[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3678 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 3678

   To help ensure the fiscal solvency of the FHA mortgage insurance 
  programs of the Secretary of Housing and Urban Development, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 13, 2012

Mr. Toomey (for himself and Mr. Warner) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
   To help ensure the fiscal solvency of the FHA mortgage insurance 
  programs of the Secretary of Housing and Urban Development, and for 
                            other purposes.

    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 Emergency 
Fiscal Solvency Act of 2012''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. FHA annual mortgage insurance premiums.
Sec. 3. Indemnification by FHA mortgagees.
Sec. 4. Early period delinquencies.
Sec. 5. Semiannual actuarial studies of MMIF during periods of capital 
                            depletion.
Sec. 6. Delegation of FHA insuring authority.
Sec. 7. Authority to terminate FHA mortgagee origination and 
                            underwriting approval.
Sec. 8. Authorization to participate in the origination of FHA-insured 
                            loans.
Sec. 9. Reporting of mortgagee actions taken against other mortgagees.
Sec. 10. Default and origination information by loan servicer and 
                            originating direct endorsement lender.
Sec. 11. Deputy Assistant Secretary of FHA for Risk Management and 
                            Regulatory Affairs.
Sec. 12. Establishment of Chief Risk Officer for GNMA.
Sec. 13. Report on mortgage servicers.
Sec. 14. FHA emergency capital plan.
Sec. 15. FHA safety and soundness review.
Sec. 16. FHA disclosure standards.
Sec. 17. Report on streamlining FHA programs.
Sec. 18. Budget compliance.

SEC. 2. FHA ANNUAL MORTGAGE INSURANCE PREMIUMS.

    (a) In General.--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 ``may'' and inserting ``shall'';
                    (B) by striking ``not exceeding 1.5 percent'' and 
                inserting ``not less than 0.55 percent''; and
                    (C) by inserting ``and not exceeding 2.0 percent of 
                such remaining insured principal balance'' before ``for 
                the following periods:''; and
            (2) in clause (ii), by striking ``1.55 percent'' and 
        inserting ``2.05 percent''.
    (b) Effective Date.--The amendments made by subsection (a) take 
effect upon the expiration of the 6-month period beginning on the date 
of the enactment of this Act.

SEC. 3. INDEMNIFICATION BY FHA 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 the 
        mortgagee knew, or should have known, of a serious or material 
        violation of the requirements established by the Secretary with 
        respect to 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 such that the mortgage loan should not have been approved 
        and endorsed for insurance, 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, 
        irrespective of whether the violation caused the mortgage 
        default.
            ``(2) Fraud or misrepresentation.--If fraud or 
        misrepresentation was involved in connection with the 
        origination or underwriting and the Secretary determines that 
        the mortgagee knew or should have known of the fraud or 
        misrepresentation, the Secretary shall 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) Appeals process.--The Secretary shall, by regulation, 
        establish an appeals process for mortgagees to appeal 
        indemnification determinations made pursuant to paragraph (1) 
        or (2).
            ``(4) Requirements and procedures.--The Secretary shall 
        issue regulations establishing appropriate requirements and 
        procedures governing the indemnification of the Secretary by 
        the mortgagee, including public reporting on--
                    ``(A) the number of loans that--
                            ``(i) were not originated or underwritten 
                        in accordance with the requirements established 
                        by the Secretary; and
                            ``(ii) involved fraud or misrepresentation 
                        in connection with the origination or 
                        underwriting; and
                    ``(B) the financial impact on the Mutual Mortgage 
                Insurance Fund when indemnification is required.''.

SEC. 4. EARLY PERIOD DELINQUENCIES.

