I 111th CONGRESS 1st Session H. R. 600 IN THE HOUSE OF REPRESENTATIVES January 16, 2009 Mr. Al Green of Texas (for himself, Ms. Waters, and Mr. Gary G. Miller of California) introduced the following bill; which was referred to the Committee on Financial Services A BILL To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act.

1.

Short title

This Act may be cited as the FHA Seller-Financed Downpayment Reform Act of 2009.

2.

FHA seller-financed downpayment program

Paragraph (9) of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended— (1)in subparagraph (C), by striking In no case shall the funds required by subparagraph (A) and inserting the following: Except in the case of a mortgage described in subparagraph (D), the funds required by subparagraph (A) shall not; and (2)by adding at the end the following new subparagraphs: (D)

Exceptions to prohibited sources

A mortgage described in this subparagraph is any of the following mortgages: (i)A mortgage under which the mortgagor has a credit score equivalent to a FICO score of 680 or greater. (ii)A mortgage under which— (I)the mortgagor has a credit score equivalent to a FICO score of at least 620 but less than 680; and (II)mortgage insurance premiums charged are established— (aa)at levels necessary, but no higher than needed, to allow such class of loans to be insured without resulting in a need for an appropriation for a credit subsidy, which may exceed the maximum amount permitted under section 203(c)(2)(B); (bb)in the case of the single premium collected at the time of insurance, in an amount not exceeding 3.0 percent of the amount of the original principal obligation of the mortgage; and (cc)in the case of the annual premium for a mortgage under which the mortgagor has a credit score equivalent to a FICO score of at least 640 but less than 680, in an amount not exceeding 1.25 percent of the remaining insured principal balance (excluding the portion of the remaining balance attributable to the premium collected at the time of insurance and without taking into account delinquent payments or prepayments). (iii)For mortgages insured in fiscal year 2010 or thereafter, a mortgage under which the mortgagor has a credit score equivalent to a FICO score of 619 or less, but only if the Secretary certifies that such loans can be insured without resulting in a need for an appropriation for a credit subsidy. For such mortgages, the Secretary may charge premiums at levels authorized under items (bb) and (cc) of clause (ii)(II) and may establish a credit or FICO score limitation or impose such other requirements as are necessary to meet the conditions for certification under this clause. (E)

Requirements for downpayment assistance entities

Any entity participating in a program that provides downpayment assistance for a mortgage described in subparagraph (D) pursuant to the exception under subparagraph (C), which programs shall include programs of governmental agencies and private nonprofit organizations, shall, before the closing for the loan involved in the mortgage in connection with which such assistance is provided— (i)offer to make available, to the mortgagor, counseling regarding the responsibilities and financial management involved in homeownership; (ii)if such offer is accepted by the mortgagor, make such counseling available for the mortgagor; and (iii)in the case of any such entity that is a private nonprofit organization, implement a conflict of interest policy that prohibits directors, officers, employees, and immediate family members from receiving financial benefits from any entity that is providing the program with goods or services other than the homeownership assistance program entity itself or its wholly owned affiliate. (F)

Civil money penalties for improperly influencing appraisals

The Secretary may impose a civil money penalty, in the same manner and to the same extent as for a violation under section 536, for compensating, instructing, inducing, coercing, or intimidating any person who conducts an appraisal of the property to be subject to a mortgage described in subparagraph (D) and under which any part of the funds required by subparagraph (A) are provided to a party described in subparagraph (C), or attempting to compensate, instruct, induce, coerce, or intimidate such a person, for the purpose of causing the appraised value assigned to the property under the appraisal to be based on any other factor other than the independent judgment of such person exercised in accordance with applicable professional standards. .