Shared equity pilot program

(a)

Purpose

The purpose of this section is to establish a shared equity homeownership pilot program for FHA mortgage insurance to complement FHA mortgage lending activity to analyze the effectiveness of shared equity finance methods that stimulate the flow of private equity capital into the housing sector, while mitigating risk to borrowers and to the Mutual Mortgage Insurance Fund. (b)

Establishment

The Secretary of Housing and Urban Development (in this section referred to as the Secretary) shall carry out a pilot program under this section (in this section referred to as the pilot program) to analyze the effectiveness of providing mortgage insurance under the FHA mortgage insurance program for mortgages for the acquisition or refinancing of 1- to 4-family residences that are financed in part through a shared equity arrangement under which independent, private sector investors invest, together with the mortgagors, equity funds for such residences and thereby share in the ownership of such residences. (c)

Application and selection

(1)

Eligibility and application

The Secretary shall establish eligibility requirements for financial institutions, nonprofit organizations, housing associations, investment pools, and other appropriate individuals and entities to participate in the pilot program and shall provide for eligible entities to apply to the Secretary for such participation. Such applications shall include such information as the Secretary considers appropriate regarding the matters referred to in subparagraphs (A) through (D) of paragraph (2). (2)

Selection

Not later than 270 days after the date of the enactment of this Act, the Secretary shall select not more than 8 individuals and entities to participate in the pilot program, from among eligible individuals and entities applying for such participation, using criteria established by the Secretary, which shall include criteria based on— (A)the methodology to be used for deploying equity sharing capital, which shall ensure that equity sharing capital shall be deployed from private sector sources; (B)a definition of markets to be targeted; (C)legal agreements and disclosures necessary to protect mortgagors and all other involved parties and to provide for periodic program monitoring; and (D)the source and level of revenue expected to be derived from participating in the pilot program. (d)

Principal residence

A residence acquired with a mortgage that is insured by the Secretary under the pilot program shall be occupied by the mortgagor as the primary residence of the mortgagor. (e)

Downpayment

The mortgagor under a mortgage insured by the Secretary under the pilot program shall comply with the requirement under section 203(b)(9) of the National Housing Act (12 U.S.C. 1709(b)(9)) that the mortgagor invest the amount required by the Secretary, which shall be not less than 3.5 percent of the appraised value of the residence. (f)

Minimum homebuyer equity

The mortgagor under the mortgage insured by the Secretary under the pilot program shall retain a percentage of ownership in the residence under the shared equity arrangement that is not less than 60 percent. (g)

Insurance premiums

Notwithstanding section 203(c)(2)(B) of the National Housing Act (12 U.S.C. 1709(c)(2)(B)), the Secretary shall establish and collect annual premium payments on mortgages insured by the Secretary under the pilot program in an amount based on the annual premium charged under such section 203(c)(2)(B), as adjusted by the Secretary to account for any reduced risk in insuring such mortgages attributable to the shared equity arrangement. (h)

Rights of mortgagor

The Secretary shall establish requirements to ensure the mortgagor maintains occupancy rights in the property subject to the mortgage insured under the pilot program. A mortgagor and shared equity investor shall receive transactional documentation that addresses the rights, privileges and responsibilities of both the mortgagor and shared equity investor. (i)

Scope

(1)

Geographic diversity

The Secretary shall carry out the pilot program in multiple regional mortgage markets in the United States. (2)

Equity sharing capital investments

The Secretary shall, for each eligible entity participating in the pilot program, limit the amount of equity sharing capital invested under the pilot program to $25,000,000. (3)

Timing

The Secretary may not insure any mortgage in connection with the pilot program after the expiration of the two-year period beginning on the date of the implementation of the pilot program under this Act. (j)

Waiver

The Secretary may waive, or specify alternative requirements for, any provision of any statute, regulation, or guideline that the Secretary administers (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment) upon a determination by the Secretary that such waiver is appropriate to carry out the pilot program under this section. (k)

Monitoring and reporting

(1)

Monitoring

The Secretary shall provide for such monitoring of the pilot program, investors participating in the pilot program, and shared equity arrangements entered into under the pilot program as may be necessary to determine the effectiveness of the pilot program and of the structure of, and requirements under, the pilot program. (2)

Reports to Congress

Not later than the expiration of the 18-month period beginning on the date of the enactment of this Act, the Comptroller General of the United States shall submit a report to the Congress analyzing effectiveness of the pilot program and making recommendations regarding expansion of the pilot program and improvements for the pilot program.