[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5072 Reported in House (RH)]

                                                 Union Calendar No. 270
111th CONGRESS
  2d Session
                                H. R. 5072

                          [Report No. 111-476]

   To improve the financial safety and soundness of the FHA mortgage 
                           insurance program.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 20, 2010

 Ms. Waters (for herself, Mrs. Capito, Mr. Frank of Massachusetts, and 
    Mr. Al Green of Texas) introduced the following bill; which was 
            referred to the Committee on Financial Services

                              May 6, 2010

             Additional sponsors: Mr. Lynch and Mr. Sherman

                              May 6, 2010

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
 [For text of introduced bill, see copy of bill as introduced on April 
                               20, 2010]


_______________________________________________________________________

                                 A BILL


 
   To improve the financial safety and soundness of the FHA mortgage 
                           insurance program.


 


    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 Reform Act of 2010''.

SEC. 2. MORTGAGE INSURANCE PREMIUMS.

    Subparagraph (B) of section 203(c)(2) of the National Housing Act 
(12 U.S.C. 1709(c)(2)(B)) is amended--
            (1) in the matter preceding clause (i)--
                    (A) by striking ``shall'' and inserting ``may''; 
                and
                    (B) by striking ``0.50 percent'' and inserting 
                ``1.5 percent''; and
            (2) in clause (ii), by striking ``shall be in an amount not 
        exceeding 0.55 percent'' and inserting ``may be in an amount 
        not exceeding 1.55 percent''.

SEC. 3. INDEMNIFICATION BY 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.''.

SEC. 4. 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'' and all 
        that follows through ``by the mortgagee''; and
            (3) by redesignating subsections (d) and (e) as subsections 
        (c) and (d), respectively.

SEC. 5. AUTHORITY TO TERMINATE MORTGAGEE ORIGINATION AND UNDERWRITING 
              APPROVAL.

    Section 533 of the National Housing Act (12 U.S.C. 1735f-11) is 
amended--
            (1) in the first sentence of subsection (b), by inserting 
        ``or areas or on a nationwide basis'' after ``area'' each place 
        such term appears; and
            (2) in subsection (c), by striking ``(c)'' and all that 
        follows through ``The Secretary'' in the first sentence of 
        paragraph (2) and inserting the following:
    ``(c) Termination of Mortgagee Origination and Underwriting 
Approval.--
            ``(1) Termination authority.--If the Secretary determines, 
        under the comparison provided in subsection (b), that a 
        mortgagee has a rate of early defaults and claims that is 
        excessive, the Secretary may terminate the approval of the 
        mortgagee to originate or underwrite single family mortgages 
        for any area, or areas, or on a nationwide basis, 
        notwithstanding section 202(c) of this Act.
            ``(2) Procedure.--The Secretary''.

SEC. 6. DEPUTY ASSISTANT SECRETARY OF FHA FOR RISK MANAGEMENT AND 
              REGULATORY AFFAIRS.

    (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 and 
Regulatory Affairs, 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 and Regulatory 
Affairs 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 Federal Housing 
Administration, filled by appointment by the Federal Housing 
Commissioner, is abolished.

SEC. 7. USE OF OUTSIDE CREDIT RISK ANALYSIS SOURCES.

    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 Outside Credit Risk Analysis Sources.--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. 8. REVIEW OF MORTGAGEE PERFORMANCE.

    Section 533 of the National Housing Act (12 U.S.C. 1735f-11) is 
amended--
            (1) in subsection (a), by inserting after the period at the 
        end the following: ``For purposes of this subsection, the term 
        `early default' means a default that occurs within 24 months 
        after a mortgage is originated or such alternative appropriate 
        period as the Secretary shall establish.'';
            (2) in subsection (b), by inserting after the period at the 
        end of the first sentence the following: ``The Secretary shall 
        also identify which mortgagees have had a significant or rapid 
        increase, as determined by the Secretary, in the number or 
        percentage of early defaults and 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.''; and
            (3) by adding at the end the following new subsections:
    ``(d) Sufficient Resources.--There is authorized to be appropriated 
to the Secretary for each of fiscal years 2010 through 2014 the amount 
necessary to provide 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 and 
to carry out other responsibilities relating to ensuring the safety and 
soundness of the Mutual Mortgage Insurance Fund.
    ``(e) Reporting to Congress.--Not later than 90 days after the date 
of enactment of the FHA Reform 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). Such report shall not include detailed information on 
the performance of individual mortgages.''.

SEC. 9. USE OF NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY.

