I

104TH CONGRESS

1ST SESSION H. R. 1708

To establish the Federal Mortgage Insurance Corporation as a wholly owned

Government corporation to provide full mortgage insurance and provide

for the development of credit enhancement products for mortgages for

single family homes of low- and moderate-income homebuyers, and for

other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 24, 1995

Mr. WELLER (for himself, Mr. METCALF, Mr. BARR, Mr. FOX of Pennsylvania, Mr. STOCKMAN, Mr. EHRLICH, Mr. CHRYSLER, Mr. NEY, Mr.

HEINEMAN, Mr. BONO, Mr. HAYWORTH, Mr. LOBIONDO, Mrs. KELLY,

Mr. TATE, Mr. DAVIS, Mr. GRAHAM, Mr. FOLEY, Mr. FORBES, Mr.

SALMON, Mr. ENGLISH of Pennsylvania, Mr. FRISA, Mr. BURR, Mr.

WAMP, and Mr. BRYANT of Tennessee) introduced the following bill;

which was referred to the Committee on Banking and Financial Services

A BILL

To establish the Federal Mortgage Insurance Corporation

as a wholly owned Government corporation to provide

full mortgage insurance and provide for the development

of credit enhancement products for mortgages for single

family homes of low- and moderate-income homebuyers,

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,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Federal Mortgage In3 surance Corporation Charter Act’’.

4 SEC. 2. TABLE OF CONTENTS.

5 The table of contents for this Act is as follows:

Sec. 1. Short title.

Sec. 2. Table of contents.

Sec. 3. Definitions.

TITLE I—ORGANIZATION OF CORPORATION

Sec. 101. Establishment.

Sec. 102. Purposes.

Sec. 103. General powers.

Sec. 104. Board of Directors.

Sec. 105. Officers and employees.

Sec. 106. Procurement.

Sec. 107. Financial safety and soundness.

Sec. 108. Federal credit reform procedures.

Sec. 109. Additional oversight and reporting requirements.

Sec. 110. Transition.

Sec. 111. Applicability of laws.

Sec. 112. GAO evaluation.

Sec. 113. Rule of construction.

Sec. 114. Authorization of appropriations.

TITLE II—BUSINESS OF CORPORATION

Sec. 201. Single family housing requirement.

Sec. 202. Transfer of FHA single family housing business.

Sec. 203. New lines of business.

Sec. 204. Limitations on business activity.

TITLE III—PROVISIONS RELATING TO GOVERNMENT NATIONAL

MORTGAGE ASSOCIATION AND OFFICE OF FEDERAL HOUSING

ENTERPRISE OVERSIGHT

Sec. 301. GNMA authority.

Sec. 302. Safety and soundness oversight of Corporation by OFHEO.

TITLE IV—FHA IMPROVEMENTS

Sec. 401. Calculation of downpayment.

Sec. 402. Delegation of single family mortgage insuring authority to direct endorsement mortgagees.

6 SEC. 3. DEFINITIONS.

7 For purposes of this Act, the following definitions

8 shall apply:
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1 (1) CORPORATION.—The term ‘‘Corporation’’

2 means the Federal Mortgage Insurance Corporation

3 established under this Act.

4 (2) NATIVE AMERICAN GOVERNMENT.—The

5 term ‘‘Native American government’’ means the gov6 ernment of any Indian or Alaska native tribe, band,

7 nation, pueblo, village or community that the Sec8 retary of the Interior acknowledges to exist as an In9 dian tribe, pursuant to the Federally Recognized In10 dian Tribe List Act of 1994.

11 (3) SINGLE FAMILY HOUSING.—The term ‘‘sin12 gle family housing’’ means a property on which there

13 is located a 1- to 4-family residence.

14 (4) UNITED STATES.—The term ‘‘United

15 States’’ includes the States, the District of Colum16 bia, the Commonwealth of Puerto Rico, the Com17 monwealth of the Northern Mariana Islands, Guam,

18 the Virgin Islands, American Samoa, and Native

19 American governments.

20 TITLE I—ORGANIZATION OF

21 CORPORATION

22 SEC. 101. ESTABLISHMENT.

23 (a) IN GENERAL.—There is hereby established a

24 body corporate to be known as the Federal Mortgage In-
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1 surance Corporation, which shall have succession until dis2 solved by Act of Congress.

3 (b) GOVERNMENT CORPORATION.—The Corporation

4 shall be established as a wholly owned Government cor5 poration subject to chapter 91 of title 31, United States

6 Code (commonly referred to as the Government Corpora7 tion Control Act), except as otherwise provided in this Act.

8 (c) FEDERAL AGENCY.—

9 (1) IN GENERAL.—The Corporation shall be an

10 agency of the United States, except that the Cor11 poration shall not be considered an agency for pur12 poses of holding, managing, and disposing of assets

13 acquired by the Corporation under the provisions of

14 this subtitle or subtitle B.

15 (2) PROPERTY DISPOSITION AUTHORITY.—For

16 purposes of this subsection, the term ‘‘holding, man17 aging, and disposing of assets’’ includes the powers

18 to—

19 (A) deal with, complete, reconstruct, rent,

20 renovate, modernize, insure, make contracts for

21 the management of, establish suitable agencies

22 for the management of, or exercise discretion to

23 sell for cash or credit or lease, any acquired

24 property;
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1 (B) pursue collection by way of com2 promise or otherwise all assigned and trans3 ferred claims; and

4 (C) at any time, upon default, foreclose on

5 any property secured by any assigned or trans6 ferred mortgage.

7 (d) SELF-SUPPORTING ENTITY.—The Corporation

8 shall operate and conduct its business as a self-supporting

9 entity.

10 (e) CORPORATE OFFICES AND RESIDENCY.—The

11 Corporation shall maintain its principal office in the Dis12 trict of Columbia and shall be deemed, for purposes of

13 venue in civil actions, to be a resident of the District of

14 Columbia. The Corporation may establish other officers in

15 such other places as the Corporation considers appropriate

16 in the conduct of its business.

17 (f) TAX STATUS.—The Corporation, including its

18 franchise, activities, income, and assets, shall be exempt

19 from all taxation now or hereafter imposed by any taxing

20 authority in the United States, except that any real prop21 erty of the Corporation (other than real property that the

22 Corporation uses as an office) shall be subject to taxation

23 to the same extent according to its value as any taxing

24 authority taxes other real property.
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1 (g) PROTECTION OF NAME.—No person, except the

2 body corporate established under this section shall, after

3 the date of the enactment of this Act, use the words ‘‘Fed4 eral Mortgage Insurance Corporation’’ or the initials

5 ‘‘FMIC’’ as the name or part thereof under which such

6 person shall do business. Violations of the preceding sen7 tence may be enjoined by any court of general jurisdiction

8 at the suit of the Corporation. In any such suit, the Cor9 poration may recover any actual damages flowing from

10 such violation, and, in addition, shall be entitled to puni11 tive damages (regardless of the existence or nonexistence

12 of actual damages) of not more than $100 for each day

13 during which such violation is committed or repeated.

