IB 

Union Calendar No. 340 

109TH CONGRESS 

2D SESSION H. R. 5121 

[Report No. 109–589] 

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 

JULY 20, 2006 

Additional sponsors: Mr. SHAYS, Mr. WYNN, Ms. HARRIS, Mr. HINOJOSA, 

Mrs. MALONEY, Mr. PAYNE, Mr. MARCHANT, Mr. CLAY, Mrs. DRAKE, 

Mr. MILLER of North Carolina, Mr. LINCOLN DIAZ-BALART of Florida, 

Mr. ENGLISH of Pennsylvania, Mr. MARIO DIAZ-BALART of Florida, Mr. 

MCKEON, Mr. DREIER, Mr. CALVERT, Mr. RADANOVICH, Mr. CAMPBELL

of California, Mr. ROHRABACHER, Mr. FORTUN ̃O, Mrs. CAPITO, Ms. 

GINNY BROWN-WAITE of Florida, Mr. ISRAEL, Mr. PEARCE, Mr. 

LATOURETTE, Mr. ROSS, Mr. DAVIS of Kentucky, Mr. FOLEY, Mr. PORTER, Mr. RENZI, Mr. NEUGEBAUER, Mrs. JO ANN DAVIS of Virginia, Mr. 

ANDREWS, Mr. SANDERS, Ms. PRYCE of Ohio, Mr. FEENEY, Mr. SESSIONS, Mr. GOODE, Mr. MCHUGH, Mr. RAMSTAD, Mr. MCGOVERN, Mr. 

AL GREEN of Texas, Mr. WELDON of Pennsylvania, Mrs. BIGGERT, Ms. 

CARSON, Mr. MICA, Ms. MATSUI, Mr. PLATTS, Mr. CLEAVER, Mr. SIMMONS, Mr. CASE, Mr. BACHUS, Ms. MCKINNEY, Mr. BACA, Mr. 

GILLMOR, Mr. POMBO, Mr. BURGESS, Mr. LUCAS, Mr. BRADY of Pennsylvania, Mr. SCOTT of Georgia, Mr. CAPUANO, Ms. HART, Ms. BERKLEY, Mr. DAVIS of Alabama, Mr. OTTER, Mr. CLYBURN, Mr. FOSSELLA, 

Mr. ROTHMAN, Mr. DAVIS of Tennessee, Mr. LARSEN of Washington, 

Mrs. BLACKBURN, Mr. BOEHLERT, Mr. KLINE, Mr. CUMMINGS, Ms. 

JACKSON-LEE of Texas, Mr. FITZPATRICK of Pennsylvania, Mr. OWENS, 

Mrs. CHRISTENSEN, Ms. MILLENDER-MCDONALD, Mr. DOOLITTLE, Mr. 

TOWNS, Mr. JEFFERSON, Mr. MEEKS of New York, Mr. FATTAH, Mr. 


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HASTINGS of Florida, Mr. RUSH, Mr. MEEK of Florida, Mr. CONYERS, 

Mr. REYNOLDS, Mr. RANGEL, Ms. NORTON, Mr. DAVIS of Illinois, Mr. 

PICKERING, Mr. BROWN of Ohio, Mr. HIGGINS, Mr. PASCRELL, Mr. 

THOMPSON of Mississippi, Mr. BISHOP of Georgia, Mr. SAXTON, Mr. 

ENGEL, Mr. SWEENEY, Mr. FORD, and Mrs. NAPOLITANO

JULY 20, 2006 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on April 6, 2006] 

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 ‘‘Ex5 panding 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. 

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. 


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Sec. 13. Home equity conversion mortgages. 

Sec. 14. Conforming loan limit in disaster areas. 

Sec. 15. Participation of mortgage brokers and correspondent lenders. 

Sec. 16. Sense of Congress regarding technology for financial systems. 

Sec. 17. Savings provision. 

