109TH CONGRESS 

2D SESSION H. R. 5121

AN ACT

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 

109TH CONGRESS 

2D SESSION H. R. 5121

AN ACT

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, 
2

•HR 5121 EH 

1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

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

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

5 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. Temporary reinstatement of downpayment requirement in event of increased defaults. 

Sec. 7. Mortgage insurance premiums. 

Sec. 8. Rehabilitation loans. 

Sec. 9. Discretionary action. 

Sec. 10. Insurance of condominiums. 

Sec. 11. Mutual Mortgage Insurance Fund. 

Sec. 12. Hawaiian home lands and Indian reservations. 

Sec. 13. Conforming and technical amendments. 

Sec. 14. Home equity conversion mortgages. 

Sec. 15. Conforming loan limit in disaster areas. 

Sec. 16. Participation of mortgage brokers and correspondent lenders. 

Sec. 17. Sense of Congress regarding technology for financial systems. 

Sec. 18. Savings provision. 

Sec. 19. Implementation.

6 SEC. 2. FINDINGS AND PURPOSES. 

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

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

9 Housing Administration (FHA) single family mort10 gage insurance program is to reach borrowers who 

11 are underserved, or not served, by the existing con12 ventional mortgage marketplace; 

13 (2) the FHA program has a long history of in14 novation, which includes pioneering the 30-year self15 amortizing mortgage and a safe-to-seniors reverse 
3

•HR 5121 EH 

1 mortgage product, both of which were once thought 

2 too risky to private lenders; 

3 (3) the FHA single family mortgage insurance 

4 program traditionally has been a major provider of 

5 mortgage insurance for home purchases; 

6 (4) the FHA mortgage insurance premium 

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

8 should be revised to reflect FHA’s enhanced ability 

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

10 to better respond to changes in the mortgage mar11 ket; 

12 (5) during past recessions, including the oil13 patch downturns in the mid-1980s, FHA remained 

14 a viable credit enhancer and was therefore instru15 mental in preventing a more catastrophic collapse in 

16 housing markets and a greater loss of homeowner 

17 equity; and 

18 (6) as housing price appreciation slows and in19 terest rates rise, many homeowners and prospective 

20 homebuyers will need the less-expensive, safer fi21 nancing alternative that FHA mortgage insurance 

22 provides. 

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

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

25 the insurance of housing loans for low- and mod-
4

•HR 5121 EH 

1 erate-income homebuyers during all economic cycles 

2 in the mortgage market; 

3 (2) to modernize the FHA single family mort4 gage insurance program by making it more reflective 

5 of enhancements to loan-level risk assessments and 

6 changes to the mortgage market; and 

7 (3) to adjust the loan limits for the single fam8 ily mortgage insurance program to reflect rising 

9 house prices and the increased costs associated with 

10 new construction. 

11 SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION. 

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

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

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

15 inserting the following new subparagraphs: 

16 ‘‘(A) not to exceed the lesser of—

17 ‘‘(i) in the case of a 1-family resi18 dence, the median 1-family house price in 

19 the area, as determined by the Secretary; 

20 and in the case of a 2-, 3-, or 4-family res21 idence, the percentage of such median 

22 price that bears the same ratio to such me23 dian price as the dollar amount limitation 

24 in effect under section 305(a)(2) of the 

25 Federal Home Loan Mortgage Corporation 
5

•HR 5121 EH 

1 Act (12 U.S.C. 1454(a)(2)) for a 2-, 3-, or 

2 4-family residence, respectively, bears to 

3 the dollar amount limitation in effect 

4 under such section for a 1-family resi5 dence; or 

6 ‘‘(ii) the dollar amount limitation de7 termined under such section 305(a)(2) for 

8 a residence of the applicable size; 

9 except that the dollar amount limitation in ef10 fect for any area under this subparagraph may 

11 not be less than the greater of (I) the dollar 

12 amount limitation in effect under this section 

13 for the area on October 21, 1998, or (II) 65 

14 percent of the dollar limitation determined 

15 under such section 305(a)(2) for a residence of 

16 the applicable size; and 

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

18 the property, plus any initial service charges, 

19 appraisal, inspection and other fees in connec20 tion with the mortgage as approved by the Sec21 retary.’’; 

22 (2) in the matter after and below subparagraph 

23 (B), by striking the second sentence (relating to a 

24 definition of ‘‘average closing cost’’) and all that fol25 lows through ‘‘title 38, United States Code’’; and 
6

•HR 5121 EH 

1 (3) by striking the last undesignated paragraph 

2 (relating to counseling with respect to the respon3 sibilities and financial management involved in 

4 homeownership). 

