspended 
        mortgagee within 30 days of the date of that notice is provided 
        to the mortgagee, the mortgagee shall be entitled to an 
        informal conference with the official authorized to issue 
        termination notices on behalf of the Secretary (or a designee 
        of such official). At the informal conference, the mortgagee 
        may present for consideration specific factors that it believes 
        were beyond its control and that caused the grounds for the 
        suspension.
    ``(f) Sufficient Resources.--There is authorized to be appropriated 
to the Secretary for each of fiscal years 2010 through 2014 the amount 
necessary to provide 90 additional full-time equivalent positions for 
the Department, or for entering into such contracts as are necessary, 
to conduct reviews in accordance with the requirements of this section.
    ``(g) Lender Monitoring.--In conducting monitoring and analysis of 
the performance of lenders for mortgages on single family housing 
insured under this Act, the Secretary shall utilize a 24-month period 
for such monitoring and analysis, to promote earlier identification of 
problem mortgagees and allow earlier intervention and sanctions.
    ``(h) Reporting to Congress.--Not later than 90 days after the date 
of enactment of the FHA Safety and Soundness and Taxpayer Protection 
Act of 2010 and not less often than annually thereafter, the Secretary 
shall make available to the Committee on Financial Services of the 
House of Representatives and the Committee on Banking, Housing, and 
Urban Affairs of the Senate any information and conclusions pursuant to 
the reviews required under subsection (a).''.

SEC. 7. INDEMNIFICATION BY MORTGAGEES.

    (a) Indemnification by Direct Endorsement Mortgagees.--Section 202 
of the National Housing Act (12 U.S.C. 1708) is amended by adding at 
the end the following new subsection:
    ``(i) Indemnification by Mortgagees.--
            ``(1) In general.--If the Secretary determines that a 
        mortgage executed by a mortgagee approved by the Secretary 
        under the direct endorsement program or insured by a mortgagee 
        pursuant to the delegation of authority under section 256 was 
        not originated or underwritten in accordance with the 
        requirements established by the Secretary, and the Secretary 
        pays an insurance claim with respect to the mortgage within a 
        reasonable period specified by the Secretary, the Secretary may 
        require the mortgagee approved by the Secretary under the 
        direct endorsement program or the mortgagee delegated authority 
        under section 256 to indemnify the Secretary for the loss.
            ``(2) Fraud or misrepresentation.--If fraud or 
        misrepresentation was involved in connection with the 
        origination or underwriting, the Secretary may require the 
        mortgagee approved by the Secretary under the direct 
        endorsement program or the mortgagee delegated authority under 
        section 256 to indemnify the Secretary for the loss regardless 
        of when an insurance claim is paid.
            ``(3) Requirements and procedures.--The Secretary shall 
        issue regulations establishing appropriate requirements and 
        procedures governing the indemnification of the Secretary by 
        the mortgagee.''.
    (b) Delegation of Insuring Authority.--Section 256 of the National 
Housing Act (12 U.S.C. 1715z-21) is amended--
            (1) by striking subsection (c);
            (2) in subsection (e), by striking ``, including 
        requirements and procedures governing the indemnification of 
        the Secretary by the mortgagee''; and
            (3) by redesignating subsections (d) and (e) as subsections 
        (c) and (d), respectively.

SEC. 8. USE OF SAFE MORTGAGE LICENSING ACT IDENTIFIERS.

    (a) Requirement.--Section 202 of the National Housing Act (12 
U.S.C. 1708), as amended by the preceding provisions of this Act, is 
further amended by adding at the end the following new subsection:
    ``(j) Use of SAFE Mortgage Licensing Act Identifiers.--The 
Secretary shall require each mortgagee, as a condition for approval by 
the Secretary to originate or underwrite mortgages on single family or 
multifamily housing that are insured by the Secretary, that the 
mortgagee obtain, maintain, and use in all dealings and communications 
with the Department, or otherwise relating to any mortgages insured by 
the Secretary, a unique identifier (as such term is defined in section 
1503 of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 
5102)).''.
    (b) Rulemaking and Implementation.--The Secretary of Housing and 
Urban Development shall conduct a rulemaking to carry out subsection 
(i) of section 202 of the National Housing Act, as added by the 
amendment made by subsection (a) of this section. The Secretary shall 
implement such subsection (i) not later than the expiration of the 120-
day period beginning upon the date of the enactment of this Act by 
notice, mortgagee letter, or interim final regulations, which shall 
take effect upon issuance.

SEC. 9. REPORTING OF AGGREGATOR ACTIONS TAKEN AGAINST MORTGAGEES.

    Section 202 of the National Housing Act (12 U.S.C. 1708(e)), as 
amended by the preceding provisions of this Act, is further amended by 
adding at the end the following new subsection:
    ``(k) Notification of Mortgagee Actions.--The Secretary shall 
require each mortgagee, as a condition for approval by the Secretary to 
originate or underwrite mortgages on single family or multifamily 
housing that are insured by the Secretary, if such mortgagee engages in 
the purchase of mortgages insured by the Secretary and originated by 
other mortgagees or in the purchase of the servicing rights to such 
mortgages, and such mortgagee at any time takes action to terminate or 
discontinue such purchases from another mortgagee based on any 
determination, evidence, report, or concern of fraud or 
misrepresentation in connection with the origination of such mortgages, 
or based on the level of defaults on such mortgages, the mortgagee 
shall, not later than 15 days after taking such action, shall notify 
the Secretary of the action taken and the reasons for such action.''.

