79–006 

111TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 111–12 

TO MAKE IMPROVEMENTS IN THE HOPE FOR 

HOMEOWNERS PROGRAM, AND FOR OTHER PURPOSES 

FEBRUARY 10, 2009.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. FRANK of Massachusetts, from the Committee on Financial 

Services, submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 787] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred 

the bill (H.R. 787) to make improvements in the Hope for Homeowners Program, and for other purposes, having considered the 

same, report favorably thereon with an amendment and recommend that the bill as amended do pass. 

CONTENTS 

Page 

Amendment .............................................................................................................. 2 

Purpose and Summary ............................................................................................ 3 

Background and Need for Legislation .................................................................... 3 

Hearings ................................................................................................................... 5 

Committee Consideration ........................................................................................ 5 

Committee Votes ...................................................................................................... 5 

Committee Oversight Findings ............................................................................... 6 

Performance Goals and Objectives ......................................................................... 6 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 6 

Committee Cost Estimate ....................................................................................... 6 

Congressional Budget Office Estimate ................................................................... 6 

Federal Mandates Statement ................................................................................. 8 

Advisory Committee Statement .............................................................................. 9 

Constitutional Authority Statement ...................................................................... 9 

Applicability to Legislative Branch ........................................................................ 9 

Earmark Identification ............................................................................................ 9 

Section-by-Section Analysis of the Legislation ...................................................... 9 


rfrederick on PROD1PC67 with HEARING
2 

Changes in Existing Law Made by the Bill, as Reported ..................................... 10 

Minority Views ......................................................................................................... 15 

AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. CHANGES TO HOPE FOR HOMEOWNERS PROGRAM. 

Section 257 of the National Housing Act, as added by section 1402(a) of Public 

Law 110–289, (12 U.S.C. 1715z–23) is amended— 

(1) in subsection (e)— 

(A) by striking paragraph (1) and inserting the following: 

‘‘(1) BORROWER CERTIFICATION.— 

‘‘(A) NO INTENTIONAL DEFAULT OR FALSE INFORMATION.—The mortgagor 

shall provide a certification to the Secretary that the mortgagor has not intentionally defaulted on the existing mortgage or mortgages and has not 

knowingly, or willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining any eligible mortgage. 

‘‘(B) LIABILITY FOR REPAYMENT.—The mortgagor shall agree in writing 

that the mortgagor shall be liable to repay to the Secretary any direct financial benefit achieved from the reduction of indebtedness on the existing 

mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made by the mortgagor in the certifications 

and documentation required under this paragraph, subject to the discretion 

of the Oversight Board.’’. 

(B) in paragraph (2)(B), by striking ‘‘90 percent’’ and inserting ‘‘93 percent’’; 

(C) by striking paragraph (7); 

(D) in paragraph (9)— 

(i) by striking ‘‘by procuring (A) an income tax return transcript of 

the income tax returns of the mortgagor, or(B)’’ and inserting ‘‘in accordance with procedures and standards that the Board shall establish, 

which may include requiring the mortgagee to procure’’; and 

(ii) by striking ‘‘and by any other method, in accordance with procedures and standards that the Board shall establish’’; 

(E) by redesignating paragraphs (8), (9), (10), and (11) as paragraphs (7), 

(8), (9), and (10), respectively; and 

(F) by adding after paragraph (10) (as so redesignated by subparagraph 

(E) of this paragraph) the following new paragraph: 

‘‘(11) BAN ON MILLIONAIRES.—The mortgagor shall not have a net worth, as 

of the date the mortgagor first applies for a mortgage to be insured under the 

Program under this section, that exceeds $1,000,000.’’; 

(2) in subsection (h)(2), by striking ‘‘, or in any case in which a mortgagor fails 

to make the first payment on a refinanced eligible mortgage’’; 

(3) by striking subsection (i) and inserting the following new subsection: 

‘‘(i) ANNUAL PREMIUMS.— 

‘‘(1) IN GENERAL.—For each refinanced eligible mortgage insured under this 

section, the Secretary shall establish and collect an annual premium in an 

amount equal to not less than 0.55 percent of the amount of the remaining insured principal balance of the mortgage and not more than 0.75 percent of such 

remaining insured principal balance, as determined according to a schedule established by the Board that assigns such annual premiums based upon the 

credit risk of the mortgage. 

