I 

111TH CONGRESS 

2D SESSION H. R. 5072 

To improve the financial safety and soundness of the FHA mortgage 

insurance program. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 20, 2010 

Ms. WATERS (for herself, Mrs. CAPITO, Mr. FRANK of Massachusetts, and Mr. 

AL GREEN of Texas) introduced the following bill; which was referred to 

the Committee on Financial Services 

A BILL 

To improve the financial safety and soundness of the FHA 

mortgage insurance program. 

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 Reform Act of 

5 2010’’. 

6 SEC. 2. MORTGAGE INSURANCE PREMIUMS. 

7 Subparagraph (B) of section 203(c)(2) of the Na8 tional Housing Act (12 U.S.C. 1709(c)(2)(B)) is amend9 ed— 

10 (1) in the matter preceding clause (i)— 


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1 (A) by striking ‘‘shall’’ and inserting 

2 ‘‘may’’; and 

3 (B) by striking ‘‘0.50 percent’’ and insert4 ing ‘‘1.5 percent’’; and 

5 (2) in clause (ii), by striking ‘‘shall be in an 

6 amount not exceeding 0.55 percent’’ and inserting 

7 ‘‘may be in an amount not exceeding 1.55 percent’’. 

8 SEC. 3. INDEMNIFICATION BY MORTGAGEES. 

9 Section 202 of the National Housing Act (12 U.S.C. 

10 1708) is amended by adding at the end the following new 

11 subsection: 

12 ‘‘(i) INDEMNIFICATION BY MORTGAGEES.— 

13 ‘‘(1) IN GENERAL.—If the Secretary determines 

14 that a mortgage executed by a mortgagee approved 

15 by the Secretary under the direct endorsement pro16 gram or insured by a mortgagee pursuant to the del17 egation of authority under section 256 was not origi18 nated or underwritten in accordance with the re19 quirements established by the Secretary, and the 

20 Secretary pays an insurance claim with respect to 

21 the mortgage within a reasonable period specified by 

22 the Secretary, the Secretary may require the mort23 gagee approved by the Secretary under the direct en24 dorsement program or the mortgagee delegated auVerDate Nov 24 2008 04:23 Apr 21, 2010 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5072.IH H5072

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1 thority under section 256 to indemnify the Secretary 

2 for the loss. 

3 ‘‘(2) FRAUD OR MISREPRESENTATION.—If 

4 fraud or misrepresentation was involved in connec5 tion with the origination or underwriting, the Sec6 retary may require the mortgagee approved by the 

7 Secretary under the direct endorsement program or 

8 the mortgagee delegated authority under section 256 

9 to indemnify the Secretary for the loss regardless of 

10 when an insurance claim is paid. 

11 ‘‘(3) REQUIREMENTS AND PROCEDURES.—The 

12 Secretary shall issue regulations establishing appro13 priate requirements and procedures governing the 

14 indemnification of the Secretary by the mortgagee.’’. 

15 SEC. 4. DELEGATION OF INSURING AUTHORITY. 

16 Section 256 of the National Housing Act (12 U.S.C. 

17 1715z–21) is amended— 

18 (1) by striking subsection (c); 

19 (2) in subsection (e), by striking ‘‘, including’’ 

20 and all that follows through ‘‘by the mortgagee’’; 

21 and 

22 (3) by redesignating subsections (d) and (e) as 

23 subsections (c) and (d), respectively. 


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1 SEC. 5. AUTHORITY TO TERMINATE MORTGAGEE ORIGINA2 TION AND UNDERWRITING APPROVAL. 

3 Section 533 of the National Housing Act (12 U.S.C. 

4 1735f–11) is amended— 

5 (1) in the first sentence of subsection (b), by in6 serting ‘‘or areas or on a nationwide basis’’ after 

7 ‘‘area’’ each place such term appears; and 

8 (2) in subsection (c), by striking ‘‘(c)’’ and all 

9 that follows through ‘‘The Secretary’’ in the first 

10 sentence of paragraph (2) and inserting the fol11 lowing: 

12 ‘‘(c) TERMINATION OF MORTGAGEE ORIGINATION

13 AND UNDERWRITING APPROVAL.— 

14 ‘‘(1) TERMINATION AUTHORITY.—If the Sec15 retary determines, under the comparison provided in 

16 subsection (b), that a mortgagee has a rate of early 

17 defaults and claims that is excessive, the Secretary 

18 may terminate the approval of the mortgagee to 

19 originate or underwrite single family mortgages for 

20 any area, or areas, or on a nationwide basis, not21 withstanding section 202(c) of this Act. 

