[Congressional Record (Bound Edition), Volume 153 (2007), Part 25]
[Senate]
[Pages 34401-34419]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     FHA MODERNIZATION ACT OF 2007

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will proceed to the consideration of S. 2338, which the clerk 
will report by title.
  The assistant legislative clerk read as follows:

       A bill (S. 2338) to modernize and update the National 
     Housing Act and enable the Federal Housing Administration to 
     more effectively reach underserved borrowers, and for other 
     purposes.

  The ACTING PRESIDENT pro tempore. The Senator from New York.
  Mr. SCHUMER. Mr. President, parliamentary inquiry: What is the status 
of the time situation?
  The ACTING PRESIDENT pro tempore. There is 30 minutes of general 
debate on the bill, equally divided.
  Mr. SCHUMER. Thank you. I yield myself 10 minutes.
  The ACTING PRESIDENT pro tempore. The Senator may proceed.
  Mr. SCHUMER. Mr. President, over the past few months, as the subprime 
crisis has deepened, I have said time and time again we need to act to 
help millions of American families at the risk of foreclosure to save 
their homes.
  Until now, we have been blocked in those efforts, which is 
unfortunate. But I do wish to thank my colleague from Oklahoma who, as 
always, has agreed to this debate, to a discussion of the issue on the 
merits. He wanted a careful look, wanted his voice heard but did not 
want to be dilatory for its own sake, and I very much appreciate that. 
Now I believe we can move this important legislation forward.
  The word ``crisis'' gets tossed around a lot in Washington. But make 
no mistake about it, we are in one. Almost a million Americans have 
lost their homes due to foreclosure this year alone. It seems each week 
foreclosures reach a new alltime high.
  Some people stand by and say: Do nothing. The administration has 
said: Well, let the market take care of this by itself. They have come 
up with various plans where they sort of tie themselves in a pretzel to 
avoid any Government involvement.
  But the fact is, if we are going to solve this problem, one thing we 
do not need is a bailout, but what we need is rational, smart 
Government involvement to help those at the bottom work their way out 
of this crisis which will, in a certain sense, trickle up and reassure 
the credit markets that things are being done and help the entire 
economy, because we have a triple whammy in this crisis that spreads 
outward. First are the more than 2 million homes that could be 
foreclosed upon in the next year and a half, 2 years. Second are 
declining housing prices. Because even if you paid your mortgage 
completely or have never missed a payment and are still paying it, if 
there are foreclosures in your community or foreclosures even in the 
country, housing prices decline.
  That hurts all of us and hurts the economy then, in the third level, 
in two ways. One, there is a dampening effect on consumer spending, 
and, two, there are the credit markets, which are right now frozen.
  If people cannot borrow, whether they be companies or individuals, it 
puts a real damper on the economy. The only way out of this is smart 
Government involvement--not solely. We need the private sector. But 
when the administration says they are never, ever going to get the 
Government involved, they have ideological blinders on, they are in an 
ideological straitjacket, they hurt those who will be foreclosed, they 
hurt all homeowners, and they hurt the general economy.
  If you talk to people in this country, even conservative Republican 
business leaders agree we need some careful, rational Government 
involvement, not a bailout. That is what we are trying to do this 
morning. The costs of inaction are high. The Joint Economic Committee 
estimated the spillover from the subprime foreclosure crisis could 
exceed $100 billion for homeowners, their neighbors, and the local tax 
base.
  On top of the subprime losses, the continuing housing slump could be 
a massive blow to the economy. Economists estimate a 10-percent decline 
in housing prices could lead to a $2.3 trillion economic loss at a time 
when our country cannot afford it.
  This legislation is the perfect example of the kind of help Americans 
are looking for. It is moderate, it is thoughtful, and it is directed 
at the problem.
  First, I wish to thank the two sponsors of this legislation, Senator 
Dodd and Senator Shelby, as well as my colleagues on the Banking 
Committee, where this passed 20 to 1, for their support.
  It is definitely and desperately needed. It has the support of the 
administration, one of the few areas where the administration has 
looked at some kind of moderate Government help. The FHA Modernization 
Act revitalizes an important Government agency that for years, until 
the rise of unscrupulous subprime lenders, helped thousands of families 
across the country achieve the American dream, and now in these 
troubled times, it can be a source of salvation for those families who 
were tricked into unaffordable loans.
  The bill makes a number of important changes to the FHA program, many 
of which will make it more competitive with subprime lenders, assure 
its financial help, and protect borrowers who were taken advantage of.
  First, and especially in high-cost States such as mine in New York 
and my colleague across the river in New Jersey, who will speak shortly 
on this measure, this is vital. For years, this program has been hard 
to use in our home State. When you go to a place such as Long Island, 
where the average home price is over $400,000, more than half the 
population cannot use FHA. That was never the intent.
  The bill also allows FHA to accept lower downpayments. It makes it 
more attractive to borrowers who could otherwise turn to an 
irresponsible subprime broker for their loan.
  This does entail some additional risk, but the legislation strikes a 
safe, responsible balance between increasing FHA's competitiveness with 
those lenders without endangering the program's bottom line.
  Finally, the bill expands the eligibility for counseling under the 
FHA program.
  We desperately need counselors. There is another piece of legislation 
still being blocked by my colleagues on the other side of the aisle, 
sponsored by the Senator from Pennsylvania, Mr. Casey, and the Senator 
from Ohio, Mr. Brown, and myself, aided by the help of Senator Murray, 
which will put $200 million into counseling. That is being blocked.
  This bill at least will allow the FHA to give counseling to a certain 
number of people. It is an improvement that not only helps borrowers by 
letting more of them preserve their homes, but it reduces losses to the 
insurance funds, which is good for taxpayers as well.
  This bill is not a panacea. It is, frankly, a small step--much needed 
but a small step. There are many more

[[Page 34402]]

things that have to be done: Money for those who need help in 
counseling; making sure there is credit for mortgages available, which 
involves using the agencies, the GSEs such as Fannie and Freddie. 
Congressman Frank and I have legislation to deal with that. We also 
need a protector for the future. Legislation Senator Dodd has offered 
and I have cosponsored and worked with him on for many months would 
actually prevent this from happening in the future by regulating the 
small group of mortgage brokers who are unscrupulous, as well as the 
mortgage lenders, almost all of them nonbanks.
  We still have a long way to go, but my hope is, given the magnitude 
of the crisis, that this first step will not be the last and that this 
first step represents a coming together of those who are not 
ideologues, those of us who say, yes, the Government needs to be 
involved in a smart, careful, and focused way. If that can happen, we 
cannot solve the subprime crisis, make it go away, but we can greatly 
mitigate the damage that occurs. We can reassure the markets finally 
that someone is in charge. The administration is trying to be involved 
but because of the ideological handcuffs, no Government involvement, 
and some of their plans get laughed at, and many of their plans are not 
taken seriously--just about all of them--because they won't deal with 
the magnitude of the crisis. You have to deal with it head-on.
  I am hopeful this is a good first step that will pave the way to 
other larger and even more necessary steps. I thank Senator Dodd, 
Senator Shelby, Senator Coburn, and my colleagues on the Banking 
Committee for their active support and guidance with this legislation.
  I reserve the remainder of my time.
  The ACTING PRESIDENT pro tempore. Who yields time?
  The Senator from Florida.
  Mr. MARTINEZ. Mr. President, may I learn the current time agreement?
  The ACTING PRESIDENT pro tempore. The Senator from New York has 15 
minutes, with 6 minutes remaining. The Senator from Florida has 15 
minutes, if he is controlling the time.
  Mr. MARTINEZ. I yield myself 5 minutes.
  Mr. President, I join with the Senator from New York in speaking 
about this important step we are taking to deal with a serious crisis 
that America and, frankly, the world is facing with credit. It is 
particularly important that we think about the many Americans who today 
feel threatened in their homes as they face the potential prospect of 
losing their homes because of the current situation. We have a partial 
answer to this large problem. It isn't the whole answer, but it is a 
very good first step. It is an important first step that is going to 
help a number of families stay in their homes.
  When I had the privilege of serving as Secretary of Housing and Urban 
Development, one of the hallmarks of our time was the attempt to put 
more and more American families into home ownership. It is the 
culmination of the American dream. That dream today is seriously 
threatened. The FHA Modernization Act before the Senate is a strong 
first step in the direction of fixing the problem.
  By the summer of 2010, about 600,000 people with subprime loans are 
expected to lose their homes because they will not be able to make 
their higher monthly payment. These are people who got into an 
adjustable rate mortgage, and each and every year or perhaps two or 
three times a year that mortgage resets at a higher payment and a 
higher rate. The way to avert that is to allow these folks to find 
another financing vehicle, and the FHA is the answer.
  HUD estimates that more than 200,000 first-time home buyers and 
current homeowners who need access to capital could obtain FHA-insured 
mortgages next year if Congress expedites passage of this legislation. 
That, combined with the administration's FHA Secure Program, will help 
more than a quarter million Americans avoid foreclosure and stay in 
their homes. The administration already has implemented a program 
called HOPE Now. That also is helping about 80,000 Americans to remain 
in their homes.
  The fact is, this is a timely piece of legislation, one that enjoys 
bipartisan support and one in keeping with the wonderful tradition the 
FHA has had in the home-ownership story of America.
  FHA began in 1934. Since that time, it has always operated in the 
black by collecting insurance premiums on the mortgages it insures and 
never burdening the taxpayers with any Government subsidy, and it has 
managed to help countless millions of Americans reach the dream of that 
first home.
  While I was HUD Secretary, we recognized that FHA was falling behind 
in market share because it had not been modernized. The rules had not 
been keeping up with changes in the marketplace. This is a tremendous 
first step. It is a step that is long overdue and one I am proud to see 
come about.
  I know some have concerns about the issue of reverse mortgages. I 
believe that is an issue which also falls well within the purview of 
FHA and can be safely done, well managed, and, in fact, should not be 
an impediment to this legislation moving forward.
  I don't want to take any more of the time. I believe it is very 
important that, working together, all of us will move this bill to 
fruition, helping hundreds of thousands of American families who have 
tasted the dream of home ownership to maintain the dream, stay in their 
homes, and work through the FHA program so they can then refinance 
their mortgages into mortgages they can live with.
  I thank Chairman Dodd and Ranking Member Shelby and others on the 
Banking Committee who have worked so hard to make this moment a 
reality. I am proud of any role I might have played in it because I 
think it is truly touching at the heart of where so many American 
families are today. They have had the dream of home ownership. Let's 
keep more and more American families in their homes, continuing that 
dream.
  (At the request of Mr. Reid, the following statement was ordered to 
be printed in the Record.)
 Mrs. BOXER. Mr. President, I would like the record to reflect 
that I would have voted in favor of the FHA Modernization Act today.
  California has been at the epicenter of the current foreclosure 
crisis, and this bill will provide new, safe, and secure financing 
opportunities both for homeowners currently trapped in abusive loans 
that are scheduled to reset at rates they no longer can afford, as well 
as for future borrowers seeking alternatives to the risky and exotic 
loans that many turned to or were steered toward in the absence of a 
viable FHA product.
  Among its most important features, the bill would raise the current 
limit on loans the FHA will insure from $362,000 to $417,000. In 
California, where the third quarter median home price was over 
$568,000, the ability to access FHA loans has virtually disappeared. 
According to the Department of Housing and Urban Development, 
California, which previously led the Nation in FHA loan usage, has seen 
its FHA loan volume drop from 109,074 in 2001 to just 2,599 in 2006, a 
decline of 98 percent and a loss of $13.6 billion.
  While the increase in the loan limit provided by this bill will 
provide welcome relief, the House version goes even farther, permitting 
the FHA to insure mortgages equal to 125 percent of the median area 
home price or 175 percent of the Freddie Mac conforming loan limit, 
whichever is lower. The House bill also would give the Secretary of 
Housing and Urban Development the authority to raise the new insurance 
limit by as much as $100,000 ``if market conditions warrant.'' For 
California and other high cost areas, this increase would further 
enable borrowers to avoid the type of nontraditional and frequently 
abusive loans that have gotten us into our current mess, and I will be 
urging conferees to support the higher limits.
  Today, however, it is important to recognize the significant step 
that the Senate has taken in overwhelmingly passing this bill as we 
seek to restore stability to the housing market and bring assistance to 
the more than 2 million Americans at risk of losing their 
homes.

[[Page 34403]]


  Mrs. FEINSTEIN. Mr. President, I am pleased that the Senate 
overwhelmingly passed the Federal Housing Administration, FHA, 
Modernization Act today. This bill would make much-needed improvements 
to this important program to give more homebuyers the option to get a 
FHA government-backed loan instead of the more risky products that have 
contributed to the current mortgage crisis.
  The FHA program is critical to insuring home mortgages for low and 
middle income borrowers that are unable to obtain financing from 
conventional mortgage lenders. However, over the past decade, FHA has 
been priced out of the market.
  In California alone, FHA loans have dropped from 109,074 in 2000 to 
just 2,599 in 2006--resulting in a decline of 98 percent in 6 years.
  Furthermore, the current crisis in the subprime lending market has 
put more than 500,000 American homeowners into foreclosure this year.
  My State of California has been especially hit hard.
  More than 50,000 California homes went into foreclosure in just the 
month of October. This equates to one foreclosure filing for every 258 
households in the state--about double the national foreclosure rate.
  The bill passed by the Senate today takes an important step to help 
American families who face the threat of losing their homes and those 
who want to buy a new home with a safe and affordable mortgage--it 
modernizes the FHA program and expands the financing options available 
to homebuyers.
  Specifically, this bill would:
  Increase the maximum size of mortgages that FHA can insure in 
expensive housing areas to $417,000 from the current level of $362,790.
  This increase in the loan limit is a step in the right direction, but 
more needs to be done. It is my hope that the final bill signed by the 
President further increases the loan limit to over $500,000, as 
included in the House-passed version of the FHA bill.
  This is essential so that more homebuyers in states like California, 
where the average cost of a home is over $490,000, can be helped.
  Reduce the downpayment requirement to 1.5 percent from the current 
requirement of 3 percent under the FHA program--allowing FHA to compete 
with subprime lenders.
  Require the secretary of the Housing and Urban Development, HUD, and 
the FHA Commissioner to work with the mortgage industry and non-profit 
organizations to improve the FHA loss mitigation process so more 
troubled homeowners can keep their homes.
  Increase consumer protections by requiring the secretary of HUD to 
prohibit unfair or deceptive practices that may be used with FHA-
insured manufactured housing loans.
  Improve housing counseling assistance by creating a pre-purchase 
counseling pilot program to test the effectiveness of various 
counseling options.
  It also expands the eligibility for post-purchase counseling for low 
and moderate income homeowners who are having trouble making their 
mortgage payments.
  It is crucial that we help make homeownership more affordable and 
accessible to American families and provide relief to those facing the 
threat of losing their homes.
  The Senate's approval of this legislation today is an important step 
to help achieve this.
  Thank you very much.
  Mr. President, I yield the floor.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. Who yields time?
  The Senator from New York.


                           Amendment No. 3853

  Mr. SCHUMER. Mr. President, under the order governing this bill, I 
call up the Dodd-Shelby amendment and ask unanimous consent that it be 
adopted.
  The ACTING PRESIDENT pro tempore. The clerk will report.
  The assistant legislative clerk:

       The Senator from New York [Mr. Schumer], for Mr. Dodd and 
     Mr. Shelby, proposes an amendment numbered 3853.