‘‘(2) REDUCTION OR TERMINATION DURING MORTGAGE TERM.—Notwithstanding 

paragraph (1), the Secretary may provide that the annual premiums charged for 

refinanced eligible mortgages insured under this section are reduced over the 

term of the mortgage or that the collection of such premiums is discontinued 

at some time during the term of the mortgage, in a manner that is consistent 

with policies for such reduction or discontinuation of annual premiums charged 

for mortgages in accordance with section 203(c).’’; 

(4) in subsection (k)— 

(A) by striking the subsection heading and inserting ‘‘EXIT FEE’’ ; 

(B) in paragraph (1), in the matter preceding subparagraph (A), by striking ‘‘such sale or refinancing’’ and inserting ‘‘the mortgage being insured 

under this section’’; and 

(C) by striking paragraph (2); 


rfrederick on PROD1PC67 with HEARING
3 

(5) in subsection (s)(3)(A)(ii), by striking ‘‘subsection (e)(1)(B) and such other’’ 

and inserting ‘‘such’’; 

(6) in subsection (v), by inserting after the period at the end the following: 

‘‘The Board shall conform documents, forms, and procedures for mortgages insured under this section to those in place for mortgages insured under section 

203(b) to the maximum extent possible consistent with the requirements of this 

section.’’; 

(7) in subsection (w)(1)(C), by striking ‘‘(e)(4)(A)’’ and inserting ‘‘(e)(3)(A)’’; and 

(8) by adding at the end the following new subsection: 

‘‘(x) PAYMENT TO EXISTING LOAN SERVICER.—The Board may establish a payment 

to the servicer of the existing senior mortgage for every loan insured under the 

HOPE for Homeowners Program in an amount, for each such loan, that does not 

exceed $1,000.’’. 

PURPOSE AND SUMMARY

H.R. 787 was introduced on February 2, 2009 by Chairman 

Frank. The purpose of the bill is to make reasonable changes the 

‘‘HOPE for Homeowners’’ program established in the Housing and 

Economic Recovery Act (P.L. 110–289) (‘‘HERA’’) to reduce program 

fees and remove administration burdens, in order to facilitate 

broader participation in the Program. 

BACKGROUND AND NEED FOR LEGISLATION

As the housing and economic crisis has grown, the number of 

mortgage defaults and foreclosures has also grown. In addition to 

having a deleterious effect on the personal and financial conditions 

of the affected homeowner, foreclosures have contributed to declining home prices, declining neighborhoods, and negative repercussions for the broader economy. The response to date to the growing 

foreclosure crisis has been largely limited to loan modifications voluntarily agreed to by existing lenders. While this has reduced payments for many borrowers, it does not seem to have had any meaningful effect in arresting the growth in foreclosures and the decline 

in housing markets. 

As a result, there has been a need for more systematic approaches to foreclosure prevention, such as refinancing opportunities which involve homeowners having mortgage payments reduced 

to affordable levels. The HOPE for Homeowners program, as 

amended by Emergency Economic Stabilization Act (EESA), has 

been an important step towards such an approach. A wide range 

of sources, however, including former HUD Secretary Preston, the 

Federal Reserve, lenders, and consumer groups, have criticized the 

program because the required fees are too high, the mandatory 

writedown is excessive, and there are too many administrative requirements that deviate from standard FHA loan requirements. 

This has prevented optimum use of the program. 

This legislation would address the criticisms and make the program easier to use and administer. 

SUMMARY OF MAJOR PROVISIONS

The HOPE for Homeowners Program was created by HERA as 

a new voluntary Federal Housing Administration (FHA) single 

family loan program authorizing $300 billion for refinancing loans 

for distressed borrowers. Eligible loans are limited to refinancings 

for which the home is the borrower’s principal residence. Existing 

junior lienholders must extinguish their loans, and the existing 

first mortgage holder must write down the principal to no more 


rfrederick on PROD1PC67 with HEARING
4 

than 90 percent of current market value and must also pay the upfront FHA premium. The program requires the FHA to collect a variety of fees, and imposes a number of additional conditions on the 

borrower and the underwriter. The EESA made changes to the 

HOPE for Homeowners program to: (a) allow for a loan to value 

(LTV) higher than 90 percent, (b) permit upfront payments to existing second lienholders as an option to induce such holders to extinguish their liens, and (c) make the debt to income ratio requirement more flexible. Despite the changes made by EESA, only 25 

loans have been made under the program to date. 

