FHA Reform Act of 1994

Summary: FHA Reform Act of 1994 - Amends the National Housing Act to:  (1) revise single family housing insurance mortgage limitations; and (2) authorize a single family risk-sharing mortgage insurance program with State and local agencies.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``FHA Reform Act of 1994''.

SEC. 2. MAXIMUM DOLLAR AMOUNT.

    Subparagraph (A) of the first sentence of section 203(b)(2) of the 
National Housing Act (12 U.S.C. 1709(b)(2)(A)) is amended by striking 
clause (ii) and all that follows through ``1992;'' and inserting the 
following:
                            ``(ii) 85 percent of the dollar amount 
                        limitation determined under section 305(a)(2) 
                        of the Federal Home Loan Mortgage Corporation 
                        Act for a residence of the applicable size;
                except that the applicable dollar amount limitation in 
                effect under this subparagraph (A) 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 the 
                        date of enactment of the FHA Reform Act of 
                        1994; or
                            ``(II) the applicable average area purchase 
                        price determined under section 143(e)(2) of the 
                        Internal Revenue Code of 1986, as adjusted by 
                        the Secretary to reflect a single amount using 
                        purchase prices for residences that have been 
                        previously occupied, and for residences that 
                        have not been so occupied, which amount shall 
                        be adjusted by the Secretary annually on the 
                        basis of the Constant Quality Housing Price 
                        Index;''.

SEC. 3. MAXIMUM LOAN-TO-VALUE RATIO.

    Section 203(b)(2) of the National Housing Act (12 U.S.C. 
1709(b)(2)) is amended--
            (1) by striking ``(including such initial service charges, 
        appraisal, inspection, and other fees as the Secretary shall 
        approve)'' the first place it appears;
            (2) by striking subparagraph (B) of the first sentence and 
        inserting the following new subparagraph:
                    ``(B) except as otherwise provided in this 
                paragraph (2), not to exceed an amount equal to the sum 
                of--
                            ``(i) 99 percent of $50,000 of the 
                        appraised value of the property, as of the date 
                        the mortgage is accepted for insurance;
                            ``(ii) 96 percent of such value in excess 
                        of $50,000 but not in excess of $125,000; and
                            ``(iii) 94 percent of such value in excess 
                        of $125,000.'';
            (3) by striking the second sentence of the matter that 
        follows subparagraph (B) of the first sentence; and
            (4) by striking penultimate undesignated paragraph.

SEC. 4. SINGLE FAMILY RISK-SHARING MORTGAGE INSURANCE PROGRAM.

