[House Report 116-282]
[From the U.S. Government Publishing Office]
116th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 116-282
======================================================================
FHA LOAN AFFORDABILITY ACT OF 2019
_______
November 12, 2019.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Ms. Waters, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3141]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3141) to limit the collection of annual premiums
under the FHA program for mortgage insurance for single family
housing, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Section-by-Section Analysis...................................... 3
Hearings......................................................... 3
Committee Consideration.......................................... 4
Committee Votes and Roll Call Votes.............................. 4
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 6
Statement of Performance Goals and Objectives.................... 6
New Budget Authority and CBO Cost Estimate....................... 6
Committee Cost Estimate.......................................... 10
Unfunded Mandate Statement....................................... 11
Advisory Committee............................................... 11
Application of Law to the Legislative Branch..................... 11
Earmark Statement................................................ 11
Duplication of Federal Programs.................................. 11
Changes to Existing Law.......................................... 11
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``FHA Loan Affordability Act of 2019''.
SEC. 2. ANNUAL PREMIUMS.
(a) In General.--Paragraph (2) of section 203(c) of the National
Housing Act (12 U.S.C. 1709(c)(2)) is amended--
(1) in subparagraph (B)--
(A) in clause (i), by striking ``For any'' and
inserting ``Subject to subparagraph (D), for any''; and
(B) in clause (ii), by striking ``For any'' and
inserting ``Subject to subparagraph (D), for any'';
(2) in subparagraph (C)(i), by striking ``In addition'' and
inserting ``Subject to subparagraph (D), in addition''; and
(3) by adding at the end the following new subparagraph:
``(D) The Secretary may not collect any annual premiums under
this paragraph with respect to a mortgage at any time that the
remaining insured principal balance (excluding the portion of
the remaining balance attributable to the premium collected
under subparagraph (A)) is 78 percent or less than the lower of
(i) the sales price of the dwelling at the sale in connection
with which the mortgage was made, or (ii) the appraised value
of the dwelling at the time of the origination of the
mortgage.''.
(b) Applicability.--The amendments made by subsection (a) of this
section shall apply with respect only to mortgages insured by the
Secretary of Housing and Urban Development after the date of the
enactment of this Act.
Purpose and Summary
On June 5, 2019, Representative Dean Phillips introduced
H.R. 3141, the ``FHA Loan Affordability Act,'' a bill that
repeals the requirement that Federal Housing Administration
(FHA) borrowers pay mortgage insurance premiums for the life of
the loan and reinstates the FHA's previous policy of requiring
borrowers to pay premiums until the outstanding principal
balance reaches 78 percent of the original home value.
Background and Need for Legislation
Under current law, private mortgage insurers are required
to cancel premiums once the outstanding principal balance
reaches 78 percent of the original home value.\1\ Prior to
2013, FHA was aligned with the private mortgage insurance
industry in charging premiums only until the outstanding
principal balance reached 78 percent of the original home
value. On June 3, 2013, the FHA began requiring its borrowers
to pay mortgage insurance premiums for the life of the loan.\2\
As a result, FHA borrowers, who are disproportionately low
income, minority, and first-time homebuyers, may pay more in
premiums over time than non-FHA borrowers.
---------------------------------------------------------------------------
\1\Section 3, Homeowners Protection Act of 1998, Pub. Law 105-216,
12 USC 4902(b)
\2\U.S. Department of Housing and Urban Development, Mortgagee
Letter 2013-04, January 31, 2013.
---------------------------------------------------------------------------
FHA contends that the change in its policy was consistent
with its efforts to strengthen the Mutual Mortgage Insurance
Fund (MMIF), which had dipped below the statutorily mandated
capital ratio of 2 percent during Fiscal Year (FY) 2009 in the
wake of the financial crisis. However, FHA has reached and
exceeded the capital ratio requirement for four consecutive
years, beginning in FY 2015, and is in strong financial
health.\3\
---------------------------------------------------------------------------
\3\FHA, ``Annual Report to Congress Regarding the Financial Status
of the Mutual Mortgage Insurance Fund,'' FY 2018.
---------------------------------------------------------------------------
While refinancing an FHA loan once it reaches the 78
percent threshold is an option that enables borrowers to avoid
paying annual premiums, refinancing may not make sense if
interest rates are significantly higher than the loan's current
rate. Refinancing also involves substantial transaction costs
that not all families can afford. To the extent that FHA
borrowers with the financial means may opt to refinance out of
FHA loans, this trend could negatively affect the financial
strength of the MMIF because borrowers with lower credit risks
would leave the portfolio. In fact, after FHA instituted its
life of loan policy in 2013, its loan retention rate fell from
about 50 percent to a current rate of 15 percent.\4\
---------------------------------------------------------------------------
\4\National Mortgage News, ``Opinion: Holistic approach needed to
fix vital federal mortgage programs,'' May 17, 2019.
---------------------------------------------------------------------------
The following organizations support this bill: The National
Association of Realtors (NAR), the National Association of Real
Estate Brokers (NAREB), the National Association of Hispanic
Real Estate Professionals (NAHREP), the Community Home Lenders
Association (CHLA), the National Consumer Law Center (NCLC) (on
behalf of its low-income clients), the National Housing
Conference (NHC), the National Community Reinvestment Coalition
(NCRC), and the California Reinvestment Coalition (CRC).
Section-by-Section Analysis
Section 1. Short title
This section states that the title of the bill is the ``FHA
Loan Affordability Act of 2019.''
Section 2. Annual premiums
This section prohibits the Secretary of HUD from collecting
annual mortgage insurance premiums from borrowers whose
remaining insured principal balance is at or below 78 percent
of either the sale price of the home when the mortgage was
made, or the appraised home value at the time of mortgage
origination, whichever is lower.
Hearings
For the purposes of section 103(i) of H. Res. 6 for the
116th Congress, the Committee on Financial Services held a
hearing to consider a draft version of H.R. 3141 entitled, ``A
Review of the State of and Barriers to Minority Homeownership''
on May 8, 2019. Testifying before the Committee were Alanna
McCargo, Vice President, Housing Finance Policy, the Urban
Institute; Nikitra Bailey, Executive Vice President, Center for
Responsible Lending; Joseph Nery, Partner, Nery & Richardson
LLC and Past President of the National Association of Hispanic
Real Estate Professionals (NAHREP), current National Board
Member; Jeffrey Hicks, President, National Association of Real
Estate Brokers; Carmen Castro-Conroy, Managing Counselor,
Montgomery County, Housing Initiative Partnership, Inc.; JoAnne
Poole, 2019 Vice Chair, Multicultural Real Estate Leadership
Advisory Group, National Association of Realtors; and Joel
Griffith, Research Fellow, Financial Regulations, the Heritage
Foundation
Committee Consideration
The Committee on Financial Services met in open session on
June 11, 2019 and ordered H.R. 3141 to be reported favorably to
the House with an amendment in the nature of a substitute by a
vote of 34 yeas and 25 nays, a quorum being present.
