[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4172 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 4172

 To authorize the Secretary of Housing and Urban Development to insure 
 mortgages that provide former homeowners who are a reasonable credit 
                 risk a second chance at homeownership.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 8, 2012

   Mr. Heck introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To authorize the Secretary of Housing and Urban Development to insure 
 mortgages that provide former homeowners who are a reasonable credit 
                 risk a second chance at homeownership.

    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 ``Second Chance at Homeownership Act 
of 2012''.

SEC. 2. SECOND CHANCE AT HOMEOWNERSHIP MORTGAGE INSURANCE PROGRAM.

    Title II of the National Housing Act (12 U.S.C. 17) is amended by 
adding at the end the following new section:

``SEC. 259. SECOND CHANCE AT HOMEOWNERSHIP PROGRAM.

    ``(a) Establishment.--There is established in the Federal Housing 
Administration a Second Chance at Homeownership Program (in this 
section referred to as the `Program').
    ``(b) Purposes.--The purposes of the Program are--
            ``(1) to create an FHA program, participation in which is 
        voluntary on the part of homeowners and eligible lenders, to 
        provide loans for qualified second-chance borrowers and support 
        long-term, sustainable homeownership;
            ``(2) to target mortgage assistance under this section to 
        enable families to become homeowners of their principal 
        residence; and
            ``(3) to ensure the Program remains in effect only for as 
        long as is necessary to provide stability to the housing 
        market.
    ``(c) Establishment and Implementation of Program Requirements.--
            ``(1) Duties of secretary.--To carry out the purposes of 
        the Program, the Secretary shall--
                    ``(A) establish requirements and standards for the 
                program consistent with section 203(b) to the maximum 
                extent possible; and
                    ``(B) prescribe such regulations and provide such 
                guidance as may be necessary or appropriate to 
                implement such requirements and standards.
            ``(2) Interim guidance and mortgagee letters.--In carrying 
        out any of the program requirements or standards established 
        under paragraph (1), the Secretary may issue such interim 
        guidance and mortgagee letters as the Secretary determines 
        necessary or appropriate.
    ``(d) Insurance of Mortgages.--The Secretary may, upon application 
of a mortgagee, make commitments to insure or may insure any mortgage 
that meets the requirements under subsection (e).
    ``(e) Requirements of Insured Mortgages.--To be eligible for 
insurance under this section, a mortgage shall comply with all of the 
following requirements:
            ``(1) Mortgagor.--The mortgagor under the mortgage may not 
        have--
                    ``(A) been the mortgagor under any other mortgage 
                or had any present ownership interest in any residence 
                after January 1, 2011, except that the Secretary may 
                provide exceptions to such requirement for any 
                mortgagor who has inherited a property;
                    ``(B) been delinquent with respect to any of the 
                most recent 12 monthly rental payments due for the 
                rental of the mortgagor's principal residence;
                    ``(C) been convicted under Federal or State law for 
                fraud during the 10-year period ending upon the 
                insurance of the mortgage under this section; and
                    ``(D) a net worth, as of the date the mortgagor 
                first applies for a mortgage to be insured under the 
                Program under this section, that exceeds $1,000,000.
            ``(2) Acquisition of principal residence.--The mortgagor 
        shall be made for the purpose of acquiring a 1- to 4-family 
        residence that--
                    ``(A) is located in the same State as the principal 
                residence of the mortgagor at the time the mortgage is 
                executed; and
                    ``(B) shall be occupied by the mortgagor as the 
                principal residence of the mortgagor.
            ``(3) Downpayment.--The mortgagor shall have paid on 
        account of the mortgage, in cash or its equivalent, on account 
        of the property an amount equal to not less than 5 percent of 
        the appraised value of the property.
            ``(4) Maximum loan amount.--The mortgage shall--
                    ``(A) have principal obligation that does not 
                exceed the dollar amount limitation for a property of 
                the applicable size that is in effect, for the year in 
                which the mortgage is executed, under the sixth 
                sentence of section 305(a)(2) of the Federal Home Loan 
                Mortgage Corporation Act (12 U.S.C. 1454(a)(2)); and
                    ``(B) be payable on a monthly basis in an amount 
                that--
                            ``(i) is fixed over the entire term of the 
