[Congressional Record Volume 152, Number 99 (Tuesday, July 25, 2006)]
[House]
[Pages H5734-H5742]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              EXPANDING AMERICAN HOMEOWNERSHIP ACT OF 2006

  Mr. NEY. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 5121) to modernize and update the National Housing Act and enable 
the Federal Housing Administration to use risk-based pricing to more 
effectively reach underserved borrowers, and for other purposes, as 
amended.
  The Clerk read as follows

                               H.R. 5121

       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 ``Expanding 
     American Homeownership Act of 2006''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Maximum principal loan obligation.
Sec. 4. Extension of mortgage term.
Sec. 5. Cash investment requirement.
Sec. 6. Temporary reinstatement of downpayment requirement in event of 
              increased defaults.
Sec. 7. Mortgage insurance premiums.
Sec. 8. Rehabilitation loans.
Sec. 9. Discretionary action.
Sec. 10. Insurance of condominiums.
Sec. 11. Mutual Mortgage Insurance Fund.
Sec. 12. Hawaiian home lands and Indian reservations.
Sec. 13. Conforming and technical amendments.
Sec. 14. Home equity conversion mortgages.
Sec. 15. Conforming loan limit in disaster areas.
Sec. 16. Participation of mortgage brokers and correspondent lenders.
Sec. 17. Sense of Congress regarding technology for financial systems.
Sec. 18. Savings provision.
Sec. 19. Implementation.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) one of the primary missions of the Federal Housing 
     Administration (FHA) single family mortgage insurance program 
     is to reach borrowers who are underserved, or not served, by 
     the existing conventional mortgage marketplace;
       (2) the FHA program has a long history of innovation, which 
     includes pioneering the 30-year self-amortizing mortgage and 
     a safe-to-seniors reverse mortgage product, both of which 
     were once thought too risky to private lenders;
       (3) the FHA single family mortgage insurance program 
     traditionally has been a major provider of mortgage insurance 
     for home purchases;
       (4) the FHA mortgage insurance premium structure, as well 
     as FHA's product offerings, should be revised to reflect 
     FHA's enhanced ability to determine risk at the loan level 
     and to allow FHA to better respond to changes in the mortgage 
     market;
       (5) during past recessions, including the oil-patch 
     downturns in the mid-1980s, FHA remained a viable credit 
     enhancer and was therefore instrumental in preventing a more 
     catastrophic collapse in housing markets and a greater loss 
     of homeowner equity; and
       (6) as housing price appreciation slows and interest rates 
     rise, many homeowners and prospective homebuyers will need 
     the less-expensive, safer financing alternative that FHA 
     mortgage insurance provides.
       (b) Purposes.--The purposes of this Act are--
       (1) to provide flexibility to FHA to allow for the 
     insurance of housing loans for low- and moderate-income 
     homebuyers during all economic cycles in the mortgage market;
       (2) to modernize the FHA single family mortgage insurance 
     program by making it more reflective of enhancements to loan-
     level risk assessments and changes to the mortgage market; 
     and
       (3) to adjust the loan limits for the single family 
     mortgage insurance program to reflect rising house prices and 
     the increased costs associated with new construction.

     SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION.

       Paragraph (2) of section 203(b) of the National Housing Act 
     (12 U.S.C. 1709(b)(2)) is amended--
       (1) by striking subparagraphs (A) and (B) and inserting the 
     following new subparagraphs:
       ``(A) not to exceed the lesser of--
       ``(i) in the case of a 1-family residence, the median 1-
     family house price in the area, as determined by the 
     Secretary; and in the case of a 2-, 3-, or 4-family 
     residence, the percentage of such median price that bears the 
     same ratio to such median price as the dollar amount 
     limitation in effect under section

[[Page H5735]]

     305(a)(2) of the Federal Home Loan Mortgage Corporation Act 
     (12 U.S.C. 1454(a)(2)) for a 2-, 3-, or 4-family residence, 
     respectively, bears to the dollar amount limitation in effect 
     under such section for a 1-family residence; or
       ``(ii) the dollar amount limitation determined under such 
     section 305(a)(2) for a residence of the applicable size;

     except that the dollar amount limitation in effect for any 
     area under this subparagraph may not be less than the greater 
     of (I) the dollar amount limitation in effect under this 
     section for the area on October 21, 1998, or (II) 65 percent 
     of the dollar limitation determined under such section 
     305(a)(2) for a residence of the applicable size; and
       ``(B) not to exceed the appraised value of the property, 
     plus any initial service charges, appraisal, inspection and 
     other fees in connection with the mortgage as approved by the 
     Secretary.'';
       (2) in the matter after and below subparagraph (B), by 
     striking the second sentence (relating to a definition of 
     ``average closing cost'') and all that follows through 
     ``title 38, United States Code''; and
       (3) by striking the last undesignated paragraph (relating 
     to counseling with respect to the responsibilities and 
     financial management involved in homeownership).

     SEC. 4. EXTENSION OF MORTGAGE TERM.

        Paragraph (3) of section 203(b) of the National Housing 
     Act (12 U.S.C. 1709(b)(3)) is amended--
       (1) by striking ``thirty-five years'' and inserting ``forty 
     years''; and
       (2) by striking ``(or thirty years if such mortgage is not 
     approved for insurance prior to construction)''.

     SEC. 5. CASH INVESTMENT REQUIREMENT.

       Paragraph (9) of section 203(b) of the National Housing Act 
     (12 U.S.C. 1709(b)(9) is amended by striking the paragraph 
     designation and all that follows through ``Provided further, 
     That for'' and inserting the following:
       ``(9) Be executed by a mortgagor who shall have paid on 
     account of the property, in cash or its equivalent, an 
     amount, if any, as the Secretary may determine based on 
     factors determined by the Secretary and commensurate with the 
     likelihood of default. For''.

     SEC. 6. TEMPORARY REINSTATEMENT OF DOWNPAYMENT REQUIREMENT IN 
                   EVENT OF INCREASED DEFAULTS.

       Section 203(b) of the National Housing Act (12 U.S.C. 
     1709(b)) is amended by adding at the end the following new 
     paragraph:
       ``(10) Effect of increased defaults.--
       ``(A) Annual determination.--If, for any calendar year 
     described in subparagraph (B)(i), the Secretary determines, 
     pursuant such subparagraph, that--
       ``(i) the ratio of the number of mortgage insurance claims 
     made during such calendar year on mortgages insured under 
     this section to the total number of mortgages having such 
     insurance in force during such calendar year exceeds, by 25 
     percent or more, such ratio for the 12-month period ending on 
     the effective date of this Act, or
       ``(ii) the ratio of the aggregate remaining principal 
     obligation under mortgages insured under this section for 
     which an insurance claim is made during such calendar year to 
     the average, for such calendar year, of the aggregate 
     outstanding principal obligation under mortgages so insured 
     exceeds, by 25 percent or more, such ratio for the 12-month 
     period ending on such effective date,

     during the 90-day period beginning upon the submission of the 
     report for such calendar year under subparagraph (B)(ii) 
     containing such determination, the Secretary may insure a 
     mortgage under this section only pursuant to the requirement 
     under subparagraph (C), and the Secretary shall, not later 
     than 60 days after submission of the report containing such 
     determination, submit a report to the Congress under 
     subparagraph (D) regarding mortgage insurance claims during 
     such calendar year.
       ``(B) 5 years of annual determinations.--
       ``(i) In general.--The Secretary shall, for each of the 5 
     calendar years commencing after the date of the enactment of 
     this Act, compare the ratios referred to in subparagraph (A) 
     and make a determination under such subparagraph.
       ``(ii) Annual report on defaults.--Not later than 90 days 
     after the conclusion of each of the calendar years described 
     in clause (i), the Secretary shall submit a report to the 
     Congress containing the determination of the Secretary under 
     such clause with respect to such calendar year and setting 
     forth the ratios referred to in such clause for such calendar 
     year.
       ``(C) Reinstatement of downpayment requirement.--The 
     requirement under this subparagraph is that paragraph (9) of 
     this subsection shall apply as such paragraph was in effect 
     on the day before the effective date of the Expanding 
     American Homeownership Act of 2006.
       ``(D) Reports regarding increased default rate.--A report 
     under this subparagraph, as required under subparagraph (A), 
     shall contain--
       ``(i) an analysis of mortgage insurance claims, made during 
     the calendar year for which the report is submitted, on 
     mortgages insured under this section;
       ``(ii) an analysis of the reasons for the increase during 
     such calendar year in the applicable ratio or ratios under 
     subparagraph (A), including an analysis of the extent to 
     which such increase is attributable to the amendments made by 
     the Expanding American Homeownership Act of 2006;
       ``(iii) the effect of such increase on the Mutual Mortgage 
     Insurance Fund;
       ``(iv) recommendations regarding--