5 SEC. 4. EXTENSION OF MORTGAGE TERM. 

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

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

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

9 ‘‘forty years’’; and 

10 (2) by striking ‘‘(or thirty years if such mort11 gage is not approved for insurance prior to construc12 tion)’’. 

13 SEC. 5. CASH INVESTMENT REQUIREMENT. 

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

15 Housing Act (12 U.S.C. 1709(b)(9) is amended by strik16 ing the paragraph designation and all that follows through 

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

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

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

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

21 determine based on factors determined by the Sec22 retary and commensurate with the likelihood of de23 fault. For’’. 
7

•HR 5121 EH 

1 SEC. 6. TEMPORARY REINSTATEMENT OF DOWNPAYMENT 

2 REQUIREMENT IN EVENT OF INCREASED DE3 FAULTS. 

4 Section 203(b) of the National Housing Act (12 

5 U.S.C. 1709(b)) is amended by adding at the end the fol6 lowing new paragraph: 

7 ‘‘(10) EFFECT OF INCREASED DEFAULTS.—

8 ‘‘(A) ANNUAL DETERMINATION.—If, for 

9 any calendar year described in subparagraph 

10 (B)(i), the Secretary determines, pursuant such 

11 subparagraph, that—

12 ‘‘(i) the ratio of the number of mort13 gage insurance claims made during such 

14 calendar year on mortgages insured under 

15 this section to the total number of mort16 gages having such insurance in force dur17 ing such calendar year exceeds, by 25 per18 cent or more, such ratio for the 12-month 

19 period ending on the effective date of this 

20 Act, or 

21 ‘‘(ii) the ratio of the aggregate re22 maining principal obligation under mort23 gages insured under this section for which 

24 an insurance claim is made during such 

25 calendar year to the average, for such cal26 endar year, of the aggregate outstanding 
8

•HR 5121 EH 

1 principal obligation under mortgages so in2 sured exceeds, by 25 percent or more, such 

3 ratio for the 12-month period ending on 

4 such effective date, 

5 during the 90-day period beginning upon the 

6 submission of the report for such calendar year 

7 under subparagraph (B)(ii) containing such de8 termination, the Secretary may insure a mort9 gage under this section only pursuant to the re10 quirement under subparagraph (C), and the 

11 Secretary shall, not later than 60 days after 

12 submission of the report containing such deter13 mination, submit a report to the Congress 

14 under subparagraph (D) regarding mortgage 

15 insurance claims during such calendar year. 

16 ‘‘(B) 5 YEARS OF ANNUAL DETERMINA17 TIONS.—

18 ‘‘(i) IN GENERAL.—The Secretary 

19 shall, for each of the 5 calendar years com20 mencing after the date of the enactment of 

21 this Act, compare the ratios referred to in 

22 subparagraph (A) and make a determina23 tion under such subparagraph. 

24 ‘‘(ii) ANNUAL REPORT ON DE25 FAULTS.—Not later than 90 days after the 
9

•HR 5121 EH 

1 conclusion of each of the calendar years 

2 described in clause (i), the Secretary shall 

3 submit a report to the Congress containing 

4 the determination of the Secretary under 

5 such clause with respect to such calendar 

6 year and setting forth the ratios referred 

7 to in such clause for such calendar year. 

8 ‘‘(C) REINSTATEMENT OF DOWNPAYMENT

9 REQUIREMENT.—The requirement under this 

10 subparagraph is that paragraph (9) of this sub11 section shall apply as such paragraph was in ef12 fect on the day before the effective date of the 

13 Expanding American Homeownership Act of 

14 2006. 

15 ‘‘(D) REPORTS REGARDING INCREASED

16 DEFAULT RATE.—A report under this subpara17 graph, as required under subparagraph (A), 

18 shall contain—

19 ‘‘(i) an analysis of mortgage insurance 

20 claims, made during the calendar year for 

21 which the report is submitted, on mort22 gages insured under this section; 

23 ‘‘(ii) an analysis of the reasons for the 

24 increase during such calendar year in the 

25 applicable ratio or ratios under subpara-
10

•HR 5121 EH 

1 graph (A), including an analysis of the ex2 tent to which such increase is attributable 

3 to the amendments made by the Expand4 ing American Homeownership Act of 2006; 

5 ‘‘(iii) the effect of such increase on 

6 the Mutual Mortgage Insurance Fund; 

7 ‘‘(iv) recommendations regarding—

8 ‘‘(I) whether the Congress 

9 should, to respond to such increase, 

10 take legislative action (aa) to apply 

11 paragraph (9) of this subsection as 

12 such paragraph was in effect on the 

13 day before the effective date of Ex14 panding American Homeownership 

15 Act of 2006, (bb) to apply paragraph 

16 (2)(A)(ii) by substituting ‘87 percent 

17 of the dollar amount limitation’ for 

18 ‘the dollar amount limitation’, or (cc) 

19 both; and 

20 ‘‘(II) whether such provisions 

21 should be temporary or permanent, 

22 and, if temporary, the period during 

23 which such provisions should apply; 

24 and 
11

•HR 5121 EH 

1 ‘‘(v) recommendations regarding any 

2 other administrative, regulatory, legislative, 

3 or other actions that should be taken to re4 spond to such increase. 