Committee Votes and Roll Call Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following roll call votes occurred during the Committee's
consideration of H.R. 3141.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of Performance Goals and Objectives
Pursuant to clause (3)(c) of rule XIII of the Rules of the
House of Representatives, the goals of H.R. 3141 are to make
FHA loans for affordable by repealing the requirement that FHA
borrowers pay mortgage insurance premiums for the life of the
loan and reinstating the FHA's previous policy of requiring
borrowers to pay premiums until the outstanding principal
balance reaches 78 percent of the original home value.
New Budget Authority and CBO Cost Estimate
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974, and pursuant to clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has received the following estimate for
H.R. 3141 from the Director of the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 28, 2019.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Madam Chairwoman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3141, the FHA Loan
Affordability Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Robert Reese.
Sincerely,
Mark P. Hadley
(For Phillip L. Swagel, Director).
Enclosure.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Bill summary: H.R. 3141 would require the Federal Housing
Administration (FHA) to stop charging annual mortgage insurance
premiums to borrowers whose outstanding principal balance falls
below 78 percent of what the property's value was at the time
of the mortgage origination (such a ratio is commonly referred
to as a loan to value ratio or LTV). The changes made by the
bill would affect mortgages insured by FHA after enactment of
H.R. 3141.
Estimated federal cost: The estimated budgetary effect of
H.R. 3141 is shown in Table 1. The costs of the legislation
fall within budget function 370 (commerce and housing credit).
TABLE 1.--ESTIMATED INCREASES IN SPENDING SUBJECT TO APPROPRIATION UNDER H.R. 3141
----------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
----------------------------------------------------------------------------
2019 2020 2021 2022 2023 2024 2019-2024
----------------------------------------------------------------------------------------------------------------
FHA Insurance:
Estimated Authorization........ 0 2,260 2,590 2,950 3,160 3,410 14,370
Estimated Outlays.............. 0 2,260 2,590 2,950 3,160 3,410 14,370
Ginnie Mae:
Estimated Authorization........ 0 -95 -80 -90 -95 -100 -460
Estimated Outlays.............. 0 -95 -80 -90 -95 -100 -460
Total Changes:a
Estimated Authorization........ 0 2,165 2,510 2,860 3,065 3,310 13,910
Estimated Outlays.............. 0 2,165 2,510 2,860 3,065 3,310 13,910
----------------------------------------------------------------------------------------------------------------
FHA = Federal Housing Administration; Ginnie Mae = Government National Mortgage Association
aUsing the fair-value approach, CBO estimates that implementing H.R. 3141 would increase costs to FHA and Ginnie
Mae by $20.7 billion over the 2020-2024 period. As shown in the table, using a FCRA approach, CBO estimates
that implementing H.R. 3141 would decrease offsetting collections generated by FHA and Ginnie Mae by about $
13.9 billion over the 2020-2024 period
Basis of estimate: For this estimate, CBO assumes that H.R.
3141 will be enacted near the end of fiscal year 2019 before
fiscal year 2020 appropriations for FHA have been enacted but
late enough in the year that it will not apply to mortgage
guarantees made in 2019. If H.R. 3141 were enacted after 2020
appropriations were completed it would increase direct
spending. For this estimate, CBO also assumes that future
appropriation acts will authorize FHA to increase the amount of
mortgage guarantees it provides by an amount sufficient to meet
the increased demand for mortgage guarantees under the bill.
Background: FHA provides mortgage insurance for the
purchase, refinance, and rehabilitation of single-family homes
and charges up-front and annual premiums to mortgagors. Those
premiums are classified in the budget as offsetting
collections, and reduce spending subject to appropriation.
Under current law, FHA requires borrowers to pay annual
mortgage insurance premiums for the life of the loan for
mortgages that have initial LTVs greater than 90 percent. For
mortgages with initial LTVs less than 90 percent, borrowers
must pay annual premiums for the first 11 years of the mortgage
term.
To estimate the budgetary effects of loan guarantees, CBO
uses the methodology specified in the Federal Credit Reform Act
(FCRA). On that basis, CBO estimates that the net present value
of the premiums collected by FHA for all mortgage guarantees
under current law will exceed the cost of any default losses on
the insured loans in each year.\1\ Currently, CBO estimates
that FHA's insurance program will have a subsidy rate of -2.69
percent in 2020. A negative subsidy occurs when the net present
value of all premiums charged for a loan guarantee is greater
than the estimated default costs associated with that
guarantee.
---------------------------------------------------------------------------
\1\A present value expresses a flow of past and future income or
payments as a single amount received or paid at a specific time. The
value depends on the rate of interest, known as the discount rate, used
to translate past and future cash flows into current dollars at that
time. The budgetary effects for FHA's guarantees are calculated under
procedures specified in FCRA. Under FCRA, projected future cash flows
are discounted to the present using interest rates on Treasury
Securities.
---------------------------------------------------------------------------
The Government National Mortgage Association (Ginnie Mae)
guarantees securities backed by pools of mortgages that are
insured by federal agencies such as FHA. Typically, 93 percent
of FHA mortgages are pooled into mortgage-backed securities
(MBSs) and guaranteed by Ginnie Mae in the first few months
after they are originated. In exchange for the Ginnie Mae
guarantee, issuers pay a fee on the pooled mortgages that back
those securities. CBO estimates that the net present value of
the fees collected by Ginnie Mae will exceed the cost of any
default losses on those securities in each year. Using the
methodology specified in FCRA, CBO estimates that Ginnie Mae's
MBS program will have a subsidy rate of -0.29 percent in 2020.
Spending subject to appropriation: CBO estimates that
implementing H.R. 3141 would increase discretionary spending by
reducing the offsetting collections attributed to FHA mortgage
insurance by about $14.4 billion over the 2020-2024 period. The
bill also would increase Ginnie Mae's offsetting collections by
$460 million over that same period--leading to a net increase
in discretionary spending of $13.9 billion over the 2020-2024
period.