14 SEC. 102. PURPOSES.

15 The Corporation is established for the following pur16 poses:

17 (1) To expand the opportunities in the United

18 States for single family homeownership through the

19 provision of full mortgage insurance and credit en20 hancement products and related activities.

21 (2) To address the unmet single family housing

22 credit needs of families and communities in the

23 United States.
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1 (3) To engage in research, development, and

2 testing of new products designed to make housing

3 credit available to underserved markets.

4 (4) To deliver full mortgage insurance and

5 credit enhancement products, and provide other

6 services, for single family housing in a nondiscrim7 inatory manner, and to administer its business in a

8 manner which affirmatively furthers fair housing.

9 (5) To promote liquidity and provide stability to

10 the single family housing finance market, by con11 tinuing to provide full mortgage insurance and credit

12 enhancement products on a sound basis during times

13 of regional and national economic downturn.

14 (6) To expand access to decent and affordable

15 single family housing and to deliver housing credit

16 to families and communities in the United States.

17 SEC. 103. GENERAL POWERS.

18 To further the purposes of this Act, in accordance

19 with chapter 91 of title 31 of the United States Code (re20 lating to government corporations), the Corporation—

21 (1) may adopt, amend, and repeal bylaws, and

22 other written administrative guidance;

23 (2) may adopt, alter, and use a corporate seal,

24 which shall be judicially noted;
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1 (3) may enhance and make commitments to en2 hance credit to the extent authorized under this Act,

3 including commitments to insure, reinsure, advance,

4 and incur liabilities, to the extent provided in title

5 II;

6 (4) may acquire, hold, use, improve, deal in, or

7 dispose of, by any means, any interests in any real

8 property or any personal property;

9 (5) may execute contracts, make grants, and

10 make other agreements in its own name, with any

11 agency, public or private entity, or person, and carry

12 out any lawful requirement of such contracts,

13 grants, or other agreements;

14 (6) may take any actions (including the restruc15 turing of debt) that Corporation determines are nec16 essary to manage the Corporation’s portfolio of

17 property, assets, and obligations;

18 (7) may, to the extent authorized under this

19 Act—

20 (A) create and supply any product or serv21 ice consistent with its corporate purposes;

22 (B) collect, generate, and make available

23 any information relevant to the provision of sin24 gle family housing credit; and
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1 (C) assess fees and charges for such prod2 ucts, information, and services in an amount, as

3 determined by the Corporation, that does not

4 exceed their value in the market and that per5 mits the Corporation to recover its fully allo6 cated long-term costs and maintain the level of

7 capital determined by the Corporation to be

8 necessary and sufficient to carry out the public

9 purposes of the Corporation;

10 (8) may insulate any product, line, or service

11 from any other, by creating distinct insurance funds

12 or other devices to segregate or permit limitations on

13 liability for business activities or accounts;

14 (9) may qualify any person or entity to engage

15 in business with the Corporation and enforce and

16 impose penalties for the breach of any duties, obliga17 tions, and other commitments made by such persons

18 or entities;

19 (10) shall take actions necessary to administer

20 its business in a manner which is nondiscriminatory

21 and which affirmatively furthers fair housing;

22 (11) may use the services or obtain the goods

23 of any Federal agency, including the Department of

24 Housing and Urban Development, under working or

25 cooperation agreements or contracts with such agen-
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1 cies and make or receive payment for the cost of

2 such activities;

3 (12) shall have the power, in its corporate

4 name, to sue and be sued, and to complain and de5 fend, in any court of competent jurisdiction, State or

6 Federal, but no attachment, garnishment, injunc7 tion, or other similar process, mesne or final, shall

8 be issued against the property of the Corporation or

9 against the Corporation with respect to its property,

10 and the Corporation shall not be liable for interest

11 prior to judgment, for punitive or exemplary dam12 ages, for penalties, or for claims based upon unjust

13 enrichment, quasi-contract, or contracts implied-in14 law, nor shall the Corporation be subject to trial by

15 jury;

16 (13) notwithstanding any other provision of

17 law—

18 (A) shall be an agency of the Federal Gov19 ernment, and the officers and employees of the

20 Corporation shall be officers and employees of

21 the Federal Government, for purposes of part

22 IV of title 28, United States Code;

23 (B) shall have all civil actions to which the

24 Corporation is a party deemed to arise under

25 the laws of the United States; and
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1 (C) may, at any time before trial and with2 out bond or security, remove any civil or crimi3 nal action or proceeding in a State court to

4 which the Corporation is a party to the United

5 States district court for the District of Colum6 bia or to the United States district court with

7 jurisdiction over the place where the civil action

8 or proceeding is pending, by following any pro9 cedure for removal of actions in effect at the

10 time of such removal;

11 (14) may—

12 (A) accept and use voluntary and uncom13 pensated services and accept, hold, administer,

14 and use gifts and bequests of property, both

15 real and personal, for the purpose of aiding or

16 facilitating the work of the Corporation; and

17 (B) hold gifts and bequests of money and

18 the proceeds from sales of other property re19 ceived as gifts or bequests in a separate ac20 count, and such amounts shall be disbursed as

21 determined by the Corporation:

22 except that property accepted pursuant to this para23 graph, and the proceeds thereof, shall be used as

24 nearly as possible in accordance with the terms of

25 the gift or bequest and, for the purpose of Federal
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1 income, estate, and gift taxes, property accepted

2 under this paragraph shall be considered as a gift or

3 bequest to or for the use of the United States;

4 (15) shall have any transaction in which it par5 ticipates be exempt from the terms of any State or

6 other law or prohibition against payment of usurious

7 interest;

8 (16) may act as a fiduciary in connection with

9 any of its undertakings;

10 (17) may foreclose any single family housing

11 mortgages held by the Corporation pursuant to the

12 same procedures applicable to the Secretary under

13 the Single Family Mortgage Foreclosure Act of

14 1994;

15 (18) shall have the priority of the United States

16 with respect to the payment of debts out of bank17 rupt, insolvent, and decedents’ estates;

18 (19) may invest in systems, technology, or other

19 capital resources, to enhance its ability to carry out

20 the purposes of this Act; and

21 (20) shall have and exercise all powers nec22 essary or appropriate to effect any purposes of this

23 Act, including the power to carry out any authority

24 transferred to the Corporation under this Act.
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1 SEC. 104. BOARD OF DIRECTORS.

2 (a) IN GENERAL.—The powers of the Corporation

3 shall be vested in the Board of Directors of the Corpora4 tion.

5 (b) APPOINTMENT.—The Board of Directors shall

6 consist of 9 individuals appointed by the President by and

7 with the advise and consent of the Senate. The President

8 shall designate a chairperson of the Board from among

9 members of the Board.

