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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3296 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 3296

To amend the National Housing Act to authorize the Secretary of Housing 
 and Urban Development to insure mortgages given to secure loans that 
are made to refinance single family homes having appraised values that 
    are less than the outstanding principal obligations refinanced.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 15, 1993

 Mr. Kennedy introduced the following bill; which was referred to the 
            Committee on Banking, Finance and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
To amend the National Housing Act to authorize the Secretary of Housing 
 and Urban Development to insure mortgages given to secure loans that 
are made to refinance single family homes having appraised values that 
    are less than the outstanding principal obligations refinanced.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Home Refinancing Assistance Act of 
1993''.

SEC. 2. INSURANCE FOR MORTGAGES TO REFINANCE UNDERWATER MORTGAGES.

    Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is 
amended by adding at the end the following new section:

          ``insurance of `underwater' single family mortgages

    ``Sec. 266. (a) Insurance Authority.--The Secretary may, upon 
application by a mortgagee, insure any refinancing mortgage eligible 
for insurance under this section to the extent authorized by this 
section, upon such terms and conditions as the Secretary may prescribe, 
and may make commitments for the insurance of such refinancing 
mortgages before the date of the execution of such mortgages.
    ``(b) Extent of Insurance.--The Secretary may provide insurance 
under this section, and make commitments to provide such insurance, 
only with respect to the portion of the original principal obligation 
(including such initial service charges, appraisal, inspection, and 
other fees approved by the Secretary) of an eligible refinancing 
mortgage that exceeds 95 percent of the appraised value of the property 
subject to the mortgage, as of the date the refinancing mortgage is 
accepted for insurance under this section, as determined by the 
Secretary.
    ``(c) Eligibility Requirements.--The Secretary may insure a 
refinancing mortgage under this section only if the mortgage complies 
with the following requirements:
            ``(1) Mortgagee.--The refinancing mortgage has been made 
        to, and held by, a mortgagee approved by the Secretary as 
        responsible and able to service the mortgage properly.
            ``(2) Mortgagor.--The mortgagor under the refinancing 
        mortgage--
                    ``(A) is the mortgagor under the underlying 
                mortgage being refinanced;
                    ``(B)(i) has made regular payments on a timely 
                basis on the underlying mortgage (and, if applicable, 
                any other previous mortgage on the property), as 
                required by the applicable mortgage agreement, for a 
                period of not less than 36 months, or (ii) has been 
                determined under subsection (d) to be an acceptable 
                credit risk; and
                    ``(C) has a gross income that meets such standards 
                as the Secretary shall establish under this section to 
                ensure that the mortgagor will be able (i) to make the 
                periodic payments required by the mortgage insured 
                under this section, and (ii) to meet other long-term 
                obligations of the mortgagor.
            ``(3) Underlying mortgage.--The proceeds of the refinancing 
        mortgage are used for satisfaction of the outstanding balance 
        owed under an underlying mortgage that--
                    ``(A) is a first mortgage on a dwelling that is--
                            ``(i) designed principally for a 1- to 4-
                        family residence;
                            ``(ii) occupied by the mortgagor under the 
                        refinancing mortgage who is also the mortgagor 
                        under the underlying mortgage; and
                            ``(iii) located in a real estate market 
                        area that the Secretary has determined is no 
                        longer subject to substantially decreasing 
                        property values that will result in an 
                        unreasonable risk of losses to the Federal 
                        Government under mortgage insurance provided 
                        under this section;
                    ``(B) is not delinquent;
                    ``(C) involves an outstanding principal obligation 
                (including such initial service charges, appraisal, 
                inspection, and other fees approved by the Secretary) 
                that exceeds 95 percent of the appraised value of the 
                property subject to the mortgage, as of the date the 
                refinancing mortgage is accepted for insurance under 
                this section, as determined by the Secretary;
                    ``(D) in the case of an underlying mortgage on a 
                condominium unit in a project that was converted from 
                rental housing--
                            ``(i) was executed more than 1 year after 
                        the conversion of the project;
                            ``(ii) has as a mortgagor or comortgagor a 
                        tenant of the rental housing; or
                            ``(iii) covers a unit in a project for 
                        which the conversion is sponsored by a bona 
                        fide tenants organization representing a 
                        majority of the households in the project; and
                    ``(E) meets any other requirements as the Secretary 
                may provide.
            ``(4) Limitation on amount.--The refinancing mortgage 
        involves a principal obligation in an amount that does not to 
        exceed--
                    ``(A) 125 percent of the appraised value of the 
                property subject to the mortgage; and
                    ``(B) the outstanding balance owed under the 
                underlying mortgage, plus such initial service charges, 
                appraisal, inspection, and other fees as the Secretary 
                shall approve.
            ``(5) Monthly payment amount.--The amount of each monthly 