  Mr. SCHUMER. I ask unanimous consent that reading of the amendment be 
dispensed with.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The amendment is as follows:

  (Purpose: To require a 12-month moratorium on the implementation of 
             risk-based premiums for FHA insured mortgages)

       At the end of title I, insert the following:

     SEC. 123. MORATORIUM ON IMPLEMENTATION OF RISK-BASED 
                   PREMIUMS.

       For the 12-month period beginning on the date of enactment 
     of this Act, the Secretary of Housing and Urban Development 
     shall not enact, execute, or take any action to make 
     effective the planned implementation of risk-based premiums, 
     which are designed for mortgage lenders to offer borrowers an 
     FHA-insured product that provides a range of mortgage 
     insurance premium pricing, based on the risk the insurance 
     contract represents, as such planned implementation was set 
     forth in the Notice published in the Federal Register on 
     September 20, 2007 (Vol. 72, No. 182, Page 53872).

  The ACTING PRESIDENT pro tempore. Without objection, the amendment is 
agreed to.
  The amendment (No. 3853) was agreed to.
  Mr. SCHUMER. I move to reconsider the vote and to lay that motion on 
the table.
  The motion to lay on the table was agreed to.
  Mr. SCHUMER. I yield 5 minutes to my distinguished colleague from New 
Jersey, a member of the Banking Committee who has worked long and hard 
on the subprime issue.
  Mr. MENENDEZ. Mr. President, I thank my distinguished colleague from 
New York for his leadership, along with the chairman of the full 
committee and the ranking member, on this issue of the FHA. It is 
something I have been advocating for quite some time.
  In March of this year, at some of the first hearings of the Banking 
Committee about what we were envisioning as it related to the subprime 
crisis, I said that we were going to be facing a tsunami of 
foreclosures. Some people said that was an overestimation. 
Unfortunately, we have not even seen the full effect of that tsunami as 
we have hundreds of thousands of mortgages reset every quarter for the 
next 2 years, and at the rate of default and foreclosures, the numbers 
will grow dramatically. Of course, that has a consequence to all of 
those American families for which the American dream becomes the 
American nightmare. It has a consequence to neighborhoods and 
communities where those properties, if they go into foreclosure, have a 
negative effect on the values of the adjoining properties and, 
obviously, on those communities as it relates to the consequence of 
property values that continue to take a nosedive. Therefore, it has an 
enormous impact on the lives of people across our country. It also has 
a very significant impact as it relates to the economy of our Nation.
  I am glad, working in the committee, that we are here today to pass 
this important bill, the FHA Modernization Act. We clearly need to pass 
FHA reform.
  I spoke then about the need to raise the FHA loan limits in order to 
give borrowers more options. In my State of New Jersey, which is not 
unique, 13 of the 21 counties are at or over the FHA ceiling of 
$362,000, and 75 percent of New Jerseyans live in these 13 counties. 
Unless this bill passes, the FHA means absolutely nothing for the 
overwhelming part of the 9 million people who live in New Jersey as a 
vehicle, an opportunity to achieve home ownership and to be good 
borrowers, people who work hard, obey the rules, follow the law, serve 
in their communities, worship, but ultimately would not have the 
wherewithal to pay but for the type of loans the FHA can guarantee.
  I believe, in the wake of the tsunami of foreclosures, these are 
critical options to new homeowners and maybe even to some who will 
ultimately refinance. The legislation before us today will bring more 
attractive FHA mortgages into the subprime marketplace so borrowers 
looking to refinance or first-time homeowners have a realistic 
opportunity to choose an FHA loan instead of a risky mortgage.
  I knew then what I know now. This legislation is long overdue. 
Homeowners need more options than just the subprime market. That is why 
I am

[[Page 34404]]

pleased we will be finally passing this critical bill. I hope we give 
it a very strong sendoff from the Senate. I know this is something for 
which we are in agreement with the administration. It should receive 
broad bipartisan support. It is only one of many tools necessary to 
deal with the challenges the Nation faces on the subprime and the 
crisis of foreclosures, but it is an important one.
  I urge its passage and yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from New Hampshire.
  Mr. GREGG. Mr. President, I support this FHA initiative. As the 
Senator from New Jersey so appropriately noted, this is another tool 
which is absolutely critical in this area, as is an amendment which I 
have pending to the farm bill which, regrettably, as a result of last 
night's cloture motion, will be ruled nongermane and therefore will not 
be allowed to be brought up. This amendment says essentially that if a 
person's home is foreclosed on, they don't then get hit with an IRS tax 
lien for the amount of the foreclosure which is not recovered. In other 
words, if you own a home and, regrettably, you can't meet your payments 
because of a subprime event, and your loan was, say, $100,000, and they 
foreclose, take it away from you, and then they sell your home but they 
don't get $100,000--let's say they get $50,000 of that loan paid--you 
get hit with a tax bill for the additional $50,000. Or if there is a 
restructuring, where the lenders actually rewrite your loan so you can 
make your payments, and that represents a writedown in the value of the 
loan, you get hit with a tax bill.
  So the irony of the event is, it is pretty devastating to people. 
First, their home gets taken. Then the IRS agent shows up and gives 
them a tax bill and hits them with a tax lien. That, obviously, is not 
fair, and it is not appropriate. It is a quirk of our Internal Revenue 
law. This amendment would eliminate that. It would eliminate that 
event.
  I do think it is important. I think it is an important element of 
moving forward in a way that tries to work us through this subprime 
meltdown which is having a deleterious effect on our economy and, 
obviously, is having a very tremendous personal impact on people who 
are affected by the interest rates on their loans jumping to a point 
where they can no longer pay them.
  So I regret this amendment was ruled out of order for all intents and 
purposes by the cloture motion. I believe there was very strong 
bipartisan support. In fact, I have not met anybody so far who is 
opposed to this concept. I hope it can be included in a final package, 
either under unanimous consent or because nobody objects to it, or, 
alternatively, that the Finance Committee, which I know is working on 
this issue, can come forward and offer a unanimous consent request to 
move this free standing.
  I think it is important we do it now. I do not think we can wait. 
These loans are being foreclosed on now. The people who are getting hit 
with these tax liens are getting these liens today. So it is very 
important we move promptly.
  So I wished to highlight this issue also as one of the issues which 
is raised relative to resolving this question or at least mitigating 
the question of how we deal with this subprime meltdown.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. Who yields time?
  The Senator from Florida.
  Mr. MARTINEZ. Mr. President, how much time is remaining?
  The ACTING PRESIDENT pro tempore. The Senator from Florida has 7 
minutes 14 seconds; the Senator from New York has 1 minute 28 seconds 
remaining.
  The Senator from New York.
  Mr. SCHUMER. Mr. President, I would like to yield 5 minutes to my 
colleague and friend--our majority whip--from Illinois, Mr. Durbin, our 
remaining time on this and then 5 minutes from the time against the 
Coburn amendment.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The Senator from Florida.
  Mr. MARTINEZ. Mr. President, from our side I would like to yield to 
Senator Isakson from Georgia 5 minutes of the remaining 7 minutes.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The assistant majority leader is recognized.
  Mr. DURBIN. Thank you, Mr. President. I will defer to the Senator 
from Georgia if he wants to speak at this moment.
  Mr. ISAKSON. I will be happy to.
  The ACTING PRESIDENT pro tempore. The Senator from Georgia is 
recognized.
  Mr. ISAKSON. Mr. President, I rise to commend the authors of this 
legislation on what they have done. This is an outstanding piece of 
work. I spent 33 years of my life in the single family housing 
business. When I got started in 1967, I cut my teeth selling houses on 
FHA and VA loans. For all those years--and it has now been 40 years--
the FHA and VA have served the United States of America well.
  The first thing the American public needs to understand is the 
current mortgage crisis in America is not an FHA problem, from a 
standpoint of poor underwriting or poor loans. FHA does a good job of 
underwriting, a good job of servicing, a good job of appraising. They 
have good standards.
  The subprime market problem is an irresponsible lending practice in 
the conventional market, particularly when it comes to the 
underwriting. However, because that crisis does exist, FHA is going to 
be looked to as the savior in many cases. As conventional capital 
restricts and credit is reduced, it is going to be more important than 
ever for the FHA to be able to meet those demands.
  But during the deliberations of this and during the writing of this 
bill, Senator Shelby and Senator Dodd did some great things the 
American public needs to understand. They realized one of the problems 
in the subprime markets was they were starting to make 100 percent 
loans--interest only--for 3 or 4 years, with a bullet at the end.
  This bill specifically ensures that every FHA loan, every FHA loan 
that is made will have at least a downpayment of 1.5 percent. So there 
is not going to be any 100 percent lending. You will have some skin in 
the game.
  Statistically, you always know in the housing business when a 
borrower has to put equity in a house, it is an insurance policy that 
loan is going to be paid. That is the insurance that ensures FHA they 
have a very low risk on the taxpayers' money.
  Secondly, this recognizes the rising values in America and raises the 
cap on the amount of an FHA loan that can be made. This is going to 
allow FHA to meet a lot of demand that is going to be created by 
failures in the subprime market.
  Another point on the subprime market is, FHA loans have not ever 
been, nor are they now, subprime loans. They are intended to be loans 
for those entering the housing system of the United States of America.
  My dear friend, the Senator from Oklahoma, is going to offer an 
amendment later on which I will comment on for a second. He and I have 
had some discussions on it.
  There is a section of the bill that deals with what is known as 
reverse mortgages, and probably most people in here would not know what 
that is. But basically that means, if you pay for your house and you 
get in your senior years and you want to draw on the equity and value 
of that house, then you can take out a mortgage against your house, and 
instead of making payments every month to pay it off, you receive 
payments every month up to a percentage of the appraised value of the 
property.
  So for people reaching their latter years or their senior years, who 
need to be able to supplement their income to exist, they can use the 
equity in that house to continue to have an income and a cash flow.
  FHA can make that loan and insure it. So can the conventional 
markets. The question the Senator from Oklahoma has is whether the FHA 
should raise the limit on the number of those loans it makes, which is 
at $275,000

[[Page 34405]]

right now. Talking to FHA, they are at that cap.
  There is a provision in the bill that calls on CBO to make a study to 
determine what that cap should be. But in the meantime, we should not 
be capping the number of loans. So the bill is appropriate to raise the 
cap, and it is appropriate to call for the study. I reluctantly oppose 
the amendment, but I do so mainly because I wish to ensure every 
American senior who has paid for their home, who has it mortgage free, 
has the opportunity to leverage that home to have income in their later 
years, safe and secure by the underwriting process of the FHA.
  But I conclude with the way I began: This is a great bill for the 
United States of America. It is not a reaction to bad practices on the 
part of FHA, but it is a reaction to say that because of our good 
practices, because of the capital that is available because of FHA, it 
is important for us to recognize the demand that will come to us as a 
byproduct of the subprime market.
  I commend Senator Crapo, Senator Shelby, Senator Dodd, Senator 
Schumer, and all those who have worked on it, and I commend it to my 
colleagues for a favorable vote.
  I yield back.
  The ACTING PRESIDENT pro tempore. The assistant majority leader is 
recognized.
  Mr. DURBIN. Mr. President, first, I wish to thank my colleague, 
Senator Schumer from New York, for his leadership on this issue and 
Senator Martinez of Florida and Senator Carper, who played an important 
role in making certain this bill came to the floor. It is timely. It is 
important.
  Back the late 1920s, the United States faced an overwhelming housing 
crisis. The values of homes were plummeting, and the availability of 
credit to buy homes was in jeopardy. At that time, President Franklin 
Roosevelt and others stepped in, in 1932 and beyond, to make a massive 
commitment to restoring the American dream for thousands, if not 
millions, of American families.
  One of the means by which it was restored was the creation of the 
Federal Housing Administration. This Government agency stepped into the 
process of mortgages and said: We will provide backing and guarantee 
and assurance it is safe to buy a home, and it is safe to loan the 
money.
  That started to restore the confidence of the American consumers in 
our housing market--a confidence which led to the dramatic expansion of 
home ownership in America, the expansion of personal wealth, as 
families invested in their homes and saw their assets grow, and then 
the investment of the growth of America's communities, neighborhoods, 
and towns. It is part of the American dream.
  Not a single one of us will forget the first home we ever purchased. 
Moving from being a renter to a homeowner is a watershed in anyone's 
life. Your feeling about where you live and what you want to put into 
where you live changes when you become a homeowner.
  Now we are involved in another housing crisis. It is a crisis which 
many want to minimize. But they should not. The fact that 2.2 million 
Americans face foreclosure is not just your neighbor's misfortune, it 
is a misfortune for your neighborhood. It is a misfortune for our 
Nation.
  That is why this bill is so important. We are trying to find ways to 
bring that same type of confidence and liquidity back into the housing 
market. That is why this bill is timely and should be passed on an 
emergency basis.
  When the Federal Housing Administration, the FHA, steps up and 
increases the loan limits, it means it is a realistic appraisal of 
today's housing market, so they are relevant to the needs of average 
families who pay higher costs now for housing than they did a few years 
ago. When we reduce the downpayments, it means some families will have 
their chance to move into a home even earlier in their earning years, 
rather than waiting and renting and perhaps missing that opportunity.
  I am heartened by the fact that this bill includes counseling--not 
only counseling for the purchase of a home but counseling when a family 
is troubled and worried about whether they can continue to make their 
mortgage payments.
  All of these are moves in the right direction. I can tell you many 
think this housing crisis is an isolated crisis in America. It is not. 
Mr. President, 2.2 million foreclosures will lead to the reduction in 
value of 44 million single family residences, condos, and other units 
of home ownership. Forty-four million homes will lose value because of 
foreclosures. I have seen it on the West Side of Chicago, where 
gentrificaton and modernization have taken neighborhoods that were 
nothing more than vacant lots and turned them into town homes and row 
houses that are worth hundreds of thousands of dollars. Now one of the 
houses on the block is boarded up, facing foreclosure and an auction, 
realizing at the auction the asking price is likely to be at least 20 
percent to 30 percent lower than the value that was originally assessed 
on the home. That means every home in the neighborhood takes a hit.
  What does it mean when 44 million homes lose value in America? It 
means 1 out of 3 homeowners in America will see a decline in the value 
of their home. It is not just the house you are living in, it is also 
the most important asset in most family's lives. That is why this bill 
is needed. That is why we need to move forward as quickly as possible.
  Let me say, even with this bill, even with Secretary Paulson's 
proposal 2 weeks ago, these are modest steps that need to be built 
upon. It is not enough. It is good. I want to see it move. It is 
important. We need to do more. This housing crisis has become an 
economic crisis in America, and we need to face it squarely. Franklin 
Roosevelt did in the 1930s. We need to do that today.
  Let me add a word too. I want to change the bankruptcy law so a 
family facing foreclosure, going into bankruptcy, has one last chance 
in the bankruptcy court to renegotiate the terms of their mortgage. You 
can do that today if you take a vacation home into your bankruptcy or 
your family farm into a bankruptcy. But the law prohibits the 
renegotiation of the terms of your mortgage for your principal 
residence. That makes no sense whatsoever. A foreclosure can cost the 
parties involved up to $50,000. The ultimate sale of the home, after 
foreclosure, can bring maybe 70 percent or 80 percent of the actual 
value of the home. Now what we need to do is look at a comprehensive 
approach to deal with the housing crisis which threatens our economy.
  I urge strong support for this legislation.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. Who yields time?
  Mr. MARTINEZ. Mr. President, could I inquire as to the remaining 
time?
  The ACTING PRESIDENT pro tempore. There is 3 minutes remaining for 
general debate on the bill on the Republican side.
  Mr. MARTINEZ. Mr. President, I yield 2 minutes on the bill itself 
from the time remaining to the Senator from Colorado.
  The ACTING PRESIDENT pro tempore. The Senator from Colorado.
  Mr. ALLARD. Mr. President, I thank the Senator from Florida for 
yielding me the time. I will make my comments very briefly.
  First of all, I rise in support of this FHA reform package. I do not 
think this is the time for us to take choices away from homeowners and 
consumers. This helps provide additional choices for homeowners with 
some safeguards.
  The FHA reverse mortgage program contains some important safeguards 
for borrowers such as mandatory counseling and limits on fees that can 
be charged. For those very rare instances in which reverse mortgages 
were used as part of a predatory or fraudulent scheme, I support 
vigorous enforcement against the perpetrators. The problem is with the 
perpetrators, not with the reverse mortgage program.
  The bill also provides some provisions restricting seller-financed 
home equity plans. There are some provisions which I think are good. 
There are provisions for the energy efficiency mortgages. I am cochair 
on the Renewable Energy and Efficiency Caucus, and