10 (c) QUALIFICATIONS.—Members of the Board of Di11 rectors shall be citizens of the United States. The Board

12 of Directors shall at all times include as members not less

13 than—

14 (1) 1 individual from the mortgage finance in15 dustry;

16 (2) 1 individual from the home building indus17 try;

18 (3) 1 individual with knowledge and experience

19 regarding secondary mortgage market activities;

20 (4) 1 individual with knowledge and experience

21 regarding home sales;

22 (5) 1 individual with knowledge and experience

23 regarding single family housing asset management;

24 (6) 1 individual from a State or local housing

25 agency engaged in single family housing activities;
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1 (7) 1 individual who represents consumer or

2 community interests in single family housing; and

3 (8) 1 individual who represents or resides in an

4 urban or rural neighborhood whose population con5 sists predominantly of members of minorities.

6 (d) TERMS.—

7 (1) IN GENERAL.—Each member of the Board

8 of Directors shall be appointed for a term of 6 years,

9 except as provided in paragraphs (2) and (3).

10 (2) TERMS OF INITIAL APPOINTEES.—As des11 ignated by the President at the time of appointment,

12 of the members first appointed—

13 (A) 3 shall be appointed for terms of 2

14 years; and

15 (B) 3 shall be appointed for terms of 4

16 years.

17 (3) VACANCIES.—Any member appointed to fill

18 a vacancy occurring before the expiration of the

19 term for which the member’s predecessor was ap20 pointed shall be appointed only for the remainder of

21 that term. A member may serve after the expiration

22 of that member’s term until a successor has taken

23 office. A vacancy in the Board shall be filled in the

24 manner in which the original appointment was

25 made.
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1 (e) MEETINGS AND QUORUM.—The Board of Direc2 tors shall meet at any time pursuant to the call of the

3 Chairperson or a majority of its members and as provided

4 by the bylaws of the Corporation, but not less than quar5 terly. 5 members of the Board shall constitute a quorum.

6 (f) POWERS.—The Board of Directors shall be re7 sponsible for the general management of the Corporation

8 and shall have the same authority, privileges, and respon9 sibilities as the board of directors of a private corporation

10 incorporated under the District of Columbia Business Cor11 poration Act.

12 (g) COMPENSATION.—Members of the Board of Di13 rectors shall serve on a part-time basis and shall serve

14 without pay.

15 (h) TRAVEL EXPENSES.—Each member shall receive

16 travel expenses, including per diem in lieu of subsistence,

17 in accordance with sections 5702 and 5703 of title 5,

18 United States Code.

19 SEC. 105. OFFICERS AND EMPLOYEES.

20 (a) APPOINTMENT OF OFFICERS.—The Board of Di21 rectors of the Corporation shall appoint a president and

22 vice president of the Corporation, and such other officers

23 as are provided for in the bylaws of the Corporation.

24 (b) APPOINTMENT OF EMPLOYEES.—The Board of

25 Directors shall appoint such other employees of the Cor-
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1 poration as the Board considers necessary for the trans2 action of its business.

3 (c) COMPENSATION, DUTIES, AND REMOVAL.—

4 (1) IN GENERAL.—The Board of Directors shall

5 fix the compensation of all officers and employees of

6 the Corporation, define their duties, and provide a

7 system of management and organization to fix re8 sponsibility and promote efficiency.

9 (2) CONSIDERATIONS IN FIXING COMPENSA10 TION.—No officer or employee of the Corporation

11 may receive pay in excess of the annual rate of basic

12 pay payable for level III of the Executive Schedule.

13 (d) PRINCIPLES GOVERNING PERSONNEL MANAGE14 MENT.—The Board shall ensure that the system of organi15 zation, compensation, and management for personnel is

16 consistent with the principles under section 2301(b) of

17 title 5, United States Code (regarding merit system prin18 ciples).

19 (e) APPLICABILITY OF CERTAIN CIVIL SERVICE

20 LAWS.—The officers and employees of the Corporation

21 shall be appointed without regard to the provisions of title

22 5, United States Code, governing appointments in the

23 competitive service, and may be paid without regard to

24 the provisions of chapter 51 and subchapter III of chapter
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1 53 of that title relating to classification and General

2 Schedule pay rates.

3 (f) USE OF FEDERAL AGENCIES.—In carrying out its

4 purposes, the Corporation may use information, services,

5 staff, and facilities of any executive agency, independent

6 agency, or department (including the Department of

7 Housing and Urban Development), with the consent of the

8 agency or department, and shall reimburse the agency or

9 department for the cost of such information, services,

10 staff, and facilities.

11 (g) INDEMNIFICATION.—The Corporation may pro12 vide for the indemnification of any officer, employee, con13 tractor, or agent of the Corporation on such terms as the

14 Corporation determines proper, except that, to the extent

15 that the Corporation self-insures for any indemnifica16 tion—

17 (1) the aggregate maximum amount of all in18 demnifications outstanding at any time shall not ex19 ceed 5 percent of the required capital level deter20 mined under section 1386 of the Federal Housing

21 Enterprises Financial Safety and Soundness Act of

22 1992 by the Director of the Office of Federal Hous23 ing Enterprise Oversight; and

24 (2) no more than $1,000,000 may be paid as

25 an indemnity for any single event.
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1 SEC. 106. PROCUREMENT.

2 (a) IN GENERAL.—The Board shall establish an eco3 nomical and results-oriented system for procurement, sup4 ply, and disposition by the Corporation of personal prop5 erty and nonpersonal services, which shall include per6 formance measures and standards for determining the ex7 tent to which the Corporation’s procurement of property

8 and services satisfies the objective for which the procure9 ment was undertaken. The system shall be consistent with

10 the principles of impartiality and competitiveness.

11 (b) CONSIDERATION OF FEDERAL PROCUREMENT

12 SYSTEM.—In establishing the system for procurement,

13 supply, and disposition under this subsection, the Board

14 shall take into consideration—

15 (1) the requirements under the Federal Prop16 erty and Administrative Services Act of 1949 and

17 the appropriateness or inappropriateness of adopting

18 identical or similar procedures for the Corporation;

19 and

20 (2) the experience of the Department of Hous21 ing and Urban Development in complying with such

22 Act in procurement, supply, and disposition activities

23 relating to the single family mortgage insurance pro24 gram under the National Housing Act.

25 (c) EXEMPTION FROM FEDERAL PROPERTY AND AD26 MINISTRATIVE SERVICE ACT PROVISIONS.—Section
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1 602(d) of the Federal Property and Administrative Serv2 ices Act of 1949 (40 U.S.C. 474) is amended—

3 (1) in paragraph (20), by striking ‘‘and’’ at the

4 end;

5 (2) in paragraph (21), by striking the period at

6 the end and inserting ‘‘; and’’; and

7 (3) by adding at the end the following new

8 paragraph:

9 ‘‘(22) The Federal Mortgage Insurance Cor10 poration.’’.

11 (d) EXEMPTION FROM PROCUREMENT PROTEST

12 SYSTEM.—Subchapter V of chapter 35 of title 31, United

13 States Code, relating to the procurement protest system,

14 shall not apply to the Corporation.