       ``(I) whether the Congress should, to respond to such 
     increase, take legislative action (aa) to apply paragraph (9) 
     of this subsection as such paragraph was in effect on the day 
     before the effective date of Expanding American Homeownership 
     Act of 2006, (bb) to apply paragraph (2)(A)(ii) by 
     substituting `87 percent of the dollar amount limitation' for 
     `the dollar amount limitation', or (cc) both; and
       ``(II) whether such provisions should be temporary or 
     permanent, and, if temporary, the period during which such 
     provisions should apply; and

       ``(v) recommendations regarding any other administrative, 
     regulatory, legislative, or other actions that should be 
     taken to respond to such increase.
       ``(E) Defaults in disaster areas not counted for 24 
     months.--In determining the number of mortgage insurance 
     claims made and the aggregate remaining principal obligation 
     under mortgages for which an insurance claim is made for 
     purposes of subparagraph (A) for any calendar year, the 
     Secretary shall not take into consideration any claim made 
     during such period on a mortgage on any property that is 
     located in an area for which a major disaster was declared 
     pursuant to the Robert T. Stafford Disaster Relief and 
     Emergency Assistance Act if such claim was made during the 
     24-month period beginning upon such declaration.''.

     SEC. 7. MORTGAGE INSURANCE PREMIUMS.

        Section 203(c) of the National Housing Act (12 U.S.C. 
     1709(c)) is amended--
       (1) in paragraph (2), in the matter preceding subparagraph 
     (A), by striking ``Notwithstanding'' and inserting ``Except 
     as provided in paragraph (3) and notwithstanding''; and
       (2) by adding at the end the following new paragraph:
       ``(3) Flexible Risk-Based Premiums.--
       ``(A) In general.--For any mortgage insured by the 
     Secretary under this title that is secured by a 1- to 4-
     family dwelling and for which the loan application is 
     received by the mortgagee on or after October 1, 2006, the 
     Secretary may establish a mortgage insurance premium 
     structure involving a single premium payment collected prior 
     to the insurance of the mortgage or annual payments (which 
     may be collected on a periodic basis), or both, subject to 
     the limitations in subparagraphs (B) and (C). The rate of 
     premium for such a mortgage may vary during the mortgage term 
     as long as the basis for determining the variable rate is 
     established before the execution of the mortgage. The 
     Secretary may change a premium structure established under 
     this subparagraph but only to the extent that such change is 
     not applied to any mortgage already executed.
       ``(B) Maximum up-front premium amounts.--For any mortgage 
     insured under a premium structure established pursuant to 
     this paragraph, the amount of any single premium payment 
     authorized by subparagraph (A), if established and collected 
     prior to the insurance of the mortgage, may not exceed the 
     following amount:
       ``(i) Except as provided in clauses (ii) and (iii), 3.0 
     percent of the amount of the original insured principal 
     obligation of the mortgage.
       ``(ii) If the mortgagor has a credit score equivalent to a 
     FICO score of 560 or more and has paid on account of the 
     property, in cash or its equivalent, at least 3 percent of 
     the Secretary's estimate of the cost of acquisition 
     (excluding the mortgage insurance premium paid at the time 
     the mortgage is insured), 2.25 percent of the original 
     insured principal obligation of the mortgage.
       ``(iii) If the annual premium payment is equal to the 
     maximum amount allowable under clause (i) of subparagraph 
     (C), 1.5 percent of the amount of the original insured 
     principal obligation of the mortgage.
       ``(C) Maximum annual premium amounts.--For any mortgage 
     insured under a premium structure established pursuant to 
     this paragraph, the amount of any annual premium payment 
     collected may not exceed the following amount:
       ``(i) Except as provided in clauses (ii) and (iii), 2.0 
     percent of the remaining insured principal obligation of the 
     mortgage.
       ``(ii) If the mortgagor is a mortgagor described in clause 
     (ii) of subparagraph (B), 0.55 percent of the remaining 
     insured principal obligation of the mortgage.
       ``(iii) If the single premium payment collected at the time 
     of insurance is equal to maximum amount allowable under 
     clause (i) of subparagraph (B), 1.0 percent of the remaining 
     insured principal obligation of the mortgage.
       ``(D) Payment incentive.--Notwithstanding subparagraph (C), 
     for any mortgage insured under a premium structure 
     established pursuant to this paragraph and for which the 
     annual premium payment exceeds the amount set forth in 
     subparagraph (C)(ii), if during the 5-year period beginning 
     upon the time of insurance all mortgage insurance premiums 
     for such mortgage have been paid on a timely basis, upon the 
     expiration of such period the Secretary shall reduce the 
     amount of the annual premium payments due thereafter under 
     such mortgage to an amount equal to the amount set forth in 
     subparagraph (C)(ii).
       ``(E) Establishment and alteration of premium structure.--A 
     premium structure shall be established or changed under 
     subparagraph (A) only by providing notice to mortgagees and 
     to the Congress, at least 30

[[Page H5736]]

     days before the premium structure is established or changed.
       ``(F) Considerations for premium structure.--When 
     establishing a premium structure under subparagraph (A) or 
     when changing such a premium structure, the Secretary shall 
     consider the following:
       ``(i) The effect of the proposed premium structure on the 
     Secretary's ability to meet the operational goals of the 
     Mutual Mortgage Insurance Fund as provided in section 202(a).
       ``(ii) Underwriting variables.
       ``(iii) The extent to which new pricing under the proposed 
     premium structure has potential for acceptance in the private 
     market.
       ``(iv) The administrative capability of the Secretary to 
     administer the proposed premium structure.
       ``(v) The effect of the proposed premium structure on the 
     Secretary's ability to maintain the availability of mortgage 
     credit and provide stability to mortgage markets.''.

     SEC. 8. REHABILITATION LOANS.

        Subsection (k) of section 203 of the National Housing Act 
     (12 U.S.C. 1709(k)) is amended--
       (1) in paragraph (1), by striking ``on'' and all that 
     follows through ``1978''; and
       (2) in paragraph (5)--
       (A) by striking ``General Insurance Fund'' the first place 
     it appears and inserting ``Mutual Mortgage Insurance Fund''; 
     and
       (B) in the second sentence, by striking the comma and all 
     that follows through ``General Insurance Fund''.

     SEC. 9. DISCRETIONARY ACTION.

       The National Housing Act is amended--
       (1) in subsection (e) of section 202 (12 U.S.C. 1708(e))--
       (A) in paragraph (3)(B), by striking ``section 202(e) of 
     the National Housing Act'' and inserting ``this subsection''; 
     and
       (B) by redesignating such subsection as subsection (f);
       (2) by striking paragraph (4) of section 203(s) (12 U.S.C. 
     1709(s)(4)) and inserting the following new paragraph:
       ``(4) the Secretary of Agriculture;''; and
       (3) by transferring subsection (s) of section 203 (as 
     amended by paragraph (2) of this section) to section 202, 
     inserting such subsection after subsection (d) of section 
     202, and redesignating such subsection as subsection (e).

     SEC. 10. INSURANCE OF CONDOMINIUMS.

