I 

112TH CONGRESS 

2D SESSION H. R. 4172 

To authorize the Secretary of Housing and Urban Development to insure 

mortgages that provide former homeowners who are a reasonable credit 

risk a second chance at homeownership. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 8, 2012 

Mr. HECK introduced the following bill; which was referred to the Committee 

on Financial Services 

A BILL 

To authorize the Secretary of Housing and Urban Development to insure mortgages that provide former homeowners who are a reasonable credit risk a second chance 

at homeownership. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Second Chance at 

5 Homeownership Act of 2012’’. 


srobinson on DSK4SPTVN1PROD with BILLS
2 

•HR 4172 IH

1 SEC. 2. SECOND CHANCE AT HOMEOWNERSHIP MORTGAGE 

2 INSURANCE PROGRAM. 

3 Title II of the National Housing Act (12 U.S.C. 17) 

4 is amended by adding at the end the following new section: 

5 ‘‘SEC. 259. SECOND CHANCE AT HOMEOWNERSHIP PRO6 GRAM. 

7 ‘‘(a) ESTABLISHMENT.—There is established in the 

8 Federal Housing Administration a Second Chance at 

9 Homeownership Program (in this section referred to as 

10 the ‘Program’). 

11 ‘‘(b) PURPOSES.—The purposes of the Program 

12 are— 

13 ‘‘(1) to create an FHA program, participation 

14 in which is voluntary on the part of homeowners and 

15 eligible lenders, to provide loans for qualified second16 chance borrowers and support long-term, sustainable 

17 homeownership; 

18 ‘‘(2) to target mortgage assistance under this 

19 section to enable families to become homeowners of 

20 their principal residence; and 

21 ‘‘(3) to ensure the Program remains in effect 

22 only for as long as is necessary to provide stability 

23 to the housing market. 

24 ‘‘(c) ESTABLISHMENT AND IMPLEMENTATION OF

25 PROGRAM REQUIREMENTS.— 


srobinson on DSK4SPTVN1PROD with BILLS
3 

•HR 4172 IH

1 ‘‘(1) DUTIES OF SECRETARY.—To carry out the 

2 purposes of the Program, the Secretary shall— 

3 ‘‘(A) establish requirements and standards 

4 for the program consistent with section 203(b) 

5 to the maximum extent possible; and 

6 ‘‘(B) prescribe such regulations and pro7 vide such guidance as may be necessary or ap8 propriate to implement such requirements and 

9 standards. 

10 ‘‘(2) INTERIM GUIDANCE AND MORTGAGEE LET11 TERS.—In carrying out any of the program require12 ments or standards established under paragraph (1), 

13 the Secretary may issue such interim guidance and 

14 mortgagee letters as the Secretary determines nec15 essary or appropriate. 

16 ‘‘(d) INSURANCE OF MORTGAGES.—The Secretary 

17 may, upon application of a mortgagee, make commitments 

18 to insure or may insure any mortgage that meets the re19 quirements under subsection (e). 

20 ‘‘(e) REQUIREMENTS OF INSURED MORTGAGES.—To 

21 be eligible for insurance under this section, a mortgage 

22 shall comply with all of the following requirements: 

23 ‘‘(1) MORTGAGOR.—The mortgagor under the 

24 mortgage may not have— 


srobinson on DSK4SPTVN1PROD with BILLS
4 

•HR 4172 IH

1 ‘‘(A) been the mortgagor under any other 

2 mortgage or had any present ownership interest 

3 in any residence after January 1, 2011, except 

4 that the Secretary may provide exceptions to 

5 such requirement for any mortgagor who has 

6 inherited a property; 

7 ‘‘(B) been delinquent with respect to any 

8 of the most recent 12 monthly rental payments 

9 due for the rental of the mortgagor’s principal 

10 residence; 

11 ‘‘(C) been convicted under Federal or 

12 State law for fraud during the 10-year period 

13 ending upon the insurance of the mortgage 

14 under this section; and 

15 ‘‘(D) a net worth, as of the date the mort16 gagor first applies for a mortgage to be insured 

17 under the Program under this section, that ex18 ceeds $1,000,000. 