H.R. 787 would amend the HOPE for Homeowners Program provisions of the National Housing Act to encourage more lenders to 

participate by reducing the fees and writedowns, provide incentives 

for mortgage servicers to engage in modifications under the program, and reduce administrative burdens to loan underwriters by 

making the requirements more consistent with standard FHA practices. Specifically, the bill would make the following changes: 

Fees. The 3 percent upfront fee is eliminated and the annual premium of 1.5 percent of the amount of the remaining insured principal balance of the mortgage is reduced to a range of between .55 

percent and .75 percent, as determined according to a schedule established by the program’s Board that assigns the premium based 

on the credit risk of the mortgage. The elimination of the upfront 

fee will have a corresponding reduction in the required loan 

writedown by the lender, thus addressing a significant barrier to 

program participation. The annual fees are brought more in line 

with normal FHA standards, making it easier to underwrite borrowers for the program. Finally, the equity sharing provision in the 

bill is recharacterized as an exit fee, thus ensuring the collection 

of significant fees for all refinanced loans that succeed. 

Profit Sharing. The requirement for the government to keep 50 

percent of property appreciation is eliminated. This addresses criticisms both that this provision is too onerous to the borrower and 

that it is excessively burdensome to administer. In particular, inconsistent state laws regarding profit sharing, combined with lack 

of clarify regarding compliance with federal Truth in Lending Act 

requirements, have deterred lenders from using the program because of this profit sharing feature. The bill would eliminate this 

profit sharing requirement (but retain the equity sharing provision, 

as noted above). 

Loan to Value (LTV). The 90 percent LTV limitation, which now 

applies under to the majority of prospective borrowers, is increased 

to 93 percent. This, in combination with the upfront fee elimination, should have a meaningful impact in addressing a major factor inhibiting program participation—the significant required 

writedown of the loan. 

Payments to Servicers for Successful Refinancings. A number of 

loan modification programs, including the proposed Federal Deposit 

Insurance Corporation plan, recognize the importance of adequately compensating and incentivizing mortgage servicers for the 

work necessary to restructure loans. Therefore, this legislation authorizes payments to servicers for successful refinances under 

HOPE for Homeowners, subject to a cap of $1,000 per loan. 

Administrative Burdens. The legislation includes general language requiring the program’s Board to make documents, forms 


rfrederick on PROD1PC67 with HEARING
5 

and procedures conform to those under normal FHA practice to the 

maximum extent possible consistent with statutory requirements. 

The purpose is to reduce paperwork, software changes, and other 

administrative deviations from standard FHA underwriting procedures. The legislation also eliminates a non-affordability requirement that imposed an administrative underwriting burden and excluded borrowers experiencing job loss or other impairment of income. Finally, the bill eliminates other statutory requirements that 

would not otherwise apply to FHA loans, such as liability for first 

payment default and a certification requirement that the borrower 

had not intentionally defaulted under any other non-mortgage debt. 

HEARINGS

The Committee on Financial Services held a hearing on February 

3, 2009, entitled ‘‘Promoting Liquidity and Lending Through Deposit Insurance, HOPE for Homeowners, and Other Enhancements.’’ The following witnesses testified: Mr. John Bovenzi, Chief 

Operating Officer, Federal Deposit Insurance Corporation; Ms. Meg 

Burns, Director of the Office of Single Family Program Development, U.S. Department of Housing and Urban Development; Mr. 

Edward L. Yingling, President and Chief Executive Officer, American Bankers Association; Mr. R. Michael S. Menzies, Sr., President 

and Chief Executive Officer, Easton Bank and Trust Company, on 

behalf of The Independent Community Bankers of America; Mr. 

John Taylor, President and Chief Executive, National Community 

Reinvestment Coalition; Mr. John A. Courson, President and Chief 

Executive Officer, Mortgage Bankers Association; Mr. Mike Calhoun, President and Chief Operating Officer, Center for Responsible Lending; Mrs. Robin Staudt; and Mr. Edward R. Morrison, 

Professor of Law, Columbia Law School. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

February 4, 2009, and ordered H.R. 787, to make improvements in 

the HOPE for Homeowners Program, as amended, favorably reported to the House by a voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. No record votes were 

taken in conjunction with the consideration of this legislation. A 

motion by Mr. Frank to report the bill, as amended, to the House 

with a favorable recommendation was agreed to by a voice vote. 