[[Page 34406]]

I want to seek every opportunity we can to have structures that promote 
energy efficiency. I think that is a good part of the bill. I thank 
Chairman Dodd and Senator Shelby, as well as Senator Martinez and 
Senator Schumer, for their work on this bill. I am pleased this reform 
package also includes title I manufactured housing, which is something 
I have worked on with Senator Bayh.
  So there are some important reforms to be offered on this bill, and I 
think they are offering opportunities for affordable home ownership. So 
I am rising in support of this particular piece of legislation.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Florida is 
recognized.
  Mr. MARTINEZ. Mr. President, with the remaining time, I simply wanted 
to say I think it is wonderful when we come together, Republicans and 
Democrats, to tackle one of America's problems. The subprime crisis, 
the loss of home ownership by so many American families, the threat of 
it, is particularly an acute problem at this time in our history. It is 
good that in this season of Christmas we have made a downpayment on 
this problem. The Government will not be able to fix all of the 
problems out there in the credit community; however, this is a good 
step, a good first step, and a good bipartisan step.
  Senator Shelby, the ranking member of the subcommittee, has played an 
integral part of us getting to this point today, and I thank him.
  I yield back the remainder of my time.
  Mr. SHELBY. Mr. President, I join my colleagues in urging passage of 
S. 2338, the FHA Modernization Act of 2007.
  The Banking Committee has invested a considerable amount of effort 
and time to reach agreement on this bill.
  Legislating can be a difficult process that requires not only 
patience but also a willingness to compromise. The Banking Committee 
has been able to compromise in a way that achieves a balanced bill.
  The bill makes the necessary changes to the FHA program so that it 
can meet the needs of today's mortgage marketplace. The bill also 
provides protections for the American taxpayer who ultimately bears the 
financial risks of the program.
  The end of a legislative session on the eve of an election year can 
be a very difficult time to reach consensus on just about anything. 
When we are able to come together, it is incumbent upon us to seize 
that opportunity and move forward.
  With that in mind, I commend Chairman Dodd's efforts to craft a 
bipartisan bill and I encourage all my colleagues, on both sides of the 
Hill, to support final passage of S. 2338 as passed by the Senate.
  The ACTING PRESIDENT pro tempore. All time for general debate has 
expired.
  The Senator from Oklahoma is recognized.


                           Amendment No. 3854

  Mr. COBURN. Mr. President, I call up amendment No. 3854 and ask for 
its immediate consideration.
  The ACTING PRESIDENT pro tempore. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Oklahoma [Mr. Coburn] proposes an 
     amendment numbered 3854.

  Mr. COBURN. I ask unanimous consent that the reading of the amendment 
be dispensed with.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The amendment is as follows:


                           amendment no. 3854

(Purpose: To ensure the cap on Home Equity Conversion Mortgages is not 
   permanently eliminated before a study regarding program costs and 
                   credits is submitted to Congress)

       On page 20, between lines 18 and 19, insert the following:
       (e) Effective Date.--The amendment made by subsection 
     (a)(2)(A) shall not take effect until the study and report 
     required under subsection (d) has been submitted to Congress.

  Mr. COBURN. Mr. President, I don't disagree we have to take action to 
help those people who are in a bind now based on both the economics, as 
well as probably a pretty severe bubble that has occurred. The real 
fact is some people are going to lose their homes. I have agreed to 
this debate, not because I was trying to stop all of the FHA 
modernization, but because I am markedly concerned that in this 
component what we are doing has nothing to do with the crisis that we 
see today, but, in fact, will put the next two generations in 
obligation for a sum somewhere between $50 billion and $60 billion in 
terms of reverse mortgages.
  Now, the question I would ask, which has not been asked, is where are 
the metrics to measure the market forces in reverse mortgages in this 
country? There are none. As a matter of fact, this bill looks at that 
by asking for a study. But the other intent of the bill is that we ask 
for a study, but we eliminate the cap which the study is supposed to 
help us determine.
  There are some other concerns the American taxpayer should have, one 
of which is FHA has what is called a qualified audit. They have two 
material weaknesses we wouldn't accept from any other corporation in 
this country in which we would entrust our money or invest our assets. 
When they are audited, there are two material weaknesses in their 
ability to control what they are doing, measure what they are doing, 
and assess what they are doing. We ought to be concerned about that.
  We are simply asking with this amendment that before we raise the cap 
on the noncritical area in the home mortgage market, we, in fact, study 
to know what we are doing. The idea for the study is great, but the 
study is going to have limited value if, in fact, we move all reverse 
mortgages to the Government. That is going to be the ultimate impact of 
this bill.
  The crisis is in the mortgage industry, not the reverse mortgage 
industry. But we are applying and using that crisis to absolutely 
ensure that in the future, our children are going to be hooked for the 
guarantee for all of the reverse mortgages in this country. We are 
going to limit the private reinsurance equity reverse mortgage in this 
country by what we do.
  I think the other thing we ought to think about as we do this is some 
``what-ifs.'' What if we don't get a good handle on this subprime 
credit and the debt situation that is going on? What if we end up 
becoming the true guarantor of all of these loans? What if they get to 
the point where they can't be repaid? It is not going to be the 
Presiding Officer and me who are going to pay this; it is going to be 
the next couple of generations.
  So this amendment is just designed for prudence. It says, if we are 
going to study this, let's study it and then make a decision. There is 
no credible source that says there is a shortage of access of credit 
for reverse mortgages in this country. It is not in the committee 
report. It is not in the report. So why are we doing this? Because it 
works and because people--we are doing it because that is the way 
everybody will go if you can get a Government-guaranteed loan. The 
banks make more money on it. It is easier--you evidently have to 
qualify, but conventional reverse mortgages will go out the window. So 
what have we done with that? We have shifted the risk for all of the 
reverse mortgages in this country to our kids. If that was where we had 
a crisis, then I would be in agreement that maybe we should go there, 
but that is not where it is.
  What we are attempting to do with the FHA Modernization Act is to 
help those who are in a crisis now. Probably, had we done this 3 years 
ago, many of the people who are in subprime loans would have been in 
FHA, and we wouldn't see the extent of the crisis we have today.
  So what I would ask is that our colleagues stop for a minute and say: 
Do we really want at this time to do this? I understand that I am going 
to be opposed on this by members of the Banking Committee, but I would 
ask them to show me the data that says there truly is a dent in this 
aspect of the reverse mortgage market.

[[Page 34407]]

  Mr. President, I reserve the remainder of my time.
  The ACTING PRESIDENT pro tempore. Who yields time?
  Mr. SCHUMER. Mr. President, I yield 7 minutes to the distinguished 
Senator from Maryland.
  The ACTING PRESIDENT pro tempore. The Senator from Maryland is 
recognized for 7 minutes.
  Mr. CARDIN. Mr. President, I rise to speak on behalf of thousands of 
families in my home State of Maryland.
  For them, the American dream has turned into a nightmare.
  I am referring to the phenomenon called the ``credit crunch,'' the 
``mortgage meltdown,'' or the ``subprime crisis.''
  Regardless of which name we choose to attach to it, the situation 
threatens to upend the financial stability of individual homeowners and 
neighborhoods.
  The latest projections show that, nationwide, millions of Americans 
may lose their homes, and the ripple effect on our economy will be felt 
by all.
  There may be no more powerful symbol of the American dream than home 
ownership.
  For most American families, their largest asset is their home, and it 
serves as their primary tool for building wealth.
  Buying a home ranks among the top motivations for saving. Owning a 
home gives a family a stake in their communities. It provides a hedge 
against an inflationary rental market; it provides tax benefits; it 
provides a source of revenue for emergency expenses, and it provides 
security in old age.
  In our communities, higher levels of home ownership improve the 
appearance and stability of neighborhoods, and result in better 
schools, more civic participation, and lower crime rates.
  Many public and private entities have committed their energies to 
increasing home ownership. Much progress had been made, with the rates 
of home ownership among every racial and ethnic group of Americans 
reaching new highs every year since 1995.
  That is precisely why the crisis that is spreading through our Nation 
is so alarming.
  The Mortgage Bankers Association has just released its National 
Delinquency Survey for the second quarter of 2007. Rates of mortgage 
delinquency have reached their highest point in twenty years. 
Foreclosure rates are at the highest level ever.
  It is now estimated that up to 2.2 million Americans who took out 
subprime mortgages between 1998 and 2006 could lose their homes during 
the next 2 to 3 years.
  As the fallout from this situation continues, we are learning more 
and more about the factors leading to the crisis. One key factor is the 
category of loans known as ``subprime.''
  Subprime loans usually have interest rates 3 percentage points or 
more higher than prime loans, which are typically offered to applicants 
with credit scores of 650 or higher. Subprimes can be either ``fixed 
rate'' loans, where payments stay the same over the life of the loan, 
or they can be adjustable rate mortgages, known as ARMs.
  ARMs come in many forms: some begin with very low ``teaser'' rates 
that then rise steadily as prime interest rates increase. Others, such 
as 2/28 loans, offer very low rates for a brief period, and then reset 
sharply higher, regardless of the prime interest rate, for the 
remaining term of the loan. Many borrowers choosing those loans were 
told that because their homes were certain to increase in value, they 
would be able to refinance later and get better terms before their 
interest rates rose.
  They assumed that the rapid escalation of prices that occurred in the 
first part of this decade would continue. I have heard from borrowers 
who took out 2/28 or 3/27 loans erroneously believing that as long as 
prime interest rates remained low, their own mortgage rates would also. 
They are now facing huge increases in their monthly payments, some as 
much as 40 percent higher.
  Some borrowers are also facing foreclosure because they could not 
afford the third or fourth year payments, and were not able to 
refinance because of missed payments or because the value of their home 
was less than the outstanding debt. Many regret ever purchasing a home 
and blame themselves for entering into a raw deal. But a 2005 Federal 
Trade Commission study showed that many borrowers did not understand 
the costs and terms of their own recently obtained mortgages. Many had 
loans that were significantly more costly than they believed, or 
contained significant restrictions, such as prepayment penalties, of 
which they were unaware.
  For a while, as problems became evident in other areas of the county, 
such as Florida and Nevada, analysts said that the Washington 
metropolitan area and the surrounding region would not be affected. 
They said that the presence of the Federal Government as a major 
employer and associated contracting opportunities would prop up housing 
prices and sustain the market. It didn't turn out that way. This area 
is now very much affected by the mortgage mess. Northern Virginia is 
experiencing some of the sharpest declines in home values in the 
Nation.
  The Mortgage Bankers Association has reported that 24 States have 
already seen decreased revenues directly attributable to changes in the 
housing sector. This is for two reasons: first declining home values 
have led to reduced property tax revenues. Second, fewer sales have 
resulted in lower revenues from transfer taxes--the fees that are paid 
when homeownership is transferred from sellers to buyers.
  Maryland is one of those 24 States. Let's look at what is happening 
in Maryland.
  The top chart shows the percentage of loans that are seriously 
delinquent in Maryland and in the United States. Seriously delinquent 
loans are more than 3 months delinquent or in the process of 
foreclosure. The percentage of prime loans is relatively small--under 2 
percent. But in the subprime category, the rates are much higher--for 
fixed rate loans, it is more than 4 percent in Maryland and nearly 6 
percent nationwide. For subprime ARMs, it is nearly 8 percent in 
Maryland and more than 12 percent nationwide.
  This tells us that nearly 1 in 15 Maryland mortgage holders with a 
subprime loan are in imminent danger of losing their homes. For 
borrowers with subprime adjustable rate mortgages, the rate rises to 
nearly 1 in 10.
  The bottom chart shows how the situation has worsened over the past 3 
years in Maryland with respect to delinquent loans. These are loans 
that are 30 to 60 days past due with no payments being made. Since the 
fourth quarter of 2004, the rate of delinquent prime loans has 
increased marginally from 1.7 percent to 2.06 percent. But the rate of 
delinquent subprime loans has increased by more than 50 percent--from 
8.56 percent at the end of 2004 to 13.76 percent today.
  If no comprehensive plan is put into effect to address this problem, 
these loans will become seriously delinquent and lead to foreclosure.
  Foreclosures affect entire neighborhoods, as the repossessed homes 
often stay vacant for extended periods. Some are boarded up, the lawns 
go untended, the neighborhoods become undesirable places to live, and 
the value of the surrounding homes is depressed.
  According to the Center for Responsible Lending, in 2005 and 2006, 
186,000 subprime loans were issued in Maryland. They accounted for 
nearly one-third of all home loans originated in the State during those 
2 years. It is projected now that because of ballooning interest rates 
that borrowers will not be able to afford, more than 38,300 Maryland 
homes will be lost to foreclosure.
  This phenomenon is hitting hardest in the communities least able to 
weather the storm. Some groups--African Americans, Latinos, and the 
elderly--are disproportionately affected.
  In recent years, minorities have markedly increased their rates of 
homeownership, helping to increase wealth and improve economic 
stability.
  These gains are now very much at risk.
  This is because statistics show that nationwide in 2005, more than 54 
percent of loans to African Americans and 46 percent of loans to 
Latinos were subprime loans.