22 ‘‘(2) PROCEDURE.—The Secretary’’. 


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1 SEC. 6. DEPUTY ASSISTANT SECRETARY OF FHA FOR RISK 

2 MANAGEMENT AND REGULATORY AFFAIRS. 

3 (a) ESTABLISHMENT OF POSITION.—Subsection (b) 

4 of section 4 of the Department of Housing and Urban De5 velopment Act (42 U.S.C. 3533(b)) is amended— 

6 (1) by inserting ‘‘(1)’’ after ‘‘(b)’’; and 

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

8 paragraph: 

9 ‘‘(2) There shall be in the Department, within the 

10 Federal Housing Administration, a Deputy Assistant Sec11 retary for Risk Management and Regulatory Affairs, who 

12 shall be appointed by the Secretary and shall be respon13 sible to the Federal Housing Commissioner for all matters 

14 relating to managing and mitigating risk to the mortgage 

15 insurance funds of the Department and ensuring the per16 formance of mortgages insured by the Department.’’. 

17 (b) TERMINATION.—Upon the appointment and con18 firmation of the initial Deputy Assistant Secretary for 

19 Risk Management and Regulatory Affairs pursuant to sec20 tion 4(b)(2) of the Department of Housing and Urban De21 velopment Act, as amended by subsection (a) of this sec22 tion, the position of chief risk officer within the Federal 

23 Housing Administration, filled by appointment by the 

24 Federal Housing Commissioner, is abolished. 


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1 SEC. 7. USE OF OUTSIDE CREDIT RISK ANALYSIS SOURCES. 

2 Section 202 of the National Housing Act (12 U.S.C. 

3 1708) is amended by adding at the end the following new 

4 subsection: 

5 ‘‘(i) USE OF OUTSIDE CREDIT RISK ANALYSIS

6 SOURCES.—The Secretary may obtain the services of, and 

7 enter into contracts with, private and other entities out8 side of the Department in— 

9 ‘‘(1) analyzing credit risk models and practices 

10 employed by the Department in connection with 

11 such mortgages; 

12 ‘‘(2) evaluating underwriting standards applica13 ble to such mortgages insured by the Department; 

14 and 

15 ‘‘(3) analyzing the performance of lenders in 

16 complying with, and the Department in enforcing, 

17 such underwriting standards.’’. 

18 SEC. 8. REVIEW OF MORTGAGEE PERFORMANCE. 

19 Section 533 of the National Housing Act (12 U.S.C. 

20 1735f–11) is amended— 

21 (1) in subsection (a), by inserting after the pe22 riod at the end the following: ‘‘For purposes of this 

23 subsection, the term ‘early default’ means a default 

24 that occurs within 24 months after a mortgage is 

25 originated or such alternative appropriate period as 

26 the Secretary shall establish.’’; 


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1 (2) in subsection (b), by inserting after the pe2 riod at the end of the first sentence the following: 

3 ‘‘The Secretary shall also identify which mortgagees 

4 have had a significant or rapid increase, as deter5 mined by the Secretary, in the number or percentage 

6 of early defaults and claims on such mortgages, with 

7 respect to all mortgages originated by the mortgagee 

8 or mortgages on housing located in any particular 

9 geographic area or areas’’; and 

10 (3) by adding at the end the following new sub11 sections: 

12 ‘‘(d) SUFFICIENT RESOURCES.—There is authorized 

13 to be appropriated to the Secretary for each of fiscal years 

14 2010 through 2014 the amount necessary to provide addi15 tional full-time equivalent positions for the Department, 

16 or for entering into such contracts as are necessary, to 

17 conduct reviews in accordance with the requirements of 

18 this section and to carry out other responsibilities relating 

19 to ensuring the safety and soundness of the Mutual Mort20 gage Insurance Fund. 

21 ‘‘(e) REPORTING TO CONGRESS.—Not later than 90 

22 days after the date of enactment of the FHA Reform Act 

23 of 2010 and not less often than annually thereafter, the 

24 Secretary shall make available to the Committee on Finan25 cial Services of the House of Representatives and the 


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1 Committee on Banking, Housing, and Urban Affairs of 

2 the Senate any information and conclusions pursuant to 

3 the reviews required under subsection (a). Such report 

4 shall not include detailed information on the performance 

5 of individual mortgages.’’. 