FHA Insurance. CBO estimates that enacting H.R. 3141 would
have two effects on the FHA program. First by limiting the time
period that annual premiums can be charged, H.R. 3141 would
lower the lifetime collections of premiums that FHA would
receive from many borrowers. Under current law the majority of
FHA mortgages for newly purchased properties will reach an LTV
of 78 percent after about 11 years and FHA guarantees of
refinanced mortgages will reach that level more quickly.
Accounting for the shorter period of time that such annual
premiums would be charged, CBO estimates that implementing H.R.
3141 would increase FHA's mortgage insurance program's subsidy
rate to -1.38 percent in 2020. Over the 2021-2024 period CBO
estimates that the FHA subsidy rate would increase by a
commensurate amount relative to our current law projections in
each year.
Second, CBO estimates that limiting the period that FHA
could charge annual premiums would increase demand for FHA
mortgage insurance relative to mortgages backed by private
mortgage insurance and result in a surge in refinancing of
existing FHA mortgages. Using information about the change in
demand for FHA guaranteed mortgages that stemmed from previous
changes to annual premiums, CBO estimates that implementing
H.R. 3141 would shift about $160 billion worth of mortgage
volume from the private market to FHA over the 2020-2024
period. For comparison, in 2018 FHA guaranteed mortgages worth
$209 billion and CBO estimates that the private market
guaranteed about $280 billion worth of mortgages. Furthermore,
CBO estimates there also would be a one-time increase in
refinancings of FHA mortgages issued prior to enactment of H.R.
3141 so that those borrowers could receive the more favorable
insurance premium treatment. Using information on refinancing
practices associated with prior FHA rate changes, CBO estimates
that implementing H.R. 3141 would lead to an increase in such
refinancing totaling $10 billion in 2020.
Taking into account the estimated increase in both subsidy
rate and volume of FHA insured mortgages, CBO estimates that
implementing H.R. 3141 would decrease discretionary offsetting
collections (and thus increase discretionary costs) from the
FHA mortgage insurance program by about $14.4 billion over the
2020-2024 period.
Ginnie Mae. The estimated increase in FHA loan volume would
increase the amount of mortgages that could be securitized by
Ginnie Mae. Under H.R. 3141, CBO estimates that 93 percent of
the additional FHA mortgages would be included in Ginnie Mae's
MBS program. Because H.R. 3141 would not change the fees
charged by Ginnie Mae, CBO's estimated subsidy rate for Ginnie
Mae (-0.29 percent over the 2020-2024 period) would not change.
CBO expects that Ginnie Mae would guarantee 93 percent of the
$170 billion worth of additional FHA loan volume that CBO
estimates would occur over the 2020-2024 period under the bill.
On that basis, CBO estimates that implementing the bill would
increase offsetting collections (and thus reduce discretionary
costs) from Ginnie Mae's MBS program by $460 million over the
2020-2024 period.
Uncertainty: This estimate is uncertain because it is hard
to predict how responsive the demand for FHA insurance would be
to the changes made by H.R. 3141. If the lower premiums under
the bill would increase demand for FHA mortgages by more than
CBO estimates, there would be a larger increase in volume and
the cost of H.R. 3141 would be lower. Conversely, if the lower
premiums affected demand to a lesser extent than CBO estimates,
there would be a smaller increase in volume and a higher cost
to H.R. 3141.
Alternative budgetary treatment: The estimated cost of H.R.
3141 depends on the method used to calculate the subsidy rate
for mortgages insured by FHA. Under current law, the budgetary
effects of FHA's mortgage insurance program are measured in the
budget according to the procedures established in FCRA.
However, as required by S. Con. Res 71, the Concurrent
Resolution on the Budget for Fiscal Year 2018, CBO also has
prepared a cost estimate for H.R. 3141 using a fair-value
approach to estimating the budgetary effect on FHA.
The fair-value approach is an alternative to the approach
specified in FCRA. Both approaches rely on the same projections
of future cash flows for guarantee programs, and both account
for the lifetime cost of the new guarantees made in a given
year (including the expected cost of losses net of fees
collected). The fair-value estimates differ from FCRA estimates
by recognizing that the government's assumption of financial
risk has a cost that exceeds the average amount of losses that
would be expected from defaults. The higher financial risk is
reflected in higher fees private entities charge for similar
guarantees on the basis of market prices. In practice, the main
difference between FCRA estimates and fair-value estimates is
the discount rate used to calculate the present value of
estimated future guarantee costs and receipts. Fair-value
estimates use higher discount rates that incorporate a premium
for market risk.
Using the fair-value approach, CBO estimates that
implementing H.R. 3141 would increase costs to FHA and Ginnie
Mae by about $20.7 billion over the 2020-2024 period.
Pay-As-You-Go considerations: None.
Increase in long-term deficits: None.
Mandates: None.
Estimate prepared by: Federal costs: Robert Reese;
Mandates: Rachel Austin.
Estimate reviewed by: Kim P. Cawley, Chief, Natural and
Physical Resources Cost Estimates Unit; H. Samuel Papenfuss,
Deputy Assistant Director for Budget Analysis; Theresa Gullo,
Assistant Director for Budget Analysis.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 3141.
However, clause 3(d)(2)(B) of that rule provides that this
requirement does not apply when the committee has included in
its report a timely submitted cost estimate of the bill
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act.
Unfunded Mandate Statement
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act (as amended by Section 101(a)(2) of the
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee
adopts as its own the estimate of federal mandates regarding
H.R. 3141, as amended, prepared by the Director of the
Congressional Budget Office.
Advisory Committee
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Application of Law to the Legislative Branch
Pursuant to section 102(b)(3) of the Congressional
Accountability Act, Pub. L. No. 104-1, H.R. 3141, as amended,
does not apply to terms and conditions of employment or to
access to public services or accommodations within the
legislative branch.
Earmark Statement
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives H.R. 3141 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as described in clauses 9(e), 9(f), and 9(g) of rule
XXI.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of H.R. 3141 establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Changes to Existing Law
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, H.R. 3141, as reported, are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
NATIONAL HOUSING ACT
* * * * * * *
TITLE II--MORTGAGE INSURANCE
* * * * * * *
insurance of mortgages
Sec. 203. (a) The Secretary is authorized, upon application
by the mortgagee, to insure as hereinafter provided any
mortgage offered to him which is eligible for insurance as
hereinafter provided, and, upon such terms as the Secretary may
prescribe, to make commitments for the insuring of such
mortgages prior to the date of their execution or disbursement
thereon.