During consideration of the bill, the following amendments were 

considered: 

An amendment by Mr. Adler, No. 1, putting a limit on payment 

to existing loan servicers, was agreed to by voice vote. 

An amendment by Mrs. Capito, No. 2, regarding protection of 

FHA, VA, and RHS loans appreciation, was offered and withdrawn. 

An amendment by Mr. Frank, No. 3, regarding borrower certification, was agreed to by a voice vote. 

An amendment by Mr. Neugebauer, No. 4, terminating the 

HOPE for Homeowners Program, was not agreed to by a voice vote. 


rfrederick on PROD1PC67 with HEARING
6 

An amendment by Mr. Hensarling, No. 5, regarding suspension 

of new commitments to insure mortgages, was not agreed to by a 

voice vote. 

An amendment by Mr. Hensarling, No. 6, regarding mortgagor 

net worth limitation of $1,000,000, was agreed to by a voice vote. 

An amendment by Mr. Hensarling, No. 7, regarding exclusion of 

no-doc loans, exclusion of zero downpayment loans, and maximum 

income for loan considered, was not agreed to by a voice vote. 

An amendment by Mr. Hensarling, No. 8, on appreciation, was 

offered and withdrawn. 

An amendment by Ms. Bean, No. 9, reinstating prohibition on 

second mortgages, was offered and withdrawn. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee held a hearing and made findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

Due to excessive fee levels and unnecessary administrative burdens required by the program’s statute, few HOPE for Homeowners 

loans have been closed to date. H.R. 787 would reduce excessive 

program fees and remove unnecessary administration burdens, in 

order to increase program participation more in line with the expectations when the program was initially enacted. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 


rfrederick on PROD1PC67 with HEARING
7 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, February 9, 2009. 

Hon. BARNEY FRANK, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 787, a bill to make improvements in the Hope of Homeowners program, and for other 

purposes. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Chad Chirico. 

Sincerely, 

DOUGLAS W. ELMENDORF, 

Director. 

Enclosure. 

H.R. 787—A bill to make improvements in the Hope for Homeowners program, and for other purposes 

Summary: H.R. 787 would modify the Hope for Homeowners loan 

guarantee program authorized by the Housing and Economic Recovery Act of 2008. The effects on direct spending and revenues 

over the 2009–2013 and 2009–2018 periods are relevant for enforcing pay-as-you-go rules under the current budget resolution. CBO 

estimates that enacting this legislation would increase deficits by 

$675 million over the five-year period from 2009 through 2013, and 

by an equal amount over the 2009–2018 period. Implementing H.R. 

787 would not affect spending subject to appropriation. 

H.R. 787 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). 

Estimated cost to the Federal Government: The estimated cost of 

H.R. 787 is shown in the following table. The costs of this legislation fall within budget function 370 (commerce and housing credit). 

By fiscal year in millions of dollars— 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009– 

2014 

2009– 

2019 

CHANGES IN DIRECT SPENDING 

Estimated Budget 

Authority ............. 304 225 146 0 0 0 0 0 0 0 0 675 675 

Estimated Outlays .. 274 233 154 15 0 0 0 0 0 0 0 675 675 

Basis of estimate: H.R. 787 would make certain changes to the 

Hope for Homeowners loan guarantee program authorized by the 

Housing and Economic Recovery Act of 2008. Those changes, which 

are aimed at increasing the number of loans refinanced through 

the program, include: 

• Eliminating the payment of an up-front insurance premium; 

• Reducing the annual insurance premium; 

• Increasing the maximum loan-to-value ratio of the refinanced mortgage to 93 percent; 

• Eliminating the government’s share of any appreciation in 

the homes’ value at sale; and 


rfrederick on PROD1PC67 with HEARING
8 

• Authorizing a payment to the servicer of the existing mortgage. 

The Federal Credit Reform Act requires the federal budget to 

record the up-front cost of subsidizing loan guarantees on a netpresent-value basis. CBO estimates that enacting this legislation, 

which would directly appropriate the subsidy cost of loan guarantees, would increase direct spending by $675 million over the 2009– 

2019 period. 

