II 

112TH CONGRESS 

1ST SESSION S. 1997 

To prohibit the Secretary of the Treasury from providing extra support 

to the Federal Housing Administration. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 15, 2011 

Mr. VITTER (for himself, Mr. CRAPO, Mr. JOHANNS, Mr. TOOMEY, Mr. 

DEMINT, Mr. PAUL, Mr. RISCH, Mr. CORNYN, and Mr. LEE) introduced 

the following bill; which was read twice and referred to the Committee 

on Banking, Housing, and Urban Affairs 

A BILL 

To prohibit the Secretary of the Treasury from providing 

extra support to the Federal Housing Administration. 

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 Bailout Protec5 tion Act of 2011’’. 

6 SEC. 2. TAXPAYER PROTECTION AT THE FHA. 

7 (a) MUTUAL MORTGAGE INSURANCE FUND.—Sec8 tion 205 of the National Housing Act (12 U.S.C. 1711) 

9 is amended by adding at the end the following: 


tjames on DSK6SPTVN1PROD with BILLS
2 

•S 1997 IS

1 ‘‘(g) TAXPAYER PROTECTION.— 

2 ‘‘(1) IN GENERAL.—In order to protect the tax3 payers of the United States from financial responsi4 bility for any obligations of the Mutual Mortgage In5 surance Fund (referred to in this subsection as the 

6 ‘Fund’), the Secretary shall take all available actions 

7 and use all available methods authorized under law 

8 to ensure that, not later than 2 years after the date 

9 of enactment of this subsection, the Fund attains 

10 the capital ratio required under subsection (f)(2) 

11 and to ensure that the Fund maintains a capital 

12 ratio that is not less than the capital ratio required 

13 under subsection (f)(2) thereafter, including— 

14 ‘‘(A) the authority to increase insurance 

15 premiums charged under this title for mort16 gages that are obligations of the Fund; 

17 ‘‘(B) the authority to establish more strin18 gent underwriting standards for mortgages de19 scribed in subparagraph (A); and 

20 ‘‘(C) the authority to increase the amount 

21 of cash or its equivalent required to be paid on 

22 account of the property subject to a mortgage 

23 described in subparagraph (A). 


tjames on DSK6SPTVN1PROD with BILLS
3 

•S 1997 IS

1 ‘‘(2) USE OF AUTHORITY TO PREVENT BAILOUT

2 OF FUND.—The Secretary shall take the actions re3 quired under paragraph (3), if— 

4 ‘‘(A) the Fund fails to— 

5 ‘‘(i) attain a capital ratio of 2 percent 

6 on the date described in paragraph (1); or 

7 ‘‘(ii) maintain such capital ratio after 

8 the date described in paragraph (1); or 

9 ‘‘(B) the expected claims rate of the Fund 

10 as set forth in the quarterly independent actu11 arial study required under section 202(a)(4) is 

12 10.0 or higher. 

13 ‘‘(3) REQUIRED ACTIONS.—The actions re14 quired under this paragraph are— 

15 ‘‘(A) increasing the annual insurance pre16 miums for mortgages that are obligations of the 

17 Fund to the maximum extent otherwise per18 mitted under law, until the date on which the 

19 Fund achieves a capital ratio of 2 percent; and 

20 ‘‘(B) until the date on which the Fund 

21 achieves a capital ratio of 2 percent, charging 

22 an additional risk-based annual insurance pre23 mium for mortgages that are obligations of the 

24 Fund having a loan-to-value ratio that is 95 

25 percent or greater, in an amount that is— 


tjames on DSK6SPTVN1PROD with BILLS
4 

•S 1997 IS

1 ‘‘(i) proportionate to the risk the 

2 mortgages pose to the Fund; and 

3 ‘‘(ii) consistent with the amount of in4 surance premiums charged by the private 

5 sector with respect to similar mortgages.’’. 

6 (b) INDEMNIFICATION BY MORTGAGEES.—Section 

7 202 of the National Housing Act (12 U.S.C. 1708) is 

8 amended by adding at the end the following: 

9 ‘‘(i) INDEMNIFICATION BY MORTGAGEES.— 

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

11 that a mortgage executed by a mortgagee approved 

12 by the Secretary under the direct endorsement pro13 gram or insured by a mortgagee pursuant to the del14 egation of authority under section 256 was not origi15 nated or underwritten in accordance with the re16 quirements established by the Secretary, and the 

17 Secretary pays an insurance claim with respect to 

18 the mortgage within a reasonable period specified by 

19 the Secretary, the Secretary shall require the mort20 gagee approved by the Secretary under the direct en21 dorsement program or the mortgagee delegated au22 thority under section 256 to indemnify the Secretary 

23 for the loss. 

