A bill to modernize the manufactured housing loan insurance program under title I of the National Housing Act.

Summary: FHA Manufactured Housing Loan Modernization Act of 2005 - Amends the National Housing Act with respect to Federal Housing Administration (FHA) housing loan insurance for manufactured homes (or lots for such homes) to: (1) exempt such loans from certain financial institution portfolio limits; (2) establish loan-to-value ratio and downpayment requirements; (3) provide that any such contract shall be conclusive evidence of an institution's insurance eligibility; (4) increase loan limits; (5) set forth borrower premium charges; and (6) direct the Secretary of Housing and Urban Development to establish underwriting criteria that will ensure the manufactured housing program's financial soundness.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``FHA Manufactured Housing Loan 
Modernization Act of 2005''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) manufactured housing plays a vital role in providing 
        housing for low- and moderate-income families in the United 
        States;
            (2) the FHA title I insurance program for manufactured home 
        loans traditionally has been a major provider of mortgage 
        insurance for home-only transactions;
            (3) the manufactured housing market is in the midst of a 
        prolonged downturn which has resulted in a severe contraction 
        of traditional sources of private lending for manufactured home 
        purchases;
            (4) during past downturns the FHA title I insurance program 
        for manufactured homes has filled the lending void by providing 
        stability until the private markets could recover;
            (5) in 1992, during the manufactured housing industry's 
        last major recession, over 30,000 manufactured home loans were 
        insured under title I;
            (6) in 2004, fewer than 2,000 manufactured housing loans 
        were insured under title I;
            (7) the dramatic reduction in the use of the title I 
        program is due primarily to certain structural problems of the 
        program, which have resulted in refusal by the Government 
        National Mortgage Association (Ginnie Mae) to accept new 
        participants into the program since 1989, contributing to 
        higher loan costs and fewer loan originators;
            (8) the loan limits for title I manufactured housing loans 
        have not been adjusted for inflation since 1992; and
            (9) these problems with the title I program have resulted 
        in an atrophied market for manufactured housing loans, leaving 
        American families who have the most difficulty achieving 
        homeownership without adequate financing options for home-only 
        manufactured home purchases.
    (b) Purposes.--The purposes of this Act are--
            (1) to provide adequate funding for FHA-insured 
        manufactured housing loans for low- and moderate-income 
        homebuyers during all economic cycles in the manufactured 
        housing industry;
            (2) to modernize the FHA title I insurance program for 
        manufactured housing loans to enhance participation by Ginnie 
        Mae and the private lending markets;
            (3) to adjust the artificially low loan limits for title I 
        manufactured home loan insurance to reflect the increase in 
        costs since such limits were last increased in 1992 and to 
        index the limits to inflation; and
            (4) to ensure that the title I manufactured housing loan 
        insurance program requires no credit subsidy from the Federal 
        Government.

SEC. 3. EXCEPTION TO LIMITATION ON FINANCIAL INSTITUTION PORTFOLIO.

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

SEC. 4. LOAN-TO-VALUE RATIO AND DOWNPAYMENT REQUIREMENT.

    Section 2(b) of the National Housing Act (12 U.S.C. 1703(b)) is 
amended by adding at the end the following new paragraph:
    ``(8) Loan-to-value and downpayment limitations on manufactured 
housing loans.--No insurance may be granted under this section to any 
such financial institution with respect to any obligation representing 
any such loan, advance of credit, or purchase by it in connection with 
a manufactured home or a lot on which to place a manufactured home (or 
both) unless such loan or advance of credit, or any loan or advance of 
credit represented by such an obligation--
            ``(A) involves a principal obligation not exceeding the sum 
        of--
                    ``(i) the amount of the mortgage insurance premium 
                paid by the borrower at the time that the loan, advance 
                of credit, or purchase is made; and
                    ``(ii) 95 percent of the appraised value of the 
                manufactured home or lot on which to place a 
                manufactured home (or both) for which the loan or 
                advance of credit is made; and
            ``(B) is made to a borrower who has paid in cash or its 
        equivalent, on account of the manufactured home or lot on which 
        to place a manufactured home (or both) for which the loan or 
        advance of credit is made, at least 3 percent of the 
        Secretary's estimate of the costs of acquisition, alteration, 
        improvements, lot preparation, or other eligible activity for 
        which the loan or advance of credit was made (excluding the 
        amount of the mortgage insurance premium paid by the borrower 
        at the time that the loan or advance of credit is made).''.