To determine this subsidy cost, CBO estimated the volume of 

loans that would be refinanced under this voluntary program and 

the likelihood that borrowers would default on their refinanced 

mortgages. Based on participation in the current Hope for Homeowners program, the FHASecure program, and information from 

mortgage industry participants, CBO estimates that as many as 

25,000 additional loans could be refinanced as a result of the proposed changes, representing a loan volume of about $5 billion over 

the next four years. (As of February 3, 2009, only 25 loans have 

been guaranteed under the Hope for Homeowners program. In addition, about 4,000 delinquent borrowers refinanced their loans 

under FHASecure over the 16-month lifetime of the program.) 

CBO estimates that the program, as modified by the bill, would 

have a subsidy rate of about 15 percent of the loan value. This estimated subsidy rate assumes that the cumulative default rate for 

the program would be about 40 percent and that recoveries on defaulted mortgages would be about 60 percent of the outstanding 

loan amount. Those rates reflect CBO’s view that mortgage holders 

would have an incentive to direct their highest-risk loans to the 

program, and are based on the expectation that the underwriting 

standards established for the new program would be less restrictive 

than those currently in place for FHA’s single-family loan-guarantee program, thereby allowing FHA to insure loans with a greater risk of default. 

Intergovernmental and private-sector impact: H.R. 787 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would not affect the budgets of state, local, or tribal 

governments. 

Previous CBO estimate: On January 13, 2009, CBO transmitted 

a cost estimate for H.R. 384, the TARP Reform and Accountability 

Act, as introduced in the House of Representatives on January 9, 

2009. H.R. 787 is similar to the HOPE for Homeowner provisions 

in title V of H.R. 384, and the estimated costs are the same. 

Estimate prepared by: Federal Costs: Susanne Mehlman and 

Chad Chirico; Impact on State, Local, and Tribal Governments: 

Lisa Ramirez-Branum; Impact on the Private Sector: Patrick Bernhardt. 

Estimate approved by: Peter H. Fontaine, Assistant Director for 

Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 


rfrederick on PROD1PC67 with HEARING
9 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional 

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the 

United States) and clause 3 (relating to the power to regulate interstate commerce). 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 787 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Changes to HOPE for Homeowners Program 

This section amends Section 257 of the National Housing Act, 

which authorized the HOPE for Homeowners program to: 

1. Remove a requirement that the borrower certify that the 

borrower has not at any time intentionally defaulted on any 

other non-mortgage debt; 

2. Eliminate a requirement that the borrower must have had 

a debt-to-income ratio greater than 31 percent as of March 1, 

2008; 

3. Raise the minimum percentage that the program’s Board 

can establish as the maximum loan to value from 90 percent 

to 93 percent; 

4. Eliminate language prohibiting second liens during the 

first five years of a HOPE for Homeowners loan, except as necessary to ensure maintenance of property standards; 

5. Prohibit loans to borrowers with a net worth of more than 

$1,000,000; 

6. Eliminate liability of an FHA underwriter for loan losses 

on loans to borrowers that default on their first payment; 

7. Eliminate the 3 percent upfront FHA premium; 

8. Reduce the annual FHA premium from 1.5 percent of the 

amount of the remaining insured principal balance of the mortgage to a range of between .55 percent and .75 percent, as determined according to a schedule that assigns the premium 

based on the credit risk of the mortgage; 

9. Eliminate 50/50 profit sharing of property appreciation 

over the current market value; 


rfrederick on PROD1PC67 with HEARING
10 

10. Recharacterize as an exit fee the federal government percentage of the equity created by the refinance, on a scale declining 100 percent for sale or refinance in year 1, to 50 percent after 5 years. 

11. Require the program’s Board to conform documents, 

forms, and procedures to those in place for mortgages insured 

under Section 203(b) to the maximum extent possible, consistent with the requirements of this legislation; and 

12. Authorize payments to servicers of existing loans for successful refinances of such loans under the program, subject to 

a cap of $1,000 per loan. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

NATIONAL HOUSING ACT 

* * * * * * * 

TITLE II—MORTGAGE INSURANCE 

* * * * * * * 

SEC. 257. HOPE FOR HOMEOWNERS PROGRAM. 

