Short title

This Act may be cited as the

FHA Safety and Soundness and Taxpayer Protection Act of 2010

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.

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.

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..

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:

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.

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:

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).

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.

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.

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.

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..

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.

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.