I 

109TH CONGRESS 

1ST SESSION H. R. 3043 

To authorize the Secretary of Housing and Urban Development to carry 

out a pilot program to insure zero-downpayment mortgages for oneunit residences. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 23, 2005 

Mr. TIBERI (for himself and Mr. SCOTT of Georgia) 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 carry out a pilot program to insure zero-downpayment mortgages for one-unit residences. 

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 ‘‘Zero Downpayment 

5 Pilot Program Act of 2005’’. 

6 SEC. 2. PILOT PROGRAM FOR INSURANCE FOR ZERO-DOWN7 PAYMENT MORTGAGES. 

8 (a) MORTGAGE INSURANCE AUTHORITY.—Section 

9 203 of the National Housing Act (12 U.S.C. 1709) is 
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1 amended by inserting after subsection (k) the following 

2 new subsection: 

3 ‘‘(l) ZERO-DOWNPAYMENT MORTGAGES PILOT PRO4 GRAM.— 

5 ‘‘(1) INSURANCE AUTHORITY.—The Secretary 

6 may insure, and commit to insure, under this sub7 section any mortgage that meets the requirements of 

8 this subsection and, except as otherwise specifically 

9 provided in this subsection, of subsection (b). 

10 ‘‘(2) ELIGIBLE SINGLE FAMILY PROPERTY.—To 

11 be eligible for insurance under this subsection, a 

12 mortgage shall involve a property upon which there 

13 is located a dwelling that is designed principally for 

14 a 1- to 3-family residence and that, notwithstanding 

15 subsection (g), is to be occupied by the mortgagor 

16 as his or her principal residence, which shall in17 clude— 

18 ‘‘(A) a 1-family dwelling unit in a multi19 family project and an undivided interest in the 

20 common areas and facilities which serve the 

21 project; 

22 ‘‘(B) a 1-family dwelling unit of a coopera23 tive housing corporation the permanent occu24 pancy of the dwelling units of which is re25 stricted to members of such corporation and in 
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1 which the purchase of such stock or member2 ship entitles the purchaser to the permanent oc3 cupancy of such dwelling unit; and 

4 ‘‘(C) a manufactured home that meets 

5 such standards as the Secretary has established 

6 for purposes of subsection (b). 

7 ‘‘(3) MAXIMUM PRINCIPAL OBLIGATION.— 

8 ‘‘(A) LIMITATION.—To be eligible for in9 surance under this subsection, a mortgage shall 

10 involve a principal obligation in an amount not 

11 in excess of 100 percent of the appraised value 

12 of the property plus any initial service charges, 

13 appraisal, inspection and other fees in connec14 tion with the mortgage as approved by the Sec15 retary. 

16 ‘‘(B) INAPPLICABILITY OF OTHER LOAN17 TO-VALUE REQUIREMENTS.—A mortgage in18 sured under this subsection shall not be subject 

19 to subparagraph (B) of paragraph (2) of sub20 section (b) or to the matter in such paragraph 

21 that follows such subparagraph. 

22 ‘‘(4) ELIGIBLE MORTGAGORS.—The mortgagor 

23 under a mortgage insured under this subsection 

24 shall meet the following requirements: 
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1 ‘‘(A) FIRST-TIME HOMEBUYER.—The 

2 mortgagor shall be a first-time homebuyer. The 

3 program for mortgage insurance under this 

4 subsection shall be considered a Federal pro5 gram to assist first-time homebuyers for pur6 poses of section 956 of the Cranston-Gonzalez 

7 National Affordable Housing Act (42 U.S.C. 

8 12713). 

9 ‘‘(B) COUNSELING.— 

10 ‘‘(i) REQUIREMENT.—The mortgagor 

11 shall have received counseling, prior to ap12 plication for the loan involved in the mort13 gage, by a third party (other than the 

14 mortgagee) who is approved by the Sec15 retary, with respect to the responsibilities 

16 and financial management involved in 

17 homeownership. Such counseling shall be 

18 provided to the mortgagor on an individual 

19 basis by a representative of the approved 

20 third party counseling entity, and shall be 

21 provided in person to the maximum extent 

22 practicable. 