[[Page 34408]]

  But minorities did not necessarily receive subprime loans because of 
lower credit scores or lower incomes. Five years ago, the Center for 
Community Change, a nonprofit consumer advocacy group, issued a report 
entitled, ``Risk or Race?'' It demonstrated that subprime lenders 
target minority communities and that African Americans and Latinos pay 
higher loan rates than Whites with similar incomes.
  When it comes to buying a home, when incomes and credit scores were 
the same, African Americans were 3.2 times more likely than Whites to 
get a higher rate loan. Latinos were 2.7 times more likely to get a 
higher rate loan.
  When it comes to refinancing, African Americans were 2.3 times more 
likely than Whites to get a higher rate loan, and Latinos were 1.6 
times more likely.
  Here's something that is even more surprising: the disparity between 
Whites and minorities increases as incomes rise. Minorities with higher 
incomes are more likely than those with lower incomes to be offered a 
higher rate loan.
  So minorities are more likely to have subprime loans, and subprime 
loans are more likely to go into foreclosure, now at alarming rates.
  On average, minority households have median net worth that is less 
than one-tenth that of White households. Of the wealth that African 
Americans and Latinos possess, two-thirds is in home equity. So the 
mortgage crisis is placing not just homes, but also the economic 
stability of minority communities, in serious jeopardy.
  This crisis will have a profoundly negative effect on the future of 
these communities.
  An article earlier this week in the Washington Post featured Caprise 
Coppedge, who works as a housing counselor at United Communities 
Against Poverty in Capitol Heights, MD. Capitol Heights sits right on 
the border between Washington, DC, and Maryland in Prince George's 
County. Ms. Coppedge spoke of the increased volume of people coming to 
her for relief, most directly as a result of mortgage problems. She 
said that her caseload of people who need help with mortgage payments 
has increased from one person a week to three a day. She said, 
``There's been a shockingly sharp increase of people in need of help in 
the past 6 months. It's unreal.'' Last year, her caseload consisted 
primarily of renters behind in their payments, and the rare homeowner 
who fell behind in payments had experienced job loss or some other 
infrequent event.
  She continued, ``Then in midsummer, we felt the tide turning. People 
started trickling in. First they came in to express concern about their 
loans and gathered information. Then by September, everything picked up 
speed and suddenly, people were telling us they were behind on their 
mortgages.''
  The Post reported that in Prince George's County, 127 out of every 
10,000 homes are in foreclosure. It is the highest rate in Maryland and 
one of the highest in the region. There are now approximately 57,000 
subprime loans being serviced in Prince George's County--41 percent of 
all loans in the county. Federal Reserve Data compiled by the Consumer 
Federation of America showed that 43 percent of people buying homes in 
Prince George's County in 2005 used high-cost loans, compared with 20 
percent in the region overall.
  Similar trends are evident in Baltimore City and Montgomery County. 
These are the areas that have the most to lose as the subprime crisis 
deepens.
  Prince George's County Executive Jack Johnson has pledged $10 million 
in foreclosure assistance to help keep people in their homes. This 
effort will help many families, but the magnitude of the problem 
demands resources that only the Federal Government can bring to bear.
  Finally, there is another set of statistics that should raise the 
antenna of every Senator. Conventional thought has always held that 
your credit score affects your mortgage rate.
  For fixed-rate loans, the highest FICO scores translate to the lowest 
interest rates and the lowest monthly payments. However, Fannie Mae, a 
government-sponsored loan buyer, has estimated that up to half of 
subprime borrowers actually had credit ratings that could have 
qualified them for prime rates. Another study by First American Loan 
Performance, a San Francisco research firm, says that this proportion 
reached 61 percent in 2006.
  How could this have happened? There are many factors involved: I will 
mention just a few: lack of consumer education; the brokerage industry; 
the advertising industry; and predatory lending, which I have already 
discussed.
  First, the lack of consumer education: a Mortgage Banker Association 
survey from 10 years ago indicated that nearly one-third of homebuyers 
never met with anyone except their real estate agent when they bought a 
home. The numbers may have changed somewhat, but the extent of the 
current crisis suggests that the picture may have not changed much.
  A more recent borrower survey by the Mortgage Bankers found that half 
of borrowers who had purchased a home in the previous 12 months 
couldn't recall the terms of their mortgage.
  Second is the brokerage industry: There is a term called ``yield-
spread-premium,'' or YSP. Simply put, it is the amount that mortgage 
brokers are paid by lenders for originating a loan.
  Some brokers have reportedly received up to 5 points for every 
subprime loan they originate--that works out to $10,000 on a $200,000 
mortgage. On a prime loan, the margin is about one percent, or $2,000. 
The Wall Street Journal reported that a March 2007 rate sheet from New 
Century Financial Corporation told brokers they could earn a ``yield 
spread premium'' equal to 2 percent of the loan if the borrower's 
interest rate was an extra 1.25 percentage points higher than the 
listed rates.
  The tiny print at the bottom of the document read, ``For Wholesale 
Use only. Not for distribution to the general public.'' New Century 
Financial is now in bankruptcy protection and no longer issuing 
subprime loans.
  Where do the extra payments to the broker come from? They are 
financed by charging the borrower a higher rate. So the monetary 
incentives are in place for brokers to steer would-be borrowers to the 
riskiest and most costly loans. About 70 percent of subprime loans are 
originated by mortgage brokers who get paid with these YSPs.
  Third, even with the intense media attention paid to this crisis, you 
can still open any newspaper and see advertisements for new housing 
developments. The developers are offering balloon mortgages that are 
more likely to lead to foreclosure for many borrowers. Also in many 
community papers you will find ads from subprime lenders touting how 
borrowers can get loans with no documentation of income, no down 
payments, and little or no credit history.
  The crisis is national and we need a national response. The President 
and Treasury Secretary Paulson have put forth a proposal that is 
voluntary and, by many estimates, will help only about one in five of 
the subprime borrowers whose rates are set to increase over the next 
year. It is limited to borrowers who took out loans only since 2005 and 
only those with lower credit scores who are up-to-date on their 
payments.
  Residents of heavily affected counties in Maryland and many other 
counties across the Nation would no doubt say that a more comprehensive 
and inclusive solution is required. Several bills have been introduced 
in the House and Senate, including S. 2338, the FHA Modernization Act, 
which we are considering today. This measure will increase the FHA's 
loan limits for single families to 100 percent of the median home price 
in an area, up from 95 percent, and it will reduce the FHA's down 
payment requirements from three to 1.5 percent. This bill will also 
authorize $200 million for foreclosure-prevention counseling for low- 
and moderate-income homeowners who are having trouble making their 
mortgage payments. I support the reforms included in this bill and I 
look forward to working with my colleagues on additional solutions.
  We must work to repair the damage that has been done, and change the

[[Page 34409]]

laws so that prospective homebuyers can secure affordable and fair 
loans. People in our communities are looking to us for leadership and 
we must provide it. The sooner we act, the more families' dreams will 
be preserved.
  Mr. President, I yield the floor.
  The ACTING PRESIDENT pro tempore. Who yields time?
  The Senator from Florida is recognized.
  Mr. MARTINEZ. Mr. President, we have reached an understanding to use 
the remaining time. At this time, I yield, in opposition to the 
amendment, 8 minutes to Senator Crapo.
  The ACTING PRESIDENT pro tempore. Off whose time?
  Mr. MARTINEZ. Off the time in opposition.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Without objection, it is so ordered.
  Mr. MARTINEZ. It will go back to the remaining speakers on the 
Democratic side.
  Mr. CRAPO. Mr. President, I rise in opposition to the Coburn 
amendment. This amendment calls into question how we are going to 
modernize the FHA reversion mortgage program, often called the HECM, or 
home equity conversion mortgage program. I have long been a supporter 
of the program, and I have worked with a number of members of the 
Banking Committee, a bipartisan group, to remove the volume limit on 
the amount of reverse mortgages the FHA may insure. I especially thank 
the other Senators who have worked on this: Senators Dodd, Shelby, 
Reed, and Allard.
  I understand the concerns my colleague from Oklahoma is raising about 
the need to further understand and be able to evaluate the development 
of the reverse mortgage industry.
  Although I support the report that is in the bill that will help us 
to do that, it is very important to understand why this amendment is 
the wrong approach to getting a better handle on understanding reverse 
mortgages.
  There has been a cap imposed on the number of reverse mortgages that 
can be issued by the FHA and by HUD. That cap has already been reached. 
So if we don't lift the cap while we are conducting the study, the 
program essentially terminates.
  The reason we must not allow that to happen is the very reason the 
Senator from Oklahoma has been talking about: We need to have further 
ability to study and evaluate this program and refine its 
effectiveness. That is what the study is in place for. We need a 
program for the study to continue to be effective.
  What does the report that we included in the bill do? It requires 
that the GAO help Congress analyze and determine the effects of 
limiting the amounts of the costs or fees under the program from the 
amounts charged under the program as of the date of enactment. It goes 
through a number of requirements; for example, requiring that we focus 
on the cost to mortgagors for participating in the program, the 
financial soundness of the program, the availability of credit under 
the program, the cost to the elderly homeowners under the program, 
particularly evaluating mortgage insurance premiums charged under the 
program, the upfront fees, and the margin rates charged under the 
program.
  I went through that on purpose because I think it is important that 
we understand there are issues here about reverse mortgages that we are 
studying. But the issues right now focus most significantly on making 
sure that the elderly who are participating in this program don't pay 
significantly high or overly high upfront fees.
  The program is very successful in terms of protecting the taxpayer. 
Over the next 5 years, it is estimated that not only will this program 
not cost the taxpayers any money, it is estimated to generate about 
$1.5 billion in revenues to the Treasury over the next 5 years because 
of the fees that are being charged as these mortgages are entered.
  I think it is important to note, because it is going to be critical 
for the future of this program, and understand what the level of these 
should be, what the level of the mortgage premium should be, and have 
the ability to work effectively as we move forward in refining the 
program.
  A reverse mortgage is a unique loan that enables a senior to remain 
in their home and to remain financially independent by converting part 
of the equity in their home into tax-free income, without having to 
sell the home, give up title, or take on a new monthly mortgage 
payment.
  The reverse mortgage is aptly named because the payment stream is 
reversed. Instead of making monthly payments to the lender, as one 
would do with a regular mortgage, the lender makes payments to the 
homeowner.
  This HECM program was created to serve our seniors who are ``cash 
poor'' but ``equity rich.'' They need to have a cashflow and they have 
significant equity in their home that they have built up over the 
years. The majority of the recipients are elderly widows. The funds 
from a reverse mortgage can be used for anything, such as daily living 
expenses, home repairs or modifications, health care expenses, 
prescription drugs, in-home care, existing debts, prevention of 
foreclosure, or any other needs that the elderly may have.
  As reverse mortgages have become more understood and the real-life 
success stories have been told, this HECM program has grown. There is a 
significantly increased interest in it. Clearly, this sector of 
industry is going to continue to grow as baby boomers get older and the 
consumers' acceptance and understanding of the program increases. 
Increased lender participation led to competition that has already 
resulted in mortgage fee reductions across the country.
  The point I am leading to here is simply this: This is a program we 
must not stop dead in its tracks by simply reimposing the cap. It is 
critical that the legislation we put together that lists the cap, while 
we are conducting this study, makes sure that we better understand how 
to approach defining the level of support for the program and that it 
is able to continue. Rather, what the amendment would do is simply 
reimpose the cap and essentially stop the program. There would be 
nothing further to study then, because the program would be ended.
  I think we can all agree we need to develop these kinds of unique and 
helpful programs for those in our country who have reached the point in 
their lives where they have significant equity but don't have the 
cashflow they need to meet their critical life needs. This program is 
one that helps them in a way that preserves their dignity, their 
ability to live in their own home, and assures that they have an 
opportunity for a cashflow that will enable them to live out their 
lives in a way that doesn't put them in a position of constantly 
wondering how they are going to make next month's payments.
  With that, I yield back the remainder of my time.
  The ACTING PRESIDENT pro tempore. Who yields time?
  Mr. SCHUMER. Mr. President, I yield 3 minutes to the Senator from 
Missouri.
  Mrs. McCASKILL. Mr. President, I am very interested in this 
legislation. I do support the bill. I think the reverse mortgage is an 
important tool for many elderly in order to live out their days with 
basic needs.
  However, this week, with the assistance and support of Senator Kohl, 
the chairman of the Aging Committee, I was given the opportunity to 
chair a hearing on reverse mortgages, where, frankly, I was shocked to 
learn some of the predatory practices that are going on. Senator Crapo 
is exactly right; there are, in fact, mostly elderly widows who are 
accessing these reverse mortgages. That is why it is so important that 
we protect them with counseling and with aggressive oversight and that 
the predatory marketing that is now beginning to go on is brought to a 
close.
  I will give some examples. Some very bad companies are now 
advertising: Come sell reverse mortgages and, by the way, you can 
double your commission if you sell an annuity at the right time.
  We heard testimony from a family where, in fact, an elderly widow who 
had a home equity line of credit had

[[Page 34410]]

money in the bank, was brought into the confidence of a salesman, who 
then ended up selling her a reverse mortgage she didn't need and a 
deferred annuity she didn't need, and she was over 80 years old. It was 
a tragedy. We have to make sure the counseling being given--by the way, 
the counseling being given now is being paid for by the lending 
industry, because HUD only gave $3 million for counseling--$3 million. 
We are talking about a program that will generate about $1.7 billion 
under this bill for the Federal Government, and more than $3 million is 
needed to help the elderly widows understand what is going on. $3 
million is outrageous.
  There is a piece of legislation I will introduce, along with Senator 
Kohl, that I will, I hope, have an opportunity to add to this bill 
before it gets to the President. It is going to do some important 
things. It is going to raise the amount of money for counseling to 
cover the need, only about $24 million a year. It is going to make sure 
that counseling is independent and that, in fact, these people getting 
the counseling are assessed as to whether they are suitable for a 
reverse mortgage. Many of the elderly are not suitable for it, and they 
are going to get themselves into a trap they cannot get out of.
  The other thing is making sure that we build a wall between the 
deferred annuity salesman and the people who are selling reverse 
mortgages. It is unconscionable that these salesmen might prey on these 
elderly people and sell them complicated financial products they don't 
need.
  I support the bill. I think the amendment Senator Coburn offered--I 
get what he is trying to do and I appreciate it. I think we need to 
pass this bill with these important safeguards in place, it is my hope 
they are added before the President signs.
  The ACTING PRESIDENT pro tempore. Who yields time?
  The Senator from Oklahoma is recognized.
  Mr. COBURN. Mr. President, it is interesting. I will ask a couple of 
questions. Where is the study that shows the Federal Government ought 
to be in the reverse mortgage market? It is not there. Where is the 
study that shows what will happen to the private mortgage market? It is 
not there. So what we are doing is moving all reverse mortgages and the 
obligations thereof to our kids.
  We ought to let private markets work some. We ought to create that 
ability. We are going to eliminate that ability. There is no question 
that reverse mortgages are advantageous for a lot of people. As you 
heard, there are going to be people preying on widows out there, 
saying: Here is the FHA, and I can sell you this annuity if you want to 
reverse mortgage your home. There is not going to be any balance on 
that.
  So we are going to shift an entire industry, which should be private, 
with FHA reserve, for those who need it to help them, to the 
Government. The long-term consequence by the auditors' report is that 
it is going to be $45 billion that is going to get shifted to debt to 
our kids. That is the exposure there.
  I am not against reverse mortgages. I am not against us trying to do 
everything we can in terms of the real crisis out there, which is 
associated with the subprime mortgages. This is a totally different 
category. What we are doing is expanding a program, unlimited. What if 
the GAO report comes back and says you should not do that, there is a 
market out there? Every banker in this country, if you give them an 
option of a conventional mortgage or an FHA-guaranteed mortgage, is 
going to go to the FHA. What will happen? There is a lower 
qualification for it. They make more money off of it. Consequently, we 
are going to direct a whole industry into a Government-backed program 
by what we are doing in this bill.
  I am not even opposed to reverse mortgages through FHA. I am opposed 
to us overreacting and creating only one market, taking the private 
market totally out of it and putting our kids on the hook for it.
  Nobody answered the questions about FHA in their audit. No large 
corporation would still be on the New York Stock Exchange, NASDAQ, or 
any other exchange, if they had three significantly qualified areas to 
their financial statements. They have two of the three that are 
material weaknesses, inability to even watch the programs we have. We 
are going to ignore all that today. I understand that. We are going to 
ignore the fact that there are no metrics, no study to tell us what we 
are doing is right. But we are going to do it.
  Somebody has to protect and think about the future. So this amendment 
is common sense. It says, wait--we can wait a short period of time; it 
will not take GAO all that long. What is the pressure on this? The 
pressure is the money generation. We are going to collect $1.5 billion 
from these same elderly people in insurance, who are going to be 
scammed by people who will sell them annuities. So they are going to 
get less money out of their reverse mortgage than they would have 
gotten in the private sector. They are going to get less. And then we 
are going to say we did something.
  I am surprised it has not been raised, but what we are doing is a 
credit card scam. We are being the credit card scam. We are going to 
enable people to get scammed. We don't know what we are doing. The 
study is important to do.
  I will work with the authors of the bill to raise the cap somewhat, 
but to raise it unlimited, never to have a cap regardless of what the 
GAO report says? When are we going to come back and fix it? What if 
they say: You shouldn't be doing this; maybe this ought to be in the 
private market. There isn't a need for our children to take on the 
additional risk of these reverse mortgages.
  What are we going to do? There is no mechanism for what we are doing 
in the FHA Modernization Act if that comes to fruition. The reason for 
the amendment is to pause and ask the question: Where are the metrics 
that say we need to do it? Where is the market failure that says the 
Federal Government ought to be doing it?
  This was a pilot. We are now converting a pilot into a full-grown 
program. Shouldn't we know what we are doing? Shouldn't we assess 
whether there is a true market failure in reverse mortgages before we 
do this? No. 2, shouldn't we consider some of the safeguards for a lot 
of the people who are going to be taken advantage of through this 
program? Finally, No. 3, with our debt growing $1 million a minute, 
$1.3 billion a day--and every child now who is born in this country is 
inheriting $400,000 in unfunded liabilities--do we have an obligation 
to be maybe a little more prudent and say: Wait a minute, let's fix the 
subprime, but let's be more prudent on this issue until we really know 
what we are doing.
  I understand it is a good idea. For me, it will be great when I 
retire. I probably will do a reverse mortgage. But we don't know what 
the markets are. We don't know where they are. And we don't know the 5-
year future right now, especially given the subprime crisis in front of 
us, and we are going to add more to that?
  What if somebody comes to their elderly mother and says: I want you 
to do a reverse mortgage on your home so I cannot default on my private 
one? Is that why we are doing this? Or what if somebody says: I want to 
sell you the best thing you ever had; I am going to give you an 
annuity. Sounds good. You have a home, you are an elderly female, no 
husband, and you buy it, only to find out later you could have bought 
an annuity that would have given you $300 or $400 more a month if you 
had been in the private market with checks and balances rather than be 
scammed.
  I ask unanimous consent to have printed in the Record a summary of 
the independent auditors' report--Urbach Kahn & Werlin--from this past 
year on the Federal Housing Administration.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                      Independent Auditors' Report