6 SEC. 9. USE OF NATIONWIDE MORTGAGE LICENSING SYS7 TEM AND REGISTRY. 

8 (a) USE BY MORTGAGEES, OFFICERS, AND OWNERS; 

9 USE FOR INSURED MORTGAGES.— 

10 (1) MORTGAGEES, OFFICERS, AND OWNERS.— 

11 Section 202 of the National Housing Act (12 U.S.C. 

12 1708), as amended by the preceding provisions of 

13 this Act, is further amended by adding at the end 

14 the following new subsections: 

15 ‘‘(j) USE OF NATIONWIDE MORTGAGE LICENSING

16 SYSTEM AND REGISTRY FOR MORTGAGEES, OFFICERS, 

17 AND OWNERS.—The Secretary may require, as a condition 

18 for approval of a mortgagee by the Secretary to originate 

19 or underwrite mortgages on single family that are insured 

20 by the Secretary, that the mortgagee— 

21 ‘‘(1) obtain and maintain a unique company 

22 identifier assigned by the Nationwide Mortgage Li23 censing System and Registry, as established by the 

24 Conference of State Bank Supervisors and the 


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1 American Association of Residential Mortgage Regu2 lators; and 

3 ‘‘(2) obtain and maintain, as relates to any and 

4 all officers or owners of the mortgagee who are sub5 ject to the requirements of the S.A.F.E. Mortgage 

6 Licensing Act of 2008, or are otherwise required to 

7 register with the Nationwide Mortgage Licensing 

8 System and Registry, the unique identifier assigned 

9 by the Nationwide Mortgage Licensing System and 

10 Registry, as established by the Conference of State 

11 Bank Supervisors and the American Association of 

12 Residential Mortgage Regulators.’’. 

13 (2) INSURED MORTGAGES.—Section 203 of the 

14 National Housing Act (12 U.S.C. 1709) is amended 

15 by adding at the end the following new subsection: 

16 ‘‘(y) USE OF NATIONWIDE MORTGAGE LICENSING

17 SYSTEM AND REGISTRY FOR INSURED LOANS.—The Sec18 retary may require each mortgage insured under this sec19 tion to include the unique identifier (as such term is de20 fined in section 1503 of the S.A.F.E. Mortgage Licensing 

21 act of 2008 (12 U.S.C. 5102)) and any unique company 

22 identifier assigned by the Nationwide Mortgage Licensing 

23 System and Registry, as established by the Conference of 

24 State Bank Supervisors and the American Association of 

25 Residential Mortgage Regulators.’’. 


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1 (b) COORDINATION WITH STATE REGULATORY

2 AGENCIES.—Section 202 of the National Housing Act (12 

3 U.S.C. 1708), as amended by the preceding provisions of 

4 this Act, is further amended by adding at the end the fol5 lowing new subsection: 

6 ‘‘(k) INFORMATION SHARING WITH STATE REGU7 LATORY AGENCIES.— 

8 ‘‘(1) JOINT PROTOCOL ON INFORMATION SHAR9 ING.—The Secretary shall, through consultation with 

10 State regulatory agencies, pursue protocols for infor11 mation sharing, including the appropriate treatment 

12 of confidential or otherwise restricted information, 

13 regarding either actions described in subsection 

14 (c)(3) of this section or disciplinary or enforcement 

15 actions by a State regulatory agency or agencies 

16 against a mortgagee (as such term is defined in sub17 section (c)(7)). 

18 ‘‘(2) COORDINATION.—To the greatest extent 

19 possible, the Secretary and appropriate State regu20 latory agencies shall coordinate disciplinary and en21 forcement actions involving mortgagees (as such 

22 term is defined in subsection (c)(7)).’’. 