(a) * * * 

* * * * * * * 

(e) REQUIREMENTS OF INSURED MORTGAGES.—To be eligible for 

insurance under this section, a refinanced eligible mortgage shall 

comply with all of the following requirements: 

ø(1) LACK OF CAPACITY TO PAY EXISTING MORTGAGE.— ø(A) BORROWER CERTIFICATION.— ø(i) IN GENERAL.—The mortgagor shall provide certification to the Secretary that the mortgagor has not 

intentionally defaulted on the mortgage or any other 

debt, and has not knowingly, or willfully and with actual knowledge, furnished material information known 

to be false for the purpose of obtaining any eligible 

mortgage. 

ø(ii) PENALTIES.— ø(I) FALSE STATEMENT.—Any certification filed 

pursuant to clause (i) shall contain an acknowledgment that any willful false statement made in 

such certification is punishable under section 

1001, of title 18, United States Code, by fine or 

imprisonment of not more than 5 years, or both. 

ø(II) LIABILITY FOR REPAYMENT.—The mortgagor 

shall agree in writing that the mortgagor shall be 

liable to repay to the Federal Housing Administration any direct financial benefit achieved from the 

reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced 

under this section derived from misrepresentaVerDate Nov 24 2008 03:16 Feb 11, 2009 Jkt 079006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR012.XXX HR012

rfrederick on PROD1PC67 with HEARING
11 

tions made in the certifications and documentation required under this subparagraph, subject to 

the discretion of the Secretary. 

ø(B) CURRENT BORROWER DEBT-TO-INCOME RATIO.—As of 

March 1, 2008, the mortgagor shall have had, or thereafter 

is likely to have, due to the terms of the mortgage being 

reset, a ratio of mortgage debt to income, taking into consideration all existing mortgages of that mortgagor at such 

time, greater than 31 percent (or such higher amount as 

the Board determines appropriate).¿ 

(1) BORROWER CERTIFICATION.— (A) NO INTENTIONAL DEFAULT OR FALSE INFORMATION.— The mortgagor shall provide a certification to the Secretary 

that the mortgagor has not intentionally defaulted on the 

existing mortgage or mortgages and has not knowingly, or 

willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining 

any eligible mortgage. 

(B) LIABILITY FOR REPAYMENT.—The mortgagor shall 

agree in writing that the mortgagor shall be liable to repay 

to the Secretary any direct financial benefit achieved from 

the reduction of indebtedness on the existing mortgage or 

mortgages on the residence refinanced under this section 

derived from misrepresentations made by the mortgagor in 

the certifications and documentation required under this 

paragraph, subject to the discretion of the Oversight Board. 

(2) DETERMINATION OF PRINCIPAL OBLIGATION AMOUNT.—The 

principal obligation amount of the refinanced eligible mortgage 

to be insured shall— 

(A) * * * 

(B) not exceed ø90 percent¿ 93 percent of the appraised 

value of the property to which such mortgage relates (or 

such higher percentage as the Board determines, in the 

discretion of the Board). 

* * * * * * * 

ø(7) PROHIBITION ON SECOND LIENS.—A mortgagor may not 

grant a new second lien on the mortgaged property during the 

first 5 years of the term of the mortgage insured under this 

section, except as the Board determines to be necessary to ensure the maintenance of property standards; and provided that 

such new outstanding liens (A) do not reduce the value of the 

Government’s equity in the borrower’s home; and (B) when 

combined with the mortgagor’s existing mortgage indebtedness, 

do not exceed 95 percent of the home’s appraised value at the 

time of the new second lien.¿ 

ø(8)¿ (7) APPRAISALS.—Any appraisal conducted in connection with a mortgage insured under this section shall— 

(A) * * * 

* * * * * * * 

ø(9)¿ (8) DOCUMENTATION AND VERIFICATION OF INCOME.—In 

complying with the FHA underwriting requirements under the 

HOPE for Homeowners Program under this section, the mortgagee shall document and verify the income of the mortgagor 

or non-filing status øby procuring (A) an income tax return 


rfrederick on PROD1PC67 with HEARING
12 

transcript of the income tax returns of the mortgagor, or(B)¿ 

in accordance with procedures and standards that the Board 

shall establish, which may include requiring the mortgagee to 

procure a copy of the income tax returns from the Internal 

Revenue Service, for the two most recent years for which the 

filing deadline for such years has passed øand by any other 

method, in accordance with procedures and standards that the 

Board shall establish¿. 