5 ‘‘(E) DEFAULTS IN DISASTER AREAS NOT

6 COUNTED FOR 24 MONTHS.—In determining the 

7 number of mortgage insurance claims made and 

8 the aggregate remaining principal obligation 

9 under mortgages for which an insurance claim 

10 is made for purposes of subparagraph (A) for 

11 any calendar year, the Secretary shall not take 

12 into consideration any claim made during such 

13 period on a mortgage on any property that is 

14 located in an area for which a major disaster 

15 was declared pursuant to the Robert T. Staf16 ford Disaster Relief and Emergency Assistance 

17 Act if such claim was made during the 24-

18 month period beginning upon such declara19 tion.’’. 

20 SEC. 7. MORTGAGE INSURANCE PREMIUMS. 

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

22 U.S.C. 1709(c)) is amended—

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

24 subparagraph (A), by striking ‘‘Notwithstanding’’ 
12

•HR 5121 EH 

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

2 and notwithstanding’’; and 

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

4 paragraph: 

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

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

7 by the Secretary under this title that is secured by 

8 a 1- to 4-family dwelling and for which the loan ap9 plication is received by the mortgagee on or after 

10 October 1, 2006, the Secretary may establish a 

11 mortgage insurance premium structure involving a 

12 single premium payment collected prior to the insur13 ance of the mortgage or annual payments (which 

14 may be collected on a periodic basis), or both, sub15 ject to the limitations in subparagraphs (B) and (C). 

16 The rate of premium for such a mortgage may vary 

17 during the mortgage term as long as the basis for 

18 determining the variable rate is established before 

19 the execution of the mortgage. The Secretary may 

20 change a premium structure established under this 

21 subparagraph but only to the extent that such 

22 change is not applied to any mortgage already exe23 cuted. 

24 ‘‘(B) MAXIMUM UP-FRONT PREMIUM

25 AMOUNTS.—For any mortgage insured under a pre-
13

•HR 5121 EH 

1 mium structure established pursuant to this para2 graph, the amount of any single premium payment 

3 authorized by subparagraph (A), if established and 

4 collected prior to the insurance of the mortgage, 

5 may not exceed the following amount: 

6 ‘‘(i) Except as provided in clauses (ii) and 

7 (iii), 3.0 percent of the amount of the original 

8 insured principal obligation of the mortgage. 

9 ‘‘(ii) If the mortgagor has a credit score 

10 equivalent to a FICO score of 560 or more and 

11 has paid on account of the property, in cash or 

12 its equivalent, at least 3 percent of the Sec13 retary’s estimate of the cost of acquisition (ex14 cluding the mortgage insurance premium paid 

15 at the time the mortgage is insured), 2.25 per16 cent of the original insured principal obligation 

17 of the mortgage. 

18 ‘‘(iii) If the annual premium payment is 

19 equal to the maximum amount allowable under 

20 clause (i) of subparagraph (C), 1.5 percent of 

21 the amount of the original insured principal ob22 ligation of the mortgage. 

23 ‘‘(C) MAXIMUM ANNUAL PREMIUM AMOUNTS.—

24 For any mortgage insured under a premium struc25 ture established pursuant to this paragraph, the 
14

•HR 5121 EH 

1 amount of any annual premium payment collected 

2 may not exceed the following amount: 

3 ‘‘(i) Except as provided in clauses (ii) and 

4 (iii), 2.0 percent of the remaining insured prin5 cipal obligation of the mortgage. 

6 ‘‘(ii) If the mortgagor is a mortgagor de7 scribed in clause (ii) of subparagraph (B), 0.55 

8 percent of the remaining insured principal obli9 gation of the mortgage. 

10 ‘‘(iii) If the single premium payment col11 lected at the time of insurance is equal to max12 imum amount allowable under clause (i) of sub13 paragraph (B), 1.0 percent of the remaining in14 sured principal obligation of the mortgage. 