SEC. 10. ANNUAL ACTUARIAL STUDY AND QUARTERLY REPORTS ON MUTUAL 
              MORTGAGE INSURANCE FUND.

    Subsection (a) of section 202 of the National Housing Act (12 
U.S.C. 1708(a)) is amended--
            (1) in the second sentence of paragraph (4), by inserting 
        before the period at the end the following: ``, any changes to 
        the current or projected safety and soundness of the Fund since 
        the most recent report under this paragraph or paragraph (5), 
        and any risks to the Fund''; and
            (2) in paragraph (5), in the matter that follows 
        subparagraph (E), by inserting at the beginning of such matter 
        and before ``The first'' the following: ``Each such quarterly 
        report shall include an assessment of the financial status of 
        the Fund, any changes to the current or projected safety and 
        soundness of the Fund since the most recent report under 
        paragraph (4) and this paragraph, and any risks to the Fund, 
        and shall set forth any recommendations (in addition to 
        recommendations under subparagraph (E)) for actions to ensure 
        that the Fund remains financially sound.''.

SEC. 11. DEFAULT AND ORIGINATION INFORMATION BY LOAN SERVICER AND 
              ORIGINATING DIRECT ENDORSEMENT LENDER.

    Paragraph (2) of section 540(b) of the National Housing Act (12 
U.S.C. 1712 U.S.C. 1735f-18(b)(2)) is amended by adding at the end the 
following new subparagraph:
                    ``(C) For each entity that services insured 
                mortgages, data on the performance of mortgages 
                originated during each calendar quarter occurring 
                during the applicable collection period, disaggregated 
                by the direct endorsement mortgagee from whom such 
                entity acquired such servicing.''.

SEC. 12. GAO REPORTS ON FHA AND GINNIE MAE.

    Not later than the expiration of the 12-month period beginning on 
the date of the enactment of this Act, the Comptroller General of the 
United States shall submit to the Congress the following reports:
            (1) FHA report.--A report on the single family mortgage 
        insurance programs of the Secretary of Housing and Urban 
        Development and the Mutual Mortgage Insurance Fund established 
        under section 202(a) of the National Housing Act (12 U.S.C. 
        1708(a)) that--
                    (A) analyzes such Fund, the economic net worth, 
                capital ratio, and unamortized insurance-in-force (as 
                such terms are defined in section 205(f)(4) of such Act 
                (12 U.S.C. 1711(f)(4))) of such Fund, the risks to the 
                Fund, how the capital ratio of the Fund affects the 
                mortgage insurance programs under the Fund and the 
                broader housing market, the extent to which the housing 
                markets are more dependent on mortgage insurance 
                provided through the Fund since the financial crisis 
                began in 2008, and the exposure of the taxpayers for 
                obligations of the Fund;
                    (B) recommends a capital ratio for the Fund 
                (notwithstanding section 205(f)(2) of such Act) that is 
                appropriate and sufficient to ensure that the 
                operational goals of the Fund under section 202(a)(8) 
                (as so redesignated by the preceding provisions of this 
                Act) are met;
                    (C) analyzes the effects of the increases in the 
                limits on the maximum principal obligation of mortgages 
                made by the FHA Modernization Act of 2008 (title I of 
                division B of Public Law 110-289), section 202 of the 
                Economic Stimulus Act of 2008 (Public Law 110-185; 122 
                Stat. 620), section 1202 of division A of the American 
                Recovery and Reinvestment Act of 2009 (Public Law 111-
                5; 123 Stat. 225), and section 166 of the Continuing 
                Appropriations Resolution, 2010 (as added by section 
                104 of division B of Public Law 111-88; 123 Stat. 
                29723) on--
                            (i) the risks to and safety and soundness 
                        of the Fund;
                            (ii) the private market for residential 
                        mortgage loans that are not insured by the 
                        Secretary of Housing and Urban Development; and
                            (iii) the Federal National Mortgage 
                        Association and the Federal Home Loan Mortgage 
                        Corporation; and
                    (D) analyzes the impacts to the Fund caused by 
                seller concessions or contributions to a borrower 
                purchasing a residence using a mortgage that is insured 
                by the Secretary and recommends an appropriate 
                limitation on such concessions or contributions.
            (2) Ginnie mae.--A report on the Government National 
        Mortgage Association that identifies--
                    (A) the volume and share of the residential 
                mortgage market that consists of mortgages that back, 
                or on which are based, securities the payment of 
                principal and interest on which is guaranteed by such 
                Association and how the Association has been affected 
                by the economic recession, credit crisis, and downturn 
                in the housing markets occurring during 2008, 2009, and 
                2010;
                    (B) the capacity of the Association to manage the 
                volume of business it conducts and securities it 
                guarantees, particularly with regard to the recent 
                dramatic increase in such volume, including the ability 
                of the Association to conduct appropriate oversight of 
                contractors and issuers of securities payment of 
                principal and interest on which is guaranteed by the 
                Association and conduct proper due diligence and 
                oversight in screening the mortgages that back such 
                securities or on which such securities are based;
                    (C) the impacts, if any, resulting from such 
                increased volume of business conducted by the 
                Association and securities it guarantees and the 
                challenges such increased volume poses to the internal 
                controls of the Association; and
                    (D) the existing capital net worth of the various 
                aggregators of mortgages that issue securities that are 
                based on or backed by such mortgages and payment of 
                principal and interest on which is guaranteed by such 
                Association and recommends an appropriate required 
                level of net worth for such aggregators and issuers to 
                protect the financial interests Federal Government and 
                the taxpayers.
    
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