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

25 fraud or misrepresentation was involved in connecVerDate Mar 15 2010 00:51 Dec 21, 2011 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1997.IS S1997

tjames on DSK6SPTVN1PROD with BILLS
5 

•S 1997 IS

1 tion with the origination or underwriting, the Sec2 retary shall require the mortgagee approved by the 

3 Secretary under the direct endorsement program or 

4 the mortgagee delegated authority under section 256 

5 to indemnify the Secretary for the loss regardless of 

6 when an insurance claim is paid. 

7 ‘‘(3) REQUIREMENTS AND PROCEDURES.—The 

8 Secretary shall issue regulations establishing appro9 priate requirements and procedures governing the 

10 indemnification of the Secretary by the mortgagee, 

11 including public reporting on— 

12 ‘‘(A) the number of loans that— 

13 ‘‘(i) were not originated or under14 written in accordance with the require15 ments established by the Secretary; and 

16 ‘‘(ii) involved fraud or misrepresenta17 tion in connection with the origination or 

18 underwriting; and 

19 ‘‘(B) the financial impact on the Mutual 

20 Mortgage Insurance Fund when indemnification 

21 is required.’’. 

22 (c) EARLY TERM DELINQUENCIES.—Section 202(a) 

23 of the National Housing Act (12 U.S.C. 1708(a)) is 

24 amended by adding at the end the following: 


tjames on DSK6SPTVN1PROD with BILLS
6 

•S 1997 IS

1 ‘‘(8) INDEMNIFICATION.—The Secretary shall 

2 take any actions required to seek indemnification for 

3 any early term delinquency on a mortgage which— 

4 ‘‘(A) is an obligation of the Mutual Mort5 gage Insurance Fund; and 

6 ‘‘(B) at the time of origination of the 

7 mortgage was not in compliance with any provi8 sion, regulation, or other guideline established 

9 or promulgated pursuant to this title. 

10 ‘‘(9) PROGRAMMATIC REVIEW OF DELIN11 QUENCIES.—The Secretary shall establish and main12 tain a program— 

13 ‘‘(A) to review the cause of each early term 

14 delinquency on a mortgage described under 

15 paragraph (8); 

16 ‘‘(B) to require indemnification of any 

17 such early term delinquency that did not meet 

18 the guidelines and requirements set forth pur19 suant to this section prior to origination; and 

20 ‘‘(C) to publicly report— 

21 ‘‘(i) the results of all early term delin22 quencies reviewed under subparagraph (A); 

23 and 

24 ‘‘(ii) if indemnification is required 

25 under subparagraph (B), the financial imVerDate Mar 15 2010 00:51 Dec 21, 2011 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1997.IS S1997

tjames on DSK6SPTVN1PROD with BILLS
7 

•S 1997 IS

1 pact on the Mutual Mortgage Insurance 

2 Fund of the indemnification. 

3 ‘‘(10) DEFINITION OF EARLY TERM DELIN4 QUENCY.—For purposes of this section, the term 

5 ‘early term delinquency’ means any loan that be6 comes delinquent or that is in default within 24 

7 months of the origination of such loan.’’. 

8 SEC. 3. ANNUAL ACTUARIAL STUDY AND QUARTERLY RE9 PORTS ON MUTUAL MORTGAGE INSURANCE 

10 FUND. 

11 Section 202(a)(4) of the National Housing Act (12 

12 U.S.C. 1708(a)(4)) is amended— 

13 (1) in the heading, by striking ‘‘ANNUAL’’ and 

14 inserting ‘‘QUARTERLY’’; 

15 (2) in the first sentence, by striking ‘‘annually’’ 

16 and inserting ‘‘quarterly’’; 

17 (3) in the second sentence, by striking ‘‘such 

18 studies’’ and inserting ‘‘each study conducted under 

19 the preceding sentence during the preceding year’’; 

20 and 

21 (4) by adding at the end the following: ‘‘Each 

22 report shall include a calculation of the claims rate 

23 for the Fund for each of the 3 preceding quarters 

24 and the expected claims rate for the Fund for each 

25 of the 3 subsequent quarters.’’. 


tjames on DSK6SPTVN1PROD with BILLS
8 

•S 1997 IS

1 SEC. 4. PROHIBITION ON TAXPAYER BAILOUT OF FHA. 

2 Section 505(c) of the Federal Credit Reform Act of 

3 1990 (2 U.S.C. 661d(c)) is amended— 

4 (1) by striking ‘‘The Secretary of the Treasury 

5 shall borrow’’ and inserting the following: 

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), the Secretary of the Treasury shall bor8 row’’; and 

9 (2) by adding at the end the following: 

10 ‘‘(2) EXCEPTION.—The Secretary of the Treas11 ury may not enter into a transaction under this sub12 section with the Mutual Mortgage Insurance Fund 

13 established under section 202 of the National Hous14 ing Act (12 U.S.C. 1708).’’. 

Æ 


tjames on DSK6SPTVN1PROD with BILLS