15 ‘‘(D) PAYMENT INCENTIVE.—Notwithstanding 

16 subparagraph (C), for any mortgage insured under 

17 a premium structure established pursuant to this 

18 paragraph and for which the annual premium pay19 ment exceeds the amount set forth in subparagraph 

20 (C)(ii), if during the 5-year period beginning upon 

21 the time of insurance all mortgage insurance pre22 miums for such mortgage have been paid on a timely 

23 basis, upon the expiration of such period the Sec24 retary shall reduce the amount of the annual pre25 mium payments due thereafter under such mortgage 
15

•HR 5121 EH 

1 to an amount equal to the amount set forth in sub2 paragraph (C)(ii). 

3 ‘‘(E) ESTABLISHMENT AND ALTERATION OF

4 PREMIUM STRUCTURE.—A premium structure shall 

5 be established or changed under subparagraph (A) 

6 only by providing notice to mortgagees and to the 

7 Congress, at least 30 days before the premium 

8 structure is established or changed. 

9 ‘‘(F) CONSIDERATIONS FOR PREMIUM STRUC10 TURE.—When establishing a premium structure 

11 under subparagraph (A) or when changing such a 

12 premium structure, the Secretary shall consider the 

13 following: 

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

15 structure on the Secretary’s ability to meet the 

16 operational goals of the Mutual Mortgage In17 surance Fund as provided in section 202(a). 

18 ‘‘(ii) Underwriting variables. 

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

20 under the proposed premium structure has po21 tential for acceptance in the private market. 

22 ‘‘(iv) The administrative capability of the 

23 Secretary to administer the proposed premium 

24 structure. 
16

•HR 5121 EH 

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

2 structure on the Secretary’s ability to maintain 

3 the availability of mortgage credit and provide 

4 stability to mortgage markets.’’. 

5 SEC. 8. REHABILITATION LOANS. 

6 Subsection (k) of section 203 of the National Hous7 ing Act (12 U.S.C. 1709(k)) is amended—

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

9 that follows through ‘‘1978’’; and 

10 (2) in paragraph (5)—

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

12 the first place it appears and inserting ‘‘Mutual 

13 Mortgage Insurance Fund’’; and 

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

15 comma and all that follows through ‘‘General 

16 Insurance Fund’’. 

17 SEC. 9. DISCRETIONARY ACTION. 

18 The National Housing Act is amended—

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

20 1708(e))—

21 (A) in paragraph (3)(B), by striking ‘‘sec22 tion 202(e) of the National Housing Act’’ and 

23 inserting ‘‘this subsection’’; and 

24 (B) by redesignating such subsection as 

25 subsection (f); 
17

•HR 5121 EH 

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

2 (12 U.S.C. 1709(s)(4)) and inserting the following 

3 new paragraph: 

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

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

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

7 section 202, inserting such subsection after sub8 section (d) of section 202, and redesignating such 

9 subsection as subsection (e). 

10 SEC. 10. INSURANCE OF CONDOMINIUMS. 

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

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

13 (1) in subsection (c)—

14 (A) in the first sentence—

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

16 and 

17 (ii) by inserting before the period at 

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

19 project has a blanket mortgage insured by 

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

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

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

23 years’’; and 

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

25 that’’ and all that follows and inserting a period. 
18

•HR 5121 EH 

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

2 the National Housing Act (12 U.S.C. 1707(a)) is amend3 ed—

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

5 a comma; and 

6 (2) by inserting before the semicolon the fol7 lowing: ‘‘, or (c) a first mortgage given to secure the 

8 unpaid purchase price of a fee interest in, or long9 term leasehold interest in, a one-family unit in a 

10 multifamily project, including a project in which the 

11 dwelling units are attached, semi-detached, or de12 tached, and an undivided interest in the common 

13 areas and facilities which serve the project’’. 

14 SEC. 11. MUTUAL MORTGAGE INSURANCE FUND. 

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

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

17 to read as follows: 

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

19 ‘‘(1) ESTABLISHMENT.—Subject to the provi20 sions of the Federal Credit Reform Act of 1990, 

21 there is hereby created a Mutual Mortgage Insur22 ance Fund (in this title referred to as the ‘Fund’), 

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

24 provisions of this title with respect to mortgages in25 sured under section 203. The Secretary may enter 
19

•HR 5121 EH 

1 into commitments to guarantee, and may guarantee, 

2 such insured mortgages. 