       (a) In General.--Section 234 of the National Housing Act 
     (12 U.S.C. 1715y) is amended--
       (1) in subsection (c)--
       (A) in the first sentence--
       (i) by striking ``and'' before ``(2)''; and
       (ii) by inserting before the period at the end the 
     following: ``, and (3) the project has a blanket mortgage 
     insured by the Secretary under subsection (d)''; and
       (B) in clause (B) of the third sentence, by striking 
     ``thirty-five years'' and inserting ``forty years''; and
       (2) in subsection (g), by striking ``, except that'' and 
     all that follows and inserting a period.
       (b) Definition of Mortgage.--Section 201(a) of the National 
     Housing Act (12 U.S.C. 1707(a)) is amended--
       (1) in clause (1), by striking ``or'' and inserting a 
     comma; and
       (2) by inserting before the semicolon the following: ``, or 
     (c) a first mortgage given to secure the unpaid purchase 
     price of a fee interest in, or long-term leasehold interest 
     in, a one-family unit in a multifamily project, including a 
     project in which the dwelling units are attached, semi-
     detached, or detached, and an undivided interest in the 
     common areas and facilities which serve the project''.

     SEC. 11. MUTUAL MORTGAGE INSURANCE FUND.

       (a) In General.--Subsection (a) of section 202 of the 
     National Housing Act (12 U.S.C. 1708(a)) is amended to read 
     as follows:
       ``(a) Mutual Mortgage Insurance Fund.--
       ``(1) Establishment.--Subject to the provisions of the 
     Federal Credit Reform Act of 1990, there is hereby created a 
     Mutual Mortgage Insurance Fund (in this title referred to as 
     the `Fund'), which shall be used by the Secretary to carry 
     out the provisions of this title with respect to mortgages 
     insured under section 203. The Secretary may enter into 
     commitments to guarantee, and may guarantee, such insured 
     mortgages.
       ``(2) Limit on loan guarantees.--The authority of the 
     Secretary to enter into commitments to guarantee such insured 
     mortgages shall be effective for any fiscal year only to the 
     extent that the aggregate original principal loan amount 
     under such mortgages, any part of which is guaranteed, does 
     not exceed the amount specified in appropriations Acts for 
     such fiscal year.
       ``(3) Fiduciary responsibility.--The Secretary has a 
     responsibility to ensure that the Mutual Mortgage Insurance 
     Fund remains financially sound.
       ``(4) Annual independent actuarial study.--The Secretary 
     shall provide for an independent actuarial study of the Fund 
     to be conducted annually, which shall analyze the financial 
     position of the Fund. The Secretary shall submit a report 
     annually to the Congress describing the results of such study 
     and assessing the financial status of the Fund. The report 
     shall recommend adjustments to underwriting standards, 
     program participation, or premiums, if necessary, to ensure 
     that the Fund remains financially sound.
       ``(5) Quarterly reports.--During each fiscal year, the 
     Secretary shall submit a report to the Congress for each 
     quarter, which shall specify for mortgages that are 
     obligations of the Fund--
       ``(A) the cumulative volume of loan guarantee commitments 
     that have been made during such fiscal year through the end 
     of the quarter for which the report is submitted;
       ``(B) the types of loans insured, categorized by risk;
       ``(C) any significant changes between actual and projected 
     claim and prepayment activity;
       ``(D) projected versus actual loss rates; and
       ``(E) updated projections of the annual subsidy rates to 
     ensure that increases in risk to the Fund are identified and 
     mitigated by adjustments to underwriting standards, program 
     participation, or premiums, and the financial soundness of 
     the Fund is maintained.

     The first quarterly report under this paragraph shall be 
     submitted on the last day of the first quarter of fiscal year 
     2007, or upon the expiration of the 90-day period beginning 
     on the date of the enactment of the Expanding American 
     Homeownership Act of 2006, whichever is later.
       ``(6) Adjustment of premiums.--If, pursuant to the 
     independent actuarial study of the Fund required under 
     paragraph (5), the Secretary determines that the Fund is not 
     meeting the operational goals established under paragraph (8) 
     or there is a substantial probability that the Fund will not 
     maintain its established target subsidy rate, the Secretary 
     may either make programmatic adjustments under section 203 as 
     necessary to reduce the risk to the Fund, or make appropriate 
     premium adjustments.
       ``(7) Operational goals.--The operational goals for the 
     Fund are--
       ``(A) to charge borrowers under loans that are obligations 
     of the Fund an appropriate premium for the risk that such 
     loans pose to the Fund;
       ``(B) to minimize the default risk to the Fund and to 
     homeowners;
       ``(C) to curtail the impact of adverse selection on the 
     Fund; and
       ``(D) to meet the housing needs of the borrowers that the 
     single family mortgage insurance program under this title is 
     designed to serve.''.
       (b) Obligations of Fund.--The National Housing Act is 
     amended as follows:
       (1) Homeownership voucher program mortgages.--In section 
     203(v) (12 U.S.C. 1709(v))--
       (A) by striking ``Notwithstanding section 202 of this 
     title, the'' and inserting ``The''; and
       (B) by striking ``General Insurance Fund'' the first place 
     such term appears and all that follows and inserting ``Mutual 
     Mortgage Insurance Fund.''.
       (2) Home equity conversion mortgages.--Section 255(i)(2)(A) 
     of the National Housing Act (12 U.S.C. 1715z-20(i)(2)(A)) is 
     amended by striking ``General Insurance Fund'' and inserting 
     ``Mutual Mortgage Insurance Fund''.
       (c) Conforming Amendments.--The National Housing Act is 
     amended--
       (1) in section 205 (12 U.S.C. 1711), by striking 
     subsections (g) and (h); and
       (2) in section 519(e) (12 U.S.C. 1735c(e)), by striking 
     ``203(b)'' and all that follows through ``203(i)'' and 
     inserting ``203, except as determined by the Secretary''.

     SEC. 12. HAWAIIAN HOME LANDS AND INDIAN RESERVATIONS.

       (a) Hawaiian Home Lands.--Section 247(c) of the National 
     Housing Act (12 U.S.C. 1715z-12) is amended--
       (1) by striking ``General Insurance Fund established in 
     section 519'' and inserting ``Mutual Mortgage Insurance 
     Fund''; and
       (2) in the second sentence, by striking ``(1) all 
     references'' and all that follows through ``and (2)''.
       (b) Indian Reservations.--Section 248(f) of the National 
     Housing Act (12 U.S.C. 1715z-13) is amended--
       (1) by striking ``General Insurance Fund'' the first place 
     it appears through ``519'' and inserting ``Mutual Mortgage 
     Insurance Fund''; and
       (2) in the second sentence, by striking ``(1) all 
     references'' and all that follows through ``and (2)''.

     SEC. 13. CONFORMING AND TECHNICAL AMENDMENTS.

       (a) Repeals.--The following provisions of the National 
     Housing Act are repealed:
       (1) Subsection (i) of section 203 (12 U.S.C. 1709(i)).
       (2) Subsection (o) of section 203 (12 U.S.C. 1709(o)).
       (3) Subsection (p) of section 203 (12 U.S.C. 1709(p)).
       (4) Subsection (q) of section 203 (12 U.S.C. 1709(q)).
       (5) Section 222 (12 U.S.C. 1715m).
       (6) Section 237 (12 U.S.C. 1715z-2).
       (7) Section 245 (12 U.S.C. 1715z-10).
       (b) Definition of Area.--Section 203(u)(2)(A) of the 
     National Housing Act (12 U.S.C. 1709(u)(2)(A)) is amended by 
     striking ``shall'' and all that follows and inserting ``means 
     a metropolitan statistical area as established by the Office 
     of Management and Budget;''.
       (c) Definition of State.--Section 201(d) of the National 
     Housing Act (12 U.S.C. 1707(d)) is amended by striking ``the 
     Trust Territory of the Pacific Islands'' and inserting ``the 
     Commonwealth of the Northern Mariana Islands''.

     SEC. 14. HOME EQUITY CONVERSION MORTGAGES.