        payment due under the refinancing mortgage is less than that 
        due under the underlying mortgage for the month in which the 
        refinancing mortgage is executed.
            ``(6) Interest.--The refinancing mortgage bears interest at 
        such rate as may be agreed upon by the mortgagor and the 
        mortgagee.
            ``(7) Maturity.--The refinancing mortgage has a maturity 
        satisfactory to the Secretary that does not, in any event, 
        exceed 35 years from the date of the beginning of the 
        amortization of the mortgage, and the Secretary may provide 
        under this paragraph for limitations on the maturity of 
        refinancing mortgages based on the unexpired terms of the 
        underlying mortgages being refinanced.
            ``(8) Other terms.--The refinancing mortgage has such terms 
        regarding maturity, amortization, periodic payments and 
        application of such payments to principal, insurance, repairs, 
        alterations, payment of taxes, default reserves, delinquency 
        charges, foreclosure proceedings, anticipation of maturity, 
        additional and subordinate liens, and other matters as the 
        Secretary may provide.
    ``(d) Hardship Provisions.--A mortgagor failing to meet the 
requirements of subsection (c)(2)(B)(i) shall be considered to be an 
acceptable credit risk for purposes of subsection (c)(2)(B)(ii) if the 
Secretary determines that--
            ``(1) the failure was caused by circumstances beyond the 
        control of the mortgagor that rendered the mortgagor 
        temporarily unable to make such regular payments on the 
        underlying mortgage;
            ``(2) before such circumstances, the mortgagor had made 
        regular payments on a timely basis on the underlying mortgage 
        (and, if applicable, any other previous mortgage on the 
        property), as required by the applicable mortgage agreement for 
        such period as the Secretary considers appropriate for purposes 
        of this subsection;
            ``(3) the circumstances causing such failure have been 
        alleviated, or the income of the mortgagor has increased, to 
        the extent necessary to allow the mortgagor to make regular 
        payments under the refinancing mortgage; and
            ``(4) the mortgagor meets such other requirements as the 
        Secretary may reasonably require to ensure that the mortgagor 
        will meet the obligations under the refinancing mortgage.
    ``(e) General Insurance Fund.--The insurance of refinancing 
mortgages under this section shall be the obligation of the General 
Insurance Fund established under section 519.
    ``(f) Premiums.--
            ``(1) Establishment.--The Secretary may fix a premium 
        charge for the insurance under this section of refinancing 
        mortgages, which shall be an amount equivalent to a percentage 
        per annum, determined by the Secretary, of the amount of the 
        portion of outstanding principal obligation of the refinancing 
        mortgage that is insured under this section, without taking 
        into account delinquent payments or prepayments. Any such 
        premiums received shall be credited to the General Insurance 
        Fund.
            ``(2) Manner and timing.--The premium charges shall be 
        payable by the mortgagee either in cash or in debentures (at 
        par plus accrued interest) issued by the Secretary as 
        obligations of the General Insurance Fund, in the manner 
        prescribed by the Secretary, except that the Secretary may not 
        require the payment of any such premium charges at the time the 
        refinancing mortgage is insured. In fixing the premium charges, 
        the Secretary shall take into consideration the risk involved 
        in insuring the portion of a mortgage that exceeds the 
        appraised value of the property subject to the mortgage.
            ``(3) Acceptance.--If the Secretary finds upon presentation 
        of a refinancing mortgage for insurance that the mortgage 
        complies with the provisions of this section, the mortgage may 
        be accepted for insurance by endorsement or otherwise as the 
        Secretary may prescribe.
            ``(4) Refund of unearned premiums.--In the event the 
        portion of the principal obligation of any refinancing mortgage 
        insured under this section is paid in full prior to the 
        maturity date, the Secretary may refund to the mortgagee for 
        the account of the mortgagor all of the current unearned 
        premium charges theretofore paid or such portion of the 
        unearned premiums as the Secretary determines to be equitable.
    ``(g) Right to Insurance Benefits.--The mortgagee shall be entitled 
to receive the benefits of the insurance, in accordance with 
regulations prescribed by the Secretary upon--
            ``(1) the sale of the insured property--
                    ``(A) at foreclosure, if such sale is for at least 
                the fair market value of the property (with appropriate 
                adjustments), as determined by the Secretary; or
                    ``(B) by the mortgagor after default, if--
                            ``(i) the sale has been approved by the 
                        Secretary;
                            ``(ii) the mortgagee receives an amount at 
                        least equal to the fair market value of the 
                        property (with appropriate adjustments), as 
                        determined by the Secretary; and
                            ``(iii) the mortgagor has received 
                        appropriate homeownership counseling, as 
                        determined by the Secretary; and
            ``(2) assignment to the Secretary of all claims of the 
        mortgagee against the mortgagor or others to any proceeds of 
        such sale in excess of the amount equal to the portion of the 
        unpaid principal balance of the loan not insured under this 
        section that arise out of the mortgage transaction or 
        foreclosure proceedings, except any claims that have been 
        released with the consent of the Secretary.
    ``(h) Payment of Insurance.--
            ``(1) In general.--Upon the sale of insured property and 
        assignment of claims referred to in subsection (g), the 
        obligation of the mortgagee to pay the premium charges for 
        insurance shall cease and the Secretary shall--