3 ‘‘(2) LIMIT ON LOAN GUARANTEES.—The au4 thority of the Secretary to enter into commitments 

5 to guarantee such insured mortgages shall be effec6 tive for any fiscal year only to the extent that the 

7 aggregate original principal loan amount under such 

8 mortgages, any part of which is guaranteed, does 

9 not exceed the amount specified in appropriations 

10 Acts for such fiscal year. 

11 ‘‘(3) FIDUCIARY RESPONSIBILITY.—The Sec12 retary has a responsibility to ensure that the Mutual 

13 Mortgage Insurance Fund remains financially sound. 

14 ‘‘(4) ANNUAL INDEPENDENT ACTUARIAL

15 STUDY.—The Secretary shall provide for an inde16 pendent actuarial study of the Fund to be conducted 

17 annually, which shall analyze the financial position 

18 of the Fund. The Secretary shall submit a report 

19 annually to the Congress describing the results of 

20 such study and assessing the financial status of the 

21 Fund. The report shall recommend adjustments to 

22 underwriting standards, program participation, or 

23 premiums, if necessary, to ensure that the Fund re24 mains financially sound. 
20

•HR 5121 EH 

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

2 year, the Secretary shall submit a report to the Con3 gress for each quarter, which shall specify for mort4 gages that are obligations of the Fund—

5 ‘‘(A) the cumulative volume of loan guar6 antee commitments that have been made during 

7 such fiscal year through the end of the quarter 

8 for which the report is submitted; 

9 ‘‘(B) the types of loans insured, cat10 egorized by risk; 

11 ‘‘(C) any significant changes between ac12 tual and projected claim and prepayment activ13 ity; 

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

15 and 

16 ‘‘(E) updated projections of the annual 

17 subsidy rates to ensure that increases in risk to 

18 the Fund are identified and mitigated by ad19 justments to underwriting standards, program 

20 participation, or premiums, and the financial 

21 soundness of the Fund is maintained. 

22 The first quarterly report under this paragraph shall 

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

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

25 day period beginning on the date of the enactment 
21

•HR 5121 EH 

1 of the Expanding American Homeownership Act of 

2 2006, whichever is later. 

3 ‘‘(6) ADJUSTMENT OF PREMIUMS.—If, pursu4 ant to the independent actuarial study of the Fund 

5 required under paragraph (5), the Secretary deter6 mines that the Fund is not meeting the operational 

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

8 substantial probability that the Fund will not main9 tain its established target subsidy rate, the Secretary 

10 may either make programmatic adjustments under 

11 section 203 as necessary to reduce the risk to the 

12 Fund, or make appropriate premium adjustments. 

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

14 goals for the Fund are—

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

16 are obligations of the Fund an appropriate pre17 mium for the risk that such loans pose to the 

18 Fund; 

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

20 Fund and to homeowners; 

21 ‘‘(C) to curtail the impact of adverse selec22 tion on the Fund; and 

23 ‘‘(D) to meet the housing needs of the bor24 rowers that the single family mortgage insur-
22

•HR 5121 EH 

1 ance program under this title is designed to 

2 serve.’’. 

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

4 Act is amended as follows: 

5 (1) HOMEOWNERSHIP VOUCHER PROGRAM

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

7 1709(v))—

8 (A) by striking ‘‘Notwithstanding section 

9 202 of this title, the’’ and inserting ‘‘The’’; and 

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

11 the first place such term appears and all that 

12 follows and inserting ‘‘Mutual Mortgage Insur13 ance Fund.’’. 

14 (2) HOME EQUITY CONVERSION MORTGAGES.—

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

16 (12 U.S.C. 1715z–20(i)(2)(A)) is amended by strik17 ing ‘‘General Insurance Fund’’ and inserting ‘‘Mu18 tual Mortgage Insurance Fund’’. 

19 (c) CONFORMING AMENDMENTS.—The National 

20 Housing Act is amended—

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

22 subsections (g) and (h); and 

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

24 striking ‘‘203(b)’’ and all that follows through 
23

•HR 5121 EH 

1 ‘‘203(i)’’ and inserting ‘‘203, except as determined 

2 by the Secretary’’. 

3 SEC. 12. HAWAIIAN HOME LANDS AND INDIAN RESERVA4 TIONS. 

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

6 National Housing Act (12 U.S.C. 1715z–12) is amend7 ed—

8 (1) by striking ‘‘General Insurance Fund estab9 lished in section 519’’ and inserting ‘‘Mutual Mort10 gage Insurance Fund’’; and 

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

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

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

14 National Housing Act (12 U.S.C. 1715z–13) is amend15 ed—

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. 13. 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)). 
24

•HR 5121 EH 

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 in13 serting ‘‘means a metropolitan statistical area as estab14 lished by the Office of Management and Budget;’’. 

