I

103D CONGRESS

2D SESSION H. R. 4390

To amend the National Housing Act to reform and simplify the single family

home mortgage insurance program of the Department of Housing and

Urban Development, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 11, 1994

Mr. KLEIN (for himself and Mr. VENTO) introduced the following bill; which

was referred to the Committee on Banking, Finance and Urban Affairs

A BILL

To amend the National Housing Act to reform and simplify

the single family home mortgage insurance program of

the Department of Housing and Urban Development,

and for other purposes.

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 ‘‘FHA Reform Act of

5 1994’’.

6 SEC. 2. MAXIMUM DOLLAR AMOUNT.

7 Subparagraph (A) of the first sentence of section

8 203(b)(2) of the National Housing Act (12 U.S.C.
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1 1709(b)(2)(A)) is amended by striking clause (ii) and all

2 that follows through ‘‘1992;’’ and inserting the following:

3 ‘‘(ii) 85 percent of the dollar amount

4 limitation determined under section

5 305(a)(2) of the Federal Home Loan

6 Mortgage Corporation Act for a residence

7 of the applicable size;

8 except that the applicable dollar amount limita9 tion in effect under this subparagraph (A) for

10 any area may not be less than the greater of—

11 ‘‘(I) the dollar amount limitation in

12 effect under this section for the area on

13 the date of enactment of the FHA Reform

14 Act of 1994; or

15 ‘‘(II) the applicable average area pur16 chase price determined under section

17 143(e)(2) of the Internal Revenue Code of

18 1986, as adjusted by the Secretary to re19 flect a single amount using purchase prices

20 for residences that have been previously oc21 cupied, and for residences that have not

22 been so occupied, which amount shall be

23 adjusted by the Secretary annually on the

24 basis of the Constant Quality Housing

25 Price Index;’’.
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1 SEC. 3. MAXIMUM LOAN-TO-VALUE RATIO.

2 Section 203(b)(2) of the National Housing Act (12

3 U.S.C. 1709(b)(2)) is amended—

4 (1) by striking ‘‘(including such initial service

5 charges, appraisal, inspection, and other fees as the

6 Secretary shall approve)’’ the first place it appears;

7 (2) by striking subparagraph (B) of the first

8 sentence and inserting the following new subpara9 graph:

10 ‘‘(B) except as otherwise provided in this

11 paragraph (2), not to exceed an amount equal

12 to the sum of—

13 ‘‘(i) 99 percent of $50,000 of the ap14 praised value of the property, as of the

15 date the mortgage is accepted for insur16 ance;

17 ‘‘(ii) 96 percent of such value in ex18 cess of $50,000 but not in excess of

19 $125,000; and

20 ‘‘(iii) 94 percent of such value in ex21 cess of $125,000.’’;

22 (3) by striking the second sentence of the mat23 ter that follows subparagraph (B) of the first sen24 tence; and

25 (4) by striking penultimate undesignated para26 graph.
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1 SEC. 4. SINGLE FAMILY RISK-SHARING MORTGAGE INSUR2 ANCE PROGRAM.

3 (a) IN GENERAL.—Title II of the National Housing

4 Act (12 U.S.C. 1707 et seq.) is amended by adding at

5 the end the following new section:

6 ‘‘SINGLE FAMILY RISK-SHARING WITH STATE AND LOCAL

7 AGENCIES

8 ‘‘SEC. 256. (a) AUTHORITY.—Notwithstanding any

9 other provision of this Act inconsistent with this section,

10 the Secretary may insure and make commitments to in11 sure under this section mortgages on single family prop12 erties under risk-sharing mortgage insurance programs es13 tablished with 1 or more States or agencies. Only mort14 gages executed in connection with the acquisition of a sin15 gle family property or for the refinancing of a mortgage

16 insured under this section shall be eligible. Under such

17 programs, the Secretary shall insure a portion of the mort18 gage and the State or local agency shall insure the remain19 der.

20 ‘‘(b) PURPOSES.—The purposes of the program

21 under this section are (1) to increase the availability of

22 single family mortgage financing in areas where there is

23 need for mortgage insurance under this Act that cannot

24 be met due to particularly high average median house

25 prices in the area, and (2) to foster arrangements with
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1 State and local agencies to share the risk of mortgage in2 surance.

3 ‘‘(c) APPLICATIONS.—

4 ‘‘(1) APPROVAL.—The Secretary may approve

5 an application submitted by a State or local agency

6 to establish a risk-sharing program under this sec7 tion, based on a determination that the State or

8 local agency demonstrates that (A) it has the legal

9 authority under State law and, where applicable,

10 local law, to participate in the risk-sharing mortgage

11 insurance program, (B) it has carried out, or has

12 the potential to carry out, a financially sound, effi13 cient, and effective mortgage insurance program,

14 and (C) it has the ongoing administrative and finan15 cial capacity necessary to carry out a program under

16 this section.

17 ‘‘(2) CANCELLATION OF APPROVAL.—For a vio18 lation of requirements and procedures under the

19 risk-sharing agreement between the State or local

20 agency and the Secretary or for other good cause,

21 the Secretary may cancel approval of a State or local

22 agency under this section by giving notice to the

23 State or local agency. The cancellation shall be effec24 tive upon receipt of the notice by the agency or at

25 a later date specified by the Secretary. A decision by
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1 the Secretary to cancel approval shall be final and

2 conclusive and shall not be subject to judicial review.