ø(10)¿ (9) MORTGAGE FRAUD.—The mortgagor shall not have 

been convicted under Federal or State law for fraud during the 

10-year period ending upon the insurance of the mortgage 

under this section. 

ø(11)¿ (10) PRIMARY RESIDENCE.—The mortgagor shall provide documentation satisfactory in the determination of the 

Secretary to prove that the residence covered by the mortgage 

to be insured under this section is occupied by the mortgagor 

as the primary residence of the mortgagor, and that such residence is the only residence in which the mortgagor has any 

present ownership interest. 

(11) BAN ON MILLIONAIRES.—The mortgagor shall not have a 

net worth, as of the date the mortgagor first applies for a mortgage to be insured under the Program under this section, that 

exceeds $1,000,000. 

* * * * * * * 

(h) STANDARDS TO PROTECT AGAINST ADVERSE SELECTION.— 

(1) * * * 

(2) EXCLUSION FOR VIOLATIONS.—The Board shall prohibit 

the Secretary from paying insurance benefits to a mortgagee 

who violates the representations and warranties, as established under paragraph (1)ø, or in any case in which a mortgagor fails to make the first payment on a refinanced eligible 

mortgage¿. 

* * * * * * * 

ø(i) PREMIUMS.—For each refinanced eligible mortgage insured 

under this section, the Secretary shall establish and collect— 

ø(1) at the time of insurance, a single premium payment in 

an amount equal to 3 percent of the amount of the original insured principal obligation of the refinanced eligible mortgage, 

which shall be paid from the proceeds of the mortgage being 

insured under this section, through the reduction of the 

amount of indebtedness that existed on the eligible mortgage 

prior to refinancing; and 

ø(2) in addition to the premium required under paragraph 

(1), an annual premium in an amount equal to 1.5 percent of 

the amount of the remaining insured principal balance of the 

mortgage.¿ 

(i) ANNUAL PREMIUMS.— 

(1) IN GENERAL.—For each refinanced eligible mortgage insured under this section, the Secretary shall establish and collect an annual premium in an amount equal to not less than 

0.55 percent of the amount of the remaining insured principal 

balance of the mortgage and not more than 0.75 percent of such 

remaining insured principal balance, as determined according 


rfrederick on PROD1PC67 with HEARING
13 

to a schedule established by the Board that assigns such annual premiums based upon the credit risk of the mortgage. 

(2) REDUCTION OR TERMINATION DURING MORTGAGE TERM.— Notwithstanding paragraph (1), the Secretary may provide that 

the annual premiums charged for refinanced eligible mortgages 

insured under this section are reduced over the term of the 

mortgage or that the collection of such premiums is discontinued at some time during the term of the mortgage, in a manner that is consistent with policies for such reduction or discontinuation of annual premiums charged for mortgages in accordance with section 203(c). 

* * * * * * * 

(k) øEQUITY AND APPRECIATION.—¿ EXIT FEE.— 

(1) FIVE-YEAR PHASE-IN FOR EQUITY AS A RESULT OF SALE OR

REFINANCING.—For each eligible mortgage insured under this 

section, the Secretary and the mortgagor of such mortgage 

shall, upon any sale or disposition of the property to which 

such mortgage relates, or upon the subsequent refinancing of 

such mortgage, be entitled to the following with respect to any 

equity created as a direct result of øsuch sale or refinancing¿ 

the mortgage being insured under this section: 

(A) * * * 

* * * * * * * 

ø(2) APPRECIATION IN VALUE.—For each eligible mortgage insured under this section, the Secretary and the mortgagor of 

such mortgage shall, upon any sale or disposition of the property to which such mortgage relates, each be entitled to 50 percent of any appreciation in value of the appraised value of such 

property that has occurred since the date that such mortgage 

was insured under this section.¿ 

* * * * * * * 

(s) DEFINITIONS.—For purposes of this section, the following definitions shall apply: 

(1) * * * 

* * * * * * * 

(3) ELIGIBLE MORTGAGE.—The term ‘‘eligible mortgage’’ 

means a mortgage— 

(A) the mortgagor of which— 

(i) * * * 

(ii) cannot, subject to øsubsection (e)(1)(B) and such 

other¿ such standards established by the Board, afford 

his or her mortgage payments; and 

* * * * * * * 

(v) RULE OF CONSTRUCTION RELATED TO INSURANCE OF MORTGAGES.—Except as otherwise provided for in this section or by action of the Board, the provisions and requirements of section 203(b) 

shall apply with respect to the insurance of any eligible mortgage 

under this section. The Board shall conform documents, forms, and 

procedures for mortgages insured under this section to those in 

place for mortgages insured under section 203(b) to the maximum 

extent possible consistent with the requirements of this section. 

