IB 

Union Calendar No. 326 

109TH CONGRESS 

2D SESSION H. R. 3043 

[Report No. 109–571] 

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 

JULY 17, 2006 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on June 23, 2005] 

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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Zero Downpayment 

3 Pilot Program Act of 2006’’. 

4 SEC. 2. PILOT PROGRAM FOR INSURANCE FOR ZERO-DOWN5 PAYMENT MORTGAGES. 

6 (a) MORTGAGE INSURANCE AUTHORITY.—Section 203 

7 of the National Housing Act (12 U.S.C. 1709) is amended 

8 by inserting after subsection (k) the following new sub9 section: 

10 ‘‘(l) ZERO-DOWNPAYMENT MORTGAGES PILOT PRO11 GRAM.— 

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

13 may insure, and commit to insure, under this sub14 section any mortgage that meets the requirements of 

15 this subsection and, except as otherwise specifically 

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

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

18 be eligible for insurance under this subsection, a 

19 mortgage shall involve a property upon which there 

20 is located a dwelling that is designed principally for 

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

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

23 his or her principal residence, which shall include— 

24 ‘‘(A) a 1-family dwelling unit in a multi25 family project and an undivided interest in the 


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1 common areas and facilities which serve the 

2 project; 

3 ‘‘(B) a 1-family dwelling unit of a coopera4 tive housing corporation the permanent occu5 pancy of the dwelling units of which is restricted 

6 to members of such corporation and in which the 

7 purchase of such stock or membership entitles the 

8 purchaser to the permanent occupancy of such 

9 dwelling unit; and 

10 ‘‘(C) a manufactured home that meets such 

11 standards as the Secretary has established for 

12 purposes of subsection (b). 

13 ‘‘(3) MAXIMUM PRINCIPAL OBLIGATION.— 

14 ‘‘(A) LIMITATION.—To be eligible for insur15 ance under this subsection, a mortgage shall in16 volve a principal obligation in an amount not in 

17 excess of 100 percent of the appraised value of 

18 the property plus any initial service charges, ap19 praisal, inspection and other fees in connection 

20 with the mortgage as approved by the Secretary. 

21 ‘‘(B) INAPPLICABILITY OF OTHER LOAN-TO22 VALUE REQUIREMENTS.—A mortgage insured 

23 under this subsection shall not be subject to sub24 paragraph (B) of paragraph (2) of subsection (b) 


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1 or to the matter in such paragraph that follows 

2 such subparagraph. 

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

4 under a mortgage insured under this subsection shall 

5 meet the following requirements: 

6 ‘‘(A) FIRST-TIME HOMEBUYER.—The mort7 gagor shall be a first-time homebuyer. The pro8 gram for mortgage insurance under this sub9 section shall be considered a Federal program to 

10 assist first-time homebuyers for purposes of sec11 tion 956 of the Cranston-Gonzalez National Af12 fordable Housing Act (42 U.S.C. 12713). 

13 ‘‘(B) COUNSELING.— 

14 ‘‘(i) REQUIREMENT.—The mortgagor 

15 shall have received counseling, prior to ap16 plication for the loan involved in the mort17 gage, by a third party (other than the mort18 gagee) who is approved by the Secretary, 

19 with respect to the responsibilities and fi20 nancial management involved in home21 ownership. Such counseling shall be pro22 vided to the mortgagor on an individual 

23 basis by a representative of the approved 

24 third party counseling entity, and shall be 


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1 provided in person to the maximum extent 

2 practicable. 

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

4 include providing to, and discussing with, 

5 the mortgagor— 

6 ‘‘(I) information regarding home7 ownership options other than a mort8 gage insured under this subsection, 

9 other zero- or low-downpayment mort10 gage options that are or may become 

11 available to the mortgagor, the finan12 cial implications of entering into a 

13 mortgage (including a mortgage in14 sured under this subsection), and any 

15 other information that the Secretary 

16 may require; and 

17 ‘‘(II) a document that sets forth 

18 the amount and the percentage by 

19 which a property subject to a mortgage 

20 insured under this subsection must ap21 preciate for the mortgagor to recover 

22 the principal amount of the mortgage, 

23 the costs financed under the mortgage, 

24 and the estimated costs involved in 

25 selling the property, if the mortgagor 


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1 were to sell the property on each of the 

2 second, fifth, and tenth anniversaries of 

3 the mortgage. 