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

       ``single family risk-sharing with state and local agencies

    ``Sec. 256. (a) Authority.--Notwithstanding any other provision of 
this Act inconsistent with this section, the Secretary may insure and 
make commitments to insure under this section mortgages on single 
family properties under risk-sharing mortgage insurance programs 
established with 1 or more States or agencies. Only mortgages executed 
in connection with the acquisition of a single family property or for 
the refinancing of a mortgage insured under this section shall be 
eligible. Under such programs, the Secretary shall insure a portion of 
the mortgage and the State or local agency shall insure the remainder.
    ``(b) Purposes.--The purposes of the program under this section are 
(1) to increase the availability of single family mortgage financing in 
areas where there is need for mortgage insurance under this Act that 
cannot be met due to particularly high average median house prices in 
the area, and (2) to foster arrangements with State and local agencies 
to share the risk of mortgage insurance.
    ``(c) Applications.--
            ``(1) Approval.--The Secretary may approve an application 
        submitted by a State or local agency to establish a risk-
        sharing program under this section, based on a determination 
        that the State or local agency demonstrates that (A) it has the 
        legal authority under State law and, where applicable, local 
        law, to participate in the risk-sharing mortgage insurance 
        program, (B) it has carried out, or has the potential to carry 
        out, a financially sound, efficient, and effective mortgage 
        insurance program, and (C) it has the ongoing administrative 
        and financial capacity necessary to carry out a program under 
        this section.
            ``(2) Cancellation of approval.--For a violation of 
        requirements and procedures under the risk-sharing agreement 
        between the State or local agency and the Secretary or for 
        other good cause, the Secretary may cancel approval of a State 
        or local agency under this section by giving notice to the 
        State or local agency. The cancellation shall be effective upon 
        receipt of the notice by the agency or at a later date 
        specified by the Secretary. A decision by the Secretary to 
        cancel approval shall be final and conclusive and shall not be 
        subject to judicial review.
    ``(d) Delegation of Authority To Insure to State and Local 
Agencies.--Pursuant to a risk-sharing agreement with a State or local 
agency, the Secretary shall delegate the authority to insure and make 
commitments to insure the portion of mortgages to be insured by the 
Secretary under this section to the State or local agency. The risk-
sharing agreement shall contain such other matters as the Secretary and 
the State or local agency agree.
    ``(e) Underwriting Standards and Loan Terms and Conditions.--The 
State or local agency shall adopt underwriting standards and loan terms 
and conditions for purposes of underwriting loans to be insured under 
this section without regard to requirements of this Act other than this 
section, section 203(g), and section 203(r)(2), subject to review and 
approval by the Secretary.
    ``(f) Mortgage Insurance Premiums.--
            ``(1) Requirement.--The State or local agency shall require 
        the payment of mortgage insurance premiums by mortgagors.
            ``(2) Shares.--The Secretary shall establish policies and 
        procedures for the sharing of premiums between the Secretary 
        and the State or local agency, based on the relative risk to, 
        and administrative costs of, the Secretary and the State or 
        local agency. The share paid to the Secretary shall not be less 
        than an amount necessary to cover the risk to, and 
        administrative costs of, the Secretary.
    ``(g) Limitations on Principal Mortgage Amount.--
            ``(1) Insured portion.--The portion of the mortgage insured 
        under this section by the Secretary may not exceed an amount 
        equal to the lesser of (A) 80 percent of the appraised value of 
        the property, or (B) the maximum amount the Secretary may 
        insure under section 203(b) of this Act for the area (but not 
        including any amount for a mortgage insurance premium).
            ``(2) Total principal amount.--The total principal amount 
        of a mortgage insured under this section by the Secretary and 
        the State or local agency (A) shall exceed the maximum amount 
        the Secretary may insure under subparagraph (A) of the first 
        sentence of section 203(b)(2) of this Act for the area, and (B) 
        may not exceed the conforming loan limitation determined under 
        section 305(a)(2) of the Federal Home Loan Mortgage Corporation 
        Act for a residence of the applicable size, as adjusted 
        annually.
            ``(3) Loan-to-value ratio.--The principal obligation of a 
        mortgage may not exceed an amount determined in accordance with 
        subparagraph (B) of the first sentence of section 203(b)(2) of 
        this Act plus the mortgage insurance premium.
            ``(4) Refinancing mortgages.--Notwithstanding paragraph 
        (2)(A) or (3), in the case of refinancing of an existing 
        mortgage insured under this section, the principal obligation 
        of a refinancing mortgage may not exceed the outstanding 
        principal balance of the existing mortgage plus any mortgage 
        insurance premium.
    ``(h) Insurance Claims.--
            ``(1) Procedure.--In the case of a default and foreclosure 
        of a mortgage insured under this section, the mortgagee may 
        file a claim with the State or local agency for insurance 
        benefits in accordance with requirements established by the 
        State or local agency and approved by the Secretary. The agency 
        shall pay the full amount of the claim owed to the mortgagee. 
        If the loss on the insured mortgage exceeds the amount of 
        insurance by the agency, the Secretary shall reimburse the 
        agency for the difference.
            ``(2) General insurance fund.--The insurance of a mortgage 
        under this section by the Secretary shall be an obligation of 
        the General Insurance Fund created pursuant to section 519 of 
        this Act.
    ``(i) Inapplicability of the Assignment Program.--Section 230 shall 
not apply to mortgages insured under the program authorized by this 
section.
    ``(j) Restriction on GNMA Securitization.--The Government National 
Mortgage Association shall not securitize any loans insured under this 
section.
    ``(k) Definitions.--As used in this section:
            ``(1) The term `local agency' means an agency of a unit of 
        general local government, as defined by the Secretary, that has 
        the authority to insure mortgages and to participate with the 
        Secretary in the single family risk-sharing program under this 
        section, or an agency or instrumentality of a local agency if 
        the agency or instrumentality has such authority.
            ``(2) The term `State agency' means an agency of a State 
        that has the authority to insure mortgages and to participate 
        with the Secretary in the single family risk-sharing program 
        under this section, or an agency or instrumentality of a State 
        agency if the agency or instrumentality has such authority.
            ``(3) The term `single family property' means a property 
        upon which there is located a dwelling designed principally for 
        occupancy by 1 family, and includes a condominium and a 
        cooperative.
            ``(4) The term `State' means the several States, the 
        Commonwealth of Puerto Rico, the District of Columbia, Guam, 
        the Trust Territory of the Pacific Islands, American Samoa, and 
        the Virgin Islands.''.
    (b) Implementation.--The Secretary of Housing and Urban Development 
may implement the program authorized by the amendment made under 
subsection (a) by entering into risk-sharing agreements negotiated with 
State agencies, notwithstanding any otherwise applicable requirement 
for regulations or notice published in the Federal Register and 
notwithstanding any otherwise applicable regulations of the Secretary.