23 ‘‘(ii) TOPICS.—Such counseling shall 

24 include providing to, and discussing with, 

25 the mortgagor— 
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1 ‘‘(I) information regarding home2 ownership options other than a mort3 gage insured under this subsection, 

4 other zero- or low-downpayment mort5 gage options that are or may become 

6 available to the mortgagor, the finan7 cial implications of entering into a 

8 mortgage (including a mortgage in9 sured under this subsection), and any 

10 other information that the Secretary 

11 may require; and 

12 ‘‘(II) a document that sets forth 

13 the amount and the percentage by 

14 which a property subject to a mort15 gage insured under this subsection 

16 must appreciate for the mortgagor to 

17 recover the principal amount of the 

18 mortgage, the costs financed under 

19 the mortgage, and the estimated costs 

20 involved in selling the property, if the 

21 mortgagor were to sell the property on 

22 each of the second, fifth, and tenth 

23 anniversaries of the mortgage. 

24 ‘‘(iii) 2- AND 3-FAMILY RESI25 DENCES.—In the case of a mortgage in-
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1 volving a 2- or 3-family residence, such 

2 counseling shall include (in addition to the 

3 information required under clause (ii)) in4 formation regarding real estate property 

5 management. 

6 ‘‘(5) OPTION FOR NOTICE OF FORECLOSURE

7 PREVENTION COUNSELING AVAILABILITY.— 

8 ‘‘(A) OPTION.—To be eligible for insurance 

9 under this subsection, the mortgagee shall pro10 vide mortgagor, at the time of the execution of 

11 the mortgage, an optional written agreement 

12 which, if signed by the mortgagor, allows, but 

13 does not require, the mortgagee to provide no14 tice described in subparagraph (B) to a housing 

15 counseling entity that has agreed to provide the 

16 notice and counseling required under subpara17 graph (C) and is approved by the Secretary. 

18 ‘‘(B) NOTICE TO COUNSELING AGENCY.— 

19 The notice described in this subparagraph, with 

20 respect to a mortgage, is notice, provided at the 

21 earliest time practicable after the mortgagor be22 comes 60 days delinquent with respect to any 

23 payment due under the mortgage, that the 

24 mortgagor is so delinquent and of how to con25 tact the mortgagor. Such notice may only be 
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1 provided once with respect to each delinquency 

2 period for a mortgage. 

3 ‘‘(C) NOTICE TO MORTGAGOR.—Upon no4 tice from a mortgagee that a mortgagor is 60 

5 days delinquent with respect to payments due 

6 under the mortgage, the housing counseling en7 tity shall at the earliest time practicable notify 

8 the mortgagor of such delinquency, that the en9 tity makes available foreclosure prevention 

10 counseling that may assist the mortgagor in re11 solving the delinquency, and of how to contact 

12 the entity to arrange for such counseling. 

13 ‘‘(D) ABILITY TO CURE.—Failure to pro14 vide the optional written agreement required 

15 under subparagraph (A) may be corrected by 

16 sending such agreement to the mortgagor not 

17 later than the earliest time practicable after the 

18 mortgagor first becomes 60 days delinquent 

19 with respect to payments due under the mort20 gage. Insurance provided under this subsection 

21 may not be terminated and penalties for such 

22 failure may not be prospectively or retroactively 

23 imposed if such failure is corrected in accord24 ance with this subparagraph. 
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1 ‘‘(E) PENALTIES FOR FAILURE TO PRO2 VIDE AGREEMENT.—The Secretary may estab3 lish and impose appropriate penalties for failure 

4 of a mortgagee to provide the optional written 

5 agreement required under subparagraph (A). 

6 ‘‘(F) LIMITATION ON LIABILITY OF MORT7 GAGEE.—A mortgagee shall not incur any li8 ability or penalties for any failure of a housing 

9 counseling entity to provide notice under sub10 paragraph (C). 