(b) To be eligible for insurance under this section a
mortgage shall comply with the following:
(1) Have been made to, and be held by, a mortgagee
approved by the Secretary as responsible and able to
service the mortgage properly.
(2) Involve a principal obligation (including such
initial service charges, appraisal, inspection, and
other fees as the Secretary shall approve) in an
amount--
(A) not to exceed the lesser of--
(i) in the case of a 1-family
residence, 115 percent of the median 1-
family house price in the area, as
determined by the Secretary; and in the
case of a 2-, 3-, or 4-family
residence, the percentage of such
median price that bears the same ratio
to such median price as the dollar
amount limitation determined under the
sixth sentence of 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 determined under such
section for a 1-family residence; or
(ii) 150 percent of the dollar amount
limitation determined under the sixth
sentence of such section 305(a)(2) for
a residence of applicable size;
except that the dollar amount limitation in
effect under this subparagraph for any size
residence for any area 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 amount limitation determined under the
sixth sentence of 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.
For purposes of the preceding sentence, the term
``area'' means a metropolitan statistical area as
established by the Office of Management and Budget; and
the median 1-family house price for an area shall be
equal to the median 1-family house price of the county
within the area that has the highest such median price.
Notwithstanding any other provision of this
paragraph, the amount which may be insured under this
section may be increased by up to 20 percent if such
increase is necessary to account for the increased cost
of the residence due to the installation of a solar
energy system (as defined in subparagraph (3) of the
last paragraph of section 2(a) of this Act) therein.
Notwithstanding any other provision of this
paragraph, the Secretary may not insure, or enter into
a commitment to insure, a mortgage under this section
that is executed by a first-time homebuyer and that
involves a principal obligation (including such initial
service charges, appraisal, inspection, and other fees
as the Secretary shall approve) in excess of 97 percent
of the appraised value of the property unless the
mortgagor has completed a program of counseling with
respect to the responsibilities and financial
management involved in homeownership that is approved
by the Secretary; except that the Secretary may, in the
discretion of the Secretary, waive the applicability of
this requirement.
(3) Have a maturity satisfactory to the Secretary,
but not to exceed, in any event, thirty-five years (or
thirty years if such mortgage is not approved for
insurance prior to construction) from the date of the
beginning of amortization of the mortgage.
(4) Contain complete amortization provisions
satisfactory to the Secretary requiring periodic
payments by the mortgagor not in excess of his
reasonable ability to pay as determined by the
Secretary.
(5) Bear interest at such rate as may be agreed upon
by the mortgagor and the mortgagee.
(6) Provide, in a manner satisfactory to the
Secretary, for the application of the mortgagor's
periodic payments (exclusive of the amount allocated to
interest and to the premium charge which is required
for mortgage insurance as hereinafter provided) to
amortization of the principal of the mortgage.
(7) Contain such terms and provisions with respect to
insurance, repairs, alterations, payment of taxes,
default reserves, delinquency charges, foreclosure
proceedings, anticipation of maturity, additional and
secondary liens, and other matters as the Secretary may
in his discretion prescribe.
(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 or its equivalent,
on account of the property an amount equal to
not less than 3.5 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 plus any initial
service charges, appraisal, inspection,
and other fees in connection with the
mortgage.
(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).
This subparagraph shall apply only to mortgages
for which the mortgagee has issued credit
approval for the borrower on or after October
1, 2008.
(c)(1) The Secretary is authorized to fix premium charge for
the insurance of mortgages under the separate sections of this
title but in the case of any mortgage such charge shall be not
less than an amount equivalent to one-fourth of 1 per centum
per annum nor more than an amount equivalent to 1 per centum
per annum of the amount of the principal obligation of the
mortgage outstanding at any time, without taking into account
delinquent payments or prepayments: Provided, That premium
charges fixed for insurance (1) under section 245, 247, 251,
252, or 253, or any other financing mechanism providing
alternative methods for repayment of a mortgage that is
determined by the Secretary to involve additional risk, or (2)
under subsection (n) are not required to be the same as the
premium charges for mortgages insured under the other
provisions of this section, but in no case shall premium
charges under subsection (n) exceed 1 per centum per annum:
Provided, That any reduced premium charge so fixed and computed
may, in the discretion of the Secretary, also be made
applicable in such manner as the Secretary shall prescribe to
each insured mortgage outstanding under the section or sections
involved at the time the reduced premium charge is fixed. Such
premium charges shall be payable by the mortgagee, either in
cash, or in debentures issued by the Secretary under this title
at par plus accrued interest, in such manner as may be
prescribed by the Secretary: Provided, That debentures
presented in payment of premium charges shall represent
obligations of the particular insurance fund or account to
which such premium charges are to be credited: Provided
further, That the Secretary may require the payment of one or
more such premium charges at the time the mortgage is insured,
at such discount rate as he may prescribe not in excess of the
interest rate specified in the mortgage. If the Secretary finds
upon the presentation of a mortgage for insurance and the
tender of the initial premium charge or charges so required
that the mortgage complies with the provisions of this section,
such mortgage may be accepted for insurance by endorsement or
otherwise as the Secretary may prescribe; but no mortgage shall
be accepted for insurance under this section unless the
Secretary finds that the project with respect to which the
mortgage is executed is economically sound. In the event that
the principal obligation of any mortgage accepted for insurance
under this title is paid in full prior to the maturity date,
the Secretary is further authorized in his discretion to
require the payment by the mortgagee of an adjusted premium
charge in such amount as the Secretary determines to be
equitable, but not in excess of the aggregate amount of the
premium charges that the mortgagee would otherwise have been
required to pay if the mortgage had continued to be insured
until such maturity date; and in the event that the principal
obligation is paid in full as herein set forth, the Secretary
is authorized to refund to the mortgagee for the account of the
mortgagor all, or such portion as he shall determine to be
equitable, of the current unearned premium charges theretofore
paid: Provided, That with respect to mortgages (1) for which
the Secretary requires, at the time the mortgage is insured,
the payment of a single premium charge to cover the total
premium obligation for the insurance of the mortgage, and (2)
on which the principal obligation is paid before the number of
years on which the premium with respect to a particular
mortgage was based, or the property is sold subject to the
mortgage or is sold and the mortgage is assumed prior to such
time, the Secretary shall provide for refunds, where
appropriate, of a portion of the premium paid and shall provide
for appropriate allocation of the premium cost among the
mortgagors over the term of the mortgage, in accordance with
procedures established by the Secretary which take into account
sound financial and actuarial considerations.