3 ‘‘(d) DELEGATION OF AUTHORITY TO INSURE TO

4 STATE AND LOCAL AGENCIES.—Pursuant to a risk-shar5 ing agreement with a State or local agency, the Secretary

6 shall delegate the authority to insure and make commit7 ments to insure the portion of mortgages to be insured

8 by the Secretary under this section to the State or local

9 agency. The risk-sharing agreement shall contain such

10 other matters as the Secretary and the State or local agen11 cy agree.

12 ‘‘(e) UNDERWRITING STANDARDS AND LOAN TERMS

13 AND CONDITIONS.—The State or local agency shall adopt

14 underwriting standards and loan terms and conditions for

15 purposes of underwriting loans to be insured under this

16 section without regard to requirements of this Act other

17 than this section, section 203(g), and section 203(r)(2),

18 subject to review and approval by the Secretary.

19 ‘‘(f) MORTGAGE INSURANCE PREMIUMS.—

20 ‘‘(1) REQUIREMENT.—The State or local agen21 cy shall require the payment of mortgage insurance

22 premiums by mortgagors.

23 ‘‘(2) SHARES.—The Secretary shall establish

24 policies and procedures for the sharing of premiums

25 between the Secretary and the State or local agency,
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1 based on the relative risk to, and administrative

2 costs of, the Secretary and the State or local agency.

3 The share paid to the Secretary shall not be less

4 than an amount necessary to cover the risk to, and

5 administrative costs of, the Secretary.

6 ‘‘(g) LIMITATIONS ON PRINCIPAL MORTGAGE

7 AMOUNT.—

8 ‘‘(1) INSURED PORTION.—The portion of the

9 mortgage insured under this section by the Sec10 retary may not exceed an amount equal to the lesser

11 of (A) 80 percent of the appraised value of the prop12 erty, or (B) the maximum amount the Secretary

13 may insure under section 203(b) of this Act for the

14 area (but not including any amount for a mortgage

15 insurance premium).

16 ‘‘(2) TOTAL PRINCIPAL AMOUNT.—The total

17 principal amount of a mortgage insured under this

18 section by the Secretary and the State or local agen19 cy (A) shall exceed the maximum amount the Sec20 retary may insure under subparagraph (A) of the

21 first sentence of section 203(b)(2) of this Act for the

22 area, and (B) may not exceed the conforming loan

23 limitation determined under section 305(a)(2) of the

24 Federal Home Loan Mortgage Corporation Act for
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1 a residence of the applicable size, as adjusted annu2 ally.

3 ‘‘(3) LOAN-TO-VALUE RATIO.—The principal

4 obligation of a mortgage may not exceed an amount

5 determined in accordance with subparagraph (B) of

6 the first sentence of section 203(b)(2) of this Act

7 plus the mortgage insurance premium.

8 ‘‘(4) REFINANCING MORTGAGES.—Notwith9 standing paragraph (2)(A) or (3), in the case of refi10 nancing of an existing mortgage insured under this

11 section, the principal obligation of a refinancing

12 mortgage may not exceed the outstanding principal

13 balance of the existing mortgage plus any mortgage

14 insurance premium.

15 ‘‘(h) INSURANCE CLAIMS.—

16 ‘‘(1) PROCEDURE.—In the case of a default and

17 foreclosure of a mortgage insured under this section,

18 the mortgagee may file a claim with the State or

19 local agency for insurance benefits in accordance

20 with requirements established by the State or local

21 agency and approved by the Secretary. The agency

22 shall pay the full amount of the claim owed to the

23 mortgagee. If the loss on the insured mortgage ex24 ceeds the amount of insurance by the agency, the
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1 Secretary shall reimburse the agency for the dif2 ference.

3 ‘‘(2) GENERAL INSURANCE FUND.—The insur4 ance of a mortgage under this section by the Sec5 retary shall be an obligation of the General Insur6 ance Fund created pursuant to section 519 of this

7 Act.

8 ‘‘(i) INAPPLICABILITY OF THE ASSIGNMENT PRO9 GRAM.—Section 230 shall not apply to mortgages insured

10 under the program authorized by this section.

11 ‘‘(j) RESTRICTION ON GNMA SECURITIZATION.—

12 The Government National Mortgage Association shall not

13 securitize any loans insured under this section.

14 ‘‘(k) DEFINITIONS.—As used in this section:

15 ‘‘(1) The term ‘local agency’ means an agency

16 of a unit of general local government, as defined by

17 the Secretary, that has the authority to insure mort18 gages and to participate with the Secretary in the

19 single family risk-sharing program under this sec20 tion, or an agency or instrumentality of a local agen21 cy if the agency or instrumentality has such author22 ity.

23 ‘‘(2) The term ‘State agency’ means an agency

24 of a State that has the authority to insure mort25 gages and to participate with the Secretary in the
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1 single family risk-sharing program under this sec2 tion, or an agency or instrumentality of a State

3 agency if the agency or instrumentality has such au4 thority.

5 ‘‘(3) The term ‘single family property’ means a

6 property upon which there is located a dwelling de7 signed principally for occupancy by 1 family, and in8 cludes a condominium and a cooperative.

9 ‘‘(4) The term ‘State’ means the several States,

10 the Commonwealth of Puerto Rico, the District of

11 Columbia, Guam, the Trust Territory of the Pacific

12 Islands, American Samoa, and the Virgin Islands.’’.

13 (b) IMPLEMENTATION.—The Secretary of Housing

14 and Urban Development may implement the program au15 thorized by the amendment made under subsection (a) by

16 entering into risk-sharing agreements negotiated with

17 State agencies, notwithstanding any otherwise applicable

18 requirement for regulations or notice published in the Fed19 eral Register and notwithstanding any otherwise applica20 ble regulations of the Secretary.

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