       Inspector General--United States Department of Housing and 
     Urban Development
       Commissioner--Federal Housing Administration

[[Page 34411]]

       We have audited the accompanying consolidated balance 
     sheets of the Federal Housing Administration (FHA), a wholly 
     owned government corporation within the United States 
     Department of Housing and Urban Development (HUD), as of 
     September 30, 2007 and 2006, and the related consolidated 
     statements of net cost, changes in net position, and the 
     combined statements of budgetary resources (Principal 
     Financial Statements) for the years then ended. The objective 
     of our audits was to express an opinion on these financial 
     statements. In connection with our audits, we also considered 
     FHA's internal control over financial reporting and tested 
     FHA's compliance with laws and regulations that could have a 
     direct and material effect on its financial statements.


                                Summary

       We concluded that FHA's Principal Financial Statements are 
     presented fairly, in all material respects, in conformity 
     with accounting principles generally accepted in the United 
     States of America.
       Our consideration of internal control over financial 
     reporting resulted in the following matters being identified 
     as significant deficiencies: A risk assessment and systems 
     development plan are needed for FHA's Home Equity Conversion 
     Mortgage systems and transaction controls; HECM credit 
     subsidy cash flow model needs improvement; and FHA system 
     security controls need to be strengthened.
       We consider the first two findings to be material 
     weaknesses. We found no reportable instances of noncompliance 
     with laws and regulations.
       This report (including Appendices A through D) discusses: 
     (1) these conclusions and our conclusions relating to other 
     information presented in the Annual Management Report, (2) 
     management's responsibilities, (3) our objectives, scope and 
     methodology, (4) management's response and our evaluation of 
     their response, and (5) the current status of prior year 
     findings and recommendations.

  Mr. COBURN. Mr. President, I remind my colleagues, the FHA has 
significant problems if they cannot pass an audit. That has not been 
addressed in this bill at all in terms of the audit defects FHA has.
  I reserve the remainder of my time and ask how much time is 
remaining?
  The ACTING PRESIDENT pro tempore. The Senator from Oklahoma has 17 
minutes remaining. Opponents to the Coburn amendment have 9 minutes 
remaining.
  Mr. SCHUMER. Mr. President, I yield 4 minutes to a distinguished 
member of the Banking Committee, the Senator from Delaware.
  The ACTING PRESIDENT pro tempore. The Senator from Delaware is 
recognized.
  Mr. CARPER. Mr. President, I thank the Senator for his leadership on 
this issue to bring us to this day and my friend from Oklahoma who 
offered the amendment before us. He raises a good point, and it is one 
that should be addressed in the conference to follow. My hope is that 
some of the concerns he raised will be addressed. I don't know that his 
amendment will be approved today, but the points he made are not 
without value.
  We have had FHA for 70 years. The reason we have it is because in the 
Great Depression, we realized we needed to encourage home ownership in 
this country, and we still do. For many years, FHA was the go-to guy, 
if you will, for folks who had marginal credit, maybe were not 
homeowners, were first-time homeowners and they needed help to get them 
in position to qualify for loans and become homeowners.
  There are all kinds of virtues that flow from home ownership. I will 
not get into them all. They are many and valid.
  In recent years, we have seen people who normally would have gone to 
the FHA, first-time home buyers or people with marginal credit, to get 
a guaranteed home loan--in recent years, instead of 15 percent of 
American loans being purchased through FHA mortgage, we see the trend 
down. Today, it is roughly 5 percent. That difference is 10 percent of 
the people. A lot of people have gone to subprime lenders. A lot have 
gone to mortgages that, frankly, in the long run don't make sense. They 
might get a teaser rate the first couple of years of 3 or 4 percent and 
then see the rate go up to 7 percent, 8 percent, or 10 percent and find 
themselves in a mortgage vehicle they cannot get out of because there 
is no ability to escape.
  We need to get that 5 percent of loans, home mortgages guaranteed by 
FHA, back up closer to 15 percent. We are not going to do it with the 
FHA of the 20th century. We have to bring the FHA into the 21st 
century. That is what we do with this legislation. We bring it into the 
era in which we live today.
  I wish to mention a couple of the changes that are made possible with 
this legislation. Among them is loan limits. Today, it is about 
$365,000. They are going to go up to roughly $415,000 to reflect the 
change in the marketplace.
  The downpayment FHA required of home buyers for years is 3 percent. 
If you buy a home for $200,000, the downpayment is $6,000. We cut that 
in half to 1.5 percent. So the downpayment for a $200,000 house will be 
about $3,000 to make home ownership within reach.
  Also, the legislation removes the caps on reversible mortgages from 
currently $150,000 to really to no cap. We are going to consider that 
and we should consider that in conference, I hope with the input from 
the GAO.
  Finally, the bill creates--and I think this is important and speaks 
to the concern raised by Senator McCaskill--it creates a prepurchasing 
counseling program.
  I am convinced it is not strong enough. Senator McCaskill authored 
legislation--and I suppose some of us will join her in sponsoring that 
legislation--to strengthen this provision to make sure, if you or I 
qualify through FHA, we want to make sure the folks going to the FHA 
making that loan are getting the kind of counseling they need and not 
somebody who is there to set them up and take advantage of them.
  This is not the only step we need to take to get us through the 
subprime lending morass for home mortgages. The Paulson freeze 
announced last week is a good idea. Interest rates would be frozen for 
5 years for folks in these adjustable rate mortgages that are about to 
reset and raise the rates. That is a good first step. This is a good 
second step.
  A good third step is to ban predatory lending practices. Legislation 
passed the House and is about to be considered in the Senate.
  Last point. This is what Senator Schumer and I are interested in: GSA 
reform. That is the last piece. It would include a low-income 
affordable home program too.
  The ACTING PRESIDENT pro tempore. The Senator's time has expired. Who 
yields time?
  Mr. SCHUMER. I yield 3 minutes to someone who has been a genuine 
leader on this issue, a cosponsor of this legislation--just like you 
and me, Mr. President--on subprime counseling, the Senator from 
Pennsylvania, Mr. Casey.
  The ACTING PRESIDENT pro tempore. The Senator from Pennsylvania is 
recognized.
  Mr. CASEY. Mr. President, I thank Senator Schumer for his leadership 
on these issues. I rise today, like so many this morning, to talk about 
something we refer to by way of acronym. In case someone is just tuning 
in, when we are talking about FHA, we are talking about the Federal 
Housing Administration. We are talking about home ownership, the dream 
of home ownership which is so much a part of the American dream, and 
today we have an opportunity to pass legislation, a modernization bill 
for the FHA, which will reform FHA lending programs to make them a more 
viable alternative for borrowers looking to purchase or to refinance a 
home.
  By way of history, back in the depths and the darkness of the 
Depression in 1934, a single-family FHA mortgage insurance program was 
created to help spur the housing market and increase home ownership--
just what we are trying to do today in 2007. FHA made the low-
downpayment, 30-year fixed-rate loan the standard product of the United 
States and has traditionally played a role in providing home purchase 
financing to minority, first-time, and lower income home buyers.
  This bill does a number of things. We have heard them, but I will go 
through the list again briefly.
  First, increasing loan limits. This is so important at this present 
time to help the middle class of America.
  Second, this legislation streamlines the borrowing process to make it 
faster and more efficient. Everyone here has been through the process 
of borrowing

[[Page 34412]]

money. It is complicated enough. Anything we can do to streamline that 
will help consumers and future homeowners.
  Third, it increases prepurchase counseling for borrowers so they know 
how much they can afford before they buy a home. This is a part of the 
subprime crisis. Not nearly enough attention and resources are 
dedicated to counseling. This legislation helps in the context of the 
FHA counseling homeowners.
  Finally, it improves and expands the availability of reverse 
mortgages so that older citizens can stay in their homes longer and 
safely tap into the equity they built up in their home.
  I don't need to go into the details of the subprime crisis; we all 
know about it. Senators Brown, Schumer, and I authored legislation, the 
Borrowers Protection Act. We also have money in the budget the 
President is talking about vetoing, $200 million for counseling. It 
will be a big mistake for the President to do that. But this 
modernization bill of our housing programs is focused on home-ownership 
preservation and providing borrowers with responsible, stable 
alternatives to subprime mortgages.
  We know we need other alternatives. Right now, the credit markets 
across the country and across the world remain tight, and even 
borrowers with good credit are having a hard time borrowing. So this 
bill provides realistic alternatives for hundreds of thousands of 
borrowers right at the time they need it.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER (Mr. Carper). The Senator's time has expired. 
Who yields time?
  Mr. SCHUMER. Mr. President, does my colleague from Oklahoma wish to 
speak?
  The PRESIDING OFFICER. Those in favor of the amendment have 17 
minutes. Those opposed have 1\1/2\ minutes.
  Mr. SCHUMER. Mr. President, may I ask unanimous consent to borrow a 
minute and a half from my colleague from Oklahoma?
  Mr. COBURN. In my normal magnanimous state, I would normally be happy 
to do that and will do that.
  Mr. SCHUMER. I yield 3 minutes to the Senator from Ohio.
  Mr. BROWN. Mr. President, I thank Senator Schumer, and I thank 
Senator Coburn for always being generous with his time. I thank the 
Senator from Delaware.
  Over the past few years, our country's problem has not been lack of 
credit; it has been too much bad credit, too many unscrupulous 
opportunists looking to take advantage of a situation. Nowhere is that 
more true than in the State of Ohio. As State and Federal regulators 
ignored the problems, predatory lending mushroomed. We have the highest 
rate of foreclosed homes in the country. Whole neighborhoods have been 
devastated because of foreclosures. It is not an isolated event. When 
homes are foreclosed, they affect the value of homes nearby, the crime 
rate, city tax revenues--the entire fabric of Slavic Village, Garfield 
Heights or Cincinnati or all over the State. These communities stretch 
across my State. Of the 30 cities hardest hit in the Nation, 6 are in 
Ohio.
  By providing loans program at a fair price, the FHA program can give 
tens of thousands of families an alternative to the decidedly unfair 
loans they are caught in today. We need to act quickly, as Senator 
Schumer and Senator Martinez said. We need to work out our differences 
with the House. We need to get this legislation to the President.
  Every day in Akron, Cincinnati, Cleveland, Dayton, Columbus, and 
Toledo, in addition to smaller cities in Ohio, 200 families in Ohio 
lose their homes. Every month, thousands and thousands of these 
predatory loans are resetting at rates that will quickly become 
unaffordable to more and more families.
  This legislation, needless to say, is only part of the solution. We 
need to do several things. We need to ensure that additional resources 
for counseling, as Senator Casey and Senator Schumer worked so hard on 
and that were included in the housing appropriations bills, are signed 
into law. We need to enact reasonable protection for borrowers so they 
are not preyed upon when it comes time to refinance loans. We need to 
change policies, as Senator Gregg, Senator Stabenow, and Senator 
Voinovich said, so families forced to sell their homes at a loss do not 
find themselves slapped with a tax bill. We need to change our 
bankruptcy laws, as Senator Durbin advocated, so that homeowners have 
the same rights in bankruptcy as vacation homeowners do. And we need to 
champion the interests of homeowners.
  Next week, the Federal Reserve will consider and I hope adopt rules 
to strengthen the protection against deceptive mortgage lending 
practices. I commend Senators Dodd, Shelby, Schumer, Casey, and all 
those who have worked hard on this legislation and want to take further 
steps to deal with this problem better than we have.
  I yield the floor.
  Mr. FEINGOLD. Mr. President, I am pleased to support the FHA 
Modernization Act of 2007, and I hope the House and Senate can quickly 
work together to get this legislation to the President. This bill is a 
good first step to helping address both housing affordability issues 
and problems in the subprime lending industry. I look forward to 
monitoring the legislation's implementation to ensure that the FHA 
reforms truly benefit low-income and middle-income homeowners.
  The rising rate of foreclosures and its broader impact on the 
nation's economy is a serious issue that requires the involvement of 
all levels of government as well as both private and non-profit 
organizations. Subprime lending and rising foreclosure rates are 
complicated issues to unravel and any response, whether legislative or 
regulatory, will bring with it a set of consequences, some intended and 
some unintended. We need to examine a variety of responses to the 
rising foreclosure rates and their consequences, including providing 
more housing counseling for borrowers and more effectively regulating 
lending practices to prevent some of the unscrupulous practices that 
have occurred. Some of the more egregious lending practices include 
high rates of predatory lending in minority communities, steering 
borrowers into subprime mortgage products even if the borrowers 
qualified for more conventional loans, and not ensuring that borrowers 
fully understood the terms of subprime loans.
  I was disappointed that the Senate FHA Modernization Act did not 
contain a provision directing some of the revenue realized by the FHA 
bill into an affordable housing fund as the House FHA reform bill did. 
I hope that conferees will work hard to find a fiscally responsible way 
to direct some of the increased revenue from the FHA bill into a 
national affordable housing trust fund. I also hope that Congress can 
pass stand-alone legislation creating a national affordable housing 
trust fund in the coming year.
  The creation of more affordable housing through a national affordable 
housing trust fund will also help to alleviate the affordable housing 
crisis we are facing throughout the country. Local communities around 
the country are creating such trust funds, including in my state of 
Wisconsin. Congress needs to act promptly so that a national affordable 
housing trust fund can complement the good work going on in states and 
local communities throughout the country.
  Earlier this year, I introduced legislation, the Affordable Housing 
Expansion and Public Safety Act, which contained provisions designed to 
assist low-income Americans in affording safe and adequate housing, 
including authorizing 100,000 new Section 8 vouchers, authorizing new 
targeted funding for the HOME program, reauthorizing the Public and 
Assisted Housing Crime and Drug Elimination Program, and calling on 
Congress to create a national affordable housing trust fund. I hope 
that Congress can take a step toward the creation of such a fund by 
including a provision in the FHA reform bill conference report to 
dedicate a fiscally responsible revenue stream toward such a national 
affordable housing trust fund.
  This Nation faces a severe shortage of affordable housing for our 
most vulnerable citizens. Shelter is one of our