                        mortgage; and
                            ``(ii) does not exceed the average amount 
                        paid by the mortgagor for the most recent 12 
                        monthly rental payments paid by the mortgagor 
                        for the rental of the mortgagor's previous 
                        principal residence.
            ``(5) Term of mortgage.--The mortgage to be insured shall--
                    ``(A) bear interest at a single rate that is fixed 
                for the entire term of the mortgage; and
                    ``(B) have a maturity of not less than 30 years 
                from the date of the beginning of amortization of such 
                mortgage.
            ``(6) Appraisals.--Any appraisal conducted in connection 
        with the mortgage shall--
                    ``(A) be based on the current value of the 
                property;
                    ``(B) be conducted in accordance with title XI of 
                the Financial Institutions Reform, Recovery, and 
                Enforcement Act of 1989 (12 U.S.C. 3331 et seq.);
                    ``(C) be completed by an appraiser who meets the 
                competency requirements of the Uniform Standards of 
                Professional Appraisal Practice;
                    ``(D) be wholly consistent with the appraisal 
                standards, practices, and procedures under section 
                202(g) of this Act that apply to all loans insured 
                under this Act; and
                    ``(E) comply with the requirements of subsection 
                (f) of this section (relating to appraisal 
                independence).
            ``(7) Prohibition on second liens.--The mortgagor under the 
        mortgage may not grant a new second lien on the mortgaged 
        property during the first 5 years of the term of the mortgage 
        insured under this section, except as the Secretary determines 
        to be necessary to ensure the maintenance of property standards 
        and provided that such new outstanding liens (A) do not reduce 
        the value of the Government's equity in the borrower's home; 
        and (B) when combined with the mortgagor's existing mortgage 
        indebtedness, do not exceed 95 percent of the home's appraised 
        value at the time of the new second lien.
            ``(8) Certifications and documentation.--
                    ``(A) Principal residence; no present ownership 
                interest.--The mortgagor shall provide documentation 
                satisfactory in the determination of the Secretary to 
                prove compliance with the requirements under paragraphs 
                (1)(A) and (2)(B).
                    ``(B) No intentional default or false 
                information.--The mortgagor shall certify to the 
                Secretary that the mortgagor--
                            ``(i) has not, during the 10-year period 
                        ending upon the insurance of the mortgage under 
                        this section--
                                    ``(I) intentionally defaulted on 
                                any mortgage or any other debt; or
                                    ``(II) knowingly or willfully 
                                furnished material information known to 
                                be false for the purpose of obtaining 
                                any mortgage; and
                            ``(ii) is in compliance with the 
                        requirement under paragraph (1)(C) (relating to 
                        convictions for fraud).
                    ``(C) Liability for repayment.--The mortgagor shall 
                agree in writing that the mortgagor shall be liable to 
                repay to the Secretary any direct financial benefit 
                achieved from a mortgage insured under this section 
                that is derived from misrepresentations made by the 
                mortgagor in the certifications and documentation 
                required under this paragraph, subject to the 
                discretion of the Secretary.
                    ``(D) Documentation and verification of income.--In 
                complying with the FHA underwriting requirements under 
                the Program under this section, the mortgagee shall 
                document and verify the income of the mortgagor or non-
                filing status in accordance with procedures and 
                standards that the Secretary shall establish (provided 
                that such procedures and standards are consistent with 
                section 203(b) to the maximum extent possible) which 
                may include requiring the mortgagee to procure a copy 
                of the income tax returns from the Internal Revenue 
                Service, for the two most recent years for which the 
                filing deadline for such years has passed and by any 
                other method, in accordance with procedures and 
                standards that the Secretary shall establish.
                    ``(E) Mortgage fraud.--The duty of the mortgagee to 
                ensure that the mortgagor is in compliance with 
                paragraph (1)(C) shall be satisfied if the mortgagee 