4 ‘‘(iii) 2- AND 3-FAMILY RESIDENCES.— 

5 In the case of a mortgage involving a 2- or 

6 3-family residence, such counseling shall in7 clude (in addition to the information re8 quired under clause (ii)) information re9 garding real estate property management. 

10 ‘‘(5) OPTION FOR NOTICE OF FORECLOSURE PRE11 VENTION COUNSELING AVAILABILITY.— 

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

13 under this subsection, the mortgagee shall pro14 vide mortgagor, at the time of the execution of 

15 the mortgage, an optional written agreement 

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

17 does not require, the mortgagee to provide notice 

18 described in subparagraph (B) to a housing 

19 counseling entity that has agreed to provide the 

20 notice and counseling required under subpara21 graph (C) and is approved by the Secretary. 

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

23 The notice described in this subparagraph, with 

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

25 earliest time practicable after the mortgagor beVerDate Aug 31 2005 23:42 Jul 17, 2006 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H3043.RH H3043

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1 comes 60 days delinquent with respect to any 

2 payment due under the mortgage, that the mort3 gagor is so delinquent and of how to contact the 

4 mortgagor. Such notice may only be provided 

5 once with respect to each delinquency period for 

6 a mortgage. 

7 ‘‘(C) NOTICE TO MORTGAGOR.—Upon notice 

8 from a mortgagee that a mortgagor is 60 days 

9 delinquent with respect to payments due under 

10 the mortgage, the housing counseling entity shall 

11 at the earliest time practicable notify the mort12 gagor of such delinquency, that the entity makes 

13 available foreclosure prevention counseling that 

14 may assist the mortgagor in resolving the delin15 quency, and of how to contact the entity to ar16 range for such counseling. 

17 ‘‘(D) ABILITY TO CURE.—Failure to provide 

18 the optional written agreement required under 

19 subparagraph (A) may be corrected by sending 

20 such agreement to the mortgagor not later than 

21 the earliest time practicable after the mortgagor 

22 first becomes 60 days delinquent with respect to 

23 payments due under the mortgage. Insurance 

24 provided under this subsection may not be termi25 nated and penalties for such failure may not be 


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1 prospectively or retroactively imposed if such 

2 failure is corrected in accordance with this sub3 paragraph. 

4 ‘‘(E) PENALTIES FOR FAILURE TO PROVIDE

5 AGREEMENT.—The Secretary may establish and 

6 impose appropriate penalties for failure of a 

7 mortgagee to provide the optional written agree8 ment required under subparagraph (A). 

9 ‘‘(F) LIMITATION ON LIABILITY OF MORT10 GAGEE.—A mortgagee shall not incur any liabil11 ity or penalties for any failure of a housing 

12 counseling entity to provide notice under sub13 paragraph (C). 

14 ‘‘(G) NO PRIVATE RIGHT OF ACTION.—This 

15 paragraph shall not create any private right of 

16 action on behalf of the mortgagor. 

17 ‘‘(H) DELINQUENCY PERIOD.—For purposes 

18 of this paragraph, the term ‘delinquency period’ 

19 means, with respect to a mortgage, a period that 

20 begins upon the mortgagor becoming delinquent 

21 with respect to payments due under the mortgage 

22 and ends upon the first subsequent occurrence of 

23 such payments under the mortgage becoming 

24 current or the property subject to the mortgage 

25 being foreclosed or otherwise disposed of. 