       (a) In General.--Section 255 of the National Housing Act 
     (12 U.S.C. 1715z-20) is amended--

[[Page H5737]]

       (1) in subsection (g)--
       (A) by striking the first sentence; and
       (B) by striking ``established under section 203(b)(2)'' and 
     all that follows through ``located'' and inserting 
     ``limitation established under section 305(a)(2) of the 
     Federal Home Loan Mortgage Corporation Act for a 1-family 
     residence'';
       (2) in subsection (i)(1)(C), by striking ``limitations'' 
     and inserting ``limitation''; and
       (3) by adding at the end the following new subsection:
       ``(n) Authority to Insure Home Purchase Mortgage.--
       ``(1) In general.--Notwithstanding any other provision in 
     this section, the Secretary may insure, upon application by a 
     mortgagee, a home equity conversion mortgage upon such terms 
     and conditions as the Secretary may prescribe, when the 
     primary purpose of the home equity conversion mortgage is to 
     enable an elderly mortgagor to purchase a 1-to 4 family 
     dwelling in which the mortgagor will occupy or occupies one 
     of the units.
       ``(2) Limitation on principal obligation.--A home equity 
     conversion mortgage insured pursuant to paragraph (1) shall 
     involve a principal obligation that does not exceed the 
     dollar amount limitation determined under section 305(a)(2) 
     of the Federal Home Loan Mortgage Corporation Act for a 
     residence of the applicable size.''.
       (b) Mortgages for Cooperatives.--Subsection (b) of section 
     255 of the National Housing Act (12 U.S.C. 1715z-20(b)) is 
     amended--
       (1) in paragraph (4)--
       (A) by inserting ``a first or subordinate mortgage or 
     lien'' before ``on all stock'';
       (B) by inserting ``unit'' after ``dwelling''; and
       (C) by inserting ``a first mortgage or first lien'' before 
     ``on a leasehold''; and
       (2) in paragraph (5), by inserting ``a first or subordinate 
     lien on'' before ``all stock''.
       (c) Study Regarding Mortgage Insurance Premiums.--The 
     Secretary of Housing and Urban Development shall conduct a 
     study regarding mortgage insurance premiums charged under the 
     program under section 255 of the National Housing Act (12 
     U.S.C. 1715z-20) for insurance of home equity conversion 
     mortgages to analyze and determine--
       (1) the effects of reducing the amounts of such premiums 
     from the amounts charged as of the date of the enactment of 
     this Act on--
       (A) costs to mortgagors; and
       (B) the financial soundness of the program; and
       (2) the feasibility and effectiveness of exempting, from 
     all the requirements under the program regarding payment of 
     mortgage insurance premiums (including both up-front or 
     annual mortgage insurance premiums under section 203(c)(2) of 
     such Act), any mortgage insured under the program under which 
     part or all of the amount of future payments made to the 
     homeowner are used for costs of a long-term care insurance 
     contract covering the mortgagor or members of the household 
     residing in the mortgaged property.

     Not later than the expiration of the 12-month period 
     beginning on the date of the enactment of this Act, the 
     Secretary shall submit a report to the Congress setting forth 
     the results and conclusions of the study.

     SEC. 15. CONFORMING LOAN LIMIT IN DISASTER AREAS.

       Section 203(h) of the National Housing Act (12 U.S.C. 1709) 
     is amended--
       (1) by inserting after ``property'' the following: ``plus 
     any initial service charges, appraisal, inspection and other 
     fees in connection with the mortgage as approved by the 
     Secretary,'';
       (2) by striking the second sentence (as added by chapter 7 
     of the Emergency Supplemental Appropriations Act of 1994 
     (Public Law 103-211; 108 Stat. 12)); and
       (3) by adding at the end the following new sentence: ``In 
     any case in which the single family residence to be insured 
     under this subsection is within a jurisdiction in which the 
     President has declared a major disaster to have occurred, the 
     Secretary is authorized, for a temporary period not to exceed 
     36 months from the date of such Presidential declaration, to 
     enter into agreements to insure a mortgage which involves a 
     principal obligation of up to 100 percent of the dollar 
     limitation determined under section 305(a)(2) of the Federal 
     Home Loan Mortgage Corporation Act for a single family 
     residence, and not in excess of 100 percent of the appraised 
     value of the property plus any initial service charges, 
     appraisal, inspection and other fees in connection with the 
     mortgage as approved by the Secretary.''.

     SEC. 16. PARTICIPATION OF MORTGAGE BROKERS AND CORRESPONDENT 
                   LENDERS.

       (a) Definitions.--
       (1) In general.--Section 201 of the National Housing Act 
     (12 U.S.C. 1707) is amended--
       (A) by striking ``As used in section 203 of this title--'' 
     and inserting ``As used in this title and for purposes of 
     participation in insurance programs under this title, except 
     as specifically provided otherwise, the following definitions 
     shall apply:'';
       (B) by striking subsection (b) and inserting the following:
       ``(2) The term `mortgagee' means any of the following 
     entities, and its successors and assigns, to the extent such 
     entity is approved by the Secretary:
       ``(A) A lender or correspondent lender, who--
       ``(i) makes, underwrites, and services mortgages;
       ``(ii) submits to the Secretary such financial audits 
     performed in accordance with the standards for financial 
     audits of the Government Auditing Standards issued by the 
     Comptroller of the United States;
       ``(iii) meet the minimum net worth requirement that the 
     Secretary shall establish; and
       ``(iv) complies with such other requirements as the 
     Secretary may establish.
       ``(B) A correspondent lender who--
       ``(i) closes a mortgage in its name but does not underwrite 
     or service the mortgage;
       ``(ii) posts a surety bond, in lieu of any requirement to 
     provide audited financial statements or meet a minimum net 
     worth requirement, in--

       ``(I) a form satisfactory to the Secretary; and
       ``(II) an amount of $75,000, as such amount is adjusted 
     annually by the Secretary (as determined under regulations of 
     the Secretary) by the change for such year in the Consumer 
     Price Index for All Urban Consumers published monthly by the 
     Bureau of Labor Statistics of the Department of Labor; and

       ``(iii) complies with such other requirements as the 
     Secretary may establish.
       ``(C) A mortgage broker who--
       ``(i) closes the mortgage in the name of the lender and 
     does not make, underwrite, or service the mortgage;
       ``(ii) is licensed, under the laws of the State in which 
     the property that is subject to the mortgage is located, to 
     act as a mortgage broker in such State;
       ``(iii) posts a surety bond in accordance with the 
     requirements of subparagraph (B)(ii); and
       ``(iv) complies with such other requirements as the 
     Secretary may establish.
       ``(3) The term `mortgagor' includes the original borrower 
     under a mortgage and the successors and assigns of the 
     original borrower.'';
       (C) in subsection (a), by redesignating clauses (1) and (2) 
     as clauses (A) and (B) respectively; and
       (D) by redesignating subsections (a), (c), (d), (e), and 
     (f) as paragraphs (1), (4), (5), (6), and (7), respectively, 
     and realigning such paragraphs two ems from the left margin.
       (2) Mortgagee review.--Section 202(c)(7) of the National 
     Housing Act (12 U.S.C. 1708(c)(7)) is amended--
       (A) in subparagraph (A), by inserting ``, as defined in 
     section 201,'' after ``mortgagee'';
       (B) by striking subparagraph (B); and
       (C) by redesignating subpargraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively.
       (3) Multifamily rental housing insurance.--Section 
     207(a)(2) of the National Housing Act (12 U.S.C. 1713(a)(2)) 
     is amended by striking ``means the original lender under a 
     mortgage, and its successors and assigns, and'' and inserting 
     ``has the meaning given such term in section 201, except that 
     such term also''.
       (4) War housing insurance.--Section 601(b) of the National 
     Housing Act (12 U.S.C. 1736(b)) is amended by striking 
     ``includes the original lender under a mortgage, and his 
     successors and assigns approved by the Secretary'' and 
     inserting ``has the meaning given such term in section 201''.
       (5) Armed services housing mortgage insurance.--Section 
     801(b) of the National Housing Act (12 U.S.C. 1748(b)) is 
     amended by striking ``includes the original lender under a 
     mortgage, and his successors and assigns approved by the 
     Secretary'' and inserting ``has the meaning given such term 
     in section 201''.
       (6) Group practice facilities mortgage insurance.--Section 
     1106(8) of the National Housing Act (12 U.S.C. 1749aaa-5(8)) 
     is amended by striking ``means the original lender under a 
     mortgage, and his or its successors and assigns, and'' and 
     inserting ``has the meaning given such term in section 201, 
     except that such term also''.
       (b) Eligibility for Insurance.--
       (1) Title i.--Paragraph (1) of section 8(b) of the National 
     Housing Act (12 U.S.C. 1706c(b)(1)) is amended--
       (A) by striking ``, and be held by,''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.
       (2) Single family housing mortgage insurance.--Paragraph 
     (1) of section 203(b) of the National Housing Act (12 U.S.C. 
     1709(b)(1)) is amended
       (A) by striking ``, and be held by,''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.
       (3) Section 221 mortgage insurance.-- Paragraph (1) of 
     section 221(d) of the National Housing Act (12 U.S.C. 
     1715l(d)(1)) is amended--
       (A) by striking `` and be held by''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.
       (4) Home equity conversion mortgage insurance.--Paragraph 
     (1) of section 255(d) of the National Housing Act (12 U.S.C. 
     1715z-20(d)(1)) is amended by striking ``as responsible and 
     able to service the mortgage properly''.
       (5) War housing mortgage insurance.--Paragraph (1) of 
     section 603(b) of the National Housing Act (12 U.S.C. 
     1738(b)(1)) is amended--
       (A) by striking ``, and be held by,''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.
       (6) War housing mortgage insurance for large-scale housing 
     projects.--Paragraph