Sec. 18. 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 are 

6 underserved, or not served, by the existing conven7 tional mortgage marketplace; 

8 (2) the FHA program has a long history of inno9 vation, which includes pioneering the 30-year self-am10 ortizing mortgage and a safe-to-seniors reverse mort11 gage product, both of which were once thought too 

12 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 struc17 ture, as well as FHA’s product offerings, should be re18 vised to reflect FHA’s enhanced ability to determine 

19 risk at the loan level and to allow FHA to better re20 spond to changes in the mortgage market; 

21 (5) during past recessions, including the oil22 patch downturns in the mid-1980s, FHA remained a 


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1 viable credit enhancer and was therefore instrumental 

2 in preventing a more catastrophic collapse in housing 

3 markets and a greater loss of homeowner equity; and 

4 (6) as housing price appreciation slows and in5 terest rates rise, many homeowners and prospective 

6 homebuyers will need the less-expensive, safer financ7 ing alternative that FHA mortgage insurance pro8 vides. 

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

10 (1) to provide flexibility to FHA to allow for the 

11 insurance of housing loans for low- and moderate-in12 come homebuyers during all economic cycles in the 

13 mortgage market; 

14 (2) to modernize the FHA single family mort15 gage insurance program by making it more reflective 

16 of enhancements to loan-level risk assessments and 

17 changes to the mortgage market; and 

18 (3) to adjust the loan limits for the single family 

19 mortgage insurance program to reflect rising house 

20 prices and the increased costs associated with new 

21 construction. 

22 SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION. 

23 Paragraph (2) of section 203(b) of the National Hous24 ing Act (12 U.S.C. 1709(b)(2)) is amended— 


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1 (1) by striking subparagraphs (A) and (B) and 

2 inserting the following new subparagraphs: 

3 ‘‘(A) not to exceed the lesser of— 

4 ‘‘(i) in the case of a 1-family residence, 

5 the median 1-family house price in the 

6 area, as determined by the Secretary; and 

7 in the case of a 2-, 3-, or 4-family residence, 

8 the percentage of such median price that 

9 bears the same ratio to such median price 

10 as the dollar amount limitation in effect 

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

12 Home Loan Mortgage Corporation Act (12 

13 U.S.C. 1454(a)(2)) for a 2-, 3-, or 4-family 

14 residence, respectively, bears to the dollar 

15 amount limitation in effect under such sec16 tion for a 1-family residence; or 

17 ‘‘(ii) the dollar amount limitation de18 termined under such section 305(a)(2) for a 

19 residence of the applicable size; 

20 except that the dollar amount limitation in effect 

21 for any area under this subparagraph may not 

22 be less than the greater of (I) the dollar amount 

23 limitation in effect under this section for the 

24 area on October 21, 1998, or (II) 65 percent of 

25 the dollar limitation determined under such secVerDate Aug 31 2005 02:20 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H5121.RH H5121

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1 tion 305(a)(2) for a residence of the applicable 

2 size; and 

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

4 the property, plus any initial service charges, 

5 appraisal, inspection and other fees in connec6 tion with the mortgage as approved by the Sec7 retary.’’; 

8 (2) in the matter after and below subparagraph 

9 (B), by striking the second sentence (relating to a def10 inition of ‘‘average closing cost’’) and all that follows 

11 through ‘‘title 38, United States Code’’; and 

12 (3) by striking the last undesignated paragraph 

13 (relating to counseling with respect to the responsibil14 ities and financial management involved in home15 ownership). 

16 SEC. 4. EXTENSION OF MORTGAGE TERM. 

17 Paragraph (3) of section 203(b) of the National Hous18 ing Act (12 U.S.C. 1709(b)(3)) is amended— 

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

20 ‘‘forty years’’; and 

21 (2) by striking ‘‘(or thirty years if such mortgage 

22 is not approved for insurance prior to construction)’’. 

23 SEC. 5. CASH INVESTMENT REQUIREMENT. 

24 Paragraph (9) of section 203(b) of the National Hous25 ing Act (12 U.S.C. 1709(b)(9) is amended by striking the 


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1 paragraph designation and all that follows through ‘‘Pro2 vided further, That for’’ and inserting the following: 

3 ‘‘(9) Be executed by a mortgagor who shall have 

4 paid on account of the property, in cash or its equiv5 alent, an amount, if any, as the Secretary may deter6 mine based on factors determined by the Secretary 

7 and commensurate with the likelihood of default. 