15 SEC. 107. FINANCIAL SAFETY AND SOUNDNESS.

16 The Director of the Office of Federal Housing Enter17 prise Oversight shall oversee the financial safety and

18 soundness of the Corporation, pursuant to subtitle E of

19 the Federal Housing Enterprise Financial Safety and

20 Soundness Act of 1992.

21 SEC. 108. FEDERAL CREDIT REFORM PROCEDURES.

22 (a) SUBMISSION OF BUDGET AND BUSINESS PLAN

23 TO OFHEO.—In each year, the Corporation shall submit

24 its annual budget and business plan to the Director of the

25 Office of Federal Housing Enterprise Oversight by a date
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1 sufficient to enable the Director to produce, pursuant to

2 section 1385(c) of the Federal Housing Enterprise Finan3 cial Safety and Soundness Act of 1992, the credit subsidy

4 cost estimates that are required for the President’s budg5 et.

6 (b) SUBMISSION OF BUDGET AND CREDIT COST ES7 TIMATES TO OMB.—For purposes of inclusion in the

8 President’s budget, the Corporation shall submit the an9 nual budget of the Corporation and the annual credit sub10 sidy cost estimates produced pursuant to section 1385(c)

11 of the Federal Housing Enterprise Financial Safety and

12 Soundness Act of 1992 to the Director of the Office of

13 Management and Budget.

14 (c) RESERVES.—

15 (1) ESTABLISHMENT.—The Corporation may

16 establish any reserve that the Corporation deter17 mines is necessary for the business operations of the

18 Corporation.

19 (2) AMOUNTS.—The Corporation may hold as a

20 reserve in any financing account, as defined in sec21 tion 502 of the Congressional Budget Act of 1974,

22 such amounts as the Corporation considers nec23 essary to comply with the capital requirements es24 tablished for the Corporation under subtitle E of the

25 Federal Housing Enterprise Financial Safety and
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1 Soundness Act of 1992 and to fulfill the purposes of

2 this Act.

3 SEC. 109. ADDITIONAL OVERSIGHT AND REPORTING

4 REQUIREMENTS.

5 (a) INSPECTOR GENERAL.—For purposes of the In6 spector General Act of 1978 and chapter 91 of title 31,

7 United States Code, the Inspector General of the Depart8 ment of Housing and Urban Development shall perform

9 the functions of Inspector General for the Corporation.

10 (b) ANNUAL BUSINESS PLAN.—The Corporation

11 shall establish a business plan on an annual basis and

12 shall make such plan available for review by the Congress

13 and the President. Such plan shall specify the product and

14 operational strategy of the Corporation, including plans

15 to address compliance with the safety and soundness re16 quirements applicable to the Corporation.

17 SEC. 110. TRANSITION.

18 (a) TRANSITION DATE AND TRANSITION PERIOD.—

19 For purposes of this Act, the following definitions shall

20 apply:

21 (1) TRANSITION DATE.—The term ‘‘transition

22 date’’ means the latter of the following 2 dates:

23 (A) EARLIEST DATE.—January 1, 1997.

24 (B) REQUIRED ACTIONS.—The first date

25 by which all of the following have occurred:
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1 (i) The Corporation has submitted an

2 initial annual budget and business plan to

3 the Congress and the President that have

4 been approved by the President.

5 (ii) The Director of the Office of Fed6 eral Housing Enterprise Oversight has cer7 tified to the Congress and the President

8 that the Director has developed an interim

9 model under section 1386(a)(2) of the

10 Federal Housing Enterprises Financial

11 Safety and Soundness Act of 1992 that is

12 sufficient for the Director’s purposes.

13 (iii) The Director of the Office of

14 Management and Budget has certified to

15 the Congress and the President that the

16 application of such interim model is con17 sistent with the Federal Credit Reform Act

18 of 1990.

19 (iv) The Director of the Office of

20 Management and Budget determines that

21 the staff, systems, and administrative in22 frastructure of the Corporation are suffi23 cient to permit the Corporation to fully

24 conduct the operation of its business.
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1 (2) TRANSITION PERIOD.—The term ‘‘transi2 tion period’’ means the period beginning upon the

3 organization of the Corporation under this Act and

4 ending upon the transition date.

5 (b) AUTHORITY DURING TRANSITION PERIOD.—

6 During the transition period—

7 (1) the Secretary of Housing and Urban Devel8 opment shall, in consultation with the Corporation

9 and the Director of the Office of Management and

10 Budget, transfer to the Corporation such powers and

11 responsibilities of the Secretary to carry out the sin12 gle family mortgage insurance programs under the

13 National Housing Act, at such times as are appro14 priate for the Corporation to assume such powers

15 and responsibilities;

16 (2) the Corporation may carry out any power or

17 responsibility that the Secretary of Housing and

18 Urban Development transfers to the Corporation

19 consistent with paragraph (1) and section 202, using

20 the staff, systems, and administrative infrastructure

21 that the Corporation engages or acquires during the

22 transition period, or the personnel and other re23 sources of the Secretary;

24 (3) the Corporation may incur any obligation

25 consistent with—
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1 (A) the carrying out of a delegated power

2 or responsibility; or

3 (B) the acquisition, engagement, or devel4 opment of staff, systems (including technology

5 to enhance its ability to engage in the business

6 of the Corporation authorized by the Act), and

7 administrative structure; and

8 (4) the Corporation may engage in any other

9 activity or undertake any responsibility (not includ10 ing any authority under section 203) that the Board

11 of Directors determines to be consistent with the

12 start-up of the Corporation and the authority of the

13 Corporation under this Act.

14 SEC. 111. APPLICABILITY OF LAWS.

15 (a) GOVERNMENT CORPORATION CONTROL ACT.—

16 Section 9101(3) of title 31, United States Code, is amend17 ed by adding at the end the following new subparagraph:

18 ‘‘(P) the Federal Mortgage Insurance Cor19 poration.’’

20 (b) TAX EXEMPT STATUS OF CORPORATION.—Sec21 tion 501(l) of the Internal Revenue Code of 1986 (26

22 U.S.C. 501(l)) is amended by adding at the end the follow23 ing new paragraph:
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1 ‘‘(4) The Federal Mortgage Insurance Corpora2 tion established under the Federal Mortgage Insur3 ance Corporation Charter Act.’’.

4 (c) NOTICE AND COMMENT RULEMAKING.—Any

5 matter relating to mortgage insurance, credit enhance6 ment, or other business activities of the Corporation au7 thorized under this Act shall be considered a matter relat8 ing to agency management or personnel or to public prop9 erty, loans, grants, benefits, or contracts, for purposes of

10 section 553(a) of title 5, United States Code.

11 (d) CONFORMING AMENDMENT RELATING TO USURY

12 EXEMPTION FOR VETERANS LOANS.—Section 3728 of

13 title 38, United States Code, is amended by inserting after

14 ‘‘National Housing Act’’ the following: ‘‘, or are credit15 enhanced under the Federal Mortgage Insurance Corpora16 tion Charter Act,’’.