19 ‘‘(2) ACQUISITION OF PRINCIPAL RESIDENCE.— 

20 The mortgagor shall be made for the purpose of ac21 quiring a 1- to 4-family residence that— 

22 ‘‘(A) is located in the same State as the 

23 principal residence of the mortgagor at the time 

24 the mortgage is executed; and 


srobinson on DSK4SPTVN1PROD with BILLS
5 

•HR 4172 IH

1 ‘‘(B) shall be occupied by the mortgagor as 

2 the principal residence of the mortgagor. 

3 ‘‘(3) DOWNPAYMENT.—The mortgagor shall 

4 have paid on account of the mortgage, in cash or its 

5 equivalent, on account of the property an amount 

6 equal to not less than 5 percent of the appraised 

7 value of the property. 

8 ‘‘(4) MAXIMUM LOAN AMOUNT.—The mortgage 

9 shall— 

10 ‘‘(A) have principal obligation that does 

11 not exceed the dollar amount limitation for a 

12 property of the applicable size that is in effect, 

13 for the year in which the mortgage is executed, 

14 under the sixth sentence of section 305(a)(2) of 

15 the Federal Home Loan Mortgage Corporation 

16 Act (12 U.S.C. 1454(a)(2)); and 

17 ‘‘(B) be payable on a monthly basis in an 

18 amount that— 

19 ‘‘(i) is fixed over the entire term of 

20 the mortgage; and 

21 ‘‘(ii) does not exceed the average 

22 amount paid by the mortgagor for the 

23 most recent 12 monthly rental payments 

24 paid by the mortgagor for the rental of the 

25 mortgagor’s previous principal residence. 


srobinson on DSK4SPTVN1PROD with BILLS
6 

•HR 4172 IH

1 ‘‘(5) TERM OF MORTGAGE.—The mortgage to 

2 be insured shall— 

3 ‘‘(A) bear interest at a single rate that is 

4 fixed for the entire term of the mortgage; and 

5 ‘‘(B) have a maturity of not less than 30 

6 years from the date of the beginning of amorti7 zation of such mortgage. 

8 ‘‘(6) APPRAISALS.—Any appraisal conducted in 

9 connection with the mortgage shall— 

10 ‘‘(A) be based on the current value of the 

11 property; 

12 ‘‘(B) be conducted in accordance with title 

13 XI of the Financial Institutions Reform, Recov14 ery, and Enforcement Act of 1989 (12 U.S.C. 

15 3331 et seq.); 

16 ‘‘(C) be completed by an appraiser who 

17 meets the competency requirements of the Uni18 form Standards of Professional Appraisal Prac19 tice; 

20 ‘‘(D) be wholly consistent with the ap21 praisal standards, practices, and procedures 

22 under section 202(g) of this Act that apply to 

23 all loans insured under this Act; and 


srobinson on DSK4SPTVN1PROD with BILLS
7 

•HR 4172 IH

1 ‘‘(E) comply with the requirements of sub2 section (f) of this section (relating to appraisal 

3 independence). 

4 ‘‘(7) PROHIBITION ON SECOND LIENS.—The 

5 mortgagor under the mortgage may not grant a new 

6 second lien on the mortgaged property during the 

7 first 5 years of the term of the mortgage insured 

8 under this section, except as the Secretary deter9 mines to be necessary to ensure the maintenance of 

10 property standards and provided that such new out11 standing liens (A) do not reduce the value of the 

12 Government’s equity in the borrower’s home; and 

13 (B) when combined with the mortgagor’s existing 

14 mortgage indebtedness, do not exceed 95 percent of 

15 the home’s appraised value at the time of the new 

16 second lien. 

17 ‘‘(8) CERTIFICATIONS AND DOCUMENTATION.— 

18 ‘‘(A) PRINCIPAL RESIDENCE; NO PRESENT

19 OWNERSHIP INTEREST.—The mortgagor shall 

20 provide documentation satisfactory in the deter21 mination of the Secretary to prove compliance 

22 with the requirements under paragraphs (1)(A) 

23 and (2)(B). 


srobinson on DSK4SPTVN1PROD with BILLS
8 

•HR 4172 IH

1 ‘‘(B) NO INTENTIONAL DEFAULT OR

2 FALSE INFORMATION.—The mortgagor shall 

3 certify to the Secretary that the mortgagor— 

4 ‘‘(i) has not, during the 10-year pe5 riod ending upon the insurance of the 

6 mortgage under this section— 

7 ‘‘(I) intentionally defaulted on 

8 any mortgage or any other debt; or 

9 ‘‘(II) knowingly or willfully fur10 nished material information known to 

11 be false for the purpose of obtaining 

12 any mortgage; and 

13 ‘‘(ii) is in compliance with the require14 ment under paragraph (1)(C) (relating to 

15 convictions for fraud). 