(w) HOPE BONDS.— 


rfrederick on PROD1PC67 with HEARING
14 

(1) ISSUANCE AND REPAYMENT OF BONDS.—Notwithstanding 

section 504(b) of the Federal Credit Reform Act of 1990 (2 

U.S.C. 661d(b)), the Secretary of the Treasury shall— 

(A) * * * 

* * * * * * * 

(C) use the proceeds from HOPE Bonds only to pay for 

the net costs to the Federal Government of the HOPE for 

Homeowners Program, including administrative costs and 

payments pursuant to subsection ø(e)(4)(A)¿ (e)(3)(A). 

* * * * * * * 

(x) PAYMENT TO EXISTING LOAN SERVICER.—The Board may establish a payment to the servicer of the existing senior mortgage for 

every loan insured under the HOPE for Homeowners Program in an 

amount, for each such loan, that does not exceed $1,000. 

* * * * * * * 


rfrederick on PROD1PC67 with HEARING
(15) 

MINORITY VIEWS 

Last July, Congress passed—over the objections of the majority 

of House Republicans—legislation creating the Hope for Homeowners program (P.L. 110–289). We were told at the time by its 

sponsors that this legislation would help hundreds of thousands of 

struggling borrowers with negative equity obtain more sustainable 

mortgages guaranteed by the Federal Housing Administration 

(FHA), thereby turning the tide of foreclosures and stabilizing 

housing markets. Some six months later, the Hope for Homeowners 

program has fallen far short of the expectations of its proponents, 

receiving some 400 applications and closing on a mere 25 loans. 

H.R. 787, as now estimated by CBO, would improve the efficacy 

of the HOPE for Homeowners program by serving 25,000 distressed 

households but at a cost of $670 million dollars, or $27,000 per assisted family. We believe that Congress should eliminate this program because it is ineffective, costly and does not maximize the 

taxpayer’s investment in providing foreclosures mitigation to distressed homeowners. Instead, we believe that Congress should 

start anew with private and existing public initiatives that have a 

proven record and will not expose taxpayers to costly remedies 

while doing little to improve conditions in the housing market. 

H.R. 787 attempts to ‘‘fix’’ the Hope for Homeowners program 

(H4H) and make it a more attractive option for lenders and borrowers. But in doing so, the bill negates key provisions in the original legislation that were designed to protect taxpayers from bearing huge losses when mortgages re-worked under the program default. For example, H.R. 787 strikes the payment of upfront premiums paid to the Federal Housing Administration for providing 

the government guarantee; increases permissible loan-to-value ratios; and cancels the government’s share of profits in the event of 

long-term home price appreciation. House Republicans believe that 

before we expose taxpayers to the losses that we know are inevitable from a government-run foreclosure prevention program, we 

should carefully consider alternatives that do not involve taxpayer 

subsidies or offend the sense of fair play of those millions of Americans who have met their obligations. 

Since its inception, we have raised concerns about the effectiveness of the Hope for Homeowners program, and as predicted this 

program has been a failure by virtually every metric. Rather than 

cut taxpayer losses, this legislation aims to fix a fundamentally 

unfixable program while abandoning key taxpayer safeguards. To 

further compound the problem, the Majority has indicated that it 

intends to ‘‘marry’’ H.R. 787 with bankruptcy cram-down legislation recently approved by the House Judiciary Committee. Cramdown proposals, coupled with the Hope for Homeowners program, 

will place the future of the FHA program in jeopardy and do nothing to resolve our current housing crisis. 


rfrederick on PROD1PC67 with HEARING
16 

SPENCER BACHUS. SHELLEY MOORE CAPITO. SCOTT GARRETT. KENNY MARCHANT. BILL POSEY. RANDY NEUGEBAUER. JUDY BIGGERT. RON PAUL. CHRISTOPHER LEE. 

Æ 


rfrederick on PROD1PC67 with HEARING