SEC. 5. INSURANCE BENEFITS.

    Section 2(b) of the National Housing Act (12 U.S.C. 1703(b)), as 
amended by section 4, is further amended by adding at the end the 
following new paragraph:
    ``(9) Insurance benefits for manufactured housing loans.--
            ``(A) In general.--Any contract of insurance with respect 
        to loans, advances of credit, or purchases in connection with a 
        manufactured home or a lot on which to place a manufactured 
        home (or both) for a financial institution that is executed 
        under this title before or after the date of the enactment of 
        the FHA Manufactured Housing Loan Modernization Act of 2005 by 
        the Secretary shall be conclusive evidence of the eligibility 
        of such financial institution for insurance, and the validity 
        of any contract of insurance so executed shall be incontestable 
        in the hands of the bearer from the date of the execution of 
        such contract, except for fraud or misrepresentation on the 
        part of such institution.
            ``(B) Losses.--With respect only to a loan, advance of 
        credit, or purchase in connection with a manufactured home or a 
        lot on which to place such a home (or both), the Secretary 
        shall otherwise provide for the payment of insurance benefits 
        under the provisions of this section for losses on such loans, 
        advances, or purchases according to the same terms, conditions, 
        procedures, and requirements applicable under section 204 to a 
        mortgage insured under section 203 covering a manufactured home 
        (and the site on which it is located).''.

SEC. 6. MAXIMUM LOAN LIMITS.

    (a) Dollar Amounts.--Section 2(b)(1) of the National Housing Act 
(12 U.S.C. 1703(b)(1)) is amended--
            (1) in subparagraph (A)(ii), by striking ``$17,500'' and 
        inserting ``$24,500'';
            (2) in subparagraph (C) by striking ``$48,600'' and 
        inserting ``$68,040'';
            (3) in subparagraph (D) by striking ``$64,800'' and 
        inserting ``$90,720'';
            (4) in subparagraph (E) by striking ``$16,200'' and 
        inserting ``$22,680''; and
            (5) by realigning subparagraphs (C), (D), and (E) 2 ems to 
        the left so that the left margins of such subparagraphs are 
        aligned with the margins of subparagraphs (A) and (B).
    (b) Annual Indexing.--
            (1) Method of indexing.--Section 206A of the National 
        Housing Act (12 U.S.C. 1712a) is amended--
                    (A) in subsection (a)--
                            (i) by redesignating paragraphs (1) through 
                        (7) as paragraphs (2) through (8), 
                        respectively; and
                            (ii) by inserting before paragraph (2) (as 
                        so redesignated) the following new paragraph:
            ``(1) subparagraphs (A)(ii), (C), (D), and (E) of section 
        2(b)(1) (12 U.S.C. 1703(b)(1));''.
            (2) 2004 and 2005 adjustments.--Not later than 30 days 
        after the date of the enactment of this Act, the Federal 
        Reserve Board shall calculate the adjustments for 2004 and 2005 
        pursuant to paragraph (1) of section 206A(a) of the National 
        Housing Act (12 U.S.C. 1712a(a)(1)), as added by the amendment 
        made by paragraph (1) of this subsection, and shall notify the 
        Secretary of Housing and Urban Development pursuant to 
        subsection (b) of such section 206A. Such adjustments shall 
        take effect upon the date of such notification.
            (3) Technical and conforming changes.--Section 2(b)(1) of 
        the National Housing Act (12 U.S.C. 1703(b)(1)), as amended by 
        subsection (a), is further amended--
                    (A) by striking ``No'' and inserting ``Except as 
                provided in the last sentence of this paragraph and in 
                paragraph (8), no''; and
                    (B) by adding after and below subparagraph (G) the 
                following flush language:
        ``The Secretary shall, by regulation, increase the dollar 
        amount limitations in subparagraphs (A)(ii), (C), (D), and (E) 
        (as such limitations may have been adjusted in accordance with 
        section 206A of this Act).''.

SEC. 7. INSURANCE PREMIUMS.

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

SEC. 8. REVISION OF UNDERWRITING CRITERIA.

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