II 

107TH CONGRESS 

1ST SESSION S. 1195 

To amend the National Housing Act to clarify the authority of the Secretary 

of Housing and Urban Development to terminate mortgagee origination 

approval for poorly performing mortgagees. 

IN THE SENATE OF THE UNITED STATES 

JULY 18, 2001 

Mr. SARBANES (for himself, Ms. MIKULSKI, Mr. BOND, Mr. REID, Mr. SCHUMER, Mr. CORZINE, and Mr. DURBIN) introduced the following bill; which 

was read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

A BILL 

To amend the National Housing Act to clarify the authority 

of the Secretary of Housing and Urban Development 

to terminate mortgagee origination approval for poorly 

performing mortgagees. 

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 ‘‘Credit Watch Act of 

5 2001’’. 


cprice-sewell on PROD1PC66 with BILLS
2 

•S 1195 IS

1 SEC. 2. CLARIFICATION OF AUTHORITY FOR HUD TO TER2 MINATE MORTGAGEE ORIGINATION AP3 PROVAL FOR POORLY PERFORMING MORT4 GAGEES. 

5 Section 533 of the National Housing Act (12 U.S.C. 

6 1735f–11) is amended to read as follows: 

7 ‘‘SEC. 533. REVIEW OF MORTGAGEE PERFORMANCE AND 

8 AUTHORITY TO TERMINATE MORTGAGEE 

9 ORIGINATION APPROVAL. 

10 ‘‘(a) IN GENERAL.—To reduce losses in connection 

11 with single family mortgage insurance programs under 

12 this Act, at least once a year, the Secretary shall— 

13 ‘‘(1) review the indicators of portfolio risk for 

14 insured single family mortgages originated or under15 written by each mortgagee, which indicators shall be 

16 prescribed by the Secretary by regulation and shall 

17 include the rates of early defaults and claims; and 

18 ‘‘(2) with respect to each mortgagee, compare 

19 those indicators of portfolio risk for insured single 

20 family mortgage loans originated or underwritten by 

21 the mortgagee with the comparable indicators for 

22 other mortgagees originating or underwriting in23 sured single family mortgage loans in the same area. 

24 ‘‘(b) TERMINATION OF MORTGAGEE ORIGINATION

25 APPROVAL.— 


cprice-sewell on PROD1PC66 with BILLS
3 

•S 1195 IS

1 ‘‘(1) IN GENERAL.—Notwithstanding section 

2 202(c), if, based on a comparison under subsection 

3 (a)(2) of this section, the Secretary determines that 

4 the mortgage loans originated or underwritten by a 

5 mortgagee present an unacceptable risk to the insur6 ance funds, the Secretary may terminate the ap7 proval of that mortgagee to originate or underwrite 

8 single family mortgages. 

9 ‘‘(2) REGULATIONS.—A determination under 

10 paragraph (1) shall be made in accordance with reg11 ulations issued by the Secretary (which may include 

12 any regulation published before the date of enact13 ment of this section, as determined by the Sec14 retary). 

15 ‘‘(3) TERMINATION PROCEDURES.— 

16 ‘‘(A) NOTICE.—Not less than 60 days 

17 prior to the effective date of a termination 

18 under this subsection, the Secretary shall pro19 vide written notice of such termination to the 

20 mortgagee. 

21 ‘‘(B) MEETING.— 

22 ‘‘(i) WRITTEN REQUEST.—Not later 

23 than 30 days after receiving a written no24 tice under subparagraph (A), the mort25 gagee may submit to the Secretary a writVerDate Aug 31 2005 10:56 Apr 26, 2006 Jkt 049200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\RENEE\S1195.IS S1195

cprice-sewell on PROD1PC66 with BILLS
4 

•S 1195 IS

1 ten request for a meeting regarding the 

2 termination. 

3 ‘‘(ii) RECEIPT OF REQUEST.—Upon 

4 receipt of a written request under this sub5 paragraph, the Secretary shall provide the 

6 mortgagee with a meeting with the official 

7 authorized to issue termination notices on 

8 behalf of the Secretary (or a designee of 

9 that official). 

10 ‘‘(iii) FACTORS FOR DEFAULT.—At 

11 the meeting provided under this subpara12 graph, the mortgagee may present for con13 sideration specific factors that the mort14 gagee believes were beyond the control of 

15 the mortgagee that contributed to the ex16 cessive default and claim rate. 

17 ‘‘(C) EFFECTIVE DATE.—A termination 

18 under this subsection shall take effect 60 days 

19 after the date on which written notice is pro20 vided to the mortgagee under subparagraph 

21 (A), unless the Secretary withdraws the termi22 nation notice or extends the notice period. 

23 ‘‘(c) AREA DEFINED.—In this section, the term 

24 ‘area’ means each geographic area in which the mortgagee 


cprice-sewell on PROD1PC66 with BILLS
5 

•S 1195 IS

1 is authorized by the Secretary to originate insured single2 family mortgages.’’. 

Æ 


cprice-sewell on PROD1PC66 with BILLS