    Subsection (a) of section 202 of the National Housing Act (12 
U.S.C. 1708(a)) is amended by adding at the end the following new 
paragraphs:
            ``(8) Programmatic review of early period delinquencies.--
        The Secretary shall establish and maintain a program--
                    ``(A) to review the cause of each early period 
                delinquency on a mortgage that is an obligation of the 
                Mutual Mortgage Insurance Fund;
                    ``(B) to require indemnification of the Secretary 
                for a loss associated with any such early period 
                delinquency that is the result of a material violation, 
                as determined by the Secretary, of any provision, 
                regulation, or other guideline established or 
                promulgated pursuant to this title; and
                    ``(C) to publicly report--
                            ``(i) a summary of the results of all early 
                        period delinquencies reviewed under 
                        subparagraph (A);
                            ``(ii) any indemnifications required under 
                        subparagraph (B); and
                            ``(iii) the financial impact on the Mutual 
                        Mortgage Insurance Fund of any such 
                        indemnifications.
            ``(9) Definition of early period delinquency.--For purposes 
        of this section, the term `early period delinquency' means, 
        with respect to a mortgage, that the mortgage becomes 90 or 
        more days delinquent within 24 months of the origination of 
        such mortgage.''.

SEC. 5. SEMIANNUAL ACTUARIAL STUDIES OF MMIF DURING PERIODS OF CAPITAL 
              DEPLETION.

    (a) In General.--Paragraph (4) of section 202(a) of the National 
Housing Act (12 U.S.C. 1708(a)(4)) is amended--
            (1) in the first sentence, by inserting ``except as 
        provided in subparagraph (B),'' after ``to be conducted 
        annually,'';
            (2) in the second sentence, by inserting ``, except as 
        provided in subparagraph (B),'' after ``annually'';
            (3) by striking the paragraph designation and heading and 
        all that follows through ``The Secretary shall provide'' and 
        inserting the following:
            ``(4) Independent actuarial study.--
                    ``(A) Annual study.--The Secretary shall provide''; 
                and
            (4) by adding at the end the following new subparagraph:
                    ``(B) Semiannual studies during periods of capital 
                depletion.--During any period that the Fund fails to 
                maintain sufficient capital to comply with the capital 
                ratio requirement under section 205(f)(2)--
                            ``(i) the independent study required by 
                        subparagraph (A) shall be conducted 
                        semiannually and shall analyze the financial 
                        position of the Fund as of September 30 and 
                        March 31 of each fiscal year during such 
                        period; and
                            ``(ii) the Secretary shall submit a report 
                        meeting the requirements of subparagraph (A) 
                        for each such semiannual study.''.
    (b) Analysis of Quarterly Actuarial Studies.--The Secretary of 
Housing and Urban Development shall conduct an analysis of the cost and 
feasibility of providing for an independent actuarial study of the 
Mutual Mortgage Insurance Fund on a calendar quarterly basis, which 
shall compare the cost and feasibility of conducting such a study on a 
quarterly basis as compared to a semi-annual basis and shall determine 
whether such an actuarial study can be conducted on a quarterly basis 
without substantial additional costs to the taxpayers. Not later than 
the expiration of the 90-day period beginning on the date of the 
enactment of this Act, the Secretary shall submit a report to the 
Congress setting forth the findings and conclusion of the analysis 
conducted pursuant to this subsection.

SEC. 6. DELEGATION OF FHA 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. 7. AUTHORITY TO TERMINATE FHA 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. 8. 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. 9. REPORTING OF MORTGAGEE ACTIONS TAKEN AGAINST OTHER MORTGAGEES.

    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) 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 or evidence of fraud or material misrepresentation in 
connection with the origination of such mortgages, to notify the 
Secretary of the action taken and the reasons for such action not later 
than 15 days after taking such action.''.

SEC. 10. 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 number of claims paid to each 
                servicing mortgagee during each calendar quarter 
                occurring during the applicable collection period.''.
    (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. 11. 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 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. 12. ESTABLISHMENT OF CHIEF RISK OFFICER FOR GNMA.

    Section 4 of the Department of Housing and Urban Development Act 
(42 U.S.C. 3533) is amended by adding after subsection (g), as added by 
section 1442 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Public Law 111-203; 124 Stat. 2163), the following new 
subsection:
    ``(h) There shall be in the Department a Chief Risk Officer for the 
Government National Mortgage Association, who shall--
            ``(1) be designated by the Secretary;
            ``(2) be responsible to the President of the Association 
        for all matters related to evaluating, managing, and mitigating 
        risk to the programs of the Association;
            ``(3) be in the competitive service or the senior executive 
        service;
            ``(4) be a career appointee;
            ``(5) be designated from among individuals who possess 
        demonstrated ability in general management of, and knowledge of 
        and extensive practical experience in risk evaluation practices 
        in large governmental or business entities; and
            ``(6) shall not be required to obtain the prior approval, 
        comment, or review of any officer or agency of the United 
        States before submitting to the Congress, or any committee or 
        subcommittee thereof, any reports, recommendations, testimony, 
        or comments if such submission include a statement indicating 
        that the views expressed therein are those of the Chief Risk 
        Officer of the Association and do not necessarily represent the 
        views of the Secretary.''.

