II

106TH CONGRESS

2D SESSION S. 2806

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

JUNE 28, 2000

Mr. SARBANES (for himself and Ms. MIKULSKI) 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 2000’’.
2

•S 2806 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, not less frequently than annually, the Secretary

13 shall—

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

15 insured single family mortgages originated or under16 written by each mortgagee, which indicators shall be

17 prescribed by the Secretary by regulation and shall

18 include the rates of early defaults and claims; and

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

20 those indicators of portfolio risk for insured single

21 family mortgage loans originated or underwritten by

22 the mortgagee with the comparable indicators for

23 other mortgagees originating or underwriting in24 sured single family mortgage loans in the same area.

25 ‘‘(b) TERMINATION OF MORTGAGEE ORIGINATION

26 APPROVAL.—
3

•S 2806 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 rink to the in6 surance funds, the Secretary may terminate the ap7 proval of that mortgagee to originate or underwrite

8 single family mortgages. A determination under this

9 paragraph shall be made in accordance with regula10 tions issued by the Secretary (which may include

11 any regulation published before the date of enact12 ment of this section, as determined by the Sec13 retary).

14 ‘‘(2) TERMINATION PROCEDURES.—

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

16 prior to the effective date of a termination

17 under this subsection, the Secretary shall pro18 vide written notice of such termination to the

19 mortgagee.

20 ‘‘(B) MEETING.—Not later than 30 days

21 after receiving a written notice under subpara22 graph (A), the mortgagee may submit to the

23 Secretary a written request for a meeting re24 garding the termination. Upon receipt of a writ25 ten request under this subparagraph, the Sec-
4

•S 2806 IS

1 retary shall provide the mortgagee with a meet2 ing with the official authorized to issue termi3 nation notices on behalf of the Secretary (or a

4 designee of that official). At the meeting, the

5 mortgagee may present for consideration spe6 cific factors that the mortgagee believes were

7 beyond the control of the mortgagee that con8 tributed to the excessive default and claim rate.

9 ‘‘(C) EFFECTIVE DATE.—A termination

10 under this subsection shall take effect 60 days

11 after the date on which written notice is pro12 vided to the mortgagee under subparagraph

13 (A), unless the Secretary withdraws the termi14 nation notice or extends the notice period.

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

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

17 is authorized by the Secretary to originate insured single18 family mortgages.’’.

Æ