8 For’’. 

9 SEC. 6. MORTGAGE INSURANCE PREMIUMS. 

10 Section 203(c) of the National Housing Act (12 U.S.C. 

11 1709(c)) is amended— 

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

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

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

15 and notwithstanding’’; and 

16 (2) by adding at the end the following new para17 graph: 

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

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

20 by the Secretary under this title that is secured by a 

21 1- to 4-family dwelling and for which the loan appli22 cation is received by the mortgagee on or after Octo23 ber 1, 2006, the Secretary may establish a mortgage 

24 insurance premium structure involving a single pre25 mium payment collected prior to the insurance of the 


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1 mortgage or periodic payments, or both, without re2 gard to any maximum or minimum premium 

3 amounts set forth in this subsection. The rate of pre4 mium for such a mortgage may vary during the 

5 mortgage term as long as the basis for determining 

6 the variable rate is established before the execution of 

7 the mortgage. The Secretary may change a premium 

8 structure established under this subparagraph but 

9 only to the extent that such change is not applied to 

10 any mortgage already executed. 

11 ‘‘(B) ESTABLISHMENT AND ALTERATION OF PRE12 MIUM STRUCTURE.—A premium structure shall be es13 tablished or changed under subparagraph (A) only by 

14 providing notice to mortgagees and to the Congress, at 

15 least 30 days before the premium structure is estab16 lished or changed. 

17 ‘‘(C) CONSIDERATIONS FOR PREMIUM STRUC18 TURE.—When establishing a premium structure 

19 under subparagraph (A) or when changing such a 

20 premium structure, the Secretary shall consider the 

21 following: 

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

23 structure on the Secretary’s ability to meet the 

24 operational goals of the Mutual Mortgage Insur25 ance Fund as provided in section 202(a). 


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1 ‘‘(ii) Underwriting variables. 

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

3 under the proposed premium structure has po4 tential for acceptance in the private market. 

5 ‘‘(iv) The administrative capability of the 

6 Secretary to administer the proposed premium 

7 structure. 

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

9 structure on the Secretary’s ability to maintain 

10 the availability of mortgage credit and provide 

11 stability to mortgage markets.’’. 

12 SEC. 7. REHABILITATION LOANS. 

13 Subsection (k) of section 203 of the National Housing 

14 Act (12 U.S.C. 1709(k)) is amended— 

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

16 that follows through ‘‘1978’’; and 

17 (2) in paragraph (5)— 

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

19 the first place it appears and inserting ‘‘Mutual 

20 Mortgage Insurance Fund’’; and 

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

22 comma and all that follows through ‘‘General In23 surance Fund’’. 

24 SEC. 8. DISCRETIONARY ACTION. 

25 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 sub7 section (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 sec14 tion 202, inserting such subsection after subsection 

15 (d) of section 202, and redesignating such subsection 

16 as subsection (e). 

17 SEC. 9. INSURANCE OF CONDOMINIUMS. 

18 (a) IN GENERAL.—Section 234 of the National Hous19 ing 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)’’; and 

23 (ii) by inserting before the period at 

24 the end the following: ‘‘, and (3) the project 


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1 has a blanket mortgage insured by the Sec2 retary 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 that’’ 

7 and all that follows and inserting a period. 

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

9 National Housing Act (12 U.S.C. 1707(a)) is amended— 

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

11 a comma; and 

12 (2) by inserting before the semicolon the fol13 lowing: ‘‘, or (c) a first mortgage given to secure the 

14 unpaid purchase price of a fee interest in, or long15 term leasehold interest in, a one-family unit in a 

16 multifamily project, including a project in which the 

17 dwelling units are attached, semi-detached, or de18 tached, and an undivided interest in the common 

19 areas and facilities which serve the project’’. 

20 SEC. 10. MUTUAL MORTGAGE INSURANCE FUND. 

21 (a) IN GENERAL.—Subsection (a) of section 202 of the 

22 National Housing Act (12 U.S.C. 1708(a)) is amended to 

23 read as follows: 

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


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1 ‘‘(1) ESTABLISHMENT.—Subject to the provisions 

2 of the Federal Credit Reform Act of 1990, there is 

3 hereby created a Mutual Mortgage Insurance Fund 

4 (in this title referred to as the ‘Fund’), which shall be 

5 used by the Secretary to carry out the provisions of 

6 this title with respect to mortgages insured under sec7 tion 203. The Secretary may enter into commitments 

8 to guarantee, and may guarantee, such insured mort9 gages. 