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

16 National 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 

19 Islands’’. 

20 SEC. 14. HOME EQUITY CONVERSION MORTGAGES. 

21 (a) IN GENERAL.—Section 255 of the National 

22 Housing Act (12 U.S.C. 1715z–20) is amended—

23 (1) in subsection (g)—

24 (A) by striking the first sentence; and 
25

•HR 5121 EH 

1 (B) by striking ‘‘established under section 

2 203(b)(2)’’ and all that follows through ‘‘lo3 cated’’ and inserting ‘‘limitation established 

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

5 Loan Mortgage Corporation Act for a 1-family 

6 residence’’; 

7 (2) in subsection (i)(1)(C), by striking ‘‘limita8 tions’’ and inserting ‘‘limitation’’; and 

9 (3) by adding at the end the following new sub10 section: 

11 ‘‘(n) AUTHORITY TO INSURE HOME PURCHASE

12 MORTGAGE.—

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

14 provision in this section, the Secretary may insure, 

15 upon application by a mortgagee, a home equity con16 version mortgage upon such terms and conditions as 

17 the Secretary may prescribe, when the primary pur18 pose of the home equity conversion mortgage is to 

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

20 family dwelling in which the mortgagor will occupy 

21 or occupies one of the units. 

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

23 A home equity conversion mortgage insured pursu24 ant to paragraph (1) shall involve a principal obliga25 tion that does not exceed the dollar amount limita-
26

•HR 5121 EH 

1 tion determined under section 305(a)(2) of the Fed2 eral Home Loan Mortgage Corporation Act for a 

3 residence of the applicable size.’’. 

4 (b) MORTGAGES FOR COOPERATIVES.—Subsection 

5 (b) of section 255 of the National Housing Act (12 U.S.C. 

6 1715z-20(b)) is amended—

7 (1) in paragraph (4)—

8 (A) by inserting ‘‘a first or subordinate 

9 mortgage or lien’’ before ‘‘on all stock’’; 

10 (B) by inserting ‘‘unit’’ after ‘‘dwelling’’; 

11 and 

12 (C) by inserting ‘‘a first mortgage or first 

13 lien’’ before ‘‘on a leasehold’’; and 

14 (2) in paragraph (5), by inserting ‘‘a first or 

15 subordinate lien on’’ before ‘‘all stock’’. 

16 (c) STUDY REGARDING MORTGAGE INSURANCE PRE17 MIUMS.—The Secretary of Housing and Urban Develop18 ment shall conduct a study regarding mortgage insurance 

19 premiums charged under the program under section 255 

20 of the National Housing Act (12 U.S.C. 1715z-20) for in21 surance of home equity conversion mortgages to analyze 

22 and determine—

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

24 premiums from the amounts charged as of the date 

25 of the enactment of this Act on—
27

•HR 5121 EH 

1 (A) costs to mortgagors; and 

2 (B) the financial soundness of the pro3 gram; and 

4 (2) the feasibility and effectiveness of exempt5 ing, from all the requirements under the program re6 garding payment of mortgage insurance premiums 

7 (including both up-front or annual mortgage insur8 ance premiums under section 203(c)(2) of such Act), 

9 any mortgage insured under the program under 

10 which part or all of the amount of future payments 

11 made to the homeowner are used for costs of a long12 term care insurance contract covering the mortgagor 

13 or members of the household residing in the mort14 gaged property. 

15 Not later than the expiration of the 12-month period be16 ginning on the date of the enactment of this Act, the Sec17 retary shall submit a report to the Congress setting forth 

18 the results and conclusions of the study. 

19 SEC. 15. CONFORMING LOAN LIMIT IN DISASTER AREAS. 

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

21 U.S.C. 1709) is amended—

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

23 ‘‘plus any initial service charges, appraisal, inspec24 tion and other fees in connection with the mortgage 

25 as approved by the Secretary,’’; 
28

•HR 5121 EH 

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

2 by chapter 7 of the Emergency Supplemental Appro3 priations Act of 1994 (Public Law 103–211; 108 

4 Stat. 12)); and 

5 (3) by adding at the end the following new sen6 tence: ‘‘In any case in which the single family resi7 dence to be insured under this subsection is within 

8 a jurisdiction in which the President has declared a 

9 major disaster to have occurred, the Secretary is au10 thorized, for a temporary period not to exceed 36 

11 months from the date of such Presidential declara12 tion, to enter into agreements to insure a mortgage 

13 which involves a principal obligation of up to 100 

14 percent of the dollar limitation determined under 

15 section 305(a)(2) of the Federal Home Loan Mort16 gage Corporation Act for a single family residence, 