    (a) Use by Mortgagees, Officers, and Owners; Use for Insured 
Mortgages.--
            (1) Mortgagees, officers, and owners.--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 subsections:
    ``(k) Use of Nationwide Mortgage Licensing System and Registry for 
Mortgagees, Officers, and Owners.--The Secretary may require, as a 
condition for approval of a mortgagee by the Secretary to originate or 
underwrite mortgages on single family that are insured by the 
Secretary, that the mortgagee--
            ``(1) obtain and maintain a unique company identifier 
        assigned by the Nationwide Mortgage Licensing System and 
        Registry, as established by the Conference of State Bank 
        Supervisors and the American Association of Residential 
        Mortgage Regulators; and
            ``(2) obtain and maintain, as relates to any and all 
        officers or owners of the mortgagee who are subject to the 
        requirements of the S.A.F.E. Mortgage Licensing Act of 2008, or 
        are otherwise required to register with the Nationwide Mortgage 
        Licensing System and Registry, the unique identifier assigned 
        by the Nationwide Mortgage Licensing System and Registry, as 
        established by the Conference of State Bank Supervisors and the 
        American Association of Residential Mortgage Regulators.''.
            (2) Insured mortgages.--Section 203 of the National Housing 
        Act (12 U.S.C. 1709) is amended by adding at the end the 
        following new subsection:
    ``(y) Use of Nationwide Mortgage Licensing System and Registry for 
Insured Loans.--The Secretary may require each mortgage insured under 
this section to include the 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)) and any unique company identifier assigned by the 
Nationwide Mortgage Licensing System and Registry, as established by 
the Conference of State Bank Supervisors and the American Association 
of Residential Mortgage Regulators.''.
    (b) Coordination With State Regulatory Agencies.--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:
    ``(l) Information Sharing With State Regulatory Agencies.--
            ``(1) Joint protocol on information sharing.--The Secretary 
        shall, through consultation with State regulatory agencies, 
        pursue protocols for information sharing, including the 
        appropriate treatment of confidential or otherwise restricted 
        information, regarding either actions described in subsection 
        (c)(3) of this section or disciplinary or enforcement actions 
        by a State regulatory agency or agencies against a mortgagee 
        (as such term is defined in subsection (c)(7)).
            ``(2) Coordination.--To the greatest extent possible, the 
        Secretary and appropriate State regulatory agencies shall 
        coordinate disciplinary and enforcement actions involving 
        mortgagees (as such term is defined in subsection (c)(7)).''.

SEC. 10. REPORTING OF MORTGAGEE ACTIONS TAKEN AGAINST OTHER 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:
    ``(m) 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, or report of fraud or material 
misrepresentation in connection with the origination of 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. 11. 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)--
                    (A) in subparagraph (D), by striking ``and'' at the 
                end;
                    (B) in subparagraph (E), by striking the period at 
                the end and inserting ``; and'';
                    (C) by adding at the end the following:
                    ``(F) any other factors that are likely to have an 
                impact on the financial status of the Fund or cause any 
                material changes to the current or projected safety and 
                soundness of the Fund since the most recent report 
                under paragraph (4).
        The Secretary may include in the report under this paragraph 
        any recommendations not made in the most recent report under 
        paragraph (4) that may be needed to ensure that the Fund 
        remains financially sound.''.

SEC. 12. REVIEW OF DOWNPAYMENT REQUIREMENTS.

    Section 205 of the National Housing Act (12 U.S.C. 1711) is amended 
by adding at the end the following new subsection:
    ``(g) Review of Downpayment Requirements.--If, at any time when the 
capital ratio (as such term is defined in subsection (f)) of the Mutual 
Mortgage Insurance Fund does not comply with the requirement under 
subsection (f)(1), the Secretary establishes a cash investment 
requirement, for all mortgages or mortgagors or with respect to any 
group of mortgages or mortgagors, that exceeds the minimum percentage 
or amount required under section 203(b)(9), thereafter upon the capital 
ratio first complying with the requirement under subsection (f)(1) the 
Secretary shall review such cash investment requirement and, if the 
Secretary determines that such percentage or amount may be reduced 
while maintaining such compliance, the Secretary shall subsequently 
reduce such requirement by such percentage or amount as the Secretary 
considers appropriate.''.

SEC. 13. DEFAULT AND ORIGINATION INFORMATION BY LOAN SERVICER AND 
              ORIGINATING DIRECT ENDORSEMENT LENDER.

    (a) Collection of Information.--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.''.
    (b) Applicability.--Information described in subparagraph (C) of 
section 540(b)(2) of the National Housing Act, as added by subsection 
(a) of this section, shall first be made available under such section 
540 for the applicable collection period (as such term is defined in 
such section) relating to the first calendar quarter ending after the 
expiration of the 12-month period that begins on the date of the 
enactment of this Act.

SEC. 14. THIRD PARTY SERVICER OUTREACH.