16 ‘‘(C) LIABILITY FOR REPAYMENT.—The 

17 mortgagor shall agree in writing that the mort18 gagor shall be liable to repay to the Secretary 

19 any direct financial benefit achieved from a 

20 mortgage insured under this section that is de21 rived from misrepresentations made by the 

22 mortgagor in the certifications and documenta23 tion required under this paragraph, subject to 

24 the discretion of the Secretary. 


srobinson on DSK4SPTVN1PROD with BILLS
9 

•HR 4172 IH

1 ‘‘(D) DOCUMENTATION AND VERIFICATION

2 OF INCOME.—In complying with the FHA un3 derwriting requirements under the Program 

4 under this section, the mortgagee shall docu5 ment and verify the income of the mortgagor or 

6 non-filing status in accordance with procedures 

7 and standards that the Secretary shall establish 

8 (provided that such procedures and standards 

9 are consistent with section 203(b) to the max10 imum extent possible) which may include re11 quiring the mortgagee to procure a copy of the 

12 income tax returns from the Internal Revenue 

13 Service, for the two most recent years for which 

14 the filing deadline for such years has passed 

15 and by any other method, in accordance with 

16 procedures and standards that the Secretary 

17 shall establish. 

18 ‘‘(E) MORTGAGE FRAUD.—The duty of the 

19 mortgagee to ensure that the mortgagor is in 

20 compliance with paragraph (1)(C) shall be sat21 isfied if the mortgagee makes a good faith ef22 fort to determine that the mortgagor has not 

23 been convicted under Federal or State law for 

24 fraud during the period described in such para25 graph. 


srobinson on DSK4SPTVN1PROD with BILLS
10 

•HR 4172 IH

1 ‘‘(f) APPRAISAL INDEPENDENCE.— 

2 ‘‘(1) PROHIBITIONS ON INTERESTED PARTIES

3 IN A REAL ESTATE TRANSACTION.—No mortgage 

4 lender, mortgage broker, mortgage banker, real es5 tate broker, appraisal management company, em6 ployee of an appraisal management company, nor 

7 any other person with an interest in a real estate 

8 transaction involving an appraisal in connection with 

9 a mortgage insured under this section shall improp10 erly influence, or attempt to improperly influence, 

11 through coercion, extortion, collusion, compensation, 

12 instruction, inducement, intimidation, nonpayment 

13 for services rendered, or bribery, the development, 

14 reporting, result, or review of a real estate appraisal 

15 sought in connection with the mortgage. 

16 ‘‘(2) CIVIL MONETARY PENALTIES.—The Sec17 retary may impose a civil money penalty for any 

18 knowing and material violation of paragraph (1) 

19 under the same terms and conditions as are author20 ized in section 536(a) of this Act. 

21 ‘‘(g) STANDARDS TO PROTECT AGAINST ADVERSE

22 SELECTION.— 

23 ‘‘(1) IN GENERAL.—The Secretary shall, by 

24 rule or order, establish standards and policies to re25 quire the underwriter of a mortgage insured under 


srobinson on DSK4SPTVN1PROD with BILLS
11 

•HR 4172 IH

1 this section to provide such representations and war2 ranties as the Secretary considers necessary or ap3 propriate to enforce compliance with all underwriting 

4 and appraisal standards of the Program. 

5 ‘‘(2) EXCLUSION FOR VIOLATIONS.—The Sec6 retary shall not pay insurance benefits to a mort7 gagee who violates the representations and warran8 ties, as established under paragraph (1), or in any 

9 case in which a mortgagor fails to make the first 

10 payment on a mortgage insured under this section. 

11 ‘‘(3) OTHER AUTHORITY.—The Secretary may 

12 establish such other standards or policies as nec13 essary to protect against adverse selection, including 

14 requiring loans identified by the Secretary as higher 

15 risk loans to demonstrate payment performance for 

16 a reasonable period of time before being insured 

17 under the program under this section. 