10 ‘‘(2) LIMIT ON LOAN GUARANTEES.—The author11 ity of the Secretary to enter into commitments to 

12 guarantee such insured mortgages shall be effective for 

13 any fiscal year only to the extent that the aggregate 

14 original principal loan amount under such mort15 gages, any part of which is guaranteed, does not ex16 ceed the amount specified in appropriations Acts for 

17 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 anVerDate Aug 31 2005 02:20 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6203 E:\BILLS\H5121.RH H5121

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1 nually to the Congress describing the results of such 

2 study and assessing the financial status of the Fund. 

3 The report shall recommend adjustments to under4 writing standards, program participation, or pre5 miums, if necessary, to ensure that the Fund remains 

6 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, categorized 

16 by risk; 

17 ‘‘(C) any significant changes between actual 

18 and projected claim and prepayment activity; 

19 ‘‘(D) projected versus actual loss rates; and 

20 ‘‘(E) updated projections of the annual sub21 sidy rates to ensure that increases in risk to the 

22 Fund are identified and mitigated by adjust23 ments to underwriting standards, program par24 ticipation, or premiums, and the financial 

25 soundness of the Fund is maintained. 


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1 The first quarterly report under this paragraph shall 

2 be submitted on the last day of the first quarter of fis3 cal year 2007, or upon the expiration of the 90-day 

4 period beginning on the date of the enactment of the 

5 Expanding American Homeownership Act of 2006, 

6 whichever is later. 

7 ‘‘(6) ADJUSTMENT OF PREMIUMS.—If, pursuant 

8 to the independent actuarial study of the Fund re9 quired under paragraph (5), the Secretary determines 

10 that the Fund is not meeting the operational goals es11 tablished under paragraph (8) or there is a substan12 tial probability that the Fund will not maintain its 

13 established target subsidy rate, the Secretary may ei14 ther make programmatic adjustments under section 

15 203 as necessary to reduce the risk to the Fund, or 

16 make appropriate premium adjustments. 

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

18 goals for the Fund are— 

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

20 are obligations of the Fund an appropriate pre21 mium for the risk that such loans pose to the 

22 Fund; 

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

24 Fund and to homeowners; 


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1 ‘‘(C) to curtail the impact of adverse selec2 tion on the Fund; and 

3 ‘‘(D) to meet the housing needs of the bor4 rowers that the single family mortgage insurance 

5 program under this title is designed to serve.’’. 

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

7 Act is amended as follows: 

8 (1) HOMEOWNERSHIP VOUCHER PROGRAM MORT9 GAGES.—In section 203(v) (12 U.S.C. 1709(v))— 

10 (A) by striking ‘‘Notwithstanding section 

11 202 of this title, the’’ and inserting ‘‘The’’; and 

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

13 the first place such term appears and all that 

14 follows and inserting ‘‘Mutual Mortgage Insur15 ance Fund.’’. 

16 (2) HOME EQUITY CONVERSION MORTGAGES.— 

17 Section 255(i)(2)(A) of the National Housing Act (12 

18 U.S.C. 1715z–20(i)(2)(A)) is amended by striking 

19 ‘‘General Insurance Fund’’ and inserting ‘‘Mutual 

20 Mortgage Insurance Fund’’. 

21 (c) CONFORMING AMENDMENTS.—The National Hous22 ing Act is amended— 

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

24 subsections (g) and (h); and 


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

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

3 ‘‘203(i)’’ and inserting ‘‘203, except as determined by 

4 the Secretary’’. 

5 SEC. 11. HAWAIIAN HOME LANDS AND INDIAN RESERVA6 TIONS. 

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

8 National Housing Act (12 U.S.C. 1715z–12) is amended— 

9 (1) by striking ‘‘General Insurance Fund estab10 lished in section 519’’ and inserting ‘‘Mutual Mort11 gage Insurance Fund’’; and 

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

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

14 (b) INDIAN RESERVATIONS.—Section 248(f) of the Na15 tional Housing Act (12 U.S.C. 1715z–13) is amended— 

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

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

18 ‘‘Mutual Mortgage Insurance Fund’’; and 

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

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

21 SEC. 12. CONFORMING AND TECHNICAL AMENDMENTS. 

22 (a) REPEALS.—The following provisions of the Na23 tional Housing Act are repealed: 

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

25 1709(i)). 