17 SEC. 112. GAO EVALUATION.

18 (a) IN GENERAL.—The Comptroller General of the

19 United States shall conduct a study and submit a report

20 to the President and the Congress on—

21 (1) whether this Act provides sufficient author22 ity to permit the Corporation to accomplish its pub23 lic purposes efficiently and effectively, and in a safe

24 and sound manner;
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1 (2) the impact of the limitations on business ac2 tivities as to mortgage amounts and aggregate com3 mitments, and any other statutory limitations, on

4 the current and anticipated business activity of the

5 Corporation; and

6 (3) whether the safety and soundness and other

7 requirements under this Act and the Federal Hous8 ing Enterprises Financial Safety and Soundness Act

9 of 1992 appropriately provide that the Corporation

10 will be operated in a safe and sound manner and will

11 fulfill the public purposes of its establishment.

12 (b) TIMING.—The report required by this section

13 shall be submitted on the third January 1st occurring

14 after the conclusion of the transition period.

15 SEC. 113. RULE OF CONSTRUCTION.

16 Notwithstanding any other evidence of the intent of

17 Congress, it is hereby declared to be the intent of Congress

18 that the provisions of this Act shall be construed broadly

19 to achieve the purposes of the Act, and the provisions of

20 any other Act that must be construed with any provision

21 of this Act shall similarly be construed to achieve the pur22 poses of this Act to the extent reasonably possible.

23 SEC. 114. AUTHORIZATION OF APPROPRIATIONS.

24 (a) ANNUAL AVAILABILITY OF NEGATIVE SUB25 SIDY.—There is authorized to be appropriated, in each fis-
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1 cal year, for conducting operations of the Corporation, an

2 amount not exceeding the amount of any net income from

3 the operations of the Corporation. Such sums shall remain

4 available until expended.

5 (b) FUNDING OF CLAIMS.— Amounts credited to the

6 financing account of the Corporation, established pursu7 ant to title V of the Congressional Budget Act of 1974,

8 shall be permanently and indefinitely available for pay9 ment of any claim that the Corporation approves under

10 a contract of insurance or other credit enhancement in11 strument under this Act. To the extent that such amounts

12 are insufficient for such purpose, the Federal Mortgage

13 Insurance Corporation may borrow from the Treasury

14 pursuant to title V of the Congressional Budget Act of

15 1974.

16 TITLE II—BUSINESS OF

17 CORPORATION

18 SEC. 201. SINGLE FAMILY HOUSING REQUIREMENT.

19 The Corporation may provide mortgage insurance or

20 credit enhancement only with respect to credit extended

21 for property that—

22 (1) is a 1- to 4-family residence; and

23 (2) is located in the United States.
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1 SEC. 202. TRANSFER OF FHA SINGLE FAMILY HOUSING

2 BUSINESS.

3 (a) IN GENERAL.—After the transition date under

4 section 110—

5 (1) the Corporation shall carry out a program

6 to insure mortgages on 1- to 4-family dwellings,

7 which shall be subject to the same limitations under

8 the National Housing Act (as amended by title IV

9 of this Act) that are applicable to the mortgage in10 surance program for 1- to 4-family dwellings carried

11 out by the Secretary of Housing and Urban Devel12 opment;

13 (2) the Corporation may exercise any authority

14 and undertake any responsibility of the Secretary of

15 Housing and Urban Development under the Na16 tional Housing Act relating to providing mortgage

17 insurance described in paragraph (1) of this sub18 section, except that any authority that requires an

19 appropriation may be conducted only to the extent

20 that amounts are so appropriated; and

21 (3) the Corporation shall manage any assets

22 and obligations transferred under subsection (b)

23 subject to the same limitations applicable to the Sec24 retary of Housing and Urban Development under

25 the National Housing Act (as amended by title IV

26 of this Act).
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1 (b) TRANSFER OF ASSETS AND OBLIGATIONS.—The

2 Secretary of Housing and Urban Development, in con3 sultation with the Secretary of the Treasury, shall, to the

4 extent approved in appropriation Acts, transfer to the Cor5 poration, on or before the transition date, all assets and

6 obligations of the Secretary of Housing and Urban Devel7 opment relating to the program for mortgage insurance

8 for 1- to 4-family dwellings, including all assets and obli9 gations of the Mutual Mortgage Insurance Fund under

10 section 202 of the National Housing Act and all assets

11 and obligations of the General Insurance Fund and Spe12 cial Risk Insurance Fund under sections 519 and 238(b),

13 respectively, of such Act relating to mortgage insurance

14 for such dwellings.

15 (c) CONTINUATION OF CONTRACTS.—This Act may

16 not be construed to affect the validity of any right, duty,

17 or obligation of the United States or other person arising

18 under or pursuant to any commitment or agreement law19 fully entered into under the National Housing Act before

20 the enactment of this Act. The provisions of this Act and

21 the National Housing Act shall continue to apply to any

22 such obligations to the same extent such provisions were

23 applicable before such enactment, except only that any ob24 ligation of the Secretary of Housing and Urban Develop25 ment transferred to the Corporation pursuant to sub-
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1 section (b) shall be an obligation of the Corporation to

2 the same extent as if the Corporation had originally exe3 cuted such obligation.

4 (d) TERMINATION OF HUD MORTGAGE INSURANCE

5 AUTHORITY.—Notwithstanding any other provision of

6 law, after the transition date the Secretary of Housing and

7 Urban Development may not provide any insurance, or

8 make any commitment to insure, any mortgage for a 1-

9 to 4-family dwelling, pursuant to title II of the National

10 Housing Act.

11 SEC. 203. NEW LINES OF BUSINESS.

12 (a) AUTHORITY.—After the transition date, the Cor13 poration may, subject to the requirements of this section

14 and section 204—

15 (1) provide full mortgage insurance for mort16 gages involving 1- to 4-family dwellings that is not

17 subject to the limitations under the National Hous18 ing Act; and

19 (2) engage in any other method of enhancing

20 credit for mortgages involving 1- to 4-family dwell21 ings.

22 (b) FULL INSURANCE.—In insuring or providing

23 credit enhancement pursuant to this section for any mort24 gage, the Corporation—
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1 (1) may provide such insurance or enhancement

2 only with respect to the full mortgage amount; and

3 (2) may not provide such insurance or enhance4 ment in any manner under which the Corporation

5 and any other agency, organization, or person agree

6 to each insure or enhance a portion of the mortgage

7 amount or to bear a particular portion of the loss

8 under such insurance or enhancement.

9 (c) APPROVAL.—The Corporation may not engage in

10 any activity under subsection (a) unless—

11 (1) such activity is within the authority pro12 vided under this Act for the Corporation and is spe13 cifically approved, as to the nature of the activity

14 and the scope of such activity, by a majority vote of

15 the Board of Directors; and

16 (2) the Director of the Office of Federal Hous17 ing Enterprise Oversight has specifically determined,

18 and notified the Board of Directors in writing, that

19 engaging in such activity will not cause the Corpora20 tion to violate the requirement under section 101(d)

21 and such activity is not likely to result in the Cor22 poration being classified as undercapitalized or sig23 nificantly undercapitalized, pursuant to section 1386

24 of the Federal Housing Enterprises Financial Safety

25 and Soundness Act of 1992.
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1 SEC. 204. LIMITATIONS ON BUSINESS ACTIVITY.