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1 SEC. 10. REPORTING OF MORTGAGEE ACTIONS TAKEN 

2 AGAINST OTHER MORTGAGEES. 

3 Section 202 of the National Housing Act (12 U.S.C. 

4 1708(e)), as amended by the preceding provisions of this 

5 Act, is further amended by adding at the end the following 

6 new subsection: 

7 ‘‘(k) NOTIFICATION OF MORTGAGEE ACTIONS.—The 

8 Secretary shall require each mortgagee, as a condition for 

9 approval by the Secretary to originate or underwrite mort10 gages on single family or multifamily housing that are in11 sured by the Secretary, if such mortgagee engages in the 

12 purchase of mortgages insured by the Secretary and origi13 nated by other mortgagees or in the purchase of the serv14 icing rights to such mortgages, and such mortgagee at any 

15 time takes action to terminate or discontinue such pur16 chases from another mortgagee based on any determina17 tion, evidence, or report of fraud or material misrepresen18 tation in connection with the origination of such mort19 gages, the mortgagee shall, not later than 15 days after 

20 taking such action, shall notify the Secretary of the action 

21 taken and the reasons for such action.’’. 

22 SEC. 11. ANNUAL ACTUARIAL STUDY AND QUARTERLY RE23 PORTS ON MUTUAL MORTGAGE INSURANCE 

24 FUND. 

25 Subsection (a) of section 202 of the National Hous26 ing Act (12 U.S.C. 1708(a)) is amended— 


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1 (1) in the second sentence of paragraph (4), by 

2 inserting before the period at the end the following: 

3 ‘‘, any changes to the current or projected safety 

4 and soundness of the Fund since the most recent re5 port under this paragraph or paragraph (5), and 

6 any risks to the Fund’’; and 

7 (2) in paragraph (5)— 

8 (A) in subparagraph (D), by striking 

9 ‘‘and’’ at the end; 

10 (B) in subparagraph (E), by striking the 

11 period at the end and inserting ‘‘; and’’; 

12 (C) by adding at the end the following: 

13 ‘‘(F) any other factors that are likely to 

14 have an impact on the financial status of the 

15 Fund or cause any material changes to the cur16 rent or projected safety and soundness of the 

17 Fund since the most recent report under para18 graph (4). 

19 The Secretary may include in the report under this 

20 paragraph any recommendations not made in the 

21 most recent report under paragraph (4) that may be 

22 needed to ensure that the Fund remains financially 

23 sound’’. 


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1 SEC. 12. REVIEW OF DOWNPAYMENT REQUIREMENTS. 

2 Section 205 of the National Housing Act (12 U.S.C. 

3 1711) is amended by adding at the end the following new 

4 subsection: 

5 ‘‘(g) REVIEW OF DOWNPAYMENT REQUIREMENTS.— 

6 If, at any time when the capital ratio (as such term is 

7 defined in subsection (f)) of the Mutual Mortgage Insur8 ance Fund does not comply with the requirement under 

9 subsection (f)(1), the Secretary establishes a cash invest10 ment requirement, for all mortgages or mortgagors or with 

11 respect to any group of mortgages or mortgagors, that ex12 ceeds the minimum percentage or amount required under 

13 section 203(b)(9), thereafter upon the capital ratio first 

14 complying with the requirement under subsection (f)(1) 

15 the Secretary shall review such cash investment require16 ment and, if the Secretary determines that such percent17 age or amount may be reduced while maintaining such 

18 compliance, the Secretary shall subsequently reduce such 

19 requirement by such percentage or amount as the Sec20 retary considers appropriate.’’. 

21 SEC. 13. DEFAULT AND ORIGINATION INFORMATION BY 

22 LOAN SERVICER AND ORIGINATING DIRECT 

23 ENDORSEMENT LENDER. 

24 (a) COLLECTION OF INFORMATION.—Paragraph (2) 

25 of section 540(b) of the National Housing Act (12 U.S.C. 


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1 1712 U.S.C. 1735f–18(b)(2)) is amended by adding at the 

2 end the following new subparagraph: 

3 ‘‘(C) For each entity that services insured 

4 mortgages, data on the performance of mort5 gages originated during each calendar quarter 

6 occurring during the applicable collection pe7 riod, disaggregated by the direct endorsement 

8 mortgagee from whom such entity acquired 

9 such servicing.’’. 

10 (b) APPLICABILITY.—Information described in sub11 paragraph (C) of section 540(b)(2) of the National Hous12 ing Act, as added by subsection (a) of this section, shall 

13 first be made available under such section 540 for the ap14 plicable collection period (as such term is defined in such 

15 section) relating to the first calendar quarter ending after 

16 the expiration of the 12-month period that begins on the 

17 date of the enactment of this Act. 

