[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]