2 The Corporation shall be subject to the following limi3 tations on business activity:

4 (1) MORTGAGE AMOUNT LIMITATION.—

5 (A) IN GENERAL.—To be eligible for mort6 gage insurance or other credit enhancement

7 under this Act, a mortgage shall involve a prin8 cipal obligation in an amount that does not ex9 ceed the lesser of—

10 (i) in the case of a 1-family residence,

11 95 percent of the median 1-family house

12 price in the area, as determined by the

13 Corporation; in the case of a 2-family resi14 dence, 107 percent of such median price;

15 in the case of a 3-family residence, 130

16 percent of such median price; or in the

17 case of a 4-family residence, 150 percent

18 of such median price; or

19 (ii) in the case of a residence for

20 fewer than five families, 75 percent of the

21 dollar amount limitation determined under

22 section 305(a)(2) of the Federal Home

23 Loan Mortgage Corporation Act for a resi24 dence of the applicable size.

25 (B) MINIMUM AREA LIMITATION.—Not26 withstanding subparagraph (A), the principal
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1 obligation limitation in effect for any area

2 under this paragraph may not be less than the

3 greater of (i) the dollar amount limitation in ef4 fect under section 203(b)(2) of the National

5 Housing Act for the area on September 28,

6 1994, or (ii) 38 percent of the dollar amount

7 limitation determined under section 305(a)(2)

8 of the Federal Home Loan Mortgage Corpora9 tion Act for a residence of the applicable size.

10 (C) APPLICABILITY OF EXCEPTIONS.—Any

11 exceptions to the limit on principal obligations

12 set forth in section 203(b)(2)(A) of the Na13 tional Housing Act, as such section and such

14 exceptions exist as of the date of the enactment

15 of this Act, shall apply to the limitations set

16 forth in subparagraphs (A) and (B) of this

17 paragraph.

18 (2) AGGREGATE MORTGAGE AMOUNT OF NEW

19 BUSINESS.—The aggregate principal amount of

20 mortgages that, during any fiscal year, are insured

21 or provided other credit enhancement by the Cor22 poration pursuant to authority under section 203

23 may not exceed 15 percent of the aggregate prin24 cipal amount of all mortgages insured or provided
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1 other credit enhancement by the Corporation during

2 such fiscal year.

3 (3) AGGREGATE NEW MORTGAGE COMMITMENT

4 LIMITATION.—The Corporation may not, during the

5 5-year period beginning upon the transition period,

6 enter into commitments to insure mortgages or pro7 vide other credit enhancement for mortgages with an

8 aggregate principal amount that exceeds

9 $520,000,000,000.

10 TITLE III—PROVISIONS RELAT11 ING TO GOVERNMENT NA12 TIONAL MORTGAGE ASSOCIA13 TION AND OFFICE OF FED14 ERAL HOUSING ENTERPRISE

15 OVERSIGHT

16 SEC. 301. GNMA AUTHORITY.

17 Title III of the National Housing Act (12 U.S.C.

18 1716 et seq.) is amended—

19 (1) in section 301(5), by inserting after ‘‘feder20 ally owned mortgage portfolios’’ the following: ‘‘(in21 cluding any owned by the Federal Mortgage Insur22 ance Corporation)’’;

23 (2) in the first sentence of section 306(g)(1)—

24 (A) by inserting ‘‘the Association, or by’’

25 after ‘‘shall (i) be issued by’’; and
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1 (B) by striking ‘‘which are insured under

2 the National Housing Act’’ and all that follows

3 through the period and inserting ‘‘which are

4 guaranteed or insured under the National

5 Housing Act, the Federal Mortgage Insurance

6 Corporation Charter Act, title V of the Housing

7 Act of 1949, the Servicemen’s Readjustment

8 Act of 1944, or chapter 37 of title 38, United

9 States Code.’’; and

10 (3) in section 306(g)(3)(A)(i), by inserting after

11 ‘‘National Housing Act’’ the following: ‘‘or the Fed12 eral Mortgage Insurance Corporation Charter Act’’.

13 SEC. 302. SAFETY AND SOUNDNESS OVERSIGHT OF COR14 PORATION BY OFHEO.

15 (a) IN GENERAL.—Title XIII of the Housing and

16 Community Development Act of 1992 (Public Law 102–

17 550; 106 Stat. 4009) is amended—

18 (1) by redesignating subtitle E as subtitle F;

19 and

20 (2) by inserting after subtitle D the following

21 new subtitle:
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1 ‘‘SUBTITLE E—SUPERVISION

2 AND REGULATION OF FED3 ERAL MORTGAGE INSURANCE

4 CORPORATION

5 ‘‘SEC. 1384. AUTHORITY OF DIRECTOR.

6 ‘‘(a) IN GENERAL.—The Director of the Office of

7 Federal Housing Enterprise Oversight shall supervise and

8 regulate the safety and soundness of the Federal Mortgage

9 Insurance Corporation (in this subtitle referred to as the

10 ‘Corporation’).

11 ‘‘(b) AUTHORITY EXCLUSIVE OF SECRETARY.—The

12 Director is authorized, without the review or approval of

13 the Secretary of Housing and Urban Development, to

14 make such determinations, take such actions, and perform

15 such functions as the Director determines necessary to

16 meet the responsibilities of the Director under this sub17 title.

18 ‘‘(c) REVIEW OF NEW BUSINESS OF CORPORA19 TION.—The Director shall review any proposed new busi20 ness activity of the Corporation authorized under section

21 203(c) of the Federal Mortgage Insurance Corporation

22 Charter Act by the Board of Directors of the Corporation

23 to determine whether such activity will cause the Corpora24 tion to violate the requirement under section 101(d) of

25 such Act or is likely to result in the Corporation being
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1 classified as undercapitalized or significantly

2 undercapitalized, pursuant to section 1386 of this Act.

3 The Director shall submit written notice of the results of

4 any such determination to the Board of Directors.

5 ‘‘SEC. 1385. EXAMINATIONS, REPORTS, AND COST ESTI6 MATES.

7 ‘‘(a) EXAMINATIONS.—The Director shall conduct

8 such examinations of the Corporation as the Director de9 termines necessary to evaluate the safety and soundness

10 of the Corporation. Such examinations shall be subject to

11 and governed by subsections (c) through (f) of section

12 1317.

13 ‘‘(b) REPORTS.—The Director may require the Cor14 poration to submit, within a reasonable period of time, any

15 regular or special report, data, or other information when16 ever, in the judgment of the Director, such report, data,

17 or information is necessary to carry out the Director’s re18 sponsibilities under this subtitle and the Federal Mortgage

19 Insurance Corporation Charter Act.

20 ‘‘(c) CREDIT SUBSIDY COST ESTIMATES.—

21 ‘‘(1) IN GENERAL.—The Director shall produce

22 and submit to the Director of the Office of Manage23 ment and Budget the annual credit subsidy cost esti24 mates for the Corporation required for the Presi25 dent’s budget. Such estimates shall be consistent
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1 with the estimates of performance generated by the

2 risk-based capital model or the interim model, as ap3 propriate, developed in accordance with section

4 1386(a), and with the President’s economic forecast.

