[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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