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1 ‘‘(6) INAPPLICABILITY OF DOWNPAYMENT RE2 QUIREMENT.—A mortgage insured under this sub3 section shall not be subject to paragraph (9) of sub4 section (b) or any other requirement to pay on ac5 count of the property, in cash or its equivalent, any 

6 amount of the cost of acquisition. 

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

8 the credit subsidy estimation calculated each year 

9 pursuant to the Federal Credit Reform Act of 1990 (2 

10 U.S.C. 661 et seq.), the Secretary shall review the pro11 gram performance for mortgages insured under this 

12 subsection and make any necessary adjustments, 

13 which may include altering mortgage insurance pre14 miums subject to subsection (c)(2), adjusting under15 writing standards, and limiting the availability of 

16 mortgage insurance under this subsection, to ensure 

17 that the Mutual Mortgage Insurance Fund shall con18 tinue to generate a negative credit subsidy. 

19 ‘‘(8) UNDERWRITING.—For a mortgage to be eli20 gible for insurance under this subsection: 

21 ‘‘(A) IN GENERAL.—The mortgagor’s credit 

22 and ability to pay the monthly mortgage pay23 ments shall have been evaluated using the Fed24 eral Housing Administration’s Technology Open 

25 To Approved Lenders (TOTAL) Mortgage ScoreVerDate Aug 31 2005 23:42 Jul 17, 2006 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H3043.RH H3043

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1 card, or a similar standardized credit scoring 

2 system approved by the Secretary, and in ac3 cordance with procedures established by the Sec4 retary. 

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

6 of a mortgage involving a property upon which 

7 there is located a dwelling that is designed prin8 cipally for a 2- or 3-family residence, the mort9 gagor meets such additional underwriting stand10 ards as the Secretary may establish. 

11 ‘‘(9) APPROVAL OF MORTGAGEES.—To be eligible 

12 for insurance under this subsection, a mortgage shall 

13 have been made to a mortgagee that meets such cri14 teria as the Secretary shall establish to ensure that 

15 mortgagees meet appropriate standards for participa16 tion in the program authorized under this subsection. 

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

18 ‘‘(A) REQUIRED DISCLOSURE.—For a mort19 gage to be eligible for insurance under this sub20 section, the mortgagee shall provide to the mort21 gagor, at the time of the application for the loan 

22 involved in the mortgage, a written disclosure, as 

23 the Secretary shall require, that specifies the ef24 fective cost to a mortgagor of borrowing the 

25 amount by which the maximum amount that 


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1 could be borrowed under a mortgage insured 

2 under this subsection exceeds the maximum 

3 amount that could be borrowed under a mortgage 

4 insured under subsection (b), based on average 

5 closing costs with respect to such amount, as de6 termined by the Secretary. Such cost shall be ex7 pressed as an annual interest rate over the first 

8 5 years of a mortgage. 

9 ‘‘(B) COORDINATION.—The disclosure re10 quired under this paragraph may be provided in 

11 conjunction with the notice required under sub12 section (f). 

13 ‘‘(11) LOSS MITIGATION.— 

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

15 any mortgage insured under this subsection, the 

16 mortgagee shall engage in loss mitigation actions 

17 for the purpose of providing an alternative to 

18 foreclosure to the same extent as is required of 

19 other mortgages insured under this title pursu20 ant to the regulations issued under section 

21 230(a). 

22 ‘‘(B) ANNUAL REPORTING.—Not later than 

23 90 days after the end of each fiscal year, the Sec24 retary shall submit a report to the Congress that 

25 compares the rates of default and foreclosure durVerDate Aug 31 2005 23:42 Jul 17, 2006 Jkt 049200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3043.RH H3043

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1 ing such fiscal year for mortgages insured under 

2 this subsection, for single-family mortgages in3 sured under this title (other than under this sub4 section), and for mortgages for housing pur5 chased with assistance provided under the down6 payment assistance initiative under section 271 

7 of the Cranston-Gonzalez National Affordable 

8 Housing Act (42 U.S.C. 12821). 

9 ‘‘(12) ADDITIONAL REQUIREMENTS.—The Sec10 retary may establish any additional requirements for 

11 mortgage insurance under this subsection as may be 

12 necessary or appropriate. 