17 and not in excess of 100 percent of the appraised 

18 value of the property plus any initial service charges, 

19 appraisal, inspection and other fees in connection 

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

21 SEC. 16. PARTICIPATION OF MORTGAGE BROKERS AND 

22 CORRESPONDENT LENDERS. 

23 (a) DEFINITIONS.—

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

25 Housing Act (12 U.S.C. 1707) is amended—
29

•HR 5121 EH 

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

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

3 and for purposes of participation in insurance 

4 programs under this title, except as specifically 

5 provided otherwise, the following definitions 

6 shall apply:’’; 

7 (B) by striking subsection (b) and insert8 ing the following: 

9 ‘‘(2) The term ‘mortgagee’ means any of the 

10 following entities, and its successors and assigns, to 

11 the extent such entity is approved by the Secretary: 

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

13 who—

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

15 mortgages; 

16 ‘‘(ii) submits to the Secretary such fi17 nancial audits performed in accordance 

18 with the standards for financial audits of 

19 the Government Auditing Standards issued 

20 by the Comptroller of the United States; 

21 ‘‘(iii) meet the minimum net worth re22 quirement that the Secretary shall estab23 lish; and 

24 ‘‘(iv) complies with such other re25 quirements as the Secretary may establish. 
30

•HR 5121 EH 

1 ‘‘(B) A correspondent lender who—

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

3 does not underwrite or service the mort4 gage; 

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

6 any requirement to provide audited finan7 cial statements or meet a minimum net 

8 worth requirement, in—

9 ‘‘(I) a form satisfactory to the 

10 Secretary; and 

11 ‘‘(II) an amount of $75,000, as 

12 such amount is adjusted annually by 

13 the Secretary (as determined under 

14 regulations of the Secretary) by the 

15 change for such year in the Consumer 

16 Price Index for All Urban Consumers 

17 published monthly by the Bureau of 

18 Labor Statistics of the Department of 

19 Labor; and 

20 ‘‘(iii) complies with such other re21 quirements as the Secretary may establish. 

22 ‘‘(C) A mortgage broker who—

23 ‘‘(i) closes the mortgage in the name 

24 of the lender and does not make, under25 write, or service the mortgage; 
31

•HR 5121 EH 

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

2 State in which the property that is subject 

3 to the mortgage is located, to act as a 

4 mortgage broker in such State; 

5 ‘‘(iii) posts a surety bond in accord6 ance with the requirements of subpara7 graph (B)(ii); and 

8 ‘‘(iv) complies with such other re9 quirements as the Secretary may establish. 

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

11 borrower under a mortgage and the successors and 

12 assigns of the original borrower.’’; 

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

14 clauses (1) and (2) as clauses (A) and (B) re15 spectively; and 

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

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

18 and (7), respectively, and realigning such para19 graphs two ems from the left margin. 

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

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

22 amended—

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

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

25 (B) by striking subparagraph (B); and 
32

•HR 5121 EH 

1 (C) by redesignating subparagraphs (C) 

2 and (D) as subparagraphs (B) and (C), respec3 tively. 

4 (3) MULTIFAMILY RENTAL HOUSING INSUR5 ANCE.—Section 207(a)(2) of the National Housing 

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

7 ‘‘means the original lender under a mortgage, and 

8 its successors and assigns, and’’ and inserting ‘‘has 

9 the meaning given such term in section 201, except 

10 that such term also’’. 

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

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

13 amended by striking ‘‘includes the original lender 

14 under a mortgage, and his successors and assigns 

15 approved by the Secretary’’ and inserting ‘‘has the 

16 meaning given such term in section 201’’. 

17 (5) ARMED SERVICES HOUSING MORTGAGE IN18 SURANCE.—Section 801(b) of the National Housing 

19 Act (12 U.S.C. 1748(b)) is amended by striking ‘‘in20 cludes the original lender under a mortgage, and his 

21 successors and assigns approved by the Secretary’’ 

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

23 section 201’’. 

24 (6) GROUP PRACTICE FACILITIES MORTGAGE

25 INSURANCE.—Section 1106(8) of the National 
33

•HR 5121 EH 

1 Housing Act (12 U.S.C. 1749aaa-5(8)) is amended 

2 by striking ‘‘means the original lender under a mort3 gage, and his or its successors and assigns, and’’ 

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

5 section 201, except that such term also’’. 

6 (b) ELIGIBILITY FOR INSURANCE.—

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

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

9 is amended—

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

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

12 service the mortgage properly’’. 