SEC. 13. REPORT ON MORTGAGE SERVICERS.

    (a) Examination.--The Secretary of Housing and Urban Development 
shall conduct an examination into mortgage servicer compliance with the 
loan servicing, loss mitigation, and insurance claim submission 
guidelines of the FHA mortgage insurance programs under the National 
Housing Act (12 U.S.C. 1701 et seq.), and an estimate of the annual 
costs to the Mutual Mortgage Insurance Fund, since 2008, resulting from 
any failures by mortgage servicers to comply with such guidelines.
    (b) Report.--Not later than the expiration of the 120-day period 
that begins upon the date of the enactment of this Act, the Secretary 
shall submit a report to the Congress on the results of the examination 
conducted pursuant to subsection (a), including recommendations for any 
administrative and legislative actions to improve mortgage servicer 
compliance with the guidelines referred to in subsection (a).

SEC. 14. FHA EMERGENCY CAPITAL PLAN.

    (a) Establishment.--Not later than the expiration of the 30-day 
period beginning on the date of the enactment of this Act, the 
Secretary of Housing and Urban Development shall develop, submit to the 
Congress, and commence implementation of an emergency capital plan for 
the restoration of the fiscal solvency of the Mutual Mortgage Insurance 
Fund (in this section referred to as the ``Fund'').
    (b) Contents.--The emergency capital plan developed pursuant to 
this section shall--
            (1) provide a detailed explanation of the processes and 
        controls by which amounts of capital that are assets of the 
        Fund are monitored and tracked;
            (2) establish a plan to ensure the financial safety and 
        soundness of the Fund that avoids the need for borrowing 
        amounts from the Treasury of the United States to meet 
        obligations of the Fund; and
            (3) describe the procedure by which, if necessary, any 
        amounts from the Treasury needed to meet obligations of the 
        Fund will be obtained from the Treasury.
    (c) Monthly Reports.--
            (1) Reports.--Subject to paragraph (3), upon the conclusion 
        of each calendar month ending after the 14-day period that 
        begins on the date of the enactment of this Act, the Secretary 
        of Housing and Urban Development shall submit to the Congress a 
        report assessing the financial status of the Fund at the 
        conclusion of such month and setting forth the information 
        described in paragraph (2).
            (2) Contents.--Each report required under paragraph (1) for 
        a month shall contain the following information regarding the 
        Fund as of the conclusion of such month:
                    (A) The number of mortgages that are obligations of 
                the Fund that are 60 or more days delinquent, the 
                expected losses to the Fund associated with such 
                delinquent mortgages, and the methodology used to make 
                such calculation.
                    (B) The number of mortgages that are obligations of 
                the Fund that have a loan-to-value ratio at the time of 
                origination that is less than 80 percent and the 
                percentage of all mortgages that are obligations of the 
                Fund having such a ratio.
                    (C) The number of mortgages that are obligations of 
                the Fund that had an original principal obligation 
                exceeding 125 percent of the median house price, for a 
                home of the size of the residence subject to the 
                mortgage, for the area in which such residence is 
                located, and the percentage of all mortgages that are 
                obligations of the Fund having such an original 
                principal obligation.
                    (D) The number of mortgages that are obligations of 
                the Fund for which the mortgagor's income at the time 
                of origination of the mortgage is greater than the 
                median income for the area in which the residence 
                subject to the mortgage is located, and the percentage 
                of all mortgages that are obligations of the Fund for 
                which the mortgagor has such an income.
                    (E) The balances for the financing and capital 
                reserve accounts of the Fund.
                    (F) Any actions taken during such month to help 
                ensure the financial soundness of the Fund and 
                compliance with section 205(f) of the National Housing 
                Act (12 U.S.C. 1711(f); relating to a capital ratio 
                requirement).
            (3) Termination of reporting requirement.--The requirement 
        to submit reports under paragraph (1) shall terminate on the 
        first date after the date of the enactment of this Act that the 
        Fund attains a capital ratio (as such term is defined in 
        section 205(f)(3) of the National Housing Act) of 2.0 percent.