[[Page 34413]]

most basic needs, and, unfortunately, too many Wisconsinites and people 
around the country are struggling to afford a place to live for 
themselves and their families. As Congress continues to take steps to 
deal with affordability issues, rising foreclosure rates, and reform of 
lending practices by banks and mortgage brokers, we need to ensure that 
any such reforms benefit those Americans most in need.
  The PRESIDING OFFICER. Who yields time?
  Mr. COBURN. Mr. President, how much time remains?
  The PRESIDING OFFICER. There is 16 minutes remaining.
  Mr. COBURN. Mr. Speaker, I yield 3 minutes to Senator Martinez in 
opposition to my amendment.
  Mr. MARTINEZ. Mr. President, I thank the Senator from Oklahoma for 
being magnanimous even with his own colleagues. I appreciate it very 
much.
  I understand the concerns of the Senator from Oklahoma. Anytime we 
are looking at an expansion of a Federal Government program, it gives 
one pause. Having been the Secretary of HUD, I understand that. But I 
must say it is important for folks to understand when we talk about any 
burden on the Federal Government, this is a program that is an 
insurance program, and since 1934 has never lost a dime of the American 
taxpayers' money. In fact, it has a surplus today of over $20 billion.
  What they do at FHA is look at the risk in the mortgage. Then they 
will insure it accordingly and the mortgagee pays a premium 
accordingly. The same takes place in the reverse mortgage. HUD 
facilitates a larger reverse mortgage program through the FHA's home 
equity conversion mortgage, which is an industry leader, accounting for 
90 percent of all reverse mortgages. So when we talk about the private 
sector, today, out of 14 million mortgage transactions in 2006, only 
100,000 were reverse mortgages, of which 90 percent were handled by the 
FHA. That has the Good Housekeeping Seal of approval.
  The problems the Senator from Oklahoma talks about occur on that 10 
percent in the private market. The HUD-insured, FHA-run HECM Program is 
one that allows a certain amount of comfort to those elderly who seek 
to have a reverse mortgage. There have been instances of predatory 
practices. Although these have generally not been a problem with the 
HUD mortgages, we always must be vigilant of those, and I support 
efforts to try to curtail any predatory practices.
  What we are looking to do is make positive changes that will enhance 
the product availability but, more importantly, lower the cost going 
forward to America's elderly who seek to use this program. It will help 
us to better understand the evolving financial needs of seniors. I am 
proud this bipartisan legislation is something that will help America's 
seniors.
  Reverse mortgage programs are an important tool used by many 
Floridians. In fact, in the last fiscal year alone, Florida witnessed a 
116-percent increase in the number of reverse mortgages, and these 
products continue to increase in popularity. Congress has the 
responsibility to ensure that our elderly are properly protected but 
still give them every opportunity to be able to make good personal 
financial decisions for themselves.
  Now, my dear friend from Oklahoma has raised concerns, but the growth 
of this program is projected to be only 109,000 from 100,000 in the 
year 2007; and in 2008, 166,000. So there is going to be a gradual 
growth of this program.
  Mr. President, how much time do I have remaining?
  The ACTING PRESIDENT pro tempore. The Senator's 3 minutes has 
expired, but the Senator from Oklahoma controls 12 minutes 30 seconds.
  Mr. COBURN. Mr. President, I yield the Senator an additional 1 
minute.
  Mr. MARTINEZ. I thank the Chair, and I thank the Senator from 
Oklahoma for his courtesy.
  Mr. President, I just want to point out that the study the Senator 
talks about is an important study, and it is a part of what this bill 
contains. However, the study will be useful to us once the program has 
been expanded and we have the opportunity to see what the experience is 
on the program. So rather than not study it, it is going to study it, 
but it has to study it in the future based on the growth and expansion 
of the program because for the past we have the statistical data 
available and the history of this program. The bottom line on the audit 
issue, which I know is a concern, is the historical data will give us a 
fuller understanding of what the experience is, rather than the 
management assumptions that are made through the current audit.
  Mr. President, I think this is a good program for America's seniors. 
The concerns raised by the Senator from Oklahoma are valid and should 
be kept in mind, but we should vote for this good amendment today.
  The ACTING PRESIDENT pro tempore. The Senator's time has expired. Who 
yields time?
  Mr. COBURN. Mr. President, I will note for my colleagues' benefit 
that I do not plan to ask for a recorded vote on this amendment. I also 
will not demand a recorded vote on the bill itself, so colleagues would 
not have to come to the floor.
  Let me summarize. What we are trying to do with FHA modernization is 
good. We have a crisis. There is no crisis in reverse mortgages. As a 
matter of fact, there is not hardly any private sector anymore. The 
reverse mortgages that are growing, I would advise the Senator from 
Florida, are growing at 60 percent a year at FHA. That is not slow 
growth. If we take 60 percent a year over the next 10 years, instead of 
109,000, we will have 800,000. So that is why GAO estimates that we are 
talking about $56 billion in new obligations that our kids are going to 
have to come up with if anything happens.
  So, again, nobody has answered the question: Is there a crisis in 
reverse mortgages? There is not. Nobody has answered the question: 
Where are the metrics in terms of the marketplace, saying there is not 
adequate credit out there in the private marketplace, not guaranteed by 
our children? We are not going to guarantee it, our children are. 
Nobody has answered those two questions. And nobody has said: Here is 
what the data shows on the market now that we are going to do 130,000-
plus, I believe, this year, and how does that impact with the total 
number of mortgages that are out there this year in the very difficult 
market that we find ourselves in with the tight credit.
  So I would ask for a voice vote on this amendment, and then I will 
not object to a voice vote or a consent after that on the underlying 
bill.
  Mr. President, I yield the remainder of my time.
  The ACTING PRESIDENT pro tempore. The question is on agreeing to the 
amendment.
  The amendment (No. 3854) was rejected.
  Mr. SCHUMER. Mr. President, I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. REID. Mr. President, it is my understanding that the time has 
expired on the debate relating to this matter, the FHA Modernization 
Act.
  The ACTING PRESIDENT pro tempore. The majority leader is correct.
  Mr. REID. I will use my leader time to speak, and I rise to express 
my optimism for the bill we are about to pass--and it will pass--and my 
appreciation that we have reached the point that we can get this done 
for the American people.
  Mr. President, every day the mortgage crisis grows worse. We have 
reached a point where hundreds of families have either lost their homes 
or may lose them, and soon that will be in the tens of thousands. As 
bad as the crisis is now, there is reason to believe we are only in the 
early stages.
  Some may say: If a borrower gets into financial trouble, it is their 
obligation, and their obligation alone, to find a way out. But that 
isn't the way it works. The cost of a foreclosed home has an impact on 
all of us--not just the borrower but all of us. Families lose

[[Page 34414]]

the roof over their heads and the equity they have gained. 
Neighborhoods suffer the loss of property values. Cities and towns lose 
taxes. Lenders and their shareholders lose too. And it is no 
exaggeration to say the entire national economy is put at risk.
  We are seeing those effects in Nevada, with the number of 
foreclosures since August of 2006 up by more than 200 percent, and 
another 21,000 homes at risk by 2009. We have been working hard to 
alleviate this problem at home. Last month, I organized a roundtable 
discussion in Reno with lenders, mortgage services, housing counseling 
agencies, and other Federal and local officials. And we followed that 
up with mobile resource centers to bring foreclosure information into 
the neighborhoods where people need them.
  Taking these steps is a crucial part of the solution, but we need new 
laws at the Federal level to give lenders the tools and flexibility to 
help people find ways to keep their homes. As grim as things look 
today, they could get far worse. That is why it is important we act 
now.
  I am glad to see my Republican colleagues have finally heard the call 
and joined us to support this legislation. Let's be clear. The 
Government can't solve this problem alone, but we certainly can help. 
When this bill becomes law, it will accomplish two main things: It will 
increase FHA loan limits on both the high and low ends, and it will 
reduce downpayment requirements. The result will be better loan options 
for families who are having trouble keeping up with their exploding 
mortgage payments resulting from teaser rate mortgages. They will have 
the option of refinancing through an FHA bank loan, with the peace of 
mind that comes with it.
  For future home buyers, a fully backed FHA loan with honest, upfront 
terms, will help prevent a crisis like we now face and ensure that more 
American families will experience all the safety, comfort, and 
stability that comes with home ownership. The past decade has seen 
remarkable growth in American home ownership. What is more, these gains 
have been enjoyed from coast to coast and among groups that have 
traditionally been shut out. The bill we are about to pass will help 
ensure this progress continues. It is an accomplishment for the Senate 
and an important step forward for the American people.
  Finally, Mr. President, during this vote I hope we can clear a 
consent request that I will offer to go forward on the Defense 
authorization bill. It is late in the year, and the President can't pay 
the troops the pay raise they deserve until we pass this bill. Waiting 
until next week will not do the trick. We must finish this today.
  I certainly hope we can work this out in the next few minutes to go 
forward on this as soon as we complete this bill. Senator Levin and 
Senator Warner have worked very hard on this legislation, as have many 
others, and I hope we can move forward on it very quickly.
  The ACTING PRESIDENT pro tempore. All time is expired.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  The ACTING PRESIDENT pro tempore. The bill having been read the third 
time, the question is on the passage of the bill, as amended.
  Mr. SCHUMER. Mr. President, I ask for the yeas and nays.
  The ACTING PRESIDENT pro tempore. Is there a sufficient second?
  There appears to be a sufficient second.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from Delaware (Mr. Biden), 
the Senator from California (Mrs. Boxer), the Senator from New York 
(Mrs. Clinton), the Senator from Connecticut (Mr. Dodd), and the 
Senator from Illinois (Mr. Obama) are necessarily absent.
  Mr. LOTT. The following Senator is necessarily absent: the Senator 
from Arizona (Mr. McCain).
  The PRESIDING OFFICER (Ms. Klobuchar). Are there any other Senators 
in the Chamber desiring to vote?
  The result was announced--yeas 93, nays 1, as follows:

                      [Rollcall Vote No. 432 Leg.]

                                YEAS--93

     Akaka
     Alexander
     Allard
     Barrasso
     Baucus
     Bayh
     Bennett
     Bingaman
     Bond
     Brown
     Brownback
     Bunning
     Burr
     Byrd
     Cantwell
     Cardin
     Carper
     Casey
     Chambliss
     Coburn
     Cochran
     Coleman
     Collins
     Conrad
     Corker
     Cornyn
     Craig
     Crapo
     DeMint
     Dole
     Domenici
     Dorgan
     Durbin
     Ensign
     Enzi
     Feingold
     Feinstein
     Graham
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hutchison
     Inhofe
     Inouye
     Isakson
     Johnson
     Kennedy
     Kerry
     Klobuchar
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     Martinez
     McCaskill
     McConnell
     Menendez
     Mikulski
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Pryor
     Reed
     Reid
     Roberts
     Rockefeller
     Salazar
     Sanders
     Schumer
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stabenow
     Stevens
     Sununu
     Tester
     Thune
     Vitter
     Voinovich
     Warner
     Webb
     Whitehouse
     Wyden

                                NAYS--1

       
     Kyl
       

                             NOT VOTING--6

     Biden
     Boxer
     Clinton
     Dodd
     McCain
     Obama
  The bill (S. 2338), as amended, was passed, as follows:

                                S. 2338

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``FHA 
     Modernization Act of 2007''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title and table of contents.

                TITLE I--BUILDING AMERICAN HOMEOWNERSHIP

Sec. 101. Short title.
Sec. 102. Maximum principal loan obligation.
Sec. 103. Cash investment requirement and prohibition of seller-funded 
              downpayment assistance.
Sec. 104. Mortgage insurance premiums.
Sec. 105. Rehabilitation loans.
Sec. 106. Discretionary action.
Sec. 107. Insurance of condominiums.
Sec. 108. Mutual Mortgage Insurance Fund.
Sec. 109. Hawaiian home lands and Indian reservations.
Sec. 110. Conforming and technical amendments.
Sec. 111. Insurance of mortgages.
Sec. 112. Home equity conversion mortgages.
Sec. 113. Energy efficient mortgages program.
Sec. 114. Pilot program for automated process for borrowers without 
              sufficient credit history.
Sec. 115. Homeownership preservation.
Sec. 116. Use of FHA savings for improvements in FHA technologies, 
              procedures, processes, program performance, staffing, and 
              salaries.
Sec. 117. Post-purchase housing counseling eligibility improvements.
Sec. 118. Pre-purchase homeownership counseling demonstration.
Sec. 119. Fraud prevention.
Sec. 120. Limitation on mortgage insurance premium increases.
Sec. 121. Savings provision.
Sec. 122. Implementation.
Sec. 123. Moratorium on implementation of risk-based premiums.

           TITLE II--MANUFACTURED HOUSING LOAN MODERNIZATION

Sec. 201. Short title.
Sec. 202. Purposes.
Sec. 203. Exception to limitation on financial institution portfolio.
Sec. 204. Insurance benefits.
Sec. 205. Maximum loan limits.
Sec. 206. Insurance premiums.
Sec. 207. Technical corrections.
Sec. 208. Revision of underwriting criteria.
Sec. 209. Prohibition against kickbacks and unearned fees.
Sec. 210. Leasehold requirements.

                TITLE I--BUILDING AMERICAN HOMEOWNERSHIP

     SEC. 101. SHORT TITLE.

       This title may be cited as the ``Building American 
     Homeownership Act of 2007''.

     SEC. 102. MAXIMUM PRINCIPAL LOAN OBLIGATION.

       Paragraph (2) of section 203(b)(2) of the National Housing 
     Act (12 U.S.C. 1709(b)(2)) is amended--
       (1) by amending subparagraphs (A) and (B) to read as 
     follows:
       ``(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

[[Page 34415]]

     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 
     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 100 percent of the appraised value of 
     the property.''; and
       (2) in the matter following subparagraph (B), by striking 
     the second sentence (relating to a definition of ``average 
     closing cost'') and all that follows through ``section 
     3103A(d) of title 38, United States Code.''.

     SEC. 103. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF 
                   SELLER-FUNDED DOWNPAYMENT ASSISTANCE.

       Paragraph 9 of section 203(b) of the National Housing Act 
     (12 U.S.C. 1709(b)(9)) is amended to read as follows:
       ``(9) Cash investment requirement.--
       ``(A) In general.--A mortgage insured under this section 
     shall be executed by a mortgagor who shall have paid, in 
     cash, on account of the property an amount equal to not less 
     than 1.5 percent of the appraised value of the property or 
     such larger amount as the Secretary may determine.
       ``(B) Family members.--For purposes of this paragraph, the 
     Secretary shall consider as cash or its equivalent any 
     amounts borrowed from a family member (as such term is 
     defined in section 201), subject only to the requirements 
     that, in any case in which the repayment of such borrowed 
     amounts is secured by a lien against the property, that--
       ``(i) such lien shall be subordinate to the mortgage; and
       ``(ii) the sum of the principal obligation of the mortgage 
     and the obligation secured by such lien may not exceed 100 
     percent of the appraised value of the property.
       ``(C) Prohibited sources.--In no case shall the funds 
     required by subparagraph (A) consist, in whole or in part, of 
     funds provided by any of the following parties before, 
     during, or after closing of the property sale:
       ``(i) The seller or any other person or entity that 
     financially benefits from the transaction.
       ``(ii) Any third party or entity that is reimbursed, 
     directly or indirectly, by any of the parties described in 
     clause (i).''.