13 (2) SINGLE FAMILY HOUSING MORTGAGE IN14 SURANCE.—Paragraph (1) of section 203(b) of the 

15 National Housing Act (12 U.S.C. 1709(b)(1)) is 

16 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 (3) SECTION 221 MORTGAGE INSURANCE.— 

21 Paragraph (1) of section 221(d) of the National 

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

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

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

25 service the mortgage properly’’. 
34

•HR 5121 EH 

1 (4) HOME EQUITY CONVERSION MORTGAGE IN2 SURANCE.—Paragraph (1) of section 255(d) of the 

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

4 amended by striking ‘‘as responsible and able to 

5 service the mortgage properly’’. 

6 (5) WAR HOUSING MORTGAGE INSURANCE.—

7 Paragraph (1) of section 603(b) of the National 

8 Housing Act (12 U.S.C. 1738(b)(1)) is amended—

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

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

11 service the mortgage properly’’. 

12 (6) WAR HOUSING MORTGAGE INSURANCE FOR

13 LARGE-SCALE HOUSING PROJECTS.—Paragraph (1) 

14 of section 611(b) of the National Housing Act (12 

15 U.S.C. 1746(b)(1)) is amended—

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

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

18 service the mortgage properly’’. 

19 (7) GROUP PRACTICE FACILITY MORTGAGE IN20 SURANCE.—Section 1101(b)(2) of the National 

21 Housing Act (12 U.S.C. 1749aaa(b)(2)) is amend22 ed—

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

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

25 service the mortgage properly’’. 
35

•HR 5121 EH 

1 (8) NATIONAL DEFENSE HOUSING INSUR2 ANCE.—Paragraph (1) of section 903(b) of the Na3 tional Housing Act (12 U.S.C. 1750b(b)(1)) is 

4 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 SEC. 17. SENSE OF CONGRESS REGARDING TECHNOLOGY 

9 FOR FINANCIAL SYSTEMS. 

10 (a) CONGRESSIONAL FINDINGS.—The Congress finds 

11 the following: 

12 (1) The Government Accountability Office has 

13 cited the FHA single family housing mortgage insur14 ance program as a ‘‘high-risk’’ program, with a pri15 mary reason being non-integrated and out-dated fi16 nancial management systems. 

17 (2) The ‘‘Audit of the Federal Housing Admin18 istration’s Financial Statements for Fiscal Years 

19 2004 and 2003’’, conducted by the Inspector Gen20 eral of the Department of Housing and Urban De21 velopment reported as a material weakness that 

22 ‘‘HUD/FHA’s automated data processing [ADP] 

23 system environment must be enhanced to more effec24 tively support FHA’s business and budget proc25 esses’’. 
36

•HR 5121 EH 

1 (3) Existing technology systems for the FHA 

2 program have not been updated to meet the latest 

3 standards of the Mortgage Industry Standards 

4 Maintenance Organization and have numerous defi5 ciencies that lenders have outlined. 

6 (4) Improvements to technology used in the 

7 FHA program will—

8 (A) allow the FHA program to improve the 

9 management of the FHA portfolio, garner 

10 greater efficiencies in its operations, and lower 

11 costs across the program; 

12 (B) result in efficiencies and lower costs 

13 for lenders participating in the program, allow14 ing them to better use the FHA products in ex15 tending homeownership opportunities to higher 

16 credit risk or lower-income families, in a sound 

17 manner. 

18 (5) The Mutual Mortgage Insurance Fund op19 erates without cost to the taxpayers and generates 

20 revenues for the Federal Government. 

21 (b) SENSE OF CONGRESS.—It is the sense of the 

22 Congress that—

23 (1) the Secretary of Housing and Urban Devel24 opment should use a portion of the funds received 

25 from premiums paid for FHA single family housing 
37

•HR 5121 EH 

1 mortgage insurance that are in excess of the 

2 amounts paid out in claims to substantially increase 

3 the funding for technology used in such FHA pro4 gram; 

5 (2) the goal of this investment should be to 

6 bring the technology used in such FHA program to 

7 the level and sophistication of the technology used in 

8 the conventional mortgage lending market, or to ex9 ceed such level; and 

10 (3) the Secretary of Housing and Urban Devel11 opment should report to the Congress not later than 

12 180 days after the date of the enactment of this Act 

13 regarding the progress the Department is making 

14 toward such goal and if progress is not sufficient, 

15 the resources needed to make greater progress. 

16 SEC. 18. SAVINGS PROVISION. 

17 Any mortgage insured under title II of the National 

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

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

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

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

22 SEC. 19. IMPLEMENTATION. 

23 The Secretary of Housing and Urban Development 

24 shall by notice establish any additional requirements that 
38

•HR 5121 EH 

1 may be necessary to immediately carry out the provisions 

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

Passed the House of Representatives July 25, 2006. 

Attest:

Clerk.