(2) Notwithstanding any other provision of this section, each
mortgage secured by a 1- to 4-family dwelling that is an
obligation of the Mutual Mortgage Insurance Fund shall be
subject to the following requirements:
(A) The Secretary shall establish and collect, at the
time of insurance, a single premium payment in an
amount not exceeding 3 percent of the amount of the
original insured principal obligation of the mortgage.
In the case of a mortgage for which the mortgagor is a
first-time homebuyer who completes a program of
counseling with respect to the responsibilities and
financial management involved in homeownership that is
approved by the Secretary, the premium payment under
this subparagraph shall not exceed 2.75 percent of the
amount of the original insured principal obligation of
the mortgage. Upon payment in full of the principal
obligation of a mortgage prior to the maturity date of
the mortgage, the Secretary shall refund all of the
unearned premium charges paid on the mortgage pursuant
to this subparagraph, provided that the mortgagor
refinances the unpaid principal obligation under title
II of this Act.
(B) In addition to the premium under subparagraph
(A), the Secretary may establish and collect annual
premium payments in an amount not exceeding 1.5 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) for the following periods:
(i) [For any] Subject to subparagraph (D),
for any mortgage involving an original
principal obligation (excluding any premium
collected under subparagraph (A)) that is less
than 90 percent of the appraised value of the
property (as of the date the mortgage is
accepted for insurance), for the first 11 years
of the mortgage term.
(ii) [For any] Subject to subparagraph (D),
for any mortage involving an original principal
obligation (excluding any premium collected
under subparagraph (A)) that is greater than or
equal to 90 percent of such value, for the
first 30 years of the mortgage term; except
that notwithstanding the matter preceding
clause (i), for any mortgage involving an
original principal obligation (excluding any
premium collected under subparagraph (A)) that
is greater than 95 percent of such value, the
annual premium collected during the 30-year
period under this clause may be in an amount
not exceeding 1.55 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)(i) [In addition] Subject to subparagraph (D), in
addition to the premiums under subparagraphs (A) and
(B), the Secretary shall establish and collect annual
premium payments for any mortgage for which the
Secretary collects an annual premium payment under
subparagraph (B), in an amount described in clause
(ii).
(ii)(I) Subject to subclause (II), with respect to a
mortgage, the amount described in this clause is 10
basis points 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).
(II) During the 2-year period beginning on the date
of enactment of this subparagraph, the Secretary shall
increase the number of basis points of the annual
premium payment collected under this subparagraph
incrementally, as determined appropriate by the
Secretary, until the number of basis points of the
annual premium payment collected under this
subparagraph is equal to the number described in
subclause (I).
(D) The Secretary may not collect any annual premiums
under this paragraph with respect to a mortgage at any
time that the remaining insured principal balance
(excluding the portion of the remaining balance
attributable to the premium collected under
subparagraph (A)) is 78 percent or less than the lower
of (i) the sales price of the dwelling at the sale in
connection with which the mortgage was made, or (ii)
the appraised value of the dwelling at the time of the
origination of the mortgage.
(d)(1) Except as provided in paragraph (2) of this
subsection, notwithstanding provision of this title governing
maximum mortgage amounts for insuring a mortgage secured by a
one- to four-family dwelling, the maximum amount of the
mortgage determined under any such provision may be increased
by the amount of the mortgage insurance premium paid at the
time the mortgage is insured.
(2) The maximum amount of a mortgage determined under
subsection (b)(2)(B) of this section may not be increased as
provided in paragraph (1).
(e) Any contract of insurance heretofore or hereafter
executed by the Secretary under this title shall be conclusive
evidence of the eligibility of the loan or mortgage for
insurance, and the validility of any contract of insurance so
executed shall be incontestable in the hands of an approved
financial institution or approved mortgagee from the date of
the execution of such contract, except for fraud or
misrepresentation on the part of such approved financial
institution or approved mortgagee.
(f) Disclosure of Other Mortgage Products.--
(1) In general.--In conjunction with any loan insured
under this section, an original lender shall provide to
each prospective borrower a disclosure notice that
provides a 1-page analysis of mortgage products offered
by that lender and for which the borrower would
qualify.
(2) Notice.--The notice required under paragraph (1)
shall include--
(A) a generic analysis comparing the note
rate (and associated interest payments),
insurance premiums, and other costs and fees
that would be due over the life of the loan for
a loan insured by the Secretary under
subsection (b) with the note rates, insurance
premiums (if applicable), and other costs and
fees that would be expected to be due if the
mortgagor obtained instead other mortgage
products offered by the lender and for which
the borrower would qualify with a similar loan-
to-value ratio in connection with a
conventional mortgage (as that term is used in
section 305(a)(2) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1454(a)(2))
or section 302(b)(2) of the Federal National
Mortgage Association Charter Act (12 U.S.C.
1717(b)(2)), as applicable), assuming
prevailing interest rates; and
(B) a statement regarding when the
requirement of the mortgagor to pay the
mortgage insurance premiums for a mortgage
insured under this section would terminate, or
a statement that the requirement shall
terminate only if the mortgage is refinanced,
paid off, or otherwise terminated.
(g)(1) The Secretary may insure a mortgage under this title
that is secured by a 1- to 4-family dwelling, or approve a
substitute mortgagor with respect to any such mortgage, only if
the mortgagor is to occupy the dwelling as his or her principal
residence or as a secondary residence, as determined by the
Secretary. In making this determination with respect to the
occupancy of secondary residences, the Secretary may not insure
mortgages with respect to such residences unless the Secretary
determines that it is necessary to avoid undue hardship to the
mortgagor. In no event may a secondary residence under this
subsection include a vacation home, as determined by the
Secretary.
(2) The occupancy requirement established in paragraph (1)
shall not apply to any mortgagor (or co-mortgagor, as
appropriate) that is--
(A) a public entity, as provided in section 214 or
247, or any other State or local government or an
agency thereof;
(B) a private nonprofit or public entity, as provided
in section 221(h) or 235(j), or other private nonprofit
organization that is exempt from taxation under section
501(c)(3) of the Internal Revenue Code of 1986 and
intends to sell or lease the mortgage property to low
or moderate-income persons, as determined by the
Secretary;
(C) an Indian tribe, as provided in section 248;
(D) a serviceperson who is unable to meet such
requirement because of his or her duty assignment, as
provided in section 216 or subsection (b)(4) or (f) of
section 222;
(E) a mortgagor or co-mortgagor under subsection (k);
or
(F) a mortgagor that, pursuant to section 223(a)(7),
is refinancing an existing mortgage insured under this
Act for not more than the outstanding balance of the
existing mortgage, if the amount of the monthly payment
due under the refinancing mortgage is less than the
amount due under the existing mortgage for the month in
which the refinancing mortgage is executed.