[[Page H5738]]

     (1) of section 611(b) of the National Housing Act (12 U.S.C. 
     1746(b)(1)) is amended--
       (A) by striking `` and be held by''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.
       (7) Group practice facility mortgage insurance.--Section 
     1101(b)(2) of the National Housing Act (12 U.S.C. 
     1749aaa(b)(2)) is amended--
       (A) by striking `` and held by''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.
       (8) National defense housing insurance.--Paragraph (1) of 
     section 903(b) of the National Housing Act (12 U.S.C. 
     1750b(b)(1)) is amended--
       (A) by striking ``, and be held by,''; and
       (B) by striking ``as responsible and able to service the 
     mortgage properly''.

     SEC. 17. SENSE OF CONGRESS REGARDING TECHNOLOGY FOR FINANCIAL 
                   SYSTEMS.

       (a) Congressional Findings.--The Congress finds the 
     following:
       (1) The Government Accountability Office has cited the FHA 
     single family housing mortgage insurance program as a ``high-
     risk'' program, with a primary reason being non-integrated 
     and out-dated financial management systems.
       (2) The ``Audit of the Federal Housing Administration's 
     Financial Statements for Fiscal Years 2004 and 2003'', 
     conducted by the Inspector General of the Department of 
     Housing and Urban Development reported as a material weakness 
     that ``HUD/FHA's automated data processing [ADP] system 
     environment must be enhanced to more effectively support 
     FHA's business and budget processes''.
       (3) Existing technology systems for the FHA program have 
     not been updated to meet the latest standards of the Mortgage 
     Industry Standards Maintenance Organization and have numerous 
     deficiencies that lenders have outlined.
       (4) Improvements to technology used in the FHA program 
     will--
       (A) allow the FHA program to improve the management of the 
     FHA portfolio, garner greater efficiencies in its operations, 
     and lower costs across the program;
       (B) result in efficiencies and lower costs for lenders 
     participating in the program, allowing them to better use the 
     FHA products in extending homeownership opportunities to 
     higher credit risk or lower-income families, in a sound 
     manner
       (5) The Mutual Mortgage Insurance Fund operates without 
     cost to the taxpayers and generates revenues for the Federal 
     Government.
       (b) Sense of Congress.--It is the sense of the Congress 
     that--
       (1) the Secretary of Housing and Urban Development should 
     use a portion of the funds received from premiums paid for 
     FHA single family housing mortgage insurance that are in 
     excess of the amounts paid out in claims to substantially 
     increase the funding for technology used in such FHA program;
       (2) the goal of this investment should be to bring the 
     technology used in such FHA program to the level and 
     sophistication of the technology used in the conventional 
     mortgage lending market, or to exceed such level; and
       (3) the Secretary of Housing and Urban Development should 
     report to the Congress not later than 180 days after the date 
     of the enactment of this Act regarding the progress the 
     Department is making toward such goal and if progress is not 
     sufficient, the resources needed to make greater progress.

     SEC. 18. SAVINGS PROVISION.

       Any mortgage insured under title II of the National Housing 
     Act before the date of enactment of this title shall continue 
     to be governed by the laws, regulations, orders, and terms 
     and conditions to which it was subject on the day before the 
     date of the enactment of this Act.

     SEC. 19. IMPLEMENTATION.

        The Secretary of Housing and Urban Development shall by 
     notice establish any additional requirements that may be 
     necessary to immediately carry out the provisions of this 
     title. The notice shall take effect upon issuance.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Ohio (Mr. Ney) and the gentlewoman from California (Ms. Waters) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Ohio.
  Mr. NEY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise today in support of H.R. 5121, the Expanding 
American Homeownership Act of 2006. This is a very important piece of 
legislation. It proposes comprehensive reform of the Federal Housing 
Administration, known as FHA, single family mortgage insurance 
activities. Giving FHA the ability to offer an array of products will 
allow it to more fairly price its guarantee to the individual borrowers 
and will allow it to base each borrower's mortgage insurance premium on 
the risk that the borrower poses to the FHA mortgage insurance fund.
  Under this proposal, the mortgage insurance premiums will consider 
the borrower's credit history, loan-to-value ratio, debt-to-income 
ratio, and will be based on FHA's historical experience with similar 
borrowers.
  This change will decrease premiums for many of the FHA's traditional 
borrowers, thereby increasing their access to homeownership. It will 
also allow FHA to reach potential homebuyers who for various reasons do 
not currently qualify for an FHA loan product.
  H.R. 5121 would allow FHA to become more efficient and streamlined. 
Modernizing FHA will improve competition in the prime home loan 
mortgage industry, and effectively assist the industry in combating 
abusive and/or discriminatory lending practices. This bill would not 
create a new government program. Rather, it would significantly 
modernize the National Housing Act while reforming and empowering the 
agency, thereby addressing some of the agency's limitations.
  More importantly, I believe that, if enacted, this bill will help 
further increase the country's homeownership rate, especially among 
low- and moderate-income and minority families. Since its inception in 
1934, FHA has played an innovative role in financing homeownership and 
affordable housing opportunities for all Americans.
  Over the past 8 years alone, FHA has financed nearly 8 million homes 
and over 754,000 units of affordable rental housing. The mortgage 
market has changed dramatically in recent years, creating what is today 
the world's most sophisticated real estate finance system.
  This system has led to the highest rate of homeownership in U.S. 
history and to the efficient production of thousands of units of 
affordable rental housing each year.
  However, in more recent times, FHA has been a mortgage insurer of the 
last resort. Potential homeowners who can participate in the private 
mortgage insurance market do so. I believe this is because FHA has 
become costly and the paperwork unmanageable. Thus, only the riskiest 
borrowers now use FHA for mortgage insurance.
  Moreover, while the prime market remained relatively constant, the 
nonprime market between 2003 and 2005 grew from $118 billion to $650 
billion in mortgages, while FHA went from insuring 9.2 percent to 4.1 
percent of the Nation's mortgages. It is important to distinguish the 
difference between subprime lending, which is necessary and critical 
for nontraditional borrowers, and predatory/abusive lending, which is 
designed to take advantage of vulnerable Americans pursuing their 
American dream of homeownership.
  While not predatory, the subprime market is not working for many 
families. These are the families FHA is really designed to reach. Among 
other things, H.R. 5121 would allow FHA to provide alternative access 
as well as standardization of a market niche designed to follow the 
agency's example.
  Moreover, the Federal Government will always have a need for an 
agency to provide the type of services symbolized by the FHA. While the 
agency only has a market share of approximately 3 to 4 percent, 
elimination of FHA will be disastrous if a capital mortgage financial 
crisis emerges, such as we saw in the United States in the 1980s.
  Further, it would be impossible to recreate this agency to respond 
rapidly to a housing homeownership crisis that could possibly, we hope 
not, but emerge in the future. H.R. 5121 will allow FHA to fulfill its 
original mission when similar circumstances exist. In 1934, interest-
only and balloon payments were prevalent. Thus, FHA was established to 
give the private sector avenues to provide long-term fixed-rate 
financing.
  Today, FHA continues to serve its original purpose by giving low- to 
moderate-income home buyers a safer, more affordable financing option 
for their homeownership. Mr. Speaker, we have a chance with this 
legislation to bring FHA back into business and to restore the FHA 
product to its traditional market position.
  American families need safe options when purchasing a home at a fair 
price. Families need a way to take part in the American Dream without 
putting themselves at risk. Families, frankly, Mr. Speaker, need FHA.
  I just want to conclude my comments for this time by saying this is, 
in my opinion, one of the most critical pieces of legislation, and if 
we haven't acted as we have, I wonder where the future of FHA would be, 
therefore helping so many Americans across this country.