                    ``(A) pay to the mortgagee cash in an amount equal 
                to the value of the portion of the mortgage insured 
                under this section, as determined by the Secretary; or
                    ``(B) issue to the mortgagee debentures having a 
                par value equal to the cash amount under subparagraph 
                (A).
            ``(2) Cash payments.--If the insurance payment is made in 
        cash, there shall be included in the payment an amount 
        equivalent to the interest that the debentures would have 
        earned if such payment were made in debentures, computed to a 
        date established pursuant to regulations issued by the 
        Secretary.
    ``(i) Debentures.--
            ``(1) Execution.--Debentures issued under this section 
        shall be executed in the name of the General Insurance Fund as 
        obligor, shall be negotiable, and, if in book entry form, 
        transferable, in the manner provided by the Secretary in 
        regulations, and shall be dated as of the date the insured 
        property is sold under subsection (g) and shall bear interest 
        from such date.
            ``(2) Terms.--Debentures issued under this section shall--
                    ``(A) bear interest at a rate, established by the 
                Secretary pursuant to section 224, payable semiannually 
                on the 1st day of January and the 1st day of July of 
                each year;
                    ``(B) have such maturity as the Secretary shall 
                provide;
                    ``(C) be exempt from taxation as provided in 
                section 207(i) with respect to debentures issued under 
                such section;
                    ``(D) be in such form and amounts, subject to such 
                terms and conditions, and include such provisions for 
                redemption, if any, as may be prescribed by the 
                Secretary of Housing and Urban Development, with the 
                approval of the Secretary of the Treasury, and may be 
                in book entry or certificated registered form, or such 
                other form as the Secretary of Housing and Urban 
                Development may prescribe in regulations;
                    ``(E) be paid out of the General Insurance Fund, 
                which shall be primarily liable therefor; and
                    ``(F) be fully and unconditionally guaranteed as to 
                principal and interest by the United States, and, in 
                the case of debentures issued in certificated 
                registered form, the guaranty shall be expressed on the 
                face of the debentures.
            ``(3) Obligation of treasury.--In the event the General 
        Insurance Fund fails to pay upon demand, when due, the 
        principal of or interest on any debentures so guaranteed, the 
        Secretary of the Treasury shall pay the holders the amount of 
        the debentures, which is hereby authorized to be appropriated, 
        and upon such payment the Secretary of the Treasury shall 
        succeed to all the rights of the holders of such debentures, to 
        the extent of the amount paid.
    ``(j) Other Powers of Secretary.--The provisions of subsections 
(c), (d), and (h) of section 2 shall apply to refinancing mortgages 
insured under this subsection and, for the purposes of this subsection, 
references in subsections (c), (d), and (h) of section 2 to `this 
section' or `this title' shall be construed to refer to this section.
    ``(k) Protection of Secretary's Interest.--Notwithstanding any 
other provisions of this Act, the Secretary may--
            ``(1) make expenditures and advances out of funds made 
        available by this Act to preserve and protect the interest of 
        the Secretary in any security for, or the lien or priority of 
        the lien under, any mortgage or other indebtedness insured by 
        or owing to the Secretary under this section; and
            ``(2) bid for and purchase at any foreclosure or other sale 
        or otherwise acquire property pledged, mortgaged, conveyed, 
        attached, or levied upon to secure the payment of any 
        indebtedness owing to the Secretary under this section.
The authority conferred by this subsection may be exercised as provided 
in the last sentence of section 204(g).
    ``(l) Refinancing.--A refinancing mortgage insured under this 
section may be refinanced and extended in accordance with such terms 
and conditions as the Secretary may prescribe, but in no event for an 
additional amount or term which exceeds the maximum provided for 
pursuant to this subsection.
    ``(m) Definitions.--For purposes of this section:
            ``(1) The terms `mortgage', `mortgagee', `mortgagor', and 
        `first mortgage' have the meanings given such terms in section 
        201, except that the term `mortgage' includes--
                    ``(A) a first mortgage given to secure the unpaid 
                purchase price of a fee interest in, or long-term 
                leasehold interest in, a one-family unit in a 
                multifamily project, including a project in which the 
                dwelling units are attached, semi-detached, or 
                detached, and an undivided interest in the common areas 
                and facilities which serve the project; and
                    ``(B) a first lien given to secure a loan made to 
                finance the purchase of stock or membership in a 
                cooperative ownership housing corporation the permanent 
                occupancy of the dwelling units of which is restricted 
                to members of such corporation, where the purchase of 
                such stock or membership will entitle the purchaser to 
                the permanent occupancy of one of such units.
            ``(2) The term `underlying mortgage' means, with respect to 
        a refinancing mortgage, the first mortgage on the same dwelling 
        that is subject to the refinancing mortgage.
            ``(3) The term `refinancing mortgage' means a subordinate 
        lien on a dwelling securing a loan, the proceeds of which are 
        used for the satisfaction of advances on, or the unpaid 
        purchase price, of the dwelling, which are secured by a first 
        mortgage on the same dwelling.''.

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HR 3296 IH----2
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