(3) For purposes of this subsection, the term ``substitute
mortgagor'' means a person who, upon the release by a mortgagee
of a previous mortgagor from personal liability on the mortgage
note, assumes such liability and agrees to pay the mortgage
debt.
(h) Notwithstanding any other provision of this section, the
Secretary is authorized to insure any mortgage which involves a
principal obligation not in excess of the applicable maximum
dollar limit under subsection (b) and not in excess of 100 per
centum of the appraised value of a property upon which there is
located a dwelling designed principally for a single-family
residence, where the mortgagor establishes (to the satisfaction
of the Secretary) that his home which he occupied as an owner
or as a tenant was destroyed or damaged to such an extent that
reconstruction is required as a result of a flood, fire,
hurricane, earthquake, storm, or other catastrophe, which the
President, pursuant to Robert T. Stafford Disaster Relief and
Emergency Assistance Act, has determined to be a major
disaster. In any case in which the single family residence to
be insured under this subsection is within a jurisdiction in
which the President has declared a major disaster to have
occurred, the Secretary is authorized, for a temporary period
not to exceed 18 months from the date of such Presidential
declaration, to enter into agreements to insure a mortgage
which involves a principal obligation of up to 100 percent of
the dollar limitation determined under section 305(a)(2) of the
Federal Home Loan Mortgage Corporation Act for single family
residence, and not in excess of 100 percent of the appraised
value.
(j) Loans secured by mortgages insured under this section
shall not be taken into account in determining the amount of
real estate loans which a national bank may make in relation to
its capital and surplus or its time and savings deposits.
(k)(1) The Secretary may, in order to assist in the
rehabilitation of one- to four-family structures used primarily
for residential purposes, insure and make commitments to insure
rehabilitation loans (including advances made during
rehabilitation) made by financial institutions. Such
commitments to insure and such insurance shall be made upon
such terms and conditions which the Secretary may prescribe and
which are consistent with the provisions of subsections (b),
(c), (e), (i) and (j) of this section, except as modified by
the provisions of this subsection.
(2) For the purpose of this subsection--
(A) the term ``rehabilitation loan'' means a loan,
advance of credit, or purchase of an obligation
representing a loan or advance of credit, made for the
purpose of financing--
(i) the rehabilitation of an existing one- to
four-unit structure which will be used
primarily for residential purposes;
(ii) the rehabilitation of such a structure
and the refinancing of the outstanding
indebtedness on such structure and the real
property on which the structure is located; or
(iii) the rehabilitation of such a structure
and the purchase of the structure and the real
property on which it is located; and
(B) the term ``rehabilitation'' means the improvement
(including improvements designed to meet cost-effective
energy conservation standards prescribed by the
Secretary) or repair of a structure, or facilities in
connection with a structure, and may include the
provision of such sanitary or other facilities as are
required by applicable codes, a community development
plan, or a statewide property insurance plan to be
provided by the owner or tenant of the project. The
term ``rehabilitation'' may also include measures to
evaluate and reduce lead-based paint hazards, as such
terms are defined in section 1004 of the Residential
Lead-Based Paint Hazard Reduction Act of 1992.
(3) To be eligible for insurance under this subsection, a
rehabilitation loan shall--
(A) involve a principal obligation (including such
initial service charges, appraisal, inspection, and
other fees as the Secretary shall approve) in an amount
which does not exceed, when added to any outstanding
indebtedness of the borrower which is secured by the
structure and the property on which it is located, the
amount specified in subsection (b)(2); except that, in
determining the amount of the principal obligation for
purposes of this subsection, the Secretary shall
establish as the appraised value of the property an
amount not to exceed the sum of the estimated cost of
rehabilitation and the Secretary's estimate of the
value of the property before rehabilitation;
(B) bear interest at such rate as may be agreed upon
by the borrower and the financial institution;
(C) be an acceptable risk, as determined by the
Secretary; and
(D) comply with such other terms, conditions, and
restrictions as the Secretary may prescribe.
(4) Any rehabilitation loan insured under this subsection may
be refinanced and extended in accordance with such terms and
conditions as the Secretary may prescribe, but in no event for
an additional amount or term which exceeds the maximum provided
for in this subsection.
(5) All funds received and all disbursements made pursuant to
the authority established by this subsection shall be credited
or charged as appropriate, to the Mutual Mortgage Insurance
Fund, and insurance benefits shall be paid in cash out of such
Fund or in debentures executed in the name of such Fund.
Insurance benefits paid with respect to loans secured by a
first mortgage and insured under this subsection shall be paid
in accordance with section 204. Insurance benefits paid with
respect to loans secured by a mortgage other than a first
mortgage and insured under this subsection shall be paid in
accordance with paragraphs (6) and (7) of section 220(h),
except that reference to ``this subsection'' in such paragraphs
shall be construed as referring to this subsection.
(6) The Secretary is authorized, for a temporary
period not to exceed 18 months from the date on which
the President has declared a major disaster to have
occurred, to enter into agreements to insure a
rehabilitation loan under this subsection which
involves a principal obligation of up to 100 percent of
the dollar limitation determined under section
305(a)(2) of the Federal Home Loan Mortgage Corporation
Act for a residence of the applicable size, if such
loan is secured by a structure and property that are
within a jurisdiction in which the President has
declared such disaster, pursuant to the Robert T.
Stafford Disaster Relief and Emergency Assistance Act,
and if such loan otherwise conforms to the loan-to-
value ratio and other requirements of this subsection.
(n)(1) The Secretary is authorized to insure under this
section any mortgage meeting the requirements of subsection (b)
of this section, except as modified by this subsection. To be
eligible, the mortgage shall involve a dwelling unit in a
cooperative housing project which is covered by a blanket
mortgage insured under this Act or the construction of which
was completed more than a year prior to the application for the
mortgage insurance. The mortgage amount as determined under the
other provisions of subsection (b) of this section shall be
reduced by an amount equal to the portion of the unpaid balance
of the blanket mortgage covering the project which is
attributable (as of the date the mortgage is accepted for
insurance) to such unit.