[[Page H5739]]

  Mr. Speaker, I want to thank the gentlewoman from California (Ms. 
Waters), who stepped up to the plate to address what I consider one of 
the most important pieces of legislation in quite a few years, of 
keeping the FHA alive by revitalizing it, by changing it, by 
streamlining it to help so many people.
  I appreciate also Ranking Member Frank, Chairman Mike Oxley, of 
course, and all of the members of the committee and the staff who have 
worked on a bipartisan basis to do, I think, a critically needed and 
wonderful thing. If we did not step up to the plate with this piece of 
legislation, I wonder what options would be out there for many, many 
citizens wanting homeownership.
  Mr. Speaker, I reserve the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
  (Ms. WATERS asked and was given permission to revise and extend her 
remarks, and include extraneous material.)
  Ms. WATERS. Mr. Speaker, before I start on my comments, I would like 
to thank Chairman Ney for his leadership on this legislation. Chairman 
Ney first envisioned the possibility of this legislation, and despite 
all of the possible obstacles to getting it passed, he persisted in 
bringing people together, to dealing with all of those obstacles, and 
today we are on the floor because of his leadership.
  But it certainly could not have happened without my ranking member, 
Mr. Frank, who has the ability to see things in legislation that no one 
else sees and to bring it to our attention, and to fix what is wrong, 
and to give support to what is good and helpful when we are trying to 
pass a significant piece of legislation.

                              {time}  1245

  I would like to thank him, and certainly Chairman Oxley. As Mr. Frank 
said, he is retiring. He will be leaving us. But he has been a chairman 
who has been fair, he has provided opportunities for all of the members 
of our committee. He has worked with the subcommittee chairs and 
ranking members, and we are certainly going to miss him.
  I rise in strong support as an original sponsor of H.R. 5121, the 
Expanding American Homeownership Act of 2006, which represents a major 
achievement by the Committee on Financial Services and the Subcommittee 
on Housing and Community Opportunity.
  As I said, the leaders, Mr. Oxley, Mr. Frank, Mr. Ney, and all of the 
other members of the subcommittees who cooperated, deserve a lot of 
credit for this bill. But I have to mention the staff. The staff on 
both sides of the aisle worked so hard into long hours of the night 
helping to straighten out very complicated problems with this bill, and 
it is because of their dedication and their concentrated work that we 
are able to be on the floor today. They were also very helpful in 
working with a rather broad-based coalition that supported this bill, 
who stand in support of this bill including housing, consumer, and 
advocacy groups, the National Association of Realtors, the Mortgage 
Bankers Association, the mortgage brokers. We have a combination of 
support behind this bill which makes it a strong piece of legislation. 
This unique piece of legislation is unusual not only because of the 
combination of support; it reflects a real consensus that FHA can 
indeed be relevant in today's market.
  When Congress enacted legislation in 1934 creating FHA, it intended 
that the government would make the dream of owning a home a reality for 
as many Americans as possible. FHA was established under the National 
Housing Act more than 70 years ago to improve housing standards and 
conditions. The goal of FHA was to provide an adequate home financing 
system with access for the average American. FHA pioneered many 
programs, including the 30-year mortgage. Not only has FHA been a 
pioneer in housing, it has been a major tool for first-time home buyers 
and moderate-income families.
  Just imagine 70 years ago in 1934 as America was coming out of the 
worst depression in its history and the impact that FHA had on 
homeownership. FHA was a brilliant idea then, as it will be again 
through passage of this bill.
  H.R. 5121 is appropriately named the Expanding American Homeownership 
Act of 2006 because it will, indeed, expand homeownership opportunities 
for all Americans. There is unequivocal evidence that, without FHA, 
many first-time home buyers and low- to moderate-income persons would 
not be able to afford a home. Americans have grown accustomed to FHA 
for mortgage insurance, guaranteeing their entry into the coveted arena 
of homeownership.
  FHA had come to rely on first-time home buyers and low- to moderate-
income persons to justify its existence. In the last few years, 
however, FHA watched as its share of the mortgage insurance market 
dwindle, and the groups it traditionally served disappeared. Between 
2003 and 2005, nonprime loans grew from $332 billion to $550 billion, 
more than a 100 percent increase. As a result of this phenomenon, FHA 
market share fell dramatically. FHA was forced to become the mortgage 
insurer of last resort rather than the preferred insurer. Without 
viable FHA alternatives, many home buyers, first-time buyers, minority 
buyers, and home buyers with less than perfect credit fled FHA for the 
subprime market, leaving many with few affordable options.
  Some have been forced to turn to high cost financing and 
nontraditional loan products. While these are acceptable for certain 
borrowers, they can have devastating consequences for others. In fact, 
when we began consideration of this bill, the foreclosure rate for non-
prime loans was approximately twice that of prime loans.
  By providing consumers with choice, H.R. 5121 will provide FHA the 
flexibility to set mortgage insurance premiums consistent with the risk 
of the loan. FHA will use the borrower's total credit score profile 
when setting the insurance premium. Borrowers who are low credit risk 
will pay a lower insurance premium, while borrowers who pose a higher 
credit risk will be charged a slightly higher premium. As such, FHA 
will reach deeper into the pool of perspective borrowers while 
guaranteeing the soundness of the FHA fund.
  In the 35th Congressional District in California that I serve, 2,064 
loans were insured by FHA in 2001, but only 74 loans were made in 2005. 
Similarly, FHA programs have been seriously curtailed in just about 
every region of the country, resulting in fewer and fewer home 
purchases supported by FHA programs. H.R. 5121 will increase FHA home 
limits. In many areas of the country, the existing FHA loan limits are 
lower than the cost of new construction or the median home price. In 
other areas, FHA had been priced out of the market. As indicated in the 
committee report that we filed with this legislation, in 1999, FHA 
insured 127,000 loans in California, while a mere 5,000 loans were 
insured by FHA in 2005, representing less than 5 percent of the 1999 
level. Because FHA business diminished dramatically during this period, 
in my view, American homeownership did not expand as much as possible. 
The FHA loan limit of $362,790 in Los Angeles, California indicated 
that FHA was essentially no longer relevant in that housing market.
  Mr. Speaker, I reserve the balance of my time.
  Mr. NEY. Mr. Speaker, I do not have any other speakers.
  I did want to take this time to say that I want to also thank 
Commissioner Brian Montgomery of the FHA. He is really one of those 
people when he started this, he came into the offices and talked to 
everybody, he really should probably take off his tie and have a t-
shirt that says, ``I'm from the government, I'm here to help you.'' He 
has a lot of enthusiasm and a lot of belief in this program, and 
cooperated so much for this important bill. I just want to say that, 
again, I want to thank the gentlewoman from California, Mr. Frank, Mr. 
Oxley, both sides of the aisle, and the staff. A wonderful staff.
  We present a bill today, it looks kind of easy. A lot of hours were 
put into it. And also some wonderful, thoughtful suggestions came from 
Ms. Waters, from Mr. Frank, to take a good bill and I think help 
improve and make it better, and we appreciated those changes in working 
with all of you on this issue.
  I can't stress, Mr. Speaker, how important a bill this is. If we 
didn't step