5 ‘‘(2) UNIFIED ESTIMATES.—The annual credit

6 subsidy cost estimates produced under this sub7 section by the Director shall be reported on a unified

8 basis, which shall be based upon the Corporation’s

9 business as a whole.

10 ‘‘(d) ANNUAL REPORT ON SAFETY AND SOUND11 NESS.—The Director shall submit an annual report to

12 Congress and the Director of the Office of Management

13 and Budget on the Corporation’s financial safety and

14 soundness, as measured pursuant to this subtitle.

15 ‘‘SEC. 1386. CAPITAL REQUIREMENTS.

16 ‘‘(a) REQUIRED CAPITAL LEVEL.—

17 ‘‘(1) STRESS TEST.—

18 ‘‘(A) IN GENERAL.—The Director shall de19 velop a risk-based capital model to determine

20 the amount of capital that is sufficient for the

21 Corporation to maintain positive capital during

22 a stressful period. The model shall incorporate

23 the assumptions under subparagraphs (B) and

24 (C). The required capital level for the Corpora-
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1 tion shall be equal to twice the amount of cap2 ital so determined.

3 ‘‘(B) CREDIT RISK.—For purposes of sub4 paragraph (A), the Director shall assume that,

5 during the stressful period referred to in sub6 paragraph (A), credit losses occur at a rate con7 sistent with a nationwide economic recession of

8 average severity based on nationwide economic

9 recessions since 1950.

10 ‘‘(C) OTHER RISKS.—For purposes of sub11 paragraph (A), the Director shall make as12 sumptions about such other aspects of the

13 stressful period as the Director determines are

14 appropriate and consistent.

15 ‘‘(2) INTERIM REQUIREMENTS.—Until the Di16 rector has established a risk-based capital test as de17 scribed in paragraph (1), the Director may establish

18 a required capital level for the Corporation based on

19 consideration of such factors as the Director consid20 ers appropriate.

21 ‘‘(3) CAPITAL CLASSIFICATION.—

22 ‘‘(A) ADEQUATELY CAPITALIZED.—The

23 Corporation shall be classified as adequately

24 capitalized if the capital of the Corporation

25 equals or exceeds the required capital level.
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1 ‘‘(B) UNDERCAPITALIZED.—The Corpora2 tion shall be classified as undercapitalized if the

3 capital of the Corporation does not equal or ex4 ceed the required capital level, but does equal

5 or exceed 50 percent of the required capital

6 level.

7 ‘‘(C) SIGNIFICANTLY UNDERCAPITAL8 IZED.—The Corporation shall be classified as

9 significantly undercapitalized if the capital of

10 the Corporation does not equal or exceed 50

11 percent of the required capital level.

12 ‘‘(4) QUARTERLY DETERMINATION.—The Di13 rector shall determine the capital classification of

14 the Corporation not less frequently than once every

15 calendar quarter.

16 ‘‘(b) CAPITAL RESTORATION PLANS.—

17 ‘‘(1) REQUIREMENT.—If the Corporation is

18 classified as undercapitalized or significantly

19 undercapitalized, the Corporation shall submit to the

20 Director a capital restoration plan that complies

21 with this subsection and carry out the plan unless it

22 is disapproved. The plan shall be submitted to the

23 Director within 45 days from the date of notifica24 tion, or if the Director determines that an extension
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1 is necessary, within such additional time as the Di2 rector so determines.

3 ‘‘(2) CONTENTS.—Each capital restoration plan

4 submitted under this section shall set forth a fea5 sible plan for raising or restoring the capital of the

6 Corporation to an amount not less than the required

7 capital level for the Corporation. Each capital res8 toration plan shall—

9 ‘‘(A) specify the level of capital the Cor10 poration shall achieve and maintain;

11 ‘‘(B) describe the actions that the Corpora12 tion shall take to become classified as ade13 quately capitalized;

14 ‘‘(C) establish a schedule for completing

15 the actions set forth in the plan; and

16 ‘‘(D) specify the types and levels of activi17 ties (including existing and new business activi18 ties) in which the Corporation shall engage dur19 ing the term of the plan.

20 ‘‘SEC. 1387. ENFORCEMENT.

21 ‘‘(a) GROUNDS.—The Director may take actions

22 under subsection (b) only if—

23 ‘‘(1) the Corporation is significantly

24 undercapitalized;

25 ‘‘(2) the Corporation is undercapitalized and—
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1 ‘‘(A) does not submit a capital restoration

2 plan that is substantially in compliance with

3 section 1386(b) within the applicable period, or

4 the Director disapproves the capital restoration

5 plan submitted by the Corporation; or

6 ‘‘(B) has failed to make, in good faith, rea7 sonable efforts necessary to comply with the

8 capital restoration plan; or

9 ‘‘(3) the Corporation is engaging or has en10 gaged, or the Director has reasonable cause to be11 lieve that the Corporation is about to engage in—

12 ‘‘(A) any conduct that is likely to threaten

13 the adequacy of the capital of the Corporation;

14 ‘‘(B) any failure to comply with any writ15 ten agreement entered into by the Corporation

16 with the Director; or

17 ‘‘(C) any failure to comply with any re18 quest by the Director for a report, data, or in19 formation under section 1385(b).

20 ‘‘(b) ACTIONS.—The Director may, under this sub21 section require the Corporation—

22 ‘‘(1) to cease and desist from any conduct or

23 activity that is described in subsection (a)(2) and

24 (3), or that contributes to the condition described in

25 subsection (a)(1); and
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1 ‘‘(2) to take corrective or remedial action, in2 cluding—

3 ‘‘(A) restricting the growth of, or contract4 ing, any category of assets or liabilities;

5 ‘‘(B) reducing, modifying, or terminating

6 any activity that the Director determines cre7 ates excessive risk to the Corporation;

8 ‘‘(C) terminating agreements or contracts;

9 ‘‘(D) engaging or employ qualified employ10 ees (who may be subject to approval by the Di11 rector at the direction of the Director); or

12 ‘‘(E) submitting to the Director for review

13 and approval a detailed and complete operating

14 plan.

15 ‘‘(c) REPORTS.—If the Director is authorized under

16 subsection (a) to take action under subsection (b) and de17 termines not to take any such action, the Director shall

18 prepare a report detailing the basis of the Director’s deci19 sion not to take such action and shall, within 30 days of

20 the decision, submit the report to the President, the Direc21 tor of the Office of Management and Budget, the Comp22 troller General of the United States, the Committee on

23 Banking and Financial Services of the House of Rep24 resentatives, and the Committee on Banking, Housing,

25 and Urban Affairs of the Senate.
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1 ‘‘SEC. 1388. REIMBURSEMENT OF COSTS.