SEC. 15. FHA SAFETY AND SOUNDNESS REVIEW.

    (a) Review.--The Comptroller General of the United States shall 
provide for an independent third party to--
            (1) conduct a one-time review of the mortgage insurance 
        programs and funds of the Secretary of Housing and Urban 
        Development that shall determine, as of the time of such 
        review--
                    (A) the financial safety and soundness of such 
                programs and funds; and
                    (B) the extent of loan loss reserves and capital 
                adequacy of such programs and funds; and
            (2) to submit a report under subsection (b).
Such review shall be conducted in accordance with generally accepted 
accounting principles applicable to the private sector and Federal 
entities.
    (b) Report.--The report under this subsection shall describe the 
methodology and standards used to conduct the review under subsection 
(a)(1), set forth the results and findings of the review, including the 
extent of loan loss reserves and capital adequacy of the mortgage 
insurance programs and funds of the Secretary of Housing and Urban 
Development, and include recommendations regarding restoring such 
reserves and capital to maintain such programs and funds in a safe and 
sound condition.
    (c) Timing.--The review required under subsection (a) shall be 
completed, and the report required under subsection (b) shall be 
submitted, not later than the expiration of the 60-day period beginning 
on the date of the enactment of this Act.
    (d) Rule of Construction.--Nothing in this section may be construed 
to alter or affect, or exempt the Secretary of Housing and Urban 
Development from complying with, any laws, regulations, or guidance 
relating to preparation or submission of budgets or audits or financial 
or management statements or reports.

SEC. 16. FHA DISCLOSURE STANDARDS.

    Not later than the expiration of the 90-day period beginning on the 
date of the enactment of this Act, the Secretary of Housing and Urban 
Development shall review and revise all standards and requirements 
relating to disclosure of information regarding the mortgage insurance 
programs and funds, including actuarial studies conducted under section 
202(a)(4) of the National Housing Act (12 U.S.C. 1708(a)(4)), quarterly 
reports under section 202(a)(5) of such Act, and annual audited 
financial statements under section 538 of such Act (12 U.S.C. 1735f-
16), to ensure that, after the date of the enactment of this Act, such 
disclosures--
            (1) provide meaningful financial and other information that 
        is timely, comprehensive, and accurate;
            (2) do not contain any material misstatements or 
        misrepresentations;
            (3) make available all relevant information; and
            (4) prohibit material omissions that make the contents of 
        the disclosure misleading.

SEC. 17. REPORT ON STREAMLINING FHA PROGRAMS.

    (a) Examination.--The Secretary of Housing and Urban Development 
shall conduct an examination of the mortgage insurance and any other 
programs of the Federal Housing Administration to identify--
            (1) the level of use and need for such programs;
            (2) any such programs that are unused or underused; and
            (3) methods for streamlining, consolidating, simplifying, 
        increasing the efficiency of, and reducing the number of such 
        programs.
    (b) Report.--Not later than the expiration of the 12-month period 
that begins upon the date of the enactment of this Act, the Secretary 
shall submit a report to the Congress on the results of the examination 
conducted pursuant to subsection (a), including recommendations for any 
administrative and legislative actions to streamline, consolidate, 
simplify, increase the efficiency of, and reduce the number of such 
programs.

SEC. 18. BUDGET COMPLIANCE.

    The Secretary of Housing and Urban Development shall allocate 
$2,500,000 from the account for Administrative Contract Expenses each 
fiscal year through September 30, 2017, which amounts shall be 
available only for the purposes of this Act and the amendments made by 
this Act, including such additional actuarial reviews as may be 
required by section 5 of this Act and the amendments made by such 
section.
                                 <all>