     SEC. 104. MORTGAGE INSURANCE PREMIUMS.

       Section 203(c)(2) of the National Housing Act (12 U.S.C. 
     1709(c)(2)) is amended--
       (1) in the matter preceding subparagraph (A), by striking 
     ``or of the General Insurance Fund'' and all that follows 
     through ``section 234(c),,''; and
       (2) in subparagraph (A)--
       (A) by striking ``2.25 percent'' and inserting ``3 
     percent''; and
       (B) by striking ``2.0 percent'' and inserting ``2.75 
     percent''.

     SEC. 105. 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. 106. 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. 107. INSURANCE OF CONDOMINIUMS.

       (a) In General.--Section 234 of the National Housing Act 
     (12 U.S.C. 1715y) is amended--
       (1) in subsection (c), in the first sentence--
       (A) by striking ``and'' before ``(2)''; and
       (B) 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
       (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) before ``a first mortgage'' insert ``(A)'';
       (2) by striking ``or on a leasehold (1)'' and inserting 
     ``(B) a first mortgage on a leasehold on real estate (i)'';
       (3) by striking ``or (2)'' and inserting ``, or (ii)''; and
       (4) 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, real estate consisting of a one-family unit in a 
     multifamily project, including a project in which the 
     dwelling units are attached, or are manufactured housing 
     units, semi-detached, or detached, and an undivided interest 
     in the common areas and facilities which serve the project''.
       (c) Definition of Real Estate.--Section 201 of the National 
     Housing Act (12 U.S.C. 1707) is amended by adding at the end 
     the following new subsection:
       ``(g) The term `real estate' means land and all natural 
     resources and structures permanently affixed to the land, 
     including residential buildings and stationary manufactured 
     housing. The Secretary may not require, for treatment of any 
     land or other property as real estate for purposes of this 
     title, that such land or property be treated as real estate 
     for purposes of State taxation.''.

     SEC. 108. 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 
     calendar 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 
     2008, or on the last day of the first full calendar quarter 
     following the enactment of the Building American 
     Homeownership Act of 2007, whichever is later.
       ``(6) Adjustment of premiums.--If, pursuant to the 
     independent actuarial study of the Fund required under 
     paragraph (4), the Secretary determines that the Fund is not 
     meeting the operational goals established under paragraph (7) 
     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 this title 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 minimize the default risk to the Fund and to 
     homeowners by among other actions instituting fraud 
     prevention quality control screening not later than 18 months 
     after the date of enactment of the Building American 
     Homeownership Act of 2007; and
       ``(B) to meet the housing needs of the borrowers that the 
     single family mortgage insurance program under this title is 
     designed to serve.''.

[[Page 34416]]

       (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 through the end of the 
     subsection 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. 109. HAWAIIAN HOME LANDS AND INDIAN RESERVATIONS.

       (a) Hawaiian Home Lands.--Section 247(c) of the National 
     Housing Act (12 U.S.C. 1715z-12(c)) 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(f)) 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. 110. 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. 111. INSURANCE OF MORTGAGES.

       Subsection (n)(2) of section 203 of the National Housing 
     Act (12 U.S.C. 1709(n)(2)) is amended--
       (1) in subparagraph (A), by inserting ``or subordinate 
     mortgage or'' before ``lien given''; and
       (2) in subparagraph (C), by inserting ``or subordinate 
     mortgage or'' before ``lien''.

     SEC. 112. HOME EQUITY CONVERSION MORTGAGES.

       (a) In General.--Section 255 of the National Housing Act 
     (12 U.S.C. 1715z-20) is amended--
       (1) in subsection (b)(2), insert ```real estate,''' after 
     ```mortgagor','';
       (2) 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'';
       (3) in subsection (i)(1)(C), by striking ``limitations'' 
     and inserting ``limitation''; and
       (4) by adding at the end the following new subsection:
       ``(o) Authority To Insure Home Purchase Mortgage.--
       ``(1) In general.--Notwithstanding any other provision of 
     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 home 
     equity conversion mortgage will be used to purchase a 1- to 
     4-family dwelling unit, one unit of which that the mortgagor 
     will occupy as a primary residence, and to provide for any 
     future payments to the mortgagor, based on available equity, 
     as authorized under subsection (d)(9).
       ``(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 1-
     family residence.''.
       (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) Limitation on Origination Fees.--Section 255 of the 
     National Housing Act (12 U.S.C. 1715z-20), as amended by the 
     preceding provisions of this section, is further amended--
       (1) by redesignating subsections (k), (l), and (m) as 
     subsections (l), (m), and (n), respectively; and
       (2) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Limitation on Origination Fees.--The Secretary shall 
     establish limits on the origination fee that may be charged 
     to a mortgagor under a mortgage insured under this section, 
     which limitations shall--
       ``(1) equal 1.5 percent of the maximum claim amount of the 
     mortgage unless adjusted thereafter on the basis of--
       ``(A) the costs to the mortgagor; and
       ``(B) the impact of such fees on the reverse mortgage 
     market;
       ``(2) be subject to a minimum allowable amount;
       ``(3) provide that the origination fee may be fully 
     financed with the mortgage;
       ``(4) include any fees paid to correspondent mortgagees 
     approved by the Secretary; and
       ``(5) have the same effective date as subsection (o)(2) 
     regarding the limitation on principal obligation.''.
       (d) Study Regarding Program Costs and Credit 
     Availability.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study regarding the costs and 
     availability of credit under the home equity conversion 
     mortgages for elderly homeowners program under section 255 of 
     the National Housing Act (12 U.S.C. 1715z-20) (in this 
     subsection referred to as the ``program'').
       (2) Purpose.--The purpose of the study required under 
     paragraph (1) is to help Congress analyze and determine the 
     effects of limiting the amounts of the costs or fees under 
     the program from the amounts charged under the program as of 
     the date of the enactment of this Act.
       (3) Content of report.--The study required under paragraph 
     (1) should focus on--
       (A) the cost to mortgagors of participating in the program;
       (B) the financial soundness of the program;
       (C) the availability of credit under the program; and
       (D) the costs to elderly homeowners participating in the 
     program, including--
       (i) mortgage insurance premiums charged under the program;
       (ii) up-front fees charged under the program; and
       (iii) margin rates charged under the program.
       (4) Timing of report.--Not later than 12 months after the 
     date of the enactment of this Act, the Comptroller General 
     shall submit a report to the Committee on Banking, Housing, 
     and Urban Affairs of the Senate and the Committee on 
     Financial Services of the House of Representatives setting 
     forth the results and conclusions of the study required under 
     paragraph (1).

     SEC. 113. ENERGY EFFICIENT MORTGAGES PROGRAM.

       Section 106(a)(2) of the Energy Policy Act of 1992 (42 
     U.S.C. 12712 note) is amended--
       (1) by amending subparagraph (C) to read as follows:
       ``(C) Costs of improvements.--The cost of cost-effective 
     energy efficiency improvements shall not exceed the greater 
     of--
       ``(i) 5 percent of the property value (not to exceed 5 
     percent of the limit established under section 203(b)(2)(A)) 
     of the National Housing Act (12 U.S.C. 1709(b)(2)(A); or
       ``(ii) 2 percent of the limit established under section 
     203(b)(2)(B) of such Act.''; and
       (2) by adding at the end the following:
       ``(D) Limitation.--In any fiscal year, the aggregate number 
     of mortgages insured pursuant to this section may not exceed 
     5 percent of the aggregate number of mortgages for 1- to 4-
     family residences insured by the Secretary of Housing and 
     Urban Development under title II of the National Housing Act 
     (12 U.S.C. 1707 et seq.) during the preceding fiscal year.''.

     SEC. 114. PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS 
                   WITHOUT SUFFICIENT CREDIT HISTORY.

       (a) Establishment.--Title II of the National Housing Act 
     (12 U.S.C. 1707 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 257. PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS 
                   WITHOUT SUFFICIENT CREDIT HISTORY.

       ``(a) Establishment.--The Secretary shall carry out a pilot 
     program to establish, and make available to mortgagees, an 
     automated process for providing alternative credit rating 
     information for mortgagors and prospective mortgagors under 
     mortgages on 1- to 4-family residences to be insured under 
     this title who have insufficient credit histories

[[Page 34417]]

     for determining their creditworthiness. Such alternative 
     credit rating information may include rent, utilities, and 
     insurance payment histories, and such other information as 
     the Secretary considers appropriate.
       ``(b) Scope.--The Secretary may carry out the pilot program 
     under this section on a limited basis or scope, and may 
     consider limiting the program to first-time homebuyers.
       ``(c) Limitation.--In any fiscal year, the aggregate number 
     of mortgages insured pursuant to the automated process 
     established under this section may not exceed 5 percent of 
     the aggregate number of mortgages for 1- to 4-family 
     residences insured by the Secretary under this title during 
     the preceding fiscal year.
       ``(d) Sunset.--After the expiration of the 5-year period 
     beginning on the date of the enactment of the Building 
     American Homeownership Act of 2007, the Secretary may not 
     enter into any new commitment to insure any mortgage, or 
     newly insure any mortgage, pursuant to the automated process 
     established under this section.''.
       (b) GAO Report.--Not later than the expiration of the two-
     year period beginning on the date of the enactment of this 
     title, the Comptroller General of the United States shall 
     submit to the Congress a report identifying the number of 
     additional mortgagors served using the automated process 
     established pursuant to section 257 of the National Housing 
     Act (as added by the amendment made by subsection (a) of this 
     section) and the impact of such process and the insurance of 
     mortgages pursuant to such process on the safety and 
     soundness of the insurance funds under the National Housing 
     Act of which such mortgages are obligations.

     SEC. 115. HOMEOWNERSHIP PRESERVATION.

       The Secretary of Housing and Urban Development and the 
     Commissioner of the Federal Housing Administration, in 
     consultation with industry, the Neighborhood Reinvestment 
     Corporation, and other entities involved in foreclosure 
     prevention activities, shall--
       (1) develop and implement a plan to improve the Federal 
     Housing Administration's loss mitigation process; and
       (2) report such plan to the Committee on Banking, Housing, 
     and Urban Affairs of the Senate and the Committee on 
     Financial Services of the House of Representatives.

     SEC. 116. USE OF FHA SAVINGS FOR IMPROVEMENTS IN FHA 
                   TECHNOLOGIES, PROCEDURES, PROCESSES, PROGRAM 
                   PERFORMANCE, STAFFING, AND SALARIES.

       (a) Authorization of Appropriations.--There is authorized 
     to be appropriated for each of fiscal years 2008 through 
     2012, $25,000,000, from negative credit subsidy for the 
     mortgage insurance programs under title II of the National 
     Housing Act, to the Secretary of Housing and Urban 
     Development for increasing funding for the purpose of 
     improving technology, processes, program performance, 
     eliminating fraud, and for providing appropriate staffing in 
     connection with the mortgage insurance programs under title 
     II of the National Housing Act.
       (b) Certification.--The authorization under subsection (a) 
     shall not be effective for a fiscal year unless the Secretary 
     of Housing and Urban Development has, by rulemaking in 
     accordance with section 553 of title 5, United States Code 
     (notwithstanding subsections (a)(2), (b)(B), and (d)(3) of 
     such section), made a determination that--
       (1) premiums being, or to be, charged during such fiscal 
     year for mortgage insurance under title II of the National 
     Housing Act are established at the minimum amount sufficient 
     to--
       (A) comply with the requirements of section 205(f) of such 
     Act (relating to required capital ratio for the Mutual 
     Mortgage Insurance Fund); and
       (B) ensure the safety and soundness of the other mortgage 
     insurance funds under such Act; and
       (2) any negative credit subsidy for such fiscal year 
     resulting from such mortgage insurance programs adequately 
     ensures the efficient delivery and availability of such 
     programs.
       (c) Study and Report.--The Secretary of Housing and Urban 
     Development shall conduct a study to obtain recommendations 
     from participants in the private residential (both single 
     family and multifamily) mortgage lending business and the 
     secondary market for such mortgages on how best to update and 
     upgrade processes and technologies for the mortgage insurance 
     programs under title II of the National Housing Act so that 
     the procedures for originating, insuring, and servicing of 
     such mortgages conform with those customarily used by 
     secondary market purchasers of residential mortgage loans. 
     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 describing 
     the progress made and to be made toward updating and 
     upgrading such processes and technology, and providing 
     appropriate staffing for such mortgage insurance programs.

     SEC. 117. POST-PURCHASE HOUSING COUNSELING ELIGIBILITY 
                   IMPROVEMENTS.

       Section 106(c)(4) of the Housing and Urban Development Act 
     of 1968 (12 U.S.C. 1701x(c)(4)) is amended:
       (1) in subparagraph (C)--
       (A) in clause (i), by striking ``; or'' and inserting a 
     semicolon;
       (B) in clause (ii), by striking the period at the end and 
     inserting a semicolon; and
       (C) by adding at the end the following:
       ``(iii) a significant reduction in the income of the 
     household due to divorce or death; or
       ``(iv) a significant increase in basic expenses of the 
     homeowner or an immediate family member of the homeowner 
     (including the spouse, child, or parent for whom the 
     homeowner provides substantial care or financial assistance) 
     due to--

       ``(I) an unexpected or significant increase in medical 
     expenses;
       ``(II) a divorce;
       ``(III) unexpected and significant damage to the property, 
     the repair of which will not be covered by private or public 
     insurance; or
       ``(IV) a large property-tax increase; or'';

       (2) by striking the matter that follows subparagraph (C); 
     and
       (3) by adding at the end the following:
       ``(D) the Secretary of Housing and Urban Development 
     determines that the annual income of the homeowner is no 
     greater than the annual income established by the Secretary 
     as being of low- or moderate-income.''.

     SEC. 118. PRE-PURCHASE HOMEOWNERSHIP COUNSELING 
                   DEMONSTRATION.

       (a) Establishment of Program.--For the period beginning on 
     the date of enactment of this Act and ending on the date that 
     is 3 years after such date of enactment, the Secretary of 
     Housing and Urban Development shall establish and conduct a 
     demonstration program to test the effectiveness of 
     alternative forms of pre-purchase homeownership counseling 
     for eligible homebuyers.
       (b) Forms of Counseling.--The Secretary of Housing and 
     Urban Development shall provide to eligible homebuyers pre-
     purchase homeownership counseling under this section in the 
     form of --
       (1) telephone counseling;
       (2) individualized in-person counseling;
       (3) web-based counseling;
       (4) counseling classes; or
       (5) any other form or type of counseling that the Secretary 
     may, in his discretion, determine appropriate.
       (c) Size of Program.--The Secretary shall make available 
     the pre-purchase homeownership counseling described in 
     subsection (b) to not more than 3,000 eligible homebuyers in 
     any given year.
       (d) Incentive to Participate.--The Secretary of Housing and 
     Urban Development may provide incentives to eligible 
     homebuyers to participate in the demonstration program 
     established under subsection (a). Such incentives may include 
     the reduction of any insurance premium charges owed by the 
     eligible homebuyer to the Secretary.
       (e) Eligible Homebuyer Defined.--For purposes of this 
     section an ``eligible homebuyer'' means a first-time 
     homebuyer who has been approved for a home loan with a loan-
     to-value ratio between 97 percent and 98.5 percent.
       (f) Report to Congress.--The Secretary of Housing and Urban 
     Development shall report to the Committee on Banking, 
     Housing, and Urban Affairs of the Senate and the Committee on 
     Financial Services of the House of Representative--
       (1) on an annual basis, on the progress and results of the 
     demonstration program established under subsection (a); and
       (2) for the period beginning on the date of enactment of 
     this Act and ending on the date that is 5 years after such 
     date of enactment, on the payment history and delinquency 
     rates of eligible homebuyers who participated in the 
     demonstration program.

