I 

111TH CONGRESS 

1ST SESSION H. R. 600 

To revise the requirements for seller-financed downpayments for mortgages 

for single-family housing insured by the Secretary of Housing and Urban 

Development under title II of the National Housing Act. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 16, 2009 

Mr. AL GREEN of Texas (for himself, Ms. WATERS, and Mr. GARY G. MILLER

of California) introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To revise the requirements for seller-financed downpayments 

for mortgages for single-family housing insured by the 

Secretary of Housing and Urban Development under title 

II of the National Housing Act. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘FHA Seller-Financed 

5 Downpayment Reform Act of 2009’’. 

6 SEC. 2. FHA SELLER-FINANCED DOWNPAYMENT PROGRAM. 

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

8 Housing Act (12 U.S.C. 1709(b)(9)) is amended— 


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1 (1) in subparagraph (C), by striking ‘‘In no 

2 case shall the funds required by subparagraph (A)’’ 

3 and inserting the following: ‘‘Except in the case of 

4 a mortgage described in subparagraph (D), the 

5 funds required by subparagraph (A) shall not’’; and 

6 (2) by adding at the end the following new sub7 paragraphs: 

8 ‘‘(D) EXCEPTIONS TO PROHIBITED

9 SOURCES.—A mortgage described in this sub10 paragraph is any of the following mortgages: 

11 ‘‘(i) A mortgage under which the 

12 mortgagor has a credit score equivalent to 

13 a FICO score of 680 or greater. 

14 ‘‘(ii) A mortgage under which— 

15 ‘‘(I) the mortgagor has a credit 

16 score equivalent to a FICO score of at 

17 least 620 but less than 680; and 

18 ‘‘(II) mortgage insurance pre19 miums charged are established— 

20 ‘‘(aa) at levels necessary, 

21 but no higher than needed, to 

22 allow such class of loans to be in23 sured without resulting in a need 

24 for an appropriation for a credit 

25 subsidy, which may exceed the 


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1 maximum amount permitted 

2 under section 203(c)(2)(B); 

3 ‘‘(bb) in the case of the sin4 gle premium collected at the time 

5 of insurance, in an amount not 

6 exceeding 3.0 percent of the 

7 amount of the original principal 

8 obligation of the mortgage; and 

9 ‘‘(cc) in the case of the an10 nual premium for a mortgage 

11 under which the mortgagor has a 

12 credit score equivalent to a FICO 

13 score of at least 640 but less 

14 than 680, in an amount not ex15 ceeding 1.25 percent of the re16 maining insured principal balance 

17 (excluding the portion of the re18 maining balance attributable to 

19 the premium collected at the time 

20 of insurance and without taking 

21 into account delinquent payments 

22 or prepayments). 

23 ‘‘(iii) For mortgages insured in fiscal 

24 year 2010 or thereafter, a mortgage under 

25 which the mortgagor has a credit score 


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1 equivalent to a FICO score of 619 or less, 

2 but only if the Secretary certifies that such 

3 loans can be insured without resulting in a 

4 need for an appropriation for a credit sub5 sidy. For such mortgages, the Secretary 

6 may charge premiums at levels authorized 

7 under items (bb) and (cc) of clause (ii)(II) 

8 and may establish a credit or FICO score 

9 limitation or impose such other require10 ments as are necessary to meet the condi11 tions for certification under this clause. 

12 ‘‘(E) REQUIREMENTS FOR DOWNPAYMENT

13 ASSISTANCE ENTITIES.—Any entity partici14 pating in a program that provides downpay15 ment assistance for a mortgage described in 

16 subparagraph (D) pursuant to the exception 

17 under subparagraph (C), which programs shall 

18 include programs of governmental agencies and 

19 private nonprofit organizations, shall, before the 

20 closing for the loan involved in the mortgage in 

21 connection with which such assistance is pro22 vided— 

23 ‘‘(i) offer to make available, to the 

24 mortgagor, counseling regarding the reVerDate Nov 24 2008 01:54 Jan 21, 2009 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H600.IH H600

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1 sponsibilities and financial management in2 volved in homeownership; 

3 ‘‘(ii) if such offer is accepted by the 

4 mortgagor, make such counseling available 

5 for the mortgagor; and 

6 ‘‘(iii) in the case of any such entity 

7 that is a private nonprofit organization, 

8 implement a conflict of interest policy that 

9 prohibits directors, officers, employees, and 

10 immediate family members from receiving 

11 financial benefits from any entity that is 

12 providing the program with goods or serv13 ices other than the homeownership assist14 ance program entity itself or its wholly 

15 owned affiliate. 

16 ‘‘(F) CIVIL MONEY PENALTIES FOR IM17 PROPERLY INFLUENCING APPRAISALS.—The 

18 Secretary may impose a civil money penalty, in 

19 the same manner and to the same extent as for 

20 a violation under section 536, for compensating, 

21 instructing, inducing, coercing, or intimidating 

22 any person who conducts an appraisal of the 

23 property to be subject to a mortgage described 

24 in subparagraph (D) and under which any part 

25 of the funds required by subparagraph (A) are 


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1 provided to a party described in subparagraph 

2 (C), or attempting to compensate, instruct, in3 duce, coerce, or intimidate such a person, for 

4 the purpose of causing the appraised value as5 signed to the property under the appraisal to be 

6 based on any other factor other than the inde7 pendent judgment of such person exercised in 

8 accordance with applicable professional stand9 ards.’’. 

Æ 


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