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

2 1709(o)). 

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

4 1709(p)). 

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

6 1709(q)). 

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

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

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

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

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

12 amended by striking ‘‘shall’’ and all that follows and insert13 ing ‘‘means a metropolitan statistical area as established 

14 by the Office of Management and Budget;’’. 

15 (c) DEFINITION OF STATE.—Section 201(d) of the Na16 tional Housing Act (12 U.S.C. 1707(d)) is amended by 

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

18 inserting ‘‘the Commonwealth of the Northern Mariana Is19 lands’’. 

20 SEC. 13. HOME EQUITY CONVERSION MORTGAGES. 

21 (a) IN GENERAL.—Section 255 of the National Hous22 ing Act (12 U.S.C. 1715z–20) is amended— 

23 (1) in subsection (g)— 

24 (A) by striking the first sentence; and 


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1 (B) by striking ‘‘established under section 

2 203(b)(2)’’ and all that follows through ‘‘located’’ 

3 and inserting ‘‘limitation established under sec4 tion 305(a)(2) of the Federal Home Loan Mort5 gage Corporation Act for a 1-family residence’’; 

6 (2) in subsection (i)(1)(C), by striking ‘‘limita7 tions’’ and inserting ‘‘limitation’’; and 

8 (3) by adding at the end the following new sub9 section: 

10 ‘‘(n) AUTHORITY TO INSURE HOME PURCHASE MORT11 GAGE.— 

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

13 provision in this section, the Secretary may insure, 

14 upon application by a mortgagee, a home equity con15 version mortgage upon such terms and conditions as 

16 the Secretary may prescribe, when the primary pur17 pose of the home equity conversion mortgage is to en18 able an elderly mortgagor to purchase a 1-to 4 family 

19 dwelling in which the mortgagor will occupy or occu20 pies one of the units. 

21 ‘‘(2) LIMITATION ON PRINCIPAL OBLIGATION.—A 

22 home equity conversion mortgage insured pursuant to 

23 paragraph (1) shall involve a principal obligation 

24 that does not exceed the dollar amount limitation de25 termined under section 305(a)(2) of the Federal Home 


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1 Loan Mortgage Corporation Act for a residence of the 

2 applicable size.’’. 

3 (b) STUDY REGARDING MORTGAGE INSURANCE PRE4 MIUMS.—The Secretary of Housing and Urban Develop5 ment shall conduct a study regarding mortgage insurance 

6 premiums charged under the program under section 255 of 

7 the National Housing Act (12 U.S.C. 1715z–20) for insur8 ance of home equity conversion mortgages to analyze and 

9 determine— 

10 (1) the effects of reducing the amounts of such 

11 premiums from the amounts charged as of the date of 

12 the enactment of this Act on— 

13 (A) costs to mortgagors; and 

14 (B) the financial soundness of the program; 

15 and 

16 (2) the feasibility and effectiveness of exempting, 

17 from all the requirements under the program regard18 ing payment of mortgage insurance premiums (in19 cluding both up-front or annual mortgage insurance 

20 premiums under section 203(c)(2) of such Act), any 

21 mortgage insured under the program under which 

22 part or all of the amount of future payments made 

23 to the homeowner are used for costs of a long-term 

24 care insurance contract covering the mortgagor or 


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1 members of the household residing in the mortgaged 

2 property. 

3 Not later than the expiration of the 12-month period begin4 ning on the date of the enactment of this Act, the Secretary 

5 shall submit a report to the Congress setting forth the results 

6 and conclusions of the study. 

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

8 Section 203(h) of the National Housing Act (12 U.S.C. 

9 1709) is amended— 

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

11 ‘‘plus any initial service charges, appraisal, inspec12 tion and other fees in connection with the mortgage 

13 as approved by the Secretary,’’; 

14 (2) by striking the second sentence (as added by 

15 chapter 7 of the Emergency Supplemental Appropria16 tions Act of 1994 (Public Law 103–211; 108 Stat. 