11 ‘‘(G) NO PRIVATE RIGHT OF ACTION.— 

12 This paragraph shall not create any private 

13 right of action on behalf of the mortgagor. 

14 ‘‘(H) DELINQUENCY PERIOD.—For pur15 poses of this paragraph, the term ‘delinquency 

16 period’ means, with respect to a mortgage, a 

17 period that begins upon the mortgagor becom18 ing delinquent with respect to payments due 

19 under the mortgage and ends upon the first 

20 subsequent occurrence of such payments under 

21 the mortgage becoming current or the property 

22 subject to the mortgage being foreclosed or oth23 erwise disposed of. 

24 ‘‘(6) INAPPLICABILITY OF DOWNPAYMENT RE25 QUIREMENT.—A mortgage insured under this sub-
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1 section shall not be subject to paragraph (9) of sub2 section (b) or any other requirement to pay on ac3 count of the property, in cash or its equivalent, any 

4 amount of the cost of acquisition. 

5 ‘‘(7) MMIF MONITORING.—In conjunction with 

6 the credit subsidy estimation calculated each year 

7 pursuant to the Federal Credit Reform Act of 1990 

8 (2 U.S.C. 661 et seq.), the Secretary shall review 

9 the program performance for mortgages insured 

10 under this subsection and make any necessary ad11 justments, which may include altering mortgage in12 surance premiums subject to subsection (c)(2), ad13 justing underwriting standards, and limiting the 

14 availability of mortgage insurance under this sub15 section, to ensure that the Mutual Mortgage Insur16 ance Fund shall continue to generate a negative 

17 credit subsidy. 

18 ‘‘(8) UNDERWRITING.—For a mortgage to be 

19 eligible for insurance under this subsection: 

20 ‘‘(A) IN GENERAL.—The mortgagor’s cred21 it and ability to pay the monthly mortgage pay22 ments shall have been evaluated using the Fed23 eral Housing Administration’s Technology Open 

24 To Approved Lenders (TOTAL) Mortgage 

25 Scorecard, or a similar standardized credit scor-
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1 ing system approved by the Secretary, and in 

2 accordance with procedures established by the 

3 Secretary. 

4 ‘‘(B) MULTI-UNIT PROPERTIES.—In the 

5 case of a mortgage involving a property upon 

6 which there is located a dwelling that is de7 signed principally for a 2- or 3-family residence, 

8 the mortgagor meets such additional under9 writing standards as the Secretary may estab10 lish. 

11 ‘‘(9) APPROVAL OF MORTGAGEES.—To be eligi12 ble for insurance under this subsection, a mortgage 

13 shall have been made to a mortgagee that meets 

14 such criteria as the Secretary shall establish to en15 sure that mortgagees meet appropriate standards for 

16 participation in the program authorized under this 

17 subsection. 

18 ‘‘(10) DISCLOSURE OF INCREMENTAL COSTS.— 

19 ‘‘(A) REQUIRED DISCLOSURE.—For a 

20 mortgage to be eligible for insurance under this 

21 subsection, the mortgagee shall provide to the 

22 mortgagor, at the time of the application for 

23 the loan involved in the mortgage, a written dis24 closure, as the Secretary shall require, that 

25 specifies the effective cost to a mortgagor of 
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1 borrowing the amount by which the maximum 

2 amount that could be borrowed under a mort3 gage insured under this subsection exceeds the 

4 maximum amount that could be borrowed under 

5 a mortgage insured under subsection (b), based 

6 on average closing costs with respect to such 

7 amount, as determined by the Secretary. Such 

8 cost shall be expressed as an annual interest 

9 rate over the first 5 years of a mortgage. 

10 ‘‘(B) COORDINATION.—The disclosure re11 quired under this paragraph may be provided in 

12 conjunction with the notice required under sub13 section (f). 

14 ‘‘(11) LOSS MITIGATION.— 

15 ‘‘(A) IN GENERAL.—Upon the default of 

16 any mortgage insured under this subsection, the 

17 mortgagee shall engage in loss mitigation ac18 tions for the purpose of providing an alternative 

19 to foreclosure to the same extent as is required 

20 of other mortgages insured under this title pur21 suant to the regulations issued under section 

22 230(a). 