(2) For the purpose of this subsection--
(A) The terms ``home mortgage'' and ``mortgage''
include a first or subordinate mortgage or lien given
(in accordance with the laws of the State where the
property is located and accompanied by such security
and other undertakings as may be required under
regulations of the Secretary) to secure a loan made to
finance the purchase of stock or membership in a
cooperative ownership housing corporation the permanent
occupancy of the dwelling units of which is restricted
to members of such corporation, where the purchase of
such stock or membership will entitle the purchaser to
the permanent occupancy of one of such units.
(B) The terms ``appraised value of the property'',
``value of the property'', and ``value'' include the
appraised value of a dwelling unit in a cooperative
housing project of the type described in subparagraph
(A) where the purchase of the stock or membership
involved will entitle the purchaser to the permanent
occupancy of that unit; and the term ``property''
includes a dwelling unit in such a cooperative project.
(C) The terms ``mortgagor'' includes a person or
persons giving a first or subordinate mortgage or lien
(of the type described in subparagraph (A)) to secure a
loan to finance the purchase of stock or membership in
a cooperative housing corporation.
(r) The Secretary shall take appropriate actions to reduce
losses under the single-family mortgage insurance programs
carried out under this title. Such actions shall include--
(1) an annual review by the Secretary of the rate of
early serious defaults and claims, in accordance with
section 533;
(2) requiring that at least one person acquiring
ownership of a one- to four-family residential property
encumbered by a mortgage insured under this title be
determined to be credit-worthy under standards
prescribed by the Secretary, whether or not such person
assumes personal liability under the mortgage (except
that acquisitions by devise or descent shall not be
subject to this requirement);
(3) in any case where personal liability under a
mortgage is assumed, requiring that the original
mortgagor be advised of the procedures by which he or
she may be released from liability; and
(4) providing counseling, either directly or through
third parties, to delinquent mortgagors whose mortgages
are insured under this section 203 (12 U.S.C. 1709),
using the Fund to pay for such counseling.
In any case where the homeowner does not request a release from
liability, the purchaser and the homeowner shall have joint and
several liability for any default for a period of 5 years
following the date of the assumption. After the close of such
5-year period, only the purchaser shall be liable for any
default on the mortgage unless the mortgage is in default at
the time of the expiration of the 5-year period.
[(s)]
(t)(1) Each mortgagee (or servicer) with respect to a
mortgage under this section shall provide each mortgagor of
such mortgagee (or servicer) written notice, not less than
annually, containing a statement of the amount outstanding for
prepayment of the principal amount of the mortgage and
describing any requirements the mortgagor must fulfill to
prevent the accrual of any interest on such principal amount
after the date of any prepayment. This paragraph shall apply to
any insured mortgage outstanding on or after the expiration of
the 90-day period beginning on the date of effectiveness of
final regulations implementing this paragraph.
(2) Each mortgagee (or servicer) with respect to a mortgage
under this section shall, at or before closing with respect to
any such mortgage, provide the mortgagor with written notice
(in such form as the Secretary shall prescribe, by regulation,
before the expiration of the 90-day period beginning upon the
date of the enactment of the Cranston-Gonzalez National
Affordable Housing Act) describing any requirements the
mortgagor must fulfill upon prepayment of the principal amount
of the mortgage to prevent the accrual of any interest on the
principal amount after the date of such prepayment. This
paragraph shall apply to any mortgage executed after the
expiration of the period under paragraph (1).
(u)(1) No mortgagee may make or hold mortgages insured under
this section if the customary lending practices of the
mortgagee, as determined by the Secretary pursuant to section
539, provide for a variation in mortgage charge rates that
exceeds 2 percent for insured mortgages made by the mortgagee
on dwellings located within an area. The Secretary shall ensure
that any permissible variations in the mortgage charge rates of
any mortgagee are based only on actual variations in fees or
costs to the mortgagee to make the loan.
(2) For purposes of this subsection--
(A) the term ``area'' means a metropolitan
statistical area as established by the Office of
Management and Budget;
(B) the term ``mortgage charges''' includes the
interest rate, discount points, loan origination fee,
and any other amount charged to a mortgagor with
respect to an insured mortgage; and
(C) the term ``mortgage charge rate'' means the
amount of mortgage charges for an insured mortgage
expressed as a percentage of the initial principal
amount of the mortgage.
(v) The insurance of a mortgage under this section in
connection with the assistance provided under section 8(y) of
the United States Housing Act of 1937 shall be the obligation
of the Mutual Mortgage Insurance Fund.
(w) Annual Report.--The Secretary of Housing and Urban
Development shall submit to the Congress an annual report on
the single family mortgage insurance program under this
section. Each report shall set forth--
(1) an analysis of the income groups served by the
single family insurance program, including--
(A) the percentage of borrowers whose incomes
do not exceed 100 percent of the median income
for the area;
(B) the percentage of borrowers whose incomes
do not exceed 80 percent of the median income
for the area; and
(C) the percentage of borrowers whose incomes
do not exceed 60 percent of the median income
for the area;
(2) an analysis of the percentage of minority
borrowers annually assisted by the program; the
percentage of central city borrowers assisted and the
percentage of rural borrowers assisted by the program;
(3) the extent to which the Secretary in carrying out
the program has employed methods to ensure that needs
of low and moderate income families, underserved areas,
and historically disadvantaged groups are served by the
program; and
(4) the current impediments to having the program
serve low and moderate income borrowers; borrowers from
central city areas; borrowers from rural areas; and
minority borrowers.
(x) Management Deficiencies Report.--
(1) In general.--Not later than 60 days after the
date of the enactment of this subsection, and annually
thereafter, the Secretary shall submit to Congress a
report on the plan of the Secretary to address each
material weakness, reportable condition, and
noncompliance with an applicable law or regulation (as
defined by the Director of the Office of Management and
Budget) identified in the most recent audited financial
statement of the Federal Housing Administration
submitted under section 3515 of title 31, United States
Code.
(2) Contents of annual report.--Each report submitted
under paragraph (1) shall include--
(A) an estimate of the resources, including
staff, information systems, and contract
assistance, required to address each material
weakness, reportable condition, and
noncompliance with an applicable law or
regulation described in paragraph (1), and the
costs associated with those resources;
(B) an estimated timetable for addressing
each material weakness, reportable condition,
and noncompliance with an applicable law or
regulation described in paragraph (1); and
(C) the progress of the Secretary in
implementing the plan of the Secretary included
in the report submitted under paragraph (1) for
the preceding year, except that this
subparagraph does not apply to the initial
report submitted under paragraph (1).