17 12)); and 

18 (3) by adding at the end the following new sen19 tence: ‘‘In any case in which the single family resi20 dence to be insured under this subsection is within a 

21 jurisdiction in which the President has declared a 

22 major disaster to have occurred, the Secretary is au23 thorized, for a temporary period not to exceed 36 

24 months from the date of such Presidential declaration, 

25 to enter into agreements to insure a mortgage which 


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1 involves a principal obligation of up to 100 percent 

2 of the dollar limitation determined under section 

3 305(a)(2) of the Federal Home Loan Mortgage Cor4 poration Act for a single family residence, and not in 

5 excess of 100 percent of the appraised value of the 

6 property plus any initial service charges, appraisal, 

7 inspection and other fees in connection with the mort8 gage as approved by the Secretary.’’. 

9 SEC. 15. PARTICIPATION OF MORTGAGE BROKERS AND 

10 CORRESPONDENT LENDERS. 

11 (a) DEFINITIONS.— 

12 (1) IN GENERAL.—Section 201 of the National 

13 Housing Act (12 U.S.C. 1707) is amended— 

14 (A) by striking ‘‘As used in section 203 of 

15 this title—’’ and inserting ‘‘As used in this title 

16 and for purposes of participation in insurance 

17 programs under this title, except as specifically 

18 provided otherwise, the following definitions 

19 shall apply:’’; 

20 (B) by striking subsection (b) and inserting 

21 the following: 

22 ‘‘(2) The term ‘mortgagee’ means any of the fol23 lowing entities, and its successors and assigns, to the 

24 extent such entity is approved by the Secretary: 


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1 ‘‘(A) A lender or correspondent lender, 

2 who— 

3 ‘‘(i) makes, underwrites, and services 

4 mortgages; 

5 ‘‘(ii) submits to the Secretary such fi6 nancial audits performed in accordance 

7 with the standards for financial audits of 

8 the Government Auditing Standards issued 

9 by the Comptroller of the United States; 

10 ‘‘(iii) meet the minimum net worth re11 quirement that the Secretary shall establish; 

12 and 

13 ‘‘(iv) complies with such other require14 ments as the Secretary may establish. 

15 ‘‘(B) A correspondent lender who— 

16 ‘‘(i) closes a mortgage in its name but 

17 does not underwrite or service the mortgage; 

18 ‘‘(ii) posts a surety bond, in lieu of 

19 any requirement to provide audited finan20 cial statements or meet a minimum net 

21 worth requirement, in— 

22 ‘‘(I) a form satisfactory to the 

23 Secretary; and 

24 ‘‘(II) an amount of $75,000, as 

25 such amount is adjusted annually by 


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1 the Secretary (as determined under 

2 regulations of the Secretary) by the 

3 change for such year in the Consumer 

4 Price Index for All Urban Consumers 

5 published monthly by the Bureau of 

6 Labor Statistics of the Department of 

7 Labor; and 

8 ‘‘(iii) complies with such other require9 ments as the Secretary may establish. 

10 ‘‘(C) A mortgage broker who— 

11 ‘‘(i) closes the mortgage in the name of 

12 the lender and does not make, underwrite, 

13 or service the mortgage; 

14 ‘‘(ii) is licensed, under the laws of the 

15 State in which the property that is subject 

16 to the mortgage is located, to act as a mort17 gage broker in such State; 

18 ‘‘(iii) posts a surety bond in accord19 ance with the requirements of subparagraph 

20 (B)(ii); and 

21 ‘‘(iv) complies with such other require22 ments as the Secretary may establish. 

23 ‘‘(3) The term ‘mortgagor’ includes the original 

24 borrower under a mortgage and the successors and as25 signs of the original borrower.’’; 


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1 (C) in subsection (a), by redesignating 

2 clauses (1) and (2) as clauses (A) and (B) re3 spectively; and 

4 (D) by redesignating subsections (a), (c), 

5 (d), (e), and (f) as paragraphs (1), (4), (5), (6), 

6 and (7), respectively, and realigning such para7 graphs two ems from the left margin. 