23 ‘‘(B) ANNUAL REPORTING.—Not later 

24 than 90 days after the end of each fiscal year, 

25 the Secretary shall submit a report to the Con-
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1 gress that compares the rates of default and 

2 foreclosure during such fiscal year for mort3 gages insured under this subsection, for single4 family mortgages insured under this title (other 

5 than under this subsection), and for mortgages 

6 for housing purchased with assistance provided 

7 under the downpayment assistance initiative 

8 under section 271 of the Cranston-Gonzalez 

9 National Affordable Housing Act (42 U.S.C. 

10 12821). 

11 ‘‘(12) ADDITIONAL REQUIREMENTS.—The Sec12 retary may establish any additional requirements for 

13 mortgage insurance under this subsection as may be 

14 necessary or appropriate. 

15 ‘‘(13) PILOT PROGRAM LIMITATIONS.— 

16 ‘‘(A) ANNUAL.—In any fiscal year, the ag17 gregate number of mortgages insured under 

18 this subsection may not exceed 10 percent of 

19 the aggregate number of mortgages and loans 

20 insured by the Secretary under this title during 

21 the preceding fiscal year. 

22 ‘‘(B) TERM OF PROGRAM.—The aggregate 

23 number or mortgages insured under this sub24 section may not exceed 50,000. 

25 ‘‘(14) PROGRAM SUSPENSION.— 
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (C), the authority under paragraph (1) to 

3 insure mortgages shall be suspended if at any 

4 time the claim rate described in subparagraph 

5 (B) exceeds 3.5 percent. A suspension under 

6 this subparagraph shall remain in effect until 

7 such time as such claim rate is 3.5 percent or 

8 less. 

9 ‘‘(B) FHA TOTAL SINGLE-FAMILY ANNUAL

10 CLAIM RATE.—The claim rate described in this 

11 subparagraph, for any particular time, is the 

12 ratio of the number of claims during the 12 

13 months preceding such time on mortgages on 1- 

14 to 4-family residences insured pursuant to this 

15 title to the number of mortgages on such resi16 dences having such insurance in force at that 

17 time. 

18 ‘‘(C) APPLICABILITY.—A suspension under 

19 subparagraph (A) shall not preclude the Sec20 retary from endorsing or insuring any mortgage 

21 that was duly executed before the date of such 

22 suspension. 

23 ‘‘(15) SUNSET.—No mortgage may be insured 

24 under this subsection after September 30, 2010, ex-
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1 cept that the Secretary may endorse or insure any 

2 mortgage that was duly executed before such date. 

3 ‘‘(16) GAO REPORTS.—The Comptroller Gen4 eral of the United States shall submit a report to 

5 the Congress not later than 2 years after the date 

6 of the enactment of this subsection, and annually 

7 thereafter, regarding the performance of mortgages 

8 insured under this subsection. 

9 ‘‘(17) IMPLEMENTATION.—The Secretary may 

10 implement this subsection on an interim basis by 

11 issuing an interim rule, except that the Secretary 

12 shall solicit public comments upon publication of 

13 such interim rule and shall issue a final rule imple14 menting this subsection after consideration of the 

15 comments submitted.’’. 

16 (b) MORTGAGE INSURANCE PREMIUMS.—The second 

17 sentence of subparagraph (A) of section 203(c)(2) of the 

18 National Housing Act (12 U.S.C. 1709(c)(2)(A)) is 

19 amended by striking ‘‘In’’ and inserting ‘‘Except with re20 spect to a mortgage insured under subsection (l), in’’. 

21 (c) GENERAL INSURANCE FUND.—Section 519(e) of 

22 the National Housing Act (12 U.S.C. 1735c(e)) is amend23 ed by striking ‘‘and 203(i)’’ and inserting ‘‘, 203(i), and 

24 203(l)’’. 

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