[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1977 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 1977

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 24, 2011

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

_______________________________________________________________________

                                 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 AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``FHA Reform Act of 
2011''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Indemnification by mortgagees.
Sec. 3. Delegation of insuring authority.
Sec. 4. Authority to terminate mortgagee origination and underwriting 
                            approval.
Sec. 5. Deputy Assistant Secretary of FHA for Risk Management and 
                            Regulatory Affairs.
Sec. 6. Review of mortgagee performance.
Sec. 7. Coordination with State regulatory agencies.
Sec. 8. Reporting of mortgagee actions taken against other mortgagees.
Sec. 9. Review of downpayment requirements.
Sec. 10. Authorization to participate in the origination of FHA-insured 
                            loans.
Sec. 11. Default and origination information by loan servicer and 
                            originating direct endorsement lender.
Sec. 12. Third party servicer outreach.
Sec. 13. Maximum mortgage amount limits for multifamily housing.
Sec. 14. Mortgage insurance premium refunds.

SEC. 2. 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. 3. 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. 4. 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. 5. 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. 6. 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.''
            (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 2012 through 2016 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 2011 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. 7. 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:
    ``(j) 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. 8. 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:
    ``(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, 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. 9. 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)(2), 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)(2) 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 may subsequently 
reduce such requirement by such percentage or amount as the Secretary 
considers appropriate.''.

SEC. 10. AUTHORIZATION TO PARTICIPATE IN THE ORIGINATION OF FHA-INSURED 
              LOANS.

    (a) Single Family Mortgages.--Section 203(b) of the National 
Housing Act (12 U.S.C. 1709(b)) is amended by striking paragraph (1) 
and inserting the following new paragraph:
            ``(1) Have been made to a mortgagee approved by the 
        Secretary or to a person or entity authorized by the Secretary 
        under section 202(d)(1) to participate in the origination of 
        the mortgage, and be held by a mortgagee approved by the 
        Secretary as responsible and able to service the mortgage 
        properly.''.
    (b) Home Equity Conversion Mortgages.--Section 255(d) of the 
National Housing Act (12 U.S.C. 1715z-20(d)) is amended by striking 
paragraph (1) and inserting the following new paragraph:
            ``(1) have been originated by a mortgagee approved by, or 
        by a person or entity authorized under section 202(d)(1) to 
        participate in the origination by, the Secretary;''.

SEC. 11. 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. 12. THIRD PARTY SERVICER OUTREACH.

    (a) Authority.--The Secretary of Housing and Urban Development may, 
to the extent any amounts for fiscal year 2012 or 2013 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 (f)) 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;
            (2) available mortgage loan modification, refinance, and 
        assistance programs; and
            (3) available counseling regarding financial management and 
        credit risk.
    (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) Priority.--In providing reimbursements under this section, the 
Secretary of Housing and Urban Development shall provide priority to 
independent third parties serving mortgagors under covered mortgages in 
areas experiencing a mortgage foreclosure rate and unemployment rate 
higher than the national average for the most recent 12-month period 
for which satisfactory data are available.
    (f) 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. 13. MAXIMUM MORTGAGE AMOUNT LIMITS FOR MULTIFAMILY HOUSING.

    (a) Elevator-Type Structures.--
            (1) Amendments.--The National Housing Act is amended in 
        each of the provisions specified in paragraph (2)--
                    (A) by inserting ``with sound standards of 
                construction and design'' after ``elevator-type 
                structures'' the first place such term appears; and
                    (B) by striking ``to not to exceed'' and all that 
                follows through ``sound standards of construction and 
                design'' each place such terms appear and inserting 
                ``by not more than 50 percent of the amounts specified 
                for each unit size''.
            (2) Provisions amended.--The provisions of the National 
        Housing Act specified in this paragraph are as follows:
                    (A) Subparagraph (A) of section 207(c)(3) (12 
                U.S.C. 1713(c)(3)(A)).
                    (B) Subparagraph (A) of section 213(b)(2) (12 
                U.S.C. 1715e(b)(2)(A)).
                    (C) Subclause (I) of section 220(d)(3)(B)(iii) (12 
                U.S.C. 1715k(d)(3)(B)(iii)(I)).
                    (D) In section 221(d) (12 U.S.C. 1715l(d))--
                            (i) subclause (I) of paragraph (3)(ii); and
                            (ii) subclause (I) of paragraph (4)(ii).
                    (E) Subparagraph (A) of section 231(c)(2) (12 
                U.S.C. 1715v(c)(2)(A)).
                    (F) Subparagraph (A) of section 234(e)(3) (12 
                U.S.C. 1715y(e)(3)(A)).
    (b) Extremely High-Cost Areas.--Section 214 of the National Housing 
Act (12 U.S.C. 1715d) is amended--
            (1) in the first sentence--
                    (A) by inserting ``, or with respect to projects 
                consisting of more than four dwelling units located in 
                an extremely high-cost area as determined by the 
                Secretary'' after ``or the Virgin Islands'' the first 
                place such term appears;
                    (B) by inserting ``, or to construct projects 
                consisting of more than four dwelling units on property 
                located in an extremely high-cost area as determined by 
                the Secretary'' after ``or the Virgin Islands'' the 
                second place such term appears; and
                    (C) by inserting ``, or with respect to projects 
                consisting of more than four dwelling units located in 
                an extremely high-cost area as determined by the 
                Secretary'' after ``or the Virgin Islands'' the third 
                place such term appears;
            (2) in the second sentence--
                    (A) by inserting ``, or with respect to a project 
                consisting of more than four dwelling units located in 
                an extremely high-cost area as determined by the 
                Secretary,'' after ``or the Virgin Islands'' the first 
                place such term appears; and
                    (B) by inserting ``, or in the case of a project 
                consisting of more than four dwelling units in an 
                extremely high-cost area as determined by the 
                Secretary, in such extremely high-cost area,'' after 
                ``or the Virgin Islands'' the second place such term 
                appears; and
            (3) in the section heading, by striking ``and the virgin 
        islands'' and inserting ``the virgin islands, and extremely 
        high-cost areas''.
    (c) Effective Date.--The amendments made by this section shall 
apply to mortgages insured under title II of the National Housing Act 
after September 30, 2011.

SEC. 14. MORTGAGE INSURANCE PREMIUM REFUNDS.

    (a) Authority.--The Secretary of Housing and Urban Development 
shall, to the extent that amounts are made available pursuant to 
subsection (c), provide refunds of unearned premium charges paid at the 
time of insurance for mortgage insurance under title II of the National 
Housing Act (12 U.S.C. 1707 et seq.) to or on behalf of mortgagors 
under mortgages described in subsection (b).
    (b) Eligible Mortgages.--A mortgage described in this section is a 
mortgage on a one- to four-family dwelling that--
            (1) was insured under title II of the National Housing Act 
        (12 U.S.C. 1707 et seq.);
            (2) is otherwise eligible, under the last sentence of 
        subparagraph (A) of section 203(c)(2) of such Act (12 U.S.C. 
        1709(c)(2)(A)), for a refund of all unearned premium charges 
        paid on the mortgage pursuant to such subparagraph, except that 
        the mortgage--
                    (A) was closed before December 8, 2004; and
                    (B) was endorsed on or after such date.
    (c) Authorization of Appropriations.--There is authorized to be 
appropriated for each fiscal year such sums as may be necessary to 
provide refunds of unearned mortgage insurance premiums pursuant to 
this section.
                                 <all>