                makes a good faith effort to determine that the 
                mortgagor has not been convicted under Federal or State 
                law for fraud during the period described in such 
                paragraph.
    ``(f) Appraisal Independence.--
            ``(1) Prohibitions on interested parties in a real estate 
        transaction.--No mortgage lender, mortgage broker, mortgage 
        banker, real estate broker, appraisal management company, 
        employee of an appraisal management company, nor any other 
        person with an interest in a real estate transaction involving 
        an appraisal in connection with a mortgage insured under this 
        section shall improperly influence, or attempt to improperly 
        influence, through coercion, extortion, collusion, 
        compensation, instruction, inducement, intimidation, nonpayment 
        for services rendered, or bribery, the development, reporting, 
        result, or review of a real estate appraisal sought in 
        connection with the mortgage.
            ``(2) Civil monetary penalties.--The Secretary may impose a 
        civil money penalty for any knowing and material violation of 
        paragraph (1) under the same terms and conditions as are 
        authorized in section 536(a) of this Act.
    ``(g) Standards To Protect Against Adverse Selection.--
            ``(1) In general.--The Secretary shall, by rule or order, 
        establish standards and policies to require the underwriter of 
        a mortgage insured under this section to provide such 
        representations and warranties as the Secretary considers 
        necessary or appropriate to enforce compliance with all 
        underwriting and appraisal standards of the Program.
            ``(2) Exclusion for violations.--The Secretary shall not 
        pay insurance benefits to a mortgagee who violates the 
        representations and warranties, as established under paragraph 
        (1), or in any case in which a mortgagor fails to make the 
        first payment on a mortgage insured under this section.
            ``(3) Other authority.--The Secretary may establish such 
        other standards or policies as necessary to protect against 
        adverse selection, including requiring loans identified by the 
        Secretary as higher risk loans to demonstrate payment 
        performance for a reasonable period of time before being 
        insured under the program under this section.
    ``(h) Premiums.--
            ``(1) Establishment and collection.--For each mortgage 
        insured under this section, the Secretary shall establish and 
        collect--
                    ``(A) at the time of insurance, a single premium 
                payment in an amount that is at least 100 basis points 
                greater than the single premium payment that would 
                otherwise be charged pursuant to section 203(c)(2)(A) 
                with respect to the mortgage; and
                    ``(B) in addition to the premium required under 
                paragraph (1), an annual premium in an amount that is 
                at least 100 basis points greater than the annual 
                premium payment that would otherwise be charged 
                pursuant to section 203(c)(2)(B) with respect to the 
                mortgage.
            ``(2) Considerations.--In setting the premium under this 
        subsection, the Secretary shall consider--
                    ``(A) the financial integrity of the Program; and
                    ``(B) the purposes of the Program set forth in 
                subsection (b).
    ``(i) Origination Fees and Interest Rate.--The Secretary shall 
establish--
            ``(1) a reasonable limitation on origination fees for 
        mortgages insured under this section; and
            ``(2) procedures to ensure that interest rates on such 
        mortgages shall be commensurate with market rate interest rates 
        on such types of loans.
    ``(j) Default.--Any mortgagor who defaults in repayment of a 
mortgage insured under this section shall not be eligible for any 
mortgage insurance provided by the Secretary for the 10-year period 
beginning upon such default.
    ``(k) 5-Year Phase-In for Equity as a Result of Sale or 
Refinancing.--For each mortgage insured under this section, the 
Secretary and the mortgagor of such mortgage shall, upon any sale or 
disposition of the property to which the mortgage relates, or upon the 
subsequent refinancing of such mortgage, be entitled to the following 
with respect to any equity created as a direct result of the mortgage 
being insured under this section:
            ``(1) If such sale or refinancing occurs during the period 
        that begins on the date that such mortgage is insured and ends 
        1 year after such date of insurance, the Secretary shall be 
        entitled to 100 percent of such equity.
            ``(2) If such sale or refinancing occurs during the period 
        that begins 1 year after such date of insurance and ends 2 
        years after such date of insurance, the Secretary shall be 
        entitled to 90 percent of such equity and the mortgagor shall 
        be entitled to 10 percent of such equity.
            ``(3) If such sale or refinancing occurs during the period 
        that begins 2 years after such date of insurance and ends 3 