(y) Requirements for Mortgages for Condominiums.--
(1) Project recertification requirements.--
Notwithstanding any other law, regulation, or guideline
of the Secretary, including chapter 2.4 of the
Condominium Project Approval and Processing Guide of
the FHA, the Secretary shall streamline the project
certification requirements that are applicable to the
insurance under this section for mortgages for
condominium projects so that recertifications are
substantially less burdensome than certifications. The
Secretary shall consider lengthening the time between
certifications for approved properties, and allowing
updating of information rather than resubmission.
(2) Commercial space requirements.--Notwithstanding
any other law, regulation, or guideline of the
Secretary, including chapter 2.1.3 of the Condominium
Project Approval and Processing Guide of the FHA, in
providing for exceptions to the requirement for the
insurance of a mortgage on a condominium property under
this section regarding the percentage of the floor
space of a condominium property that may be used for
nonresidential or commercial purposes, the Secretary
shall provide that--
(A) any request for such an exception and the
determination of the disposition of such
request may be made, at the option of the
requester, under the direct endorsement lender
review and approval process or under the HUD
review and approval process through the
applicable field office of the Department; and
(B) in determining whether to allow such an
exception for a condominium property, factors
relating to the economy for the locality in
which such project is located or specific to
project, including the total number of family
units in the project, shall be considered.
Not later than the expiration of the 90-day period
beginning on the date of the enactment of this
paragraph, the Secretary shall issue regulations to
implement this paragraph, which shall include any
standards, training requirements, and remedies and
penalties that the Secretary considers appropriate.
(3) Transfer fees.--Notwithstanding any other law,
regulation, or guideline of the Secretary, including
chapter 1.8.8 of the Condominium Project Approval and
Processing Guide of the FHA and section 203.41 of the
Secretary's regulations (24 CFR 203.41), existing
standards of the Federal Housing Finance Agency
relating to encumbrances under private transfer fee
covenants shall apply to the insurance of mortgages by
the Secretary under this section to the same extent and
in the same manner that such standards apply to the
purchasing, investing in, and otherwise dealing in
mortgages by the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation. If the
provisions of part 1228 of the Director of the Federal
Housing Finance Agency's regulations (12 CFR part 1228)
are amended or otherwise changed after the date of the
enactment of this paragraph, the Secretary of Housing
and Urban Development shall adopt any such amendments
or changes for purposes of this paragraph, unless the
Secretary causes to be published in the Federal
Register a notice explaining why the Secretary will
disregard such amendments or changes within 90 days
after the effective date of such amendments or changes.
(4) Owner-occupancy requirement.--
(A) Establishment of percentage
requirement.--Not later than the expiration of
the 90-day period beginning on the date of the
enactment of this paragraph, the Secretary
shall, by rule, notice, or mortgagee letter,
issue guidance regarding the percentage of
units that must be occupied by the owners as a
principal residence or a secondary residence
(as such terms are defined by the Secretary),
or must have been sold to owners who intend to
meet such occupancy requirements, including
justifications for the percentage requirements,
in order for a condominium project to be
acceptable to the Secretary for insurance under
this section of a mortgage within such
condominium property.
(B) Failure to act.--If the Secretary fails
to issue the guidance required under
subparagraph (A) before the expiration of the
90-day period specified in such clause, the
following provisions shall apply:
(i) 35 percent requirement.--In order
for a condominium project to be
acceptable to the Secretary for
insurance under this section, at least
35 percent of all family units
(including units not covered by FHA-
insured mortgages) must be occupied by
the owners as a principal residence or
a secondary residence (as such terms
are defined by the Secretary), or must
have been sold to owners who intend to
meet such occupancy requirement.
(ii) Other considerations.--The
Secretary may increase the percentage
applicable pursuant to clause (i) to a
condominium project on a project-by-
project or regional basis, and in
determining such percentage for a
project shall consider factors relating
to the economy for the locality in
which such project is located or
specific to project, including the
total number of family units in the
project.
* * * * * * *
MINORITY VIEWS
H.R. 3141, the FHA Loan Affordability Act, would prevent
the Federal Housing Administration (FHA) from charging its
annual Mortgage Insurance Premium (MIP) when a borrower's loan-
to-value ratio (LTV) reaches 78 percent. While Committee
Republicans appreciate the effort of this bill to move FHA's
processes closer to that of private mortgage insurance (PMI),
the bill as currently drafted fails to consider the inherent
differences between PMI and FHA's programs.
When a loan insured with PMI reaches a LTV of 78, both the
MIP and the mortgage insurance coverage are terminated.
However, in the case of FHA, mortgage insurance continues for
the entirety of the loan, even if the MIP payments are stopped.
This ``life-of-loan'' coverage means that the FHA has a
continuing financial obligation to the loan that differs from
PMI's coverage on a mortgage. Stopping MIP payments to FHA
would negatively impact FHA's Mortgage Insurance Fund (MMIF)
and would likely cause the MIP payments to increase before the
borrower had reached an LTV of 78 in order to account for the
cost of covering the default risk for the entirety of the loan.
In fact, this experiment has been tried before and ended in
failure. In 2013, the Obama Administration terminated the
experiment out of concern for the harmful effect it was having
on the MMIF. Current estimates from FHA reveal that the
legislation as proposed would reduce contributions to the MMIF
by approximately $1.7 billion each year. Proponents of this
legislation assert that loans that have amortized to 78 percent
present little risk to FHA and the MMIF. However, FHA's own
statistics show this not to be the case, with typical FHA loans
reaching a LTV of 78 at around 9 years and roughly one-fifth of
all defaults occurring after a nine year period. Committee
Republicans respect the effort to make owning a home more
affordable, but this bill is not the solution, and will likely
have the opposite effect.
David Kustoff.
Lance Gooden.
Scott Tipton.
Trey Hollingsworth.
John Rose.
Denver Riggleman.
Tom Emmer.
French Hill.
Patrick McHenry.
Andy Barr.
Frank D. Lucas.
Bill Huizenga.
Steve Stivers.
Peter T. King.
Roger Williams.
Bryan Steil.
Anthony Gonzalez.
Barry Loudermilk.
Tedd Budd.
Warren Davidson.
Lee M. Zeldin.
Alexander X. Mooney.
Ann Wagner.
Blaine Luetkemeyer.
Bill Posey.
[all]