13 ‘‘(13) PILOT PROGRAM LIMITATIONS.— 

14 ‘‘(A) ANNUAL.—In any fiscal year, the ag15 gregate number of mortgages insured under this 

16 subsection may not exceed 10 percent of the ag17 gregate number of mortgages and loans insured 

18 by the Secretary under this title during the pre19 ceding fiscal year. 

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

21 number or mortgages insured under this sub22 section may not exceed 50,000. 

23 ‘‘(14) PROGRAM SUSPENSION.— 

24 ‘‘(A) IN GENERAL.—Subject to subpara25 graph (C), the authority under paragraph (1) to 


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1 insure mortgages shall be suspended if at any 

2 time the claim rate described in subparagraph 

3 (B) exceeds 3.5 percent. A suspension under this 

4 subparagraph shall remain in effect until such 

5 time as such claim rate is 3.5 percent or less. 

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

7 CLAIM RATE.—The claim rate described in this 

8 subparagraph, for any particular time, is the 

9 ratio of the number of claims during the 12 

10 months preceding such time on mortgages on 1- 

11 to 4-family residences insured pursuant to this 

12 title to the number of mortgages on such resi13 dences having such insurance in force at that 

14 time. 

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

16 subparagraph (A) shall not preclude the Sec17 retary from endorsing or insuring any mortgage 

18 that was duly executed before the date of such 

19 suspension. 

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

21 under this subsection after September 30, 2010, except 

22 that the Secretary may endorse or insure any mort23 gage that was duly executed before such date. 

24 ‘‘(16) GAO REPORTS.—The Comptroller General 

25 of the United States shall submit a report to the ConVerDate Aug 31 2005 23:42 Jul 17, 2006 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6203 E:\BILLS\H3043.RH H3043

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1 gress not later than 2 years after the date of the en2 actment of this subsection, and annually thereafter, 

3 regarding the performance of mortgages insured under 

4 this subsection. 

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

6 implement this subsection on an interim basis by 

7 issuing an interim rule, except that the Secretary 

8 shall solicit public comments upon publication of such 

9 interim rule and shall issue a final rule imple10 menting this subsection after consideration of the 

11 comments submitted.’’. 

12 (b) MORTGAGE INSURANCE PREMIUMS.—The second 

13 sentence of subparagraph (A) of section 203(c)(2) of the Na14 tional Housing Act (12 U.S.C. 1709(c)(2)(A)) is amended 

15 by striking ‘‘In’’ and inserting ‘‘Except with respect to a 

16 mortgage insured under subsection (l), in’’. 

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

18 the National Housing Act (12 U.S.C. 1735c(e)) is amended 

19 by striking ‘‘and 203(i)’’ and inserting ‘‘, 203(i), and 

20 203(l)’’. 

21 (d) GAO STUDY OF EXPANDED OR EXTENDED PRO22 GRAM.—If at any time authority to insure mortgages under 

23 section 203(l) of the National Housing Act (as added by 

24 subsection (a) of this section) is— 

25 (1) expanded to more than 50,000 mortgages, or 


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1 (2) extended to a date after September 30, 2010, 

2 including any permanent extension of such authority, 

3 the Comptroller General of the United States shall con4 duct a study of the financial soundness, at such time, of 

5 the Mutual Mortgage Insurance Fund and the effects of 

6 such expansion or extension on such financial soundness, 

7 and shall submit a report to the Congress regarding the 

8 conclusions of such study not later than 60 days after the 

9 date of the enactment of the law providing for such expan10 sion or extension. 


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Union Calendar No. 326 

109TH CONGRESS 

2D SESSION H. R. 3043 

[Report No. 109

–571] 

A BILL 

To authorize the Secretary of Housing and Urban 

residences. sure zero-downpayment mortgages for one-unit Development to carry out a pilot program to inJULY 17, 2006 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


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