     SEC. 119. FRAUD PREVENTION.

       Section 1014 of title 18, United States Code, is amended in 
     the first sentence--
       (1) by inserting ``the Federal Housing Administration'' 
     before ``the Farm Credit Administration''; and
       (2) by striking ``commitment, or loan'' and inserting 
     ``commitment, loan, or insurance agreement or application for 
     insurance or a guarantee''.

     SEC. 120. LIMITATION ON MORTGAGE INSURANCE PREMIUM INCREASES.

       (a) In General.--Notwithstanding any other provision of 
     law, including any provision of this Act and any amendment 
     made by this Act--
       (1) for the period beginning on the date of the enactment 
     of this Act and ending on October 1, 2009, the premiums 
     charged for mortgage insurance under multifamily housing 
     programs under the National Housing Act may not be increased 
     above the premium amounts in effect under such program on 
     October 1, 2006, unless the Secretary of Housing and Urban 
     Development determines that, absent such increase, insurance 
     of additional mortgages under such program would, under the 
     Federal Credit Reform Act of 1990, require the appropriation 
     of new budget authority to cover the costs (as such term is 
     defined in section 502 of the Federal Credit Reform Act of 
     1990 (2 U.S.C. 661a) of such insurance; and
       (2) a premium increase pursuant to paragraph (1) may be 
     made only if not less than 30 days prior to such increase 
     taking effect, the Secretary of Housing and Urban 
     Development--

[[Page 34418]]

       (A) notifies the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives of such increase; and
       (B) publishes notice of such increase in the Federal 
     Register.
       (b) Waiver.--The Secretary of Housing and Urban Development 
     may waive the 30-day notice requirement under subsection 
     (a)(2), if the Secretary determines that waiting 30-days 
     before increasing premiums would cause substantial damage to 
     the solvency of multifamily housing programs under the 
     National Housing Act.

     SEC. 121. 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 title.

     SEC. 122. 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.

     SEC. 123. MORATORIUM ON IMPLEMENTATION OF RISK-BASED 
                   PREMIUMS.

       For the 12-month period beginning on the date of enactment 
     of this Act, the Secretary of Housing and Urban Development 
     shall not enact, execute, or take any action to make 
     effective the planned implementation of risk-based premiums, 
     which are designed for mortgage lenders to offer borrowers an 
     FHA-insured product that provides a range of mortgage 
     insurance premium pricing, based on the risk the insurance 
     contract represents, as such planned implementation was set 
     forth in the Notice published in the Federal Register on 
     September 20, 2007 (Vol. 72, No. 182, Page 53872).

           TITLE II--MANUFACTURED HOUSING LOAN MODERNIZATION

     SEC. 201. SHORT TITLE.

       This title may be cited as the ``FHA Manufactured Housing 
     Loan Modernization Act of 2007''.

     SEC. 202. PURPOSES.

       The purposes of this title are--
       (1) to provide adequate funding for FHA-insured 
     manufactured housing loans for low- and moderate-income 
     homebuyers during all economic cycles in the manufactured 
     housing industry;
       (2) to modernize the FHA title I insurance program for 
     manufactured housing loans to enhance participation by Ginnie 
     Mae and the private lending markets; and
       (3) to adjust the low loan limits for title I manufactured 
     home loan insurance to reflect the increase in costs since 
     such limits were last increased in 1992 and to index the 
     limits to inflation.

     SEC. 203. EXCEPTION TO LIMITATION ON FINANCIAL INSTITUTION 
                   PORTFOLIO.

       The second sentence of section 2(a) of the National Housing 
     Act (12 U.S.C. 1703(a)) is amended--
       (1) by striking ``In no case'' and inserting ``Other than 
     in connection with a manufactured home or a lot on which to 
     place such a home (or both), in no case''; and
       (2) by striking ``: Provided, That with'' and inserting ``. 
     With''.

     SEC. 204. INSURANCE BENEFITS.

       (a) In General.--Subsection (b) of section 2 of the 
     National Housing Act (12 U.S.C. 1703(b)), is amended by 
     adding at the end the following new paragraph:
       ``(8) Insurance benefits for manufactured housing loans.--
     Any contract of insurance with respect to loans, advances of 
     credit, or purchases in connection with a manufactured home 
     or a lot on which to place a manufactured home (or both) for 
     a financial institution that is executed under this title 
     after the date of the enactment of the FHA Manufactured 
     Housing Loan Modernization Act of 2007 by the Secretary shall 
     be conclusive evidence of the eligibility of such financial 
     institution for insurance, and the validity of any contract 
     of insurance so executed shall be incontestable in the hands 
     of the bearer from the date of the execution of such 
     contract, except for fraud or misrepresentation on the part 
     of such institution.''.
       (b) Applicability.--The amendment made by subsection (a) 
     shall only apply to loans that are registered or endorsed for 
     insurance after the date of the enactment of this Act.

     SEC. 205. MAXIMUM LOAN LIMITS.

       (a) Dollar Amounts.--Paragraph (1) of section 2(b) of the 
     National Housing Act (12 U.S.C. 1703(b)(1)) is amended--
       (1) in clause (ii) of subparagraph (A), by striking 
     ``$17,500'' and inserting ``$25,090'';
       (2) in subparagraph (C) by striking ``$48,600'' and 
     inserting ``$69,678'';
       (3) in subparagraph (D) by striking ``$64,800'' and 
     inserting ``$92,904'';
       (4) in subparagraph (E) by striking ``$16,200'' and 
     inserting ``$23,226''; and
       (5) by realigning subparagraphs (C), (D), and (E) 2 ems to 
     the left so that the left margins of such subparagraphs are 
     aligned with the margins of subparagraphs (A) and (B).
       (b) Annual Indexing.--Subsection (b) of section 2 of the 
     National Housing Act (12 U.S.C. 1703(b)), as amended by the 
     preceding provisions of this Act, is further amended by 
     adding at the end the following new paragraph:
       ``(9) Annual indexing of manufactured housing loans.--The 
     Secretary shall develop a method of indexing in order to 
     annually adjust the loan limits established in subparagraphs 
     (A)(ii), (C), (D), and (E) of this subsection. Such index 
     shall be based on the manufactured housing price data 
     collected by the United States Census Bureau. The Secretary 
     shall establish such index no later than 1 year after the 
     date of the enactment of the FHA Manufactured Housing Loan 
     Modernization Act of 2007.''
       (c) Technical and Conforming Changes.--Paragraph (1) of 
     section 2(b) of the National Housing Act (12 U.S.C. 
     1703(b)(1)) is amended--
       (1) by striking ``No'' and inserting ``Except as provided 
     in the last sentence of this paragraph, no''; and
       (2) by adding after and below subparagraph (G) the 
     following:
       ``The Secretary shall, by regulation, annually increase the 
     dollar amount limitations in subparagraphs (A)(ii), (C), (D), 
     and (E) (as such limitations may have been previously 
     adjusted under this sentence) in accordance with the index 
     established pursuant to paragraph (9).''.

     SEC. 206. INSURANCE PREMIUMS.

       Subsection (f) of section 2 of the National Housing Act (12 
     U.S.C. 1703(f)) is amended--
       (1) by inserting ``(1) Premium charges.--'' after ``(f)''; 
     and
       (2) by adding at the end the following new paragraph:
       ``(2) Manufactured Home Loans.--Notwithstanding paragraph 
     (1), in the case of a loan, advance of credit, or purchase in 
     connection with a manufactured home or a lot on which to 
     place such a home (or both), the premium charge for the 
     insurance granted under this section shall be paid by the 
     borrower under the loan or advance of credit, as follows:
       ``(A) At the time of the making of the loan, advance of 
     credit, or purchase, a single premium payment in an amount 
     not to exceed 2.25 percent of the amount of the original 
     insured principal obligation.
       ``(B) In addition to the premium under subparagraph (A), 
     annual premium payments during the term of the loan, advance, 
     or obligation purchased in an amount not exceeding 1.0 
     percent of the remaining insured principal balance (excluding 
     the portion of the remaining balance attributable to the 
     premium collected under subparagraph (A) and without taking 
     into account delinquent payments or prepayments).
       ``(C) Premium charges under this paragraph shall be 
     established in amounts that are sufficient, but do not exceed 
     the minimum amounts necessary, to maintain a negative credit 
     subsidy for the program under this section for insurance of 
     loans, advances of credit, or purchases in connection with a 
     manufactured home or a lot on which to place such a home (or 
     both), as determined based upon risk to the Federal 
     Government under existing underwriting requirements.
       ``(D) The Secretary may increase the limitations on premium 
     payments to percentages above those set forth in 
     subparagraphs (A) and (B), but only if necessary, and not in 
     excess of the minimum increase necessary, to maintain a 
     negative credit subsidy as described in subparagraph (C).''.

     SEC. 207. TECHNICAL CORRECTIONS.

       (a) Dates.--Subsection (a) of section 2 of the National 
     Housing Act (12 U.S.C. 1703(a)) is amended--
       (1) by striking ``on and after July 1, 1939,'' each place 
     such term appears; and
       (2) by striking ``made after the effective date of the 
     Housing Act of 1954''.
       (b) Authority of Secretary.--Subsection (c) of section 2 of 
     the National Housing Act (12 U.S.C. 1703(c)) is amended to 
     read as follows:
       ``(c) Handling and Disposal of Property.--
       ``(1) Authority of secretary.--Notwithstanding any other 
     provision of law, the Secretary may--
       ``(A) deal with, complete, rent, renovate, modernize, 
     insure, or assign or sell at public or private sale, or 
     otherwise dispose of, for cash or credit in the Secretary's 
     discretion, and upon such terms and conditions and for such 
     consideration as the Secretary shall determine to be 
     reasonable, any real or personal property conveyed to or 
     otherwise acquired by the Secretary, in connection with the 
     payment of insurance heretofore or hereafter granted under 
     this title, including any evidence of debt, contract, claim, 
     personal property, or security assigned to or held by him in 
     connection with the payment of insurance heretofore or 
     hereafter granted under this section; and
       ``(B) pursue to final collection, by way of compromise or 
     otherwise, all claims assigned to or held by the Secretary 
     and all legal or equitable rights accruing to the Secretary 
     in connection with the payment of such insurance, including 
     unpaid insurance premiums owed in connection with insurance 
     made available by this title.
       ``(2) Advertisements for proposals.--Section 3709 of the 
     Revised Statutes shall not be construed to apply to any 
     contract of hazard insurance or to any purchase or contract 
     for services or supplies on account of such property if the 
     amount thereof does not exceed $25,000.

[[Page 34419]]

       ``(3) Delegation of authority.--The power to convey and to 
     execute in the name of the Secretary, deeds of conveyance, 
     deeds of release, assignments and satisfactions of mortgages, 
     and any other written instrument relating to real or personal 
     property or any interest therein heretofore or hereafter 
     acquired by the Secretary pursuant to the provisions of this 
     title may be exercised by an officer appointed by the 
     Secretary without the execution of any express delegation of 
     power or power of attorney. Nothing in this subsection shall 
     be construed to prevent the Secretary from delegating such 
     power by order or by power of attorney, in the Secretary's 
     discretion, to any officer or agent the Secretary may 
     appoint.''.

     SEC. 208. REVISION OF UNDERWRITING CRITERIA.

       (a) In General.--Subsection (b) of section 2 of the 
     National Housing Act (12 U.S.C. 1703(b)), as amended by the 
     preceding provisions of this Act, is further amended by 
     adding at the end the following new paragraph:
       ``(10) Financial soundness of manufactured housing 
     program.--The Secretary shall establish such underwriting 
     criteria for loans and advances of credit in connection with 
     a manufactured home or a lot on which to place a manufactured 
     home (or both), including such loans and advances represented 
     by obligations purchased by financial institutions, as may be 
     necessary to ensure that the program under this title for 
     insurance for financial institutions against losses from such 
     loans, advances of credit, and purchases is financially 
     sound.''.
       (b) Timing.--Not later than the expiration of the 6-month 
     period beginning on the date of the enactment of this Act, 
     the Secretary of Housing and Urban Development shall revise 
     the existing underwriting criteria for the program referred 
     to in paragraph (10) of section 2(b) of the National Housing 
     Act (as added by subsection (a) of this section) in 
     accordance with the requirements of such paragraph.

     SEC. 209. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES.

       Title I of the National Housing Act is amended by adding at 
     the end of section 9 the following new section:

     ``SEC. 10. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES.

       ``(a) In General.--Except as provided in subsection (b), 
     the provisions of sections 3, 8, 16, 17, 18, and 19 of the 
     Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 
     et seq.) shall apply to each sale of a manufactured home 
     financed with an FHA-insured loan or extension of credit, as 
     well as to services rendered in connection with such 
     transactions.
       ``(b) Authority of the Secretary.--The Secretary is 
     authorized to determine the manner and extent to which the 
     provisions of sections 3, 8, 16, 17, 18, and 19 of the Real 
     Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et 
     seq.) may reasonably be applied to the transactions described 
     in subsection (a), and to grant such exemptions as may be 
     necessary to achieve the purposes of this section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) the term `federally related mortgage loan' as used in 
     sections 3, 8, 16, 17, 18, and 19 of the Real Estate 
     Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.) 
     shall include an FHA-insured loan or extension of credit made 
     to a borrower for the purpose of purchasing a manufactured 
     home that the borrower intends to occupy as a personal 
     residence; and
       ``(2) the term `real estate settlement service' as used in 
     sections 3, 8, 16, 17, 18, and 19 of the Real Estate 
     Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.) 
     shall include any service rendered in connection with a loan 
     or extension of credit insured by the Federal Housing 
     Administration for the purchase of a manufactured home.
       ``(d) Unfair and Deceptive Practices.--In connection with 
     the purchase of a manufactured home financed with a loan or 
     extension of credit insured by the Federal Housing 
     Administration under this title, the Secretary shall prohibit 
     acts or practices in connection with loans or extensions of 
     credit that the Secretary finds to be unfair, deceptive, or 
     otherwise not in the interests of the borrower.''.

     SEC. 210. LEASEHOLD REQUIREMENTS.

       Subsection (b) of section 2 of the National Housing Act (12 
     U.S.C. 1703(b)), as amended by the preceding provisions of 
     this Act, is further amended by adding at the end the 
     following new paragraph:
       ``(11) Leasehold requirements.--No insurance shall be 
     granted under this section to any such financial institution 
     with respect to any obligation representing any such loan, 
     advance of credit, or purchase by it, made for the purposes 
     of financing a manufactured home which is intended to be 
     situated in a manufactured home community pursuant to a 
     lease, unless such lease--
       ``(A) expires not less than 3 years after the origination 
     date of the obligation;
       ``(B) is renewable upon the expiration of the original 3 
     year term by successive 1 year terms; and
       ``(C) requires the lessor to provide the lessee written 
     notice of termination of the lease not less than 180 days 
     prior to the expiration of the current lease term in the 
     event the lessee is required to move due to the closing of 
     the manufactured home community, and further provides that 
     failure to provide such notice to the mortgagor in a timely 
     manner will cause the lease term, at its expiration, to 
     automatically renew for an additional 1 year term.''.

  Mr. REID. Madam President, I move to reconsider the vote and move to 
lay that motion on the table.
  The motion to lay on the table was agreed to.

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