8 (2) MORTGAGEE REVIEW.—Section 202(c)(7) of 

9 the National Housing Act (12 U.S.C. 1708(c)(7)) is 

10 amended— 

11 (A) in subparagraph (A), by inserting ‘‘, as 

12 defined in section 201,’’ after ‘‘mortgagee’’; 

13 (B) by striking subparagraph (B); and 

14 (C) by redesignating subpargraphs (C) and 

15 (D) as subparagraphs (B) and (C), respectively. 

16 (3) MULTIFAMILY RENTAL HOUSING INSUR17 ANCE.—Section 207(a)(2) of the National Housing 

18 Act (12 U.S.C. 1713(a)(2)) is amended by striking 

19 ‘‘means the original lender under a mortgage, and its 

20 successors and assigns, and’’ and inserting ‘‘has the 

21 meaning given such term in section 201, except that 

22 such term also’’. 

23 (4) WAR HOUSING INSURANCE.—Section 601(b) 

24 of the National Housing Act (12 U.S.C. 1736(b)) is 

25 amended by striking ‘‘includes the original lender 


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1 under a mortgage, and his successors and assigns ap2 proved by the Secretary’’ and inserting ‘‘has the 

3 meaning given such term in section 201’’. 

4 (5) ARMED SERVICES HOUSING MORTGAGE IN5 SURANCE.—Section 801(b) of the National Housing 

6 Act (12 U.S.C. 1748(b)) is amended by striking ‘‘in7 cludes the original lender under a mortgage, and his 

8 successors and assigns approved by the Secretary’’ 

9 and inserting ‘‘has the meaning given such term in 

10 section 201’’. 

11 (6) GROUP PRACTICE FACILITIES MORTGAGE IN12 SURANCE.—Section 1106(8) of the National Housing 

13 Act (12 U.S.C. 1749aaa–5(8)) is amended by striking 

14 ‘‘means the original lender under a mortgage, and his 

15 or its successors and assigns, and’’ and inserting ‘‘has 

16 the meaning given such term in section 201, except 

17 that such term also’’. 

18 (b) ELIGIBILITY FOR INSURANCE.— 

19 (1) TITLE I.—Paragraph (1) of section 8(b) of 

20 the National Housing Act (12 U.S.C. 1706c(b)(1)) is 

21 amended— 

22 (A) by striking ‘‘, and be held by,’’; and 

23 (B) by striking ‘‘as responsible and able to 

24 service the mortgage properly’’. 


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1 (2) SINGLE FAMILY HOUSING MORTGAGE INSUR2 ANCE.—Paragraph (1) of section 203(b) of the Na3 tional Housing Act (12 U.S.C. 1709(b)(1)) is amend4 ed 

5 (A) by striking ‘‘, and be held by,’’; and 

6 (B) by striking ‘‘as responsible and able to 

7 service the mortgage properly’’. 

8 (3) SECTION 221 MORTGAGE INSURANCE.— Para9 graph (1) of section 221(d) of the National Housing 

10 Act (12 U.S.C. 1715l(d)(1)) is amended— 

11 (A) by striking ‘‘ and be held by’’; and 

12 (B) by striking ‘‘as responsible and able to 

13 service the mortgage properly’’. 

14 (4) HOME EQUITY CONVERSION MORTGAGE IN15 SURANCE.—Paragraph (1) of section 255(d) of the 

16 National Housing Act (12 U.S.C. 1715z–20(d)(1)) is 

17 amended by striking ‘‘as responsible and able to serv18 ice the mortgage properly’’. 

19 (5) WAR HOUSING MORTGAGE INSURANCE.— 

20 Paragraph (1) of section 603(b) of the National Hous21 ing Act (12 U.S.C. 1738(b)(1)) is amended— 

22 (A) by striking ‘‘, and be held by,’’; and 

23 (B) by striking ‘‘as responsible and able to 

24 service the mortgage properly’’. 


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1 (6) WAR HOUSING MORTGAGE INSURANCE FOR

2 LARGE-SCALE HOUSING PROJECTS.—Paragraph (1) of 

3 section 611(b) of the National Housing Act (12 U.S.C. 