[[Page H5740]]

up to the plate now, I really wonder where the FHA would be.
  Mr. Speaker, I reserve the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield 5 minutes to the gentleman from 
Massachusetts, who was singularly responsible for helping to negotiate 
many of the difficulties in this bill and made it possible for us to 
form a consensus.
  Mr. FRANK of Massachusetts. Mr. Speaker, I thank my colleague. And I 
must say, I am very pleased that, having worked together, that the 
relationship of ranking member of the full committee and ranking member 
of the subcommittee or chairman of a full committee and the chairman of 
a subcommittee, nobody planned that to work as smoothly. You have to 
work at it, and with kind of overlapping responsibilities. I am very 
proud of the very constructive work we have done together, along with 
our counterparts on the other side.
  I agree with what has been said about this bill. It takes the FHA and 
makes it a more important entity.
  On one issue, the high cost loan limits, for much of the district 
that I represent in Massachusetts, the FHA might as well be on the moon 
because the median house prices in my district are beyond what the FHA 
could do. And I was glad to work with my colleague, the gentleman from 
California, who has joined us, Mr. Miller, to make it realistic. People 
have said, well, you are creating homes for the wealthiest. No. What we 
have is a situation where, if you don't do it by median house price, 
middle income borrowers are priced out of the market because of the 
price of the house.
  And, of course, people said, well, you are going to be squeezing out 
lower income people. No. When the FHA makes those loans to people at 
the median income in the high-cost areas, that makes money for the FHA. 
And I want to stress that. This is a money maker bill. This is a bill 
that expands housing, but it will make money for the Treasury. The FHA, 
in our accounting term it is called a negative subsidy. A negative 
subsidy means you put money in. And, the FHA is a net contributor. I 
think at some point we might look at expanding some of what we do at 
the FHA without further increasing the cost to the Treasury. But this 
is a bill that expands housing opportunities and makes money for the 
Treasury.
  There is one particular part I want to address, and the gentlewoman 
from California generously mentioned it and the gentleman from Ohio was 
helpful on this. We do, in this bill, extend FHA's authority to lend to 
people who have lower credit scores, people who are bigger risks. And 
when that happens, you have to worry about higher defaults.
  I did not think we, the Federal Government, should be in the position 
of saying that, as we lend to people who are bigger risks, we should 
take that risk pool and make those people who are higher risks who meet 
their obligations pay for the people who are higher risks who don't. In 
other words, yes, we understand that. As you reach down into a lower 
credit sector, and there is a correlation with income there, obviously, 
you are going to have more defaults and we have to pay for the 
defaults. But it is not fair, and we the Federal Government should not 
set the principle that one low-income person or 10 low-income people 
who meet their responsibilities are the ones who have to make up for 
the low-income person who isn't able to.
  Now, this bill doesn't entirely meet my desires in this respect, but 
it does set this important principle. Yes, it says if you are of a low 
credit score, you will have to pay some more. But after 5 years under 
this bill, if you have been meeting your obligations, you then no 
longer have to pay more on the annual basis. Thus, it seems to be both 
an incentive for people to keep their payments but also a matter of 
fairness. I don't see why, if I am someone with a low credit score and 
I am making my payments in a responsible way, I should have to shoulder 
the burden of those people who aren't able to make their payments any 
more than anybody else.
  Now, as I said, this doesn't go as far as I would like, but it sets 
that important principle. And the other thing I would note is this: We 
give FHA the authority to go up to certain levels for the borrowers 
with lower credit, but they are not mandated. And I would urge my 
friends in the FHA, and they have worked with us and I appreciate it 
and some of them are here today observing, as is fitting given the 
cooperative effort we had here.
  As we go forward, given that the FHA makes money, let's refrain from 
penalizing the responsible low credit people. And they are the great 
majority, by the way. Nobody thinks that you are going to have a 
majority of them default. Let's say to those lower credit borrowers who 
meet their obligations that we are not going to try to make them be 
held responsible for others who can't make it. That is something, if it 
has to be done, could be more fairly done across the board.
  So I am very appreciable of the things in the bill, the increase in 
the loan limits, the reaching out to other entities to be able to 
function and reaching out to give people an alternative to predatory 
lending, and it is important that we set the principle. As we give 
people an alternative to what might be predatory loans in the purely 
private sector, we do it in a way that will give people of lower credit 
recognition that if they are responsible and meet their payments, they 
will no longer be put under the gun. I think we have further to go 
there, and as experience works out, I will be pushing for that.
  But it is very important that we set that principle, and I am 
grateful to the gentleman from Ohio, to my good friend from California 
who has done such great work in the housing area, and to the people in 
the administration who worked out an agreement with us to get this 
principle set forward.
  Mr. NEY. Mr. Speaker, at this time, I would like to yield 5 minutes 
to the gentleman from California (Mr. Gary G. Miller), the vice 
chairman of the Housing Opportunity Subcommittee who has done 
unbelievable work in so many areas to help with the housing bills.
  Mr. GARY G. MILLER of California. Mr. Speaker, I want to thank 
Chairman Ney and Mike Oxley for their help in this area. That is an 
issue that Barney Frank and I have worked on for quite a few years. We 
started out with a GSE, government sponsored enterprise, which is 
Fannie and Freddie, trying to reform that concept in high-cost areas.

                              {time}  1300

  We found out that many people in high-cost areas, such as Mr. Frank's 
district and my district in California and Maxine Waters' district, 
because of the rising costs of houses, people could not qualify for 
conforming loan limits. We had to raise the conforming rates in the 
high-cost areas, and the same problem once we completed that was 
realized in FHA.
  Barney and I took this on a few years ago, trying to take a system 
that has been up and running for 70 years and conform that system to 
today's marketplace. It has basically become so antiquated that many 
people in high-cost areas could not qualify for an FHA loan. In fact, I 
would talk to brokers and lenders in my district that have not been 
able to process an FHA loan in years because the system is so 
structured and the costs have gone up so high in housing marketplaces, 
that you have taken a situation where first-time and low-income buyers 
could not qualify; or if they had to go to a conventional loan because 
of the high loan-to-value ratios, they couldn't get those loans. And 
because of the payment-to-income ratios, they couldn't qualify for 
conventional. That is why FHA is an extremely viable option for these 
people.
  When I say ``these people,'' I am talking about the people who work 
in our districts: teachers, nurses, firemen, policemen. They live in 
areas that they often travel in California an hour and a half to 2 
hours just to get to work because they cannot afford to buy a home 
within the city within which they work. Their reasons might be lack of 
downpayment or other reasons that in the past have been figured to 
qualify for a conventional loan.
  That is why if we can bring FHA up to today's standards, we can 
provide loans for these individuals who need to buy housing where they 
work, who can make the payment, and they can qualify for an FHA loan if 
we raise it in high-cost areas.
  A situation many of my conservative friends, and I am extremely 
conservative on the Republican side, we had

[[Page H5741]]