    (a) Authority.--The Secretary of Housing and Urban Development may, 
to the extent any amounts for fiscal year 2010 or 2011 are made 
available in advance in appropriation Acts for reimbursements under 
this section, provide reimbursement to servicers of covered mortgages 
(as such term is defined in subsection (e)) for costs of obtaining the 
services of independent third parties meeting the requirements under 
subsection (b) of this section to make in-person contact with 
mortgagors under covered mortgages whose payments under such mortgages 
are 60 or more days past due, solely for the purposes of providing 
information to such mortgagors regarding--
            (1) available counseling by housing counseling agencies 
        approved by the Secretary ; and
            (2) available mortgage loan modification, refinance, and 
        assistance programs.
    (b) Qualified Independent Third Parties.--An independent third 
party meets the requirements of this subsection if the third party--
            (1) is an entity, including a housing counseling agency 
        approved by the Secretary, that meets standards, 
        qualifications, and requirements (including regarding 
        foreclosure prevention training, quality monitoring, 
        safeguarding of non-public information) established by the 
        Secretary for purposes of this section for in-person contact 
        about available mortgage loan modification, refinance, and 
        assistance programs; and
            (2) does not charge any fees or require other payments, 
        directly or indirectly, from any mortgagor for making in-person 
        contact and providing information and documents under this 
        section.
    (c) Treatment of Personal, Non-public, and Confidential 
Information.--An independent third party whose services are obtained 
using amounts made available for use under this section and the 
mortgage servicer obtaining such services shall not use, disclose, or 
distribute any personal, non-public, or confidential information about 
a mortgagor obtained during an in-person contact with the mortgagor, 
except for purposes of engaging in the process of modification or 
refinance of the covered mortgage.
    (d) Date of Contact and Disclosures.--Each independent third party 
whose services are obtained by a mortgage servicer using amounts made 
available for use under this section shall--
            (1) initiate in-person contact with a mortgagor not later 
        than 10 days after the date upon which payments under the 
        covered mortgage of the mortgagor become 60 days past due; and
            (2) upon making in-person contact with a mortgagor, provide 
        the mortgagor with a written document that discloses--
                    (A) the name of, and contact information for, the 
                independent third party and the mortgage servicer;
                    (B) that the independent third party has contracted 
                with the mortgage servicer to provide the in-person 
                contact at no charge to the mortgagor;
                    (C) that the independent third party is an agent of 
                the mortgage servicer;
                    (D) that the in-person contact with the mortgagor 
                consists of providing information about available 
                counseling by a housing counseling agency approved by 
                the Secretary and available mortgage loan modification, 
                refinance, and assistance programs;
                    (E) that the independent third party and the 
                mortgage servicer are prohibited from the use, 
                disclosure, or distribution of personal, non-public, 
                and confidential information about the mortgagor, 
                obtained during the in-person contact, except for 
                purposes of engaging in the process of modification or 
                refinance of the covered mortgage;
                    (F) any other information that the Secretary 
                determines should be disclosed.
    (e) Definition of Covered Mortgage.--For purposes of this section, 
the term ``covered mortgage'' means a mortgage on a 1- to 4-family 
residence insured under the provisions of subsection (b) or (k) of 
section 203, section 234(c), or 251 of the National Housing Act (12 
U.S.C. 1709, 1715y, 1715z-16).

SEC. 15. 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) analyzes the methodology of the capital ratio 
                for the Fund under section 205(f) of such Act and 
                examines other alternative methodologies with respect 
                to which methodology is most appropriate to meet the 
                operational goals of the Fund under section 202(a)(7);
                    (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 impact on the affordability and 
                        availability of mortgage credit for borrowers 
                        for loans authorized under such higher loan 
                        limits;
                            (iii) the private market for residential 
                        mortgage loans that are not insured by the 
                        Secretary of Housing and Urban Development; and
                            (iv) the Federal National Mortgage 
                        Association and the Federal Home Loan Mortgage 
                        Corporation; and
                    (D) analyzes the impact on affordability to FHA 
                borrowers, and the impact to the Fund, of seller 
                concessions or contributions to a borrower purchasing a 
                residence using a mortgage that is insured by the 
                Secretary.
            (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 
                securities for which the payment for principal and 
                interest 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 for which the 
                payment of principal and interest is guaranteed by the 
                Association and to determine whether the 
                characteristics of various mortgage products constitute 
                appropriate collateral for the federally guaranteed 
                securities for which payment of principal and interest 
                is guaranteed by such Association;
                    (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 requirements for 
                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 of the Federal 
                Government and the taxpayers.
                                                 Union Calendar No. 270

111th CONGRESS

  2d Session

                               H. R. 5072

                          [Report No. 111-476]

_______________________________________________________________________

                                 A BILL

   To improve the financial safety and soundness of the FHA mortgage 
                           insurance program.

_______________________________________________________________________

                              May 6, 2010

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed