I 

109TH CONGRESS 

2D SESSION H. R. 5121 

To modernize and update the National Housing Act and enable the Federal 

Housing Administration to use risk-based pricing to more effectively 

reach underserved borrowers, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 6, 2006 

Mr. NEY (for himself, Ms. WATERS, Mr. GARY G. MILLER of California, and 

Mr. TIBERI) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To modernize and update the National Housing Act and 

enable the Federal Housing Administration to use riskbased pricing to more effectively reach underserved borrowers, and for other purposes. 

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 AND TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Expanding American Homeownership Act of 2006’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title and table of contents. 


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Sec. 2. Findings and purposes. 

Sec. 3. Maximum principal loan obligation. 

Sec. 4. Extension of mortgage term. 

Sec. 5. Cash investment requirement. 

Sec. 6. Mortgage insurance premiums. 

Sec. 7. Rehabilitation loans. 

Sec. 8. Discretionary action. 

Sec. 9. Insurance of condominiums. 

Sec. 10. Mutual Mortgage Insurance Fund. 

Sec. 11. Hawaiian home lands and Indian reservations. 

Sec. 12. Conforming and technical amendments. 

Sec. 13. Home equity conversion mortgages. 

Sec. 14. Conforming loan limit in disaster areas. 

Sec. 15. Savings provision. 

Sec. 16. Implementation. 

1 SEC. 2. FINDINGS AND PURPOSES. 

2 (a) FINDINGS.—The Congress finds that— 

3 (1) one of the primary missions of the Federal 

4 Housing Administration (FHA) single family mort5 gage insurance program is to reach borrowers who 

6 are underserved, or not served, by the existing con7 ventional mortgage marketplace; 

8 (2) the FHA program has a long history of in9 novation, which includes pioneering the 30-year self10 amortizing mortgage and a safe-to-seniors reverse 

11 mortgage product, both of which were once thought 

12 too risky to private lenders; 

13 (3) the FHA single family mortgage insurance 

14 program traditionally has been a major provider of 

15 mortgage insurance for home purchases; 

16 (4) the FHA mortgage insurance premium 

17 structure, as well as FHA’s product offerings, 

18 should be revised to reflect FHA’s enhanced ability 


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1 to determine risk at the loan level and to allow FHA 

2 to better respond to changes in the mortgage mar3 ket; 

4 (5) during past recessions, including the oil5 patch downturns in the mid-1980s, FHA remained 

6 a viable credit enhancer and was therefore instru7 mental in preventing a more catastrophic collapse in 

8 housing markets and a greater loss of homeowner 

9 equity; and 

10 (6) as housing price appreciation slows and in11 terest rates rise, many homeowners and prospective 

12 homebuyers will need the less-expensive, safer fi13 nancing alternative that FHA mortgage insurance 

14 provides. 

15 (b) PURPOSES.—The purposes of this Act are— 

16 (1) to provide flexibility to FHA to allow for 

17 the insurance of housing loans for low- and mod18 erate-income homebuyers during all economic cycles 

19 in the mortgage market; 

20 (2) to modernize the FHA single family mort21 gage insurance program by making it more reflective 

22 of enhancements to loan-level risk assessments and 

23 changes to the mortgage market; and 

24 (3) to adjust the loan limits for the single fam25 ily mortgage insurance program to reflect rising 


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1 house prices and the increased costs associated with 

2 new construction. 

3 SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION. 

4 Paragraph (2) of section 203(b) of the National 

5 Housing Act (12 U.S.C. 1709(b)(2)) is amended— 

6 (1) in subparagraph (A)— 

7 (A) by striking the subparagraph designa8 tion and all that follows through the end of 

9 clause (i) and inserting the following: 

10 ‘‘(A) not to exceed the lesser of— 

11 ‘‘(i) the median house price in the 

12 area, as determined by the Secretary; or’’; 

13 and 

14 (B) in clause (ii)— 

15 (i) by striking ‘‘87 percent of’’; 

16 (ii) by striking ‘‘for Fiscal Year’’ and 

17 inserting a comma; and 

18 (iii) by striking ‘‘48 percent’’ and in19 serting ‘‘65 percent’’; 

20 (2) by striking subparagraph (B) and inserting 

21 the following: 

22 ‘‘(B) not to exceed the appraised value of 

23 the property, plus any initial service charges, 

24 appraisal, inspection and other fees in connecVerDate Aug 31 2005 22:31 Apr 13, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5121.IH H5121

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1 tion with the mortgage as approved by the Sec2 retary.’’; 

3 (3) in the matter after and below subparagraph 

4 (B), by striking the semi-colon in the first sentence 

5 and all that follows through ‘‘title 38, United States 

6 Code’’ and inserting a period; and 

7 (4) by striking the last undesignated paragraph 

8 (relating to counseling with respect to the respon9 sibilities and financial management involved in 

10 homeownership). 

11 SEC. 4. EXTENSION OF MORTGAGE TERM. 

12 Paragraph (3) of section 203(b) of the National 

13 Housing Act (12 U.S.C. 1709(b)(3)) is amended— 

14 (1) by striking ‘‘thirty-five years’’ and inserting 

15 ‘‘forty years’’; and 

16 (2) by striking ‘‘(or thirty years if such mort17 gage is not approved for insurance prior to construc18 tion)’’. 

19 SEC. 5. CASH INVESTMENT REQUIREMENT. 

20 Paragraph (9) of section 203(b) of the National 

21 Housing Act (12 U.S.C. 1709(b)(9) is amended by strik22 ing the paragraph designation and all that follows through 

23 ‘‘Provided further, That for’’ and inserting the following: 

24 ‘‘(9) Be executed by a mortgagor who shall 

25 have paid on account of the property, in cash or its 


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1 equivalent, an amount, if any, as the Secretary may 

2 determine based on factors determined by the Sec3 retary and commensurate with the likelihood of de4 fault. For’’. 

5 SEC. 6. MORTGAGE INSURANCE PREMIUMS. 

6 Section 203(c) of the National Housing Act (12 

7 U.S.C. 1709(c)) is amended— 

8 (1) in paragraph (2), in the matter preceding 

9 subparagraph (A), by striking ‘‘Notwithstanding’’ 

10 and inserting ‘‘Except as provided in paragraph (3) 

11 and notwithstanding’’; and 

12 (2) by adding at the end the following new 

13 paragraph: 

14 ‘‘(3) FLEXIBLE RISK-BASED PREMIUMS.— 

15 ‘‘(A) IN GENERAL.—For any mortgage insured 

16 by the Secretary under this title that is secured by 

17 a 1- to 4-family dwelling and for which the loan ap18 plication is received by the mortgagor on or after 

19 October 1, 2006, the Secretary may establish a 

20 mortgage insurance premium structure involving a 

21 single premium payment collected prior to the insur22 ance of the mortgage or periodic payments, or both, 

23 without regard to any maximum or minimum pre24 mium amounts set forth in this subsection. The rate 

25 of premium for such a mortgage may vary during 


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1 the mortgage term as long as the basis for deter2 mining the variable rate is established before the 

3 execution of the mortgage. The Secretary may 

4 change a premium structure established under this 

5 subparagraph but only to the extent that such 

6 change is not applied to any mortgage already exe7 cuted. 

8 ‘‘(B) ESTABLISHMENT AND ALTERATION OF

9 PREMIUM STRUCTURE.—A premium structure shall 

10 be established or changed under subparagraph (A) 

11 only by providing notice to mortgagees and to the 

12 Congress, at least 30 days before the premium 

13 structure is established or changed. 

14 ‘‘(C) CONSIDERATIONS FOR PREMIUM STRUC15 TURE.—When establishing a premium structure 

16 under subparagraph (A) or when changing such a 

17 premium structure, the Secretary shall consider the 

18 following: 

19 ‘‘(i) The effect of the proposed premium 

20 structure on the Secretary’s ability to meet the 

21 operational goals of the Mutual Mortgage In22 surance Fund as provided in section 202(a). 

23 ‘‘(ii) Underwriting variables. 


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1 ‘‘(iii) The extent to which new pricing 

2 under the proposed premium structure has po3 tential for acceptance in the private market. 

4 ‘‘(iv) The administrative capability of the 

5 Secretary to administer the proposed premium 

6 structure. 

7 ‘‘(v) The effect of the proposed premium 

8 structure on the Secretary’s ability to maintain 

9 the availability of mortgage credit and provide 

10 stability to mortgage markets.’’. 

11 SEC. 7. REHABILITATION LOANS. 

12 Subsection (k) of section 203 of the National Hous13 ing Act (12 U.S.C. 1709(k)) is amended— 

14 (1) in paragraph (1), by striking ‘‘on’’ and all 

15 that follows through ‘‘1978’’; and 

16 (2) in paragraph (5)— 

17 (A) by striking ‘‘General Insurance Fund’’ 

18 the first place it appears and inserting ‘‘Mutual 

19 Mortgage Insurance Fund’’; and 

20 (B) in the second sentence, by striking the 

21 comma and all that follows through ‘‘General 

22 Insurance Fund’’. 

23 SEC. 8. DISCRETIONARY ACTION. 

24 The National Housing Act is amended— 


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1 (1) in subsection (e) of section 202 (12 U.S.C. 

2 1708(e))— 

3 (A) in paragraph (3)(B), by striking ‘‘sec4 tion 202(e) of the National Housing Act’’ and 

5 inserting ‘‘this subsection’’; and 

6 (B) by redesignating such subsection as 

7 subsection (f); 

8 (2) by striking paragraph (4) of section 203(s) 

9 (12 U.S.C. 1709(s)(4)) and inserting the following 

10 new paragraph: 

11 ‘‘(4) the Secretary of Agriculture;’’; and 

12 (3) by transferring subsection (s) of section 203 

13 (as amended by paragraph (2) of this section) to 

14 section 202, inserting such subsection after sub15 section (d) of section 202, and redesignating such 

16 subsection as subsection (e). 

17 SEC. 9. INSURANCE OF CONDOMINIUMS. 

18 (a) IN GENERAL.—Section 234 of the National 

19 Housing Act (12 U.S.C. 1715y) is amended— 

20 (1) in subsection (c)— 

21 (A) in the first sentence— 

22 (i) by striking ‘‘and’’ before ‘‘(2)’’; 

23 and 

24 (ii) by inserting before the period at 

25 the end the following: ‘‘, and (3) the 


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1 project has a blanket mortgage insured by 

2 the Secretary under subsection (d)’’; and 

3 (B) in clause (B) of the third sentence, by 

4 striking ‘‘thirty-five years’’ and inserting ‘‘forty 

5 years’’; and 

6 (2) in subsection (g), by striking ‘‘, except 

7 that’’ and all that follows and inserting a period. 

8 (b) DEFINITION OF MORTGAGE.—Section 201(a) of 

9 the National Housing Act (12 U.S.C. 1707(a)) is amend10 ed— 

11 (1) in clause (1), by striking ‘‘or’’ and inserting 

12 a comma; and 

13 (2) by inserting before the semicolon the fol14 lowing: ‘‘, or (3) a first mortgage given to secure the 

15 unpaid purchase price of a fee interest in, or long16 term leasehold interest in, a one-family unit in a 

17 multifamily project, including a project in which the 

18 dwelling units are attached, semi-detached, or de19 tached, and an undivided interest in the common 

20 areas and facilities which serve the project’’. 

21 SEC. 10. MUTUAL MORTGAGE INSURANCE FUND. 

22 (a) IN GENERAL.—Subsection (a) of section 202 of 

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

24 to read as follows: 

25 ‘‘(a) MUTUAL MORTGAGE INSURANCE FUND.— 


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1 ‘‘(1) ESTABLISHMENT.—Subject to the provi2 sions of the Federal Credit Reform Act of 1990, 

3 there is hereby created a Mutual Mortgage Insur4 ance Fund (in this title referred to as the ‘Fund’), 

5 which shall be used by the Secretary to carry out the 

6 provisions of this title with respect to mortgages in7 sured under section 203. The Secretary may enter 

8 into commitments to guarantee, and may guarantee, 

9 such insured mortgages. 

10 ‘‘(2) LIMIT ON LOAN GUARANTEES.—The au11 thority of the Secretary to enter into commitments 

12 to guarantee such insured mortgages shall be effec13 tive for any fiscal year only to the extent that the 

14 aggregate original principal loan amount under such 

15 mortgages, any part of which is guaranteed, does 

16 not exceed the amount specified in appropriations 

17 Acts for such fiscal year. 

18 ‘‘(3) FIDUCIARY RESPONSIBILITY.—The Sec19 retary has a responsibility to ensure that the Mutual 

20 Mortgage Insurance Fund remains financially sound. 

21 ‘‘(4) ANNUAL INDEPENDENT ACTUARIAL

22 STUDY.—The Secretary shall provide for an inde23 pendent actuarial study of the Fund to be conducted 

24 annually, which shall analyze the financial position 

25 of the Fund. The Secretary shall submit a report 


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1 annually to the Congress describing the results of 

2 such study and assessing the financial status of the 

3 Fund. The report shall recommend adjustments to 

4 underwriting standards, program participation, or 

5 premiums, if necessary, to ensure that the Fund re6 mains financially sound. 

7 ‘‘(5) QUARTERLY REPORTS.—During each fiscal 

8 year, the Secretary shall submit a report to the Con9 gress for each quarter, which shall specify for mort10 gages that are obligations of the Fund— 

11 ‘‘(A) the cumulative volume of loan guar12 antee commitments that have been made during 

13 such fiscal year through the end of the quarter 

14 for which the report is submitted; 

15 ‘‘(B) the types of loans insured, cat16 egorized by risk; 

17 ‘‘(C) any significant changes between ac18 tual and projected claim and prepayment activ19 ity; 

20 ‘‘(D) projected versus actual loss rates; 

21 and 

22 ‘‘(E) updated projections of the annual 

23 subsidy rates to ensure that increases in risk to 

24 the Fund are identified and mitigated by ad25 justments to underwriting standards, program 


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1 participation, or premiums, and the financial 

2 soundness of the Fund is maintained. 

3 The first quarterly report under this paragraph shall 

4 be submitted on the last day of the first quarter of 

5 fiscal year 2007, or upon the expiration of the 90- 

6 day period beginning on the date of the enactment 

7 of the Expanding American Homeownership Act of 

8 2006, whichever is later. 

9 ‘‘(6) ADJUSTMENT OF PREMIUMS.—If, pursu10 ant to the independent actuarial study of the Fund 

11 required under paragraph (5), the Secretary deter12 mines that the Fund is not meeting the operational 

13 goals established under paragraph (8) or there is a 

14 substantial probability that the Fund will not main15 tain its established target subsidy rate, the Secretary 

16 may either make programmatic adjustments under 

17 section 203 as necessary to reduce the risk to the 

18 Fund, or make appropriate premium adjustments. 

19 ‘‘(7) OPERATIONAL GOALS.—The operational 

20 goals for the Fund are— 

21 ‘‘(A) to charge borrowers under loans that 

22 are obligations of the Fund an appropriate pre23 mium for the risk that such loans pose to the 

24 Fund; 


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1 ‘‘(B) to minimize the default risk to the 

2 Fund and to homeowners; 

3 ‘‘(C) to curtail the impact of adverse selec4 tion on the Fund; and 

5 ‘‘(D) to meet the housing needs of the bor6 rowers that the single family mortgage insur7 ance program under this title is designed to 

8 serve.’’. 

9 (b) OBLIGATIONS OF FUND.—The National Housing 

10 Act is amended as follows: 

11 (1) HOMEOWNERSHIP VOUCHER PROGRAM

12 MORTGAGES.—In section 203(v) (12 U.S.C. 

13 1709(v))— 

14 (A) by striking ‘‘Notwithstanding section 

15 202 of this title, the’’ and inserting ‘‘The’’; and 

16 (B) by striking ‘‘General Insurance Fund’’ 

17 the first place such term appears and all that 

18 follows and inserting ‘‘Mutual Mortgage Insur19 ance Fund.’’. 

20 (2) HOME EQUITY CONVERSION MORTGAGES.— 

21 Section 255(i)(2)(A) of the National Housing Act 

22 (12 U.S.C. 1715z–20(i)(2)(A)) is amended by strik23 ing ‘‘General Insurance Fund’’ and inserting ‘‘Mu24 tual Mortgage Insurance Fund’’. 


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1 (c) CONFORMING AMENDMENTS.—The National 

2 Housing Act is amended— 

3 (1) in section 205 (12 U.S.C. 1711), by striking 

4 subsections (g) and (h); and 

5 (2) in section 519(e) (12 U.S.C. 1735c(e)), by 

6 striking ‘‘203(b)’’ and all that follows through 

7 ‘‘203(i)’’ and inserting ‘‘203, except as determined 

8 by the Secretary,’’. 

9 SEC. 11. HAWAIIAN HOME LANDS AND INDIAN RESERVA10 TIONS. 

11 (a) HAWAIIAN HOME LANDS.—Section 247(c) of the 

12 National Housing Act (12 U.S.C. 1715z–12) is amend13 ed— 

14 (1) by striking ‘‘General Insurance Fund estab15 lished in section 519’’ and inserting ‘‘Mutual Mort16 gage Insurance Fund’’; and 

17 (2) in the second sentence, by striking ‘‘(1) all 

18 references’’ and all that follows through ‘‘and (2)’’. 

19 (b) INDIAN RESERVATIONS.—Section 248(f) of the 

20 National Housing Act (12 U.S.C. 1715z–13) is amend21 ed— 

22 (1) by striking ‘‘General Insurance Fund’’ the 

23 first place it appears through ‘‘519’’ and inserting 

24 ‘‘Mutual Mortgage Insurance Fund’’; and 


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1 (2) in the second sentence, by striking ‘‘(1) all 

2 references’’ and all that follows through ‘‘and (2)’’. 

3 SEC. 12. CONFORMING AND TECHNICAL AMENDMENTS. 

4 (a) REPEALS.—The following provisions of the Na5 tional Housing Act are repealed: 

6 (1) Subsection (i) of section 203 (12 U.S.C. 

7 1709(i)). 

8 (2) Subsection (o) of section 203 (12 U.S.C. 

9 1709(o)). 

10 (3) Subsection (p) of section 203 (12 U.S.C. 

11 1709(p)). 

12 (4) Subsection (q) of section 203 (12 U.S.C. 

13 1709(q)). 

14 (5) Section 222 (12 U.S.C. 1715m). 

15 (6) Section 237 (12 U.S.C. 1715z–2). 

16 (7) Section 245 (12 U.S.C. 1715z–10). 

17 (b) DEFINITION OF AREA.—Section 203(u)(2)(A) of 

18 the National Housing Act (12 U.S.C. 1709(u)(2)(A)) is 

19 amended by striking ‘‘shall’’ and all that follows and in20 serting ‘‘means a metropolitan statistical area as estab21 lished by the Office of Management and Budget;’’. 

22 (c) DEFINITION OF STATE.—Section 201(d) of the 

23 National Housing Act (12 U.S.C. 1707(d)) is amended by 

24 striking ‘‘the Trust Territory of the Pacific Islands’’ and 


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1 inserting ‘‘the Commonwealth of the Northern Mariana 

2 Islands’’. 

3 SEC. 13. HOME EQUITY CONVERSION MORTGAGES. 

4 Section 255 of the National Housing Act (12 U.S.C. 

5 1715z–20) is amended— 

6 (1) in subsection (g)— 

7 (A) by striking the first sentence; and 

8 (B) by striking ‘‘established under section 

9 203(b)(2)’’ and all that follows through ‘‘lo10 cated’’ and inserting ‘‘limitation established 

11 under section 305(a)(2) of the Federal Home 

12 Loan Mortgage Corporation Act for a 1-family 

13 residence’’; 

14 (2) in subsection (i)(1)(C), by striking ‘‘limita15 tions’’ and inserting ‘‘limitation’’; and 

16 (3) by adding at the end the following new sub17 section: 

18 ‘‘(n) AUTHORITY TO INSURE HOME PURCHASE

19 MORTGAGE.— 

20 ‘‘(1) IN GENERAL.—Notwithstanding any other 

21 provision in this section, the Secretary may insure, 

22 upon application by a mortgagee, a home equity con23 version mortgage upon such terms and conditions as 

24 the Secretary may prescribe, when the primary pur25 pose of the home equity conversion mortgage is to 


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1 enable an elderly mortgagor to purchase a 1-to 4 

2 family dwelling in which the mortgagor will occupy 

3 or occupies one of the units. 

4 ‘‘(2) LIMITATION ON PRINCIPAL OBLIGATION.— 

5 A home equity conversion mortgage insured pursu6 ant to paragraph (1) shall involve a principal obliga7 tion that does not exceed the dollar amount limita8 tion determined under section 305(a)(2) of the Fed9 eral Home Loan Mortgage Corporation Act for a 

10 residence of the applicable size.’’. 

11 SEC. 14. CONFORMING LOAN LIMIT IN DISASTER AREAS. 

12 Section 203(h) of the National Housing Act (12 

13 U.S.C. 1709) is amended— 

14 (1) by inserting after ‘‘property’’ the following: 

15 ‘‘plus any initial service charges, appraisal, inspec16 tion and other fees in connection with the mortgage 

17 as approved by the Secretary,’’; 

18 (2) by striking the third sentence (as added by 

19 chapter 7 of the Emergency Supplemental Appro20 priations Act of 1994 (Public Law 103–211; 108 

21 Stat. 12)); and 

22 (3) by adding at the end the following new sen23 tence: ‘‘In any case in which the single family resi24 dence to be insured under this subsection is within 

25 a jurisdiction in which the President has declared a 


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1 major disaster to have occurred, the Secretary is au2 thorized, for a temporary period not to exceed 36 

3 months from the date of such Presidential declara4 tion, to enter into agreements to insure a mortgage 

5 which involves a principal obligation of up to 100 

6 percent of the dollar limitation determined under 

7 section 305(a)(2) of the Federal Home Loan Mort8 gage Corporation Act for a single family residence, 

9 and not in excess of 100 percent of the appraised 

10 value of the property plus any initial service charges, 

11 appraisal, inspection and other fees in connection 

12 with the mortgage as approved by the Secretary.’’. 

13 SEC. 15. SAVINGS PROVISION. 

14 Any mortgage insured under title II of the National 

15 Housing Act before the date of enactment of this title shall 

16 continue to be governed by the laws, regulations, orders, 

17 and terms and conditions to which it was subject on the 

18 day before the date of the enactment of this Act. 

19 SEC. 16. IMPLEMENTATION. 

20 The Secretary of Housing and Urban Development 

21 shall by notice establish any additional requirements that 

22 may be necessary to immediately carry out the provisions 

23 of this title. The notice shall take effect upon issuance. 

Æ 


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