18 ‘‘(h) PREMIUMS.— 

19 ‘‘(1) ESTABLISHMENT AND COLLECTION.—For 

20 each mortgage insured under this section, the Sec21 retary shall establish and collect— 

22 ‘‘(A) at the time of insurance, a single pre23 mium payment in an amount that is at least 

24 100 basis points greater than the single pre25 mium payment that would otherwise be charged 


srobinson on DSK4SPTVN1PROD with BILLS
12 

•HR 4172 IH

1 pursuant to section 203(c)(2)(A) with respect 

2 to the mortgage; and 

3 ‘‘(B) in addition to the premium required 

4 under paragraph (1), an annual premium in an 

5 amount that is at least 100 basis points greater 

6 than the annual premium payment that would 

7 otherwise be charged pursuant to section 

8 203(c)(2)(B) with respect to the mortgage. 

9 ‘‘(2) CONSIDERATIONS.—In setting the pre10 mium under this subsection, the Secretary shall con11 sider— 

12 ‘‘(A) the financial integrity of the Pro13 gram; and 

14 ‘‘(B) the purposes of the Program set 

15 forth in subsection (b). 

16 ‘‘(i) ORIGINATION FEES AND INTEREST RATE.—The 

17 Secretary shall establish— 

18 ‘‘(1) a reasonable limitation on origination fees 

19 for mortgages insured under this section; and 

20 ‘‘(2) procedures to ensure that interest rates on 

21 such mortgages shall be commensurate with market 

22 rate interest rates on such types of loans. 

23 ‘‘(j) DEFAULT.—Any mortgagor who defaults in re24 payment of a mortgage insured under this section shall 

25 not be eligible for any mortgage insurance provided by the 


srobinson on DSK4SPTVN1PROD with BILLS
13 

•HR 4172 IH

1 Secretary for the 10-year period beginning upon such de2 fault. 

3 ‘‘(k) 5-YEAR PHASE-IN FOR EQUITY AS A RESULT

4 OF SALE OR REFINANCING.—For each mortgage insured 

5 under this section, the Secretary and the mortgagor of 

6 such mortgage shall, upon any sale or disposition of the 

7 property to which the mortgage relates, or upon the subse8 quent refinancing of such mortgage, be entitled to the fol9 lowing with respect to any equity created as a direct result 

10 of the mortgage being insured under this section: 

11 ‘‘(1) If such sale or refinancing occurs during 

12 the period that begins on the date that such mort13 gage is insured and ends 1 year after such date of 

14 insurance, the Secretary shall be entitled to 100 per15 cent of such equity. 

16 ‘‘(2) If such sale or refinancing occurs during 

17 the period that begins 1 year after such date of in18 surance and ends 2 years after such date of insur19 ance, the Secretary shall be entitled to 90 percent of 

20 such equity and the mortgagor shall be entitled to 

21 10 percent of such equity. 

22 ‘‘(3) If such sale or refinancing occurs during 

23 the period that begins 2 years after such date of in24 surance and ends 3 years after such date of insur25 ance, the Secretary shall be entitled to 80 percent of 


srobinson on DSK4SPTVN1PROD with BILLS
14 

•HR 4172 IH

1 such equity and the mortgagor shall be entitled to 

2 20 percent of such equity. 

3 ‘‘(4) If such sale or refinancing occurs during 

4 the period that begins 3 years after such date of in5 surance and ends 4 years after such date of insur6 ance, the Secretary shall be entitled to 70 percent of 

7 such equity and the mortgagor shall be entitled to 

8 30 percent of such equity. 

9 ‘‘(5) If such sale or refinancing occurs during 

10 the period that begins 4 years after such date of in11 surance and ends 5 years after such date of insur12 ance, the Secretary shall be entitled to 60 percent of 

13 such equity and the mortgagor shall be entitled to 

14 40 percent of such equity. 

15 ‘‘(6) If such sale or refinancing occurs during 

16 any period that begins 5 years after such date of in17 surance, the Secretary shall be entitled to 50 percent 

18 of such equity and the mortgagor shall be entitled 

19 to 50 percent of such equity. 

20 ‘‘(l) LIMITATION ON AGGREGATE INSURANCE AU21 THORITY.—The aggregate original principal obligation of 

22 all mortgages insured under this section may not exceed 

23 $200,000,000,000. 