        years after such date of insurance, the Secretary shall be 
        entitled to 80 percent of such equity and the mortgagor shall 
        be entitled to 20 percent of such equity.
            ``(4) If such sale or refinancing occurs during the period 
        that begins 3 years after such date of insurance and ends 4 
        years after such date of insurance, the Secretary shall be 
        entitled to 70 percent of such equity and the mortgagor shall 
        be entitled to 30 percent of such equity.
            ``(5) If such sale or refinancing occurs during the period 
        that begins 4 years after such date of insurance and ends 5 
        years after such date of insurance, the Secretary shall be 
        entitled to 60 percent of such equity and the mortgagor shall 
        be entitled to 40 percent of such equity.
            ``(6) If such sale or refinancing occurs during any period 
        that begins 5 years after such date of insurance, the Secretary 
        shall be entitled to 50 percent of such equity and the 
        mortgagor shall be entitled to 50 percent of such equity.
    ``(l) Limitation on Aggregate Insurance Authority.--The aggregate 
original principal obligation of all mortgages insured under this 
section may not exceed $200,000,000,000.
    ``(m) Reports by Secretary.--The Secretary shall submit monthly 
reports to the Congress identifying the progress of the Program, which 
shall contain the following information for each month:
            ``(1) The number of new mortgages insured under this 
        section, including the location of the properties subject to 
        such mortgages by census tract.
            ``(2) The aggregate principal obligation of new mortgages 
        insured under this section.
            ``(3) The amount of premiums collected for insurance of 
        mortgages under this section.
            ``(4) The claim and loss rates for mortgages insured under 
        this section.
            ``(5) Any other information that the Secretary considers 
        appropriate.
Upon submitting each monthly report required under this subsection, the 
Secretary shall make such report publicly available on the World Wide 
Web site of the Department of Housing and Urban Development.
    ``(n) Required Outreach Efforts.--The Secretary shall carry out 
outreach efforts to ensure that homeowners, lenders, and the general 
public are aware of the opportunities for assistance available under 
this section.
    ``(o) Enhancement of FHA Capacity.--The Secretary shall take such 
actions as may be necessary to--
            ``(1) contract for the establishment of underwriting 
        criteria, automated underwriting systems, pricing standards, 
        and other factors relating to eligibility for mortgages insured 
        under this section;
            ``(2) contract for independent quality reviews of 
        underwriting, including appraisal reviews and fraud detection, 
        of mortgages insured under this section or pools of such 
        mortgages; and
            ``(3) increase personnel of the Department as necessary to 
        process or monitor the processing of mortgages insured under 
        this section.
    ``(p) GNMA Commitment Authority.--
            ``(1) Guarantees.--The Secretary shall take such actions as 
        may be necessary to ensure that securities based on and backed 
        by a trust or pool composed of mortgages insured under this 
        section are available to be guaranteed by the Government 
        National Mortgage Association as to the timely payment of 
        principal and interest.
            ``(2) Guarantee authority.--To carry out the purposes of 
        section 306 of the National Housing Act (12 U.S.C. 1721), the 
        Government National Mortgage Association may enter into new 
        commitments to issue guarantees of securities based on or 
        backed by mortgages insured under this section, not exceeding 
        $200,000,000,000. The amount of authority provided under the 
        preceding sentence to enter into new commitments to issue 
        guarantees is in addition to any amount of authority to make 
        new commitments to issue guarantees that is provided to the 
        Association under any other provision of law.
    ``(q) Sunset.--The Secretary may not enter into any new commitment 
to insure any mortgage pursuant to this section before October 1, 2012 
or after September 30, 2015.
    ``(r) Rule of Construction Relating to Voluntary Nature of 
Program.--This section shall not be construed to require that any 
financial institution or mortgagee approved by the Secretary under 
section 203 as responsible and able to service mortgages responsibly 
participate in any activity authorized under this section.
    ``(s) Rule of Construction Relating to Insurance of Mortgages.--
Except as otherwise provided for in this section or by action of the 
Secretary, the provisions and requirements of section 203(b) shall 
apply with respect to the insurance of any mortgage under this section. 
The Secretary shall conform documents, forms, and procedures for 
mortgages insured under this section to those in place for mortgages 
insured under section 203(b) to the maximum extent possible consistent 
with the requirements of this section.''.
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