the argument over is this a government program that is taxing people 
and basically providing a subsidy for somebody else, and it is really 
not. The people who qualify for FHA and get the FHA loans pay for the 
insurance. As a matter of fact, it makes a profit for the Federal 
Government.
  Some people say, well, we need to raise the amount of premiums and 
the percentage based on what they are borrowing, and some still believe 
that is appropriate. If it is proven that the system is not breaking 
even, which it is today, then let's look at it; but there is no reason 
to raise premiums on a loan that we are basically trying to expand for 
more people the opportunity to qualify for.
  Limiting the FHA's complicated downpayment calculation and 
traditional cash investment requirement is provided in this loan. It 
was a very cumbersome process. It was complicated. It did not need to 
be that way, and providing FHA the flexibility to set insurance 
premiums commensurate with the risk of the loan is in this bill, and 
that is most appropriate. They are basically saying that we are going 
to base the premium on how risky the loan is we are making to the 
individual, rather than coming up with some matrix that just says we 
are going to raise premiums overall for no proven reason.
  This says, let's look at the risk based on the individual, and let's 
base the premium on that. It is a reasonable approach. It takes FHA and 
brings it up to the level it should be today. It takes a system that 
worked 70 years ago, worked 20 years ago, but today it does not because 
of the inflation in housing, the costs have gone so high, that FHA 
loans are so low, you could basically not provide that opportunity to 
people who really needed it.
  I want to thank Maxine Waters who has been very helpful in this. We 
have had a lot of fun working together. There are some issues we don't 
agree on. This is one we are absolutely in lock-step on. In fact, it is 
amazing, between Maxine and Barney Frank and Chairman Ney and myself, 
the issues we have come together on in housing, trying to provide and 
meet the needs of our communities, and just by changing the rules 
offering expanded opportunity, we have come a long way to helping 
people get into a new home, both first-time home buyers and police and 
firemen who might be in their second or third home, but they just have 
trouble with the conventional marketplace because it puts them into a 
jumbo loan when you get up into these areas.
  Savings to an individual for this type of a loan might be $170 a 
month. That is tremendous. It provides an opportunity that does not 
exist today, and it is a very good bill, and I ask for an ``aye'' vote
  Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
New York (Mrs. Maloney), who serves on the committee.
  Mrs. MALONEY. Mr. Speaker, I rise in strong support of the Expanded 
Homeownership Act. It modernizes and moves the FHA into the realities 
of the housing market of the 21st century.
  I want to build on the comments of my colleague Maxine Waters who has 
worked selflessly and devotedly on moving this legislation to the floor 
in a bipartisan effort.
  There are three points that are particularly important to New York 
and the district that I represent. The bill raises the mortgage limits 
to 100 percent of area median income, thereby making more Americans 
eligible to receive loans under FHA.
  Secondly, it expands coverage, not only to higher risk individuals, 
but also to cover condos and co-ops. I represent many people who live 
in high-rises. They live vertically as opposed to horizontally. This is 
an important change. Many more will be eligible for FHA support.
  Thirdly, and very importantly to the elderly in New York City and 
around the country, it lifts the cap on the number of reverse mortgages 
HUD can insure, allowing many more elderly in our country to be able to 
stay in their homes.
  I congratulate the leadership on both sides of the aisle. This is an 
example of the bipartisan effort in the Financial Services Committee 
that has moved forward meaningful legislation, and I particularly thank 
my colleague and ranking member of the committee, Maxine Waters.
  Mr. NEY. Mr. Speaker, I yield back the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Washington (Mr. Inslee).
  (Mr. INSLEE asked and was given permission to revise and extend his 
remarks.)
  Mr. INSLEE. Mr. Speaker, I would like to address a very important 
part of this bill that increases Americans' access to reverse 
mortgages.
  Reverse mortgages are a tremendous vehicle by which Americans can get 
access to the equity in their home to make it available for health 
care, for assistance, for travel, for education; and now this bill will 
take three big steps forward to make reverse mortgages more available.
  First, it will do so by having a uniform national cap so that it will 
remove this cap in a lot of areas in the country that have prevented 
Americans from having reverse mortgages.
  Secondly, it will make it available for, essentially, homeownership, 
which might be in the best interests of senior citizens.
  Third, it will remove the cap on the number of reverse mortgages that 
essentially can go through the FHA home equity conversion program, 
which now issues 90 percent of the reverse mortgages in the country.
  So this is a fantastic opportunity, particularly for our seniors to 
be able to have access to the equity in their homes. It is a big stride 
forward. I know a lot of seniors are going to take advantage of it to 
make sure they can stay in their homes, to use their equity to finance 
having health care and assistance in their homes to give them their 
liberty.
  I want to thank the bipartisan effort to put this together. I also 
want to thank noted author Tom Kelly who has been a great advocate for 
getting these reverse mortgages used by more Americans.
  Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, let me thank the chairman, Mr. 
Ney, and his ranking member, Ms. Waters, for their constant enhancement 
of opportunities for homeowners, and allow me to congratulate the 
Congress who I hope will vote to add to the American Dream.
  I come from a community where under 50 percent own homes. So we are 
still striving in Houston, Texas, to provide those opportunities. There 
are three elements that I think are very crucial in this legislation 
that would help expand that opportunity.
  One, the risk-based pricing is a great step up. I have always argued 
that there needs to be some flexibility. Credit scoring has denied many 
of our hardworking taxpayers getting homes. This at least allows a risk 
assessment to be made on the homeowner's credit standing, and then if 
they emerge and do better, they can get out from under this assessment, 
and the ability for downpayment can range from high risk to low risk. 
That is good.
  In addition, including the 100 percent financing for FHA is 
outstanding because in all of our jurisdictions, the costs of housing 
is going up. One hundred percent is far better than 87 percent. Even 
Houston is a high-dollar market as more competition comes in for 
housing.
  I would also say that reverse mortgages is something that is an 
innovative tool. However, I hope in the legislation there is 
information to seniors so that they understand, and others who would 
partake of a reverse mortgage, what the pros and cons are so that, in 
essence, it is a positive and not a negative. You keep your house; you 
do not lose it. You are, in fact, given expanding opportunities.
  So I congratulate my colleagues for answering the question, Is the 
American Dream of homeownership for everyone? Yes, it is. It is for 
Houstonians who have less of a 50 percent ownership. Yes, it is, and 
the Expanding American Homeownership Act of the Financial Services 
Committee is a good start.
  I congratulate and ask my colleagues to support this particular 
legislation.
  Ms. WATERS. Mr. Speaker, in closing, I would simply again like to 
thank

[[Page H5742]]

Mr. Ney for having brought to this floor perhaps the most significant 
piece of legislation of this session, a piece of legislation that is 
going to benefit all, so many Americans, a piece of legislation that is 
absolutely going to open up homeownership opportunities in ways that we 
could not have done. He saved one of the most significant Departments 
of government by understanding that the FHA was in danger and that it 
was about to become irrelevant; and because of this legislation, it is 
revitalized. It can do what those who originally envisioned its 
possibilities intended for it to do.
  Mr. BACA. Mr. Speaker, I rise in strong support of H.R. 5121, the 
Expanding American Homeownership Act of 2006. I am proud to be a 
cosponsor of a bill that restores the Federal Housing Administration 
(FHA) program back to California's housing markets.
  The FHA program has not kept up with the needs of underserved 
homebuyers. According to HUD estimates, the number of working families 
served by FHA has declined considerably with only 3 percent of home 
buyers using FHA loans. I am especially concerned that this decline has 
had a disparate impact on the State of California. In 2000, FHA insured 
109,074 mortgages in California. But last year, FHA insured only 5,137 
loans. This is a decrease of 95 percent in just five years--by far the 
largest in the country!
  Many of my constituents are being priced out of the housing market 
because the cost of housing is too high. In fact, the median home price 
in San Bernardino County is $403,000 which is only affordable for 2 out 
of every 10 families. For these families FHA is not an option because 
the program's maximum mortgage limit is too low. As a result, FHA fell 
from providing 5,543 single family loans in my district in 2000 to just 
199 loans last year. The FHA program has all but disappeared in my 
district, placing housing further out of reach for underserved 
communities!
  If we don't pass the reforms in this bill, minority and low income 
families are left vulnerable in the housing market. Without FHA loans 
first-time and minority homebuyers with less-than perfect credit are 
left with fewer safe and affordable options. This creates an incentive 
for predatory lenders to steer them into more expensive and riskier 
loans.
  H.R. 5121 will help reverse this trend by improving the FHA program 
so that FHA can offer better mortgage options to low and moderate 
income families and minorities. It reforms the FHA program by raising 
the loan limits for high cost areas from 87 percent of the conforming 
limit to 100 percent of that limit. This change is critical to 
California, where home prices and new home construction have eclipsed 
FHA's current limit of $362,790.
  We must pass H.R. 5121 because it will allow the FHA program to reach 
underserved communities. All hard-working people deserve a fair deal in 
the homebuying process with a real chance to create better, more 
economically secure futures for their families.
  Mr. Speaker, I express my full support of this bill and urge my 
fellow colleagues to adopt its final passage.
  Ms. WATERS. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Hayes). The question is on the motion 
offered by the gentleman from Ohio (Mr. Ney) that the House suspend the 
rules and pass the bill, H.R. 5121, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. FLAKE. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this question will 
be postponed.

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