18 SEC. 14. GAO REPORTS ON FHA AND GINNIE MAE. 

19 Not later than the expiration of the 12-month period 

20 beginning on the date of the enactment of this Act, the 

21 Comptroller General of the United States shall submit to 

22 the Congress the following reports: 

23 (1) FHA REPORT.—A report on the single fam24 ily mortgage insurance programs of the Secretary of 

25 Housing and Urban Development and the Mutual 


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1 Mortgage Insurance Fund established under section 

2 202(a) of the National Housing Act (12 U.S.C. 

3 1708(a)) that— 

4 (A) analyzes such Fund, the economic net 

5 worth, capital ratio, and unamortized insur6 ance-in-force (as such terms are defined in sec7 tion 205(f)(4) of such Act (12 U.S.C. 

8 1711(f)(4))) of such Fund, the risks to the 

9 Fund, how the capital ratio of the Fund affects 

10 the mortgage insurance programs under the 

11 Fund and the broader housing market, the ex12 tent to which the housing markets are more de13 pendent on mortgage insurance provided 

14 through the Fund since the financial crisis 

15 began in 2008, and the exposure of the tax16 payers for obligations of the Fund; 

17 (B) analyzes the methodology of the cap18 ital ratio for the Fund under section 205(f) of 

19 such Act and examines other alternative meth20 odologies with respect to which methodology is 

21 most appropriate to meet the operational goals 

22 of the Fund under section 202(a)(7); 

23 (C) analyzes the effects of the increases in 

24 the limits on the maximum principal obligation 

25 of mortgages made by the FHA Modernization 


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1 Act of 2008 (title I of division B of Public Law 

2 110–289), section 202 of the Economic Stim3 ulus Act of 2008 (Public Law 110–185; 122 

4 Stat. 620), section 1202 of division A of the 

5 American Recovery and Reinvestment Act of 

6 2009 (Public Law 111–5; 123 Stat. 225), and 

7 section 166 of the Continuing Appropriations 

8 Resolution, 2010 (as added by section 104 of 

9 division B of Public Law 111–88; 123 Stat. 

10 29723) on— 

11 (i) the risks to and safety and sound12 ness of the Fund; 

13 (ii) the impact on the affordability 

14 and availability of mortgage credit for bor15 rowers for loans authorized under such 

16 higher loan limits; 

17 (iii) the private market for residential 

18 mortgage loans that are not insured by the 

19 Secretary of Housing and Urban Develop20 ment; and 

21 (iv) the Federal National Mortgage 

22 Association and the Federal Home Loan 

23 Mortgage Corporation; and 

24 (D) analyzes the impact on affordability to 

25 FHA borrowers, and the impact to the Fund, 


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1 of seller concessions or contributions to a bor2 rower purchasing a residence using a mortgage 

3 that is insured by the Secretary. 

4 (2) GINNIE MAE.—A report on the Government 

5 National Mortgage Association that identifies— 

6 (A) the volume and share of the residential 

7 mortgage market that consists of mortgages 

8 that back securities for which the payment for 

9 principal and interest is guaranteed by such As10 sociation and how the Association has been af11 fected by the economic recession, credit crisis, 

12 and downturn in the housing markets occurring 

13 during 2008, 2009, and 2010; 

14 (B) the capacity of the Association to man15 age the volume of business it conducts and se16 curities it guarantees, particularly with regard 

17 to the recent dramatic increase in such volume, 

18 including the ability of the Association to con19 duct appropriate oversight of contractors and 

20 issuers of securities for which the payment of 

21 principal and interest is guaranteed by the As22 sociation and to determine whether the charac23 teristics of various mortgage products con24 stitute appropriate collateral for the federally 

25 guaranteed securities for which payment of 


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1 principal and interest is guaranteed by such As2 sociation; 

3 (C) the impacts, if any, resulting from 

4 such increased volume of business conducted by 

5 the Association and securities it guarantees and 

6 the challenges such increased volume poses to 

7 the internal controls of the Association; and 

8 (D) the existing capital net worth of the 

9 various aggregators of mortgages that issue se10 curities that are based on or backed by such 

11 mortgages and payment of principal and inter12 est on which is guaranteed by such Association 

13 and recommends an appropriate required level 

14 of net worth for such aggregators and issuers 

15 to protect the financial interests of the Federal 

16 Government and the taxpayers. 

Æ 


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