4 1746(b)(1)) is amended— 

5 (A) by striking ‘‘ and be held by’’; and 

6 (B) by striking ‘‘as responsible and able to 

7 service the mortgage properly’’. 

8 (7) GROUP PRACTICE FACILITY MORTGAGE IN9 SURANCE.—Section 1101(b)(2) of the National Hous10 ing Act (12 U.S.C. 1749aaa(b)(2)) is amended— 

11 (A) by striking ‘‘ and held by’’; and 

12 (B) by striking ‘‘as responsible and able to 

13 service the mortgage properly’’. 

14 (8) NATIONAL DEFENSE HOUSING INSURANCE.— 

15 Paragraph (1) of section 903(b) of the National Hous16 ing Act (12 U.S.C. 1750b(b)(1)) is amended— 

17 (A) by striking ‘‘, and be held by,’’; and 

18 (B) by striking ‘‘as responsible and able to 

19 service the mortgage properly’’. 

20 SEC. 16. SENSE OF CONGRESS REGARDING TECHNOLOGY 

21 FOR FINANCIAL SYSTEMS. 

22 (a) CONGRESSIONAL FINDINGS.—The Congress finds 

23 the following: 

24 (1) The Government Accountability Office has 

25 cited the FHA single family housing mortgage insurVerDate Aug 31 2005 02:20 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6203 E:\BILLS\H5121.RH H5121

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1 ance program as a ‘‘high-risk’’ program, with a pri2 mary reason being non-integrated and out-dated fi3 nancial management systems. 

4 (2) The ‘‘Audit of the Federal Housing Adminis5 tration’s Financial Statements for Fiscal Years 2004 

6 and 2003’’, conducted by the Inspector General of the 

7 Department of Housing and Urban Development re8 ported as a material weakness that ‘‘HUD/FHA’s 

9 automated data processing [ADP] system environ10 ment must be enhanced to more effectively support 

11 FHA’s business and budget processes’’. 

12 (3) Existing technology systems for the FHA 

13 program have not been updated to meet the latest 

14 standards of the Mortgage Industry Standards Main15 tenance Organization and have numerous deficiencies 

16 that lenders have outlined. 

17 (4) Improvements to technology used in the FHA 

18 program will— 

19 (A) allow the FHA program to improve the 

20 management of the FHA portfolio, garner great21 er efficiencies in its operations, and lower costs 

22 across the program; 

23 (B) result in efficiencies and lower costs for 

24 lenders participating in the program, allowing 

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1 ing homeownership opportunities to higher credit 

2 risk or lower-income families, in a sound man3 ner 

4 (5) The Mutual Mortgage Insurance Fund oper5 ates without cost to the taxpayers and generates reve6 nues for the Federal Government. 

7 (b) SENSE OF CONGRESS.—It is the sense of the Con8 gress that— 

9 (1) the Secretary of Housing and Urban Devel10 opment should use a portion of the funds received 

11 from premiums paid for FHA single family housing 

12 mortgage insurance that are in excess of the amounts 

13 paid out in claims to substantially increase the fund14 ing for technology used in such FHA program; 

15 (2) the goal of this investment should be to bring 

16 the technology used in such FHA program to the level 

17 and sophistication of the technology used in the con18 ventional mortgage lending market, or to exceed such 

19 level; and 

20 (3) the Secretary of Housing and Urban Devel21 opment should report to the Congress not later than 

22 180 days after the date of the enactment of this Act 

23 regarding the progress the Department is making to24 ward such goal and if progress is not sufficient, the 

25 resources needed to make greater progress. 


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1 SEC. 17. SAVINGS PROVISION. 

2 Any mortgage insured under title II of the National 

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

4 continue to be governed by the laws, regulations, orders, and 

5 terms and conditions to which it was subject on the day 

6 before the date of the enactment of this Act. 

7 SEC. 18. IMPLEMENTATION. 

8 The Secretary of Housing and Urban Development 

9 shall by notice establish any additional requirements that 

10 may be necessary to immediately carry out the provisions 

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


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Union Calendar No. 340 

109TH CONGRESS 

2D SESSION H. R. 5121 

[Report No. 109

–589] 

A BILL 

To modernize and update the National Housing Act 

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

JULY 20, 2006 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


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