2 ‘‘(a) ASSESSMENT AND COLLECTION.—The Director

3 shall assess and collect from the Corporation such

4 amounts determined by the Director as necessary to reim5 burse the Office of Federal Housing Enterprise Oversight

6 for the reasonable costs and expenses of the activities un7 dertaken by such Office to carry out the duties of the Di8 rector under this subtitle, including the costs of examina9 tion, enforcement, and oversight expenses.

10 ‘‘(b) REQUIREMENTS.—Annual assessments imposed

11 by the Director shall be—

12 ‘‘(1) imposed prior to October 1 of each year;

13 ‘‘(2) collected at such time or times during each

14 assessment year as determined necessary or appro15 priate by the Director;

16 ‘‘(3) deposited into the Federal Housing Enter17 prise Fund established by section 1316(f); and

18 ‘‘(4) available, to the extent provided in appro19 priation Acts, for carrying out the responsibilities of

20 the Director under this subtitle.’’.

21 (b) CLERICAL AMENDMENT.—The table of contents

22 in section 1(b) of the Housing and Community Develop23 ment Act of 1992 (Public Law 102–550; 106 Stat. 3679)

24 is amended—
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1 (1) by redesignating the item relating to sub2 title E of title XIII as relating to subtitle F of such

3 title; and

4 (2) by inserting after the item relating to sec5 tion 1383 the following new items:

‘‘SUBTITLE E—SUPERVISION AND REGULATION OF FEDERAL

MORTGAGE INSURANCE CORPORATION

‘‘Sec. 1384. Authority of Director.

‘‘Sec. 1385. Examinations, reports, and cost estimates.

‘‘Sec. 1386. Capital requirements.

‘‘Sec. 1387. Enforcement.

‘‘Sec. 1388. Reimbursement of costs.’’.

6 TITLE IV—FHA IMPROVEMENTS

7 SEC. 401. CALCULATION OF DOWNPAYMENT.

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

9 U.S.C. 1709(b)(2)) is amended—

10 (1) by striking subparagraph (B) and inserting

11 the following new subparagraph:

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

13 paragraph (2), not in excess of—

14 ‘‘(i) in the case of a mortgage for a

15 property with an appraised value equal to

16 or less than $50,000, 98.75 percent of the

17 appraised value of the property,

18 ‘‘(ii) in the case of a mortgage for a

19 property with an appraised value in excess

20 of $50,000 but not in excess of $125,000,

21 97.65 percent of the appraised value of the

22 property,
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1 ‘‘(iii) in the case of a mortgage for a

2 property with an appraised value in excess

3 of $125,000, 97.15 percent of the ap4 praised value of the property, or

5 ‘‘(iv) notwithstanding clauses (ii) and

6 (iii), in the case of a mortgage for a prop7 erty with an appraised value in excess of

8 $50,000 and which is located in a State for

9 which the average closing cost exceeds 3.25

10 percent of the average, for the State, of

11 the sale price of properties located in the

12 State for which mortgages have been exe13 cuted, 97.75 percent of the appraised value

14 of the property,

15 plus the amount of the mortgage insurance pre16 mium paid at the time the mortgage is in17 sured.’’;

18 (2) in the 1st sentence of the matter following

19 subparagraph (B), by inserting before the period at

20 the end the following: ‘‘, and the term ‘average clos21 ing cost’ means, with respect to a State, the average,

22 for mortgages executed for properties that are lo23 cated within the State, of the total amounts (as de24 termined by the Secretary) of initial service charges,

25 appraisal, inspection, and other fees (as the Sec-
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1 retary shall approve) that are paid in connection

2 with such mortgages’’;

3 (3) by striking the 2d sentence of the matter

4 following subparagraph (B); and

5 (4) in penultimate undesignated paragraph—

6 (A) in the 2d sentence, by striking ‘‘the

7 preceding sentence’’ and inserting ‘‘this sub8 section’’; and

9 (B) by striking the 1st sentence.

10 SEC. 402. DELEGATION OF SINGLE FAMILY MORTGAGE IN11 SURING AUTHORITY TO DIRECT ENDORSE12 MENT MORTGAGEES.

13 Title II of the National Housing Act (12 U.S.C. 1707

14 et seq.) is amended by adding at the end the following

15 new section:

16 ‘‘DELEGATION OF INSURING AUTHORITY TO DIRECT

17 ENDORSEMENT MORTGAGEES

18 ‘‘SEC. 256. (a) AUTHORITY.—The Secretary may del19 egate, to one or more mortgagees approved by the Sec20 retary under the direct endorsement program, the author21 ity of the Secretary under this Act to insure mortgages

22 involving property upon which there is located a dwelling

23 designed principally for occupancy by 1 to 4 families.

24 ‘‘(b) CONSIDERATIONS.—In determining whether to

25 delegate authority to a mortgagee under this section, the

26 Secretary shall consider the experience and performance
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1 of the mortgagee under the direct endorsement program,

2 the default rate of insured mortgages originated by the

3 mortgagee compared to the default rate of all insured

4 mortgages in comparable markets, and such other factors

5 as the Secretary determines appropriate to minimize risk

6 of loss to the insurance funds under this Act.

7 ‘‘(c) ENFORCEMENT OF INSURANCE REQUIRE8 MENTS.—

9 ‘‘(1) IN GENERAL.—If the Secretary determines

10 that a mortgage insured by a mortgagee pursuant to

11 delegation of authority under this section was not

12 originated in accordance with the requirements es13 tablished by the Secretary, and the Secretary pays

14 an insurance claim with respect to the mortgage

15 within a reasonable period specified by the Sec16 retary, the Secretary may require the mortgagee ap17 proved under this section to indemnify the Secretary

18 for the loss.

19 ‘‘(2) FRAUD OR MISREPRESENTATION.—If

20 fraud or misrepresentation was involved in connec21 tion with the origination, the Secretary may require

22 the mortgagee approved under this section to indem23 nify the Secretary for the loss regardless of when an

24 insurance claim is paid.
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1 ‘‘(d) TERMINATION OF MORTGAGEE’S AUTHORITY.—

2 If a mortgagee to which the Secretary has made a delega3 tion under this section violates the requirements and pro4 cedures established by the Secretary or the Secretary de5 termines that other good cause exists, the Secretary may

6 cancel a delegation of authority under this section to the

7 mortgagee by giving notice to the mortgagee. Such a can8 cellation shall be effective upon receipt of the notice by

9 the mortgagee or at a later date specified by the Secretary.

10 A decision by the Secretary to cancel a delegation shall

11 be final and conclusive and shall not be subject to judicial

12 review.

13 ‘‘(e) REQUIREMENTS AND PROCEDURES.—Before ap14 proving a delegation under this section, the Secretary shall

15 issue regulations establishing appropriate requirements

16 and procedures, including requirements and procedures

17 governing the indemnification of the Secretary by the

18 mortgagee.’’.

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