24 ‘‘(m) REPORTS BY SECRETARY.—The Secretary shall 

25 submit monthly reports to the Congress identifying the 


srobinson on DSK4SPTVN1PROD with BILLS
15 

•HR 4172 IH

1 progress of the Program, which shall contain the following 

2 information for each month: 

3 ‘‘(1) The number of new mortgages insured 

4 under this section, including the location of the 

5 properties subject to such mortgages by census 

6 tract. 

7 ‘‘(2) The aggregate principal obligation of new 

8 mortgages insured under this section. 

9 ‘‘(3) The amount of premiums collected for in10 surance of mortgages under this section. 

11 ‘‘(4) The claim and loss rates for mortgages in12 sured under this section. 

13 ‘‘(5) Any other information that the Secretary 

14 considers appropriate. 

15 Upon submitting each monthly report required under this 

16 subsection, the Secretary shall make such report publicly 

17 available on the World Wide Web site of the Department 

18 of Housing and Urban Development. 

19 ‘‘(n) REQUIRED OUTREACH EFFORTS.—The Sec20 retary shall carry out outreach efforts to ensure that 

21 homeowners, lenders, and the general public are aware of 

22 the opportunities for assistance available under this sec23 tion. 

24 ‘‘(o) ENHANCEMENT OF FHA CAPACITY.—The Sec25 retary shall take such actions as may be necessary to— 


srobinson on DSK4SPTVN1PROD with BILLS
16 

•HR 4172 IH

1 ‘‘(1) contract for the establishment of under2 writing criteria, automated underwriting systems, 

3 pricing standards, and other factors relating to eligi4 bility for mortgages insured under this section; 

5 ‘‘(2) contract for independent quality reviews of 

6 underwriting, including appraisal reviews and fraud 

7 detection, of mortgages insured under this section or 

8 pools of such mortgages; and 

9 ‘‘(3) increase personnel of the Department as 

10 necessary to process or monitor the processing of 

11 mortgages insured under this section. 

12 ‘‘(p) GNMA COMMITMENT AUTHORITY.— 

13 ‘‘(1) GUARANTEES.—The Secretary shall take 

14 such actions as may be necessary to ensure that se15 curities based on and backed by a trust or pool com16 posed of mortgages insured under this section are 

17 available to be guaranteed by the Government Na18 tional Mortgage Association as to the timely pay19 ment of principal and interest. 

20 ‘‘(2) GUARANTEE AUTHORITY.—To carry out 

21 the purposes of section 306 of the National Housing 

22 Act (12 U.S.C. 1721), the Government National 

23 Mortgage Association may enter into new commit24 ments to issue guarantees of securities based on or 

25 backed by mortgages insured under this section, not 


srobinson on DSK4SPTVN1PROD with BILLS
17 

•HR 4172 IH

1 exceeding $200,000,000,000. The amount of author2 ity provided under the preceding sentence to enter 

3 into new commitments to issue guarantees is in ad4 dition to any amount of authority to make new com5 mitments to issue guarantees that is provided to the 

6 Association under any other provision of law. 

7 ‘‘(q) SUNSET.—The Secretary may not enter into any 

8 new commitment to insure any mortgage pursuant to this 

9 section before October 1, 2012 or after September 30, 

10 2015. 

11 ‘‘(r) RULE OF CONSTRUCTION RELATING TO VOL12 UNTARY NATURE OF PROGRAM.—This section shall not 

13 be construed to require that any financial institution or 

14 mortgagee approved by the Secretary under section 203 

15 as responsible and able to service mortgages responsibly 

16 participate in any activity authorized under this section. 

17 ‘‘(s) RULE OF CONSTRUCTION RELATING TO INSUR18 ANCE OF MORTGAGES.—Except as otherwise provided for 

19 in this section or by action of the Secretary, the provisions 

20 and requirements of section 203(b) shall apply with re21 spect to the insurance of any mortgage under this section. 

22 The Secretary shall conform documents, forms, and proce23 dures for mortgages insured under this section to those 

24 in place for mortgages insured under section 203(b) to the 


srobinson on DSK4SPTVN1PROD with BILLS
18 

•HR 4172 IH

1 maximum extent possible consistent with the requirements 

2 of this section.’’. 

Æ 


srobinson on DSK4SPTVN1PROD with BILLS